Equities
Content
Equities
India Infoline provided the prospect of researched investing to its clients, which was hitherto restricted only to the institutions. Research for the retail investor did not exist prior to India Infoline. India Infoline leveraged technology to bring the convenience of trading to the investor¶s location of preference (residence or office) through computerized access. India Infoline made it possible for clients to view transaction costs and ledger updates in real time. Over the last five years, India Infoline sharpened its competitive edge through the following initiatives: Multi-channel delivery model : The Company is among the few financial intermediaries in India to offer a complement of online and offline broking. The Companies network of branches also allows customers to place orders on phone or visit our branches for trading. Integrated middle and back office : The customer can trade on the BSE and NSE, in the cash as well as the derivatives segment all through the available multiple options of Internet, phone or branch presence. Multiple-trading options : The Company harnessed technology to offer services at among the lowest rates in the business. Membership: The Company widened client reach in trading on the domestic and international exchanges. Technology : The Company provides a prudent mix of proprietary and outsourced technologies, which facilitate business growth without a corresponding increase in costs. Content : The Company has leveraged its research capability to provide regular updates and investment picks across the short and long-term. Service : Clients can access the customer service team through various media like toll-free lines, emails and Internet- messenger chat for instant query resolution. The Companies customer service executives proactively contact customers to inform them of key changes and initiatives taken by the Company. Business World rated the Companies customer service as Best in their survey of online trading sites carried out in December 2003. Key features : Membership on the Bombay Stock Exchange Limited and the National Stock Exchange Registered with the NSDL as well as CDSL as a depository participant, providing a one-
stop solution for clients trading in the equities market Broking services in cash and derivative segments, online as well as offline. Presence across 350 cities and towns with a network of over 850 business locations Equity client base of over 500,000 clients Provision of free and world-class research to all clients.
Fundamental Analysis Article Archive
Marketplace Interpreting A Strategy Performance Report These key performance metrics will help you decide if your trading strategy is a winner. Find Hidden Stock Gems That Analysts Ignore Just because it doesn't get a lot of coverage, doesn't mean a company isn't a great find. Cashing In On Macroeconomic Trends Learn to identify the things that may impact your investments down the road. What Is A Cash Flow Statement? Learn how the CFS relates to the balance sheet and income statement as a part of a company's financial reports. Qualitative Analysis: What Makes A Company Great? To understand the qualities that make for a great company, investors must dig deep into "soft" metrics. Understanding The Cash Conversion Cycle Find out how a simple calculation can help you uncover the most efficient companies. EDGAR: Investors' One-Stop-Shop For Company Filings You can learn a lot about any listed company through this system - if you know how to use it. Operational Risk: A Must-Know For Investors This type of risk is often overlooked, but it can mean the downfall of a company - and its investors. Using Consumer Spending As A Market Indicator What people buy and where they shop can provide valuable information about the economy.
Trading Cen
ROA And ROE Give Clear Picture Of Corporate Health Both measure performance, but sometimes they tell a very different story. This is why theyâ¼re best used together. Analyst Recommendations: Do Sell Ratings Exist? Analyst reports can be an investor's best friend - but without knowing how to read them, you won't be able to fully utilize them. Special Of Free Rep Trade Fu Get a Fre Investors Beware: There Are 5 Types Of Earnings Per Share Investors need to know the varieties of EPS and what each represents to really determine whether Huge Re a company is a good value. Ask Inves Spotting Creative Accounting On The Balance Sheet What are t Companies have ways of manipulating their balance sheets that investors should be aware of. What's the accounting Company Clone Cost Reveals True Value (view answ Find out how calculating a reproduction cost for a company can beat out the dividend discount model. What effec and Consu Understanding The Income Statement debtors? (v Learn how to use revenue and expenses, among other factors, to break down and analyze a company. What was California Evaluating A Company's Management What is th Financial statements don't tell you everything about a company's health. Investigate the LIMEAN? management behind the numbers! How's Your Mutual Fund Really Doing? Determine how fund managers are doing by sizing them up against their peers. Small Business: Speed Up Receivables To Avoid A Cash Crunch Waiting for customers to pay can be a losing game. Look to factoring for quicker cash. Whom Should Corporations Please? Companies balance the interests of owners, customers and employees. Find out who comes out on top. Depreciation: Straight-Line Vs. Double-Declining Methods Appreciate the different methods used to describe how book value is "used up". Financial Institutions: Stretched Too Thin? Find out how to evaluate a firm's loan portfolio to determine its financial health. CEO Savvy And Stock's Success Go Hand In Hand A CEO shapes the direction a business will take. We provide four clues to help you determine How much answer) How do na generic co
