Investing for Beginners .EU, investing Wall Street people learn nothing and forget everything.
Benjamin Graham

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Investing in Gold (II)
The upper limit of the price is even more difficult. In our times gold is not founded in streams as was shown in the movies. Now gold is mined from the deep earth and separated from gold dust, metal ore or rock. In natur

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

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

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

US Debt Relief
  Let me give you few facts at first that we would now what are we talking about: The General government gross debt in percent of GDP in the United States was reported at 83.21 percent of GDP in 2009 (90% of GDP

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

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

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

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

Investment psychology gains momentum in contemporary business world
  Many individuals make rational investment decisions, but others are swayed by their emotions, serving as clear-cut illustration of just how the mindset and behavior can affect finances, and this is an important a

BRIC Countries
  BRIC countries are the largest emerging economies over the world. The first letters of every country make a name of B R I C and those countries are: Brazil (population - 192m) Russia (population - 143m) Indi

(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

  Commodities are goods or products that are traded in exchanges. Usually not all the goods that are produced are traded in exchange, only those which can be standardized enough to trade them at the identical price

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

Sortino ratio
  Sortino ratio is a financial ratio that is used to measure the performance of investment portfolio and is very similar to a Sharpe ratio. The main difference between Sortino ratio and Sharpe ratio is that Sharpe

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

Investing 10 NOT
  INVESTING 10 things that you should try NOT to do:     Do not let the emotions to take over control. The investment market is always full of emotions. It is very important to maintain sanity and

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

Investing for Retirement
Investing for retirement may be one of the most reasonable investment objectives. Sometimes, people invest so they can afford expensive things that they otherwise could not afford without investing. For example

Investment in Bonds
Debt (fixed income) securities Bonds are fixed income securities and the principle of them is simple - the issuer of the bonds attracts the money from the investors and commits to pay back for the investors until end of

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

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

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

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

Investment Strategy in Growth Stocks
  Investing in the rapidly growing companies has always attracted the attention of all worlds’ investors, in particular, at the market rise. The reason why investing in growth stocks - so popular is very simp

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

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

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.

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

Investment Book:
  Investing for Beginners Exposed: Or What Investment Consultants Hide from You   Rokas Lukosius (Author of the book and this website)   No matter whether you are a seasoned inv

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

Investment Solutions
  Investment solutions are services provided by investment banks or brokerage firms. These services may include common elements of investing: securities trading trough broker, online investing, securities depositor

Investment Techniques
  Investment techniques are some combination of investment strategies and investment tactics. Investment techniques usually are middle term oriented procedures that help to reach some predetermined result. It may i

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

  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

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

Reverse Stock Split
  Reverse stock split is a merge of existing company’s shares increasing its face value. For several owned shares an investor gets one share depending on reverse split ratio, when total outstanding shares num

Stock Book Value
  Stock book value is a book value of one share. It is calculated dividing shareholders equity by share number and gives some very approximate investing guidance about the value of the stock. It is popular to look

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

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

Dividend Policy
  A dividend policy is a company’s written practice that describes dividend payments scale over time. Dividend policy may be as short as target dividend payout ratio or also include some reaction to a ch

Dividend Stocks
  Dividend stocks are called stocks that have high dividend yield and high dividend payout ratio. Normal dividend stocks should have stable 6%-10% dividend yield and possible 60-100% dividend payout ratio. High div

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

Initial Public Offering (IPO)
  An initial public offering (IPO) is a first introduce of company’s shares to the stock market. However, during initial public offering shares are sold not on the stock exchange but on network of clients by

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,

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,

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

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

Pension Funds
  Pension funds are investment funds established on purpose to generate income for retirement. They are very useful in economy when society gets older and number of population decreases, because a working class is

  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

Institutional Investment
  Institutional investment is an investment that is made by an organization/institution. Usually, institutional investments are large scale and has important role in financial markets. Most institutional investment

Institutional Investor
  An institutional investor is an investor that is a corporation/institution. Institutional investors have high impact to investment markets and sometimes decisions of most known institutional investment manag

