Investing Terms

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…

A collar strategy is a defensive equity play in which an investor seeks to limit the downside in a stock in exchange for forgoing some of the upside potential. This strategy is also known as a hedge wrapper. The investor buys a long position in a stock, in which he will benefit if the price goes up, although the strategy can also be accomplished without actually buying the underlying stock.…

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.

The Futures Industry Association (FIA) is a leading authority on the global derivatives industry. Headquartered in Singapore, Brussels, London and Washington D.C., the FIA is an advisory body to the world's futures and options market participants. Operating as a network of clearinghouses, exchanges and trading firms, the FIA aims to satisfy its self-stated, multifaceted mission: Support market transparency, competition and open accessibility Preserve the integrity of the financial system Promote…

What Is Contribution Margin? Contribution margin is a business accounting term that measures the difference between sales revenue and the variable costs to produce or sell a product. It shows the amount of profitability a company would achieve once it covers its fixed costs, i.e., its breakeven point. A company's fixed costs remain basically the same whether it makes or sells one unit or thousands. The most common fixed costs…

In finance, the term market capitalisation is used to reference the aggregate value of a specific security, sector, exchange, or trading venue. Frequently shortened to "market cap," it may be calculated in a variety of ways and is especially useful when comparing the relative size of tradable securities or marketplaces. Stocks One of the most common applications of market capitalisation is to corporate stock offerings. According to the U.S. Securities…

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.

In 1973, the Organisation of Petroleum Exporting Countries (OPEC) placed an oil embargo on allies of Israel during the Yom Kippur War. Until March of 1974, exorbitant energy prices plagued the global economy, prompting the creation of the petrodollar.

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…