Tuesday, January 13, 2015

Nuances of Stock Options Valuations for Investors

Valuations for Investors
Stock options valuation also known as options pricing is probably one of the least understood parts of options trading and also one of the most dangerous assumptions that traders make. A stock options price does not always move in tandem with the price of the underlying stock. There are six factors that control the price and profit potential of options. First—the current market price of the stock. Second—the strike price of the option. Third is the remaining life of the option. Fourth is the volatility. Fifth is the interest rates and sixth is stock dividends.

With all things being equal, if a stock goes up in value, then a call option will go up in value and subsequently, a put option will go down in value. Calls and Puts essentially operate opposite to each other as far as the pricing is concerned. These days, large companies are focusing a lot on stock options. They may use them as a part of employee compensation packages or they may use them to conserve cash. Regardless of the purpose, the company needs to have some idea of the value of the options that are being exchanged.

There are some widely accepted techniques for stock options valuation, but the Black-Scholes model is the most commonly used model for stock valuation. If the options of publicly traded companies need to be evaluated, the Black-Scholes model is considered to be the best. In addition to this model, the Gordon Growth model can also be used to estimate the stock price and volatility variables. As a fund manager or as a consultant, you need to suggest a reasonable way to estimate the value of options for publicly and non-publicly traded companies. There is a lot of uncertainty in the stock options and by increasing the credibility of the stock option valuations, fund managers can pick up the right options for the companies.

There are several benefits of using the best measurement technique for stock options. The biggest benefit is that it improves the reliability of financial statements of non-publicly traded companies, which are currently into issuance of stock options.

If you are planning to invest in stock options, you can do it on your own, but you will have to be good at financial analysis. If you are not, then you can opt for some of the best stock option services. Information that you get on stock options can be convoluted and complex. You will need the best stock valuation services that provide you implicit information on these stock options. Most stock valuation service provides have teams that comprise economists and financial professionals.

These professionals have the expertise and the experience to offer in-depth information and accurate financial analysis. These consulting companies gain stock valuation expertise by working very closely with some of the best multi-national companies. While selecting stock valuation services, you need to check out of the company is committed to meeting deadlines, while providing high level of service. These services generally cater to corporations and several other legal and financial communities around the world.

Sunday, January 11, 2015

The True Costs of DIY

Costs of DIY
Economic circumstances have many people looking for ways to cut costs. In the summer of 2012, 70 percent of upper-income home owners looked to do-it-yourself (DIY) home projects first before relying on contractors. However, it is important for homeowners to not take the DIY bug too far and take on projects beyond their skill and expertise. Doing so can actually cost a homeowner more in the long run.

Know Your Limits

No one claims that homeowners are completely helpless. In fact, there are some repairs that you should know how to finish. Calking, fixing doors and locks, and painting rooms are all well-handled by consumers. Unclogging toilets and replacing faucet washers also make that list. These tasks arise much more frequently and offer little risk if you struggle with them.

But you must know when to hire an expert. These specialist categories include:

Structural changes, like remodeling or a new foundation; electrical and wiring; roofing; windows; and plumbing.

Experts already offer the skills, tools, and supplies. They will also finish the work in less time which means less opportunity cost incurred by you.

Impacts of Avoiding Expertise

Taking on a complex project may seem fun and satisfying at first, but it can become a nightmare very quickly. Besides completing a less-than-perfect job that falls apart, there are also other impacts you must consider.

Legal Liability. Your project may require permits. If you miss steps in this process, it exposes you to legal liability and fines. Contractors are normally well-versed in this process and can ensure your obligations are covered.

Chance of Injury. Roofers, window installers, and electricians take precautions. They use safety equipment so climbing ladders, handling wires, and removing lead paint or pipes is unlikely to lead to illness or injury. DIY homeowners often do not have the same resources and can increase costs through lost time from work or high medical bills if they are sick or hurt.

Increased Costs. Even if you survive the permit process and avoid injury, you may discover later that your repair or improvement was not as solid as you hoped. In this case, you will need to hire a contractor anyway to fix your mistakes, which can become quite costly.

All the complications of plumbing, for one example, show why you need to avoid the DIY route for specialist work. Damaged pipes, outdated plumbing, drain cleaning and other unexpected developments can demand expert attention. Leaving any plumbing job, including drain cleaning, as a DIY project risks flooding or cutting off water to your home.

