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Finance GlossaryDeferred Tax Liability
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Deferred Tax Liability

Definition of Deferred Tax Liability

A deferred tax liability is line item on a company’s balance sheet that refers to taxes that owed but due in the future. Common examples of deferred tax liabilities include:

  • Paying less tax
  • Sales in instalments

Related Terms

Convertible Bonds

A convertible bond is a hybrid security that’s initially designed to be a debt instrument that pays a fixed interest rate in exchange for a loan. Once the loan’s tenure ends, the holder can decide to take one of either action:

  • Don’t convert bond: face value of the bond is transferred to the holder on maturity
  • Derivatives Trading

    Derivatives trading means buying and selling derivatives contracts like futures, options, swaps, and forwards either on an exchange or over the counter.

    Trading derivatives means trading contracts that derive their value from an underlying asset like stocks, commodities, currencies, indexes, interest rates, and more.

    The buyer of the contract can decide to take delivery to the underlying asset or offset it with an opposite contract.

    Box Spread

    A box spread is a trading strategy that involves buying a bull call spread and a matching bear put spread. The components of a box spread are designed as so:

    • Bull call spread : two call options with a lower and upper strike price
    • Bear put spread : buying and selling puts at different strike prices of the same underlying asset with the same expiration

    Convertible Arbitrage

    A convertible arbitrage is a trading strategy that involves buying convertible securities - most commonly bonds and preferred stock - and a short option on the common stock of the same company.

    Because of this combination of purchases, a convertible arbitrage strategy is known as a neutral strategy designed to profit from the supposed inefficiencies that lie in the pricing of convertible securities.

    Floating Interest Rate

    The rate of interest that changes across the tenure of a loan, generally every quarter, due to the government’s interest rate, market conditions, and other factors is known as a floating interest rate.

    Personal loans and home loans are typical examples of borrowing that carry a floating interest rate. A point to note here: the floating interest rate is added on top of a base interest rate that is charged by lenders.

    Assets And Liabilities

    An asset is something that has monetary value and can generate profits in the future while a liability is a debt that’s repayable immediately or in the future. Assets are owned whereas liabilities as owed.



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