Endowment funds

Endowment funds are the investment funds established for the support of institutions such as colleges, private schools, museums, hospitals, and foundations. An investment fund set up by an institution in which regular withdrawals from the invested capital are used for ongoing operations or other specified purposes.

An endowment may come with stipulations regarding its usage. In some circumstances an endowment may be required to be spent in a certain way or alternatively invested, with the principal to remain intact in perpetuity or for a defined time period. This allows for the donation to have an impact over a longer period of time than if it were spent all at once.

True Endowment funds are received from external donors with restriction that the principal or gift amount is to be retained in perpetuity and cannot be spent.

In Term Endowment funds all or part of the principal may be expended only after the expiration of a stated period of time or occurrence of a specified event, depending on donor wishes.

Quasi Endowment funds must retain the purpose and intent as specified by the donor or source of the original funds and earnings may be expended only for the specified purpose.

Veblen Goods

Veblen goods are a group of commodities for which people's preference for buying them increases as a direct function of their price, as greater price confers greater status, instead of decreasing according to the law of demand. A Veblen good is often also a positional good. The Veblen effect is named after economist Thorstein Veblen, who first pointed out the concepts of conspicuous consumption and status-seeking.

Some types of high-status goods, such as high-end wines, designer handbags and luxury cars are Veblen goods, in that decreasing their prices decreases people's preference for buying them because they are no longer perceived as exclusive or high status products.

Business Cycle

The term business cycle (or economic cycle) refers to economy-wide fluctuations in production or economic activity over several months or years. These fluctuations occur around a long-term growth trend, and typically involve shifts over time between periods of relatively rapid economic growth (an expansion or boom), and periods of relative stagnation or decline (a contraction or recession).

The usual pattern of the business cycle is: bust, recovery, boom and recession. The levels of economic growth, employment, and inflation are directly affected in each of the phases of the business cycle. The business cycle has an impact also on corporate earnings and cash flows.

Business cycles are usually measured by considering the growth rate of real gross domestic product. Despite being termed cycles, these fluctuations in economic activity do not follow a mechanical or predictable periodic pattern.

Many developments and indicators are cited as causes of the business cycles. The most common ones, however, are: over-investment, under-consumption, fluctuations in agricultural output, the interaction of the multiplier and accelerator, war and international politics.

Kurtosis

Kurtosis is a measure of the peakedness of the probability distribution of a real-valued random variable. It is the fourth central movement of a distribution. The first three movements are mean, standard deviation, and skewness.  It measures the distribution’s peakedness and the thickness of its tails.

Higher kurtosis means more of the variance is the result of infrequent extreme deviations, as opposed to frequent modestly sized deviations. Leptokurtosis, or positive excess kurtosis, indicates a distribution that is more peaked at the center and has fatter than normal tails. Platykurtosis, or negative excess kurtosis, indicates a relatively flatter top and thinner tails.

Debt service parity approach

Debt service parity approach is an analysis wherein the payment alternatives under consideration will provide the firm with the exact same schedule of after-tax debt payments (including both interest and principal).