A strategic buyout is the purchase of a firm by another firm in order to gain some operational benefit which will lead to increased earnings. If Company A, which produces toothpaste, buys Company B, which owns toothpaste tubing and packaging factories, the combination of the two companies’ operational forces means that Company A can now produce their whole product more cheaply than before. Before the buyout, Company B was charging Company A a lot for tubing and packaging, but now because they are the same company, there is no charge.
Archive for the ‘Level 1’ Category
A Strategic Buyout is…
Thursday, August 20th, 2009A Market Sector is…
Thursday, August 20th, 2009A market sector is how companies are classified by their industries. If a company sells clothes, we can put them in the apparel sector. Microsoft, for example, would be in the technology sector.
Deforestation is…
Thursday, August 20th, 2009Deforestation is the removal of trees from a wooded area. Excessive deforestation is detrimental to the environment, so many activists seek to curb it or to plant new trees in deforested areas.
A Proportional Tax is…
Thursday, August 20th, 2009A proportional tax is a system of taxation in which individuals are taxed at the same rate regardless of their income level. So whether you make $25,000 a year or $3,000,000, you’re still paying the same percentage of that amount in income taxes. The U.S. uses a progressive tax system for income tax purposes.
An Acquisition is…
Thursday, August 20th, 2009An acquisition is the purchase of one company by another. You acquire a company through buying or exchanging stock. Usually it relates to a controlling interest, or more than 50% ownership. For example, if you own 35% of a company’s voting shares and you buy another 20% of the shares from someone else (for a total of 55% ownership), you have acquired that company.
Direct Deposit is…
Thursday, August 20th, 2009Direct deposit is a method of salary payment that automatically places money in a savings or a checking account. Instead of getting a physical pay check, money is transferred electronically to your account.
Bankruptcy is…
Thursday, August 20th, 2009Bankruptcy is a legal procedure which occurs when a company in debt is unable to make the payments it owes and therefore the assets of the company are distributed to the creditors. Filing for bankruptcy can be either voluntary or involuntary but is an indicator that a company cannot raise enough money to repay the debt without selling its assets.
Individuals can also file for bankruptcy for basically the same reason: they have more debt than they can reasonably repay. When you file for bankruptcy, your debts are either forgiven or reorganized into a viable payment plan. A declaration of personal bankruptcy will remain on your credit record for seven to ten years.
An Annual Report is…
Thursday, August 20th, 2009An annual report is a written account of an organization’s financial progress over the past year and its projections for the future. The SEC requires public companies and mutual funds to give an annual report to their shareholders at the end of every fiscal year. Nonprofits also generally publish annual reports.
A Currency Market is…
Thursday, August 20th, 2009A currency market is also known as a foreign exchange or FX market. It deals with the buying and selling of international currencies such as U.S. Dollars, Great British Pounds, Japanese Yen, etc.