Investment Report
  An investment report is a for investors prepared document on purpose to provide useful and objective information that would help to make an investment decision.     Investment report may have many for

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

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

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

Brokerage Company
  A Brokerage Company is a financial institution that has a license to provide intermediary services for a securities trading to the clients. Every retail client cannot by securities on stock exchange by himself be

Credit Union
  A credit union is a financial intermediary institution controlled by its members, who brings deposits to the union and become a creditors of the institution. The principal services of the credit union are th

Commercial Bank
  A commercial bank also commonly called just a bank is financial institution that has a license to provide financial services.    The principal services provided by banks: Taking the deposits

Business Organization Forms
  Business organization forms may be different vary over countries depending on corporate law. The most popular classification, also applied in US classifies such forms: Sole proprietorship Partnership Limited

Sole Proprietorship
  A sole proprietorship is form of business that is owned by one individual. The main advantage of the sole proprietorship is the simplicity of starting business in this form. No weighty investments are needed. The

  A corporation is a legal business form that is dominating over capital world. Most of the biggest businesses in the world are working under corporation form. Capital raising, transferring of shares, mergers &

Limited Liability Company
  A limited liability company (LLC) is a business form that has the same advantage like corporations have: a limited liability. Owners of LLC risk only their capital that was invested in company. Limited liability

Publicly Owned Corporation
  A publicly owned corporation is a company, which has its shares listed on the stock exchange. A publicly owned companies normally are medium or large scale corporations owned by a large number of investors (both

Junk Bonds
  Junk bonds are bonds that have a speculative-grade credit rating, which is BB or lower.    Junk bonds are riskier but they have higher yields. The spread between junk bond yield and safe bond yield (c

Penny Stocks
  Penny stocks used to be described as stocks which price on stock exchange are lower than 1$ or 5$ (there is no officially approved norm). However, it is not very fair to judge a company for its share price on exc

Investment Advisor
  An investment advisor is a person or a company that is registered with the Securities and Exchange Commission (SEC) and provides investment consultancies for remuneration. Investment advisor might provide consult

Cheap Stocks
  Cheap stocks are such stocks that are traded at low valuation multiples. For example, if you see a telecom or utility company of which P/E is equal to 6 and EV/EBITDA is equal to 3, you may say it is a cheap stoc

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

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

Investment Market
  An investment market is a part of a financial market and represents all investments that were issued by corporations, governments or other entities. All the trades made by retail and institutional investors can b

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

  A takeover is an acquisition of publicly owned corporation by another company. If non-control stake is acquired, it is not yet a takeover. The takeover occurs only when the acquirer gets a control to form managem

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

Net Present Value (NPV)
  Net present value (NPV) is a value calculated by discounting all future net cash flows (net cash flow is calculated taking all the forecasted future income and subtracting from them forecasted expenses in every p

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

Financial Leverage
  A financial leverage is a use of borrowed money to achieve more efficient capital structure. A borrowed capital is cheaper than equity capital most of the times. So usage of loaned money makes weighted average ca

Corporate Investment
  A corporate investment is investment made by one corporation into another. All corporations try to keep the growth of the business. Some do it only organically, while others also proceeds mergers & acquisitio

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

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

  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

Investment Performance Measurement
  Many investors are happy about investment managers until the stock market is growing, but when the decline starts investment managers gets only the worst words about their job. However, this is wrong attitud

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

Jensen’s 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

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

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

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

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

Investment Finance
  Investment finance is finance that is related to investment. Investment market is a part of financial market, so we can say that investment is a part of finance.    Investment finance specializes on f

  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

Valuation Multiples
  Valuation multiples are stock ratios that include in the calculation share price and show whether stock is cheap or expensive compared to similar stocks.     Valuation multiples (or just multiples) ar

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

PEG ratio
Price-to-Earnings to Growth ratio   PEG ratio is quiet popular among retail investors, however professionals do not use it often because of this ratio subjectivity. PEG ratio shows how expensive is stock compared

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

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

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

P/S ratio
Price to Sales ratio   P/S ratio shows the price of the stock compared to its sales. This ratio historically was quiet popular, but now EV/S ratio, which is more correct methodically, is used.

