A corporation is a legal entity established by individuals or shareholders in order to generate profits. In other words, it’s an impersonal entity that possesses an existence that is separate from its owners. A corporation can own assets, borrow money, enter into contracts, hire employees, and much more. It is managed by a board of directors who are elected by shareholders. The shareholders of a corporation own a percentage of the company based on the number of shares they hold. When it comes to decision making, shareholders vote based on the number of shares they own. The basic structure of a corporation consists of shareholders, board of directors, officers, and employees. A corporation has limited liability, meaning the owners are protected against debts and lawsuits filed against the company. For example, if a corporation is sued for defaulting on a loan, the shareholders are not personally responsible for the debt. Advantages of Corporation
A corporation is a separate legal entity, meaning the owners are protected from the debts and liabilities of the corporation. If the company goes bankrupt, the creditors cannot pursue the owners’ personal assets. In effect, the owners of a corporation can conduct business without risking their personal assets.
A corporation can raise substantial amounts through the sale of stock. This access to capital is a luxury that most entities such as sole proprietorship or partnership do not have.
The existence of a corporation is not dependent upon its owners. That means it will continue to exist beyond the deaths of the owners, directors, managers, and officers. A corporation can only come to an end when the board of directors and owners decide to end the corporation.
The ownership of a corporation is easily transferable through the sale of shares. In the case of a private entity, it is comparatively difficult to transfer ownership.
Although some corporations are subject to double taxation, the owners can receive tax-free benefits such as deductions for retirement plans, health insurance premiums, savings on self-employment taxes, and more. Disadvantages of A Corporation
The process of incorporating a business is often a long one due to the extensive paperwork involved. The owners have to acquire many permits from different regulatory authorities.
Corporations pay taxes at the corporate level and the individual level. In other words, the corporation’s business income gets taxed and the dividends paid out to shareholders get taxed as well.
Corporations are legally required to provide shareholders with an annual report showing sales volume, profits, debts, and other information. These reports are available to the general public, meaning the shareholders lose the confidentiality of their business.
It’s possible for the board of directors and the executives running the corporation to have a conflict of interest in the business. They may make certain decisions in which they have an interest and end up impacting the profitability of the business. ConclusionThe choice of business structure to use depends on your type of business and how you want it to operate. Consider these advantages and disadvantages carefully before deciding to incorporate your business. Article Source Here: Advantages and Disadvantages of Corporation
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The stock markets are unlikely to continue their bull run of the past year in 2022 with investors eying other opportunities as interest rates rise, according to Wharton finance professor Itay Goldstein. Federal Reserve officials last week projected at least three quarter-percentage-point rate increases next year, signaling their concern over rising inflation. The Fed also stated that it would reduce its asset purchases next year as part of a tighter monetary policy... Goldstein said the steep rise in stock prices this year pointed to a dearth of investment opportunities. “People don’t have many places to put their money,” he noted. “The interest rates that they can get on risk-free investments are low, so they continue to look for investment opportunities and they put their money in the stock market. They put their money in real estate. They start looking for all sorts of other investment opportunities [such as] cryptocurrencies and NFTs (non-fungible tokens, which are digital assets that represent real-world assets). Across the board, prices are high, and people are just looking for more and more investment opportunities.” Read more and listen to the podcast. Goldstein said concerns over inflation will continue to fuel volatility in the stock markets in the year ahead. “Some of the uncertainties about inflation are playing into what we see in the market,” he said. “We’re going to continue to see a bumpy ride, but with a pretty high level of risk given the high levels of prices overall.” Article Source Here: How Interest Rates Will Affect Stock Markets What is Market CycleIt is not a secret that every financial market including the stock market faces a lot of ups and downs. It can be seen in past years that these ups and downs are coming with frequent regularity, roughly about every 2-3 years. A lot of people might think that this is just another coincidence but some financial experts recognize these phenomena as the cyclical nature of the stock market. These periods or cycles are known as the market cycle. In this article, we will learn more about the various aspects of the stock market cycle. Definition of Market CycleMarket Cycles or Stock Market Cycles is a term that refers to certain patterns and trends that occur in the overall movement of the market. It is said that these patterns and trends repeat themselves over time. During these cycles some stocks or financial assets outperform others, and some become overvalued or undervalued. Some financial assets outperform others because their business models are ideal for the current state of the market. Simply put, the Market Cycle is the period between the high and low points of the market. Types of Market CycleThere are four different types of Market Cycles
Indicators of Market CycleThere are a few indicators that can help you determine where the market is in its cycle.
