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what is the shareholder value maximization myth | it is commonly understood that corporate directors and management have a duty to maximize shareholder value especially for publicly traded companies however legal rulings suggest that this commonly held belief is in fact a myth there is actually no legal duty to maximize profits while managing a corporation 1the idea c... | |
what is a balance sheet | the term balance sheet refers to a financial statement that reports a company s assets liabilities and shareholder equity at a specific time balance sheets provide the basis for computing rates of return for investors and evaluating a company s capital structure in short the balance sheet is a financial statement that ... | |
what is a capital gain | capital gain refers to the increase in the value of a capital asset when it is sold put simply a capital gain occurs when you sell an asset for more than what you originally paid for it almost any type of asset you own is a capital asset this can include a type of investment like a stock bond or real estate or somethin... | |
what s the difference between tangible and intangible assets | there are two types of asset categories tangible and intangible tangible assets are typically physical assets or property owned by a company such as computer equipment tangible assets are the main type of assets that companies use to produce their product and service intangible assets don t physically exist yet they ha... | |
what is shareholder value added sva | shareholder value added sva is a measure of the operating profits that a company has produced in excess of its funding costs or cost of capital the basic calculation is net operating profit after tax nopat minus the cost of capital which is based on the company s weighted average cost of capital | |
how shareholder value added sva works | some value investors use sva as a tool to judge the corporation s profitability and management efficacy this line of thinking runs congruent with value based management which assumes that the foremost consideration of a corporation should be to maximize economic value for its shareholders shareholder value is created w... | |
what is a shareholders agreement | a shareholders agreement also called a stockholders agreement is an arrangement among shareholders that describes how a company should be operated and outlines shareholders rights and obligations the agreement also includes information on the management of the company and privileges and protection of shareholders the b... | |
what are shares | shares are units of ownership in a company the terms shares and stocks are often used interchangeably but they are technically different stock is the financial instrument a company issues and a share is a single instance of that financial instrument investopedia sydney saporitounderstanding shares | |
when establishing a corporation owners may choose to issue stock to raise capital companies then divide their stock into shares which are sold to investors these investors are generally investment banks or brokers that in turn sell the shares to other investors individually or through instruments like a mutual fund or ... | shares are the equivalent of ownership in a corporation because they represent ownership not debt there is no legal obligation for the company to reimburse the shareholders if something happens to the business however some companies may distribute payments to shareholders through dividends others may elect not to do so... | |
how shares are issued and regulated | generally a company s board of directors is given a specific number of shares that can be issued these are called authorized shares issued shares are the number of shares sold to shareholders and counted for ownership purposes so a corporation might have 10 million authorized shares but only issue 8 million because sha... | |
what s the difference between a share and a stock | a stock is an equity instrument issued by a corporation that represents ownership of that company a share is one unit of that ownership you would say i own 10 shares of apple stock for example | |
what is a stock split | a stock split occurs when a company divides its existing shares into multiple shares this increases the number of shares outstanding while proportionally decreasing the price per share for example in a 2 for 1 split each share becomes two shares each worth half the original price | |
how do you calculate earnings per share | earnings per share eps is calculated by dividing a company s net income by its number of outstanding shares it s a key metric for assessing a company s profitability on a per share basis a higher eps generally indicates higher profitability the bottom lineshares are units of stocks issued by a corporation that represen... | |
what is the sharing economy | the sharing economy is a peer to peer p2p economic model it facilitates acquiring providing or sharing access to goods and services sharing economies have existed throughout history but in modern times the sharing economy is experiencing a revival with the support of community based online platforms understanding the s... | |
how the sharing economy is evolving | the sharing economy has evolved over the past few years to encompass a wide range of online economic transactions that may even include business to business b2b interactions other platforms that have joined the sharing economy include in 2017 the brookings institute predicted that the sharing economy would grow from 14... | |
how is the sharing economy more environmentally sustainable | the sharing economy is often cited as environmentally beneficial because it allows existing resources to be used more efficiently an uber driver sells rides to many people who otherwise would have to buy vehicles a co working space provides all of the equipment and space needed for a large number of home offices | |
