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Trading Value and Stock Price
relationship between trading volume and price
In their 2005 article, Gunduz and Hatemi-J have explored the relationship between stock price and volume by using information from the major stock markets of Central and Eastern Europe. They have made use of the Toda-Yamamoto (1995) procedure to determine Granger causality among the variables. The findings of their study provide insight into the different ways stock price and volume influence, and are influenced by, one another. In fact, in some cases, as in the Czech stock market, it was found that no causal relationship between stock price and volume exists. A unidirectional relationship was observed in some markets while in other markets a bidirectional relationship was observed. Therefore, a conclusive statement about the causal relationship between trading volume and price cannot be made.
The Importance of the Study
This is an important study for several reasons.…
Brailsford, T.J., 1994. The Empirical Relationship between Trading Volume, Returns and Volatility, pp. 1-33.
Deo, M., Srinivasan, K. And Devanadhen, K., 2008. The Empirical Relationship between Stock Returns, Trading Volume and Volatility: Evidence from Select Asia-Pacific Stock Market. European Journal of Economics, Finance and Administrative Sciences, 12, pp.41-49.
Gunduz, L. And Hatemi-J, A., 2005. Stock Price and Volume Relation in Emerging Markets. Emerging Markets Finance and Trade, 41 (1), pp.29-44.
Leon, N.K., 2007. An Empirical Study of the Relation between Stock Return Volatility and Trading Volume in the BRVM. African Journal of Business Management, 1 (7), pp.176-184.
In these scenarios, stock options provide a powerful tool in which to properly align the goals of management with those of the firm
What exactly performance-oriented rewards are in regards stock options? To begin, options are not stock in its physical form but rather a claim to stock at a predetermined price. There are two key distinctions regarding this concept. First, stock options have an asymmetric payoff (see Chapter 2) and second they do not pay any dividends. Stocks, in regards to actual ownership, do pay dividends. These two key distinctions can create risk-taking behavior on the part of management because the value of options increases with the overall risk on the firm. The price of options also decreases with a large dividend increase. The more stable a company is in regards to its performance, the less valuable the option will become. Therefore, performance oriented rewards provide incentive for the…
2. Toyota Motor Corp.
3. The Coca-Cola Company
The data in the Table 2 reveals the Coca Cola has recorded a decline in its stock price within the last 3 months making investors to record a loss within the last three months. However, the company recorded a moderate increase in the stock returns between 1 and 5 years. Similarly, Microsoft Corporation records a decline in the stock price within the last 3 months leading to the loss in the stock return. However, the company also demonstrated a moderate increase in the stock returns in the last 5 years. Toyota Motors recorded a loss in the stocks within the last one week. However, Cocoa Cola could still be appropriate for both shorter and long-term investment for investors who can carry the risks.
Fig 3: Money for Investment
Conclusion and ecommendation
Based on the evaluation of the listed stocks in…
Trading Economics (2013). United States Market (Dow Jones)
Appendix: Stocks Worth Considered
Stock Market Prices and the Media During the Tech Bubble
Stock Price and the Media During the Tech Stock Bubble
The world of stock trading at first gives the impression of a hardcore science. Prediction of stock movement is based on a complex series of formulas, algorithms, and mathematical predictive models. These portions of stock trading represent the quantitative element of the stock world. However, there is also a qualitative side to stock trading that is often not addressed via traditional stock trading metrics. The world of finance is reactive to major world events and other conditions such as consumer demand. Prior to the great tech stock crash of the 1990s, tech companies attempted to make a profit based on trends in consumer demand. This research will analyze two companies that used unethical practices to profit from the tech stock crash.
The ise and Fall of the Tech Sector
Austin, I. (2012). Ex-Nortel Executives' Fraud Trial to Begin. The New York Times. January 15,
2012. Retrieved September 7, 2012 from http://www.nytimes.com/2012/01/16/business/former-nortel-executives-fraud-trial-to-begin.html?_r=1
Galbraith, J. & Hale, T. (2004). Income Distribution and the Information Technology Bubble.
University of Texas Inequality Project Working Paper. In Reil, B. & Meiklejohn
How good is the long-run performance of IPO firms? How is holding on to IPO stocks is a risky proposition? Explain.
All publicly traded companies have some form of initial public offerings, and thus judging the truly long-term performance of IPO value means assessing stock market value. In shorter terms, however, most IPO purchases end up lagging behind market averages, and ultimately many newer companies fail (Goldberg, 1999). This means holding onto IPO-purchased stock runs the risk of lower rates of return on the investment than could be achieved by selling and purchasing more established stocks, or even of having the value of the investment completely eroded through a company closure or bankruptcy (Koch & Johnson, 2009). Selling quickly is typically the best way to reap rewards from these stocks, and for the average investor trying to purchase an IPO usually isn't worthwhile (Goldberg, 1999; Koch & Johnson,…
Brain, M. (2012). How NASDAQ IPOs Work. Accessed 16 April 2012. http://money.howstuffworks.com/nasdaq-ipo.htm
Goldberg, S. (1999). Guess which hot investment isn't really so hot. Kiplinger's Personal Finance (May): 32.
Koch, E. & Johnson, D. (2009). The Complete Idiot's Guide to Investing. New York: Penguin.
Reilly, F. & Brown, K. (2011). Investment Analysis and Portfolio Management. Mason, OH: Cengage.
Payment of stratospheric compensations to the corporate executives by the dot.com companies is the talk of the day. It is pertinent to note that these compensations are paid not only in terms of the cash compensations but also in terms of stock options. However, compensations plans in terms of stock options are not new and being used years together in order to attract the employees and retain with a bondage to the company. The rationale is to give the ownership interest in the company with an expectation that the executive will improve their performances working closely with the share holder interests and the company's long-term profit maximization goals. The stock options as a part of the package for compensating the executives has much more wide spread presently with the cropping up of Internet-based dot.com companies.
The origin of the stock options perhaps traced back to the efforts of…
Change for Stock Option Repricing" Balachandran, Sudhakar; Ellen Carter, Mary;
Luann J, Lynch. Retrieved at http://www.nd.edu/~mshackel/acct_workshop/pdf/BCL_112002.pdf Accessed on May 12, 2004
Commentary: An Options Plan Your CEO Hates" Business Week retrieved from http://www.businessweek.com/careers/content/jan1990/b3670152.htm . Accessed on May 12,
Duan, Jin-Chuan; Wei, Jason. "Executive Stock Options and Incentive Effects due to Systematic Risk" retrieved at http://www.wu-wien.ac.at/inst/or/op1/CEOoption_2003_07.pdf Accessed on May 12, 2004
Since institutional investors typically hedge their risks by using asset liability management and derivatives instruments against market risk, it is estimated that institutional investors in a representative stock market such as the London Stock Exchange lost only 10% of the value of their assets in the 1987 crash. In the absence of such hedging the effect of the crash and the resultant liquidity crunch would have been far greater. (Markose, Sheri, n.d.)
Causes of the Crash number of possible reasons for the Crash have put forward by the experts, some of which are discussed below:
Program trading (also called computer trading) involves index arbitrage - which takes advantage of price discrepancies between indexes of stocks and futures contracts by using sophisticated computer models to hedge positions. Program traders or an arbitrageur simultaneously buys a stock in one market and offsets that purchase by selling it in a futures…
1987 Stock Market Crash." 1929 Stock Market Crash. 2004. June 1, 2005. http://www.1929stockmarketcrash.com/1987-Stock-Market-Crash.htm
Byrne, Rebecca. "The Trade Deficit's Widening Threat." The Street.com. August 17, 2004. June 1, 2005. http://www.thestreet.com/_tscs/markets/rebeccabyrne/10178505.html
The Causes of the Stock Market Crash of 1987." 1929 Stock Market Crash. 2004. June 1, 2005. http://www.1929stockmarketcrash.com/1929-stock-market-crash/stock-market-crash-of-1987.shtml
Crash of 1987." Great Market Crashes. N.d. June 1, 2005. http://members.aol.com/Mallard/crashes.html
During high school, students can prepare by taking classes in mathematics, sciences, languages, and business (Hobsons College View). Usually, a four-year bachelor's degree is required, at minimum. A degree in the areas of economics, investments, or a general business degree with an emphasis on economics is useful. And MBA can be useful for working within the securities fields (Hobsons College View). Successful competition of the General Securities Registered Representative Examination is often required, and many states require a stock broker to take the Uniform Securities Agents State Law Examination. Stock brokers generally must go through a period of time when they are considered a trainee before being considered a stock broker (Princeton Review).
ork conditions as a stock broker are generally good. Stock brokers work in offices during business hours, in all parts of the country, under safe conditions (Sify.com; Fasteb).
