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What Are Chips, Caps, and Sectors in the World of Corporate Finance?

You may hear a lot of talk about different types of chips, caps, and sectors when stocks get brought up in financial conversations. These terms are all just different ways of classifying and lumping together [more…]

Equity Valuation Models to Evaluate Stock Values

Easily the most difficult part of investing in stocks is figuring out what they’re worth and projecting how their prices will change. There are a number of different influences on the value and price of [more…]

Corporate Analysis Used to Determine the Value of Stock

Corporate analysis is one of the primary methods of determining the value of stock because the value of the underlying company contributes strongly to the value of the stock. Don’t be confused; the actual [more…]

Evaluate Industry Performance to Determine Stock Value

Each industry responds differently and at different times to different variables. Understanding how each sector responds to cycles and policies in economy is very important for traders and investors alike [more…]

What Is Macroeconomics in the World of Corporate Finance?

Macroeconomics is the study of large-scale, collective economic management. It’s usually related to the national economy or other issues involving an aggregate of smaller economic entities. Macroeconomics [more…]

The Derivatives Market in the World of Corporate Finance

Derivatives are legal contracts that set the terms of a transaction that can be bought and sold as the current market price varies against the terms in the contract. Originally, derivatives were all about [more…]

What Are Options in the World of Corporate Finance?

Options in corporate finance are contracts that give the buyer the right to buy or sell a fixed number of goods at a predetermined price, but they don’t obligate the buyer to do so. [more…]

Customize Contracts with Forwards

A forward in the world of corporate finance is an agreement between parties to perform a sale of a specific type of good in a predetermined quantity at a predetermined price at a predetermined date in [more…]

Add Some Standardization to Contracts with Futures

Futures contracts are highly standardized in a number of ways: futures contracts must be for a homogenous commodity of a standardized type and quality; each futures contract must be for a standardized [more…]

Swap Derivatives and Their Role in Corporate Finance

Of the four most common derivatives, the swap is easily the most confusing. Why? Because each swap involves two agreements rather than just one. Swaps occur when corporations agree to exchange something [more…]

What Is Financial Engineering?

Financial engineering is nothing more than the creation of new and interesting financial tools, often accomplished through the use of mathematic modeling and computer engineering. Financial engineering [more…]

How to Make Securities Out of Just about Anything

When people talk about securities, more frequently than not they’re referring to equity securities, also known as stocks. Equity securities aren’t even close to being the only type of security out there [more…]

Hybrid Finances and Corporate Finance

A hybrid is anything that is made by combining two or more things. The idea is simple: Take two financial products and smush them together into a single product. Some work more effectively together than [more…]

What Does It Mean to Bundle Assets?

When several of a single type of asset or, sometimes, several different types of assets are grouped together and sold collectively as a single security, that’s called [more…]

Appeal to a Large Market with Exotic Finances

Exotic financial products aren’t entirely new; rather, they’re new and/or rare variations of existing products. The word exotic is used in finance in the sense that something is attractive simply because [more…]

Engineering Corporate Finances

Portfolio engineering and investing strategy go hand-in-hand and are easily the most mathematically complicated subject in all of financial engineering. As Isaac Newton pointed out, modeling the madness [more…]

Computational Finance

The most significant trend in the manner in which financial transactions take place and the financial implications of this change comes from an overlap between financial engineering and computer engineering [more…]

How to Measure the Cost of Capital the WACC Way

The most common method of measuring the cost of capital that you’ll see in all the major college finance textbooks is called WACC (pronounced “whack”), the weighted average cost of capital. This particular [more…]

How to Calculate the Cost of Debt

Calculating the cost of debt is pretty simple. Debt includes any long- or short-term debt that is used to finance the operations of a business.

The biggest influence on the cost of debt is simply the interest [more…]

The Cost of Equity

The cost of equity is a little less singular than the cost of debt. Equity is any funding raised through the selling of stock. Different people have different ways of measuring equity. [more…]

How Dividend Policy Influences the Cost of Equity

The cost of equity is heavily influenced by the corporation’s dividend policy. When a company makes a profit, that profit technically belongs to the owners of the company, which are the stockholders. So [more…]

Choose the Proper Capital Structure

From the corporation’s perspective, investing, debt, and equity all come back to the original question of how to fund its operations and how to properly balance the amount of debt or equity that is being [more…]

Analyze a Corporation's Financial Success

Determining how financially successful a corporation is actually provides a lot more information about the corporation than simply how well it manages money. Financial performance analyses are the way [more…]

Conventional Evaluations of Investment Performance

The degrees of success being generated by corporations can be measured in many ways. There are several different methods for evaluating the success of standard capital investments as well as financial [more…]

Portfolio Manager Evaluations

One concept that can be applied to any expenditure or investment is generally applied to evaluations of the success of investment portfolio managers. These evaluations involve [more…]

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