When making investment decisions in a company, investors consider various factors. Among these, profits are the most crucial as they can impact the investors’ future returns. However, a company’s earnings may not be meaningful if it has cash flow problems or operational inefficiencies. There are two terms, closely related to …

Capital structure defines the mix of debt and equity finance that a company has at its disposal. Every company utilizes a different combination of several finance sources to increase their benefits while decreasing costs. Companies can make a decision about their capital structure by using various models or theories. One …

Behavioural economics studies the psychology that relates to the decision-making process of investors. It looks at how investors allow psychological factors to impact their decisions. It goes against traditional finance theories, which assume that individuals don’t let biases affect their decision-making. Behavioural economics also studies the subsequent effects on the …

What is Behavioural Finance? Behavioural finance is a field of behavioural economics that deals with investors’ psychological influences and biases. It studies how these influences and biases affect the financial behaviour that investors use in investing decisions. Similarly, behavioural finance also explores market anomalies, specifically in the stock market. It …

A company’s capital structure defines the mix of equity and debt finance used to finance its activities. For every company, the capital structure will differ based on its needs and usage. This combination of equity and debt finance may also vary during a period or from one year to another. …

What is Hedging? Hedging is a process that investors use to protect their finances from any risks. In other words, hedging is the process that investors use to mitigate their risks. They do so to reduce the chances of losses or offset their assets against the losses. Hedging is also …

A convertible bond is a type of bond that comes with the right to convert the debt into equity instruments. Investors that invest in these bonds get the benefits of other debt instruments while also getting the option to receive equity investments. Convertible debts come with interest payments and face …

Risk represents the probability that the actual results differ from the expected results. Entities, including individuals, companies, organizations, and other bodies, face risk in their transactions. It also includes the possibility that losses occur for these entities. When transacting in financial markets, facing risks is inevitable. However, there are various …

Investing in a company’s equity instruments is straightforward. Investors pay to receive a company’s stock, which gives them the right to receive dividends and voting rights. However, there are some instruments that investors can convert into equity instruments in the future. Among these, the two common ones that investors usually …

Interest rate swaps are a primary type of hedging methods used by participants to mitigate their risks. With these swap contracts, participants can exchange their interest payments with another party to receive favourable terms in the future. There are several types of interest rate swaps that participants can use for …