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Overfitting is an error that occurs in data modeling as a result of a particular feature aligning too closely with a minimum set of data points. Financial professionals run the risk of overfitting a model based on limited data and end up with erroneous results. When a model is compromised by overfitting, it can lose its value as a predictive investment tool. The data model may also be underfit, i.e. it is too simple and contains too few data points to be effective. Overfitting is a more common problem than underfitting and usually results from an attempt to avoid overfitting. Absolute Return
September 25, 2022 Absolute return is the return that an asset receives over a certain period. Accretion
September 25, 2022 Accretion refers to the gradual and gradual growth of assets. Activity-Based Management (ABM)
September 25, 2022 Performance Based Management (ABM) is a means of analyzing a company’s profitability by looking at every aspect of its business to determine its strengths and weaknesses. After-Tax Real Rate of Return
September 25, 2022 The after-tax real rate of return takes inflation and taxes into account to determine the true profit or loss on an investment. Agency Problem
September 25, 2022 An agency problem is a conflict of interest inherent in any relationship where one party is expected to act in the interests of the other. Appropriation
September 25, 2022 Appropriation is the act of allocating money for a particular purpose. Asset Financing
September 25, 2022 Asset financing allows a company to obtain a loan by pledging its balance sheet assets. Asset-Liability Committee (ALCO)
September 25, 2022 Asset and Liability Management Committees (ALMCs) are responsible for overseeing the asset and liability management of a company or bank. Audit Committee
September 25, 2022 The Audit Committee consists of members of the company’s board of directors and oversees its financial reporting and reporting. Average Inventory
September 25, 2022 Average inventory is a calculation that estimates the cost or quantity of a particular item or set of items over two or more specific time periods. BCG Growth-Share Matrix
September 25, 2022 The BCG Growth Share Matrix is an internal tool used by management to assess the current state of the value of a firm’s divisions or product lines. Ballpark Figure
September 25, 2022 A ballpark figure is a rough estimate of what something might mean in numerical terms when a more precise number is estimated, such as the cost of a product. Baye's Theorem
September 25, 2022 Bayes’ theorem allows you to update the predicted probabilities of an event by incorporating new information. Binomial Distribution
September 25, 2022 The binomial distribution is a probability distribution that generalizes the probability that a value will take on one of two independent values given a set of parameters or assumptions. Business Valuations
September 25, 2022 Business valuation determines the economic value of a business or business unit. Buy-In Management Buyout (BIMBO)
September 25, 2022 Management buyout (BIMBO) occurs when an external management team joins the company (buy-in) and also buys out the existing management team. Capital Employed
September 25, 2022 Capital employed is obtained by subtracting current liabilities from total assets; or, alternatively, by adding long-term liabilities to equity. Capital Leases
September 25, 2022 A capital lease is a contract that gives the lessee the right to temporarily use an asset. Capital Market Line (CML)
September 25, 2022 The capital market line (CML) represents portfolios that optimally combine risk and return. Capital Markets
September 25, 2022 Capital markets refer to places where funds are exchanged between providers and those seeking capital for their own use. Capital Project
September 25, 2022 A capital project is often a costly, long-term project to expand, maintain, or improve a significant portion of a property. Capital Stock
September 25, 2022 Share capital is the number of ordinary and preferred shares that the company has the right to issue and which are accounted for on the balance sheet as part of share capital. Capital Structure
September 25, 2022 The capital structure is how a company finances its overall operations and growth. Capitalization Table
September 25, 2022 Capitalization table is a table showing the capitalization of a company’s share capital. Central Limit Theorem (CLT)
September 25, 2022 The Central Limit Theorem (CLT) states that the distribution of sample means approaches a normal distribution as the sample size increases, regardless of the distribution of the population.