which ones have the right stuff. Earnings Sustainability: The Key To Your Investing Future Learn how to analyze earnings sustainability - an important part of making sound investments. The 4 Basic Elements Of Stock Value Investors use these four measures to determine a stock's worth. Find out how you can too. Decoding DuPont Analysis Get a deeper understanding of ROE with these three-step and five-step calculations. Accounting For Differences In Oil And Gas Accounting How a company accounts for its expenses affects how its net income and cash flow numbers are reported. EBITDA: Challenging The Calculation This measure has a bad rap, but it's still a valuable tool when used appropriately. Getting On The Right Side Of The P/E Ratio Trend Buying at the right time is crucial, but how do we know when that is? The Baltic Dry Index: Evaluating An Economic Recovery This index can provide insight into economic growth and production, but it has its critics. Financial Statement Manipulation An Ever-Present Problem For Investors The SEC has taken steps to eliminate this type of corporate fraud, but it remains a real risk for investors. Pick Better Stocks By Consulting Form 10-K Learn to read and dissect the most comprehensive compilation of information on a company. Free Cash Flow Yield: The Best Fundamental Indicator Cash in the bank is what every company strives to achieve. Find out how to determine how much a company is generating and keeping. Conference Calls: Press 1 For Investment Insight These calls can be an investor's most direct line to information about a company's operations. Evaluate Stock Price With Reverse-Engineering DCF This is a more accurate method to use when trying to find a target price for a stock. 5 Must-Have Metrics For Value Investors These quick-and-dirty ratios will help you find the most undervalued stocks on the market. Build A Baby Berkshire
Get a piece of Warren Buffett's profit by using Form 13F to coattail his picks. Economic Moats: A Successful Company's Best Defense Find out why some companies thrive while others flounder. Don't Forget To Read The Prospectus! Learn to decipher the secret language of the prospectus - it can tell you a lot about a company's future. Reading The Balance Sheet Learn about the components of the statement of financial position and how they relate to each other. Litigation: Are Your Investments At Risk? Don't let company lawsuits hit you unprepared. Learn how to uncover how they might affect you. Common Clues Of Financial Statement Manipulation Search for the "bloody" fingerprints in accounting crimes. Banking Stress Tests: Would Yours Pass? In weaker economic times, banks may be tested by the government to see how safe they are. How Buybacks Warp The Price-To-Book Ratio Relying on price-to-book can get ugly if a company has repurchased stock. Learn why. Cleaning Up Dirty Surplus Items Dirty surplus items can skew net income. Knowing how to account for them will give you a cleaner picture. The Best CEOs Listen To The Street Studies show that transparency and listening to the market are a winning combination for CEOs and the companies they run. Pharma Patent Trolls: Cheap Drugs At A Steep Price Though patent trolls can help patients achieve cheaper medication in the short-term, everyone pays for it in the long term. How To Avoid Falling Prey To The Next Madoff Scam Due diligence does work, but the loose reporting standards for hedge funds make extra care and attention necessary. Assessing Bank Assets: Are Your Savings Safe? Learn how to determine if your assets are safe or if your bank has spread itself too thin. Accretion / Dilution Analysis: A Merger Mystery This analysis tool is an effective way to value mergers and acquisitions. The deal's on the table,
but should you sign the papers? Is Your Bank On Its Way Down? Find out how the Tier 1 capital ratio can be used to tell if your bank is going under. Hamburger Economics: The Big Mac Index In theory, PPP stands up much better than it does in reality. Find out how to evaluate currencies according to the price of a Big Mac. 4 Characteristics Of Recession-Proof Companies Investors can find profitable companies - even in a recession. It's all about knowing where to look. Equity Valuation In Good Times And Bad Learn how to filter out the noise of the market place in order to find a solid way of determing a company's value. Signs A Stock Is Ready To Slide In investment, knowledge is power. Knowing these signs could alert you to potential problems on the horizon for your stocks. Mark-To-Market: Tool Or Trouble? Mark-to-market accounting can be a valuable practice, but all bets are off when the market fluctuates wildly. Making A Winning Long-Term Stock Pick Learn the different ratios and indicators that characterize a good long-term investment. Dial Up Choice Telecom Stocks This ever-changing industry can leave investors scratching their heads. Find out which metrics matter. Book Value: Theory Vs. Reality In theory, a low P/B ratio means you have a cushion against poor performance. In practice, it is much less certain. The Value Investor's Handbook Learn the technique that Buffett, Lynch and other pros used to make their fortunes. Intermarket Relationships: Following The Cycle Find out how commodity, bond, stock and currency markets interact. Time Value Of Money: Determining Your Future Worth Determining monthly contributions to college funds, retirement plans or savings is easy with the TVM calculation.
PEG Ratio Nails Down Value Stocks Learn how this simple calculation can help you determine a stock's earnings potential. Poker Face: Corporate Tells And How To Spot Them Observing a company's behavior can prove beneficial for the mindful investor. Know the signs before you make a reactionary move. Are Your Stocks Doomed? When a company is headed for trouble, the warning signs are usually there. Learn how to spot disaster. Reverse Engineering The ROE Return on equity is a widely used ratio, but return on net operating assets (RNOA) takes things one step farther. 10 Timeless Market Rules Find out what most investors are doing wrong, and how you can do it right. How To Find P/E And PEG Ratios If these numbers have you in the dark, these easy calculations should help light the way. Texas Ratio Rounds Up Bank Failures This measure can help investors spot potential trouble in a bank's financials. Find out how. Get A Richer Picture With The Penman-Nissim Framework Probability trends and profitability analysis are clearer when using this framework. Value Investing Using The Enterprise Multiple This simple measure can help investors determine whether a stock is a good deal. The Evolution Of Enterprise Risk Management This growing sector can tell you a lot about the companies you are investing in. Executive Compensation: How Much Is Too Much? The proxy statement can help determine whether a CEO is well compensated - or just overpaid. Red Flag Phrases: "Material Adverse Effect" Learn about this warning sign and how to spot it in a company's financial statements. A New Approach To Equity Compensation The new financial accounting standard known as FAS 123R could take a bite out of your portfolio. Find out why here. Uncovering Insider Trading Some insider trading is actually legal - and can be extremely telling for investors.
