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Investing in Africa
Investing in Africa even sounds a little extreme. But investing in Africa not only sound extremely - it is like this in fact. If we would distinguish developed and emerging markets, then most of the Africa’s countr
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Investing in Russia
Investing in Russia has gotten really widely promoted for the last period. I can remember the talks that stocks in Russia are the cheapest over the world for not less than year. The fact, that those stocks are st
http://www.investingforbeginners.eu/investing_in_russia-p0-i9
Investment in Bulgaria
Starting from the very beginning I will try to make clear why I am bullish about investing Bulgarian stock market. At first I would suggest to look at the chart below. Five year Bulgarian stock market in
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What to Do With Investments in Current Turbulence?
The question is really not an easy one. The problem is that there is no left any good investments on this world. Let’s looks at the most topical investments classes: Stocks. Even before
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Investing in Land - Agricultural REITs
Investing in land I have noticed an increased interest in agricultural land investments during the last period. And I can it understand completely. When stocks are so volatile and bonds may offer such low return
http://www.investingforbeginners.eu/investing_in_land_agricultural_reits-p0-i12
Stocks Riskier than Bonds?
It is so common that stocks are riskier investments than bonds; nobody is even considering this question. Would I doubt it? Of course not, stocks are stocks and bonds are bonds. But I would like to look at it fro
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Bond Investment: Government Bonds and Corporate Bonds
Corporate Bonds and Government Bonds Today I want to discuss another untraditional topic. However, this topic concerns the most traditional investments – bonds. Bonds been used for very long time a
http://www.investingforbeginners.eu/bond_investment_government_bonds_and_corporate_bonds-p0-i17
How to Beat the Stock Market
Investing is good, but the real challenge for every portfolio manager is to beat the stock market, or beat the market. Of course the term ‘market’ is not very exact. In reality to beat the market is t
http://www.investingforbeginners.eu/how_to_beat_the_stock_market-p0-i20
Baltic Investment
Baltic Stock Exchange Baltic stock exchange now belongs to the world gigantic stock exchange NASDAQ OMX, and now is called NASDAQ OMX Baltic. Historically Lithuania, Latvia and Estonia had their own nati
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European Dividend Stocks
Before getting to the exact stocks, at first, please let me explain why I have chosen European dividend stocks as a topic. For the beginning, lets solve the question why dividend stocks. The true is that many inv
http://www.investingforbeginners.eu/european_dividend_stocks-p0-i22
Investments
(Are you looking for investment definition?) Investments are instruments that allow us to receive a higher amount of money than was spent. If someone spends 10 euros or dollars and he knows that he will receive
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Interest Coverage Ratio
Interest coverage ratio shows company’s ability to pay interests for its financial debts. Interest coverage ratio is a ratio between operating profit (EBIT to be more exact) and expenses for interests. The
http://www.investingforbeginners.eu/interest_coverage_ratio
Investing
Investing - what is that exactly? Probably you have heard many different definitions of investing. However, what is the essence of it? The essence is very simple: investing - a present sacrifice for the future.If
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Investing for Beginner
Many people are prepared to invest, and understand that investing would help to achieve many important goals of life.However, most of those people do not even start to invest, because do not know exactly how to do that,
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Investment in Cash
Bank (saving) Accounts, Deposits, Deposit Certificates, Treasure Bills, Money Market Funds When we are talking about investment, cash is not only the real paper (or metal) money that are held in the wallet or under the
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Investment in Mutual Funds
Investment Funds (Collective Investment) Investment in mutual funds is one of the most popular types of investment. A mutual fund is just a large and well diversified investment portfolio of many securities, in which ca
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Investment in Commodities
Investment in Oil, gold, Silver, Copper, Wheat Commodities (raw materials) are indeed a tangible asset class, but it can be also assigned to financial investments, because in current days most investments in commo
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asset Management
Definition asset management which also is called as investment management has many similarities to finance management but investment management is more specific and narrow area of finance. Invest
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Non-Financial Investments
When talks go about investing and investments everybody focuses on financial investments forgetting that spectrum of investments is much broader. Investment in non-financial investments is also popular, especiall
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Terminal Value
Terminal value is a value of the business (or other asset) used in discounted cash flow (DCF) method that is added after the discontinuing of the cash flow forecasting. DCF valuation is based on the sum
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Direct Investment
Investment in Tangible assets Direct investment are very wide issue to study, but it‘s not so close to traditional investing. Direct investments are more related with business development and would depend
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Investment in Options
