What is the difference between a broker and a market maker?

July 9, 2024 No Comments

A: A broker is an intermediary who has a license to buy and sell securities on a client’s behalf. Stockbrokers coordinate contracts between buyers and sellers, usually for a commission. A market maker, on the other hand, is an intermediary that is willing and ready

What is the difference between a compiled and a certified financial statement?

July 9, 2024 No Comments

A: All publicly-traded companies are required to provide financial statements, including a balance sheet, cash flow statement and income statement. To ensure that these statements are accurate and fall within the guidelines of generally accepted accounting principles (GAAP) they are audited and certified by an

What is the difference between a merger and a takeover?

July 9, 2024 No Comments

A: In a general sense, mergers and takeovers (or acquisitions) are very similar corporate actions – they combine two previously separate firms into a single legal entity. Significant operational advantages can be obtained when two firms are combined and, in fact, the goal of most

What is the average price-to-earnings ratio in the automotive sector?

July 9, 2024 No Comments

A: As of January 2015, the current price-to-earnings, or P/E, ratio was 15 for auto manufacturers and 20 for auto parts manufacturers. The forward P/E ratios, which are based on projected earnings, are 29 and 17, respectively. Automotive Sector The automotive sector is composed of

What is the difference between a Ponzi and a pyramid scheme?

July 9, 2024 No Comments

A: Pyramid schemes and Ponzi schemes share many similar characteristics in which unsuspecting individuals are fooled by unscrupulous investors who promise extraordinary returns. However, in contrast to a regular investment, these types of schemes can offer consistent “profits” only as long as the number

What is considered a healthy EV/EBITDA?

July 9, 2024 No Comments

A: The enterprise-value-to-EBITDA ratio varies by industry. However, the EV/EBITDA for the S&P 500 has typically averaged from 11 to 14 over the last few years. As of the end of 2017, the average EV/EBITDA for the S&P was 12.75. As a general guideline, an EV/EBITDA value below 10 is commonly interpreted

What is considered a high debt-to-equity ratio and what does it say about the company?

July 9, 2024 No Comments

A: The debt-to-equity ratio is a measure of a company’s financial leverage that relates the amount of a firms’ debt financing to the amount of equity financing. It is calculated by dividing a firm’s total liabilities by total shareholders’ equity. What is considered a “high”

What is double entry bookkeeping and how does it work in the general ledger?

July 9, 2024 No Comments

A: Double entry bookkeeping is the concept that every accounting transaction has two affects on a company’s finances. The general ledger is the record of the two sides of each transaction. If a company sells a product, its revenue increases and its cash increases by

What is earnings management?

July 9, 2024 No Comments

A: Before diving into what earnings management is, it is important to have a solid understanding of what we mean when we refer to earnings. Earnings are the profits of a company. Investors and analysts look to earnings to determine the attractiveness of a particular

What is liquidity management?

July 9, 2024 No Comments

A: In finance, liquidity management takes one of two forms based on the definition of liquidity. One type of liquidity refers to the ability to trade an asset, such as a stock or bond, at its current price. The other definition of liquidity applies to

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