However, although the career may entail considerable stress. The…
Hobsons College View. Training to be a Stock Broker. 11 October 2004. http://www.collegeview.com/college/ask_experts/choosing_mj/stockbroke.html
FastWeb. Career Overview: Stock broker. Monster.com. Source: U.S. Department of Labor, Bureau of Labor Statistics. 11 October 2004. http://fastweb.monster.com/fastweb/content/career_db/stockbroker/index.ptml?ID=
Princeton Review. Career: Stock broker. 11 October 2004. http://www.princetonreview.com/cte/profiles/dayInLife.asp?careerID=150
Sify.com. Stock Broker. 11 October 2004. http://sify.com/news_info/education/careerguide/fullstory.php?id=13360233
The phenomenon of Stock Options has had a dramatic rise and fall during the last 15 years or so. They have been hailed as a great way to share ownership, attract and retain employees in a tight labor market and "the fuel of entrepreneurial fire" (Malone, 2003). At the same time, they have been condemned as a major cause of the high-profile business scandals during 2000-01 and the subsequent down-turn in the U.S. stock-markets. In this paper, I shall describe what Stock Options really are, take a look at their history, advantages, and disadvantages and discuss their future in the business world.
What are Stock Options?
A stock option is a contract offered by the employer that gives an employee the right to buy or sell a certain number of shares in the company at a specific price within a certain period of time. The price at which…
Employee Stock Options Fact Sheet." (2002). NCEO -The National Center for Employee Ownership Website. Retrieved on February 29, 2004 at http://money.howstuffworks.com/framed.htm?parent=question436.htm&url=http://www.nceo.org/library/optionfact.html
Glasner, Joanna (2004). "Last Hurrah for Stock Options." Feb. 05, 2004. Wired.com. Retrieved on February 29, 2004 at http://www.wired.com/news/business/0,1367,62156,00.html
Krantz, Matt and Jones, Del. "Enron's fall fuels push for stock option law." USA TODAY
02/07/2002. Retrieved on February 29, 2004 at http://www.usatoday.com/money/energy/enron/2002-02-08-options.htm
Seeking to raise more capital," Amazon.com plans to sell about $600 million of convertible subordinated notes" (Mutter, 2000, p. 80). Amazon, at the time, was considered a much more substantial risk than it is currently. The issuance of convertible debt seemed very speculative at the time. Mutter even wrote that investors did not like "the equity-like risk assumed by debt holders" (Mutter, p. 80). but, the investment has paid off in the long run.
An additional American company that could be used as an example of one that issued convertible notes is Candescent Technologies.
Based in the United States, it "raised $125 million through the sale of senior subordinated convertible notes to finance a facility for the manufacture of field emission displays (FEDs)" (Brown, 1998, p.17).
Senior convertible notes are less a risk of loss of investment capital than regular convertible notes because, as the name implies, they are senior…
Background on the Australian Stock Exchange, (2006) Accessed August 17, 2008, at http://www.gocurrency.com/articles/asx.htm
Brown, P. (1998) U.S. flat panel fab planned, Electronic News, Vol. 44, No. 2220, p. 17
IINET Ltd., Accessed August 17, 2008, at http://www.asx.com.au/asx/markets/PriceResults.jsp?method=get&template=F1001&ASXCodes=iin
Miller, S.E., (2007) Valuing preferred stock, Journal of Accountancy, Vol. 203, No. 2, pp. 55-59
An upside gain can also be handled in that same manner, with a sell order placed above the trading price. This guarantees that the stock will automatically be sold as soon as it hits that price (if there is a buyer).
Another method of purchasing or selling shares that some investors use is called the option method. This method is used to obtain the right to purchase or sell shares at a certain price (the strike price). If an investor wishes to purchase a thousand shares of stock but does not wish to pay for them right away, the investor could purchase 10 options (100 shares per option) to buy the shares at a certain price. The closer the strike price is to the current price of the shares the higher the option will be.
Options can also be used to sell shares at a higher price than what they…
DO the MATH: SAVVY STOCK-PICKING IS a MYTH.(Letter to the Editor)." Business Week 3975 (March 13, 2006): Vol. 20
Kadlec, Daniel. "Oct. 29, 1929: Wall Street's Bad, Bad Fall.(Special Section TIME's 80th Anniversary/80 Days That Changed the World)(Wall Street crash)(Brief Article)." Time 161.13 (March 31, 2003): A12. General Reference Center Gold. Thomson Gale. Salt Lake City Public Library. Accessed May 12, 2007 http://www.find.galegroup.com.salty.slcpl.lib.ut.us:80/ips/infomark.do?&contentSet=IACDocuments&type=retrieve&tabID=T003&prodId=IPS&docId=A99128177&source=gale&srcprod=GRGM&userGroupName=slpl&version=1.0
The SEC's Atkins: Words of Dissent." Securities Industry News (May 7, 2007)
If the board of directors approves a 10% stock dividend, each stockholder will get an additional share for each 10 shares held. "A stock dividend does not involve cash. ather, it is the distribution of more shares of the corporation's stock. Perhaps a corporation does not want to part with its cash, but wants to give something to its stockholders. If the board of directors approves a 10% stock dividend, each stockholder will get an additional share for each 10 shares held" (Stock splits and stock dividends, 2012, Accounting Coach). It can be thus viewed as a kind of 'creative' way of rewarding shareholders and holding on to necessary cash. The company may be cash-poor because it wishes to invest more heavily in &D, to engage in efforts to expand the company, or to deal with the costs of a merger, acquisition, or some other form of internal or external…
Stock split. (2012). Fool FAQ. Retrieved: http://www.fool.com/FoolFAQ/FoolFAQ0035.htm
Stock splits and stock dividends. (2012). Accounting Coach. Retrieved:
What is a stock dividend? (2012). Investor Words Retrieved:
A stock dividend is when the company uses the money that would ordinarily go to pay shareholder dividends but instead uses it to buy additional shares for the shareholder. The stock split occurs when the company issues new shares (2 or more) for every existing share held by investors. The former action decreases the overall float in the marketplace, which means the share price is likely to be driven up—good for investors if they want to sell. The latter is dilutive and increases the float by doubling the number of shares available for purchase.
It really depends on the company. For instance, Apple split its stock 7:1 in 2014, which drove the price down significantly and made it more attractive for retail buyers (Stock Split, 2019). Because many retail buyers view Apple as at the forefront of the tech industry, they were willing to buy. Apple, too, has been conducting…
Distribution policy is a set of principle stipulating the guidelines for cash dividends payout to the shareholders and stock repurchases. Dividends mean the company's earnings distributed to the stockholders declared during the year, interim dividends, or at the end of a financial year referred to as the final dividend. Dividends account as a source of income for the investors but also have an information signaling effect. Therefore, a dividend distribution is informing the management of the earnings to allocate as dividends and contribute to sharing purchase investment decisions. Dividend distribution policy is informed by multiple factors such as financial flexibility, investment opportunities for the company, tax consideration, contractual and legal restrictions, the volatility of expected future earnings, and flotation costs (Baker & Weigand, 2015).
Dividends may be distributed in the form of stock repurchases or cash dividends. Cash dividends offer investors a stream of income. Stock repurchases entail the…
That being said, the overall risks to the portfolio will vary, depending upon the type of stock that is purchased and how much diversification is being utilized. ("What are the Main Types of Stock.," 2010)
How much does a stock contribute to the return of a portfolio?
Historically the average return of the S&P 500 has been 9.8% a year. (Swedroe, 2009) However, the overall impact of the return will depend upon: the underlying amounts of growth and dividends that are received. These two factors are important, because they can cause the total return of the portfolio to vary. As a result, the overall contribution of stocks, on the return of the portfolio; will depend upon the type of equity securities that are being purchased and the holding period.
Clearly, the underlying amounts of risks and rewards will depend upon a number of different factors. As far as risks are…
It is expected that the bond will mirror the performance of the S & P. 500. ("Transaction History," 2010)
November 24, 2010
On November 24th several more new purchases would take place to include: General Motors, erkshire Hathaway, the Fidelity Immediate Government Fund and the Strategic Advisors Income Fund.