Options are very known derivatives and especially popular among investing speculators. Options has some attraction: every successful prediction can grow up invested amount a lot of times very quickly and potentia
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Investment in Fund of Funds
If each normal investment fund invests in underlying assets directly, the fund of funds is investing solely in other funds that invest directly in shares, bonds or other assets.If such funds distributors would ar
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Strategy Investment
Strategy investment refers to an investment strategy, which should be wise chosen according to investing person character and market environment. Investing always has to be strategic and foresee possible future e
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Value Investing
Investment strategy - Value Investing Investing in value stocks is fundamentally different from investing in the growth companies. Stocks of growth company will rise up impressively during bull market when value
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Investing in Funds
Investment Funds Strategy Indeed, investing in mutual funds is not complete investment strategy, but only a part of it, or more precisely, only the choice of investment instrument. For example, if the strategy d
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Net Debt
Definition 'Net debt' is used quite often in finance and it is equal to financial liabilities of the company that are reduced by the cash amount (and cash equivalents) that are held by the company.
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Finance Management
Financial management, asset management, investment management, wealth management in fact are similar processes only called in different names. An investments definition may include both financial assets and real
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Investment Manager
Investment management or finance management are particularly a lot of attention and responsibility requiring areas. It does not matter whether you manage your money whether corporate funds, in any case, it is important t
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Investment Strategy by Age
It is very popular to allocate asset classes in investment portfolio according to investor’s age. And it has some reasonable justification: when investor’s age is changing – his risk tolerance a
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Investment Definition
Investment definition may have two meanings: 1) An investment as a process (investing) when tangible or financial assets are acquired on purpose to earn more money (or other material benefits) than was s
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Investing Definition
Investing definition is similar to investment definition. Shortly, it is an acquisition of asset made on purpose to profit from it over time. Investing is a process that may last from very short period a
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Investment Policy
An investment policy is an investment philosophy, main principles to be used of an investor. Investment policy may be written or not, and is needed for the investor to maintain attitudes during market turmoil. In
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OTC Market
OTC (Over-The-Counter) market is decentralized market where financial assets are traded. Decentralized market means a contrast to the exchange trading. OTC market doesn’t have one place (no physical, no vir
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Shareholder
A shareholder (stockholder) is a individual or company that owns some shares of stock in a corporation. Technically, every investor who is investing in shares is a shareholder for as long as he holds those s
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Investor
An investor is an individual or corporate unit that invests in any class of investments on purpose to earn some return from invested capital. There may be more criteria to distinguish very small investments
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Share Investor
A share investor is an investor who invests in shares (stocks) but not the other investments. If investor invests in different asset classes he is a regular investor. If investor is specializing in shares he must
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Stock Split
A stock split is a divide of existing company’s shares decreasing its face value. For every owned share an investor gets a several (or one) additional shares depending on split ratio, and the total out
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Book Value of Share
A book value of share is calculated dividing all company’s book value (less preferred equity) by its common share number. For example, if company’s book value is 1,000,000 USD and issued share nu
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Stock Buyback
A stock buyback (share repurchase) is a company’s purchase of its own stock on the market. It is contrary way to pay out capital for shareholders to dividends. Stock buybacks are getting more and more
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Investment Tactics
Investment tactics are the rules for investment actions that help to react on market conditions and achieve more efficient results. Investment tactics deal with lower scale questions than investment strategy, whi
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asset Management
asset management is a process when assets acquired, monitored and sold on purpose to achieve optimal investment results. There is no strong difference between investment management and asset management. However,
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Investment Portfolio
An investment portfolio is a composition of different investments made on purpose to achieve the highest return at predetermined risk level. Investment portfolio can include all kinds of investments: stocks,
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Market Timing
Market timing is investor's actions when investments are switched between asset classes and may be a part of investment strategy. For example, if investor sees that stocks are very high and economical downturn is
