Investing for Beginners .EU, investing Don't try to buy at the bottom and sell at the top. It can't be done except by liars.
Bernard Baruch

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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 Uncertain Period
Investing always has some uncertainty, but there are some situations when rise even more questions than usually. The current situation is just like one of those uncertain periods. When the economic cycle so inconclusive,

Investing in Africa
Investing in Africa even sounds a little extreme. But investing in Africa not only sound extremely - it is like this in fact. If we would distinguish developed and emerging markets, then most of the Africa’s countr

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

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

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

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

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.

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

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

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

The Most Known Investors: Who are they?
  Regularly, a magazine is releasing its top 100 billionaires of the world. These are the investment giants and the masters of investing.  We all know that the investing world is a world of strategies and the

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

Learning the basic investment concept: a good start in investing
The first step in investing is learning the investment concept itself. It is very important that you understand the basic rules in investing in order for your investment to profit and to prevent losses. As we all know,

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

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 - what is that exactly? Probably you have heard many different definitions of investing. However, what is the essence of it? The essence is very simple: investing - a present sacrifice for the future.If

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 Top 10
  INVESTING 10 things that you should try to do:     Always have an investment strategy and follow it strictly. Set up an investment strategy (investing rules) even before beginning of investing: t

Investing for Beginners
  Investing can seem a hard thing to do for beginners. But investing for beginners isn‘t any harder than other things in the beginning. Many processes can look difficult until you don‘t know what is hid

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

Investment in Mutual Funds
Investment Funds (Collective Investment) Investment in mutual funds is one of the most popular types of investment. A mutual fund is just a large and well diversified investment portfolio of many securities, in which ca

Investment in Commodities
Investment in Oil, gold, Silver, Copper, Wheat  Commodities (raw materials) are indeed a tangible asset class, but it can be also assigned to financial investments, because in current days most investments in commo

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

Investment in Property
Investment in housing and commercial real estate I don‘t know why, but historically in most places almost every countryman becomes to a property investment expert, or at least he thinks he is. And perhaps that's q

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,

Direct Investment
Investment in Tangible Assets   Direct investment are very wide issue to study, but it‘s not so close to traditional investing. Direct investments are more related with business development and would depend

Investment in Futures
  Futures - derivative financial instruments, which can help to acquire some object in the future with pre-agreed price.In the case of futures, the seller undertakes to sell the object, while the buyer to purchase

Investment in Forwards
Forwards – derivative financial instruments almost identical to the future contracts. This contract represents the parties committed to sell and buy the object at the predetermined time and price.Difference between

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,

Investment in Index-Linked Bonds
  Index-linked bonds are also known as structured bonds. This product is more popular in immature investment markets, where investors are not sufficiently educated. Diversity of index-linked bonds can be very high,

Investment in Actively-Managed Funds
Active Mutual (Investment) Funds Actively managed investment funds usually are those mutual funds that choose not copy the index (benchmark), but is trying to beat it, so could give for investing person a higher return,

Strategy Investment
  Strategy investment refers to an investment strategy, which should be wise chosen according to investing person character and market environment. Investing always has to be strategic and foresee possible future e

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

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

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

Investment Objectives for Beginners
The full investment objectives for beginners are very individual parameters. They were already mentioned briefly in article about benefits of investment. However, the basic investment objective is one - to make capital w

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

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 Strategy by Age
  It is very popular to allocate asset classes in investment portfolio according to investor’s age. And it has some reasonable justification: when investor’s age is changing – his risk tolerance a

Investment in Short ETF
  Investment in Short ETF is very different from regular investing. “Short” – means short selling transactions when securities are loaned and sold with obligation to return it after some pre-agree

  Speculation is an investment action made under intentions to earn large profits in short term. Usually such actions are very risky and lays somewhere between investing and gambling. It is hard to say where exactl

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 Policy
  An investment policy is an investment philosophy, main principles to be used of an investor. Investment policy may be written or not, and is needed for the investor to maintain attitudes during market turmoil. In

Investment Decision
  An investment decision is a choice made by investor or investment manager trying to maximize the return and minimize the risk. The every decision maker tries to make the best choice for him, the same time better

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

Bull Market
  A bull market is a market trend when investment market is increasing over longer period and is believed to increase in the future. Bull market is a well known term among investors and is opposite to bear mar

Bear Market
  A bear market is a market trend when investment market is decreasing over longer period and is believed to decrease in the future. Bear market is a well known term in the investment world and is opposite to bull

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

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,

Market Timing
  Market timing is investor's actions when investments are switched between asset classes and may be a part of investment strategy. For example, if investor sees that stocks are very high and economical downturn is

Diversified Investments
  Diversified investments are investments that are well diversified, which should include regional diversification, allocation between asset classes, sectors, maturity, denomination of currencies and other characte

  A diversification is an investment technique or a part of an investment strategy, which is used to reduce the investment risk of the portfolio, including in it larger number of different securities or other inves

Venture Capital
  A venture capital is a capital provided by capital investment groups or private equity funds for small start up businesses.   There are not many opportunities for young fast growing companies. If they

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

Equity Fund
  An equity fund is a mutual fund that is investing in equity (stocks). Equity fund can be actively managed, index fund, listed index fund (ETF) and can invest in some specific sectors or regions, or can invest glo

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

Small Cap Stocks
  Small cap stocks are stocks of lower market capitalization. All stocks may be classified to large cap, mid cap and small cap (if ignoring mega, nano and other modern classification caps). There is no united class