General Motors was selected, because it could help to provide the portfolio with above average growth. The results were that that stock would see an increase of 1.4%. ("Transaction History," 2010)
erkshire Hathaway was purchased to provide the portfolio with stability and diversification. This investment is expected to outperform the major market averages. The results were up .96%.( "Transaction History," 2010)
The Fidelity Intermediate Government Fund was selected because of their focus on medium term Treasury investments. This is expected to underperform the market averages. The results were that the position declined by 2.55%. ("Transaction History," 2010)
Account Details. (2010). Stock Trak. Retrieved from: http://www.stocktrak.com/private/account/summary.aspx
Ford Posts 68% Rise in Third Quarter Income. (2010). MSNBC. Retrieved from: http://www.msnbc.msn.com/id/39845528/ns/business-autos/
Transaction History. (2010). Stock Trak. Retrieved from: http://www.stocktrak.com/private/account/transactionhistory.aspx
Kavilanliz, P. (2010). Black Friday. CNN Money. Retrieved from: http://money.cnn.com/2010/11/27/news/economy/Black_friday_2010_sales/
In regard to the organizational structure, al-Mart Stores can be said to be organized by divisions. In this regard, we have al-Mart supercentres, Sam's Clubs etc. Currently, the company's president is Mr. Mike Duke. Other key management positions in the firm include the position of chief financial officer, vice chairman, chief executive officer-international operations, and chief executive officer- al-Mart U.S.. These key positions are currently held by Mr. Charles M. Holley Jr., Mr. Eduardo Castro-right, Mr. Doug McMillon and Mr. illiam S. Simon respectively.
"Stagnant ages, High Unemployment Slam al-Mart U.S. Sales: Domestic Sales at orld's Largest Retailer Post Two-Year Slump." (5/17/2011). (MSN n.p.)
Impact and Reason
In my own opinion, the news item above will bring about a decrease in the price of al-Mart's Store Stock. My reasoning in this case is that based on a decline in sales, investors will not be…
LaRocco. L. "Wal-Mart's Quiet Tax Haven." CNBC. N.p. Sept 23rd 2011. Web. 18th Oct 2011. http://www.cnbc.com/id/44627207
MSN. "Stagnant Wages, High Unemployment Slam Wal-Mart U.S. Sales: Domestic Sales at World's Largest Retailer Post Two-Year Slump (5/17/2011)." MSN. N.p. May 17th 2011. Web. 18th Oct 2011.
Rappeport, A. "Wal-Mart has First U.S. sales Rise in Two Years." Financial Times. N.p. Oct 12th 2011 Web. 18th Oct 2011.
Statistics in the World of Stocks
Many students at various levels in mathematics at times find themselves asking the question, why do I need to learn this? It is admittedly true that many people will never really use algebra in their daily lives, and the complex world of statistics and probability also goes unutilized by many. Algebra, probability, and statistics can all be useful to everyone, in actuality, and more importantly there are specific instances where these areas of mathematics prove absolutely invaluable. When it comes to the stock market, many people try to use statistical models to predict when certain stocks are good values, or when they are poised to skyrocket investors to new fortunes, but there are also more sensible applications of certain probability and statistics concepts that are reasonable means of influencing stock-buying decisions. Applying a few basic methods of analysis to some elements of…
As a result, we received an execution price of $65.08.
First Energy was chosen, because it can provide the portfolio with stability. As, the company is focused primarily on: the distribution and production of electricity. These two elements are important, because this resource is always in demand regardless of shifts that are occurring in the economy. I selected this stock, because it can provide the portfolio with earnings stability and consistent dividends. During times when the markets are becoming very volatile, this will ensure that the value remains steady.
Time Warner was chosen due to the fact that: they own a large cable operation and they can benefit from the shifts to digital cable. This will ensure that the company is able to take advantage of the changes in how consumers want to be entertained. As, they are: demanding more services at home and they want them to be bundled…
Wang 93's Portfolio, 2011. Print.
Wang 93's Portfolio NYX, 2011. Print
MLA Format. http://owl.english.purdue.edu/owl/resource/747/01/
Because of this, I would expect that U.S. Energy would have performed better, but that has not been the case. None of the individual holdings are overly dependent upon energy costs, such as we would see in the airline industry, so the performance of the portfolio does not seem to have been overly affected by the rise in energy prices.
The proper approach to investing involves diversifying, not only across different companies, but also across different sectors of the economy. In a given year, one sector of the economy will be up and another will be down. One-year large cap growth stocks will be up and foreign stocks will be down. The next year real estate will be up and large cap growth may be down. If we knew in advance which sectors would be on top, investing would be easy, but we don't. As a result, diversification across different…
NYSE & NASDAQ
Generally speaking, and with many notable exceptions, the fundamental difference between the companies listed and traded on the New York Stock Exchange and the NASDAQ is that the NASDAQ is home to many technology firms and other more volatile companies, while the NYSE is where most of the major industrial companies and so-called "blue-chip" companies are traded. here is a broad price range and performance record for the stocks of both exchanges, and their ups and downs are most often in alignment (increasingly so as the period of examination is extended), meaning that the perceived differences and the real differences in the companies that make up each exchange might be exaggerated in terms of the effect they have on the actual performance of the stocks being traded. A look at two individual companies, each listed on one of these exchanges, yields more contrast than an…
Tim Hortons, Inc., a Canadian-based donut and coffee chain, is traded on the NYSE under the symbol THI. On September 13th, 2011, THI stock had a closing price of $45.92, a 52-week price range of $35.80 to $51.04, and a volume of 481,700 was traded; the P/E Ratio was 12.39 and the Earnings-per-share were $3.71. On the Nasdaq, the chip maker Nvidia (which trades as NVDA) is a fairly typical stock in many ways; the same figures for this stock on the same date of September 13th are a closing price of $14.52, 52-week price range of $10.30 to $26.17, trading volume of 44,257,800, a P/E Ratio of 16.17 and Earnings-per-share of $0.90. Tim Hortins trades at a higher price with much higher earnings and at a lower volume; Nvidia is more volatile and has a much higher trading volume with lower earnings and a higher P/E Ratio.
The balance sheet of a given company tells us about its current liquidity -- what its assets are compared to its liabilities and its equity. In other words, the balance sheet breaks down (into rather large components) the various holdings of the company in terms of its cash, property and equipment, collectable accounts, and other elements of the company worth a real dollar value, compared with the companies outstanding debts, losses from depreciation, and the amount of money that has been invested in the company from its owners -- the equity it would need to theoretically pay back to investors if the company were to sell all of its assets to pay its liabilities. The general rule of accounting is that assets always equals liabilities plus equity. The income statement helps to inform the balance sheet to some degree by presenting information regarding how money comes into and goes out of the company, listing (again in rather large components) the sources and amounts of revenue as well as the expenses that the company incurs during its operations. This can help investors determine how profitable the company is and is likely to be, based on how revenues compare to expenses and what projections are for changes in both areas of the income statement.
It is impossible to predict with any real certainty what companies will post returns over any period of time, or how consistent those returns will be. Selecting three individual stocks that will have increasing weekly returns through October would take a great deal of experience and calculation, and even then would ultimately rely on at least some level of guesswork.
Stocks have fluctuated in exactly the same way. The Home Depot went up 1.46% during the first week, while Lowe's managed to go even further: 1.74%. The situation was quite the same during the second week: 1.41 for the Home Depot, and 1.11% for Lowe. The upward trend was maintained for three weeks, but the growth ratio was only 0.5-0.57. The fourth week was not so good for the two companies. Stocks went down 0.6% and 0.86%, respectively. The fifth week was not better, as the downward trend continued, but the percentage change was not that significant: 0.5%-0.6%. The stocks are currently at higher levels: $41.06 for Home Depot and $65.22 for Lowe's. Morningstar analysts estimate the fair value of the two stocks at $44 and $62 respectively.
1. Morningstar Analyst report on the Home Depot www.morningstar.com
2. Morningstar Analyst report on Lowe's www.morningstar.com
3. Information on the business…
1. Morningstar Analyst report on the Home Depot www.morningstar.com
2. Morningstar Analyst report on Lowe's www.morningstar.com
3. Information on the business of Home Depot http://www.homedepot.com/HDUS/EN_US/corporate/about/about.shtml
4. Press article http://www.retailnet.com/story.cfm?ID=23316
("Gates, Bill," 2007) the company is in fact considered a regional financial backbone, in the Seattle-edmond area where its world headquarters are. The whole region and to some extent the whole world takes notice when Microsoft announces financial strategies and changes or when stocks rise or fall.