Plumbers can video-inspect to find and remove obstructions. Besides hair or debris, tree roots and natural obstructions can also block pipes. Hasty DIY work on this problem can mean damage to pipes that cuts off your water supply or further inconvenience if a clog returns.

Hiring a contractor means knowing a job will be done right. Save DIY adventures to those jobs with little impact and more certainty.

Tuesday, December 9, 2014

Checklist to buy new houses to ensure better returns

housing property
Previously, humans just survived by merely exchanging goods and services. Concept of money opened new doors to trade and exchange. Things were priced in a better way, the future payments could be secured, there was no question of perishability and so on and so forth. With invention of money, people started spending. Over a period of time, people came to know that they must save something for future or to buy some money demanding product or services. Concept of saving came into the picture. People started saving their money at their homes at a secure and secret place. Banks came in and lockers came into the picture. Lockers and accounts kept the money safe and gave interest. There also developed a parallel way of investing money as shares of a company or in metal. This gave rise to investments and people started investing and saving instead of just saving. Investment can be considered as a saving with better returns. One of the best and most rewarding investments today can be the real estate sector. This sector has seen a rampant rise in the past few years and is at a growing pace. But while investing in any of the upcoming projects in India, one should thoroughly check these conditions: -

1. Proper documentation: - one must verify and check the documents before investing in any of the upcoming projects in India. There may be cases of scam and fraudulent behavior if one is not alert and does not verify and check the documents. Documents of the house and documents of the society should be verified to avoid any future shocks and problems.

2. The city in which the invested house is: - one must see the future prospects of a city and invest wisely. A city like Ahmedabad has golden prospects as it is one of the fastest developing cities and the growth rate is very high. There are many latest new projects in Ahmedabad which will prove value for money and give great returns in the future. Ahmedabad has seen great development and there is still scope for it to be one of the greatest cities of the world. Investing in the latest new projects in Ahmedabad will ensure that the future is bright and there is shortage of returns.

3. No of rooms: - the number of rooms or the BHK s of the house is surely a thing to bank upon. The greater the number of rooms, the greater returns. Besides, one can also think about their future and invest in a larger house as one might have children or the children may be of marriage age which will demand larger space. If these houses are given on rent, they would fetch a better income and fill the pockets at a faster rate.

4. Purpose of purchase: - one must decide as to why he or she is buying the house. If it is for primary residence, the luxury factor, number of rooms and facilities must be considered. If it’s a weekend house, one must focus on the location and the lavishness of the house. The latest new projects in Ahmedabad are focused on luxury factor and have a lavish touch.

Thus, the above is the checklist one must follow and keep up with when buying a new house. The various upcoming projects in India are designed and built to fulfill every need and fit every pocket! So ensure that the investment is in the best place and get the highest of returns!

Friday, September 19, 2014

Alternatives to Traditional Business Loans

Easy business loans
Money and time are typical challenges for different companies. Business loans are effective solutions to shortages of time or cash and have direct and indirect benefits for your bottom line. A food business can buy equipment to produce better quality dishes at a lower cost. New machines also have depreciation expense that is a write off to lower your taxable income.

Sounds great, but getting approved for financing can be difficult. Here are some of the common hurdles that entrepreneurs face:

Lack of Personal or Business Credit: Established companies and startups alike have poor or limited credit histories. Some business owners use their personal credit to finance business matters, which exposes them to more risks in case of default. Sole props must rely on strong personal credit.

Income: Two years of business tax returns with a positive trend are required by most lenders.

Collateral: Many startups tend to be in fields with limited or unfavorable collateral, such as technology firms or restaurants. Lenders prefer to collateralize a loan with equipment, real estate and cash rather than tables,chairs or food.

Industry: Banks view restaurants, construction, bars and medical offices as high risk loans. These industries may seasonal cash flow, high A/R or greater liability. .

Has your business loan been declined for any or all of these reasons? You have several alternatives that require little or no credit.

Equipment financing makes it easy to determine collateral, which also eases some concerns about credit. Your industry is also not a factor and lenders focus on your ability to repay the equipment loan alone. Unlike a general purpose loan or line of credit, a bank can lend money on a pizza oven and feel more secure knowing how the money is spent and that there is collateral coverage.

