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Financial Services
Financial services
Financial services
are the economic services provided by the finance industry, which encompasses a broad range of businesses that manage money, including credit unions, banks, credit-card companies, insurance companies, accountancy companies, consumer-finance companies, stock brokerages, investment funds, individual managers and some government-sponsored enterprises.[1]
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Public Finance
Public finance
Public finance
is the study of the role of the government in the economy.[1] It is the branch of economics which assesses the government revenue and government expenditure of the public authorities and the adjustment of one or the other to achieve desirable effects and avoid undesirable ones.[2] The purview of public finance is considered[by whom?] to be threefold: governmental effects on (1) efficient allocation of resources, (2) distribution of income, and (3) macroeconomic stabilization.Contents1 Ov
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Leveraged Buyout
A leveraged buyout (LBO) is a financial transaction in which a company is purchased with a combination of equity and debt, such that the company's cash flow is the collateral used to secure and repay the borrowed money. The use of debt, which has a lower cost of capital than equity, serves to reduce the overall cost of financing the acquisition. The cost of debt is lower because interest payments reduce corporate income tax liability, whereas dividend payments do not.[1] This reduced cost of financing allows greater gains to accrue to the equity, and, as a result, the debt serves as a lever to increase the returns to the equity.[2] The term LBO is usually employed when a financial sponsor acquires a company. However, many corporate transactions are partially funded by bank debt, thus effectively also representing an LBO
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Security (finance)
A security is a tradable financial asset. The term commonly refers to any form of financial instrument, but its legal definition varies by jurisdiction. In some jurisdictions the term specifically excludes financial instruments other than equities and fixed income instruments. In some jurisdictions it includes some instruments that are close to equities and fixed income, e.g., equity warrants
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Stock
The stock (also capital stock) of a corporation is constituted of the equity stock of its owners. A single share of the stock represents fractional ownership of the corporation in proportion to the total number of shares. In liquidation, the stock represents the residual assets of the company that would be due to stockholders after discharge of all senior claims such as secured and unsecured debt. Stockholders' equity cannot be withdrawn from the company in a way that is intended to be detrimental to the company's creditors.[1]Contents1 Shares 2 Types2.1 Rule 144 stock3 Stock
Stock
derivatives 4 History 5 Shareholder 6 Application6.1 Shareholder rights 6.2 Means of financing7 Trading7.1 Buying 7.2 Selling 7.3 Stock
Stock
price fluctuations 7.4 Share price determination 7.5 Arbitrage trading8 See also 9 References 10 External linksShares[edit] The shares together form stock
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Corporate Finance
Corporate finance
Corporate finance
is the area of finance dealing with the sources of funding and the capital structure of corporations, the actions that managers take to increase the value of the firm to the shareholders, and the tools and analysis used to allocate financial resources. The primary goal of corporate finance is to maximize or increase shareholder value.[1] Although it is in principle different from managerial finance which studies the financial management of all firms, rather than corporations alone, the main concepts in the study of corporate finance are applicable to the financial problems of all kinds of firms. Correspondingly, corporate finance comprises two main sub-disciplines.[citation needed] Capital budgeting
Capital budgeting
is concerned with the setting of criteria about which value-adding projects should receive investment funding, and whether to finance that investment with equity or debt capital
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Accounting
Accounting
Accounting
or accountancy is the measurement, processing, and communication of financial information about economic entities[1][2] such as businesses and corporations. The modern field was established by the Italian mathematician Luca Pacioli
Luca Pacioli
in 1494.[3] Accounting, which has been called the "language of business",[4] measures the results of an organization's economic activities and conveys this information to a variety of users, including investors, creditors, management, and regulators.[5] Practitioners of accounting are known as accountants
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Audit
An audit is a systematic and independent examination of books, accounts, statutory records, documents and vouchers of an organization to ascertain how far the financial statements as well as non-financial disclosures present a true and fair view of the concern. It also attempts to ensure that the books of accounts are properly maintained by the concern as required by law. Auditing has become such a ubiquitous phenomenon in the corporate and the public sector that academics started identifying an " Audit
Audit
Society".[1] The auditor perceives and recognises the propositions before them for examination, obtains evidence, evaluates the same and formulates an opinion on the basis of his judgement which is communicated through their audit report.[2] Any subject matter may be audited
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Capital Budgeting
