What is the Structure of a Corporation?
Each state has different stipulations concerning what defines a corporation, but there are some commonalities across the country. Businesses must file Articles of Incorporation with the Secretary of State in the state of their home office, which detail the proposed structure of the business, before their status as a corporation can be approved. Each corporation is going to be different, of course, and each state has slightly different laws delineating the structure and bylaws that corporations must adopt. Continue reading...
What is a Profit?
In its simplest form, a profit is the revenue or income gained from an entity after all expenses/overhead is accounted for. In business, a company deals with a number of expenses - operating expenses (the cost of doing business), fixed costs (overhead), salaries and benefits, legal fees, and so on. If a company’s revenues exceed all of these costs combined, the company is considered profitable. A profit is also known as a company’s bottom line, net earnings, or net profit. Continue reading...
What does Earnings mean?
Earnings is another word for the net income of a company. It is one of the most important numbers in corporate finance. If a company cannot show earnings, and growth in earnings, investors aren’t going to stick around. Earnings are normally computed as revenue minus taxes and expenses. It is synonymous with net income. Earnings is a positive cash outlay for the year, which means the company is not operating at a deficit. Continue reading...
What is a BitLicense?
A BitLicense is an informal name for the New York state license required of cryptocurrency businesses to operate within the state. While a lot of cryptocurrency transactions can and do happen “off the grid,” many companies working in cryptocurrency choose to register for licenses to do business and to comply with relevant state and federal regulations and reporting requirements. Different states have different requirements for the businesses that operate within them. In New York state, the applicable license has come to be called the BitLicense. Continue reading...
What is the Operating Cash Flow Ratio?
The operating cash flow ratio, or OCF ratio, is used to measure whether a company’s cash flows are sufficient to cover current liabilities. It essentially measures how many times a company can use cash flow from operations to cover debt expenses. It can be measured by dividing a company’s cash flow from operations by its current liabilities. Companies with high (relative to their peers or other companies in the sector OCF ratios are generally in good financial health, meaning they can adequately cover ongoing liabilities with cash flow from operations. Continue reading...
What is the 'Fixed Assets to Net Worth' Ratio?
The fixed assets to net worth ratio is a calculation intended to measure the solvency of a company. It generally tells the analyst what percentage of a company’s assets are cash vs. fixed assets. To calculate the ratio, you divide net fixed assets into net worth. A fixed assets to net worth ratio greater than 0.75, generally, means that a company has too much of their net worth tied up in assets like equipment, machinery, land, and so on. Continue reading...
What is market disruption?
Market disruption is a term that describes the state of affairs when the status quo of the stock market or a particular industry’s market is destabilized. This could include the entry of what’s called a disruptive technology or new competitive company, or a natural disaster, or technical difficulties with the computer network that the exchanges use. It is also commonly used to refer to a panic or mania that makes the market disorderly and is stemmed through the use of circuit breakers. Continue reading...
Whats is Commercial Paper?
Commercial Paper is an unsecured short-term loan that a highly rated corporation can issue to finance short-term obligations, like accounts receivable or inventory builds. The high quality paper is typically issued in increments of $100,000 and with a duration of no more than 270 days, which actually makes it a safe investment since the solvency/cash flow of a business is predictable over such a short stretch. Continue reading...
What is triple witching?
Triple witching hour is when three types of derivatives expire at once, which happens once every quarter in the US. It typically results in irregular or volatile movements in the markets. When stock market index futures, stock market index options and stock options all expire at the same time, the hour before close is called the Triple Witching Hour. This occurs on the third Friday of March, June, September, and December in the United States between 3:00 PM and 4:00 PM Eastern time. Continue reading...
What is a Credit Spread?
Credit Spread is an indication of the default risk perceived in corporate bonds at the current time. The credit spread is the difference between the yield on the safest bonds and the riskiest bonds. How much does it cost corporations to issue bonds, in terms of the yield expected by investors in the current market? Typically, a higher spread indicates a more unstable economy. Buyers of large quantities of bonds tend to insure their purchases, and the cost of the insurance is usually reflected in so-called CDS's (Credit Default Swaps). The more expensive the CDS's are, the more risky it is to purchase the bond. Continue reading...