A rough measurement of the amount of a company’s profit that can be allocated to one share of its stock. Basic earnings per share (EPS) do not factor in the dilutive effects on convertible securities. Basic EPS is calculated as follows: Basic EPS = (net income – preferred dividends) / weighted average number of common shares outstanding If a company has a simple capital structure, meaning that it has not issued any potential dilutive securities, basic EPS can be a useful metric on its own. Taobiz explains Basic Earnings Per Share For companies that have a complex capital structure (that is, they have issued potential dilutive securities), diluted EPS is considered to be a more precise metric than basic EPS. Diluted EPS takes into account all of the outstanding dilutive securities that could potentially be exercised (such as stock options and convertible preferred stock) and shows how such an action would impact earnings per share. Companies with a complex capital structure must report both basic EPS and diluted EPS to provide a more accurate picture of their earnings per share; basic EPS will always be the higher of the two. If the company has a simple capital structure, it only needs to report basic EPS.
1. The analysis of economic trends in relation to a specific base year. base-year analysis expresses economic measures in base-year prices to eliminate the effects of inflation. 2. The analysis of a company's financial statements by comparing current data with that of a previous year, or base year. base-year analysis allows for comparison between current performance and historical performance. Taobiz explains base-Year Analysis 1. base-year analysis is often used when expressing gross domestic product, and is known as real GDP when referred to in this way. By eliminating inflation, the trend of economic growth is more accurate, as price level changes are accounted for. $$ (base Year) = $$ (Chosen Year) x Price Index (base Year) / Price Index (Chosen Year) 2. base-year analysis of a company's financial statements is important to be able to determine whether a company is growing or shrinking. If, for example, a company is profitable every year, the fact that its revenues are shrinking year-over-year may go unnoticed. By comparing revenues and profits to those of a previous year, a more detailed picture emerges.
Alternate term for a short position in a financial security. A bear position attempts to profit in a market by betting that prices will fall for certain securities. The short seller borrows securities in the hopes that prices will decline. When the price drops, the investor makes a profit on the price change. When the price rises, the investor loses money. There are also numerous alternative ways to initiate bear positions such as buying put options or buying inverse ETFs. Taobiz explains Bear Position A bear position is the opposite of a bull position. A bear position is a trade or investment that is made in the hopes that the security's price will drop. If a short sale moves against the investor or trader, the trader may be exposed to unlimited losses since the price of the security can continue to rise. This is in contrast to a long position where the price of the security can move against the investor only a certain amount; that is, to zero. The use of alternative strategies to initiate a bear position can mitigate some of these risks.
A market condition in which the prices of securities are falling, and widespread pessimism causes the negative sentiment to be self-sustaining. As investors anticipate losses in a bear market and selling continues, pessimism only grows. Although figures can vary, for many, a downturn of 20% or more in multiple broad market indexes, such as the Dow Jones Industrial Average (DJIA) or Standard & Poor's 500 Index (S&P 500), over at least a two-month period, is considered an entry into a bear market. Taobiz explains Bear Market A bear market should not be confused with a correction, which is a short-term trend that has a duration of less than two months. While corrections are often a great place for a value investor to find an entry point, bear markets rarely provide great entry points, as timing the bottom is very difficult to do. Fighting back can be extremely dangerous because it is quite difficult for an investor to make stellar gains during a bear market unless he or she is a short seller.
An offer made by one company to buy the shares of another for a much higher per-share price than what that company is worth. A bear hug offer is usually made when there is doubt that the target company's management will be willing to sell. Taobiz explains Bear Hug The name "bear hug" reflects the persuasiveness of the offering company's overly generous offer to the target company. By offering a price far in excess of the target company's current value, the offering party can usually obtain an agreement. The target company's management is essentially forced to accept such a generous offer because it is legally obligated to look out for the best interests of its shareholders.
A certificate of deposit whose interest rate fluctuates in inverse correlation to the value of an underlying market index. In other words, the interest rate paid on the CD increases as the underlying market index decreases in value. Taobiz explains Bear CD This type of CD is used for two main purposes: speculation or hedging. An investor may want the safety of a CD but with the market exposure of a bear CD. This CD is bearish because the investor is betting that the market will fall during the life of the CD. This type of instrument is also used to hedge actual market positions. If an investor has a long position that is highly correlated to the underlying market index, he or she may invest his or her excess cash in a bear CD, which can offset losses in the market investment.
An order to buy or sell a security at a price lower than the current market price. Taobiz explains Below the Market Investors may choose to place a limit order to buy, a stop order to sell, or a stop-limit order to sell. In order to limit losses, investors holding a long position may place a stop order, which activates the sale of the securities if the price declines below a particular point.
In the United Kingdom, the practice whereby the holder of a security sells it at the end of the day on the last day of the financial year and buys it back the next morning. Arrangements are made between the holder of the security and the broker to accommodate the sale and repurchase. Taobiz explains Bed And Breakfast Deal A bed and breakfast deal is carried out to maintain an investment portfolio while minimizing capital gains taxes. Positions are closed out at the end of the year and immediately reopened on the first day of the new financial year. Because this practice intentionally seeks to limit capital gains taxes, tax authorities work to minimize the occurrence of bed and breakfast deals.
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