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

June 30, 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?

June 30, 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 factors are taken into account to quantify credit risk?

June 30, 2024 No Comments

A: The quantification of credit risk, assigning measurable and comparable numbers to the likelihood of default or spread risk, is a major frontier in modern finance. The factors that affect credit risk range from borrower-specific criteria, such as debt ratios, to market-wide considerations such as

What happens to the shares of stock purchased in a tender offer?

June 30, 2024 No Comments

A: The shares of stock purchased in a tender offer become the property of the purchaser. From that point forward, the purchaser, like any other shareholder, has the right to hold or sell the shares at his discretion. What Is a Tender Offer? A tender

What industries use the loan to value ratio?

June 30, 2024 No Comments

A: The financial sector and mortgage investment industry use the loan-to-value ratio to assess the lending risk of mortgages. Calculate the loan-to-value ratio by dividing the mortgage amount by the property’s appraised value. Lenders evaluate a mortgage’s loan-to-value ratio before they underwrite the loan. Generally,

What investments are considered liquid assets?

June 30, 2024 No Comments

A: A liquid asset is cash on hand or an asset that can be readily converted to cash. An asset that can readily be converted into cash is similar to cash itself because the asset can be sold with little impact on its value. (For

What is a “non linear” exposure in Value at Risk (VaR)?

June 30, 2024 No Comments

A: The value at risk (VaR) is a statistical risk management technique that determines the amount of financial risk associated with a portfolio. There are generally two types of risk exposures in a portfolio: linear or nonlinear. A portfolio that contains a significant amount of

What is a back door listing?

June 30, 2024 No Comments

A: A back door listing, sometimes referred to as a reverse takeover, reverse merger, or reverse initial public offering (IPO), occurs when a privately held company that may not qualify for the public offering process purchases a publicly traded company. By undertaking a back door

What is a bad interest coverage ratio?

June 30, 2024 No Comments

The interest coverage ratio is one of several debt ratios that market analysts utilize. The formula allows investors or analysts to determine how comfortably interest on all its outstanding debt can be paid by a company. The ratio is calculated by using the interest expenses

What causes dividends per share to increase?

June 30, 2024 No Comments

A: There are two primary causes for increases in a company’s dividend per share payout. The first is simply an increase in the company’s net profits out of which dividends are paid. The second is a shift in the company’s growth strategy that leads the

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