Initial Public Offering (IPO) Phases In an Initial Public Offering (IPO), the issuer obtains the assistance of an underwriting firm, which helps it determine what type of security to issue (common or preferred), the best offering price and the time to bring it to market. Any IPO process goes through the following stages of transformation: The pre-IPO transformation phase can be considered to be a restructuring phase where a company starts the groundwork toward becoming a publicly-traded company. Furthermore, companies should re-examine their organizational processes and policies and make necessary changes to enhance the company’s corporate governance and transparency. Most importantly, the company needs to develop an effective growth and business strategy that can persuade potential investors the company is profitable and can become even more profitable. The IPO transaction phase usually takes place right before the shares are sold and involves achieving goals that would enhance the optimal initial Continue reading
Investment Terms
Corporate Investment Decisions – Meaning and Stages
In order to succeed in a competitive market, corporations need to pay much attention to their investment decisions to gain benefits and profits. The process of making effective decisions involves several steps, and it needs to be discussed in detail along with a list of options that are available to corporations for their investment. The purpose of this article is to provide an explanation of how the majority of corporations make specific investment decisions to add to their profitability and competitive advantage. The first step in the decision-making process related to investing in the analysis of a current situation with the help of certain tools, such as the cash flow analysis and the analysis of the cost of capital. These tools are important to indicate the current position of a corporation in the market, evaluate its attractiveness to potential investors, and influence its own investing decisions. The second step in Continue reading
Risk and Return in Investments
There are different motives for investment. The most prominent among all is to earn a return on investment. However, selecting investments on the basis of return in not enough. The fact is that most investors invest their funds in more than one security suggest that there are other factors, besides return, and they must be considered. The investors not only like return but also dislike risk. So, what is required is: Clear understanding of what risk and return are, What creates them, and How can they be measured? Return: The return is the basic motivating force and the principal reward in the investment process. The return may be defined in terms of (i) realized return, i.e., the return which has been earned, and (ii) expected return, i.e., the return which the investor anticipates to earn over some future investment period. The expected return is a predicted or estimated return and Continue reading
Futures Trading in Commodity Markets
The process of trading commodities is also known as futures trading. Futures Contracting is an important activity for any economy to meet raw material requirements, to facilitate storage as a profitable economic activity and also to manage supply and demand risk, forward contracts gives rise to price risk, so to the need of price risk management, unlike other kinds of investments, such as stocks and bonds, when investor trade futures, he/she do not actually buy anything or own anything. He/she are speculating on the future direction of the price in the commodity in which they are trading. This is like a bet on future price direction. The terms “buy” and “sell” merely indicate the direction you expect future prices will take. In other word Forward/Future trading is an activity in which a trader takes a position in an equity in advance of an action which he/she knows his/her brokerage will Continue reading
An Overview of Hedge Fund Strategies or Hedging Techniques
Hedge funds are pools of investment that invest in almost any opportunity in any market where they foresee impressive gains at reduced risk. Hedging refers to implementing strategies that manage or protect against an identified risk exposure. They take leveraged positions in publicly traded equity, debt, foreign exchange and derivatives. The primary aim of most hedge funds is to reduce volatility and risk while attempting to preserve capital and deliver positive returns under all market conditions. Derivatives provide institutions the opportunity to break financial risks into smaller components and then to buy or sell those components to manage risk. Hedge funds hold a number of assets; they use derivatives to protect against the adverse price movement of these assets. Hedge funds play more of the role of speculators than of hedgers. They use derivatives when buying and selling assets and by putting long-short positions, they seek to hedge themselves against Continue reading
Stock – Meaning and Definition
Stock is the share in the ownership of the company. Stock represents the claim on the company’s assets and earnings. In other words, it means, the more the stock, the ownership stake in the company becomes greater. The stock is represented by a stock certificate which is a document that proves the ownership in the company. Few years ago when the person wanted to buy or sell shares, he/she physically took the certificates to the brokerage firm. But now information technology has increased, because of which this stock document is stored electronically. Now trading with a click of mouse or a phone call has made transacting easier. The stock certificate is considered worthless if there is no claim on the ownership of the company’s assets and earnings. Another important feature of stock is its limited liability. It means as the owner of the stock, he/she is not responsible for the Continue reading