Detecting Two Tricks Of The Trade "One-time charges" and "investment gains" are two strategies companies can use to distort their numbers.
Primary market
The primary market is that part of the capital markets that deals with the issue of new securities. Companies, governments or public sector institutions can obtain funding through the sale of a new stock or bond issue. This is typically done through a syndicate of securities dealers. The process of selling new issues to investors is called underwriting. In the case of a new stock issue, this sale is an initial public offering (IPO). Dealers earn a commission that is built into the price of the security offering, though it can be found in the prospectus. Primary markets creates long term instruments through which corporate entities borrow from capital market. Features of primary markets are:
y
y y y y y
y
This is the market for new long term equity capital. The primary market is the market where the securities are sold for the first time. Therefore it is also called the new issue market (NIM). In a primary issue, the securities are issued by the company directly to investors. The company receives the money and issues new security certificates to the investors. Primary issues are used by companies for the purpose of setting up new business or for expanding or modernizing the existing business. The primary market performs the crucial function of facilitating capital formation in the economy. The new issue market does not include certain other sources of new long term external finance, such as loans from financial institutions. Borrowers in the new issue market may be raising capital for converting private capital into public capital; this is known as "going public." The financial assets sold can only be redeemed by the original holder.
Methods of issuing securities in the primary market are:
y y y
Initial public offering; Rights issue (for existing companies); Preferential issue.
Secondary market
The secondary market, also known as the aftermarket, is the financial market where previously issued securities and financial instruments such as stock, bonds, options, and futures are bought and sold.[1]. The term "secondary market" is also used to refer to the market for any used goods or assets, or an alternative use for an existing product or asset where the customer base is the second market (for example, corn has been traditionally used primarily for food production and feedstock, but a "second" or "third" market has developed for use in ethanol production). Another commonly referred to usage of secondary market term is to refer to loans which are sold by a mortgage bank to investors such as Fannie Mae and Freddie Mac. With primary issuances of securities or financial instruments, or the primary market, investors purchase these securities directly from issuers such as corporations issuing shares in an IPO or private placement, or directly from the federal government in the case of treasuries. After the initial issuance, investors can purchase from other investors in the secondary market. The secondary market for a variety of assets can vary from loans to stocks, from fragmented to centralized, and from illiquid to very liquid. The major stock exchanges are the most visible example of liquid secondary markets - in this case, for stocks of publicly traded companies. Exchanges such as the New York Stock Exchange, Nasdaq and the American Stock Exchange provide a centralized, liquid secondary market for the investors who own stocks that trade on those exchanges. Most bonds and structured products trade ³over the counter,´ or by phoning the bond desk of one¶s broker-dealer. Loans sometimes trade online using a Loan Exchange.
Contents
[hide]
y y y y y
1 Function 2 Related usage 3 Private Secondary Markets 4 References 5 See also
[edit] Function
Secondary marketing is vital to an efficient and modern capital market.[citation needed] In the secondary market, securities are sold by and transferred from one investor or speculator to another. It is therefore important that the secondary market be highly liquid (originally, the only way to create this liquidity was for investors and speculators to meet at a fixed place regularly; this is how stock exchanges originated, see History of the Stock Exchange). As a general rule, the greater the number of investors that participate in a given marketplace, and the greater the centralization of that marketplace, the more liquid the market.
Fundamentally, secondary markets mesh the investor's preference for liquidity (i.e., the investor's desire not to tie up his or her money for a long period of time, in case the investor needs it to deal with unforeseen circumstances) with the capital user's preference to be able to use the capital for an extended period of time. Accurate share price allocates scarce capital more efficiently when new projects are financed through a new primary market offering, but accuracy may also matter in the secondary market because: 1) price accuracy can reduce the agency costs of management, and make hostile takeover a less risky proposition and thus move capital into the hands of better managers, and 2) accurate share price aids the efficient allocation of debt finance whether debt offerings or institutional borrowing.[1]
[edit] Related usage
The term may refer to markets in things of value other than securities. For example, the ability to buy and sell intellectual property such as patents, or rights to musical compositions, is considered a secondary market because it allows the owner to freely resell property entitlements issued by the government. Similarly, secondary markets can be said to exist in some real estate contexts as well (e.g. ownership shares of time-share vacation homes are bought and sold outside of the official exchange set up by the time-share issuers). These have very similar functions as secondary stock and bond markets in allowing for speculation, providing liquidity, and financing through securitization.
[edit] Private Secondary Markets
Partially due to increased compliance and reporting obligations enacted in the Sarbanes-Oxley Act of 2002, private secondary markets began to emerge. These markets are generally only available to institutional or accredited investors and allow trading of unregistered and private company securities. In private equity, the secondary market (also often called private equity secondaries or secondaries) refers to the buying and selling of pre-existing investor commitments to private equity funds. Sellers of private equity investments sell not only the investments in the fund but also their remaining unfunded commitments to the funds.
