Author: John

Fama French 3 Factor Model

The Capital Asset Pricing Model (CAPM) is a model that describes the relationship between systematic risk and anticipated returns. It is a model commonly used by companies to calculate their cost of capital. They may also use some other models. However, CAPM considers the systematic risk of investments, making it …

What Does Due Diligence Mean?

What does Due Diligence mean? Due diligence is the process of investigating, reviewing, and auditing that companies and businesses perform. Usually, they do so to confirm facts relevant to a financial transaction. For example, companies may perform due diligence before acquiring another company. They may do so to verify whether …

Buy-Side vs Sell-Side Analysts

Financial analysts study various companies to identify ones from which investors can benefit. Among these, there are two types of analysts. These include buy-side and sell-side analysis. Both of these are different in various aspects. Who are Buy-Side Analysts? Buy-side analysts are institutional investors who collect money from investors and …

How Leveraged Buyout Works

What is a Leveraged Buyout? A leveraged buyout represents a strategy that companies use to acquire other companies using debt as the primary source of finance. Leveraged buyouts may also include using the acquired company’s assets as collateral to finance the transaction. Sometimes, however, companies may also use their own …

What Does A Chief Financial Officer Do

What is a Chief Financial Officer? A Chief Financial Officer (CFO) is a senior executive in companies, responsible for overlooking financial matters. In any company, a CFO is the highest rank figure in finance. Usually, CFOs are professionals with an understanding of financial matters and who can resolve any related …

What Is Operational Risk Management

Companies need to face various types of risks during their operations. Most of these risks accompany adverse implications for a company and cause damage to its operations. Therefore, identifying and dealing with these risks promptly is crucial for a company’s success. These risks may come in various forms and from …

What Is Reputational Risk?

When companies and businesses start operations, they may not be profitable. However, once they develop a customer base and good supplier relationships, they can earn more. These are things that come due to a company’s reputation, often termed as goodwill. Developing a good reputation is crucial for a company’s success …

What Is Legal Risk?

Operational risk represents the risk that comes due to uncertainties and hazards in a company’s operations. Operational risk is a type of business risk and can impact a company’s profits adversely. This risk exists for every business and company. There are various operational risks that companies may face, one of …

What Is Regulatory Risk?

There are various risks that surround any company. Some of these may come from external factors, while others may relate to internal operations. For external risks, there are five areas that may affect the risks faced by a company. These include political, economic, social, technological, environmental, and legal matters. Among …

Audit Committee Role in Corporate Governance

What is Corporate Governance? Corporate governance represents a system of rules, practices, and processes which dictate how companies should operate. Technically, corporate governance can be defined as “the system by which companies are directed and controlled in the interests of shareholders and other stakeholders”. The control and direction may come …