The software maker said it would buy back $20 billion through a tender offer set to be completed on Aug. 17. The company said that its board of directors has also authorized the company to buy back up to $20 billion worth of stock through June 2011. The company said it has completed the $30 billion stock buyback announced two years ago. "With our share repurchase programs announcement today, we reaffirm our confidence and optimism in the long-term future of the company and continue to execute on our strategy of returning capital to shareholders," Microsoft Chief Financial Officer Chris Liddell said in a…
Bolten, S.E. (2000). Stock Market Cycles: A Practical Explanation. Westport, CT: Quorum Books. Retrieved August 29, 2009, from Questia database: http://www.questia.com/PM.qst?a=o&d=29180460
Fried, I. (July 20, 2006) Microsoft plans massive stock buyback, CNET News
Gates, Bill. (2007). In the Columbia Encyclopedia (6th ed.). New York: Columbia University Press. Retrieved August 29, 2009, from Questia database: http://www.questia.com/PM.qst?a=o&d=112860479
Regardless of one's appetite for risk, it is essential that some diversification of assets is used to prevent 'losing' money by saving money in a bank account alone, although noninsured investments should not be concentrated on one area of the economy, to protect against potential losses.
Even in today's economic climate, investors should allocate some of their funds in safe, but higher-interest bearing sources. These might include certificates of deposits or CDs, which can be allocated into different accounts so the CDs mature at different times, to free up more of the saver's money. These safer investments may also include government bonds of stable governments and corporations, as well as preferred stock for companies that offer this option. Unlike CDs less than $250,000 in value, however, bonds and preferred stocks are not insured by the government.
The concept of the future value of money underlines the importance of saving in…
2% (Yahoo 2009). This is significantly under both the industry average and the Standard & Poor 500 Performance Index, but the company remains financially strong and has paid a cash dividend on shares every quarter for the past four years (Yahoo 2009). These dividends have actually increased every year, including 2008 and so far in 2009, despite the worse performance brought on by the recession (Yahoo 2009). At $60.20, the stock is near its high-point for the year, but with things picking up again it is likely to continue rising, though the winter months and the attendant reduction in sales might lead to a more opportune moment to buy.
Sean P. Hennessy is Sherwin Williams Chief Financial Officer, and has been in that post since 2001. He also served as the company's treasurer for a year during that period, and has been with the company since 1984. Such solidity and…
Sherwin Williams (2009). Investor relations website. Accessed 31 August 2009. http://www.sherwin-williams.com/about/investor-relations/corporate-governance/corporate-officers/index.jsp
Yahoo! Stcok Screener. (2009). "Sherwin Williams." Accessed 31 August 2009. http://finance.yahoo.com/q?s=SHW&d=t
The Golden Cross is when a security's short-term moving average breaks through its long-term moving average. This would indicate a bull market on the horizon. ight now the 15-day moving average is 16491 and the 50-day moving average is 16370. The 100-day moving average is 16250, so unlike many of the other indicators, the Golden Cross indicates a bull market.
The graph tells me little, actually. It's better to regress these numbers to understand the nature of the correlation than to play the guessing game with a graph that covers the last forty years. The graph does tell me, however, that the growth rate of M1 does not correlate much with recessions. There are two major growths in M1 (in 2011 and in the mid-80s) that had no link to recession. There are also three that were linked, and in each there was a runup in M1 prior to…
IndexIndicators. (2014). NYSE Composite vs. Average 14-day RSI for NYSE stocks. IndexIndicators.com. Retrieved May 8, 2014 from http://www.indexindicators.com/charts/nyse-vs.-nyse-stocks-avg-14d-rsi-params-3y-x-x-x/
McClellan, T. (2014). Coppock Curve turns down. McClellan Financial Publications. Retrieved May 8, 2014 from http://www.mcoscillator.com/learning_center/weekly_chart/coppock_curve_turns_down/
00. ("Nue Core," 2010) Arcelor Mittal has trailing PE ratio of 23.28 and a forward PE ratio of 7.09. The current ratio is 1.35 and the put call ratio is .55. The price dividend ratio is 45.74, while the beta is 2.70. ("Arcelor Mittal," 2010)
Upon doing a side by side comparison, Arcelor Mittal is the strongest company out of three. This is because their PE ratios remained more stable over the past year and the reading of 7.09 on the forward PE ratio, is an attractive long-term valuation. The high put call ratio indicates that investors have become somewhat pessimistic in the stock. The price dividend ratio is the only drawback, where historically this number should be in the 14 to 17 range. However, given the volatile nature of the steel industry, the fact that they are continuing to pay dividends after a severe recession is a sign of…
Arcelor Mittal. (2010). Retrieved June 12, 2010 from Yahoo Finance website: http://finance.yahoo.com/q?s=MT
Arcelor Mittal. (2010). Retrieved June 12, 2010 from Schaffer's Research website: http://www.schaeffersresearch.com/streetools/indicators/putcall_open_interest_ratio.aspx
Nue Core. (2010). Retrieved June 12, 2010 from Yahoo Finance website: http://finance.yahoo.com/q/ks?s=NUE+Key+Statistics
Nue Core. (2010). Retrieved June 12, 2010 from Schaffer's Research website:
alt Disney Company (DIS)
• Fundamentals - the company's business, is it financially sound? Is it growing?
Per their earnings amounts for Disney, the answer is that they are growing. They are indeed fairly financially sound, but their overall revenues are not doing all that well. Over the last three full years, revenue has grown at a clip of about $3 billion a year as they were at $42.2 billion in 2012, $45 billion in 2013 and $48.8 billion in 2014. Gross profit grew at a good clip over that same time frame, going from $18.8 billion in 2012, $20 billion in 2013 and $22.3 billion in 2014. The proportion of gross profit to total revenue did edge up slightly, albeit by about one percent. Net income has grown at about a billion per year, so it too is looking good. Total assets are growing (about five billion a year…
While the Dow sank and then recovered to its original levels, Immunogen has both done the opposite and it has NOT returned to its original level, although that would be a good thing since the raise in price is a good thing. The price started in the $12.75 range five days ago and then shot up quite quickly until it peaked at nearly $15 a share (a raise of nearly a fifth as compared to the starting point) and then fell very quickly on Tuesday until it bottomed out at $14.00. The price then fluttered a bit between $14.00 and $14.50 and sits at $14.23 as of June 10th. It's about half a buck (or 4.2%) higher it was five days ago but it's been higher very recently. Zooming out to six months tells a very different story. The stock price absolutely soared (it rose about five bucks….about a third) in early June before tapering off and has bounced between $14 and $15 then. Prior to that huge spike, its highest price since the turn of the year was about $10. The reason for the spike is revealed in the headlines about Immunogen in that they apparently had very positive results with one of their ovarian cancer treatments. This news breaking happened on June 1st…right when the spike happened. Not much has been said about them since so this explains why the price is fairly stable but does not explain its activity that is different from the Dow average.
.....company would expense the 1000 share options at $15 (1000 x $15 = $15,000), as this was fair market value at the time of expense, based on Black-Scholes (Harper, 2017). In 2014, the expense would be $3 per share option (1000 x $3 = $3,000), because that is the amount of increase in the value of the options that derives from the change in the exercise price.
The accounting for the awards would change after the options became fully vested, because the value of the options would no longer be based on Black-Scholes. Instead, the options would be based on the difference between the new exercise price and the old exercise price. After the options have vested, there is no longer any time value to the options, so an options model for pricing is no longer necessary -- they are just shares at that point because the employees no longer…
right or wrong answer when it comes to evaluating discount vs. full-price stockbrokers. hat is right for one individual is based on his or her needs, and the context of the situation. In general, though, the discount brokers are probably a better value when considering a number of variables, including: free stock information provided on the orld ide eb, capital gains taxes, and stock brokers' motivations (Investitor website).
In order to understand why the discount brokerage firms are "generally" better, one has to understand the difference between the two. Discount brokerage houses are essentially "order takers." You tell them what trades you want to make, and they execute them for a very small commission (usually somewhere around $5-$7 dollars a trade) (FoolU website).
In many cases, signing up for one of the online discount brokerages will earn individual free trades, as will large-scale trading. The reason why these brokerage houses…
Discount Vs. Full Price Brokers." FoolU Website. Accessed June 4, 2003. http://www.fool.com/foolu/askfoolu/1999/askfoolu990120.htm
Investing in the Stock Market." Investitor Website. Accessed June 4, 2003. http://www.investitor.net/stocks.htm .