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Diversified Investments
Diversified investments are investments that are well diversified, which should include regional diversification, allocation between asset classes, sectors, maturity, denomination of currencies and other characte
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Diversification
A diversification is an investment technique or a part of an investment strategy, which is used to reduce the investment risk of the portfolio, including in it larger number of different securities or other inves
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Real Estate Investment Trust (REIT)
Real estate investment trust (REIT) is a corporate entity that invests exceptionally in to real estate sector. Usually securities of REIT’s are traded on stock exchange and every investor can easily acquire
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Private Equity Fund
A private equity fund is a fund that invests in a stakes of non-listed companies (private equity). Investment in private equity funds is much different from investment in mutual funds. They are illiquid, riskier
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Equity Fund
An equity fund is a mutual fund that is investing in equity (stocks). Equity fund can be actively managed, index fund, listed index fund (ETF) and can invest in some specific sectors or regions, or can invest glo
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Mutual Fund
A mutual fund is a collective investment vehicle that is consisted of fund units, which are sold for retail investors. Practically, mutual fund is a large investment portfolio, in which can take a part even small
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Derivatives
Derivatives are securities (financial instruments) that are created by financial intermediaries synthetically, and are based on price or value of some primer assets or indicator. Usually such underlying assets ar
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Securities
Securities are financial instruments that represent rights to some assets. Securities can be listed or non-listed. Listed securities are traded on securities exchanges, which commonly are called as stock exchange
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Investment Management Company
An investment Management Company or asset Management Company is a firm that has a license and provides investment management services. Such management company can manage private investment portfolios, invest
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Physical asset Market
A physical asset market is a market in which real products are traded. Physical asset market can also be called real asset market. Such real/tangible products traded in physical asset markets are gold, grain, mea
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Financial asset Markets
Financial asset markets also called just financial markets. These are the markets, in which securities are traded.
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Enterprise Value
Enterprise value (EV) is a financial measure that is used to reflect the magnitude of the business. If market capitalization shows only the value of shareholders equity, enterprise value includes both: equity val
http://www.investingforbeginners.eu/enterprise_value
Holding Company
Holding company is a type of a company which main activity is to invest in other companies. Holding as itself does not do any activity instead of managing their subsidiary companies and searching for new investme
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Mortgage Bond
A mortgage bond is a bond that has some collateral to make the security safer as investment. In case of bond default the creditor gets back his money or part of it from the sale of the assets that were pledged. U
http://www.investingforbeginners.eu/mortgage_bond
Market Risk
A market risk is a systematical risk that cannot be diversified. There are some risk factors that can make effect on the whole market: economical cycles, nature disasters, wars; and such are not diversifiable ris
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Investment Strategies
Investment (investing) strategy – often discussed by both amateur and professional investors, but in fact very rarely encountered. Amateurs usually imagine that they has an investment strategy only after th
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Direct Investments in Stocks
Direct investments in stocks are investments made without financial intermediaries (only theoretically). It means an investor buys stock directly from the company without intermediation of stock exchange or broke
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Investment Management Fees
Investment management fees (fees that are paid straight to investment manager) basically are one of these types: Performance based fee. Performance based fee is calculated according to increase of inve
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Total Expense Ratio
‘Total expense ratio shows all expenses of investment fund. It is a good measure that shows you how much of different fees you are really paying when investing in some fund. Total expense ratio is a percent
http://www.investingforbeginners.eu/total_expense_ratio
INVESTMENT MANAGEMENT HOW TO MANAGE YOURS INVESTMENTS PROPERLY
Investment management is a complete science and if you are expecting to become a professional investment manager in few hours you should get disappointed. However, there are several most important guidelines at i
http://www.investingforbeginners.eu/investment_management_how_to_manage_yours_investments_properly
Treynor Ratio
Treynor ratio is another popular ratio that is used to measure the performance of investment portfolio. This ratio compares the excess return (above risk free return) of a portfolio to beta of that portfolio. Whi
http://www.investingforbeginners.eu/treynor_ratio
Jensens Alpha
Jensen’s alpha is used to measure the performance of an investment portfolio. The higher ratio means better performance of portfolio manager. Basically, this Jensen’s ratio shows the above market port