Analysis of Market CycleThe market cycle can be analyzed to determine where it is in its current phase. When the market goes into the Downtrend phase, it means that it is at its low point after which there will be an increase in prices or stock value. The accumulation phase comes after the downtrend phase when prices are low. During the accumulation phase, there is a lot of buying activity in the market and it can be considered to be stable or almost reaching its peak. The markup phase usually occurs after the accumulation phase. This is where the market starts to become more stable and prices start to increase. Buying and selling activities are starting to rise during this phase. The distribution phase is considered as the peak point of the market cycle where the stock prices reach their peak. Most investors start to sell their assets at this point, and the market becomes unstable. And it leads again to the Downtrend phrase, And the cycle starts again. ConclusionThe market cycle is a recurring pattern of phases that the market goes through. There are four different types of the market cycle, and each type has its own indicators. You can use these indicators to determine where the market is in its current phase. The market can be analyzed to determine which phase it is in and what to expect in the future. Post Source Here: Market Cycle: Definition, Indicators, Stages, Psychology When entering an item into the financial systems, companies must have a supporting document. In most cases, this document will differ based on the type of transaction. Once entered, companies cannot remove the entry. However, they can still reverse the impact through other journal entries. Nonetheless, the transaction will require a supporting document. What is a Memorandum in Accounting?A memorandum in accounting is a source document that includes a short message. This message provides the base for an accounting journal entry. Through a memo, companies can enter a transaction in the accounting system. This transaction ends up on the general ledger. When tracking that transaction, the memorandum helps understand its source. A memorandum is a written note or document. The primary objective of this document is to provide clarity about the financial transaction. Sometimes, it can also serve as a reminder to adjust the accounts. This term may also refer to a memorandum entry in accounting. This entry does not include any amounts. However, it consists of a short message that becomes a part of the general journal and general ledger. What are the types of Memorandum in Accounting?A memorandum in accounting may come in three types. These include debit, credit, and general memos. Usually, the first two are more common and involve an amount. However, the general memorandum is also crucial in the accounting process. A description of each of these types is as below. Debit memorandumA debit memorandum is a source document used to inform customers about a decrease in their balance. However, that applies to banks only. In accounting, it refers to an entry that serves as a notice to customers about their owed amount. Usually, it also includes a source document sent to the customer. Companies adjust the balance in the customer's account through a debit memo. With a debit memo, companies increase the receivable balance from a customer. Usually, they use it to include items missed in an invoice. The primary objective of the debit memo is to adjust a billing error, usually under-billing. For example, a company sends a $200 invoice for $300 worth of goods to a customer. A debit memo will increase that invoice amount by $100. Credit memorandumA credit memorandum also applies to banking. In that case, it notifies a customer of an increase in their checking account balance. However, a credit memorandum in accounting is different. In that case, it serves as an adjustment to an invoice. It is similar to a debit memorandum in that regard. However, it decreases the invoice amount instead of increasing it. A credit memorandum is the opposite of a debit memorandum. When companies overbill a customer, they use this memo to reduce it. It also applies to sales returns where customers return goods. For example, a company sends a $200 invoice to a customer. However, the customer returns those goods later. Therefore, the company will issue a credit memorandum for $200 to the customer. General memorandumA general memorandum differs significantly from the above two types. It is a document used for internal purposes only. In essence, a general memo is used for partial or incomplete transactions. It includes a short message that companies enter into the general ledger. Another name used for it is memorandum entry. ConclusionA memorandum in accounting is a document that includes a short message. This document serves as a source for various transactions. Usually, companies use debit or credit memorandums which adjust customer balances. However, they may also create general memos, which serve as an explanation for transactions. Article Source Here: Memorandum in Accounting A leveraged exchange-traded fund (ETF) is a financial instrument that offers the return of an underlying index multiplied by a given leverage factor. The fund usually uses borrowed money, futures, swaps, and other derivatives to amplify the daily price movements of the underlying index. Investing in these exchange-traded funds involves a high level of risk and may not be suitable for all investors. They can lose all of their money, as we have seen during the recent market selloffs of 2018 and 2020, In February 2018, for example, a sudden and unexpected rise in market volatility resulted in short