Log-Normal Distribution Definition Uses and How To Calculate

What is Log-Normal Distribution? Log-normal distribution is a probability distribution that is commonly used in statistics and finance to model variables that are positively skewed and have a wide range of values. It is a continuous probability distribution of a random variable whose logarithm is normally distributed. Definition and Explanation …

K-Ratio: The Meaning, Formula And Calculation With An Example

What is K-Ratio? The K-Ratio is a financial metric that is used to evaluate the risk-adjusted returns of an investment. It measures the consistency of returns and takes into account the volatility of the investment. The K-Ratio is often used by investors and portfolio managers to assess the performance of …

Kelly Criterion: Definition, Formula, History, Goals

Kelly Criterion: Definition, Formula, History, Goals The Kelly Criterion is a mathematical formula that helps investors and gamblers determine the optimal amount of money to allocate to a particular investment or bet. It was developed by John L. Kelly Jr., a researcher at Bell Labs, in the 1950s. The goal …

Hypothesis Testing: Definition and 4 Steps for Testing with Example

Hypothesis Testing: Definition and 4 Steps for Testing with Example Hypothesis testing is a statistical method used to make inferences or draw conclusions about a population based on a sample. It involves formulating a hypothesis, collecting data, and analyzing the results to determine if the data supports or rejects the …

Hidden Value: Understanding, Mechanism, And Illustration

Mechanism of the Hidden Value At its core, the mechanism of the hidden value revolves around the idea of uncovering and utilizing untapped potential or resources. It involves identifying and leveraging assets, skills, or opportunities that may not be immediately apparent or recognized. One key aspect of the mechanism is …

Headline Earnings: Understanding, Analysis, Controversy

Analyzing the Controversy Headline earnings have been a subject of controversy in the financial world. While they provide a quick snapshot of a company’s performance, there are concerns about their accuracy and transparency. It is important for investors and analysts to understand the controversy surrounding headline earnings in order to …

Harvard MBA Indicator: A Key Metric for Economic Forecasting

What is the Harvard MBA Indicator? The Harvard MBA Indicator is a powerful tool used for economic forecasting. It is a metric that measures the percentage of Harvard Business School graduates who accept job offers by a certain date. This indicator is considered a key metric because it provides valuable …

Hamada Equation: Definition, Formula, and Example

Hamada Equation: Definition, Formula, and Example The Hamada Equation is a financial tool used to calculate the financial leverage of a company. It helps investors and analysts understand the impact of debt on a company’s risk and return. By using the Hamada Equation, investors can determine the optimal level of …

Gross Sales Calculation and Examples

Gross Sales Calculation Gross sales calculation is a vital aspect of any business, as it helps determine the total revenue generated from the sale of goods or services before deducting any expenses. It provides a clear picture of the financial performance of a company and is often used as a …

Gross Merchandise Value GMV Definition Formula Pros and Cons and Example

Gross Merchandise Value (GMV): Definition, Formula, Pros and Cons, and Example Gross Merchandise Value (GMV) is a metric used in e-commerce to measure the total value of goods sold through a platform or marketplace. It provides insights into the overall performance and growth of the business by considering the total …

Graham Number Definition Formula Example and Limitations

Graham Number: Definition, Formula, Example, and Limitations The Graham Number is a financial metric used by investors to evaluate the fair value of a stock. It was developed by the legendary investor Benjamin Graham, who is considered the father of value investing. The Graham Number takes into account both the …

Future Value: Definition, Formula, Calculation, Example, and Applications

Future Value: Definition, Formula, Calculation, Example, and Applications The future value is a financial concept that calculates the value of an investment or cash flow at a specified date in the future. It is based on the principle of compounding, which takes into account the interest earned on the initial …

Funds Transfer Pricing (FTP) Calculation and Explanation

Funds Transfer Pricing (FTP) Calculation Funds Transfer Pricing (FTP) is a financial management technique used by banks and other financial institutions to allocate the cost of funds to different business units and products. It helps in determining the profitability of different activities and ensures that each business unit is accountable …

Free Cash Flow Yield Definition Formula and How to Calculate

Free Cash Flow Yield: Definition, Formula, and Calculation In the world of finance, free cash flow yield is an important metric that investors use to evaluate the profitability and financial health of a company. It provides insight into how much cash a company generates relative to its market value. By …

Financial Plans: Understanding the Meaning, Purpose, and Key Components

Meaning of Financial Plans A financial plan refers to a comprehensive document that outlines an individual’s or an organization’s financial goals and the strategies to achieve them. It is a roadmap that helps in managing finances effectively and making informed financial decisions. Importance of Financial Plans Components of Financial Plans …

