What are Efficiency Ratios? Efficiency ratios are metrics that are used in analyzing a company’s ability to effectively employ its resources, such as capital and assets, to produce income. The ratios serve as a comparison of expenses made to revenues generated, essentially reflecting what kind of return in revenue or profit a company can make…
What are Registration Rights? Registration rights are a form of control provision that enables investors to force companies to file a registration document, for the purposes of both transparency and audit. The document must be filed with the Securities and Exchange Commission (SEC), complying with the Securities Act of 1933. According to this law, all…
What is Forward Dividend Yield? Forward dividend yield refers to the projection of a company’s yearly dividend. It’s calculated as a percentage of the current share price. For many investors, the dividends paid out by companies are one of their primary sources of income, with another being an appreciation in the stock price. When stock…
What is the PRAT Model? The PRAT model, also known as the sustainable growth rate (SGR) model, is used to describe the optimal rate of growth a company can achieve without borrowing more debt or using equity. The PRAT model aims to help companies boost their sales and revenues without increasing their financial leverage. Companies…
What are Outstanding Shares? Outstanding shares represent the number of a company’s shares that are traded on the secondary market and, therefore, are available to investors. Outstanding shares include all restricted shares held by the company’s officers and insiders (senior employees), as well as the equity portion owned by institutional investors such as mutual funds,…
What are Authorized Shares? Authorized shares, or authorized stock, are simply a legally allowed maximum number of shares that a company can issue to investors. The number of authorized shares is specified in the company’s articles of incorporation. You can also see the number in the capital accounts section on the balance sheet. Understanding Authorized…
What are Dividends? There are advantages and disadvantages relative to investing in stocks with dividends vs stocks without dividends. Dividends are periodic payments made by companies to owners of its stock. They are a means for a company to share some of its revenue with those who own an equity interest in the company. Dividends…
What is the Operating Ratio? The operating ratio is a measure of efficiency that is used by management to determine day-to-day operational performance. This metric compares operating expenses, also known as OPEX, to net sales. The desired outcome is a lower ratio of operating expenses. The operating ratio metric assesses how effective an organization or…
What is a Monopoly? A monopoly is a market with a single seller (called the monopolist) but with many buyers. In a perfectly competitive market, which comprises a large number of both sellers and buyers, no single buyer or seller can influence the price of a commodity. Unlike sellers in a perfectly competitive market, a…
