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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

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

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 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 in Swaps
  Swaps - an investment tool used rarely at investing process. Typically, these contracts are used by financial institutions or other big companies in order to exchange cash flows in different currencies. In fact,

  Derivatives are securities (financial instruments) that are created by financial intermediaries synthetically, and are based on price or value of some primer assets or indicator. Usually such underlying assets ar

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

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

Real Risk-Free interest rate
  A real risk-free interest rate is very similar to (nominal) risk free rate. The only difference is that real risk free rate is under condition if no inflation expected. Real risk free rate is deducted from nomina

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

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

  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

Inflation Linked Bonds
  Inflation linked bonds (or inflation indexed bonds) are bonds that have their principal linked to inflation, which means the value of the bond principal increases together with inflation. Such bonds are offering

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

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

Discounted Cash Flow
  Discounted cash flow (DCF) is forecasted net cash flow of the company or other asset that is recalculated (discounted) to its current value. Discounted cash flow is important for investment assessing and mostly i

  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

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

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

Risk Averse
  Risk averse is a characteristic of an investor who is avoiding risk. The more investor is avoiding the risk the more is he risk averse. Almost all the investors (as people are too) are more or less risk averse an

Passive Income
  Passive income is an earnings that person receives consistently for a long term from some stable sources. One and most probable source of passive income may be income from investment.    For example,

  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

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

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

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

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

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

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

Net Interest Income
  Net interest income is an indicator that measures lending business performance of a financial institution. Basically, it is equal to interest income from loans and other assets less interest expenses for deposits

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

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