According to economic experts, shareholder activism refers to a process through which an individual with equity in a publicly traded corporation attempts to use his or her shareholder rights to pressure the management team into making changes. Shareholders are partial owners of a corporation. Thus they have rights they can exercise to influence a change of behavior. However, achieving this feat is highly dependent on one’s share classification. Major shareholders have a greater influence over the running of a corporation compared to minority shareholders who only have limited options such as proxy battles, publicity campaigns, litigation, as well as writing formal proposals that are voted for during annual meetings. An activist shareholder focuses on pressuring the management to make financial and non-financial changes that range from the corporate policy, financing structure, disinvestment, adoption of environmentally conscious policies to cost-cutting measures, among others. Several publicly listed companies in the United States Continue reading
Investment Ideas
Bitcoin’s Role as an Alternative Currency System
Bitcoin fall in a broad form of monetary history. Bitcoin is a decentralized digital money that may be sent from user to user on the peer-to-peer Bitcoin network without intermediaries. Network nodes verify transactions via cryptography and are recorded in a distributed public ledger called a blockchain. A blockchain is a distributed digital database that records all cryptocurrency transactions. It is constantly expanding as completed blocks and new recordings are added. Each block includes the previous block’s cryptographic hash, a timestamp, and transaction data. Bitcoin nodes utilize the blockchain to distinguish valid transactions. Bitcoin transactions from attempts to re-spend coins that an unknown individual or organization under open-source. Bitcoin and cryptocurrency can revolutionize how people store, transfer, and create value in money. Naturally, money is believed to be a physical commodity that may be used as a medium of exchange, such as gold or silver. People consider money a unit Continue reading
Role of Financial Statements Analysis in Making Investment Decisions
One of the most important long-term decisions for any business is investment with the aim of making gains in the future. Investment decisions are concerned with the use of funds including buying, holding or selling and each decision could be vital to a firm. A careless decision may result in a long-term loss or even worse, bankruptcy. Therefore, an in-depth understanding and analysis is necessary for a high quality investment decision process. This is also even more critical to investors who invest in stock of company or shareholders. Financial statement analysis is critical in making effective stock investment decisions. By study the balance sheet, income statement, cash flow statement and statement of owners’ equity separately and combined, an analyst might have a good sense of a company’s overall financial picture; therefore, the investment decisions are likely to be reasonable and profitable. Financial Statements Analysis In order to understand the analysis Continue reading
Factors to Consider in Making Financial Investment Decisions
When investing, it is fundamental for an investor to make a comparison of various investment opportunities and determine which investment promises a higher return while ensuring that risks are minimized. The analysis sometimes requires a thorough examination of elements associated with various types of investments. An investor should consider features such as interest rates, maturity period, risks, required rate of return, and upfront payments. Notably, investments differ in various aspects including minimum level of capital required, periodic payments, and income, among other features. For instance, an individual intending to invest in equities would find that dividends for stocks vary according to the market situation. However, the investor would also notice that apart from dividends, an individual would earn capital gains if he or she invested in equities. On the other hand, an individual considering an investment in bonds would find that bonds have a fixed maturity period that may determine Continue reading
The Clients of Asset Management Firms
Typically, asset management firms are categorized according to the kind of clients they serve. Clients generally fall into one of three categories: (1) mutual funds (or retail), (2) institutional investors, or (3) high net worth. Some firms specialize in one of the three components, but most participate in all three. Asset management firms usually assemble these three areas as distinct and separate divisions within the company. It is critical that you understand the differences between these client types; job descriptions vary depending on the client type. For instance, a portfolio manager for high-net-worth individuals has an inherently different focus than one representing institutional clients. A marketing professional working for a mutual fund has a vastly different job than one handling pensions for an investment management firm. 1. Mutual Funds Mutual funds are investment vehicles for individual investors who are typically below the status of high net worth (we will discuss Continue reading
Bonus Issue of Shares – Meaning, Benefits and Motives
BONUS ISSUE OF SHARES When we invest the share capital in a business, we do so with the expectation of getting back not only our invested capital, but also a proportionate share of the surplus generated from operations, after all the other stakeholders have been paid their dues. Thus, collectively the business owes its shareholders, their invested capital as well as the surplus generated from operations. But in reality, while the business may pay us annual dividends, seldom is this surplus fully distributed away as dividends. Thus, the surplus which is retained in the business is still owed to us. This retained surplus is also reflected as retained earnings or reserves in the Balance sheet of a company. Together, share capital and reserves are known as equity or the net worth of a company. Over a period of time, the retained earnings of a firm Continue reading