VIX ETFs to lose more than 90% of their value in a matter of days (some of which were forced to liquidate altogether due to losses incurred). Or take a look at what happened to oil ETFs during the COVID recession. The ProShares Ultra Bloomberg Crude Oil ETF (UCO), which doubles the exposure to crude oil prices, lost 98% of its value from January 2020 to April 2020 and needed to complete a 1:25 reverse split in order to merely stay alive. Even when volatility rises modestly, these leveraged funds can easily fall by 10-20% or more. Another disadvantage of leveraged ETFs is that their return will not match that of the benchmark index with the leverage factor taken into account. In other words, if the underlying index goes up over time, investors will not get the return of the index times the leverage. The reason is that the mathematics of compounding prevents the funds from exactly replicating the underlying index. Despite all of this, asset managers keep issuing more exotic ETFs. Recently, Leverage Shares issued an ETF that is designed to offer 5 times the daily return on the Nasdaq 100 index. Leverage Shares, which could be considered the European version of Direxion, which offers dozens of leveraged and inverse exchange-traded products (among others, of course), brought an unprecedented product to the market this week - the Leverage Shares 5x Long US Tech 100 ETP. As the name suggests, it's designed to offer 5 times the daily return on the Nasdaq 100 index. This product, which is an exchange-traded note and not an exchange-traded fund, will be linked to the Invesco QQQ Trust (QQQ). Read more. So there must be a demand for this kind of financial instrument? Let us know what you think. Originally Published Here: 5x Leveraged Exchange Traded Fund Almost every security trader will rather go for a trading strategy that minimizes risks and increases chances of achieving success. And, the time-weighted average price (TWAP) is one such trade execution strategy. TWAP reduces the impact of large orders on the security market, making it a perfect choice for high-volume traders. Furthermore, calculating the time-weighted average price uses an easy-to-understand formula. And, in this article, we will help you understand the time-weighted average price better, including how to calculate it. What is the Time Weighted Average Price?Time-weighted average price (TWAP) tells you the average price of a security over a predetermined period. TWAP is a relevant tool for effective trading as it offers traders an alternative strategy to executing large orders. Using the TWAP, you can break up a large order into smaller chunks to minimize the impact of large orders on the market. The ultimate goal is to improve the price of security via executing trades evenly over a specified period. For instance, if you want to purchase 10,000 of a company's shares, applying the TWAP strategy, you could break the trade down, purchasing 1,000 shares every 15 mins. The Time-weighted average price is not so different from the Volume -weighted average price (VWAP). While the VWAP considers volume in its calculation, TWAP does not. Normally, VWAP is an ideal order execution algorithm, but not when you foresee unfavorable market price momentum. How to Calculate Time Weighted Average PriceCalculating TWAP does not demand any complex mathematical procedure, you only need to master the formula. You can calculate TWAP by taking the average of the "typical price" - Open, High, Low, and Close price of each bar, and then calculating their averages for ‘n’ number of periods. The formula for calculating TWAP is: TP=(Open+Low+Close+High)/4 TWAP=TP1+TP2+...+TPnn In application, assuming you want TWAP value for 5 periods, then:
However, if you are faced with daily prices with several after-hours movements, you should use the open, high, low, and close when factoring in the typical price. In cases where the open and close are similar, such as intraday prices on liquid stocks, using the open, high, and low is advisable. When you have gotten the TWAP, it is also important to detect whether the security is overvalued or undervalued. To do this you have to compare the order price. An order price that is below TWAP indicates that the security is undervalued, and if above the TWAP, it is an indicator that the security is overvalued. ConclusionThe time-weighted average price plays a major role in trading especially when you are dealing with large orders. By breaking down your order into smaller chunks and executing them within a specific period you could reduce the impact of large orders and improve price. Originally Published Here: Time Weighted Average Price Publication of the Canadian dollar offered rate (CDOR), Canada's primary interest rate benchmark, should end after June 2024, the working group helping to transition Canadian financial markets to risk-free benchmark interest rates said on Thursday. The Canadian Alternative Reference Rate working group (CARR) recommends that Refinitiv Benchmark Services (UK) Limited (RBSL), the administrator of CDOR, cease publication of all of the interest rate benchmark's remaining tenors after June 30, 2024 .... The decision to cease using CDOR ultimately lies solely with RBSL. CARR proposes a two-staged approach to the transition from CDOR. The first stage would run until June 30, 2023, when the working group would expect all new derivative contracts and securities to have transitioned to using CORRA. That date is also when all remaining U.S. dollar Libor tenors are due to cease. The second stage to June 30, 2024, would provide firms with additional time to transition their loan agreements and deal with potential issues.