[edit] References
1. ^ Law, Share Price Accuracy and Econ. Performance, Durnev et al. 102 MICH. L. REV. 331 (2003)
Forward contract
In finance, a forward contract or simply a forward is a non-standardized contract between two parties to buy or sell an asset at a specified future time at a price agreed today.[1] This is in contrast to a spot contract, which is an agreement to buy or sell an asset today. It costs nothing to enter a forward contract. The party agreeing to buy the underlying asset in the future assumes a long position, and the party agreeing to sell the asset in the future assumes a short position. The price agreed upon is called the delivery price, which is equal to the forward price at the time the contract is entered into. The price of the underlying instrument, in whatever form, is paid before control of the instrument changes. This is one of the many forms of buy/sell orders where the time of trade is not the time where the securities themselves are exchanged. The forward price of such a contract is commonly contrasted with the spot price, which is the price at which the asset changes hands on the spot date. The difference between the spot and the forward price is the forward premium or forward discount, generally considered in the form of a profit, or loss, by the purchasing party. Forwards, like other derivative securities, can be used to hedge risk (typically currency or exchange rate risk), as a means of speculation, or to allow a party to take advantage of a quality of the underlying instrument which is time-sensitive. A closely related contract is a futures contract; they differ in certain respects. Forward contracts are very similar to futures contracts, except they are not exchange traded, or defined on standardized assets.[2] Forwards also typically have no interim partial settlements or "true-ups" in margin requirements like futures - such that the parties do not exchange additional property securing the party at gain and the entire unrealized gain or loss builds up while the contract is open. However, being traded OTC, forward contracts specification can be customized and may include mark-to-market and daily margining. Hence, a forward contract arrangement might call for the loss party to pledge collateral or additional collateral to better secure the party at gain.[clarification needed]
How a forward contract works
Suppose that Bob wants to buy a house a year from now. At the same time, suppose that Andy currently owns a $100,000 house that he wishes to sell a year from now. Both parties could enter into a forward contract with each other. Suppose that they both agree on the sale price in one year's time of $104,000 (more below on why the sale price should be this amount). Andy and Bob have entered into a forward contract. Bob, because he is buying the underlying, is said to have entered a long forward contract. Conversely, Andy will have the short forward contract.
At the end of one year, suppose that the current market valuation of Andy's house is $110,000. Then, because Andy is obliged to sell to Bob for only $104,000, Bob will make a profit of $6,000. To see why this is so, one needs only to recognize that Bob can buy from Andy for $104,000 and immediately sell to the market for $110,000. Bob has made the difference in profit. In contrast, Andy has made a potential loss of $6,000, and an actual profit of $4,000. The similar situation works among currency forwards, where one party opens a forward contract to buy or sell a currency (ex. a contract to buy Canadian dollars) to expire/settle at a future date, as they do not wish to be exposed to exchange rate/currency risk over a period of time. As the exchange rate between U.S. dollars and Canadian dollars fluctuates between the trade date and the earlier of the date at which the contract is closed or the expiration date, one party gains and the counterparty loses as one currency strengthens against the other. Sometimes, the buy forward is opened because the investor will actually need Canadian dollars at a future date such as to pay a debt owed that is denominated in Canadian dollars. Other times, the party opening a forward does so, not because they need Canadian dollars nor because they are hedging currency risk, but because they are speculating on the currency, expecting the exchange rate to move favorably to generate a gain on closing the contract. In a currency forward, the notional amounts of currencies are specified (ex: a contract to buy $100 million Canadian dollars equivalent to, say $114.4 million USD at the current rate²these two amounts are called the notional amount(s)). While the notional amount or reference amount may be a large number, the cost or margin requirement to command or open such a contract is considerably less than that amount, which refers to the leverage created, which is typical in derivative contracts.
[edit] Example of how forward prices should be agreed upon
Continuing on the example above, suppose now that the initial price of Andy's house is $100,000 and that Bob enters into a forward contract to buy the house one year from today. But since Andy knows that he can immediately sell for $100,000 and place the proceeds in the bank, he wants to be compensated for the delayed sale. Suppose that the risk free rate of return R (the bank rate) for one year is 4%. Then the money in the bank would grow to $104,000, risk free. So Andy would want at least $104,000 one year from now for the contract to be worthwhile for him - the opportunity cost will be covered.
