Common Automobile Insurance Myths

Many insurance policies can be quite confusing sometimes. There are tons of options, terms and conditions and a policy holder can easily get lost in all of them. Moreover, every state has its own regulations as to every policy. For instance, car, business and private unemployment insurance in California have much more options than the […]

The Pros And Cons Of Structured CDs

The stock market has been on quite a ride this year, with the DJIA up over 22% to date. On the other hand, we all remember the dark days of the banking crisis, and are perhaps wary of another period of turbulence on the exchanges. This is made all the more acute by the recent […]

Degree of Total Leverage

Using the formulas for Degree of Operating Leverage (DOL) and Degree of Financial Leverage (DFL), we can calculate the degree of total leverage (DTL) for the firm as follows: In the above formula, you can observe that if there are no fixed operating costs and fixed financing costs, there is no leverage, and DTL will […]

Degree of Financial Leverage

Financial leverage arises when a firm has fixed financing costs in its income stream. The presence of financial leverage magnifies the effects of changes in sales to the firm’s net earnings. Sources of financial leverage are primarily debt and preferred stock. The British expression for financial leverage is gearing. The degree of financial leverage is […]

How to Calculate Degree of Operating Leverage

Operating leverage arises when a firm has fixed operating costs in its income stream. The presence of operating leverage magnifies the effects of changes in sales to the firm’s operating earnings, i.e., a change in the volume of sales results in a “more than proportional” change in operating profit (or loss). The degree of operating […]

How to Calculate Annualized Standard Deviation

A stock trader will generally have access to daily, weekly, monthly, or quarterly price data for a stock or a stock portfolio. Using this data he can calculate corresponding returns from the stock (daily, weekly, monthly, quarterly returns). He can use this data to calculate the standard deviation of the stock returns. The standard deviation […]

The Accounting Equation

Businesses exchange items of equal value, real or perceived. Imagine that an exchange is like balancing a scale: the left side goes down (a service is given) and the right side reacts (cash is received) to maintain the balance of the scale. Accounting uses a technique to show how a transaction changes the business’s resources […]

Put Option Payoff

A put option is the right, but not the obligation, to sell an asset at a prespecified price on, or before, a prespecified date in the future. Long Put The payoff diagram of a put option looks like a mirror image of the call option (along the Y axis). Consider a put option with a […]

Call Option Payoff

A call option is the right, but not the obligation, to buy an asset at a prespecified price on, or before, a prespecified date in the future. An investor can take a long or a short position in a call option. Long Call Consider a call option with a strike price of \$105 and a […]