Lewis, Roy. "Capital Gains Tax Rates." Tax Center Website. Accesssed June 4, 2003. http://www.fool.com/taxes/2000/taxes000310.htm
When the market crashes, turns bearish, or severely corrects, investors not only lose objective things such as money, they also lose the sustaining functions of which the investing process (and/or money, which may psychologically represent self-esteem, independence, power, etc.) has been the source. That means, in addition to objectively not having the money to buy that new house or car, self-esteem drops, and the investors capacity to calm themselves down is diminished, motivation wanes, confidence is shaken, and vitality ebbs. A down market represents an injury to our total sense of self and all the functions that sustain it. In a general way it represents a hope or fantasy lost.
For the young investor, with a large amount of earning power remaining in his life, the ups and downs of the market are small obstacles to the long-term objective of amassing a financial nest egg on which to…
Block Sandra. Stable value funds low-cost, reliable investments., USA Today, 11-30-1998, pp 20A.
McEwen David, Best to find out your risk tolerance., The Daily News (Taranaki, New Zealand), 10-08-2001, pp 6.
Luke, Robert. Staff, Step 1: Investors should evaluate tolerance for risk Finance professor's quiz helps determine the asset allocation each individual is most comfortable with.., The Atlanta Journal and Constitution, 04-03-2000, pp S26.
Southern New England Telephone, a subsidiary of SBC Communications, Inc.
The difficulties in evaluating the relative success or failure of a company in the telecommunications industry, or any government-regulated service, such as telephone service, are numerous. How does one evaluate the overall success of the company, in relation to financial and legal difficulties, even to outright failures of its subsidiaries on a local level? Also, how does one unravel the legal snarls that plague the communications industry in a climate that often fluctuates from state to local ordinances? "Pity the Regulator," wrote The Economist in 1997, when the Internet and communications snarl was just beginning to grip the nation and the world. However, when writing the recent history of Southern New England Telephone, one might want to extend pity to this subsidiary of SBC as well.
Over the course of the last several financial quarters, there has been…
The Connecticut Triennial Review Reporter. (November 13, 2003). "Draft Decision May Provide Insight into the DPUC's Interpretation of the Triennial Review Order."
The Economist. (September 11, 1997) "The Short Arm of the Law: Pity the Telecom Regulator."
Hamerly, David. "SBC: Industry Report" (2004). Hoover's Reports. Austin: Hoover's Inc.
Press Release: SBC. (February 12, 2004) "SBC Applauds FCC For Action On Internet-Based Communication Services." Washington, District of Columbia.
Raising Corporate Capital Issues
It appears fairly clear that the most advantageous means of raising capital for a corporation is to sell common stock. However, it is critical to realize that there are other things that a corporation must do in addition to selling common stock to make this method provide the degree of efficacy that the corporation desires. The reason that selling common stock can help to raise capital for the corporation is that it is possible to get many different people to invest in the company through this means. However, these individuals will tend to do so in greater numbers and in ways that continue to benefit the corporation if the company itself excels. Specifically, the company must simultaneously focus on its core business and keep abreast of its competition so that it can continue to generate revenue and, hopefully, provide the sort of profit margins that are…
Executive Stock Option Plans
"If the company does not do better than its competitors, but the stock market goes up, executives do very well from their stock options. This makes no sense." Discuss viewpoint. Can you think of alternatives to the usual executive option plan that take the viewpoint into account?
Executive stock options are performance-based incentive plans that became popular in the 1950s and 1960s. They declined due to the stock market crash of the 1970s, but returned aggressively returned in the 1990s (Kole, 1997). Today, most companies grant stock options to their top officers as part of executive compensation, along with salary and bonuses. Options that are awarded as part of a compensation package can be very valuable to executives when stocks are performing well. The challenge comes in when stock value is realized for executives even when a company is not faring well at all. This is…
Cicero, D.C. (2009). The manipulation of executive stock option exercise strategies: Information timing and backdating. Journal of Finance, 64(6), 2627 -- 2663.
Collins, D.W., Gong, G., & Li, H. (2009). Corporate Governance and Backdating of Executive Stock Options. Contemporary Accounting Research, 26(2), 403-445.
Hamilton, S. And Wise, D. (2008). Adding performance criteria to your stock options. Hay Group. Retrieved from http://184.108.40.206/haygroupusmkting/e_article001162460.cfm.
Hess, D. (2012). More Stock Rewards Tied To Performance. Crain's New York Business, 28(31), 0015.
(Dow Jones and Company, 2009). The DJIA can be used in three principal ways: as a yardstick, as a barometer, or as an investment.
When the DJIA is used as a yardstick, the goal is to measure performance from one period of time to another:
The most common use of an index by investors is to evaluate the performance of their own portfolios on a monthly or quarterly basis. This is the "benchmark" function of an index, and it constitutes the bogey that many investors try to beat with individual stock picks or with mutual funds. There is no official benchmark for the stock market. Each investor chooses his or her own. The only logical requirement is that the benchmark chosen should represent the part of the stock market that is targeted by the investor's portfolio. For example, if the investor dabbles in large stocks from a variety of industries,…
H.J. Heinz Co. 2009. Shareholder Information. H.J. Heinz Company. Available from:
http://heinz.com/our-company/investor-relations/shareholder-information.aspx [August 28, 2009].
Dow Jones and Company. 2009. About the Averages: Overview. New York: Dow Jones and Company. Available from: http://www.djaverages.com/?view=about&page=overview [August 28, 2009].
E*Trade Financial Corp. 2009. Pricing. E*Trade Financial Corp. Available from:
One of the most significant factors in the decision to invest in ICICI Bank is to determine the affects of recent capital expenditure and the anticipated return for these investments. Entry into microfinancing represents a considerable amount to risk, due to the financial instability of the target market. The following chart highlights the most significant changes affecting the financial health of ICICI bank that result from expenditures associated with entry into the rural finance venture. It compares key indicators and explains the effects of ICICI's most recent changes to their banking strategy.
Income Statement for years 2003-2006 (in millions USD)
Cost of evenue
Balance Sheet for years 2003-2006 (in millions USD)
Cash Flow for years 2003-2006 (in millions USD)
Net Cash Flows Investing
Net Cash Flows Financing
Net Cash Flow
Data Source: Nasdaq.com (2007).
Das, K. (2006). India's ICICI Bank Targets 25 Million New Rural Customers. Innovations in Emerging Markets. Retrieved May 3, 2007 at http://ifcblog.ifc.org/emergingmarketsifc/2006/11/indias_icici_ba.html .
Domash, H. (2007). The Basics: 10 growth stocks that can't be stopped. Moneycentral. Retrieved May 3, 2007 at http://moneycentral.msn.com/content/Investing/Simplestrategies/P109819.asp
Jubak, J. (2006). 10 top stock picks for 2007. Jubak's Journal. Retrieved May 3, 2007 from: http://articles.moneycentral.msn.com/Investing/JubaksJournal/10TopStockPicksFor2007.aspx .
Nasdaq.com (2007). ICIC Bank. Infoquotes. Retrieved May 3, 2007 at http://www.nasdaq.com/reference/glossary.stm#EPS
Employee Stock Ownership on Employees in the Airlines Industry since September 11th.
Review current materials on the issue.
Airline industry ESOPs tend to be very volatile.
This paper will examine the effects of the September 11th tragedy on employees' employee stock ownership plans in the airlines industry. The following generic information is provided for background before examining the main issue for this paper.
In the United States, the main vehicle for employee ownership in a company is the Employee Stock Ownership Plan (ESOP) which first became a recognized plan in 1974. There are between 17 and 20 million U.S. employees participating in large ESOPs or other contribution plans holding stock. Employees may own stock directly in their companies through stock purchase programs or be members of work cooperatives.
Studies find the employee ownership has a positive impact on performance even in adverse times. September 11th adversely affected the majority of…
Douglas Kruse, Ph.D. "Research Evidence on Prevalence and Effects of Employee Ownership. http://wwww.chrs.rutgers.edu.February 2002.
United Airlines. Form 10K. Securities and Exchange Commission.
Southwest Airlines. Form 10K. Securities and Exchange Commission.
Continental Airlines. Form 10K. Securities and Exchange Commission.
Agreeing upon audit expectations goes a long ways in solidifying the workers' perspective of their own role in helping to keep track of warehouse stock and how they can benefit the company. When set up properly and carried out thoroughly and regularly, an audit is one of the best tools a business has in helping to keep warehouse stock inventories well managed and in keeping records accurate and reliable.
