Free cash flow to firm (FCFF) represents the available cash flow for both debt and equity holders of the firm. The cash is remaining cash after paying all its expenses including both operating and capital expenditures (taxes, interest, expenditures etc.).FCFF is calculated by intrinsic valuation method and terminal value of ... Read More

The performance ratios help in understanding the financial statements and give a better view of business.Company calculates these ratios regularly to see how well they are using their own resources and gives their performance.Some of the advantages of performance ratios for a company are forecasting, budget estimation and determination of ... Read More

Let us understand what free cash flow to firm (FCFF) and free cash flow to equity are, before learning about their differences.Free cash flow to firm (FCFF)Free cash flow is an integral measurement tool which is used in management accounting. This allows business members to monitor and measure the values ... Read More

Call option is the contract in which, buyer has a right to buy shares of number at strike price before an expiry date.In this, the buyer has no right for an obligation.In this option, premium is paid for risk associated with an obligation.These are purchased mainly for speculation and are ... Read More

Put option is the contract in which the holder has a right to sell equity shares of number at strike price before an expiry date.Put option is available in stocks, indexes, commodities and currencies.Price change is impacted by underlying assets, time decay, interest rates, and strike price. If there is ... Read More

Let us learn about the depression and recession before understanding the differences between them.DepressionDepression is a more prolonged and severe form of recession. According to the IMF, if the GDP declines over 10% then it is considered as depression. Depression is always borne out of recession and debate continues when ... Read More

Inflation and deflation are burning issues which almost every country experienced. In simple words inflation is an increase in price of goods and services and decrease in purchasing power. Deflation is where decrease in price of goods and services and increase in purchasing power.InflationThis situation occurs due to variability in ... Read More

Let us learn about the exchange traded derivatives and over the counter (OTC) before understanding the differences between them.Exchange traded derivativesWith a standardized contract, exchanged traded derivatives consist of options and futures mostly and traded on public exchanges. Determines expiry date, settlement process, lot size and states underlying instruments on ... Read More

People who do business internationally should be aware of exchange rates and how they work exactly. Let’s try to understand about floating currency exchange rate and fixed currency exchange rate.Floating currency exchange rateFloating currency exchange rate depends on demand and supply. If demand for currency is high then value increases ... Read More

Equity swaps is a derivative contract between parties, which involves exchange of future cash flows between two cash streams. Cash streams are also called “leg”. One cash stream/leg has equity based cash flows (return on equity index etc.) and the other cash stream has fixed income cash flows (LIBOR etc.)In ... Read More