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Investing in Gold (I)
I will not be the first, and probably also will not be the last, who spoke about the Gold Rush that shakes down the world for the last few years. Just in this time it is a little different than in the days when desired f
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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
http://www.investingforbeginners.eu/investment_in_bulgaria-p0-i10
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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How ECB Is Affecting Investment Markets?
Today was announced very interesting news. The news is about the fact that ECB (European Central Banks) lends 489 billion of Euros to the banks. It is a really huge amount of capital that flows from ECB to the fi
http://www.investingforbeginners.eu/how_ecb_is_affecting_investment_markets-p0-i18
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
http://www.investingforbeginners.eu/baltic_investment-p0-i21
Putting Investment Indicators from Economy to Good Use
Putting investment indicators from economy to good use People in various professions – journalists, stock market traders, businessmen, or individuals looking at investing in property – usually refer to inv
http://www.investingforbeginners.eu/putting_investment_indicators_from_economy_to_good_use-p0-i25
The Most Known Investors: Who are they?
Regularly, a magazine is releasing its top 100 billionaires of the world. These are the investment giants and the masters of investing. We all know that the investing world is a world of strategies and the
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Learning the basic investment concept: a good start in investing
The first step in investing is learning the investment concept itself. It is very important that you understand the basic rules in investing in order for your investment to profit and to prevent losses. As we all know,
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How Investment Horizon Affects Your Investment Portfolio?
All investors have an investment horizon, which is the amount of time that they're willing to keep their money on the market. In layman's terms, it measures how long one is willing to wait before selling one's securiti
http://www.investingforbeginners.eu/how_investment_horizon_affects_your_investment_portfolio-p0-i32
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
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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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Derivatives
Derivative Financial Instruments Derivatives are so called because they are constructed from other traditional securities, and operate the rights to them. Apart from the fact that there are some basic derivative instrum
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Investing Top 10
INVESTING 10 things that you should try to do: Always have an investment strategy and follow it strictly. Set up an investment strategy (investing rules) even before beginning of investing: t
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Investment in Stocks
Stocks (shares) are investments that attract the most attention in financial markets, and perhaps stocks are worth it, because investors can expect the highest return from stocks among the range of traditional investme
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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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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 Actively-Managed Funds
Active Mutual (Investment) Funds Actively managed investment funds usually are those mutual funds that choose not copy the index (benchmark), but is trying to beat it, so could give for investing person a higher return,
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Investing in Unprofitable Companies
Investment Strategy - Unprofitable Companies Investing in companies that are still unprofitable is more difficult than investing in profitable companies, but may also be very successful. If the company will turn around
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Speculation
Speculation is an investment action made under intentions to earn large profits in short term. Usually such actions are very risky and lays somewhere between investing and gambling. It is hard to say where exactl
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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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Bull Market
A bull market is a market trend when investment market is increasing over longer period and is believed to increase in the future. Bull market is a well known term among investors and is opposite to bear mar
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Bear Market
A bear market is a market trend when investment market is decreasing over longer period and is believed to decrease in the future. Bear market is a well known term in the investment world and is opposite to bull
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Share
A share is a unit of firm’s ownership, which represents the rights and obligations of the shareholder (owner of the shares). If investor owns all shares of the company he is a complete owner, but if he
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Preferred Stock (Preferred Shares)
A preferred stock or preferred shares are other type of shares than common shares. They are called preferred only because of priority over common shares in case of a firm’s termination.
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Stockholder Wealth Maximization
Stockholder wealth maximization is a main goal for firm’s managers in corporate finance. Stockholder wealth maximization is above the profit maximization because of long term orientation and better risk man
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Dividend Yield
A dividend yield is a ratio that shows how much investor gets dividends from the stock compared to its price. It is calculated dividing dividend per share by the share price. Dividend yield is impo
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Dividend Payout Ratio
Payout ratio is a percentage that shows a portion of company’s income distributed as dividends. Formula Dividend payout ratio = common shares dividends / net income *For the sam
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Flipping
Flipping is partly an investment strategy, partly a speculation when investor resells acquired property quickly on purpose to get fast profit. Flipping is most common in IPO’s when retail inv
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Market Capitalization