what is the downside of the sharing economy | consider an alternate name for the sharing economy the gig economy some of its participants appreciate the freedom and flexibility that has been made feasible as the sharing economy has grown however this also allows businesses to shift away from hiring full time workers to hiring more contractors this decreases the nu... | |
how does the share economy differ from the conventional economy | the share economy has several distinct characteristics the bottom linethe sharing economy has enabled many people to live a life that is relatively independent and flexible while sharing their resources and talents with others like them it can allow participants to make extra money by pooling unused resources which dec... | |
what is the sharpe ratio | the sharpe ratio compares the return of an investment with its risk it s a mathematical expression of the insight that excess returns over a period of time may signify more volatility and risk rather than investing skill economist william f sharpe proposed the sharpe ratio in 1966 as an outgrowth of his work on the cap... | |
what the sharpe ratio can tell you | the sharpe ratio is one of the most widely used methods for measuring risk adjusted relative returns it compares a fund s historical or projected returns relative to an investment benchmark with the historical or expected variability of such returns the risk free rate was initially used in the formula to denote an inve... | |
when benchmarked against the returns of an industry sector or investing strategy the sharpe ratio provides a measure of risk adjusted performance not attributable to such affiliations | the ratio is useful in determining to what degree excess historical returns were accompanied by excess volatility while excess returns are measured in comparison with an investing benchmark the standard deviation formula gauges volatility based on the variance of returns from their mean the ratio s utility relies on th... | |
what is a good sharpe ratio | sharpe ratios above 1 are generally considered good offering excess returns relative to volatility however investors often compare the sharpe ratio of a portfolio or fund with those of its peers or market sector so a portfolio with a sharpe ratio of 1 might be found lacking if most rivals have ratios above 1 2 for exam... | |
what is a shell corporation | a shell corporation is a corporation without active business operations or significant assets these types of corporations are not all necessarily illegal but they are sometimes used illegitimately such as to disguise business ownership from law enforcement or the public legitimate reasons for a shell corporation includ... | |
what is the sherman antitrust act | the sherman antitrust act refers to a landmark u s law that banned businesses from colluding or merging to form a monopoly passed in 1890 the law prevented these groups from dictating controlling and manipulating prices in a particular market the act aimed to promote economic fairness and competitiveness while regulati... | |
what is the sherman antitrust act in simple terms | the sherman antitrust act is a law passed by congress to promote competition within the economy by prohibiting companies from colluding or merging to form a monopoly | |
why was the sherman antitrust act passed | the sherman antitrust act was passed to address concerns by consumers who felt they were paying high prices on essential goods and by competing companies who believed they were being shut out of their industries by larger corporations | |
what are the penalties for violating the sherman act | those found guilty of violating the sherman act can face a hefty punishment it is also a criminal law and offenders may serve prison sentences of up to 10 years beyond that there are also fines which can be up to 1 million for an individual and up to 100 million for a corporation in some cases heftier fines could also ... | |
have any of today s big name companies been accused of violating the sherman act | many household names have been hit with antitrust suits based in part on the sherman act other than google in recent years microsoft and apple have both faced complaints with the former accused of seeking to create a monopoly in internet browser software and the latter of unethically raising the price of its e books an... | |
what is the difference between the sherman act and the clayton act | the clayton act was introduced later in 1914 to address some of the specific practices that the sherman act did not clearly prohibit or failed to properly clarify the sherman act the first of its kind was deemed too vague allowing some companies to find ways to maneuver around it 2essentially the clayton act deals with... | |
what is a shooting star | a shooting star is a bearish candlestick with a long upper shadow little or no lower shadow and a small real body near the low of the day it appears after an uptrend 1 said differently a shooting star is a type of candlestick that forms when a security opens advances significantly but then closes the day near the open ... | |
what does the shooting star tell you | shooting stars indicate a potential price top and reversal the shooting star candle is most effective when it forms after a series of three or more consecutive rising candles with higher highs it may also occur during a period of overall rising prices even if a few recent candles were bearish following the advance a sh... | |
what is a short position | a short or a short position is created when a trader sells a security first with the intention of repurchasing it or covering it later at a lower price a trader may decide to short a security when they believe that the price of that security is likely to decrease in the near future there are two types of short position... | |
