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Embezzlement is…

Monday, July 25th, 2011

Embezzlement is taking something for personal gain that you’re supposed to be looking after for someone else.

It often happens in small amounts over time, and can sometimes go undetected for years. This is why accounting is so important – and why we need watchdogs like the U.S. Securities and Exchange Commission (SEC) to growl at offenders.

Examples of embezzlement include someone in charge of a trust or an investment fund snagging some of the money in their care, or those at the head of a nonprofit tweaking the books so that everything looks normal… while dollars secretly slip out the back door.

A Reverse Stock Split is…

Thursday, May 19th, 2011

A reverse stock split is when a company adjusts the number of shares they have available to artificially increase the price per share. Technically, the shareholders don’t lose or gain any money when this happens, but the company buys itself some time to rebound from an economic drop.

The easiest way to explain reverse stock splits is with an example. Let’s say you own 100 shares of Apple stock, each worth $10. (For the record, AAPL is nowhere near that cheap in real life.) Unfortunately, Apple is suddenly hit hard by the recession – nobody’s buying iThings anymore – and the price of their stock falls to $0.50.

Apple knows that if their stock price remains under $1 for 30 days, it may be delisted from the NYSE. So in order to increase the price per share, Apple asks for a 10 to 1 reverse stock split. Suddenly, instead of having 100 shares worth $0.50 each, you have 10 shares worth $5 each.

In order to get from $0.50 to $5, you have to multiply $0.50 by 10. Imagine smooshing 10 of your $0.50 shares into one big ball of shares. Instead of 10, you now have one. And that one is worth $5.

You haven’t lost a penny. But Apple has just saved itself from being delisted.

A Double Bottom Line is…

Wednesday, October 6th, 2010

A double bottom line is a way for a company to measure its performance in terms of positive social impact as well as financial success. While a traditional bottom line helps a company understand its financial profits and losses, a double bottom line factors in the greater social consequences to business decisions.

How do you keep track of your investment profits or losses?

Wednesday, October 6th, 2010

When you calculate your net profit or loss on an investment, you have to factor in what it cost you to make the investment in the first place. That’s called the “cost basis” or “tax basis.”

Here’s a simple example: let’s say you buy 100 shares of Company A for $10 a share – $1,000 in total. That $1,000 is your cost basis. Your gain on the investment is whatever you make that’s above that number. So if you later sell those 100 shares for $15 a share, you make $1,500 in that transaction, but you have to subtract your cost basis, so your profit is $500. If you sell them for $7.50 a share, you make $750, but once you factor in your cost basis, you actually have a $250 loss.

Making A Legal Profit With Marijuana

Tuesday, June 29th, 2010

Colorado’s medical marijuana industry is hampered by a slew of rules and restrictions as lawmakers attempt to establish standards of respectability within this promising new market.

  • Amendment 1284, a new set of regulations for the marijuana industry, is expected to put many dispensaries out of business. But some dispensaries are welcoming the regulations since the more regulated (and respectable) their business appears to be, the easier it will be for them to operate.
  • In order to succeed as a dispensary of medical marijuana, entrepreneurs must grow their own weed (which vastly increases profits), and secure “caregiver rights” (the more customers who give your establishment caregiver rights, the more marijuana you can grow).
  • Thus far, the industry has failed to generate anywhere near the amount of revenue predicted by the lawmakers who supported the drug’s legalization. In fact, the people making the most money from the business are not dispensaries, but the medical professionals who issue medical marijuana certificates.

Facts & Figures

  • To date, 80,000 people in Colorado have medical marijuana certificates, and the number of certificate holders is increasing by about 1,000 people per month.
  • Americans spend approximately $25 billion per year on marijuana. The sales in Colorado so far are expected to generate about $2.7 million in license fees (not including the $681,000 in income taxes collected from July 2009 to February 2010). By contrast, Dr. Boland, a certificate-issuer interviewed by the newspaper, has grossed $1 million over the past year.
  • 13 states and the District of Columbia currently have medical marijuana laws.

