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What is a Merger?
A merger is the voluntary melding of two companies into one, when the owners believe the change is mutually beneficial. A merger could happen between two companies that were competitors, called a horizontal merger, or between companies who are part of the same supply chain, called a vertical merger. A merger between two companies who are based in the same industry but serve different markets could also be called a market extension. Continue reading...
What is a Monopoly?
A monopoly is an unhealthy situation in the market in which a single company is the only option in a specific sector or area, which undermines the principals of a free market. In a free market, there is competition which keeps the prices and the quality of products as good as they can be for the consumer. The consumer will therefore receive the most value, and society will be in its best possible position, when the needs and demands of consumers are being addressed by several companies attempting to outdo each other to earn the consumer’s business. Continue reading...
What is a vertical spread?
A Vertical Spread involves the strategy of buying and selling an equal number of options on the same underlying security with the same expiration date, but different strike prices. Vertical Spreads can be both bullish and bearish, depending on your view of the underlying security. If you use calls, you are constructing a Vertical Bull Spread, and if you’re using puts, you’re constructing a Vertical Bear Spread. Continue reading...
What is a currency certificate?
A currency certificate is also called a foreign exchange (Forex) certificate (FEC), and it validates that the bearer is entitled to a certain amount of foreign currency upon the redemption of the certificate, or that a certain amount of foreign currency was exchanged for it. This is not to be confused with a certificate of currency, which is proof that some types of insurance are currently in effect. Currency certificates have been historically used in countries with closed or controlled economies, such as the Soviet Union, Cuba, and China. Continue reading...
What is a Certificate of Deposit?
A Certificate of Deposit, commonly referred to as a CD, is a financial product that essentially pays risk-free interest (though typically at very low rates). CDs are typically offered by banks and credit unions, and usually span in duration from one month to 5 or 10 years. They are FDIC guaranteed up to $250,000, so customers may generally consider them risk-free. But because there is very little risk to purchasing a CD, they also typically pay very low annual interest rates. Continue reading...
What are International Equity Funds?
International equity funds hold stocks of corporations based outside of the United States. International equity funds invest mostly in the stock of overseas companies. People purchase shares of such funds as a means of globally diversifying their portfolio. There is some degree of currency risk involved in international investments, which may necessitate a currency hedging strategy if an investor is heavily invested across the globe. Continue reading...
What is market saturation?
Market Saturation is the point at which there are few consumers that are still interested in buying a product because those who were ever likely to already have done so. Saturation can be said to exist for all similar products in a market. This may call for different strategies which could keep a company going. One is that products can be made to wear out after a certain amount of time and need replacement. Another is that the business can shift its focus to subscription or service-based income. Continue reading...
What are the Contribution Limits for My Money Purchase/Profit Sharing Plan?
Contributions are generally limited to 25% of employee compensation, but a small addition amount may be contributed for higher-income employees. Money Purchase plans and Profit Sharing plans are funded by employer contributions, and in general these contributions cannot exceed 25% of gross compensation. For a self-employed person or a partner in a pass-through entity, the real percentage of contributions cannot exceed 20% of net profits because self-employment taxes will reduce the amount of profits considered compensation, as will the actual contribution. Continue reading...
What is a bull put spread?
A bull put spread is used when an investor thinks the price of a security is set to rise modestly. The strategy involves buying one put option on the security while simultaneously selling another put option at a higher strike price. A Bull Put Spread is usually a vertical spread, meaning the two options used have the same expiration date (and different prices). The lower-strike put option is bought and held long, while the higher-strike option is sold short. The short position sold will be at or just below the current market price for the security, and the long position will be at a lower strike price than the short position. Continue reading...
Should I pay for financial planning services?
Any professional that you work with for financial planning is going to be compensated for the work they do, but there are different ways they earn their pay. Whether it’s worth it to you is another question. If you have enough knowledge and time on your hands, and your investment portfolio is not very complicated, you may be able to manage it on your own. This can save you some money on financial advisor fees. Continue reading...
How Do You Accept Bitcoin Payments for Your Store?
Several services make it easy to accept bitcoin payments, or a programmer can help you set up your own node. The most convenient way to accept bitcoin payments as a merchant is to use the services made available by exchanges like Coinbase and Bitpay, who make it simple enough to add a button to your website and to accept payments in person via NFC and QR codes. These exchanges have established what is called Full Nodes on the blockchain, which are slightly more efficient than using regular client software on the blockchain, and have optimized them for merchant services. Continue reading...
How to Mine Litecoin and other Altcoins?
