A "pump and dump" is an illegal scheme used to artificially boost the price of a stock by making false and misleading claims about a company's business prospects. Then, the shares are sold before the fraud becomes known, at which point the stock price usually plummets and the unsuspecting investors lose their money. Pump and dump scams have been around for a long time but are now more commonly perpetrated…
The quick ratio is an accounting formula that measures a company's short-term liquidity. Also known as the "acid test" ratio, the quick ratio is a more stringent measurement than the current ratio of a company's ability to meet its most short-term obligations, usually those due within 90 days. The formula for calculating the quick ratio is: Quick Ratio = (Cash + Marketable Securities + Receivables)/Current Liabilities Basically, the quick ratio…
The current ratio is a business accounting formula that measures a company's ability to pay its short-term obligations, namely those due within a year. The mathematical formula is expressed as: Current Ratio = Current Assets/Current Liabilities Current assets include cash and cash equivalents, securities that can be sold quickly, short-term investments, accounts receivable, short-term notes receivable, inventories and supplies, and prepayments. Current liabilities, which are obligations that must be paid…
Monetary policy is made up of the decisions and actions taken by a central bank to achieve its goals, which are typically to promote economic growth, create jobs and lower interest rates and inflation.
The money supply is the amount of currency available to consumers and businesses to make payments, in addition to the money held in checking and savings accounts. It is also made up of different components.
Price discovery is the mechanism by which buyers and sellers on an open market determine an asset's premium. In contemporary finance, the process of price discovery is carried out electronically in the markets of equities, futures, options and currencies.
Liquidity is the ability of an asset or security to be readily converted into cash. In active trading and finance, high degrees of liquidity are desirable. Liquid markets promote efficient trade, while corporate and personal solvency boost creditworthiness and value.
Influencing interest rates is one of the most important things central banks do, because interest rates have a profound effect on economic growth, job creation and inflation. But how does it happen? Learn more in this FXCM Insights article.
An important part of measuring various items in investing, a weighted average is a mathematical formula that takes into account the relative size or importance of each item in a list of financial data rather than a simple average.
A repurchase agreement is a short-term loan structured as the sale of securities. As part of the repo, the seller agrees to buy the securities back at a later date. Learn more about a repo works at FXCM Insights.
A Ponzi scheme is a type of financial fraud that occurs when the perpetrator promises consistent, guaranteed returns on an investment. In reality, however, it simply involves paying early investors by using payments from new investors.
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