Archive for April, 2009
The Strategy of Momentum Investing
Momentum investing is a style in which the investor looks for stocks that have been aggressively trending in an attempt to exploit opportunities from this current sentiment. The idea behind momentum investing is that when a trend is established, it is more likely to continue in that direction than to reverse. Under this strategy, [...]
Analyzing the Cash Flow Statement
The Cash Flow Statement (CFS) or “statement of cash flows” is a financial statement that records the cash and cash equivalents entering and leaving a company. The “cash inflow” is the money coming into the business, while the “cash outflow” is the money going out. Cash is the lifeblood of any business since, [...]
The Relationship Between Bond Prices and Interest Rates
While bonds provide an element of stability for an investor’s portfolio, they are vulnerable to economic changes that can decrease their value. In fact, the biggest threat to bond prices is rising interest rates. Interest rates constantly go higher and lower with their direction determined by a number of factors, including decisions by the [...]
The Influence of Greed and Fear on the Stock Market
As the expression goes, there are two emotions that drive the behavior of stock market investors: fear and greed. Observers of the stock market will note that when prices plummet they do so sharply and quickly. This happens when stock market investors are driven by fear. The same can be said when [...]
Short-Term Stock Investing Strategies
Most financial experts would tell you that short-term stock investing is best left to experienced investors. Because stocks can be so unpredictable in the short-term (which in the most extreme case includes day trading) they can be a bad choice for short-term investors. Short-term stock investors need to have nerves of steel and the [...]
Measuring a Company’s Cash Conversion Cycle
The cash conversion cycle (CCC) is a measure of the time it takes a company to convert its resources to cash. The CCC is the total time it takes for the company to convert its resources into inventories, then into finished products for sale, then the conversion of those products into accounts receivable and then [...]
The Various Sectors of an Economy
An economic sector is defined by the type of business activity it supports in relation to the overall economy. The categorization of these various sectors can be thought of as a continuum that starts with the primary sector- the sector which is concerned with the use of raw materials (coal, oil, lumber, etc.). [...]
Understand and Calculate Cash Flow per Share
Cash flow per share provides a measure of a firm’s financial strength and is frequently used by analysts in valuing a firm’s stock. Many of these financial experts believe that the amount of net cash a firm produces is a more important measure of its value than its reported earnings per share (EPS). [...]
Choosing Between Separate and Joint Bank Accounts
While it was once pretty much given that a newly married couple would share their finances in a single account, this is no longer the case. More and more couples seem to favor a system in which each spouse gets their own money and often a third account is set up as a joint [...]
The Importance of Operating Cash Flow
Operating Cash Flow or “cash flow from operating activities” is the cash a company generates through the operations of its business. The operating cash flow is generally defined as revenues minus the costs associated with the company’s operations. Because operating cash flow adjusts for liabilities, depreciation, and receivables, it is viewed as a [...]