Post Source Here: Bank of Canada’s working group recommends ending CDOR in mid-2024 For most companies, external audits are mandatory. This process involves independent auditors assessing a company's financial statements. Based on that, they conclude whether those statements include material misstatements. However, companies must also examine their internal processes. This process falls under internal auditing. Within that process, companies may conduct operational audits. What is an Operational Audit?An operational audit is an internal process of evaluating a company's operations. Usually, it includes assessing all the processes involved in performing operating activities. Unlike external audits, operational audits don't consider financial information only. These audits are more thorough compared to other forms of examination. In essence, operational audits involve examining how companies conduct their operations. Operational audits require companies to analyze their procedures, processes, and systems. Usually, these audits do not consider a specific area or department. In most cases, operational audits don't focus on financial issues. Instead, they examine a company's management practices. Companies may use external auditors or an internal team to conduct these audits. The aim of operational audits also differs from other types of audits. With this process, companies seek to identify inefficient processes or operations. Once they do so, they can assess whether those areas need improvement to achieve efficiency. In contrast, external audits examine financial statements and other related information. How does an Operational Audit work?Operational audits involve several steps. The first of these includes establishing whether to use external auditors. In most cases, companies use an internal team to conduct these audits. Sometimes, however, they may not have an internal audit department. Therefore, they will obtain the services of an external audit firm. The primary objective of this process is also to ensure the auditors are independent. The second step in the operational audit process is for auditors to plan it. This process is similar to other audits. However, it focuses on operations and processes. During the planning stage, auditors will also establish their goals and strategies for the audit. These strategies will differ based on the underlying objective of the audit. Once auditors complete the planning stage, they will conduct the audit. This stage involves examining the processes and procedures involved within operations. In most cases, the primary objective of the audit is to identify any weaknesses in those operations. Once they evaluate the processes, they will assess whether any inefficiencies exist. Subsequently, auditors will prepare a report that includes their findings during the operational audit. This process is similar to other audits. However, this report focuses on operations and the inefficiencies within them. Similarly, auditors will also present their recommendations on how the company can improve those areas. The last step will involve performing a follow-up on those recommendations. What are the advantages and disadvantages of an Operational Audit?Operational audits can be highly beneficial for companies. These audits allow a company to assess its operations and identify any inefficiencies. Similarly, it can help build on the effectiveness of processes and procedures. Operational audits also provide companies with an objective opinion. Furthermore, these audits can also identify any risks and opportunities within operations. However, operational audits may also involve some disadvantages. The most crucial of these is the costs involved with these audits. Companies must compare those costs with the benefits obtained from these audits. Similarly, operational audits may require companies to make changes to their operations. They can also be time-consuming and affect productivity. ConclusionAn operational audit is a process auditors use to evaluate a company's operations. Through these audits, companies can identify inefficient activities. Usually, operational audits involve several steps, similar to other audits. However, the primary objective of operational audits differs. These audits also have several advantages and disadvantages, as listed above. Article Source Here: Operational Audit No matter your trading strategy, there are some parameters you must get right to become a profitable trader. Beyond correct analyses and prediction, a good trader must also master good timing, accuracy, and precision. This will help to get trades on time and maximize market movements. However, it usually takes much time and effort to master these trading fundamentals and integrate them into a trading strategy. Unless you're a full-time trader, you might not have the luxury of time to monitor the market all the time to execute trades. This is where automated trading comes in handy. Here, let's consider what automated trading means, the strategies you can use for automated trading, and the different systems that can