Open outcry
From Wikipedia, the free encyclopedia Open outcry is the name of a method of communication between professionals on a stock exchange or futures exchange which involves shouting and the use of hand signals to transfer information primarily about buy and sell orders.[2] The part of the trading floor where this takes place is called a pit. Examples of markets which use this system in the United States are the New York Mercantile Exchange, the Chicago Mercantile Exchange, the Chicago Board of Trade, and the Chicago Board Options Exchange. In the United Kingdom, the London Metal Exchange still makes use of open outcry. The open outcry system is being replaced by electronic trading systems (such as CATS and Globex). The supporters of electronic trading claim that they are faster, cheaper, more efficient for users, and less prone to manipulation by market makers and broker/dealers. However, many traders advocate for the open outcry system on the basis that the physical contact allows traders to speculate as to a buyer/seller's motives or intentions and adjust their positions accordingly. A "trading floor" is a trading venue. This expression often refers to a place where traders or stock brokers meet in order to buy and sell equities, also called a pit. Sometimes, the expression "trading floor" is also used to refer to the "trading room" or "dealing room", i.e. the office space where market activities are concentrated in investment banks or brokerage houses. But, technically speaking, these two spaces are different
India Infoline provided the prospect of researched investing to its clients, which was hitherto restricted only to the institutions. Research for the retail investor did not exist prior to India Infoline. India Infoline leveraged technology to bring the convenience of trading to the investor¶s location of preference (residence or office) through computerized access. India Infoline made it possible for clients to view transaction costs and ledger updates in real time. Over the last five years, India Infoline sharpened its competitive edge through the following initiatives: Multi-channel delivery model : The Company is among the few financial intermediaries in India to offer a complement of online and offline broking. The Companies network of branches also allows customers to place orders on phone or visit our branches for trading. Integrated middle and back office : The customer can trade on the BSE and NSE, in the cash as well as the derivatives segment all through the available multiple options of Internet, phone or branch presence. Multiple-trading options : The Company harnessed technology to offer services at among the lowest rates in the business. Membership: The Company widened client reach in trading on the domestic and international exchanges. Technology : The Company provides a prudent mix of proprietary and outsourced technologies, which facilitate business growth without a corresponding increase in costs. Content : The Company has leveraged its research capability to provide regular updates and investment picks across the short and long-term. Service : Clients can access the customer service team through various media like toll-free lines, emails and Internet- messenger chat for instant query resolution. The Companies customer service executives proactively contact customers to inform them of key changes and initiatives taken by the Company. Business World rated the Companies customer service as Best in their survey of online trading sites carried out in December 2003. Key features : Membership on the Bombay Stock Exchange Limited and the National Stock Exchange Registered with the NSDL as well as CDSL as a depository participant, providing a one-
stop solution for clients trading in the equities market Broking services in cash and derivative segments, online as well as offline. Presence across 350 cities and towns with a network of over 850 business locations Equity client base of over 500,000 clients Provision of free and world-class research to all clients.
Fundamental Analysis Article Archive
Marketplace Interpreting A Strategy Performance Report These key performance metrics will help you decide if your trading strategy is a winner. Find Hidden Stock Gems That Analysts Ignore Just because it doesn't get a lot of coverage, doesn't mean a company isn't a great find. Cashing In On Macroeconomic Trends Learn to identify the things that may impact your investments down the road. What Is A Cash Flow Statement? Learn how the CFS relates to the balance sheet and income statement as a part of a company's financial reports. Qualitative Analysis: What Makes A Company Great? To understand the qualities that make for a great company, investors must dig deep into "soft" metrics. Understanding The Cash Conversion Cycle Find out how a simple calculation can help you uncover the most efficient companies. EDGAR: Investors' One-Stop-Shop For Company Filings You can learn a lot about any listed company through this system - if you know how to use it. Operational Risk: A Must-Know For Investors This type of risk is often overlooked, but it can mean the downfall of a company - and its investors. Using Consumer Spending As A Market Indicator What people buy and where they shop can provide valuable information about the economy.
Trading Cen
ROA And ROE Give Clear Picture Of Corporate Health Both measure performance, but sometimes they tell a very different story. This is why theyâ¼re best used together. Analyst Recommendations: Do Sell Ratings Exist? Analyst reports can be an investor's best friend - but without knowing how to read them, you won't be able to fully utilize them. Special Of Free Rep Trade Fu Get a Fre Investors Beware: There Are 5 Types Of Earnings Per Share Investors need to know the varieties of EPS and what each represents to really determine whether Huge Re a company is a good value. Ask Inves Spotting Creative Accounting On The Balance Sheet What are t Companies have ways of manipulating their balance sheets that investors should be aware of. What's the accounting Company Clone Cost Reveals True Value (view answ Find out how calculating a reproduction cost for a company can beat out the dividend discount model. What effec and Consu Understanding The Income Statement debtors? (v Learn how to use revenue and expenses, among other factors, to break down and analyze a company. What was California Evaluating A Company's Management What is th Financial statements don't tell you everything about a company's health. Investigate the LIMEAN? management behind the numbers! How's Your Mutual Fund Really Doing? Determine how fund managers are doing by sizing them up against their peers. Small Business: Speed Up Receivables To Avoid A Cash Crunch Waiting for customers to pay can be a losing game. Look to factoring for quicker cash. Whom Should Corporations Please? Companies balance the interests of owners, customers and employees. Find out who comes out on top. Depreciation: Straight-Line Vs. Double-Declining Methods Appreciate the different methods used to describe how book value is "used up". Financial Institutions: Stretched Too Thin? Find out how to evaluate a firm's loan portfolio to determine its financial health. CEO Savvy And Stock's Success Go Hand In Hand A CEO shapes the direction a business will take. We provide four clues to help you determine How much answer) How do na generic co