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

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

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

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

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 Consultant
  An investment consultant is a job position in financial companies. Main functions of investment consultant: Help private investors to make a proper investment strategy according to investors risk tolerance. A

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

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

Diversifiable risk
  A diversifiable risk is the risk that can be reduced by increasing number of investments in the investment portfolio. For example, company’s risk can easy diversifiable by choosing more companies. Even coun

Market risk
  A market risk is a systematical risk that cannot be diversified. There are some risk factors that can make effect on the whole market: economical cycles, nature disasters, wars; and such are not diversifiable ris

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

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

Investment Growth
  An investment growth may have two different meanings: Most probable it refers to growth investing. It is an investment strategy or part of it, which concentrates on investments in stocks that grow faster than

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

  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

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

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

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

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

  Correlation is a statistical measure that shows the relationship between two objects. Correlation may range between +1 and -1. If correlation between the objects is 0 that means they are not dependable on each ot

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

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

Political risk
  A political risk is related to political decisions and political environment development, and is one of the main risks when investing in emerging markets. Developed markets also contain political risk, but there

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

Trading Stocks
  Trading stocks is a process when stocks are bought and sold on the stock market. How differs trading stocks and investing in stocks? Well, it is the same, just is common to think that investing is a long term pro

White Knight
  A white knight is a friendly (for the target) bidder who gives a better offer to acquire stake in the company than “hostile” bidder during hostile takeover. White knight is one of the strategies used

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

  Bearish is attitude of an investor if investor expects market to go down in the near future. Most often term bearish is applied for stock investments when is believed that stocks are going to decrease in value. T

  Bullish is an investor's attitude when he believes that the investment market is going to rise in the near future. Most of the times this term is applied for investments in stocks, when is believed that stock mar

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

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

Growth Funds
  Growth funds are investment (mutual) funds that concentrate on investing in stocks of fast growing companies. Growth funds can be passively managed or actively-managed funds but all growth funds are riskier than

Balanced Fund
  A balanced fund is a mutual (investment) fund that invests in different asset classes: stocks, bonds and money market investments according to the fund’s investment strategy.    It may

Stock Option
  A stock option is derivative financial instrument that gives the holder of the option the right to buy some particular stock at the predetermined strike price till the end of the option (or at the end, depending

Index Options
  Index options are derivative financial instruments that provide for the buyer of the option the right (possibility) to make profits from index value changes. It may be a good investing instrument for the investor

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

Day Trader
  A day trader is a speculator that trades in stocks, currencies or some other securities within a very short period. Most of the trades are made by the trading in one day period. Day trader is a pure speculator, e

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,

Best Investments
  Best investments are always wanted, but the reality is that there are no best investments for everyone. And if such investment would exist then those investments would become an investment bubble and would not st

Short-Term Investments
  Short term investments are investments that are suited for short term investing. There can be different understanding of short term investing but it is normal that investments for period till one year can be cons

Safe Investments
  Safe investments are investments that contain low risk and considered to be safe. Safe investments do not necessary have to be 100% safe because there is no 100% safe investments in this world as this world isn&r

CIS countries
  CIS countries (Commonwealth of Independent States) is by Russia led group of countries that earlier belonged to the Soviet Union. However, not all the countries of the past Soviet Union’s belong to CIS coun

Good Stocks
  Good stocks are those stocks that meet’s investors risk tolerance and investment strategy. Also good stocks should have upside potential to increase in value in the future. If stocks are already priced high

Buying Stocks
  Buying stocks is an easy thing. Of course, it is harder to pick good stocks. Every person, that has some capital, can open a trading platform and buy stocks, but the goal is not only to buy the stocks but to make

  (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

Investment Fund Management
  Investment fund management is not much different from simply investment management or asset management. Investment fund is large investment portfolio and the composition of that portfolio depends on particular fu

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

Investment Management Consultations
  Investment management consulting is part of investment management business that helps for investors to manage their investments more effectively. Investment management is one of the most crucial step in personal

Real Estate Investors
  Real estate investors are individuals or investment companies that are investing in real estate (property). There few main types of real estate investors:   • Real estate developers are investors that

Equity Investors
  Equity investors are investors that are investing in equity investments: listed stocks or similar ownership securities, stock funds, unlisted stock stakes or other half-equity strategies (equity loan, mezzanine f

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

Small Business Investors
  Small business investors are private investors or business investors that are investing in to small businesses. Small businesses are also in need for capital and the best source for that capital might a bank beca

Angel Investors
  Angel investors are investors that have capital for investments and are investing in young companies that are in start-up stage and are needed for capital to exploit growth potential. The source of funding from a

Finding Investors
  Finding investors might be a hard task if you have no required knowledge for that. Most probably you are looking some business investors or angel investors that would invest in to your business. And the success o

  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

  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

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

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

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

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

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

Investment Formula
  If you are looking for some perfect investment formula, you should get disappointed because there is no secret investment formula that would be profitable for every investor. If there would be such perfect formul

Investing Formula
  Still looking for some magic investing formula? Well, you will be the lucky one if you will find it, but many investors are just failing in a way of finding that perfect investment formula. Maybe you can find it,

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

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

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

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

  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

Rate of Return
  A rate of return is a percentage that shows what is the profit or loss gained on some investment on annual basis. There are many ways to calculate the rate of return including internal rate of return, arithmetica

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

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

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

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

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

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

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

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

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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