There are many contributing factors to warehouse stock record inaccuracies and in keeping the warehouse employees as productive and efficient as possible. Many of the causes of warehouse stock record inaccuracies are very basic in nature, and stem from an improper balance between prudent, logical actions and a businesses inability to keep track of their products, stock, and employees. When businesses understand the factors in keeping stock accurately accounted for and safe, they can build and grow through time and money…
DeHoratius, Nicole and Raman, Ananth. (2008). "Inventory Record Inaccuracy: An
Empirical Analysis." Management Science, August 2008.
Ernst, R., Guerrero, J. And Roshwalb, A. (1993). "A Quality Control Approach for Monitoring Inventory Stock Levels." Journal of the Operational Research Society, 44, 1115-1127.
Johnson, J, R., Leitch, R.A., and Neter, J. (1981). "Characteristics of Errors in Accounts
High Stock Returns in Efficient Markets
"An efficient market is where market prices are an unbiased estimate of the true value of the investment" (Market Efficiency-Definitions and Tests). Market efficiency only requires that errors in market price be unbiased, not the market price to equal true value every time. Overvalue or undervalue of stock is random in an efficient market. There is an equal chance that stocks are overvalued or undervalued at any point in time.
Profit opportunities presented by overvalued and undervalued stock motivate investors to trade, which moves stock toward its intrustic value (Jones). Changes in stock prices in an efficient market should be random. Investors cannot earn abnormally high returns on stock in an efficient market when prices reflect the intrustic value.
If the stock market is efficient, some people can make very high returns by purchasing the stock at under the value of the intrustic stock…
Jones, S.L. & Netter, J.M. Efficient Capital Markets. 2008. website. 13 Feb 2013.
Market Efficiency-Definitions and Tests. n.d. website. 13 Feb 2013.
Apple Inc. Stock
In 2017, AAPL has performed quite well. It started the year off at $115 and today is selling for $170. 2017 has been a great year for stocks, with the election of President Trump seeming to have a lot to do with the rise in equities across the board, as the market has expected the President to introduce tax cuts that would be good for businesses like Apple. I was attracted specifically to Apple because I am an Apple user, enjoy the products, have many friends who enjoy the products and think it is a great brand to be a part of. I think that it will continue to perform well thanks to the creative forces within the company and the good leadership at the top of the company.
I bought AAPL at $156 and sold at $174 for an 11.5% gain. I purchased the stock because…
Telephone, wireless, and internet communications is becoming increasingly critical to simply live and function in modern society and commerce. However, the volatility of the industry might make certain aspects of investing in any telecommunications company dicey -- competition is likely to be fierce in upcoming years, and also a new form of technology developed by a rival company might weaken at&T's competitive edge. Not even the most perfect formula can predict changes in technology or a new regulatory environment that may affect the price of a stock.
In the short-term, at&T looks strong, making it a good bankable retirement stock, although its price is quite high. A wealthy investor like Beebee with money to burn might want to select a slightly more risky company, meaning that it might not be the best choice for him. Also, Beebee seems to have a guaranteed income not based in investments at all, but…
Derivatives Explained." Financial Pipeline. Retrieved 18 Nov 2007 at http://www.finpipe.com/derivatives2.htm
Preferred vs. Common Stock." Created by Ameritrade in 1999. Updated in 2003. Retrieved 18 Nov 2007 at http://www.ameritradefinancial.com/educationv2/fhtml/stocksfunds/prevscom.fhtml#overview_preferred
Indian Stock and Bond Markets
Do you think an investment in the Indian stock market is a good long-term investment?
The Indian stock market has experienced a number of fluctuations over the past 20 years or so that would suggest that investors might want to adopt a "wait-and-see" approach before making the plunge into these financial waters. For example, Schmidt and Hersh emphasize that, "The history of the operation of the Indian stock market has been dotted with brokers often unable to meet their commitments, allegations and proved instances of insider trading, and deliberate manipulation of stock prices by bears and bulls" (2000, p. 131). The prices for stocks listed on the Indian stock have experienced a number of highs and lows, with the most significant boom taking place during the period 1993 to 1995; however, although there have been some spikes, there has been a downward trend experienced since…
Kumar, R. (2007). Economic growth and volatility in Indian stock market: a critical analysis.
South Asian Journal of Management, 14(2), 47-48.
Schmidt, J.D. & Hersh, J. (2000). Globalization and social change. London: Routledge.
Sen, P., Bahel, N. & Ranjan, S. (2003, July). Developing the Indian debt capital markets:
Since inception, the Amex Composite Index has shown an increase of 57.3%, as compared to the NASDAQ Composite's gain of 26.6%, the S&P 500's gain of 7.1%, and the NYSE composite's gain of 14.3% (American Stock Exchange).
Values and volumes of stocks and options at the AMEX are significant. Closing values as of 10/11/2004 at 5:07 PM ET show significant activity. As of this date, the total volume was 44,288,030, with 1,359 block trades. Total options volume was 576,653, and bond volume was 102,000 (American Stock Exchange).
Like other stock exchanges, the AMEX is run by a number of officials. Officers of the AMEX include Chairman and Chief Executive Officer SALVATOE F. SODANO, the President Peter Quick, Executive Vice President alph . afaniello, and Chief Financial Officer and Controller MICHAEL T. D'EMIC. The AMEX also has a Board of Governors, trustees, a nominating committee, exchange officials, floor officials and a…
American Stock Exchange.
Welcome to the American Stock Exchange, 2004. 11 October 2004. http://www.amex.com/
CCH Incorporated. American Stock Exchange (AMEX), 2004. 11 October 2004. http://wallstreet.cch.com/AmericanStockExchangeAMEX/
Investorwords.com. American Stock Exchange. WebFinance, Inc., 2004. 11 October 2004.
In terms of size, the largest stock market is, by far, represented by NYSE, which trades the highest volumes of shares and which has the highest value of the transactions.
The New York Stock Exchange and the Brazilian Exchange are both companies created as a result of mergers between two other entities, namely Sao Paolo Stock Exchange and the Brazilian Mercantile and Futures Exchange in the case of BM&F Bovespa and the NYSE Group and Euronext N.V. In the case of the New York Stock Exchange. The Mexican Stock Exchange however is a public institution.
The three institutions serve similar functions, yet the differences reside in the areas they serve, the volume of traded shares, the number of investors and other indices which show the differences in size and strength between NYSE and the two other markets.
All in all, the current project has assessed two important international aspects, namely…
(2012). G20 Summit in Los Cabos, Mexico: Key outcomes. Federal Ministry of Finance. http://www.bundesfinanzministerium.de/Content/EN/Standardartikel/Topics/International_affairs/Articles/2012-06-21-g20-los-cabos.html accessed on September 17, 2012
Kirton, J., Kulik, J; (2012).The shortcomings of the G20 Los Cabos Summit. University of Toronto. http://www.g20.utoronto.ca/analysis/120627-kirton-kulik-shortcomings.html accessed on September 17, 2012
(2012). Website of the Brazilian Stock Exchange. www.bmfbovespa.com.b accessed on September 19, 2012
(2012). Website of the Mexican Stock Exchange. http://www.bmv.com.mx / accessed on September 19, 2012
As with any of the big questions worth asking, there is no easy answer to whether the stock market is rigged. The real answer is both yes and no. On the one hand, the market has rules and regulations, oversight boards like the Securities and Exchange Commission, and is open for all investors to participate in on a potentially equal basis. On the other hand, the way the market works is clearly “unfair,” as Tepper puts it (1). Unfairness is built into the system because the actual point of sale is not something the ordinary investor is privy to—meaning the price of stocks is not a true reflection of investor supply and demand. This inherent unfairness built into the process of the stock market is why maverick developers like Brad Katsuyama has developed the IEX (Tepper 1). Abraham points out other reasons why the stock market methodologies remain unfair, “rigged,”…
Stock exchange: An exchange where shares of stock and common stock are sold and purchased. Common exchanges are the New York Stock Exchange and American Stock Exchange.
Secured bonds: A secured bond is a bond issued with the backing of collateral. A common example of a secured bond would be a mortgage bond. If the bond is defaulted on, the title of the collateral is transferred to the bondholder.
Factoring: Factoring occurs when a company sells their accounts receivable, or customer's debt, to another entity at a discount. The entity then assumes all credit risk of the account debtors, and receives the cash as these debts are settled. This process is also known as accounts receivable financing.
Trade credit: Trade credit refers to a company's open account arrangement with vendors. As the company makes purchases, the vendor debits the company's account, and bills them for this credit transaction.