Best Quote

“We’re past the days when people call here to ask if marijuana will give men breasts. Now, the calls are from angel investors, or REITs – people who are looking for ways to invest or offer their services.” – Allen St. Pierre, Executive Director of the National Organization for the Reform of Marijuana Laws (NORML)

Foreclosed Homes: A Good Deal For Buyers?

Wednesday, June 23rd, 2010

The number of foreclosures on private homes continues to increase, and it shows no indication of stopping in 2010.

  • Between 3 and 3.5 million houses in the U.S. are expected to go into foreclosure in 2010 (up from 2.8 million in 2009).
  • Foreclosed homes are sold “as is,” so there are many potential complications and hidden costs.
  • It’s typical for bank-owned homes to have electricity, gas, and water completely turned off, emphasizing the importance of buyer inspections.

Facts and Figures

  • There have been more than 300,000 homes per month for 15 consecutive months that received foreclosure notices.
  • An estimated 45% of adults may consider purchasing a foreclosure.
  • Some banks are offering financial incentives to those buying foreclosures.

Best Quote

“We’ve plateaued at an unprecedented level of foreclosure activity.” – Rick Sharga, Senior Vice President of RealtyTrac

How do they choose who rings the bell at the NYSE/NASDAQ?

Friday, June 18th, 2010

The first way to answer this question is to address the “they.” The New York Stock Exchange and the NASDAQ are two separate entities, though both are stock markets and both are headquartered in New York City. On both exchanges, “opening” and “closing” bells are rung to signal the beginning and end of each trading day. The trading day starts at 9:30am EST and ends at 4:00pm EST.

The logic of who gets to ring these bells is a more interesting question. It’s basically pure public relations and promotional play to ring the opening or closing bell of the NYSE or NASDAQ. Lebron James might stop by to ring the bell because he is in New York playing with the Knicks, or it could be the CEO of Electronic Arts because his company is about to release the latest version of Rock Band. On some days, no one is scheduled to ring the opening or closing bells, and officials from the exchanges have to do the job themselves. Generally speaking, companies and individuals request to ring the bell and the individual exchanges choose who they will allow to do so.

It’s important to remember, though, that ringing the bell to start or end the trading day is a ceremony and has significance. You wouldn’t want to be remembered as the person who rang in the worst trading day of the year. On the other hand, if your company rings the bell on the opening or closing of the best trading day ever, it’s a victory for pretty much everyone!

Annuities are…

Friday, June 18th, 2010

Annuities are contracts, or a form of investment, between two parties.  The investor makes an investment and the financial institution (usually an insurance company) agrees to repay the investor, with interest, over different time intervals. Typically, you would make either one lump-sum payment or a series of payments to your insurance company, and in return the insurance company would pay back your investment at agreed points in time and an agreed interest rate. There are three types of annuities: fixed, variable and equity-indexed annuities.

Do I need to buy a hybrid to drive green?

Friday, June 18th, 2010

Hybrids are pretty cool, but the most powerful tool for eco-friendly driving is YOU. Changing the way you drive can help keep the environment clean and save you money no matter what kind of car you drive. “Hypermilers” take this to the extreme and claim they can get up to 100 miles per gallon from standard model cars by strictly following certain guidelines and techniques. Here are a few simple things you can do that will have an immediate impact on your gas bill and your carbon footprint:

  • Chill out! Driving aggressively is really inefficient. Accelerate slowly and evenly and try to keep your speed as constant as possible – you burn more gas when you accelerate.
  • Slow down! Driving slower burns less gas. The difference between going 75 mph and 55 mph on the highway is HUGE in miles per gallon… and also in money for speeding tickets!
  • Take care of your car. Regular maintenance and keeping your tires at the manufacturer’s recommended pressure can keep your mpg (that’s miles of driving per gallon of gas) at its highest level.
  • Cruise… Using cruise control on the highway can keep you from creeping up to those higher, less efficient speeds, and it prevents all that carbon-spewing stop-and-go driving.

You can definitely help the environment with your money – buying green products, investing in a socially responsible manner, or giving to an Environment Cause – but you can also do a lot just by modifying your behavior. Remember, efficiency is good for the environment and your bottom line!

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