Financial Performance: Definition How it Works and Example

What is Financial Performance? Financial performance refers to the measure of a company’s ability to generate profits and manage its financial resources effectively. It provides valuable insights into the overall health and success of a business. By analyzing financial performance, investors, stakeholders, and management can assess the company’s profitability, liquidity, …

Fair Value Definition, Formula, and Example – All You Need to Know

Fair Value Definition, Formula, and Example Fair value is a term used in finance to determine the worth of an asset or liability. It is the price that would be agreed upon by willing and knowledgeable parties in an open and unrestricted market. The formula for calculating fair value depends …

Factor Investing: A Guide To And Implementing

What is Factor Investing? Factor investing is a popular investment strategy that involves selecting securities based on specific characteristics or factors that are expected to drive their performance. These factors can include variables such as company size, valuation, profitability, and momentum. Factor investing is based on the idea that certain …

Expanded Accounting Equation: Definition, Formula, How It Works

Expanded Accounting Equation: Definition The expanded accounting equation is a fundamental concept in accounting that helps businesses keep track of their financial transactions and understand their financial position. It expands on the basic accounting equation, which states that assets equal liabilities plus equity. Assets = Liabilities + Equity This equation …

Event Study: Definition, Methods, Uses in Investing and Economics

Event Study: Definition and Importance An event study is a research method used in the fields of investing and economics to analyze the impact of specific events on financial markets or economic variables. It involves studying the reaction of stock prices, trading volumes, or other relevant indicators before, during, and …

Earnings: Company Earnings And How To Measure Them

Section 3: Importance of Measuring Company Earnings Here are some key reasons why measuring company earnings is important: 1. Assessing profitability: Measuring earnings allows investors to assess a company’s profitability. By comparing earnings over time or against industry benchmarks, investors can determine if a company is generating consistent profits and …

Dividend Discount Model Formula: Variations, Examples, and Shortcomings

Variations of the Dividend Discount Model The Dividend Discount Model (DDM) is a valuation method used to determine the intrinsic value of a stock based on the present value of its expected future dividends. While the basic formula for the DDM is relatively straightforward, there are several variations and modifications …

Discounts For Lack Of Marketability (DLOM) and Their Importance in Valuation

Importance of DLOM in Valuation Discounts for Lack of Marketability (DLOM) play a crucial role in the valuation of assets and businesses. DLOM represents the reduction in the value of an asset or business interest due to its lack of marketability, which refers to the ability to quickly and easily …

Different Methods for Evaluating Stocks: A Comprehensive Stock Analysis Guide

Different Methods for Evaluating Stocks Fundamental Analysis One of the most common methods for evaluating stocks is through fundamental analysis. This approach involves analyzing a company’s financial statements, such as its balance sheet, income statement, and cash flow statement, to assess its overall financial health and performance. By examining key …

Delphi Method Forecasting: Definition and Usage

Delphi Method Forecasting: Definition The Delphi Method is a forecasting technique that is used to gather expert opinions and make predictions about future events. It is a structured and iterative process that involves multiple rounds of surveys or questionnaires, where experts are asked to provide their opinions and estimates on …

Degree of Financial Leverage Definition and Formula

Degree of Financial Leverage Definition The degree of financial leverage (DFL) is a financial ratio that measures the sensitivity of a company’s earnings per share (EPS) to changes in its operating income. It indicates the impact of changes in operating income on the company’s profitability and risk. The degree of …

Cost of Revenue Calculation and Example

Calculating Cost of Revenue One way to calculate the cost of revenue is by using the following formula: Cost of Revenue Formula By subtracting the ending inventory from the sum of the beginning inventory and purchases, you can determine the cost of revenue for the specific period. Let’s consider an …

Conditional Value at Risk CVaR Definition Uses Formula

Conditional Value at Risk (CVaR): Definition, Uses, Formula Conditional Value at Risk (CVaR) is a risk measurement technique that provides a more comprehensive assessment of the potential losses in an investment or portfolio. It goes beyond traditional risk measures such as standard deviation and Value at Risk (VaR) by considering …

Conditional Probability Formula and Real-Life Examples

What is Conditional Probability? Conditional probability is a concept in probability theory that measures the likelihood of an event occurring given that another event has already occurred. It is a way to calculate the probability of an event based on additional information or conditions. To understand conditional probability, it is …