It used to be that litecoin mining could only be done by GPU, but now ASIC machines are getting all the glory. For a time, new miners preferred to mine litecoin instead of bitcoin because ASIC miners had rendered old-fashioned GPU mining for Bitcoin unprofitable. During that time, when ASIC machines had not be designed for Litecoin Scrypt mining, anyone with a good enough GPU could profitably mine litecoin with the same computer they used at home, while they were off at work or asleep not using it. If you aren’t aware, GPUs (graphics cards) compute the kinds of functions necessary for mining at many times the speed that CPUs (core processors) alone would. Continue reading...
What is a bull call spread?
A bull call spread is a vertical spread that buys and sells calls in a way that benefits from upward price movement but limits the risk of the short position. Using calls options of the same expiration date but different prices, a bull call spread seeks to maximize profits for moderate price movements upward. A long position is taken in a call contract (meaning it is bought and held) that has a strike price near the current market price of the security or is at least lower than the other call contract used in this strategy. Continue reading...
What are foreign currency effects?
Companies with significant operations or sales abroad will be affected by changes in foreign currency exchange rates. If the dollar strengthens relative to a foreign currency, the price paid for the goods in the country will not be worth as much domestically when the company converts their profits back to dollars. Some foreign currencies fluctuate much more than the US dollar does, but even the dollar can behave unpredictably. This can have a tremendous effect on the bottom line of companies engaged in significant amounts of business abroad. Continue reading...
What Does Ripple Do?
Ripple does several things, serving as a protocol for decentralized currency exchange and transfers of value, primarily focused on the financial service industry. Ripple’s defining characteristic is probably its interface for inter-ledger payments and settlements, meaning the ledgers of other blockchains and the database systems of banks can be seamlessly integrated to offer validation and record-keeping with a reliability and speed that was heretofore unheard-of. Ripple cuts out as many middlemen as possible and dramatically reduces the transaction costs and time required for cross-border money transfers, while also significantly reducing some of the risks inherent to international trade, like counter-party risk. Continue reading...
What is a Bank Reconciliation Statement?
It is a useful practice to compare the balance reported by the bank and your internal accounting, in the form of a Bank Reconciliation Statement. Bank Reconciliation is the useful practice of comparing the records of the bank and a business's internal accounting for a specific accounting period. Many businesses produce Bank Reconciliation Statements (BRS) on a monthly basis. There may be pending transactions that have not settled yet, such as outstanding checks to vendors, which have shown up on the business’s books but are not represented in the bank account balance. It can be important to identify which transactions have shown up on the bank’s ledger and which ones have not. Continue reading...
What is alpha in investing?
Alpha is a risk ratio which measures gains or losses relative to a benchmark, indicating whether an investor is being compensated with a return greater than the volatility risk being taken. Alpha’s counterpart, the Beta figure, measures how closely an investment follows movements in the market as a whole or, when examining mutual funds, how similarly the funds move to their relevant indexes. Alpha is expressed as integers, which can be translated into percentage points above or below a benchmark for a time period. Investors are interested in higher Alpha figures: the larger the positive Alpha, the more the fund in question has outperformed its benchmark. An Alpha of 2 indicates a performance 2% greater than its benchmark; inversely, a -2 Alpha would denote 2% underperformance. Continue reading...
What is the Accounting Cycle?
The Accounting Cycle includes all of the documentation that is collected and all of the controls and systems in place to ensure accurate accounting. The Accounting Cycle begins with the point of sale, with documentation for the transaction (invoice or receipt) and the internal expenses and inventory. There are conventions, controls and systems in place to account for and control the flow of information in a company at each stage of the process to ensure that accounts are as accurate as possible. The Accounting Cycle may refer to the length of time between trial balances, such as monthly, quarterly, or annually. Continue reading...
What is Exponential Moving Average?
Moving averages are important components of many technical indicators. The Exponential Moving Average (EMA) uses the closing prices of all the previous trading days for a given interval to calculate an average price from that for the period, but is weighted to give the most recent days more influence over the final number. The weighted averages are plotted in a line that helps traders follow trends. Continue reading...
What is a Life Settlement?
A life settlement, also known as a viatical settlement, is a lump sum payment that purchases a person’s life insurance contract from them and makes the life settlement company the new beneficiary. These have become more regulated in last 20 years due to the questionable moral dilemma that this presents. They tend to only work for permanent life insurance products like whole life and universal life, since the viatical company will know that it will get a return on its investment. Life insurance companies have some of the most impressive returns, in a risk-adjusted perspective, on the money in their general account. Continue reading...