What is systematic risk and how to measure it

Systematic risk is the risk that affects a security or portfolio due to its relationship with the market. Systematic risk is also called market risk, aggregate risk, or undiversifiable risk.

Systematic risk can’t be reduced through portfolio diversification. Since this risk is associated with overall market sentiment rather than performance of few stocks. Systematic risk results from forces which can’t be controlled by a firm. Read more

August 16, 2009 | Filed Under Stock market Terminology | Leave a Comment

About CEO, COO and CFO of a company

CEO, COO & CFO forms the top management of the firm and look after day to day to operations but with different responsibilities. These individuals are hired by board of directors.

CEO(Chief Executive Officer): CEO is one of the highest ranking corporate officer and the head of the management. With the assitance of senior managers CEO implements the decisons approved by board of directors. CEO directly reports to chairman/board of directors . Sometimes, he will be designated as president of the company

COO(Chief operating officer): COO is one of the highest rank manager of a firm responsible for managing the day-to-day activities of the corporation and for operations management. He is often designated as vice president. Read more

About Board of Directors of a firm

Board of Directors are the individuals elected by the shareholders of the company who oversee the activities of a company. Board of Directors are some times referred to as board of trustees, board of governors, executive board or simply ‘the board’.

The board of directors is made up of two kinds of representatives. One: Internal individuals within the company. These can be CEOs, CFOs etc who work for the company. The other kind is external individuals who are independent from the company.

The responsibilities of board of directors include

Governing the organization by establishing broad policies and objectives
Accounting to the stakeholders for the organization’s performance.
Selecting, appointing, supporting and reviewing the performance of the CEO and other high level management team
Formulating company’s business strategy
Approving annual budgets

May 23, 2009 | Filed Under Stock market Terminology, You should know | Leave a Comment

What is spin off of companies

A Spin off is, essentially, the opposite of a merger. In a spin off the existing business is separated from a big company to form a new entity. If the new company is wholly owned by the parent company, equity structure may not change. A company decides to go for spin off when the existing company is too large to handle the operations or if it thinks separate management structure would benefit the business.

January 31, 2009 | Filed Under Stock market Terminology | Leave a Comment

What is Acquisition or Takeover of a Company ?

In an acquisition the acquiring company buys controlling stake in the acquired company. The acquired company is also referred to as ‘Target Company’. There are two types of acquisitions; Friendly acquisitions and Hostile acquisitions.

In a friendly acquisition the target company is formally informed about the acquisition and there is an agreement on corporate management and finance control. In a hostile take over the target company does not find it favorable that a majority of its shares are bought by the acquiring entity. In a hostile take over the acquiring company keeps on increasing its stake in the target company by buying the shares from institutional investors or through normal stock exchange transactions. Read more

January 24, 2009 | Filed Under Stock market Terminology | Leave a Comment