Market capitalization (market cap) is a company’s value (price) on the stock exchange. Market capitalization is calculated by multiplying the outstanding share number by the last share price on the exchange
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Buying on Margin
Buying on Margin Costs of Buying Stocks on Margin Margin Call The Pros and Cons Psychology: Is it worth? Buying on margin gets popularity during every strong bull market. Unfortunately, it be
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Capital Investment Group
Capital investment group is an organization that can have many juridical forms. Usually capital investment group is privately held or public organization, that invests in stakes of non-listed companies, real esta
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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
http://www.investingforbeginners.eu/real_estate_investment_trust_reit
Hedge (Hedging)
Hedge (hedging) is protection of investment portfolio against fluctuations using financial instruments. Hedge is very popular at investment theory, but not so popular at investment practice. In theory everything
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Investment Bank
An investment bank is a financial institution that has a license of bank and specializes exclusively on investment services. In the USA investment banking services was separated from other banking activity u
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Business Valuation
The goal of business valuation is to determine the correct market value of a business. Usually business valuation is performed by professional valuators / assessors who have required qualifications for the job.&n
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Investment Banking Services
Investment banking services are corporate finance services provided by investment banks. Investment banking includes such services like capital rising, securities issuing, IPO’s running, mergers and acquisitions
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Insurance Company
An insurance company may provide insurance services of two different directions: life insurance and non-life insurance. Non-life insurance is not very closely related (if to mention own insurance company’s
http://www.investingforbeginners.eu/insurance_company
Value Stocks
Value stocks are opposite to growth stocks and attract investors not by growth perspectives but by stable cash and dividend flow. Market ratios (P/E, P/B and other) of value stocks are low and together with high
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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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Value Penny Stocks
Value penny stocks are stocks that have characteristics of both: value stock and penny stock. Investment in value penny stocks isn’t very popular, because stock investors who seek for safety invest in norma
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Operating Leverage
An operating leverage is a company’s EBIT (earnings before taxes and financial operations) sensitivity to changes of sales. As the sensitivity is measured to operating income (close to EBIT), the
http://www.investingforbeginners.eu/operating_leverage
Corporate Finance
Corporate finance is a niche of finance that deals with financial questions related to corporations. The main goal of every company should be stockholders wealth maximization, but to achieve that m
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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 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
http://www.investingforbeginners.eu/investment_risk_management
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
http://www.investingforbeginners.eu/return_on_investment
P/E Ratio
P/E ratio is the most popular valuation multiple that is used for stock analysis. This ratio shows the price of the stock compared to its earnings. The multiple is so popular because of its simplicity and im
http://www.investingforbeginners.eu/p_e_ratio
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
http://www.investingforbeginners.eu/p_b_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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Inventory Turnover Formula
Inventory turnover formula helps to calculate inventory turnover ratio. There are few possible ways to calculate inventory turnover that are used in financial practice. You may see the formulas below:
http://www.investingforbeginners.eu/inventory_turnover_formula
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
http://www.investingforbeginners.eu/relative_valuation
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
http://www.investingforbeginners.eu/dcf_valuation
Earnings Per Share
Earnings per share (EPS) shows how much of net earnings are allocated to one common share. EPS might give some guidance about the value of the share for shareholder. Share price compared to EPS is equal to P/E ra
http://www.investingforbeginners.eu/earnings_per_share
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
http://www.investingforbeginners.eu/hedge_funds
OIBDA
OIBDA or also called operating income before depreciation and amortization is a financial measure used to represent specific type of an income. There are many types of income and each of those has some advantages
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Inventory Turnover Ratio
Inventory turnover ratio shows how quickly company’s inventory is changing compared to its sales or cost of goods sold. This ratio shows how effectively inventory is managed in company’s production/di
http://www.investingforbeginners.eu/inventory_turnover_ratio
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
http://www.investingforbeginners.eu/ebitda_coverage_ratio
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
http://www.investingforbeginners.eu/profitability_margins
EBITDA Margin
EBITDA margin is a profitability margin that shows how much of EBITDA earns company’s revenue relatively. The EBITDA margin is the best for profitability comparison of the companies if you want to measure e
http://www.investingforbeginners.eu/ebitda_margin
profit Margin
profit margin normally refers to net profit margin, which is net profit divided by sales. But one should remember that profit might be of different kinds (net profit, pretax profit, EBIT, EBITDA and gross profit)
http://www.investingforbeginners.eu/profit_margin
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
http://www.investingforbeginners.eu/roa
The Pros and Cons of Buying on Margin
Buying on Margin Costs of Buying Stocks on Margin Margin Call The Pros and Cons of Buying on Margin Psychology of Buying on Margin: Is it worth? The opportunity provided by buying on margin i
http://www.investingforbeginners.eu/the_pros_and_cons_of_buying_on_margin
Psychology of Buying on Margin: Is it worth?
