Definition: Semi-Annual is the time interval or frequency of an event occurring every six months, twice a year, or semi annually.
What Does Semi-Annual Mean?
What is the definition of semiannual? In business, semiannual is usually attached to something that is recurring such as payments or interest rates. In a more general sense, it can even be used to convey the recurrence of a particular metric or event such as a convention or organizational meeting.
Businesses commonly use semi-annual in the similar to way to how the definition above dictated. This is of particular note when it comes to interest rates on securities that are either being received or issued. This can have a substantial impact on the evaluation of a particular organization’s risk management analysis and decisions moving forward.
Businesses also state payment periods, loans, and even meeting arrangements in this time period. For instance, a semi-annual loan payment starting May 1 would require the first payment on May 1 and the second on October 1. Likewise, companies also issue reports and financial statements semiannually as well.
Similarly, interest rates are occasionally stated in six-month periods as well. This is important to understand because a 10% semiannual interest rate is actually a 20% annual rate. Thus, if a business borrows $100,000 6% semi annual loan, it will make two $6,000 interest payments during the year. Thus, it is paying an annual rate of 12 percent.
Let’s look at another example.
Example
Janice owns an interior decorating company called We Prefer Decor. Jeremy’s graphic design company often purchases large amounts of inventory in order to fill local and national demand for design materials. However, because of the exceptional inventory demand, Janice does not currently have the funds needed to fulfill all of her orders. So, Janice decides to seek out an investment to give her the amount of capital necessary to fulfill these orders.
The investment she seeks comes with the stipulation of a compound interest rate and the interest rate is on a semi-annual schedule. This means that the compound interest rate will be calculated on the bases of the principal added with the result of the compound interest rate from the previous term’s calculation, twice a year. Janice decides to hold an organizational meeting semi-annually to discuss this commitment among others as well. Because the meeting is designated to be semi-annual, it also will only occur twice a year.
Summary Definition
Define Semi-Annually: Semi-annual means an event occurs regularly every 6 months.