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Investment Risk Management
There are several main methods of investment risk management: Diversification. Diversification is the easiest and most of the times the cheapest way to reduce risk level of the investment portfol
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Sharpe Ratio
Sharpe ratio measures the above risk free performance of investment portfolio in relation to its risk. This ratio was developed by William F. Sharpe which introduced the ratio in 1966. Now Sharpe ratio is the mos
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Working Capital
Working capital can be calculated from balance sheet data. There are few ways to calculate working capital, but the most accurate is this one (for operating working capital): Working capital = total curr
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Working Investment
Working investment mostly refers to working capital, which is equal to current assets less current liabilities. The other meaning of working investments might be that those are investments that are
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Foreign Direct Investment
Foreign direct investment (FDI) traditionally was understood as investment that is made by foreign country in direct assets, for example factory, including land, building and machinery. When financial markets evo
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Return on Investment
Return on investment (ROI) is a percentage that shows profitability of an investment or investment portfolio. Return on investment calculation: CALCULATION: Return on investment = net in
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Deflation
Deflation is a process opposite to inflation and occurs when inflation is negative. Deflation means that prices of goods and services are decreasing. Such situation when prices are decreasing is not very common i
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P/B Ratio
P/B (P/Bv or price-to-book) ratio shows how expensive stock is compared to its books value. Company’s book value (also called equity, capital, shareholders funds etc.) is equal to company’s total assets les
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P/NAV Ratio
Price to Net asset Value P/NAV ratio shows how expensive share is compared to its NAV (net asset value). This ratio is very similar to P/B ratio but in this case market values (not book values) are used. M
http://www.investingforbeginners.eu/p_nav_ratio
EV/S Ratio
Enterprise Value to Sales Ratio EV/S ratio shows how expensive firm is compared to its sales. This multiple is important when company is unprofitable or profits margins are very low and turnaround is expected in
http://www.investingforbeginners.eu/ev_s_ratio
EV/EBITDA Ratio
EBITDA Multiple EV/EBITDA ratio shows how expensive firm is compared to its EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization). EV to EBITDA multiple is mostly used by professionals because
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Cost of Equity
Cost of equity is the rate of return that is required by equity owners from their investment. Of course, requirements of the shareholders have to be real and meet market conditions as well. Basically cost of equi
http://www.investingforbeginners.eu/cost_of_equity
EV/EBIT Ratio
EBIT Multiple EV/EBIT ratio is identical to EV/EBITDA ratio. The only difference is that EBIT instead of EBITDA is used. EBITDA differs from EBIT at depreciation and amortization (DA). So EBITDA i
http://www.investingforbeginners.eu/ev_ebit_ratio
Stock Valuation
Stock valuation is very important part of investing in stocks, and this part is the most time consuming and knowledge requiring. Stock valuation is a necessary and main step at stock picking process. The only way
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Relative Valuation
Comparative analysis Relative valuation is stock valuation method that gained its popularity because of simplicity and practical importance. The key principle of relative valuation is about valuation multi
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DCF Valuation
Discounted Cash Flow Analysis DCF valuation might be applied to any asset that generates positive free cash flow or is expected to generate that cash flow in the future. DCF valuation might be directly applied t
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Replacement Cost Valuation
Replacement cost valuation method is not very popular at stock valuation. Most of the investors are picking stocks with help of relative valuation or DCF valuation. Only when those two methods aren’t possib
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Correlation
Correlation is a statistical measure that shows the relationship between two objects. Correlation may range between +1 and -1. If correlation between the objects is 0 that means they are not dependable on each ot
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Discounted Cash Flow
Discounted cash flow (DCF) is forecasted net cash flow of the company or other asset that is recalculated (discounted) to its current value. Discounted cash flow is important for investment assessing and mostly i
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CAPM
CAPM (Capital asset Pricing Model) is method widely used for equity cost calculation. Equity cost should show the return that investor should expect/seek from an investment that contains specific level of risk.&n
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Hedge Funds
Hedge funds are investment funds that use financial leverage and derivatives to achieve better investment results. The name of hedge fund came from hedging, which originally is a defensive investment strategy, bu
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Political Risk
A political risk is related to political decisions and political environment development, and is one of the main risks when investing in emerging markets. Developed markets also contain political risk, but there
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EBITDA Coverage Ratio
EBITDA coverage ratio (also called EBITDA to Interest Coverage Ratio) shows company’s capability to deal with its financial leverage. If this ratio is too low, that may show company is in trouble and may ha
