After-tax income, also known as after-tax cash flow, represents the amount of earnings that remain after deductions for income taxes. It is a crucial indicator of an individual's or business's actual financial situation and their ability to invest, save, or spend.
Understanding what constitutes an asset is crucial for evaluating one's financial health. Assets are things of value owned by an individual or organization that can provide future economic benefits.
The back-end ratio is one of several criteria used to qualify homebuyers or owners for mortgage loans. It takes into account existing long-term debt of the loan applicant, contrasting with the front-end ratio.
Borrowing capacity, also referred to as loan eligibility or credit capacity, determines the maximum amount of funds that an individual or entity can borrow from a lender. It is calculated based on factors such as monthly income, existing liabilities, credit score, and financial assets. Understanding borrowing capacity is critical for making informed financial decisions and optimizing loan approvals.
A Credit Rating (Report) is an evaluation of an individual's or business's capacity and history of debt repayment. It provides creditors with an understanding of a borrower's reliability, aiding in the decision-making process for loans and credit.
The Debt-to-Income Ratio (DTI) measures a borrower’s ability to manage monthly payments and repay debts. This ratio compares an individual's gross income to their combined housing and nonhousing expenses.
Net worth is a financial metric that provides a snapshot of an individual's financial health at a specific point in time. It represents the difference between total assets and total liabilities.
A P&L statement, also known as a profit and loss statement, is a financial document that provides a summary of a company's revenues, expenses, and profits/losses over a specific period.
A performing loan is a loan on which the borrower is making the scheduled payments without default or breach of terms. Performing loans are contrasted with nonperforming loans where payments are overdue by 90 days or more.
Working capital is a financial metric that represents the difference between a company's current assets and current liabilities, providing insight into its short-term financial health and operational efficiency.
