Equity vs Fixed Income

Equity vs Fixed Income

Equity vs Fixed Income

If a person wants to generate income or appreciation in the future he acquires an asset known as investment. An investment is always purchased to generate more in the future than you invest today. But there is always a risk associated with the investment. Investments instead of profits can also generate losses as they can lose value in the future. For example, you invest in a company and that company goes bankrupt. One can invest in these different types of investments such as bonds, stocks, mutual funds, exchange-traded funds, index funds, and options. This article aims to provide an overview of Equity vs Fixed Income. (more…)
Debt Covenant

Debt Covenant

Debt Covenant

The restrictions imposed by the lenders on the borrowers are known as debt covenant. It is a formal agreement or promises made between parties like creditors, vendors, suppliers, shareholders, investors, and a company that announces the limits for financial ratios which a debtor must refrain from breaching. Debt covenants are the restrictions that a borrower agrees to which are set by the lending institutions. (more…)
Asset-Backed Securities (ABS)

Asset-Backed Securities (ABS)

Asset-Backed Securities (ABS)

A security whose income payments and hence values are derived from and backed by a specified pool of underlying assets are known as Asset-Backed Securities (ABS). An ABS is an investment security consisting of a bond or note that is collateralized by a pool of assets, such as loans, leases, credit card debt, royalties, or receivables. ABS is a pool of loans that are packed and sold to investors as securities through a process known as securitization. This pool is a group of illiquid and small assets that cannot be sold individually. (more…)
Eurozone Debt Crisis

Eurozone Debt Crisis

Eurozone Debt Crisis

Eurozone Debt Crises is a multi-year debt crisis that has been happening in the European Union since the end of 2009. It is also known as the Eurozone crisis or European Sovereign Debt Crisis. The crisis erupted in the wake of the Great Recession after 2009 due to government structural deficits and increasing debt levels. In simple terms, it defines the struggle of Eurozone Countries to pay off the debts that accumulated over the decades. (more…)
Structured Investment Vehicle

Structured Investment Vehicle

Structured Investment Vehicle

A structured investment vehicle (SIV) is a type of special-purpose vehicle that purchases long-term bonds and other fixed-income securities and pays for them with short- to medium-term instruments like commercial paper. Citibank founded the first SIV, Alpha Finance Corporation, in 1988, and since then, numerous SIVs have been set up by specialist fund managers and banks.

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Enterprise Value

What is Enterprise Value?

What is Enterprise Value?

Enterprise Value (EV) is the measure of a company’s total value which includes both equity and debt capital and uses current market valuation for calculation. Another way for calculating the company value is by Book Value and market capitalization but in Book Value the Valuation Of the Company is calculated on the basis of the balance sheet of the company’s financial statements which may differ from the market value, while in Market Capitalization the valuation of the company is calculated by multiplying the number of equity share that is outstanding by the price of the stock. Thus, current market value and debt are not included in both of these methods respectively. Therefore, Enterprise Value is the method to consider the correct and accurate value of the company. (more…)
Capital structure

Capital structure

Capital structure

What is Capital Structure? Capital structure is basically a combination of debt and equity which is used by the company to finance its operations and overall growth. Debt is loans or bond issues. Short as well as long debts are considered a part of capital structure. Equity is preferred stock, retained earnings, or common stocks. A firm’s capital structure is expressed as a Debt-to-Equity or even Debt-to-Capital ratio. (more…)
Asset Allocation Fund

Asset Allocation Fund

Asset Allocation Fund

An investment strategy that balances the risk and rewards of an individual’s portfolio by apportioning it to other asset classes by taking into consideration individual goals, risk appetite, and investment horizon is referred to as asset allocation.  The fund that provides investors with a diversified portfolio of investments across various asset classes is called an asset allocation fund. The three main asset classes are equity, fixed income, and cash equivalents. (more…)
Equity Linked Notes

Equity Linked Notes

What are Equity Linked Notes?

Equity-linked notes (ELNs) are a type of debt instrument which are similar to fixed income security but the risk involved in this instrument depends on the market movement of particular stock or security an individual invests. The equity-linked note is basically a short-term instrument trade for 1 to 4 months in which investors are allowed to purchase their selected security at a discount price from the market price which results into a high return to an investor. Similarly, there is another term called Reversed Equity Linked Notes (RELNs) under this instrument an investor has an option to sell their selected security at a higher price than the price prevailing in the market. In short Equity, Link Notes are the instrument which helps an investor to get a high return from various type of security but the amount of risk involved in of the security will highly depend on the market movement (more…)
Probability of Default

Probability of Default

Probability of Default

The probability when a borrower or debtor defaults on loan repayments, is termed as the Probability of Default (PD). In financial markets, the asset’s probability of default is the probability that the asset yields no return to its holder over its lifetime and the asset price touches zero. This is used by investors to calculate the expected loss from an investment. (more…)