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Total assets Turnover Ratio
Total assets turnover ratio shows how much of sales company’s assets are generating. If the company has a lot invested in assets, but do not generate a lot of sales from those assets, it may show some ineff
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Profitability Margins
Profitability margins are ratios that show how profitable company’s activity is. There may be many kinds of profitability margins. Normally profitability means some kind of profit divided by revenue. But al
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ROE
ROE (Return on Equity) shows profitability of company’s book value. Company’s book value (equity) is equal to company’s assets less liabilities, and ROE is usually higher if company ha
http://www.investingforbeginners.eu/roe
ROA
ROA (Return on assets) shows what profits are earned by company’s assets. Of course, assets alone usually do not earn the profit, because most of the times profit is the result of know-how and hard work of
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Margin Calls
Margin call is a call by margin trading service provider to an investor who is buying on margin. Such calls are provided when assets (collateral) in the investment portfolio are losing value and reach the margin. Margin
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Financial Investment
Financial investment is any financial asset that should provide a return for investor. Financial asset is an asset that doesn’t have tangible form and has some financial obligations to its owner. All securi
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Leveraged Buyout
A leveraged buyout (LBO) is a takeover of a company when debt capital is the main financing source for the acquisition and the acquired assets are used as collateral to receive the needed debt. The LBO may be exe
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Market Value
The meaning of market value depends on the context for which the term is applied. Generally, market value is a price at which the buyer would agree to buy and seller would agree to sell the object without any ext
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Bearish
Bearish is attitude of an investor if investor expects market to go down in the near future. Most often term bearish is applied for stock investments when is believed that stocks are going to decrease in value. T
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Bullish
Bullish is an investor's attitude when he believes that the investment market is going to rise in the near future. Most of the times this term is applied for investments in stocks, when is believed that stock mar
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Fund Manager
A fund manager is an employee of investment management company which is responsible for the management of the fund’s assets. Most of the times, more than one person is involved in fund’s management bu
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Balanced Fund
A balanced fund is a mutual (investment) fund that invests in different asset classes: stocks, bonds and money market investments according to the fund’s investment strategy. It may
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Financial assets
There are two main investment (asset) classes: financial assets and non-financial (tangible) assets. Both of them may have similar characteristics as yielding or increasing in value over long period; but financia
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Index Options
Index options are derivative financial instruments that provide for the buyer of the option the right (possibility) to make profits from index value changes. It may be a good investing instrument for the investor
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Investment Bubble
Investment bubble is a jump in price of particular investment when price starts increasing faster and faster as long as the price reaches its peak and falls down to a similar to previous level, if there are no ot
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Safe Investments
Safe investments are investments that contain low risk and considered to be safe. Safe investments do not necessary have to be 100% safe because there is no 100% safe investments in this world as this world isn&r
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Valuation Consultants
Valuation consultants are professionals that know everything about the value of an asset or business. The real market value consists of many parts and all of them may have critical importance to the value. Only e
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asset Valuation
The specifics of asset valuation depend on particular asset class. However, the main valuation methods are the same for all assets. The mostly used methods are relative valuation and DCF valuation. Relative valua
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Buying Stocks
Buying stocks is an easy thing. Of course, it is harder to pick good stocks. Every person, that has some capital, can open a trading platform and buy stocks, but the goal is not only to buy the stocks but to make
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Liquidity
(1) Market liquidity is a characteristic of a security or other traded investment that shows how easy it is convertible in to cash at a market value. Usually when investor decides to sell some investment and
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Investment Fund Management
Investment fund management is not much different from simply investment management or asset management. Investment fund is large investment portfolio and the composition of that portfolio depends on particular fu
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Investment Management System
It is common to understand an investment management system as investment management software that helps in investment portfolio management. While other people believe that investment management system should do t
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Investment Management Consultations
