Equity items, such as buildings and machinery, are long-lasting assets that can be financed over time. They appear on a company’s balance sheet and can be depreciated for tax purposes. Financing can be done through debt, bonds, or shares, and the obligation is typically tied to the expected life of the equipment. An equity item […]
Capital budgeting involves calculating the potential financial variability in revenue from a project or idea. The risk has three levels: independent risk, risk of contribution to the company, and systematic risk. Financial managers are primarily interested in systematic risk, which can be incorporated using the certainty-equivalent approach or the risk-adjusted discount rate. A company’s capital […]
Corporate capital has two meanings: accounting and marketing. The former is based on the money invested in the business, while the latter is the value of the company. Business capital can come from personal investments, outside investors, or the sale of company stock. It can be used to purchase equipment, pay for space, hire staff, […]
The capital market facilitates long-term financial product transactions, including bonds and stocks. Organized security exchanges and over-the-counter markets are important elements. Stocks have two types of shares, common and preferred, while bonds can be less volatile. Different types of bonds include debentures, mortgage bonds, and junk bonds. The term capital market refers to the network […]
Legal capital is the value of a company’s outstanding shares, based on the par value of the share when it is issued. It is an archaic tool in today’s business world, but still important in preferred shares, where dividends are calculated as a percentage of the total par value of the stock. Legal capital is […]
The cost of capital is the expected rate of return compared to the amount obtained by selling the investment. Investors aim for a positive cost of capital and avoid securities with negative opportunity costs. Researching investment opportunities increases the chances of earning a rate of return. The cost of capital is essentially another way of […]
Capital growth is the increase in value of assets in a financial portfolio, with the goal of keeping ahead of inflation. Property and assets that remain desirable over time, such as diamonds and handwoven textiles, can generate capital growth. Improving assets and investing in secure stocks, bonds, land, buildings, and precious gems can also achieve […]
Capital budgeting is a process where companies evaluate potential long-term investments. The steps include identifying and evaluating opportunities, reviewing cash flows, and selecting a capital mix to pay for projects that increase revenue, profit, and shareholder value. The final step is to compare cash flows with initial costs to determine the best project. Capital budgeting […]
Capital formation is a macroeconomic term referring to additions to the capital stock in a given period, allowing economists to understand a country’s economic expansion and production. It includes fixed capital investment, inventory value increase, and net value of assets lent to other countries. Variations include gross fixed capital formation and human capital formation. While […]
Authorized capital is the maximum amount of funds a company can use for ongoing operations or issue to shareholders, as specified in constitutional documents. It is often expressed in the currency of the company’s home country and is controlled to ensure the business remains viable. Shareholders refer to authorized capital as nominal capital, which can […]
Capital markets are used by investors to trade securities and by companies and governments to raise capital. An efficient capital market requires rapid price changes in response to demand and supply, liquidity, and accurate information. The market consists of debt and equity products, with the primary market being where securities are created and sold, and […]
Risk management is essential in capital markets to ensure investors understand the securities they buy. Underwriters review entities’ accounts, and rating agencies assign credit ratings to stocks and bonds. Investors must do their own research, and government regulators audit rating agencies and brokerage firms to ensure accurate risk information. Corporations and other institutions raise money […]
Emerging capital markets are developing economies committed to reform and growth, creating new capital opportunities for the global market. Transparency, efficiency, and accountability are crucial to attract investors, and reform measures may include exchange rate measures to mitigate capital flight. Developed economies can provide expertise to position the economy for foreign investment, allowing for reinvestment […]
Social capital is the network of relationships between individuals, groups, and entities that can provide advantages and benefits. It can take many forms, such as connections between people who attended the same university or live in the same neighborhood. The concept can be used to achieve various ends, such as finding a dentist or getting […]
Venture capital is funding provided by third parties to finance startup operations. Startups seek venture capital from investors in exchange for future concessions, and investors expect huge profits when the business becomes profitable. Startups should seek VC equity responsibly and maintain a good relationship with investors. Venture capital is the measure of what a party […]
Tier 1 capital is a measure of a bank’s financial health and solvency, calculated by dividing a company’s Tier 1 capital by its risk-weighted assets. Common equity capital is a key component, but hidden assets may compromise the actual financial health of the institution. Tier 1 capital refers to the financial health of a bank. […]
The capital structure and cost of capital have a direct relationship, affecting a company’s financial well-being and investment decisions. Capital structure refers to debt and equity, while cost of capital is the expected returns from a project. Failing to balance them can negatively impact a business’s stability and viability. The capital structure and the cost […]
Capital IQ provides web-based financial research and analysis to a wide range of clients, including corporations, investment banks, private equity firms, and universities. The platform offers a large database of constantly updated financial information, real-time news, market updates, and quotes, as well as data discovery capabilities and an Excel add-in to create spreadsheets and calculate […]
Different human capital models, such as strategic management, statistical analysis, and empirical studies, help companies understand how to best utilize their employees. Strategic management focuses on placing the right people in the right positions, while statistical analysis looks at the cost-benefit of investing in employee education and training. Empirical studies analyze various variables to make […]
Human capital services help companies maximize the performance of their employees. Services include staffing, recruitment, talent management, software solutions, and HR outsourcing. Providers specialize in different areas, such as executive search and assessment. They help organizations mitigate risks associated with hiring full-time employees and retain invested talent. Human capital service providers analyze operations, identify deficiencies, […]