when creating a short position one must understand that the trader has a finite potential to earn a profit and infinite potential for losses that is because the potential for a profit is limited to the stock s distance to zero however a stock could potentially rise for years making a series of higher highs one of the m... | a short squeeze is when a heavily shorted stock suddenly begins to increase in price as traders that are short begin to cover the stock one famous short squeeze occurred in october 2008 when the shares of volkswagen surged higher as short sellers scrambled to cover their shares during the short squeeze the stock rose f... | |
how to set up a short position | in order to place a short order an investor must first have access to this type of order within their brokerage account since margin and interest will be incurred in a short trade this means that you need to have a margin account in order to set up a short position once you have the correct type of account along with a... | |
what is margin | in finance the margin is the collateral that an investor has to deposit with their broker or exchange to cover the credit risk the holder poses for the broker or the exchange for example a short position cannot be established without sufficient margin in the case of short sales under regulation t the federal reserve bo... | |
how much can i lose on a short position | short selling occurs when a trader borrows a security and sells it on the open market planning to buy it back later for less money theoretically the price of an asset has no upper bound and can climb to infinity this means that in theory the risk of loss on a short position is unlimited | |
what is a short squeeze | short positions represent borrowed shares that have been sold in anticipation of buying them back in the future as the underlying asset prices rise investors are faced with losses to their short position aside from the pressure of mounting paper losses maintaining a short position can also become more difficult because... | |
when investors are forced to buy back shares to cover their position it is referred to as a short squeeze if enough short sellers are forced to buy back shares at the same time then it can result in a surge in demand for shares and therefore an extremely sharp rise in the underlying asset s price | the bottom linewhile it sounds illegal to sell something you don t own the market is tightly regulated when traders believe that a security s price is likely to decline in the near term they may enter a short position by selling the security first with the intention of buying it later at a lower price to set up a short... | |
what is a short call | a short call is an options position taken as a trading strategy when a trader believes that the price of the asset underlying the option will drop therefore it s considered a bearish trading strategy short calls have limited profit potential and the theoretical risk of unlimited loss they re usually used only by experi... | |
how a short call works | a short call strategy is one of two simple ways options traders can take bearish positions it involves selling call options or calls calls give the holder of the option the right to buy the underlying security at a specified price the strike price before the option contract expires the seller or writer of the call opti... | |
why would someone sell call options | investors who believe that the price of a security is going to fall might sell calls on that security simply for income in other words they ll profit just from the premium they received for selling the option however for the strategy to succeed the option has to expire unexercised by the buyer | |
what s the risk of a naked short call | a naked short call refers to a situation where traders sell call options but don t already own the underlying securities that they would be obligated to deliver if the buyer exercises the calls so the risk is that the market price for the security goes up above the option strike price the buyer exercises the option and... | |
what is short covering | short covering refers to buying back borrowed securities in order to close out an open short position at a profit or loss it requires purchasing the same security that was initially sold short and handing back the shares initially borrowed for the short sale 1 this type of transaction is referred to as buy to cover for... | |
how does short covering work | short covering is necessary in order to close an open short position a short position will be profitable if it is covered at a lower price than the initial transaction it will incur a loss if it is covered at a higher price than the initial transaction when there is a great deal of short covering occurring in a securit... | |
how does short covering work | short covering works by closing out a short position that an investor has made by buying back shares that were initially borrowed and sold when an investor shorts a stock they borrow shares from a stock lender and sell them on the market with the expectation of buying them back at a lower price in the future if the sto... | |
what s the difference between short interest and the short interest ratio | short interest refers to the total number of shares that have been sold short in a specific security that has not been covered or closed out investors use the metric as a measure of bearish sentiment short interest can be expressed as a percentage of the total shares outstanding or as a ratio of the total shares that a... | |
how did short covering contribute to the gamestop short squeeze | retail traders noticed a high level of short interest in gamestop and worked together through reddit trading group wallstreetbets to coordinate frenzied buying in the company s shares and options the increased sudden buying pressure forced several hedge funds who had bet against the videogame retailer to promptly cover... | |
what risks are associated with short covering | investors who cover a short position at a higher price than they initially shorted the stock for will incur a loss the act of short covering can trigger further buying creating a short squeeze in the stock increasing the potential for significant losses as traders scramble to buy back shares at progressively higher pri... | |
