Tutorial
Added on: December
30th , 2006
Investing in mutual
funds also includes the fact that you have to pay
your broker a lot of fees. Some mutual fund brokers
will make it seem to you that the higher fee you
pay, the higher return you will achieve on your
investment. This is NOT true. All the broker will
be doing (if you pay a higher fee) is take greater
risks with your money, which could have devastating
consequences. In order to avoid paying high fees
to your broker and to maximize your ROI (return
on investment), you should consider the different
classes of mutual funds to purchase and which class
is the right one for you.
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Tutorial
Added on: December
27th , 2006
Corporations and
their shareholders are determined to make profits
from their business operations and make a good return
on their investment (ROI). In order to make good
profits, a firm needs to be run efficiently and
have sufficient cash flow to meet current liabilities
and short term debt (liquidity). You as a small
scale investor need to investigate the profitability
of a company in order to determine if it is both
liquid and it is being run efficiently. The way
to do this is by calculating the various profit
margin ratios available. We look at a few below:
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Tutorial
Added on: December
26th , 2006
One of the ways
of determining if a particular stock is strong is
by looking at that company's Balance Sheet. The
balance sheet will illustrate what the company owns
(current & long term assets), what it owes (short
& long term debt) and its position of financial
liquidity. You wouldn't want to invest in a company
that has trouble paying its short term bills now
would you? In this article, we will look at 3 of
the common accounting ratios that help determine
the financial position of a company.
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Tutorial
Added on: December
25th , 2006
There are 2 types
of debt that fall under the Home Mortgage Interest
Tax deduction provision and are tax-deductible.
The first type of debt is debt that was acquired
in order to build, purchase or improve your home.
The second type of debt is called equity debt because
the collateral used is drawn on the equity of your
home. You can therefore take out a maximum debt
of $1.1 million and deduct the mortgage interest
from your taxes payable. However, any of the mortgages
you acquire must fall into 1 of the following categories:
- Debt Acquired Before
October 13, 1987: Referred to as "Grandfathered
debt", you can deduct all interest paid on
any of this debt.
- Debt Acquired After
October 13, 1987: If you took out this
debt to build, purchase or improve your home,
you can fully deduct all interest paid on this
debt provided the total debt you acquired (including
the Grandfathered Debt) does not exceed $1 million
for married couples or $500,000 for singles.
- Home Equity Debt
Acquired After October 13, 1987: If you
acquired debt after this date for reasons OTHER
than to build, improve or purchase your home,
the maximum can be $100,000 for married couples
or $50,000 for singles.
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Tutorial
Added on: December
24th , 2006
Cyclical and non
cyclical is the correlation of stocks with the economic
conditions of the market and general fluctuations
of the economy. Cyclical stocks are highly correlated
with the market conditions. For example, if the
economy is weak and consumers are not spending money,
Cyclical stocks will experience a decline in prices.
This is because with less disposable income, consumers
can afford less luxuries and material goods. This
results in lower sales and net income results for
Cyclical stock companies.
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Tutorial
Added on: December
23rd , 2006
The first modern
mutual fund was created in 1924 in Boston, Massachussets.
Known as Massachusetts Investors' Trust, the fund
went public in 1928 and eventually led to the founding
of MFS Investment Management firm. Some of the innovators
involved in this transformation included Richard
Paine, Richard Saltonstall and Paul Cabot.
By the year 1929, there were
700 closed-end funds with 19 open-ended mutual funds.
Thanks to the 1929 stock market crash, closed-end
funds lost their popularity and small open-end funds
started to skyrocket. In 1933, the Securities and
Exchange Commission (SEC) was created to protect
the investments of consumers in mutual funds. Mutual
funds must be registered with the Securities and
Exchange Commission (SEC) before they can be invested
into.
