Excess Cash Flow

AAA

DEFINITION of 'Excess Cash Flow'

A term used to describe the income derived from mortgages or other assets backing a bond that is in excess of what is needed to retire the bond. The excess cash flow may be passed to investors who purchased a residual interest in the securities or used by the bond issuer to pay out to bond holders.

INVESTOPEDIA EXPLAINS 'Excess Cash Flow'

Excess cash flow usually occurs as a result of overcollateralization in order to improve the borrower's credit rating and lower the lender's default risk. Also, in terms of financial statements, excess cash flow can als refer to available cash left after expenditures and dividends are paid.

RELATED TERMS
  1. Bond

    A debt investment in which an investor loans money to an entity ...
  2. Excess Loans

    A loan made by a state chartered or national bank to an individual ...
  3. Cash Flow Loan

    Borrowing cash typically to meet day-to-day operations or acquisitions. ...
  4. Overcollateralization - OC

    The process of posting more collateral than is needed to obtain ...
  5. Mortgage-Backed Security (MBS)

    A type of asset-backed security that is secured by a mortgage ...
  6. Cash Flow

    1. A revenue or expense stream that changes a cash account over ...
RELATED FAQS
  1. When looking at my online broker account, I see an account value, cash value and ...

    When looking at some online brokerage accounts, there are a few figures that may be confusing, including account value, cash ... Read Full Answer >>
  2. What is a Ginnie Mae security?

    A Ginnie Mae, or Government National Mortgage Association security, functions similarly to the process of lending someone ... Read Full Answer >>
  3. Which is a better metric, modified duration or Macaulay duration?

    The modified duration is likely the more useful metric since it measures the price sensitivity of a bond to a change in interest ... Read Full Answer >>
  4. What are the tax benefits of establishing a sinking fund?

    The primary tax benefit available through the creation of a sinking fund is a deduction for interest payments made. The other ... Read Full Answer >>
  5. What does the book-to-bill ratio in the electronics sector refer to?

    The collection and analysis of data can significantly complement and enhance operations management, leading to increased ... Read Full Answer >>
  6. What is the risk return tradeoff for bonds?

    Macaulay duration and modified duration are mainly used to calculate the durations of bonds. The Macaulay duration calculates ... Read Full Answer >>
Related Articles
  1. Entrepreneurship

    Business Owners: Rules For Qualified Retirement Plans

    Business owners need to take note of how they handle qualified-plan distributions to former employees.
  2. Budgeting

    Should You Pay In Cash?

    Avoiding all forms of plastic payment can do wonders for your stress level and pocket book.
  3. Insurance

    Investing In Securitized Products

    Securitized assets are customizable and have a wide range of yields, making them an attractive asset class.
  4. Retirement

    The Essentials Of Corporate Cash Flow

    Tune out the accounting noise and see whether a company is generating the stuff it needs to sustain itself.
  5. Markets

    Cash: Can A Company Have Too Much?

    Cash is something companies love to have. But if they are not using it there could be problems.
  6. Markets

    Free Cash Flow: Free, But Not Always Easy

    Free cash flow is a great gauge of corporate health, but it's not immune to accounting trickery.
  7. Economics

    Explaining the Cash Budget

    A cash budget is a plan for the inflows and outflows of cash for a business or an individual.
  8. Economics

    Explaining Residual Value

    Residual value is a measurement of how much a fixed asset is worth at the end of its lease, or at the end of its useful life.
  9. Economics

    What is the Cash Ratio?

    The cash ratio is the ratio of a company's total cash and cash equivalents to its current liabilities.
  10. Stock Analysis

    Fight Volatility and Inflation with Infrastructure

    As institutional investors flock to infrastructure assets there's good reason for retail investors to follow suit.

You May Also Like

Hot Definitions
  1. Covered Call

    An options strategy whereby an investor holds a long position in an asset and writes (sells) call options on that same asset ...
  2. Butterfly Spread

    A neutral option strategy combining bull and bear spreads. Butterfly spreads use four option contracts with the same expiration ...
  3. Unlevered Beta

    A type of metric that compares the risk of an unlevered company to the risk of the market. The unlevered beta is the beta ...
  4. Moving Average - MA

    A widely used indicator in technical analysis that helps smooth out price action by filtering out the “noise” from random ...
  5. Yield Curve

    A line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturity ...
  6. Productivity

    An economic measure of output per unit of input. Inputs include labor and capital, while output is typically measured in ...
Trading Center