help you implement automated trading. What is Automated Trading?Automated Trading is a kind of trading where a computer automatically makes trade decisions based on pre-installed algorithms. The algorithms are defined with predefined instructions to execute the trader's strategy. In a nutshell, automated trading enables traders to automatically execute trades using computer software. How Does Automated Trading Work?Every strategy defines certain criteria that must be met under certain rules before a trade is executed. For instance, a trend strategy trader will always wait to confirm that a market movement is a trend before taking a trade. So, the general idea behind automated trading is to program these rules into a computer and set the necessary parameters. Such parameters include the volume of the trade market price, etc. The software algorithm then executes trades with the parameters when the specified conditions are fulfilled. Strategies For Automated TradingAs earlier mentioned, the strength of automated trading systems lies in the strategy it is set up to execute. There are different strategies common to automated trading, and each one executes trades based on the modalities of the programmed strategy. Some of the most common automated trading strategies include:
This strategy often makes use of technical analysis and indicators like moving averages to identify trends based on existing data. Then, it executes trades based on the prediction of whether or not the trend continues.
This strategy seeks to maximize differences in securities prices in different exchanges. The automated trading system detects and purchases an item for a lower price on one exchange and sells for a higher exchange on another. The strength of this strategy is the ability of the system to be fast and accurate and maximize high trade volumes for optimal profit even on little price differences.
People who use this strategy believe that prices must fluctuate but must return to a certain average point after a certain time. So, the automated trading systems try to identify these "limits" and execute trades as soon as prices are off these points, waiting to take profit as price returns. Best Platforms for Automated TradingMany different trading platforms enable automated trading, with each providing both general and unique features for profitable trading. Below are some of the most popular and most effective.
ConclusionIf you have developed a working strategy for your digital trading, automated trading systems can help you implement it. That way, you can minimize emotional instability during trades and make profits from trades without having to monitor them all the time. Article Source Here: Automated Trading: Strategies, Software, Algorithm, Platform Analyzing the intermarket relationships between assets can help us identify trends and predict returns. Traditionally, analysts use commodity, currency, and interest-rate data to predict the direction of the stock markets. In this regard, reference [1] brings a fresh new perspective. It utilized price ratios of gold over other assets in order to forecast stock market returns. Specifically, the authors constructed ten gold price ratios: the gold oil ratio, gold silver ratio, gold CPI ratio, gold corn ratio, gold copper ratio, gold Dow Jones Industrial Average ratio, gold yield dividend ratio, gold treasury bond yield ratio, and gold federal fund rate ratio. They then used univariate and bivariate predictive regressions to investigate the forecasting power of the constructed gold price ratios in the stock market. The authors pointed out, We empirically investigate the predictive ability of ten gold price ratios for US excess stock returns. Gold price ratios are constructed as the natural logarithm of gold to other asset prices. We find that gold price ratios positively predict future stock returns and have higher predictive ability than traditional predictors studied in Welch and Goyal (2008) on average. Among these ratios, the gold oil ratio (GO) is the most powerful return predictor, and the information contained in GO does not overlap with that contained in traditional predictors and other gold price ratios. A one standard deviation increase in GO is associated with a 6.60% increase in the annual excess return for the next month in sample. GO also significantly outperforms the historical mean model out of sample and generates substantial economic gains for a mean variance investor. Therefore, the predictive ability of GO is both statistically and economically significant. In short, among the constructed gold price ratios, the gold oil ratio is a good predictor of the stock market returns. This article showed that we can use not only asset prices as independent variables in a predictive model but also combinations of them. References [1] T. Fang, Z. Su and L Yin, Gold price ratios and aggregate stock returns, 2021. Available at SSRN: https://ssrn.com/abstract=3950940 Article Source Here: Gold Oil Price Ratio As a Predictor of Stock Market Returns |
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