Investing for Beginners .EU, investing Whenever an individual or a business decides that success has been attained, progress stops.
Thomas J. Watson

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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

What to Do With Investments in Current Turbulence?
  The question is really not an easy one. The problem is that there is no left any good investments on this world. Let’s looks at the most topical investments classes:   Stocks. Even before

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

Where Are the Investment Markets Moving Now?
  Some of the market participants call the current situation a “crisis” others are starting to be convinced that we are in a bear market. While others just don’t know how to call it. Well, I call

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

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 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

Problems in Greece: Is It Going to End?
  Greece sounds like a curse for all investors and all other participants of the financial market. Yes, it is a small country compared to the global or European economy by the size of a GDP or other economical indi

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

(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

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 Benefits For Beginners
Is the investment really worth it? Many investing beginners ask a question: why to invest?  There can be different answers. Some might even say that is not worth to invest. Why let your money into uncertainty if yo

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.

Bond Market
  A bond market includes all the bonds (debt securities) that are issued and traded or just held. Bond market is a part of a whole financial market.  This market covers all the fixed income securities that are

  Dividends are capital payments from companies to theirs shareholders. Normally dividends are paid by cash and usually but necessary once a year. Every company’s common share of the same class gets equal div

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

Private Equity Fund
  A private equity fund is a fund that invests in a stakes of non-listed companies (private equity). Investment in private equity funds is much different from investment in mutual funds. They are illiquid, riskier

Mortgage Markets
  Mortgage markets are markets, in which credits, that include pledged real estate property, are created and traded. Usually in mortgage markets main players are financial institutions: retail banks sell such mortg

Risk-Free Interest Rate
  A risk-free interest rate  is rate of interests that would be paid by fixed income securities that contains no risk at all.    For a very long time short-term US Treasury securities was used to d

Enterprise Value
  Enterprise value (EV) is a financial measure that is used to reflect the magnitude of the business. If market capitalization shows only the value of shareholders equity, enterprise value includes both: equity val

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

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

  Repo (repurchase agreement) is a contract between the investor, who borrows money, and the lender who lends money and takes (buys and resells) securities for collateral, in case if the investor will default to re

  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

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

Cost of Equity
  Cost of equity is the rate of return that is required by equity owners from their investment. Of course, requirements of the shareholders have to be real and meet market conditions as well. Basically cost of equi

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

Replacement Cost Valuation
  Replacement cost valuation method is not very popular at stock valuation. Most of the investors are picking stocks with help of relative valuation or DCF valuation. Only when those two methods aren’t possib

  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

  Eurobonds are bonds that are issued in other that home currency. It does not mean that Eurobonds have to be denominated in Euros. Actually, most of the Eurobonds that are issued in Europe are in denominated in US

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

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

  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

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

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

Management Buyout
  A management buyout (MBO) is an acquisition of a company when company’s management gets the control interest in the company. Management buyout can be placed on if existing shareholders agree to sell their s

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

Financial Statements
  Financial statements are periodically by the companies issued reports that provide the most important financial information about company’s financial condition and success of activity.    There

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

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

  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

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

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

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

Cost of debt Formula
  Cost of debt formula    Theoretical cost of debt formula:   Before tax cost of debt = Risk free rate + Credit risk premium  After tax cost of debt = (Risk free rate + Credit risk premiu

Before Tax Cost of debt
  Before tax cost of debt (or pretax cost of debt) usually is a standard cost of debt. When you determine the interest rate paid by the company for its debt, it is equal to debt cost before tax. However, interest e

After Tax Cost of debt
  There are two types of the debt cost: ‘before tax cost of debt’ and after tax cost of debt. The only difference between those is that the first one is equal to the interest rate paid by company while

  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

Cost of debt Calculation
  The cost of debt is easy to calculate if they are required data. Actually, there are few methods to get the cost of debt, but some of those are more accurate some less. If you want that your result would be more

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

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

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

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

  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

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

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

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

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

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

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

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

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

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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