Investment management consulting is part of investment management business that helps for investors to manage their investments more effectively. Investment management is one of the most crucial step in personal
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Real Estate Investors
Real estate investors are individuals or investment companies that are investing in real estate (property). There few main types of real estate investors: • Real estate developers are investors that
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Investment Management Business
Investment management business is a large part of a financial industry and is very important for investment banks and other investment companies because investment management business has quite good profitability
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Investment Management Process
Investment management process has several functions: Macroeconomics analysis and estimates Research of industry sectors Security picking asset allocation Market timing Financial news covering Securitie
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Private Investors
Private investors are individuals that are investing in to some assets for investment purpose. (1) There are two main types of investors: private investors and institutional investors (business investor). Also th
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Financial Statements
Financial statements are periodically by the companies issued reports that provide the most important financial information about company’s financial condition and success of activity. There
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Balance Sheet
Balance sheet is one of the three main financial statements (others are income statement and cash flow statement). Balance sheet also might be called a statement of financial position because this statement expla
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Earnings
Earnings are calculated gains of the company and should represent the profit of that business. There are several types of earnings: Retained earnings are equal to net profit less dividends. Net earnin
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Profit
Profit is a term used in various finance fields and may have many meanings. Basically profit is the positive difference between the income and costs. If costs are higher than income, then instead of profit loss w
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Operating Margin
Operating margin is a profitability percentage that shows what company’s profit margin is before it pays interests and taxes. Operating margin simply ignores capital structure (because ignores financial act
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Financial Analysis
Financial analysis is an important part of investing, especially if investor wants better results from his investments. Of course it is possible to ignore financial analysis and make investment decisions based on
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Return
Return analysis is different from profitability analysis because usually return is measured as a profitability of the assets, investments, capital or other similar asset group but not as a profitability of the re
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Times Interest Earned Ratio
‘Times interest earned ratio' compares ‘earnings before interest and taxes’ of the company to its interest expenses. Low ratio means that company may be in dangerous situation and its interest e
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Solvency
Solvency analysis takes an important part in financial analysis and mostly is used by creditors. Creditors of the business (bondholders, banks that provide loans) don’t care much if company’s profit w
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Debt to Equity
Debt to equity ratio (also known as D/E ratio, Debt/Equity) measures how big is company’s debt compared to its book capital (equity). The higher is the debt to equity ratio the higher is the insolvency risk
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Debt to asset Ratio
Debt to asset ratio (also called as D/A ratio, Debt/asset) measures how big is company’s debt compared to its assets. Debt to asset ratio is very similar to debt to equity (D/E) ratio but normally is lower
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Debt to EBITDA
Debt to EBITDA (also known as D/EBITDA or Debt/EBITDA) is widely used ratio that measures how big company’s debt is compared to its EBITDA (earnings before interest taxes depreciation and amortization). EBI
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Financial Planning
Financial planning is a type of financial analysis of which goal is to predict financial situation of the object in the future. There are two main trends where financial planning can be applied: in corporate fina
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Turnover Ratio
(1) Turnover ratio of mutual fund shows how quickly assets of the fund are changing. Actively managed investment funds have higher turnover ratio than passively managed funds, and normally turnover ratio is measu
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asset Turnover Ratio Formula
There are many modifications of ‘asset turnover ratio’ formulas. These are the most popular forms of this ratio formula: (1) asset turnover ratio = Sales revenue / Total averag
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asset Turnover Ratio
asset turnover ratio compares company’s sales and assets in order to identify the efficiency of assets used in the business. In simple words, it shows show much of sales are generated by company’s ass
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Working Capital Management
Why Working Capital Is Important? Working capital is one of the main parts of company’s finances and every manager, even of the small company, manages working capital despite the fact he knows about that o
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Working Capital Calculation
There are few modifications of working capital calculation. All data that are needed for working capital calculation can be found in balance sheet (which is one the three main financial statements).
