Vertical analysis Vertical analysis is the proportional analysis of a financial statement, where each line item on a financial statement lists as a percentage of another item. It is also useful for trend analysis, to see relative changes in accounts over time, such as on a comparative basis over five years. For example, if the…
Horizontal Analysis Horizontal analysis is an approach used to analyze financial statements by comparing specific financial information for a certain accounting period with information from other periods. Analysts use such an approach to analyze historical trends. Horizontal analysis can also be compared with a vertical one. Whereas vertical analysis analyzes a particular financial statement using…
Fund Flow Fund flow, also referred to as asset flows or just “flows,” measures the net movement of cash into and out of investment vehicles like mutual funds and exchange-traded funds. They do not reflect the performance of the investment, only how investors move their money. Outflows reflect share redemptions, or when investors take their…
Mixed cost A mixed cost is a cost that contains both a fixed cost component and a variable cost component. It is important to understand the mix of these elements of a cost so that one can predict how costs will change with different levels of activity. Typically, a portion of a mixed cost may…
Gross domestic product (GDP) Gross domestic product (GDP), the total market value of the goods and services produced by a country’s economy during a specified period. It includes all final goods and services—that is, those that produce from the economic agents in that country regardless of their ownership. Moreover, it is used throughout the world…
Economic Growth Rate Economic growth Rate describes an increase in the quantity and quality of the economic goods and services that a society produces and consumes. From the long-term perspective of social history, we know that economic prosperity and lasting economic growth is very recent achievement for humanity. In this entry, we will also look…
Effective Gross Income What is Effective Gross Income (EGI)? There’s big money-making potential with an investment rental property. However, determining how much you’ll actually make isn’t as simple as multiplying the monthly rent by 12. To understand your true cash flow, you’ll need to keep an eye on your effective gross income (EGI) about your net…
Diluted EPS The Diluted EPS formula is equal to Net Income less preferred dividends, divided by the total number of diluted shares outstanding (basic shares outstanding plus the exercise of in-the-money options, warrants, and other dilutive securities). Also, the concept of diluted shares outstanding can be equated to a pie, of sorts. If more slices are…
Margin Call To understand a forex margin call, it is essential to know about the interrelated concepts of margin and leverage. Margin and leverage are two sides of the same coin. Margin is the minimum amount of money required to place a leveraged trade. Leverage provides traders with greater exposure to markets without having to fund the…
Currency Revaluation What is Currency Revaluation? In a fixed exchange rate regime, only a decision by a country’s government, such as its central bank, can alter the official value of the currency. Developing economies are more likely to use a fixed-rate system to limit speculation and provide a stable system. A floating rate is the opposite of a…