what is short interest | short interest is the number of shares that have been sold short and remain outstanding traders typically sell a security short if they anticipate that price will decline by borrowing shares of stock the investor then sells these borrowed shares to buyers willing to pay the market price short interest is often an indic... | |
what does short interest signal | short interest can provide insight into the potential direction of an individual stock as well as how bullish or bearish investors are about the market overall stock exchanges measure and report on short interest and issue reports each month providing investors a tool to use as a short selling benchmark a large increas... | |
how to use short interest | if a stock has a rising level of short interest it doesn t mean that the stock will fall in price but only that a high number of investors are betting that the stock will fall in price an investor can calculate short interest or short float for a stock by dividing the number of shares sold short by the float by the tot... | |
what are the limitations of using short interest | short interest is a useful tool but should not be the sole determinant of an investment decision changes in short interest and even extremes may not lead to significant price changes in a timely fashion a stock can stay at an extreme reading for long periods or a major price decline short interest is published only mon... | |
what is a short squeeze | a short squeeze occurs when a high number of short sellers attempt to cut their losses and exit their short positions by purchasing their borrowed shares due to panic about potential losses also a short squeeze often occurs if a stock price rises | |
how does short interest compare to a put call ratio | short interest and the put call ratio are both indicators of market sentiment short interest focuses on the number of short shares outstanding the put call ratio uses the options market for its data put options are bearish bets while calls are bullish bets changes in the put call ratio are another gauge that can be use... | |
what is a good short interest | short interest as a percentage of float below 10 indicates strong positive sentiment short interest as a percentage of float above 10 is fairly high indicating significant pessimistic sentiment short interest as a percentage of float above 20 is extremely high | |
is 20 a high short interest | yes short interest as a percentage of float above 20 is considered high and it indicates a very pessimistic sentiment the bottom lineshort interest indicates how many shares of a company are currently sold short and not yet covered short interest is often expressed as a number yet it is more telling as a percentage an ... | |
what is the short interest ratio | the short interest ratio takes the number of shares held short in a stock and it divides this by the stock s average daily trading volume simply put the ratio can help an investor find out very quickly if a stock is heavily shorted or not shorted versus its average daily trading volume the term is sometimes used interc... | |
what the short interest ratio can tell you | the ratio tells an investor if the number of shares short is high or low versus the stock s average trading volume the ratio can rise or fall based on the number of shares short however it can also increase or decrease as volume levels change example of how to use the short interest ratiothe tesla chart below shows the... | |
what is a short put | a short put refers to when a trader opens an options trade by selling or writing a put option the trader who buys the put option is long that option and the trader who wrote that option is short the writer short of the put option receives the premium option cost and the profit on the trade is limited to that premium ba... | |
what is the short run | short run is an economic concept that states that within a certain period in the future at least one input is fixed while others are variable it expresses the idea that an economy behaves differently depending on the length of time it has to react to certain stimuli the short run does not refer to a specific duration o... | |
what is a short sale | a short sale is the sale of an asset such as a bond or stock that the seller does not own it is generally a transaction in which an investor borrows a security from a broker and then sells it in anticipation of a price decline the seller is then required to return an equal number of shares at some point in the future t... | |
why would an investor make a short sale transaction | the two most common reasons an investor might want to short sell a security are who loses in short selling the trader loses if the stock they are shorting rises in price instead if that happens they must make up the price difference losing money in the process | |
how do investors make money in a short sale | to make money in a short sale the investor must repurchase the shares they borrowed at a lower price than the initial purchase the difference is the investor s profit on the transaction minus commissions or fees if any the bottom linein a short sale an investor borrows stocks to sell at one price with the intention of ... | |
what is short selling | short selling is a trading strategy where investors speculate on a stock s decline short sellers bet on and profit from a drop in a security s price traders use short selling as speculation and investors or portfolio managers may use it as a hedge against the downside risk of a long position jessica olah investopedia | |
how short selling works | traders commonly engage in short selling for speculation and hedging to open a short position a trader must have a margin account and pay interest on the value of the borrowed shares while the position is open the financial industry regulatory authority finra which enforces the rules and regulations governing registere... | |