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

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

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:

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

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

ADR (American Depository Receipt)
  ADR (American Depository Receipt) is a form of international stock trading when a certificate (security) that might be traded in some US stock exchange in US dollars and represents shares of foreign company. The

GDR (Global Depository Receipt)
  GDR (Global Depository Receipt) is a security’s certificate that is traded on some European stock exchange and represents shares of foreign company. GDR normally is denominated in one of the main currencies

Depository Receipts
  Depository receipts are certificates that makes easier to invest in foreign stocks. Depository receipts lowers administration costs for foreign investment and makes foreign investments more trustful for local inv

Power of Compounding
  Power of compounding (compound interest) is a known description for fast increase in value when investment brings steady interests and interests are reinvested. The principle of the growth is the geometric progre

  WACC (Weighted Average Capital Cost) shows cost of capital when capital is consisted of both equity and debt capital. So WACC simply calculates the weighted average between equity cost and debt cost.

  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

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

Floating Exchange Rate
  Floating exchange rate is a regime of a currency which sets currency ratio naturally according to demand and supply in the market. Most of the biggest currencies (EUR, USD, GBP, JPY and others) are floating curre

  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

Target Capital Structure
  Target capital structure is a mix of equity and debt capital that maximizes value of the shares. Target capital structure may be achieved when WACC (Weighted Average Capital Cost) is minimal. If proportion of equ

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

Days Sales Outstanding
  Days sales outstanding (DSO) shows how quickly company collect its money from sales. Usually company doesn’t get paid immediately; depending on business and distributors network such period may be from seve

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

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

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

  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

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)

  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

  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

Margin Call
  Buying on Margin Costs of Buying Stocks on Margin Margin Call The Pros and Cons Psychology: Is it worth?     Margin call is a fabulous term which carries some mysticism. However, there is nothing

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

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

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

Equity Trading
  Equity trading is a process when equities are bought and sold through a trading platform. Equity trading is a synonym for trading stocks as equity in investment field is represented by stocks. Investing in equity

  M&A (mergers & acquisitions) is a field of corporate finance in which corporations are acquiring other companies or are merging in between. Theoretically it doesn’t sound very impressive, but in rea

  An acquisition is a takeover of one corporation by another when shares are bought and control of management is overtaken. Acquisition is an M&A deal and as targets for acquisition usually become some competin

Hostile Takeover
  A hostile takeover is an acquisition of a target company when its management doesn’t want the company to be overtaken by another corporation. The target of a hostile takeover may be only listed company whic

Friendly Takeover
  A friendly takeover is an acquisition of a target company when its management doesn’t resist to be overtaken by another corporation. Most the deals in M&A are friendly when management of one company neg

Poison Pill
  A poison pill is one of the strategies used to avoid hostile takeover. Poison pills are some rules in company’s charters that give some extra rights for corporation. Poison pills may be rights to acquire mo

  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

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

Employee Buyout
  An employee buyout is a takeover of the company’s control interest by its employees (usually employee stock ownership plan). Compared to a management buyout, employee buyout involves much more employees, an

Go Public
  Go public means to get company’s shares listed on the stock exchange; the process also called floatation. To go public, company has to hire some investment banking firm that would help to execute an IPO (in

  Floatation means going public through an IPO. If companies go public they have to get listed their shares on some stock exchange. Each company’s may choose any stock exchange, but normally smaller companies

No-Load Fund
  No-Load fund is a fund that does not have a load fee which is paid by investor that acquires the mutual fund. There are two types of load fees: front-end load and back-end load, and ‘no-load fund’ sho

Outstanding Share Number
  Outstanding share number is an important characteristic for the stock value of every stock company. This number represents all the issued shares in the company except the shares that are held by the company itsel

High Return Investments
  High-return investments (or high-yield investments) are investments that can provide the higher return than average investments, and of course such investments are riskier. The reality is that people have differe

Voting Right
  A voting right is a right provided by every common stock to participate in a shareholders’ meeting and vote for the decisions as management election, audit company election and other important questions. Us

