Goods used by individuals and businesses that must be replaced regularly because they wear out or are used up. Consumables can also be defined as the components of an end product that are used up or permanently altered in the process of manufacturing, such as semiconductor wafers and basic chemicals. Taobiz explains Consumables Stocks of companies that make consumables are considered to be relative safe harbors for equity investors when the economy shows signs of weakness. The reasoning is simple: people will always need to purchase groceries, clothes and gas no matter what is going on in the broad economy. Many of the items measured in the basket of goods used to calculate the Consumer Price Index (CPI) are consumables; inflation in these items is closely watched because it can lower the discretionary income people have to spend on items such as cars, vacations and entertainment.
An asset allocation strategy in which assets are assigned a fixed percentage in a portfolio and readjusted to their target weights periodically. The readjustment allows the portfolio to remain properly weighted, and forces the sale of outperforming assets and purchase of underperforming assets. In a constant ratio plan, the manager must choose how often to rebalance the portfolio and weigh the tradeoff between the desire to frequently rebalance and the added transaction costs that will result. Taobiz explains Constant Ratio Plan A constant ratio plan differs from buy-and-hold and momentum strategies. Buy-and-hold investors set one allocation and don't rebalance, while momentum investors sell underperforming assets and buy outperforming ones. A constant ratio plan performs best in a volatile market with a general mean-reverting pattern. For example, if the stock market is oscillating, a constant ratio plan will buy when stock prices fall and sell when they rise.
An electronic system that continuously reports data on the sales volume and price of exchange traded securities. Taobiz explains Consolidated Tape In contrast to the specific tapes for different exchanges that only record affiliated transactions, the consolidated tape records all the transactions of exchange traded securities on all exchanges.
1. Equity shares owned by major shareholders of a publicly traded corporation. These shareholders have either a majority of the shares outstanding or a portion of the shares that is significant enough to allow them to exert a controlling influence on the firm's decisions. 2. In situations where companies have more than one class of common shares, shares with superior voting power or vote weighting are considered to be control stocks, relative to the inferior class. Taobiz explains Control Stock 1. Shareholders who control a majority of a company's shares effectively have enough voting power to dictate the firm's decisions. As such, their shares can be referred to as control stock. 2. Suppose XYZ Corp. had two classes of common stock, Class A and Class B, and both types of shares carry equal claim to the firm's assets. In other words, if the firm has 100 common shares in total, 50 are Class A shares and 50 are Class B shares. Let's assume that the B shares entitle the shareholder to one vote, but the A shares entitle the shareholder to 10 votes. If you owned one Class A share, you would own 1% of the company's assets, but wield 10 votes at company meetings. An investor who owned one Class B share would have the same 1% claim to the firm's assets, but wield only one vote at company meetings.
The amount of money that a company earns from sources other than its profits, such as when a company issues and sells shares at a price greater than their par value. The contributed surplus figure helps both investors and the company to distinguish between non-operational and operational income. It is found within the balance sheet. Taobiz explains Contributed Surplus If this value was combined with operational earnings, investors would have a hard time forecasting relatively accurate future earnings because earnings from contributed surplus are not a part of ongoing business operations.
When one shareholder or a group acting in kind holds a high enough percentage of ownership in a company to enact changes at the highest level. By definition, this figure is 50% of the outstanding shares or voting shares, plus one. However, controlling interest can be achieved with less than 50% ownership of the stock if that person/group owns a significant proportion of the voting shares, because in many cases, not every share carries a vote in shareholder meetings. Taobiz explains Controlling Interest For the majority of large public companies (such as those that belong to the S&P 500), a shareholder with much less than 50% of the outstanding shares can still cause a lot of shake-up at the company. Single shareholders with as little as 5-10% ownership can push for their own seats on the board, or enact changes at shareholder meetings by publicly lobbying for them.
A metric developed by Institutional Shareholder Services (ISS) that rates publicly traded companies in terms of the quality of their corporate governance. Each public company covered by the metric is assigned a rating based on a number of factors that are considered by the ISS model. Factors used in the CGQ formula include board structure and composition, the executive and director compensation charter, and bylaw provisions. Taobiz explains Corporate Governance Quotient - CGQ The CGQ serves as a reasonable approximation of the quality of a public firm's corporate governance. Investors seeking to hold shares in a company for the long term will typically be concerned about the quality of their company's corporate governance, as research has shown that a high quality of corporate governance typically leads to enhanced shareholder returns.
The reorganization of a company's outstanding obligations, often achieved by reducing the burden of the debts on the company by decreasing the rates paid and increasing the time the company has to pay the obligation back. This allows a company to increase its ability to meet the obligations. Also, some of the debt may be forgiven by creditors in exchange for an equity position in the company. Taobiz explains Corporate Debt Restructuring The need for a corporate debt restructuring often arises when a company is going through financial hardship and is having difficulty in meeting its obligations. If the troubles are enough to pose a high risk of the company going bankrupt, it can negotiate with its creditors to reduce these burdens and increase its chances of avoiding bankruptcy. In the U.S., Chapter 11 proceedings allow for a company to get protection from creditors with the hopes of renegotiating the terms on the debt agreements and survive as a going concern. Even if the creditors don't agree to the terms of a plan put forth, if the court determines that it is fair it may impose the plan on creditors.
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