Investorwords.com. Retrieved Dec 7, 2006 from Investor Words. Website: http://www.investorwords.com .
As Mokoaleli-Mokoteli et al. (2009) point out, though, previous research has confirmed that while it is accurate to suggest that analysts provide optimistic reports on the majority of the stocks they include in their analytical portfolios, such recommendations do not routinely affect the market in any substantive way. According to these researchers, "After accounting for risk and transaction costs, investors do not earn better than average returns from following analysts' stock recommendations" (Mokoaleli-Mokoteli et al., 2009, p. 388). There is also the matter of the human propensity to be overly optimistic in those situations where there are complex issues involved, a tendency that has also been well documented in the scholarly research (Mokoaleli-Mokoteli et al., 2009). According to Mokoaleli-Mokoteli and his colleagues, "Both analyst overoptimism, as measured by the tone of their report, and conflicts of interest distinguish between new buy and new sell recommendations. This is consistent with the…
Cao, J. & Kohlbeck, M. (2011). Analyst quality, optimistic bias, and reactions to major news. Journal of Accounting, Auditing & Finance, 26(3), 502 -- 526.
Mokoaleli-Mokoteli, T., Taffler, R.J. & Agarwal, V. (2009, April/May). Behavioural bias and conflicts of interest in analyst stock recommendations. Journal of Business
Finance & Accounting, 36(3) & (4), 384 -- 418.
nvestments: Stock Selection
On March 9, 2009 the stock market settled on a 12-year closing low with the Dow Jones ndustrial Average (DJA), a barometer of the economy and stock market trajectory, closing at 6,547.05. (Twin, A. March 9, 2009). The precipitous plunge for the DJA from an "all-time high of 14,164.53" (Twin, A. October 9, 2007) reached on October 9, 2007 marked the timeline of the country's worst recession since the Great Depression. From the historic lows however, the market has rebounded dramatically closing at 12,105.78 on February 23, 2011, a gain of over 75% from the March lows (CNBC.com. February 23, 2011). The vicissitudes of the stock market over the past three plus years limn the debate over whether an investor who is risk averse would choose to invest in a stock market in which all stocks rise and fall together, or a market in which individual stocks…
Investors are marked by two extremes, the active investor who tracks, analyzes, and disseminates information on the companies in their investment portfolio, the economy, and global financial news which may influence the direction of their stock investments. At the other extreme is the investor who is socking away their five percent contribution with company match into their 401K. This investor cedes to expert portfolio managers, or trusts in the long run upward trend of equities as defined in index funds: S&P 500, Wilshire, and DJIA. While there are investors at both extremes the vast majority fall at some point on the spectrum, engaged but not able to fully commit the time or resources to portfolio management.
In this context the risk-averse investor will likely fall in with the preponderance of investors who have investment portfolios but are not actively managing them. The investor's portfolio may have individual stocks, mutual funds, or index funds. Which leads to the question, which environment would an investor desire to be in to attain their goal of reduced risk concomitant with acceptable return? The answer ironically comes from the same source, yet at bifurcated ends of an investment philosophy.
Warren Buffett considered the world's most accomplished and successful investor for over fifty years posits that a risk-averse individual could reach their investment objectives in either economic environment. In 2009, Warren Buffett entered into an agreement to purchase the remaining shares of Burlington Northern Railroad which his firm Berkshire Hathaway did not already own. His rationale for the purchase was simple "I basically believe this country will prosper and you'll have more people moving more goods 10 and 20 and 30 years from now, and the rails should benefit; it's a bet on the country, basically" (Crippen, A. November 3, 2009). This statement defines an investment strategy which suggests that over the long-term the stock market will generally move higher, the rising tide lifts all boats metaphor. Yes, stocks will fall, sometimes dramatically, across
UnitedHealth Group Stock
This report will provide insight into the UnitedHealth Group Stock from an investor's perspective. The report will show a financial analysis included with an overview of the company's current health standing. The paper will also provide a summary of the company and their products and services. The key to any intelligent investing strategy lies in the investor knowing what a stock is really worth and also if it is safe to buy, sell or hold. Therefore, since this report is from an investor's perspective, the company's stock and industry will be reviewed so as to present a big picture of where United Health is today and where they want to go in the future.
Over the five past years the UnitedHealth Group stock has been making great progress as analysts consistently consider the group a strong buy option. As can be seen from the two…
UHC Home Page. Ed. UnitedHealthcare. UNH. http://www.uhc.com/ .
United Health Group Home Page. Ed. United Health Group. UnitedHealth Group. http://www.unitedhealthgroup.com/ .
UnitedHealth Group. Ed. Yahoo Finance. Yahoo Finance. http://finance.yahoo.com/q?s=UNH&d=t .
If you need to type anything after the Reference List then start it on this page
employee stock option pricing is effected by the bonus plan hypotheses as discussed in the Watts and Zimmerman article.
Employee stock option pricing is an option on the common stock of a company that is issued as a form of non-cash compensation. estrictions on the option (as for instance vesting and limited transferability) are ways in which the business attempts to align its own interests with those of the holder's interests. In the event of the company's stock rising, holders of options generally experience a direct financial benefit, which gives employees the incentive to behave in ways that will boost the company's stock price (Summa; web).
The management compensation hypothesis, otherwise known as the Bonus plan hypothesis accordingly states that managers whose incentives are tied up with the firm's accounting performance are more likely to use accounting choices that reduce reported profits and manipulate their accounting methods and records in…
Summa, J. employee stock options. Investopedia.
Watts, R. L & Zimmerman, J.L,"Towards a positive theory of the determination of accounting standards" The Accounting Review, January 1978, pp 112-34.
To find out the stock's value with the information provided, the Gordon Growth Model would be used. The Gordon Growth Model is used to determine the price of a stock if the dividend, dividend growth rate and discount rate are all known. The underlying assumption behind the Gordon Growth Model is that the stock price is based on the expected future dividends -- investors are only investing for the known future cash flows. As a result, only the dividend and the discount rate are taken into account, along with the expected future growth rate of the dividend. Capital gains are not taken into account in the Gordon Growth Model.
The formula for the Gordon Growth Model is as follows:
Source: Investopedia (2011)
Thus, $2 / (.15-.05) = P
P = $
The stock's value if the riskiness of the stock changes would be calculated with the same formula,…
Amadeo, K. (2012). Inverted yield curve. About.com. Retrieved February 4, 2012 from http://useconomy.about.com/od/glossary/g/Inverted_yield.htm
Baker, S. (2009). Perils of the internal rate of return. Economics Interactive Tutorial. Retrieved February 4, 2012 from http://hspm.sph.sc.edu/courses/econ/invest/invest.html
Chmielowiec, M. & Granger, B. (2011). Cost of risk: Show me the money. U.S. Captive. Retrieved February 4, 2012 from http://www.pointright.com/pdf/PR_Article_2011_Cost_of_Risk_Show_Me_The_Money.pdf
Investopedia. (2011). Gordon growth model. Investopedia. Retrieved February 4, 2012 from
50) to 2097 -- the price of this bond is of $58 (Yahoo Finance, 2009).
Despite their past low popularity, the investors are now beginning to seek more vividly the Ford preferred stock (F-PF) and this is generally explained by the fact that the popularity of the common stock has suffered demises. The company officials have decided to allow owners of common stocks to exchange them with preferred stocks and vice versa, in order to increase investor satisfaction. The preferred stock is being traded at a value of $38.86. Preferred stocks are among the riskiest investments and the specialized advice is that they be kept for long periods of time, but in small amounts. Additionally, it is necessary to diversify the portfolio and the preferred stock should not make up more than one percent (Neubert, 2007).
Neubert, D., 2007, Ford Preferred (F-PS): Used Only with Diversification, The Panelist, http://thepanelist.com/Neubert%27s_Trades/Neuberts_Trades/_20070805502/last…
Neubert, D., 2007, Ford Preferred (F-PS): Used Only with Diversification, The Panelist, http://thepanelist.com/Neubert%27s_Trades/Neuberts_Trades/_20070805502/last accessed on July 8, 2009
2009, Bond Screener at Yahoo Finance, http://reports.finance.yahoo.com/z1?is=ford last accessed on July 8, 2009
2009, Investopedia, http://www.investopedia.com last accessed on July 8, 2009
Components of a stock's realized return are distributions, dividends, bonds, and share price appreciation. Some kinds of stocks also offer income tax write-offs.
