This entails the buying and selling (of a commodity, stock, derivative, etc) indifferent markets in order to make a profit as a result of a price differential. For example buyinga stock listed on the Toronto Stock Exchange and simultaneously selling the same stock on the NASDAQ if, after taking taking currency exchange into account, the net selling price on NASDAQ is slightly higher than the net buying price on Toronto. Another example occurs whena takeover bid is made for a company and it is trading below the value of the bid. This presentsan arbitrage opportunity for speculators.
Companies' financial statements are sometimes subjected to an
by an independentaccounting firm, meaning that the statements are objectively checked and verified to ensure fair and total disclosure to the stockholders. For public companies, an annual audit is mandatory.Quarterly reports are unaudited. Private firms can do what they want and seldom go to thetrouble of incurring an audit and the associated audit fees.
This is company's accounting statement that shows its assets and liabilities (andnet worth) at one moment in time. It is a snapshot of the financial health of a company. It isgoverned by the equation ASSETS = LIABILITIES + NET WORTH.
Bank of Canada Rate:
This is the central bank's official interest rate. It is like a wholesale ratefor commercial banks on the "overnight" loans. The Bank rate is dictated by government policyand will in turn drive the commercial bank rates, e.g. the prime rate.
When a company becomes insolvent, i.e. it can't pay its bills and meetits financial obligations, it is said to be bankrupt.
When a company becomes insolvent, i.e. it can't pay its bills and meet its financialobligations, it is said to be bankrupt. There are two variations on this definition. A company may be technically bankrupt or it may be legally bankrupt. The former means that the company has, atleast temporarily, run out of cash to pay its bills and is, at the moment, bankrupt. However, itmay recover by raising capital, collecting monies owed to it, or selling off various assets. When acompany does not do this on its own, its creditors may, through the courts, put a companyofficially or legally into bankruptcy.
When a company is bankrupt, it may be allowed to continue with its business operations (as opposed to having it liquidated). It essentially gets a reprieve and sometime to get its affairs in order. During this time, it is "protected" from being pursued by itscreditors so that it can focus on rescuing itself. To do this, a company is said to file for bankruptcy protection. In the USA, this is referred to as "Chapter 11". A
" may beappointed by the courts during this period.
A Basis Point refers to one-one hundredth of a unit, such as interest rates or exchange rates.
This is the term used to refer to a weak, sluggish stock market. Prices and sharevolumes are decreasing in a Bear Market. The opposite to this is a Bull Market.