What does it mean when a company has a high capital adequacy ratio?

July 9, 2024 No Comments

A: The capital adequacy ratio, also known as capital to risk-weighted assets ratio, measures a bank’s financial strength by using its capital and assets. Generally, a bank with a high capital adequacy ratio is considered safe and likely to meet its financial obligations. The capital

What does it mean when airline revenues are adjusted for air traffic liability?

July 9, 2024 No Comments

A: Airline revenue adjustments for air traffic liability are simply part of the accrual accounting method that airlines commonly use. Revenues are adjusted at the time of ticket sales in recognition of the fact that the airline has thereby incurred the liability of providing the

What does it mean when my broker says that shares are for auction?

July 9, 2024 No Comments

A: An auction market is one in which stock buyers enter competitive bids and stock sellers enter competitive offers at the same time. If this sounds like buying and selling stock on a stock exchange, you’re right. It is worth noting that before stocks are

What does negative shareholder equity on a balance sheet mean?

July 9, 2024 No Comments

A: N egative shareholder equity could show up on a company’s balance sheet for a number of reasons, all of which should serve as red flags to look much closer before investing. To understand why, you need to look no further than the formula for

What does the Efficient Market Hypothesis have to say about fundamental analysis?

July 9, 2024 No Comments

A: The efficient market hypothesis (EMH) is at odds with fundamental analysis because of its assumptions about the availability of information and the rationality of the market. Fundamental analysis requires a thorough assessment of a company’s financial position and prospects. Based on some combination of

What does the forward p/e indicate about a company?

July 9, 2024 No Comments

A: The price to earnings (P/E) ratio compares the share price of a company to the earnings it generates per share. The formula used to calculate this ratio simply divides the market value per share by the earnings per share (EPS). The typical calculation of

What did Knight Trading Group do to incur a $1.5 million fine for violating trading rules?

July 9, 2024 No Comments

A: The dotcom boom accelerated many deceitful business practices that first became apparent during the ’80s and ’90s. Many of these had to do with analyst recommendations being tied with investment banking divisions’ interests and other basic conflict of interest problems. One of the clearest

What do efficiency ratios measure?

July 9, 2024 No Comments

A: Efficiency ratios measure a company’s ability to use its assets and manage its liabilities effectively. Some efficiency ratios include the inventory turnover ratio, asset turnover ratio and receivables turnover ratio. These ratios measure how efficiently a company uses its assets to generate revenues and

What do the letters / symbols on credit ratings mean?

July 9, 2024 No Comments

A: The letters or numbers used to express a credit rating or credit score express the creditworthiness of the individual, business or government being assessed. Credit ratings are usually expressed in letters such as “AAA” or “BB.” Credit scores, which are normally assigned to individuals,

What does a futures contract cost?

July 9, 2024 No Comments

A: The value of a futures contract is derived from the cash value of the underlying asset. While a futures contract may have a very high value, a trader can buy or sell the contract with a much smaller amount, which is known as the

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