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 Relative
Value of Growth
Tutorial
Added on: December
6th , 2006
Relative
Value of Growth (RVG)
is a Finance formula invented by Nathaniel J. Mass
that determines how corporate growth and profit
margin improvement can affect the value of shareholder's
investment in a company. The Relative Value of Growth
formula divides 1% growth of the company's revenues
by 1% improvement in its profit margin. The division
between the two shows whether the growth of the
corporation was valuable or not. For example, an
RVG of 2 indicates that the corporation
would generate 2 times as much Shareholder Value
by adding 1% of growth, as opposed to increasing
the operating profit margin by 1% (View
Full Article)
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Tutorial
Added on: November
30th , 2006
An Option
is a contractual right given to an individual allowing
him to buy or sell an underlying asset (common stock,
derivatives, etc) at a specific price on or before
a certain date. Options are similar to stocks and
bonds in that they are all securities that have
strict defined terms and characteristics.
Take a real life example. Imagine
you want to purchase this piece of jewellery for
$50,000 but you do not have the cash upfront. However,
6 months later, you will have enough cash to afford
the jewellery. So you make a deal with the owner,
giving you the option of purchasing this piece of
jewellery for $50,000 in exactly 6 months from now.
However, to give you the right or this "Option",
the owner charges you $2500. From here, you stand
to either gain from the transaction or lose from
it.
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Tutorial
Added on: November
11th , 2006
Stock Beta is
a calculation or measurement of volatility or risk
of a stock trading on the stock market. It is the
fluctuation in stock prices and the market in general.
Some stocks have greater risk than others, and thus
carry higher Stock Betas. Stock betas are measured
using regression analysis.
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Tutorial
Added on: November
9th , 2006
Cash Flow from Operations (Operating Cash
Flow) compares the difference between reported Operating
or Net Income and actual cash flows of the company.
If a company does not have sufficient cash resources
set aside to pay off its Current
Liabilities, then this shows a sign of inefficiency
or problems with inventory turnover (goods not getting
sold). A healthy company is one where inventory
is turned over at industry standard rate and one
where there's enough cash in the bank to meet both
short term and long term debt obligations.
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Tutorial
Added on: November
7th , 2006
If you buy a stock at
a P/E ratio of 15, this means it will take you 15
years of earnings derived from that stock in order
to cover up your original investment. In other words,
you'll get a "payback in 15 years." Consider
a corp that earned $15 million last year and had
earnings per share of $15 with 1.5 million shares
outstanding. If the current trading price of the
stock is $150, this means the firm's P/E Ratio is
= $150 / $15 = $10. This can also mean the investors
are willing to pay $10 for every $1 of earnings
derived from that stock
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Tutorial
Added on: November
5th , 2006
Return on Capital Employed
(ROCE) is a measuring tool that measures the efficiency
and profitability of capital investments undertaken
by a corporation. A firm acquires capital assets
such as trucks, computers, etc to help makes its
business operations more efficient, cut down on
costs and realize greater profits or acquire more
market share. Return on Capital Employed ratio also
indicates whether the company is earning sufficient
revenues and profits in order to make the best use
of its capital assets. It is expressed in the form
of a percentage, and the higher the percentage,
the better.
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Tutorial
Added on: November
5th , 2006
- Direct Materials
- These are the raw materials such as wood, metal,
bricks, etc that are used in order to create a finished
usable good which will be demanded by the market.
- Direct Labor - Direct Labor is
the manwork and total factory hours put behind assembling
the raw materials, creating the finished good, etc.
- Fixed Manufacturing Overhead -
This includes expenses such as rent of factory where
the raw materials are turned into finished goods,
amortization of factory building, utilities, etc
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 Tutorial
Added on: October
5th , 2006
In essence, time value of money refers
to the growth of 1 dollar as time increases. 1 dollar
today is worth more 10 years down the road because
it can earn interest payments. How much is 1$ worth
10 years down the road? This answer depends on various
factors such as the interest rate, monthly/quarterly/annual
compounding, payment contributions or withdrawals
and more.
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 Tutorial
Added on: October
5th , 2006
Working capital is a measure of a firm's
ability to pay off short term debt and have enough
money to finance its day to day business operations.
The formula for Working Capital is:
| Working
Capital = Current Assets - Current Liabilities |
Therefore, if Current Assets
are greater than Current Liabilities, than the firm
is financially healthy in the short term. However,
if Current Liabilities are greater than Current
Assets, the company may have to borrow additional
debt (bond financing)
to finance its day to day business operations, and
if conditions do not change, it may be heading towards
bankruptcy
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