Specialty companies and banks each offer equipment loans. The loan officers work closely with manufacturers and can often speed up approval or push through a borderline application in some cases. Make sure to ask about trade in options to keep pace with changes in technology.

You should work with a CPA to manage capital equipment from a tax standpoint as well. In accounting terms, old machines that have been paid off no longer have a ‘useful life’. This equipment may not be productive and has no write off for depreciation expense. Conversely, new equipment can improve and have tax benefits. Companies should consider these factors to maximize the ROI of equipment loans.

Receivables affect your cash flow and make it difficult to meet payroll, surprise expenses or other overhead. As a solution, you can sell your A/R to a factoring company for quick cash. The factor buys your receivables for a discount percentage, which will vary based on who the A/R is from and how long the receivable is outstanding. A/R from larger corporate that is 30 days out will fetch a higher % than individual accounts in the 60 day bucket.

Companies can also use A/R financing as leverage to expand. A medical office can pounce on discounts for new billing software or technology by selling pending payments from insurance companies to a factor.

Focus on selling A/R with higher profit margins. In basic terms, selling invoices with a 20% margin at 85 cents of the dollar still results in a 5% net.

A company can also get short-term capital by borrowing against future credit card sales. Your credit is not an issue, as the history of credit card receipts is what determines the decision. You will repay the loan plus a premium as a % of daily credit card sales over 6 months to 1 years. Confirm there are no prepayment penalties before signing.

As an example of merchants loans in practice; restaurants could use the money to prepare for catering or special events. The cash buys decorations and hires entertainment before you realize revenues. Merchant loans can also supplement lines of credit or business credit cards to cover shortfalls.

Business owners can use equipment loans, A/R financing and merchant loans in several ways. Each of these business loan alternatives has value at many stages of a company’s growth.

Monday, September 1, 2014

What are basic bank accounts - A knowledgebase

all about bank accounts
Basic bank accounts are special types of bank accounts in the UK for people who can’t be able to get regular bank accounts. It is important to note that it is harder to get a regular bank account in the UK than in the US. This can be attributed to numerous restrictions in the UK's banking industry barring most people (especially those with poor credit scores/rating) from getting regular bank accounts. Basic bank accounts solve this problem.

As the name suggests, basic bank accounts offer you basic banking i.e. a place to store your money and send money from. They were created for people who were either new to the country with no credit history or had accumulated a bad credit score as a result of bad debt. As such, these "bad credit bank accounts" do not offer overdraft facilities or in-credit interest. Most banks offer their basic bank account holders a debit card for making payments in regular and online stores. You can also be allowed to set up direct debits which is great because it makes paying bills cheaper.

Contrary to popular belief, basic bank accounts aren’t 100% free of charges. Just because account holders don’t have access to credit doesn’t mean they won’t be charged some fees. The accounts usually attract occasional charges i.e. you will be charged for attempting to make payments when your account balance is insufficient. Most banks usually charge an unpaid transaction fee not exceeding £25 a time. It is therefore advisable to know exactly how much money is in your account before you attempt transacting.

Basic bank accounts aren't publicised by banks simply because banks don’t stand to make a lot of money from basic accounts. Unless you make the mistake of using the card when you don’t have money, banks don’t stand to gain anything from your basic bank account. In fact, the accounts attract more cons simply because of the workload the accounts attract (administration costs) without bringing any notable returns. Unless you specifically request for a basic bank account, bank staff don’t offer the account as an option for individuals with bad credit.

You may be wondering why banks bother offering basic bank accounts if they aren't good for business. Well, the answer is simple; bankers know that they can be forced easily by legislators to offer the accounts if they refused to offer them. Such a move would have serious consequences given the fact that bankers would have already lost the goodwill of the people and legislators.

How to open/apply for a basic bank account

As mentioned above, basic bank accounts are for individuals who have poor credit history which is usually caused by bankruptcy, serious defaults or CCJs. The accounts are also available for individuals with no credit history i.e. basic bank accounts for those with no credit history. If you fit in the above description, you can open a basic bank account. Although there are a few unique exceptions, anyone can get a basic bank account. The accounts are specifically meant for people who can’t pass credit checks for standard bank accounts.