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

Passive Investment
  Passive investment (management) is an investment style when investors skips the steps of securities picking and market timing and invests mainly in index funds that have the lowest expenses.    P

Investment Information
  Investment information is crucial to make good investment decisions. It is information that may help to make good investment solution and would help to reach for better investment results.    The deta

Personal Investing
  Personal investing is investing when investments are made by an individual but not a corporation which is corporate investment.   Personal investing is a part of personal finance that is responsible for pe

Small Business Valuation
  Small business valuation is not much different from standard business valuation. However, small business valuation is faster to perform because there is less financial and business data to analyze and less time c

Stock Price
  A stock price is the last price of a share (stock) that was traded in a stock exchange for a particular stock. If stock exchange is closed at the moment, then the last stock price will be closing price for that s

  (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

Bid-Ask Spread
  Bid-ask spread is the difference between the bid price and the ask price, or in other words it is a difference between the best offered price of a seller and the best given price by a buyer for a particular secur

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

Real Estate Investment Management
  Real estate investment management is a management of real estate portfolio. Real estate investments are different from standard investments (securities) and management of real estate investments differs from inve

Investment Management Solutions
  Investment management solutions are not much different from investment management system and most of the times are applied as portfolio management software that helps in administration of investment management pr

Private Equity Investor
  Private equity investor is a corporation or individual that is investing in stakes of unlisted companies. The only different between equity investor and private equity investor is that the last one invests in unl

Undervalued Stocks
  Undervalued stocks are called those stocks that are believed to have higher target price than their stock price on the exchange. The higher is the difference the more stock is undervalued. If stock price in the m

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

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

Cash Flow Statement
  Cash flow statement is one of the three main financial statements (others are income statement and balance sheet). If income statement exposes income that was received according accounting standards, cash flow st

  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

  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

  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

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

  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

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

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

  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

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

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

  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

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

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

  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

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

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

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

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

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

Cash Debt Coverage ratio
  ‘Cash debt coverage ratio’ (also known as ‘current cash debt coverage ratio’) measures company’s ability to repay its debts. Basically, it compares cash flow that is received from op

Cash Coverage ratio
  Cash coverage ratio measures company’s ability to repay its debts. It compares EBITDA (type of earnings) of the company and interest that is paid for company’s debts annually. EBITDA is not exactly eq

Cash Flow Coverage ratio
  Cash flow coverage ratio measures company’s ability to repay its debt. This ratio compares operating cash flow of the company to its debts.  If ratio is low (lower than 0.2), it may indicate potential

Financial Forecasting
  Financial forecasting is a part of financial planning and also a part of a DCF valuation. But usually financial planning covers only a period of year or two while financial forecasting regularly covers about five

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

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

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

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

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).

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)

Investments in Blue Chip Stocks
  Stock investments require high degree of financial knowledge and the understanding of market realities, but only if you are seeking for the most efficient result. Yet, the reality is that there are millions of pe

Investments in Small Cap Stocks
  Investments in Small Cap Stocks Investments in small cap stocks could be compared to penny stock investments but the term ‘penny stocks’ is not specific enough. The thing is that the determination of

Cost of Debt
  Cost of debt shows what the capital cost of the company for its debt capital is. Basically company’s capital consists of two parts: debt capital and equity capital. (A mixed capital like mezzanine financing

  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

Price to Free Cash Flow
  Price to free cash flow (P/FCF) or EV/FCF ratio are ratios that compare company's price to its free cash flow. The main difference between those two ratios is that EV/FCF also includes the eff

Price to Cash Flow ratio
  Price to cash flow ratio (P/CF) and EV/CF ratio are similar but there are some differences. The main difference is that EV/CF also includes the effect of company’s financial debt which says a different

Free Cash Flow Yield
  Free cash flow yield (FCF yield) show how much of cash that may be distributed to shareholders the business earns compared to its price on the stock exchange (including both: equity value and debt value or just e

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:

Free Cash Flow
  Free cash flow of the company shows how much of cash business has earned in the reality over the period. There are many ways to determine the free cash flow of the company, and most often this indicator is provid