Capital budgeting, and investment appraisal, is the planning process used to determine whether an organization's long term investments such as new machinery, replacement of machinery, new plants, new products, and research development projects are worth the funding of cash through the firm's capitalization structure (debt, equity or retained earnings). It is the process of allocating resources for major capital, or investment, expenditures.[1] One of the primary goals of capital budgeting investments is to increase the value of the firm to the shareholders. Many formal methods are used in capital budgeting, including the techniques such asAccounting rate of return Average accounting return Payback period Net present value Profitability index Internal rate of return Modified internal rate of return Equivalent annual cost Real options valuationThese methods use the incremental cash flows from each potential investment, or project
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Credit Rating Agency
A credit rating agency (CRA, also called a ratings service) is a company that assigns credit ratings, which rate a debtor's ability to pay back debt by making timely interest payments and the likelihood of default. An agency may rate the creditworthiness of issuers of debt obligations, of debt instruments,[1] and in some cases, of the servicers of the underlying debt,[2] but not of individual consumers. The debt instruments rated by CRAs include government bonds, corporate bonds, CDs, municipal bonds, preferred stock, and collateralized securities, such as mortgage-backed securities and collateralized debt obligations.[3] The issuers of the obligations or securities may be companies, special purpose entities, state or local governments, non-profit organizations, or sovereign nations.[3] A credit rating facilitates the trading of securities on a secondary market. It affects the interest rate that a security pays out, with higher ratings leading to lower interest rates
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Financial Risk Management
Financial risk
Financial risk
management is the practice of economic value in a firm by using financial instruments to manage exposure to risk: operational risk, credit risk and market risk, foreign exchange risk, shape risk, volatility risk, liquidity risk, inflation risk, business risk, legal risk, reputational risk, sector risk etc. Similar to general risk management, financial risk management requires identifying its sources, measuring it, and plans to address them.[1] Financial risk
Financial risk
management can be qualitative and quantitative
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Financial Statement
[1][clarification needed] Historical financial statements Financial statements
Financial statements
(or financial reports) are formal records of the financial activities and position of a business, person, or other entity. Relevant financial information is presented in a structured manner and in a form which is easy to understand. They typically include four basic financial statements accompanied by a management discussion and analysis:[2]A balance sheet or statement of financial position, reports on a company's assets, liabilities, and owners equity at a given point in time. An income statement—or profit and loss report (P&L report), or statement of comprehensive income, or statement of revenue & expense—reports on a company's income, expenses, and profits over a stated period of time. A profit and loss statement provides information on the operation of the enterprise
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Mergers And Acquisitions
Mergers and acquisitions
Mergers and acquisitions
(M&A) are transactions in which the ownership of companies, other business organizations, or their operating units are transferred or consolidated with other entities. As an aspect of strategic management, M&A can allow enterprises to grow or downsize, and change the nature of their business or competitive position. From a legal point of view, a merger is a legal consolidation of two entities into one, whereas an acquisition occurs when one entity takes ownership of another entity's stock, equity interests or assets. From a commercial and economic point of view, both types of transactions generally result in the consolidation of assets and liabilities under one entity, and the distinction between a "merger" and an "acquisition" is less clear
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Exotic Option
In finance, an exotic option is an option which has features making it more complex than commonly traded vanilla options. Like the more general exotic derivatives they may have several triggers relating to determination of payoff. An exotic option may also include non-standard underlying instrument, developed for a particular client or for a particular market
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Structured Finance
Structured finance
Structured finance
is a sector of finance that was created to help transfer risk using complex legal and corporate entities
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Venture Capital
Venture capital
Venture capital
(VC) is a type of private equity,[1] a form of financing that is provided by firms or funds to small, early-stage, emerging firms that are deemed to have high growth potential, or which have demonstrated high growth (in terms of number of employees, annual revenue, or both). Venture capital
Venture capital
firms or funds invest in these early-stage companies in exchange for equity, or an ownership stake, in the companies they invest in. Venture capitalists take on the risk of financing risky start-ups in the hopes that some of the firms they support will become successful. The start-ups are usually based on an innovative technology or business model and they are usually from the high technology industries, such as information technology (IT), clean technology or biotechnology. The typical venture capital investment occurs after an initial "seed funding" round
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