Buying on Margin Costs of Buying Stocks on Margin Margin Call The Pros and Cons of Buying on Margin Psychology of Buying on Margin: Is it worth? For the conclusion I would like to say that bu
http://www.investingforbeginners.eu/psychology_of_buying_on_margin_is_it_worth
Costs of Buying Stocks on Margin
Buying on Margin Costs of Buying Stocks on Margin Margin Call The Pros and Cons Psychology: Is it worth? We won’t talk about the possible losses in here. The goal of this paragraph is t
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Trading Stocks
Trading stocks is a process when stocks are bought and sold on the stock market. How differs trading stocks and investing in stocks? Well, it is the same, just is common to think that investing is a long term pro
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Underwriter
An underwriter is a company (normally an investment bank) that organizes the selling of new security issues for the corporations. It is a financial intermediary that buys new issues of securities (shares or bonds
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Investment Products
Investment products basically are investments that are packed and adopted for every investor. The best example of investment product could be mutual funds or any other investment funds that are well diversified a
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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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Stock Trader
A stock trader is a speculator that is trying to make profits from quick changes in value of stocks or other securities that he trades. Stock trader have few differences from normal investor and the main differen
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Stock Market Trading
Stock market trading is similar to stock market investing; however, it is not exactly the same. At first, stock trading refers to a stock trader who trades stocks very often and do not invests for a long term. Lo
http://www.investingforbeginners.eu/stock_market_trading
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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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
http://www.investingforbeginners.eu/investment_management_business
Equity Investors
Equity investors are investors that are investing in equity investments: listed stocks or similar ownership securities, stock funds, unlisted stock stakes or other half-equity strategies (equity loan, mezzanine f
http://www.investingforbeginners.eu/equity_investors
Income Statement
Income statement (also called statement of operations, profit and loss statement, P&L or other) is one of three main financial statements reported by the companies periodically. Income statement exposes compa
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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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Income
The term income may have several meanings. In corporate finance it basically means profit or earnings that are equal to revenue less expenses. But in some cases income may also indicate company’s revenue bu
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Net Income
Net income (net profit) is a financial indicator of the company that shows the real profitability of the business in accordance to its capital structure. Net income is equal to all revenue and gains less all expe
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Loss
Loss (net loss) is a financial situation of the company when its revenue is lower than expenses. It is natural that every company tries to receive a profit instead of a loss, but not every succeeds that. Some com
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Gross Income
Gross income (gross profit) is equal to company’s revenue minus all cost of goods sold (COGS). Gross income is just one type of income; other types of income are operating income, pre-tax income or net inco
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Gross Margin
Gross margin is profitability percentage that shows the ratio between gross income and revenue. Gross margin is usually calculated when there is a need to compare company’s competiveness and effectiveness i
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Operating Income
Operating income (operating profit) is the type of company’s profit that comes from operating activity. That means operating profit is lower than gross income by operating expenses but higher than pre-tax p
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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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EBIT
EBIT (also called Earnings Before Interest and Taxes) is a financial indicator of the company that provides information about company’s profitability while ignoring the impact of capital structure and corpo
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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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profitability Analysis
The main purpose of profitability analysis is to determine the profit margin and compare it to the appropriate financial data. profitability should not be confused with return because profitability is based on so
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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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Debt Coverage Ratio
Debt coverage ratio (debt service coverage ratio) is a ratio that measures solvency risk and mostly is applied for property projects. There are many debt coverage ratios that are used in financial practice on thi
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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
http://www.investingforbeginners.eu/solvency
Strategic Financial Planning
Strategic financial planning is a bit different from standard financial planning because standard financial planning focuses on a budget which is detailed estimation of financial statements when strategic financi
http://www.investingforbeginners.eu/strategic_financial_planning
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
http://www.investingforbeginners.eu/asset_turnover_ratio
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
http://www.investingforbeginners.eu/working_capital_management
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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Investment Formula
If you are looking for some perfect investment formula, you should get disappointed because there is no secret investment formula that would be profitable for every investor. If there would be such perfect formul
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Minority Interest
Minority interest (non-controlling interest) is a part of net income or of an equity that does not belong to the shareholders of the main group. Basically there are two types of the minority interest:
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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
http://www.investingforbeginners.eu/ebita
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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profit Taking
profit taking is the selling of stocks or other investments after sharp rise in prices. Investors are say that they ‘took profit’ when they sold their stocks after good rise when they seceded with sto
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Real Estate Flipping
Real estate flipping always gets popular when economical cycle is increasing. It usually coincides with the period of real estate prices boom. It looks very simple when real estate prices are raising and some peo
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Inside Information
Inside information is information of the company that was not publicly disclosed. Such information is daily routine for company’s managers, finance department employees or product department employees as th
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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
http://www.investingforbeginners.eu/nopat
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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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
http://www.investingforbeginners.eu/return_on_capital_employed
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
http://www.investingforbeginners.eu/interest_rate_spread
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
http://www.investingforbeginners.eu/net_interest_margin
Cost/Income Ratio
Cost/income ratio is very popular financial ratio in bank analysis. This ratio measures the relation of bank’s operating costs to operating income. Basically, lower ratio is better because means higher prof
http://www.investingforbeginners.eu/cost_income_ratio
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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Leverage
Leverage definition In finance leverage means usage of debt capital in addition to the equity capital in order to increase the profit. Increase in leverage is understood as increase in riskiness and volatility.
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About Us
The website INVESTING FOR BEGINNERS EU was created in order to educate investors and other participants of the financial markets in accordance to the highest standards. Investment process is not re
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Internal Rate of Return
An internal rate of return (IRR) is a ratio used very often to measure a profitability of some investment project. IRR is determined as a discount rate when NPV of the project is equal to zero. If IRR is higher t
http://www.investingforbeginners.eu/internal_rate_of_return
