09 Nov 2015
Dividend Policy

by veristrat

An investor cannot evaluate any investment, whether it’s a stock, bond, rental property, collectible or option without a return. In case of stock, dividend is a form of return to the stockholders of the company. Dividend is one of the important ways with which companies communicate its financial position and the shareholder value too. In this article, we’ll cover the types of dividends policy and factors affecting them.

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03 Nov 2015
Quantitative Easing – An Insight

by veristrat

Quantitative Easing can be defined as a type of unconventional monetary policy whereby the central bank controls money supply within the economy through purchase and sale of financial assets from commercial banks and various other financial institutions. It intends to stimulate economic growth at the time of recession and stabilize high inflation periods when the conventional models does not seem effective.

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28 Oct 2015
Secondary Buyouts : How They Create Value

by veristrat

Private Equity firms generally deploy a number of strategies to maximize the value creation of their investments. Profitability of any investment depends upon realization of a successful exit strategy. Traditionally, private equity firms resort to three exit options namely, a Corporate Acquisition, IPO and Secondary Buyouts. Earlier IPO’s or corporate acquisitions were considered as successful exits as these tend to maximize their returns, however, of lately secondary buyouts have gained importance as a preferred exit route.

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20 Oct 2015
IPO Insights & Listing across Stock Exchanges

by veristrat

The Initial Public offering (IPO) is a mechanism by which company offers to sell its shares to public in order to raise funds to finance their future growth and expand their business activity. Doing an IPO is referred to as “going public”, as it allows the company to get listed on any favorable exchange and raise capital from public. Going public ensures that companies fulfil all the regulatory and compliance requirements of the exchange and a successful IPO will provide a company its true valuation, good public image and low cost of borrowing.

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15 Oct 2015
Inflation and Investments

by veristrat

Investment decisions are made after lot of deliberation and considering the micro and macro-economic factors that affect them. Some 50 years ago, with a $10 bill you could buy a lot of things, the value of the $10 bill today and in 1965 is completely different. This phenomenon is known as inflation, and is one of the main factors to be considered when making investments.
What Is Inflation?
Inflation is a sustainable increase in the overall price rise; it is based on the economic concept of the time value of money. That concept states that over time, money loses value. Said another way, over time, prices rise.

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30 Sep 2015
HEDGING STRATEGIES, TECHNIQUES – AN INSIGHT

by veristrat

Hedging is any strategy designed to offset or reduce the risk of price fluctuations for an asset or investment. The market supply-and-demand dynamics creates unprecedented volatility in the asset prices, thus exposing investors to the downside risk. In an attempt to manage this volatility many investors use hedging as a strategy. Portfolio managers, investors and corporations use hedging strategies to limit risk and curtail potential losses, but with reduced risk comes reduced returns. In designing hedging strategies, investors can choose from a variety of tools, including stocks, exchange-traded funds, insurance and various derivative products.
Employing an effective hedging strategy does not mean eliminating the risk completely, but rather it tries to differentiate acceptable and unacceptable risks and transform the risk that is unacceptable. However, determining the risk that the company is willing to bear and one that needs to be transformed is a challenge in itself. Main purpose of a hedging strategy should be to achieve an optimal risk profile for the company that ultimately creates a balance between the benefits and costs of hedging.

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16 Sep 2015
DELISTING: MOTIVATIONS BEHIND PRIVATISING COMPANIES

by veristrat

Entrepreneur’s generally dream of scaling up their ventures and aims towards successful listing of their entities. However, the world of private and public companies is entirely different and the transition from one to another is a cumbersome process. An IPO helps a private company “to go public” by issuing shares, hence IPO’s have become the most preferred route towards successful exit by various early stage investors.
However, sometime companies are motivated to transition from public to private, known as “Delisting”. It is a process by which securities are permanently removed from the stock exchanges and hence are no longer traded. Delisting can be classified into two types:-
Compulsory – This is a penalising measure whereby securities are permanently removed when they are not able to comply with the requirements set out in the listing agreement within the prescribed time frames.
Voluntary – In this the listed entity decides on its own to remove their securities permanently from stock exchange.
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08 Sep 2015
Valuation Allocation Methods

by veristrat

If the subject company’s capital structure is highly leveraged or consists of security classes(preferred & common) more complex than plain-vanilla equity and debt, then the valuation professional must apportion Enterprise Value to each security class based on its rights and preferences. In this article we discuss various equity allocation approaches and outline their strengths and weaknesses as discussed below.
Current Value Method
Current Value method is also referred to as “waterfall” and it is the most straight-forward method to allocate value and does not involve any complexity. The enterprise value determined as of the valuation date is allocated to different classes of security based upon their rights and preferences. There are two circumstances when CVM can be applied:

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04 Sep 2015
The Hunt for Value

by veristrat

When we talk about measure of a company’s performance, one metric that rarely comes to mind is Economic Value Added (EVA). EVA attempts to capture true economic profit / value added to the company.  Economic profit is not a wealth metric, it is a performance metric.
A performance metric refers to a measure which can be controlled by the company, such as earnings or return on capital. A wealth metric, on the other hand, is a measure of value that depends on the stock market’s collective and forward-looking view such as market capitalization. Now, although these two types of metrics are distinct, they are related.
Economic profit when broken into part is nothing but the Invested Capital and Present value of future economic profits. EVA can be measures by subtracting the cost of capital from the Net Operating Profit after Tax (NOPAT). What separated EVA from other performance metrics like EBITDA, EPS etc. is that it takes into account all the cost of running the business.
Capture

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11 Aug 2015
PRIVATE INVESTMENT IN PUBLIC EQUITY (PIPE)

by veristrat

Capital is one of the key components which contributes towards successful operations of a company and helps them fuel their growth plans thereby capital raising process assumes a significant place in business operations. However, generally small and mid-sized public companies face significant impediments while raising capital as some of the players do not possess the same level of access to capital markets as compared to their bigger counter parts. Hence, a popular financing technique “PIPE” – Private Investment in Public Equity comes to their rescue.
pipe

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