which ones have the right stuff. Earnings Sustainability: The Key To Your Investing Future Learn how to analyze earnings sustainability - an important part of making sound investments. The 4 Basic Elements Of Stock Value Investors use these four measures to determine a stock's worth. Find out how you can too. Decoding DuPont Analysis Get a deeper understanding of ROE with these three-step and five-step calculations. Accounting For Differences In Oil And Gas Accounting How a company accounts for its expenses affects how its net income and cash flow numbers are reported. EBITDA: Challenging The Calculation This measure has a bad rap, but it's still a valuable tool when used appropriately. Getting On The Right Side Of The P/E Ratio Trend Buying at the right time is crucial, but how do we know when that is? The Baltic Dry Index: Evaluating An Economic Recovery This index can provide insight into economic growth and production, but it has its critics. Financial Statement Manipulation An Ever-Present Problem For Investors The SEC has taken steps to eliminate this type of corporate fraud, but it remains a real risk for investors. Pick Better Stocks By Consulting Form 10-K Learn to read and dissect the most comprehensive compilation of information on a company. Free Cash Flow Yield: The Best Fundamental Indicator Cash in the bank is what every company strives to achieve. Find out how to determine how much a company is generating and keeping. Conference Calls: Press 1 For Investment Insight These calls can be an investor's most direct line to information about a company's operations. Evaluate Stock Price With Reverse-Engineering DCF This is a more accurate method to use when trying to find a target price for a stock. 5 Must-Have Metrics For Value Investors These quick-and-dirty ratios will help you find the most undervalued stocks on the market. Build A Baby Berkshire
Get a piece of Warren Buffett's profit by using Form 13F to coattail his picks. Economic Moats: A Successful Company's Best Defense Find out why some companies thrive while others flounder. Don't Forget To Read The Prospectus! Learn to decipher the secret language of the prospectus - it can tell you a lot about a company's future. Reading The Balance Sheet Learn about the components of the statement of financial position and how they relate to each other. Litigation: Are Your Investments At Risk? Don't let company lawsuits hit you unprepared. Learn how to uncover how they might affect you. Common Clues Of Financial Statement Manipulation Search for the "bloody" fingerprints in accounting crimes. Banking Stress Tests: Would Yours Pass? In weaker economic times, banks may be tested by the government to see how safe they are. How Buybacks Warp The Price-To-Book Ratio Relying on price-to-book can get ugly if a company has repurchased stock. Learn why. Cleaning Up Dirty Surplus Items Dirty surplus items can skew net income. Knowing how to account for them will give you a cleaner picture. The Best CEOs Listen To The Street Studies show that transparency and listening to the market are a winning combination for CEOs and the companies they run. Pharma Patent Trolls: Cheap Drugs At A Steep Price Though patent trolls can help patients achieve cheaper medication in the short-term, everyone pays for it in the long term. How To Avoid Falling Prey To The Next Madoff Scam Due diligence does work, but the loose reporting standards for hedge funds make extra care and attention necessary. Assessing Bank Assets: Are Your Savings Safe? Learn how to determine if your assets are safe or if your bank has spread itself too thin. Accretion / Dilution Analysis: A Merger Mystery This analysis tool is an effective way to value mergers and acquisitions. The deal's on the table,
but should you sign the papers? Is Your Bank On Its Way Down? Find out how the Tier 1 capital ratio can be used to tell if your bank is going under. Hamburger Economics: The Big Mac Index In theory, PPP stands up much better than it does in reality. Find out how to evaluate currencies according to the price of a Big Mac. 4 Characteristics Of Recession-Proof Companies Investors can find profitable companies - even in a recession. It's all about knowing where to look. Equity Valuation In Good Times And Bad Learn how to filter out the noise of the market place in order to find a solid way of determing a company's value. Signs A Stock Is Ready To Slide In investment, knowledge is power. Knowing these signs could alert you to potential problems on the horizon for your stocks. Mark-To-Market: Tool Or Trouble? Mark-to-market accounting can be a valuable practice, but all bets are off when the market fluctuates wildly. Making A Winning Long-Term Stock Pick Learn the different ratios and indicators that characterize a good long-term investment. Dial Up Choice Telecom Stocks This ever-changing industry can leave investors scratching their heads. Find out which metrics matter. Book Value: Theory Vs. Reality In theory, a low P/B ratio means you have a cushion against poor performance. In practice, it is much less certain. The Value Investor's Handbook Learn the technique that Buffett, Lynch and other pros used to make their fortunes. Intermarket Relationships: Following The Cycle Find out how commodity, bond, stock and currency markets interact. Time Value Of Money: Determining Your Future Worth Determining monthly contributions to college funds, retirement plans or savings is easy with the TVM calculation.
PEG Ratio Nails Down Value Stocks Learn how this simple calculation can help you determine a stock's earnings potential. Poker Face: Corporate Tells And How To Spot Them Observing a company's behavior can prove beneficial for the mindful investor. Know the signs before you make a reactionary move. Are Your Stocks Doomed? When a company is headed for trouble, the warning signs are usually there. Learn how to spot disaster. Reverse Engineering The ROE Return on equity is a widely used ratio, but return on net operating assets (RNOA) takes things one step farther. 10 Timeless Market Rules Find out what most investors are doing wrong, and how you can do it right. How To Find P/E And PEG Ratios If these numbers have you in the dark, these easy calculations should help light the way. Texas Ratio Rounds Up Bank Failures This measure can help investors spot potential trouble in a bank's financials. Find out how. Get A Richer Picture With The Penman-Nissim Framework Probability trends and profitability analysis are clearer when using this framework. Value Investing Using The Enterprise Multiple This simple measure can help investors determine whether a stock is a good deal. The Evolution Of Enterprise Risk Management This growing sector can tell you a lot about the companies you are investing in. Executive Compensation: How Much Is Too Much? The proxy statement can help determine whether a CEO is well compensated - or just overpaid. Red Flag Phrases: "Material Adverse Effect" Learn about this warning sign and how to spot it in a company's financial statements. A New Approach To Equity Compensation The new financial accounting standard known as FAS 123R could take a bite out of your portfolio. Find out why here. Uncovering Insider Trading Some insider trading is actually legal - and can be extremely telling for investors.
