Why do analysts sometimes give an overweight recommendation on a stock?

July 9, 2024 No Comments

A: Financial analysts give their opinions of the future performance of a security. They can give performance ratings of underweight, overweight and market perform to a security. If analysts give a stock an overweight rating, they expect the stock to outperform its industry in the

Will getting a student loan deferral hurt my credit score?

July 9, 2024 No Comments

A: A student loan deferral lets you postpone making payments on your student loan for a period of time. Your lender may approve your deferral request under a number of circumstances, including but not limited to temporary total disability, public service (e.g., the Peace Corps

Why do companies use reverse/forward stock splits?

July 9, 2024 No Comments

A: Companies will use reverse/forward stock splits mainly in an attempt to save future administrative costs. A reverse/forward stock split involves two corporate actions: first, the company will perform a reverse stock split, and will immediately follow with a forward stock split. The purpose of

Why do shareholders need financial statements?

July 9, 2024 No Comments

A: Shareholders need financial statements to evaluate their equity investments and help them make informed decisions as to how to vote on corporate matters. When evaluating investments, shareholders are able to glean meaningful data found on financial statements. There are a number of tools shareholders

Why do you need a margin account to short sell stocks?

July 9, 2024 No Comments

A: The reason that margin accounts and only margin accounts can be used to short sell stocks has to do with Regulation T, a rule instituted by the Federal Reserve Board. This rule is motivated by the nature of the short sale transaction itself and

Why does accumulated depreciation have a credit balance on the balance sheet?

July 9, 2024 No Comments

A: Accumulated depreciation is increased with a credit entry, although it is shown on the asset side of the balance sheet. Following the accounting equation, which is the basis for a balance sheet, assets must always be equal to liabilities plus equity. Assets, on the

Why is Average Collection Period important to a company?

July 9, 2024 No Comments

A: An average collection period shows the average number of days necessary to convert business receivables into cash. The degree to which this is useful for a business depends on the business’s relative reliance on credit sales to generate revenue; a high balance in accounts

When should I use depreciation expense instead of accumulated depreciation?

July 9, 2024 No Comments

A: The most basic difference between depreciation expense and accumulated depreciation lies in the fact that one appears as an expense on the income statement, and the other is a contra asset reported on the balance sheet. Both pertain to the “wearing out” of equipment,

Which financial ratio best reflects capital structure?

July 9, 2024 No Comments

A: When analyzing the financial health and growth potential of a company, business owners and investors look to financial ratios that indicate how a company is funded and how effectively those dollars are being used. In ratio analysis, the debt to equity ratio is widely

Which is better: A high or low equity multiplier?

July 9, 2024 No Comments

A: An equity multiplier measures a company’s financial leverage by using a ratio of the company’s total assets to its stockholders’ equity. Generally, a lower equity multiplier indicates a company has lower financial leverage. It is better to have a low equity multiplier, because a

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