Mon, Sep 1, 2014, 5:11 PM EDT - U.S. Markets closed for Labor Day

Recent

% | $
Quotes you view appear here for quick access.
click here

Investing 101 Archive

  • For this installment of Investing 101, we'll take you through the process of how and why companies go public and offer stock to investors in an initial public offering, or IPO.

    There are currently about 15,000 public companies in the U.S. and in each and every instance, the IPO-journey begins once a business announces that it wants to raise money by selling some, or all of itself, to outside investors.

    A timely example is Twitter (TWTR), where the founders and early backers are selling about 10% of the business they've built on the New York Stock Exchange.

    No matter what stage of life - or profitability - an IPO'ing company is in, they all must publish a prospectus which details its basic business and financial information, as well as the expected price range that the shares will be sold at, the ticker symbol and exchange where the newly minted stock will trade.

    Related: Success of Twitter’s Business Model Questioned Ahead of IPO

    Pricing an IPO is really more art than science. A company like Twitter obviously wants to get the highest price possible price for its stock, thereby returning as much money as possible to its investors. As the middleman between the company and new shareholders, it is the job of an investment bank to gauge demand and sentiment and then determine what the marketplace is willing to pay.

    Once all the shares have been spoken for and the deal gets priced, it is time for the stock to actually begin trading in the open market. Like all goods and service, the share price will fluctuate depending on the prevailing state of supply and demand, or in the case of IPOs, the number buyers and sellers.

    Read More »from A Peek Behind the Curtain of IPOs Like Twitter’s
  • The Treasury department is warning that unless Congress raises the debt ceiling by October 17th the U.S. will run out of money. Simply put America won’t be able to pay its bills.

    Under this worst case scenario Washington would be faced with decisions like whether to stop paying members of the armed forces, put Social Security checks on hold, or delay funding to local schools.

    The U.S. might even be forced to renege on interest payments owed to our foreign debt holders. Defaulting on those obligations would shake financial markets to a degree not seen since the Great Depression.

    Members of the Republican party claim the Democrats are overstating the risk of default. Conservatives argue that the U.S. has more than enough to pay its bills well beyond the October 17th deadline. From this perspective raising the debt ceiling just enables the government to continue to increase spending with no accountability.

    Read More »from Debt Deadline Approaches: Here’s What Would Happen If U.S. Defaults
  • Inside Earnings: The Only Numbers That Matter

    Another earnings season is upon us. It's arguably the best insight into the financial health of Corporate America, but it can also be overwhelming due to the volume of data released. For this installment of Investing 101, we take a closer look at quarterly earnings reports, explaining the key terms and numbers that matter.

    The Top Line
    A company's total sales or revenue results is called their "top line" figure. This is where all the calculating begins. It's the number from which various costs and expenses of running a business are deducted. Sales growth is the primary measurement for most companies and is normally computed as the percentage change from the same period a year ago.

    The Bottom Line
    There are two primary ways of calculating how much money, or profit, a business made. The first is net income, expressed in dollars. The second is earnings per share (or EPS). This number is calculated by dividing the profit by the number of shares outstanding.EPS is also the main number computed by analysts who make estimates ahead of earnings releases. The average of all of these is known as "the consensus estimate" and is the number a company is expected to hit. It is important to know that businesses aren't always profitable and therefore income and EPS can be positive or negative numbers.

    Ex-Items
    Because of the innate complexity involved in running a large business, many companies choose to exclude certain items from the calculations in hopes of painting a better picture as to how the underlying business is actually doing.

    Read More »from Inside Earnings: The Only Numbers That Matter

Pagination

(56 Stories)

ABOUT INVESTING 101

Breakout’s Investing 101 helps you gain insight on money management and trading. Whether you’re managing your own retirement account, just beginning, or an advanced investor in need of a good refresher, Investing 101 will help you learn, grow, and keep you informed of the basic steps to effectively manage your money. Expect investing tips that focus on trading strategies, asset allocation, and portfolio management.





Investing 101

Subscribe and RSS

[X]

How to subscribe

Roll over each section to subscribe using Add to My Yahoo or RSS Feed feeds.

Yahoo News offers dozens of RSS feeds you can read in My Yahoo or using third-party RSS news reader software. Click here to find out more about RSS and how you can use it with Yahoo News.

DISCLAIMER

Merrill Lynch is not responsible for any content on this site.