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

  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

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

Cost of Capital
  Capital of every company consists of two parts: equity capital and debt capital (only if company has no financial debts it has only equity capital). Both these capital sources have their costs and this is cost of

  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,

  What is volatility? Volatility definition can be short: volatility is the size of the amplitude in investment’s value changes over time. In simple words, it describes the riskiness of the security because

Share Issue
  Share issue may refer to a new share issue or an existing one. An issue of new shares is associated with capital increase of a company during IPO (initial public offering) or SPO (secondary public offering). All

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

Insider Trading
  Insider trading is an illegal activity in trading stocks when a stock trader is using information that was not officially disclosed. Such information is called inside information. Such trading is called ‘in

Annual Report
  Annual report is a report on company’s activity issued each year. Not every company issues an annual report and mostly such reports are issued by public companies or those that are preparing going public.&n

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

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

  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

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

  CFROI or cash flow return on investment is a rate of return that measures the performance of corporation based on its cash flow generation ability. CFROI is not very popular but is still used by some companies an

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

Accounts Payable Turnover
  Accounts payable turnover ratio shows how quickly company is paying to its suppliers for services or goods and materials. If payables turnover is very low, it may signify different reasons behind it: Company i

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

Fundamental Analysis
  Fundamental analysis is the type of financial analysis that relies on company’s fundamentals. Those fundamentals depend on the target of the analysis. For example, fundamental analysis of stock depends on i

Technical Analysis of Stocks
  Technical analysis of stocks is widely known type of stock analysis. Technical analysis is completely opposite to fundamental analysis. While fundamental analysis relies on company’s ability to generate cas

Coverage ratios
  Coverage ratios are financial ratios that measure the ability of the company to repay its financial liabilities. Such ratios compare company’s operating income (or other type of income) or operating cash fl

Receivables Turnover
  Receivables turnover ratio (also called as accounts receivable turnover) is a financial ratio that measures how efficiently company collects its receivables. If receivables turnover is very low, it means company

Average Collection Period
  Average collection period is a financial ratio that is used to measure how fast company collects its receivables. ‘Average collection period’ shows what is the average time period till company gets ca

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Cash Conversion Cycle
  Cash conversion cycle is a measure that shows how many days take to convert the cash of a company in to production and to sell it. However, the formula of conversion cycle also includes ‘days payable outsta

Days Payable Outstanding
  ‘Days payable outstanding’ ratio shows how long it takes the company to pay its liabilities to the suppliers. The longer period means that company is not in a hurry to settle up its debts to the suppl

Days Inventory Outstanding
  ‘Days inventory outstanding’ measures how efficiently company manages its inventory. Inventory often is the main part of working capital and it is very important to managed inventory efficiently. Ther

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

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

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

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

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

Total Debt
  Definition   The understanding of the total debt may be different depending on the experience of the user. Traditionally, ‘total debt’ includes financial liabilities of the company, although ot

Gross Debt
  (1) Gross debt in corporate finance is often used as synonym for ‘total debt’, however there might be some differences depending on the version of the total debt. Technically, ‘gross debt’

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

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

CAGR Formula
  CAGR formula is used to calculate 'compound annual growth rate':   CAGR = (Value at the end / Value at the beginning) ^ (1 / Years) - 1 * Can be multiplied by 100%. Where: Value at t

  CAGR is used to measure return and means compound annual growth rate. This type of return measurement is very popular in investment finance because interest also earns interest and power of compounding cannot be

  (1) Negotiable means the description of the price when it is or can be flexible depending on other conditions. All sold goods or services may have negotiable or fixed prices, and it depends on the sales strategy

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.

Market Risk Premium
(Equity Risk Premium)   Every investment carries some level of risk and some level of potential return. Those two measures are closely related in investment finance and are used in CAPM which calculates cost of eq

Load Fee
  'Load fee' is a fee that is paid during the selling process of the mutual fund. The sales load fee is also called as sales fee or distribution fee because normally it is paid by investor during sales-distribution

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

Privately Held Corporation
  Privately held corporation or closely held corporation is a company, which doesn’t have its shares listed on the stock exchange. If a corporation is closely held it not necessary means that it is small busi

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