The characteristics of a realized return, in short, are the quantity of actual gains that is made on the value of a portfolio over a specific period of time. In other words, how much value one has received in terms of returns / gains as demonstrated in one's portfolio as a whole.
The realized return considers the profitable returns of the each of the assets contained in one's portfolios as well as each of the losses of particular assets incurred during that specific period, as a result of flucturtaitons that occurred to the market of particular assets. These are the components of each of the realized returns associated with each individual asset that is held in the portfolio.
Calculating the rate of return would enable the investor…
If one particular company has plenty of liquid assets, which therefore assures its progression in future business ventures, then the company has good potential for investing. However, if the company seems to have more current liabilities than assets and capitol, then the investor should definitely look elsewhere.
There are several ways which investors should judge companies in terms of potential investments. One is to judge a company based on their earnings per share, which is calculated through the earnings of the company in the last four quarters. Revenue-Based Evaluations compares companies based on revenues as related to company costs or long-term debt. Investors should also look at a company's cash-flow, or the amount of capitol which actually passes through a company each quarter after that company withdraws money for the cost of maintaining business. Another way is to judge based on the equity of a company, which is judging the…
Even if Bristol-Squib Meyers is not directly implicated in all of the cases surrounding this issue, fears about the over all health of the industry will affect stock prices. And finally, there is increased consumer outrage about drug costs and pressure to change current regulations about providing effective health care to Americans. Whatever the long-term impact upon the industry, the government is likely to have to devote considerable resources to health care reform in the near future. Changes in regulation, whatever they are, will make pharmaceutical stocks very volatile for the next 5-7 years.
Finally, the particularly negative publicity surrounding ImClone, justified or not, will negatively impact stock prices for all of the companies connected to the scandal, and Bristol must struggle and devote valuable corporate resources to generate positive media coverage to regain its faltering ethical reputation in the eyes of investors…
Coach, Inc. Stock Analysis
Coach, Inc. -- Stock Pick
Coach, Inc. (NYSE:COH) is a solid, long-term investment. The company produces high-end, luxury fashion and lifestyle accessories such as handbags, sunglasses, scarves, jewelry, shoes and other items. The brand is especially popular in the United States and Japan. Coach has a unique competitive advantage due to its 70-year legacy, name recognition, loyal customer base, and international appeal. The product line always emphasizes high end leathers, product detailing and finishes at affordable price points. Handbags are the company's flagship offering. Competitors include Kenneth Cole, Louis Vuitton, Dooney and Burke, Gucci, Fendi, and Prada. Each company carries handbags that offer comparable quality, but at prices well over $1,000. Coach targets an equally affluent and brand conscious demographic; however, the company is best known for "affordable luxury" with price points beginning at $300. This pricing strategy has proven to be a competitive advantage, particularly…
(2012, October 24). Stocks in the News. Wall Street Journal - Eastern Edition. p. C4.
This company is well positioned to capitalize on the growing population of older Americans whose children have moved out and are in search of more efficient and cost-effective homes. Like the business model adopted by NVR, Toll also takes advantage of efficiencies in its value chain by developing its properties on land that the company has either acquired and/or developed.
For the 5-year period ended October 31, 2004, Toll had completed 24,271 homes in 456 communities, including 6,627 homes from 273 communities during the fiscal year ended October 31, 2004 (Toll 2).
Toll also operates its own land development, architectural, engineering, mortgage, title, security monitoring, landscape, cable television, broadband Internet access, lumber distribution, house component assembly and manufacturing operations, as well as owning and operating golf courses and country clubs in connection with a number of the company's master planned communities (Toll 3). hile Toll's stock performance cannot compare with…
NVR, Inc. (2005). Yahoo! Finance. Retrieved February 18, 2005 at http://finance.yahoo.com/q?s=TOL .
Toll, Inc. (2005). Yahoo! Finance. Retrieved February 18, 2005 at http://finance.yahoo.com/q/pr?s=TOL .
By opening stock options to middle management and employees, it was assumed that better employee performance would be incentivized. As company stock prices go up, it creates a greater spread between the option price when it was granted to the employee and the hypothetical sale price at the end of the vesting period. Consistently better performance over a longer period of time would yield greater reward when the option is exercised. However, as Hall and Murphy again point out, "even if employees can increase the value of the firm, their share of that gain through their option holdings is very small. Combining this enormous free-rider problem with the risk imposed on employees through stock-based pay, it seems obvious that cash-based incentive plans based on objective or subjective performance measures can provide stronger and more efficient pay-performance incentives."
Despite many early statements in the life of the practice that employee stock…
Calomiris, C. a. (2004, 01-08). Options Pricing and Accounting Practice. Retrieved 12-13, 2010, from Should We Expense Stock Options: http://docs.google.com/viewer?a=v&q=cache:tDxxxPDG3cwJ:www0.gsb.columbia.edu/faculty/ccalomiris/papers/Options%2520Pricing%2520and%2520Accounting%2520Practice.pdf+Stock+options+are+an+expense&hl=en&gl=us&pid=bl&srcid=ADGEEShtdjeKitOxVfuENYIeyxgGdUiOjraoDHCLwH-WWxt9w30pnL310kAkP21iDHhBpErxlJ6mC_GQS6NEu7L3UGdc6T1ky33N1e7CFGL_NSZAn5ntALxB4KVgA2vjEiww911f6x4d&sig=AHIEtbRx6dSwLFzFHZnpHTpV0lsNIVpCYw
Core, J. a. (2001). Stock option plans for non-executive eployees. Journal of Financial Economics (61), 253-287.
Engel, E. a. (2001, Jan.). The Roles of Performance Measures and Monitoring in Annual Governance Decisions in Entrepreneurial Firms. Retrieved 12-13, 2010, from an Analysis of Executive Compensation, Ownership, and Control in Closely Held Firms: http://docs.google.com/viewer?a=v&q=cache:5vp-iWjpPb4J:faculty.chicagobooth.edu/ellen.engel/research/egh-rev-11_2.pdf+%E2%80%98%E2%80%98Stock-based+pay+in+new+economy+firms%E2%80%99%E2%80%99.+Journal+of+Accounting+and+Economics,&hl=en&gl=us&pid=bl&srcid=ADGEESifIyqUeDNwUoNkeDagDN_o40V-Jd9R56ECpswKKWzRQRdz_dZzpDHfcmTAKvZCDwZPpz9ZtR51HmXhCZ408jF-cv485C4m1xIxTy2zfTfQ4rp_g-4KFhIUdwKFVtmNCOWy82W5&sig=AHIEtbQapxbbbr0z-APPf2sdFQgWOYglLA
Glater, J. (2009, March 26). Stock Options Are Adjusted After Many Share Prices Fall. New York Times, p. B1.
While stock may be used instead of monetary motivation, management may inflate the value of these and gain more from employees with less investment. Furthermore, a buyback strategy may result in a negative external business image for the company when stock is later revealed to be of lower value than merited by the buyback price.
3. I believe that stock buybacks are indeed a strategy. A strategy can be defined as a plan of action to further the business advantage and image of a company. As seen above, while the strategy may be to the advantage or disadvantage of the investor, it is always used to the advantage of the company buying back stock. Some companies include this strategy as part of their yearly business plan and projections for the future. The disclosure of buying back strategies can also be used as a tool to encourage future investments. As such,…
The first component is as follows: Net Margin = Net Income/Sales. How much profit Abbott laboratories makes for very $1.00 it generates in revenue, and the higher a company's profit margin the better. The second component is as follows: Asset Turnover = Sales/Total Assets. The amount of sales generated for every dollar's worth of assets. This measures Abbott's efficiency at using assets, and again, the higher the number the better. The final factor of the Du Pont analysis is as follows: Leverage Factor = Total Assets/Shareholder's Equity. The higher the number, the more debt the company has. Abbott's Du Pont analysis is computed using the following equation:
In this case, for the end of 2006, Abbott Laboratories reported a net income of $717 million dollars, sales of $22,476 million, total assets for 2006 of $36, 178 million, and equity of $14,054 for 2006. Placing these figures into the equation above…
Abbott. (2007). About the Company. Retrieved November 9, 2007 at http://www.abbott.com .
Epsicom. (2007). Abbott Medical Device Company Intelligence Report. Retrieved November 9, 2007 at http://www.piribo.com/publications/medical_devices/companies/abbott_medical_device_company_intelligence_report.html .
McKinnell, H. (2003). Performance Report. Bayer AG 2003 Annual Review: 1-30.
Rogers, M. (2003). Risk Management in Real Options-Based Pharmaceutical