Detecting Two Tricks Of The Trade "One-time charges" and "investment gains" are two strategies companies can use to distort their numbers.
Primary market
The primary market is that part of the capital markets that deals with the issue of new securities. Companies, governments or public sector institutions can obtain funding through the sale of a new stock or bond issue. This is typically done through a syndicate of securities dealers. The process of selling new issues to investors is called underwriting. In the case of a new stock issue, this sale is an initial public offering (IPO). Dealers earn a commission that is built into the price of the security offering, though it can be found in the prospectus. Primary markets creates long term instruments through which corporate entities borrow from capital market. Features of primary markets are:
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This is the market for new long term equity capital. The primary market is the market where the securities are sold for the first time. Therefore it is also called the new issue market (NIM). In a primary issue, the securities are issued by the company directly to investors. The company receives the money and issues new security certificates to the investors. Primary issues are used by companies for the purpose of setting up new business or for expanding or modernizing the existing business. The primary market performs the crucial function of facilitating capital formation in the economy. The new issue market does not include certain other sources of new long term external finance, such as loans from financial institutions. Borrowers in the new issue market may be raising capital for converting private capital into public capital; this is known as "going public." The financial assets sold can only be redeemed by the original holder.
Methods of issuing securities in the primary market are:
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Initial public offering; Rights issue (for existing companies); Preferential issue.
Secondary market
The secondary market, also known as the aftermarket, is the financial market where previously issued securities and financial instruments such as stock, bonds, options, and futures are bought and sold.[1]. The term "secondary market" is also used to refer to the market for any used goods or assets, or an alternative use for an existing product or asset where the customer base is the second market (for example, corn has been traditionally used primarily for food production and feedstock, but a "second" or "third" market has developed for use in ethanol production). Another commonly referred to usage of secondary market term is to refer to loans which are sold by a mortgage bank to investors such as Fannie Mae and Freddie Mac. With primary issuances of securities or financial instruments, or the primary market, investors purchase these securities directly from issuers such as corporations issuing shares in an IPO or private placement, or directly from the federal government in the case of treasuries. After the initial issuance, investors can purchase from other investors in the secondary market. The secondary market for a variety of assets can vary from loans to stocks, from fragmented to centralized, and from illiquid to very liquid. The major stock exchanges are the most visible example of liquid secondary markets - in this case, for stocks of publicly traded companies. Exchanges such as the New York Stock Exchange, Nasdaq and the American Stock Exchange provide a centralized, liquid secondary market for the investors who own stocks that trade on those exchanges. Most bonds and structured products trade ³over the counter,´ or by phoning the bond desk of one¶s broker-dealer. Loans sometimes trade online using a Loan Exchange.
Contents
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1 Function 2 Related usage 3 Private Secondary Markets 4 References 5 See also
[edit] Function
Secondary marketing is vital to an efficient and modern capital market.[citation needed] In the secondary market, securities are sold by and transferred from one investor or speculator to another. It is therefore important that the secondary market be highly liquid (originally, the only way to create this liquidity was for investors and speculators to meet at a fixed place regularly; this is how stock exchanges originated, see History of the Stock Exchange). As a general rule, the greater the number of investors that participate in a given marketplace, and the greater the centralization of that marketplace, the more liquid the market.
Fundamentally, secondary markets mesh the investor's preference for liquidity (i.e., the investor's desire not to tie up his or her money for a long period of time, in case the investor needs it to deal with unforeseen circumstances) with the capital user's preference to be able to use the capital for an extended period of time. Accurate share price allocates scarce capital more efficiently when new projects are financed through a new primary market offering, but accuracy may also matter in the secondary market because: 1) price accuracy can reduce the agency costs of management, and make hostile takeover a less risky proposition and thus move capital into the hands of better managers, and 2) accurate share price aids the efficient allocation of debt finance whether debt offerings or institutional borrowing.[1]
[edit] Related usage
The term may refer to markets in things of value other than securities. For example, the ability to buy and sell intellectual property such as patents, or rights to musical compositions, is considered a secondary market because it allows the owner to freely resell property entitlements issued by the government. Similarly, secondary markets can be said to exist in some real estate contexts as well (e.g. ownership shares of time-share vacation homes are bought and sold outside of the official exchange set up by the time-share issuers). These have very similar functions as secondary stock and bond markets in allowing for speculation, providing liquidity, and financing through securitization.
[edit] Private Secondary Markets
Partially due to increased compliance and reporting obligations enacted in the Sarbanes-Oxley Act of 2002, private secondary markets began to emerge. These markets are generally only available to institutional or accredited investors and allow trading of unregistered and private company securities. In private equity, the secondary market (also often called private equity secondaries or secondaries) refers to the buying and selling of pre-existing investor commitments to private equity funds. Sellers of private equity investments sell not only the investments in the fund but also their remaining unfunded commitments to the funds.