what is a short squeeze | a short squeeze happens in financial markets when the price of an asset rises sharply causing traders who had sold short to close their positions it occurs when a security has a significant amount of short sellers meaning lots of investors are betting on its price falling a short squeeze begins when the price of an ass... | |
how does a short squeeze work | short sellers make their trades expecting that the price of a stock will fall when a heavily shorted stock unexpectedly rises in price instead the short sellers may have to act fast to limit their losses short sellers borrow shares of an asset that they believe will drop in price in order to buy them after they fall if... | |
why short squeezes happen | short sellers open positions on stocks that they believe will decline in price however sound their reasoning a positive news story a product announcement or an earnings beat that excites the interest of buyers can upend this the turnaround in the stock s fortunes may prove to be temporary but if it s not short sellers ... | |
when identifying stocks at risk of a short squeeze two useful measures are short interest and the short interest ratio | short interest is the total number of shares sold short as a percentage of the total shares outstanding the short interest ratio is the total number of shares sold short divided by the stock s average daily trading volume speculative stocks tend to have higher short interest than more stable companies watching short in... | |
what is days to cover and is it useful for identifying short squeeze targets | days to cover also known as the short interest ratio is calculated by taking a stock s total number of shares sold short and dividing that number by the stock s average daily trading volume for example if a stock has one million shares sold short and its average daily trading volume is 100 000 shares then the days to c... | |
where can i find information on stocks with high short interest | finance portals such as yahoo finance have free stock screeners that generate lists of heavily shorted stocks drilling down into individual stocks displays relevant short selling information such as the number of shares sold short and the short interest ratios for specific companies online resources like marketbeat pro... | |
what was the biggest short squeeze in history | during the 2008 financial crisis porsche automobile holding se poahy already a major holder of volkswagen ag vwagy shares increased its total stake in volkswagen to about 75 the state of lower saxony also owned more than 20 of the company leaving few remaining shares available to trade at a time when the stock was bein... | |
what is short term debt | short term debt also called current liabilities is a firm s financial obligations that are expected to be paid off within a year it is listed under the current liabilities portion of the total liabilities section of a company s balance sheet investopedia madelyn goodnightunderstanding short term debtthere are usually t... | |
what are short term investments | short term investments also known as marketable securities or temporary investments are financial investments that can easily be converted to cash typically within five years many short term investments are sold or converted to cash after a period of only three 12 months some common examples of short term investments i... | |
how short term investments work | the goal of a short term investment for both companies and individual or institutional investors is to protect capital while also generating a return similar to a treasury bill index fund or another similar benchmark companies in a strong cash position will have a short term investments account on their balance sheet a... | |
what are the best short term investments | some of the best short term investment options include short dated cds money market accounts high yield savings accounts government bonds and treasury bills check their current interest rates or rates of return to discover which is best for you | |
where can i invest for 6 months | common short term investment vehicles include six month cds money market accounts high yield savings accounts government bonds and treasury bills 1 | |
what is the best way to invest 5 000 | based on experience and risk tolerance investors will differ on this question however many financial analysts will say the best way to invest 5 000 is to put it in a mutual fund or exchange traded fund that tracks the s p 500 and keep it for the long run | |
what can you invest in with little money | individuals with only a little bit of cash have a lot of options they can put the money in any investments that don t require a minimum balance such as certain savings accounts fractional shares of an index fund or even cheaper stocks bonds and cds the bottom lineshort term investments can be great investments for indi... | |
what is a shortfall | a shortfall is an amount by which a financial obligation or liability exceeds the required amount of cash that is available a shortfall can be temporary arising out of a unique set of circumstances or it can be persistent in which case it may indicate poor financial management practices regardless of the nature of a sh... | |
what is shrinkage | shrinkage is the loss of inventory that can be attributed to factors such as employee theft shoplifting administrative error vendor fraud damage and cashier error shrinkage is the difference between recorded inventory on a company s balance sheet and its actual inventory this concept is a key problem for retailers as i... | |
why is understanding shrinkage important | shrinkage is the difference between the recorded book inventory and the actual physical inventory book inventory uses the dollar value to track the exact amount of inventory that should be on hand for a retailer when a retailer receives a product to sell it records the dollar value of the inventory on its balance sheet... | |
