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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

Foundation of the Europe’s Financial Market
  The key question in Europe now is how European Union will look after few years from now. This question is the most important at these days for all the Europe and may have affect to the entire world.

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

Is the Bubble of Commodities Going Down?
  It can be said that commodity bubble already went down. The prices of the most commodities have slumped significantly during several last months. But was there really a bubble? Yes, the prices have

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

(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

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

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,

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

Investing for Beginners - Trading Account
  a href="">Investing for beginners helps on many questions that every investor should solve in beginning of investment process or before it. One of such starting questions sho

Investment in Collectibles
  Many kinds of collectibles may also be considered as investments, but their value and benefits are much more elusive, than more serious traditional investment instruments. Works of art, stamps, antiques, coins,

Investment in ETF Funds
ETF (Exchange-Traded Fund) Investment in ETFs has become increasingly popular pushing out traditional investment funds. Few main factors added to popularity of this investment: availability of ETF's and low taxes compar

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

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

Derivative Market
  A derivative market is a totality of derivatives (futures, forwards, options, swaps and other) that have been created over the world. Some of the derivatives are standardized and are traded on Exchanges whil

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

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

International Investment
  International investment is investment that includes investments from different countries. If investor acquires investments in several countries, we could call him international investor. If investment portfolio

Blue Chip Stocks
  Blue chip stocks are stocks of the biggest large cap companies. Blue chip stocks usually are safer than average investment in stocks, have stable cash flow and pay stable dividends according dividend policy. Blue

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

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

Life Insurance
  A life insurance is a service provided by insurance companies trying to bring more financial stability in to the lives of people.    Looking from investment point life insurance is two products c

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

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

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

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

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

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

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

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

  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

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

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

Risk Tolerance
  Risk tolerance is a characteristic that describes the investor and his ability to withstand losses from investments. The higher risk tolerance of investor the more losses he/she may handle.    Investm

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

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

Brokerage Account
  Brokerage account is an account provided to investor by a brokerage company or an investment bank. Brokerage account has changed during computerization and now almost all brokerage accounts have electronic interf

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

  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

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 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

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

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

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

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

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

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

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

Cash Investments
  Cash investments are the safest investments over short-term period. Such investments include saving accounts, certificates of deposit, money market instruments (treasury bills, money market funds). The main crite

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

  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

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

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

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

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

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

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

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