[edit] References
1. ^ Law, Share Price Accuracy and Econ. Performance, Durnev et al. 102 MICH. L. REV. 331 (2003)
Forward contract
In finance, a forward contract or simply a forward is a non-standardized contract between two parties to buy or sell an asset at a specified future time at a price agreed today.[1] This is in contrast to a spot contract, which is an agreement to buy or sell an asset today. It costs nothing to enter a forward contract. The party agreeing to buy the underlying asset in the future assumes a long position, and the party agreeing to sell the asset in the future assumes a short position. The price agreed upon is called the delivery price, which is equal to the forward price at the time the contract is entered into. The price of the underlying instrument, in whatever form, is paid before control of the instrument changes. This is one of the many forms of buy/sell orders where the time of trade is not the time where the securities themselves are exchanged. The forward price of such a contract is commonly contrasted with the spot price, which is the price at which the asset changes hands on the spot date. The difference between the spot and the forward price is the forward premium or forward discount, generally considered in the form of a profit, or loss, by the purchasing party. Forwards, like other derivative securities, can be used to hedge risk (typically currency or exchange rate risk), as a means of speculation, or to allow a party to take advantage of a quality of the underlying instrument which is time-sensitive. A closely related contract is a futures contract; they differ in certain respects. Forward contracts are very similar to futures contracts, except they are not exchange traded, or defined on standardized assets.[2] Forwards also typically have no interim partial settlements or "true-ups" in margin requirements like futures - such that the parties do not exchange additional property securing the party at gain and the entire unrealized gain or loss builds up while the contract is open. However, being traded OTC, forward contracts specification can be customized and may include mark-to-market and daily margining. Hence, a forward contract arrangement might call for the loss party to pledge collateral or additional collateral to better secure the party at gain.[clarification needed]
How a forward contract works
Suppose that Bob wants to buy a house a year from now. At the same time, suppose that Andy currently owns a $100,000 house that he wishes to sell a year from now. Both parties could enter into a forward contract with each other. Suppose that they both agree on the sale price in one year's time of $104,000 (more below on why the sale price should be this amount). Andy and Bob have entered into a forward contract. Bob, because he is buying the underlying, is said to have entered a long forward contract. Conversely, Andy will have the short forward contract.
At the end of one year, suppose that the current market valuation of Andy's house is $110,000. Then, because Andy is obliged to sell to Bob for only $104,000, Bob will make a profit of $6,000. To see why this is so, one needs only to recognize that Bob can buy from Andy for $104,000 and immediately sell to the market for $110,000. Bob has made the difference in profit. In contrast, Andy has made a potential loss of $6,000, and an actual profit of $4,000. The similar situation works among currency forwards, where one party opens a forward contract to buy or sell a currency (ex. a contract to buy Canadian dollars) to expire/settle at a future date, as they do not wish to be exposed to exchange rate/currency risk over a period of time. As the exchange rate between U.S. dollars and Canadian dollars fluctuates between the trade date and the earlier of the date at which the contract is closed or the expiration date, one party gains and the counterparty loses as one currency strengthens against the other. Sometimes, the buy forward is opened because the investor will actually need Canadian dollars at a future date such as to pay a debt owed that is denominated in Canadian dollars. Other times, the party opening a forward does so, not because they need Canadian dollars nor because they are hedging currency risk, but because they are speculating on the currency, expecting the exchange rate to move favorably to generate a gain on closing the contract. In a currency forward, the notional amounts of currencies are specified (ex: a contract to buy $100 million Canadian dollars equivalent to, say $114.4 million USD at the current rate²these two amounts are called the notional amount(s)). While the notional amount or reference amount may be a large number, the cost or margin requirement to command or open such a contract is considerably less than that amount, which refers to the leverage created, which is typical in derivative contracts.
[edit] Example of how forward prices should be agreed upon
Continuing on the example above, suppose now that the initial price of Andy's house is $100,000 and that Bob enters into a forward contract to buy the house one year from today. But since Andy knows that he can immediately sell for $100,000 and place the proceeds in the bank, he wants to be compensated for the delayed sale. Suppose that the risk free rate of return R (the bank rate) for one year is 4%. Then the money in the bank would grow to $104,000, risk free. So Andy would want at least $104,000 one year from now for the contract to be worthwhile for him - the opportunity cost will be covered.
Open outcry
From Wikipedia, the free encyclopedia Open outcry is the name of a method of communication between professionals on a stock exchange or futures exchange which involves shouting and the use of hand signals to transfer information primarily about buy and sell orders.[2] The part of the trading floor where this takes place is called a pit. Examples of markets which use this system in the United States are the New York Mercantile Exchange, the Chicago Mercantile Exchange, the Chicago Board of Trade, and the Chicago Board Options Exchange. In the United Kingdom, the London Metal Exchange still makes use of open outcry. The open outcry system is being replaced by electronic trading systems (such as CATS and Globex). The supporters of electronic trading claim that they are faster, cheaper, more efficient for users, and less prone to manipulation by market makers and broker/dealers. However, many traders advocate for the open outcry system on the basis that the physical contact allows traders to speculate as to a buyer/seller's motives or intentions and adjust their positions accordingly. A "trading floor" is a trading venue. This expression often refers to a place where traders or stock brokers meet in order to buy and sell equities, also called a pit. Sometimes, the expression "trading floor" is also used to refer to the "trading room" or "dealing room", i.e. the office space where market activities are concentrated in investment banks or brokerage houses. But, technically speaking, these two spaces are different
