Finance Terms

What Is a Credit Default Swap (CDS)? A credit default swap (CDS) is a type of financial contract that works like insurance. It protects a lender or investor in case a borrower does not repay a loan. In a CDS, one party pays regular fees to another party, called the seller. In return, the seller promises to pay if the borrower defaults on the loan. For example, suppose a bank lends money to a company. To reduce its risk, the bank buys a CDS from another firm. If the company fails to repay the loan, the CDS seller pays the bank the agreed amount. If the company pays back the loan on time, the seller keeps the fee and nothing else happens. CDSs became widely known during the 2008 financial crisis. Many banks and investors used them to bet on or protect against mortgage loans. But because CDS contracts are not regulated like insurance, some firms took on too much risk. When large numbers of borrowers defaulted, many CDS sellers could not cover the losses, le...

What Is Artificial Intelligence (AI) in Accounting? Artificial Intelligence (AI) in accounting means using smart computer systems to handle tasks that usually require human thinking. These systems can analyze large amounts of financial data, find patterns, and help with everyday accounting work like sorting invoices or checking for errors. For example, AI can scan and process hundreds of invoices in minutes. It can also spot unusual transactions that might point to fraud. Some AI tools can even give real-time insights on a company’s financial health, helping teams make faster and better decisions. It's important to know that AI does not replace accountants. Instead, it works alongside them. By taking care of repetitive tasks, AI allows accountants to focus on more complex work like strategy and financial planning. As businesses handle more data every day, AI is becoming a key tool in modern accounting. It helps teams work faster, reduces mi...