It is however worth noting that you don’t have to have be in financial/credit problems to be a basic account holder. You can open a basic bank account to simply help you manage money better. You should however be specific or the bank might offer you a standard instead of a basic account. The only group of people who aren't allowed to operate basic bank accounts are people who have had fraud criminal convictions

To open a basic bank account, you need some form of identification as is the case when opening a regular bank account i.e. a national identification card to current passport. You need a current European Union (EU) member state ID, a current UK photo card driving license or full paper driving license, an ID card issued by Northern Ireland’s Electoral Office, a benefits book or benefits entitlement letters including child benefit, pension, disability, income support and job seekers allowance or a HMRC tax notification or an assessment letter.

In case you have problems providing the above documents, you can use other ID forms. You can visit the Money Advice Service website to see the list of all the requirements you must meet to open a basic bank account with all the major banks in the UK. In case you are unable to provide any acceptable forms of identification, you can contact the respective bank and explain your situation to see if you have any other options. In a nutshell, you shouldn't have any problems applying for a basic bank account in the UK if you have the right ID documents and you don’t have any history of fraud.

Saturday, August 16, 2014

Other Options That Are Available to get finances

financial sources
Annuities: These are insurance policies that offer payments at fixed intervals or lump sum at the time of retirement.

Stocks & Mutual Funds: You can choose to invest in many company stocks, however this needs skills as the high probability of great returns is accompanied by high risks too. When one is not very confident about able to manage the trading it is best to enter the market through borrowers funds. These are managed by professionals and the risk associated is lower too.

Bonds: These debt instruments are securities in which the investor lends to a corporation or the government for a certain interest payment and there is a guarantee of the repayment of the bond’s face value.

Cash Instruments: There are many low-risk and relatively short-term options like CDs, that offer fixed rates of interests.

DRIPs: These Direct Reinvestment Plans involve reinvesting the returns or dividends to buy more shares of that corporation.

Exchange Traded Funds - ETFs are traded on stock exchanges and offer unique investment options. 

Whatever instrument you may choose to plan out your retirement benefits as early as possible. This is because you’ll have more time to achieve your savings goal and hence can explore a greater variety of investment tools and more time to recover losses, if any and of course, you can compound your saving by reinvesting your returns. This is most useful when you have a good amount of time available at your end.

Calculate & Save

Most people do not pay attention to their expenditure or their cash flows or do not have any understanding of where they are headed to. One can start by making an assessment of your net worth. This can be found out by deducting your liabilities (what you owe) from your assets (valuables that you own). The difference amount between your liabilities and assets gives a clear indication of your net worth and give you a clarity of goals after factoring in your net worth.

Therefore it’s best to set yourself a specific goal or you’ll never be able to meet the same. When this is missing neither will your efforts remain directed or measurable nor will you find enough motivation to keep up your savings and make the right decisions. You may even think of writing down a SMART (specific, measurable, attainable, realistic and time bound) retirement goal for yourself. You may want to define your retirement age, your financial aspirations like where you’d like to live, how much you’d like to spend, post your retirement. This will all add up to a figure which you’ll be chasing to achieve.

Don’t Let Emotions Guide Your Financial Decisions

You may not even realize the extent to which emotions can guide your decisions even when investments are concerned. When your investments are doing well you tend to be overconfident and often overlook the risk factors and end up making bad decisions. And when the investments aren’t performing, you’ll probably be risk averse and avoid even attractive and may not make enough money over a period of time.

Therefore, as far as your investments go, it’s best to keep your emotions in check and take a very realistic and dispassionate look at the opportunity and remember that there will be a risk element and not all will be performing at the same level. Keep your portfolio balanced to mitigate the risk.

The other important factor to look out for is the fees that you pay. These are the charges attached to the investment options and often eat away your profits, reducing your investment’s attractiveness. These may come in the form of Administrative charges, transaction fees, loads etc.

Start Now, if Still Unsure, Ask an Expert

Think about it truthfully, are you postponing your retirement savings just because you are not too sure of the ways and options? Then it is best to contact a professional and get the necessary help at the soonest. You may even decide to do some research or pursue an educational course to get your knowledge and skills updated.

Whatever way you may choose, as has been reiterated, the essence is to start as early as possible. This will give you enough time to plan for a comfortable after retirement life for your family and even give you some cushioning against life’s unpredictable twists and turns!