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Working Capital Ratio
Working capital ratio may have several meanings in practice: (1) Working capital ratio = Working capital / Sales (2) Working capital ratio = Current ratio = Current assets / Current liabilities (3)
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Stocks and Commodities
You may ask how stocks and commodities related are. And the answer is simple: everything is related and especially in financial markets. Normally, if some of the main asset class (as stocks) looses or gains
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Opex
Opex (operating expense) are expenses of the business and are related to the operational activity of the company. Basically, every company has few types of expenses: COGS (cost of sales) include costs t
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Capex
Capex (capital expenditure) is company’s investment in long-term assets that are needed to continue the business or for future’s growth. The perfect examples of capital expenditure can be an acquisiti
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Operating Cash Flow
Operating cash flow or ‘cash flow from operations’ (CFFO) is one of the most important among financial indicators and is used to measure company’s results in cash terms. While net income or oper
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EBITA
EBITA (earnings before interest, taxes and amortization) is a financial indicator that shows company’s earnings which are equal to pretax profit plus corporate tax and amortization. EBITA is
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asset Performance
asset performance is a return of an asset over some period. Usually performance is measured on annual basis. But basically performance of any asset depends on its riskiness and the period (most of the stocks and
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Economic Cycle
What is economical cycle? An economic cycle means the repeated changes of the economical trends. While during very long economical period economy always has up-trend because of technological evolution and increa
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Beta
What is beta? Beta is a ratio that measures volatility of an investment in relation to the whole market. In other words, it shows how the price of stock was changing compared to the whole market. Theoretically,
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Intangible assets
All assets can be classified to three main groups: tangible assets, financial assets and intangible assets. Intangible assets are those assets that aren’t financial and don’t have a real physical form
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Tangible assets
Basically all assets can be divided in tangible assets or non-tangible assets (intangible and financial). Tangible assets are those assets that exist physically and the value of them depends on their physical con
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NOPAT
NOPAT (‘net operating profit after tax’ or ‘after tax operating profit’) is equal to operating profit less taxes. It is adjusted by tax rate because the part cost of debt which is part of
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Rate of Return
A rate of return is a percentage that shows what is the profit or loss gained on some investment on annual basis. There are many ways to calculate the rate of return including internal rate of return, arithmetica
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Return on Invested Capital
Return on invested capital (ROIC) or also called return on capital is a financial ratio employed to measure nominal company’s return that is earned by capital invested in operating asset. Basically return o
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Financial Ratios
Financial ratios are ratios that are used in financial analysis or in other words that are using financial data of a company. Such financial data usually is found in financial statements (income statement, balanc
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Fixed asset Turnover
Fixed asset turnover ratio is a financial ratio that measures how much of sales are created by company’s property, plant and equipment. The ‘higher asset turnover’ is the better, because it mean
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Quick Ratio
Quick ratio (also called ‘acid test ratio’) is a financial ratio that measures company’s financial liquidity. This ratio compares company’s most liquid assets and short-term liabilities. I
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Capital Employed
Capital employed is a value of capital investments in a company. Basically, the capital of each company can be classified in these types of capital: Equity capital Debt capital Working capital
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Current Ratio
Current ratio is a financial ratio that measures company’s financial liquidity in short term. In simple words, this ratio compares company’s short-term assets to its short term liabilities. If short-t
