What is ROIC vs ROCE? Understanding financial ratios such as ROCE vs ROIC is important to investors in determining the viability of an investment. ROIC is the net operating income divided by invested capital. ROCE, on the other hand, is the net operating income divided by the capital employed. The two ratios come with identical numerators…
What is a Liquidating Dividend? A liquidating dividend is a dividend issued by a business as part of its liquidation process. Liquidation is the process by which a company ends its business activities and exits the market. Liquidation can be voluntary or involuntary (forced). A liquidating dividend is also known as a liquidating distribution or…
What are Checking Accounts vs Savings Accounts? A bank client can choose to open checking accounts vs savings accounts depending on several factors, such as purpose, ease of access, or other attributes. A checking account is a type of bank account that is used for everyday transactions. It is the most basic account that banks,…
What is Earnings Volatility? Earnings volatility is a statistical concept that determines the associated risk and helps predict the market price of a particular stock. Volatility is the risk related to different degrees of change in a security’s value. Higher volatility implies higher risk. A market witnessing sustained rises and falls over a significant period…
What is an Acquirer? An acquirer is a registered company that purchases a portion of, or all the rights to, another company. The acquiring company takes over the management of another company by obtaining a majority stake in the target, effectively giving it control of the company through stock voting rights. Alternatively, the acquirer may…
What is Profit vs Cash? Understanding the difference between profit vs cash is very important in the finance industry. Profit is defined as revenue less all the expenses of a company in a certain period, while cash flow is cash that flows in and out to/from a business throughout a certain period of time. Profit…
What are Sources of Finance? Companies always seek sources of funding to grow their business. Funding, also called financing, represents an act of contributing resources to finance a program, project, or need. Funding can be initiated for either short-term or long-term purposes. The different sources of funding include: Retained earnings Debt capital Equity capital Other…
What is Shareholder Base? Shareholder base refers to the total number of shareholders in a company. In other words, it is a base of owners (investors) of a company that holds a certain number of stock (shares) in the business distributed proportionally, depending on the amount of investment made. Shareholders are diverse, which means that…
What are Provisions? Provisions represent funds put aside by a company to cover anticipated losses in the future. In other words, provision is a liability of uncertain timing and amount. Provisions are listed on a company’s balance sheet under the liabilities section. Example of a Provision An example of a provision is a product warranty…
What is Investment? Investment is the process of allocating capital to a financial instrument (e.g., stocks, bonds) backed by an expectation to receive certain benefits in the future. In the financial world, the benefit of investment is referred to as a return. The return can be either positive (gain) or negative (loss). Returns can be…