what is the impact of shrinkage | the largest impact of shrinkage is a loss of profits this is especially negative in retail environments where businesses operate on low margins and high volumes meaning that retailers have to sell a large amount of product to make a profit if a retailer loses inventory through shrinkage it cannot recoup the cost of the... | |
what are the causes of shrinkage | shrinkage is caused from the loss of inventory due to shoplifting administrative error employee theft vendor fraud and broken items among other reasons | |
how do you control shrinkage | to help prevent shrinkage businesses can conduct inventory audits install surveillance cameras thoroughly review vendors and set up theft prevention training for employees | |
how is shrinkage calculated in retail | to calculate shrinkage in a retail store you would look at the book inventory which represents the inventory received and should be present in the store and then subtract the actual amount of inventory which is the amount of goods that are physically in the store | |
how much is lost to shrinkage annually | according to a study from the national retail foundation retail businesses lost 62 billion from shrink in 2019 amounting to an average of 1 6 of sales 1 | |
what are retailers prioritizing to reduce risk of loss | nearly 30 of retailers reported that ecommerce crime has become a much higher priority over the last five years followed by organized retail crime orc 28 and internal theft 20 2the bottom lineshrinkage is the loss of inventory or cash from a business due to factors such as theft damage or administrative errors shrinkag... | |
what is a shutdown point | a shutdown point is a level of operations at which a company experiences no benefit for continuing operations and therefore decides to shut down temporarily or in some cases permanently it results from the combination of output and price where the company earns just enough revenue to cover its total variable costs the ... | |
how the shutdown point works | at the shutdown point there is no economic benefit to continuing production if an additional loss occurs either through a rise in variable costs or a fall in revenue the cost of operating will outweigh the revenue at that point shutting down operations is more practical than continuing if the reverse occurs continuing ... | |
when cash flow is tight several different types of personal loan offer a possible solution signature loans offer the best terms they only require your signature as collateral and typically offer more attractive rates than other types of unsecured debt | explore the ins and outs of signature loans and decide if one is right for you | |
what is a signature loan | a signature loan also known as a good faith loan or character loan is a type of personal loan offered by banks and other finance companies that only requires the borrower s signature and a promise to pay rather than physical collateral such as a car title or a home a signature loan can typically be used for any purpose... | |
how a signature loan works | to determine whether to grant a signature loan a lender typically looks for a solid credit history and sufficient income to repay the loan in some cases the lender may require a co signer on the loan but the co signer is only called upon in the event that the original lender defaults on payments signature loans are one... | |
how are signature loans different from personal loans | a signature loan is a type of personal loan it s different from other kinds of personal loans because it s unsecured the only collateral is the borrower s signature and a promise to pay who are signature loans typically good for borrowers with good credit are typically candidates for signature loans because they have e... | |
how much do people borrow with a signature loan | they can start at as little as 500 and go up to 50 000 3 however keep in mind that not all banks and credit unions offer signature loans the bottom linesignature loans are a type of personal loan requiring only a promise to pay as collateral while in the past they were typically made to people with poor credit today th... | |
what is a silent partner | a silent partner is an individual whose involvement in a partnership is limited to providing capital to the business a silent partner is seldom involved in the partnership s daily operations and does not generally participate in management meetings silent partners are also known as limited partners since their liabilit... | |
how silent partners work | as with other partnership agreements a silent partnership generally calls for a formal agreement in writing before forming a silent partnership the business must be registered either as a general partnership or a limited liability partnership llp per state regulations all parties will be responsible for ensuring that t... | |
how does a silent partner compare to a general partner | regardless of the aforementioned usual roles of a silent partner giving guidance when solicited providing business contacts to develop the business and mediating a dispute between other partners it is considered a background role that cedes control to the general partner this requires the silent partner to have full co... | |
what is the difference between a silent partner and a general partner | the silent partner takes a background role that cedes control to the general partner the silent partner must have full confidence in the general partner s ability to grow the business the silent partner may need to ensure that their management style or corporate vision is compatible with that of the general partner | |
what should a silent partnership have formalized | a silent partnership should have a formal agreement preferably in writing that includes the bottom linea silent partner is an individual in a business partnership whose involvement is limited to providing capital the silent partner is rarely involved in the partnership s daily operations and does not generally particip... |
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