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Cash Ratio
Cash ratio is a financial ratio that measures company’s financial liquidity over short term. It compares company’s cash reserves to short-term liabilities. If ‘cash ratio’ is high, it may
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Equity Ratio
Equity ratio is a financial ratio that compares company’s equity to assets. Basically, it shows what part equity capital makes in total capital of a company. If ‘equity ratio’ is very high (clos
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Return on Capital Employed
Return on capital employed ratio (ROCE) measures company’s return compared to its employed capital. Return in this case is some kind of profit (mostly EBIT or NOPAT) and the capital employed means equity ca
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Capital Adequacy Ratio
Capital adequacy ratio is the main financial ratio for banks to measure whether the bank has enough of capital on which depends the riskiness of the bank. Banks are borrowing money from other depositors and it is
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Net Interest Income
Net interest income is an indicator that measures lending business performance of a financial institution. Basically, it is equal to interest income from loans and other assets less interest expenses for deposits
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Interest Rate Spread
‘Interest rate spread’ is a very important measure for banks and other financial institutions. As money lending is the core business for most of the banks, it is very important that this operational s
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Net Interest Margin
Net interest margin shows the profitability of the lending business for a bank or other financial institution. Lending business is the core business for most of the banks, and the profitability of this operational segmen
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Non-Performing Loan Ratio
Non-performing loan ratio measures the quality of the loan portfolio of the financial institution. This financial ratio compares non-performing loans to the total loan portfolio (loans are assets for the bank), a
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Loan to Deposit Ratio
Loan to deposit ratio is financial ratio used for banks or other financial institutions. This ratio compares bank’s loan portfolio to deposit portfolio and measures financial liquidity of the institution. &n
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Loans to assets Ratio
‘Loans to assets ratio’ is a financial ratio that usually is applied for banks (or credit unions) to measure the relation of the bank’s loan portfolio to the total assets. Providing loa
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Reserve Ratio
Reserve ratio (reserve requirement or cash reserve ratio) is a ratio that is used by central bank of an area to regulate the financial market. This financial ratio compares the cash of the bank to the deposits th
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Cash Turnover Ratio
Cash turnover ratio compares company’s sales to its cash and measures how effectively company is using cash assets. However, this financial ratio now is a bit outworn and is not very meaningful for most of
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Liquidity Ratio
Liquidity ratio is a ratio that measures company’s liquidity. At first, it is needed to mention that liquidity may have two meanings: financial liquidity of a company or market liquidity of some asset. Liqu
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Equity to asset Ratio
Equity to asset ratio measures company’s riskiness by comparing its equity to its assets. If this ratio is very low (lower than 0.3), it might mean that company may be at risk if conditions of the market wo
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asset to Equity Ratio
asset to equity ratio compares company’s assets to the book value and measures the riskiness of the company. This ratio cannot be lower than 1.0, and if it is equal to 1, it means that assets are equal to e
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Total Debt Ratio
Total debt ratio compares total liabilities to total assets. The higher ratio represents riskier situation. And if this ratio is equal to 1.0, it would mean that liabilities are equal to assets or in other words
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Non-Operating assets
Non-operating assets are assets of the company that aren’t used in the main activity of the company. Such assets can be either financial or non-financial. This asset type is very important during the valuat
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Book Value
There are two main types of values that are used in finance: Book value Market value Book value is a value that is recorded in the balance sheet of a company. Every asset of the company must
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