Economia finanziaria, dal calcolo degli interessi su strumenti finanziari alla valutazione di azienda attraverso i vari indici

YIELDS ON MONEY MARKET SECURITIES

Bond Equivalent Yields: For money market securities, the bond equivalent yield is the product of the periodic rate and the number of periods in a year. It is calculated as follows:

Effective Annual Return: The bond equivalent yield is a quoted nominal or stated rate earned on an investment over a one-year period. The bond equivalent yield does not consider the effects of compounding of interest during a less than one year investment horizon. Generally, interest is paid or compounded more than once per year, the true annual rate earned is the effective annual return on an investment. The bond equivalent yield on money market securities with a maturity of less than one year can be converted to an effective annual interest return (EAR) using the following equation:

Discount Yields: Some money market instruments (Treasury bills & Commercial paper) are bought and sold on a discount basis. That is, instead of directly received interest payments over the investment horizon,

The return on these securities results from the purchase of the security at a discount from its face value (P) and the receipt of face value (P) at maturity, as we show in the following time line.

Further, yields on these securities use a 360-day year rather than a 365-day year. Interest rates on discount securities, or discount yields (i), are quoted on a discount basis using the following equation:

An appropriate comparison of interest rates on discount securities versus non-discount securities, adjusting for both the base price and days in the year differences, requires converting a discount yield into a bond equivalent yield in the following manner:

Single-Payment Yields: Some money market securities (jumbo CDs & fed funds) pay interest only once during their lives: at maturity. Thus, the single-payment security holder receives a terminal payment consisting of interest plus the face value of the security, as we show in the following time line. Such securities are special cases of

The pure discount securities that only pay the face value on maturity. They normally assume a 360-day year. The nominal interest rate must be converted to a bond equivalent yield in the following manner:

Allowing for interest rate compounding, the EAR for single-payment securities must utilize the bond equivalent yield as follows:

A variety of money market securities are issued by corporations and government units to obtain short-term funds. These securities include Treasury bills, federal funds, repurchase agreements, commercial paper, negotiable certificates of deposit, and banker's acceptances.

Treasury Bills are short-term obligations of the U.S. government issued to cover government budget deficits and to refinance maturing government debt.

Treasury bill auctions - The formal process by which the U.S. Treasury sells new issues of Treasury bills.

The discount yield (d) on a T-bill is calculated as follows:

Repurchase Agreement: An agreement involving the sale of securities by one party

Reverse Repurchase Agreement: An agreement involving the purchase of securities by one party from another with the promise to sell them back.

Repurchase Agreement Yields: The yield on repurchase agreements is calculated as the annualized percentage difference between the initial selling price of the securities and the contracted (re)purchase price (the selling price plus interest paid on the repurchase agreement), using a 360-day year.

Commercial Paper: An unsecured short-term promissory note issued by a company to raise short-term cash, often to finance working capital requirements.

Commercial Paper Yields: Like Treasury bills, yields on commercial paper are quoted on a discount basis - the discount return to commercial paper holders is the annualized percentage difference between the price paid for the paper and the par value using a 360-day year.

Negotiable Certificate

of Deposit: A bank-issued, fixed maturity, interest-bearing time deposit that specifies an interest rate and maturity date and is negotiable.

Bearer instrument: An instrument in which the holder at maturity receives the principal and interest.

Banker's Acceptance: A time draft payable to a seller of goods, with payment guaranteed by a bank.

BOND MARKETS

Capital Markets are markets that trade debt (bonds and mortgages) and equity (stocks) instruments with maturities of more than one year.

Bonds are long-term debt obligations issued by corporations and government units. Bond markets are markets in which bonds are issued and traded.

BOND MARKET SECURITIES:

Treasury Notes & Bonds: Long-term securities issued by the U.S. Treasury to finance the national debt and other federal government expenditures. These are issued by the U.S. Treasury to finance the national debt and other federal government expenditures. The national debt (ND) reflects the historical accumulation of annual federal

government deficits or expenditures (G) minus taxes (T) over the last 200-plus years, as follows: STRIP: A Treasury security in which the periodic interest payment is separated from the final principal payment. Accrued Interest: The portion of the coupon payment accrued between the last coupon payment and the settlement day. It is calculated as: Municipal Bonds are securities issued by state and local governments. Municipal Bond Yields: To compare returns from tax-exempt municipal bonds with those on fully taxable corporate bonds, the after-tax (or equivalent tax-exempt) rate of return on a taxable bond can be calculated as follows: General Obligation Bonds: Bonds backed by the full faith and credit of the issuer. Revenue Bonds: Bonds sold to finance a specific revenue generating project, backed by cash flows from that project. Firm Commitment Underwriting: The issue of securities by an investment bank in which the investment bank guarantees the issuer a price for newly issued securities by

buying the whole issue at a fixed price from the issuer. It then seeks to resell these securities to suppliers of funds (investors) at a higher price.

Best-Efforts Offering: The issue of securities in which the investment bank does not guarantee a price to the issuer and acts more as a placing or distribution agent on a fee basis related to its success in placing the issue.

Private Placement: A security issue placed with one or a few large institutional buyers.

Corporate Bonds: Long-term bonds issued by corporations.

Bond Indenture: The legal contract that specifies the rights and obligations of the bond issuer and the bond holders.

BOND CHARACTERISTICS:

Bearer Bonds - Bonds on which coupons are attached. The bond holder presents the coupons to the issuer for payments of interest when they come due.

Registered Bonds - With a registered bond, the owner's identification information is recorded by the issuer and the coupon payments are mailed to the registered owner.

Term Bonds - Bonds in which

1. Serial Bonds - Bonds that mature on a series of dates, with a portion of the issue paid off on each.
2. Mortgage Bonds - Bonds that are issued to finance specific projects that are pledged as collateral for the bond issue.
3. Equipment Trust Certificates - Bonds collateralized with tangible non-real estate property (e.g., railcars and airplanes).
4. Debentures - Bonds backed solely by the general credit of the issuing firm and unsecured by specific assets or collateral.
5. Subordinated Debentures - Unsecured debentures that are junior in their rights to mortgage bonds and regular debentures.
6. Convertible Bonds - Bonds that may be exchanged for another security of the issuing firm at the discretion of the bond holder.
7. Stock Warrants - Bonds that give the bond holder an opportunity to purchase common stock at a specified price up to a specified date.
8. Callable Bonds - Bonds that allow the issuer to force the bond holder to sell the bond back to the issuer at a price.

above 1.5, it indicates that the company has a strong ability to meet its short-term obligations)Quick Ratio = (Current Assets - Inventory)/Current Liabilities(It measures the company's ability to pay off its current liabilities without relying on the sale of inventory)EFFICIENCY INDICATORSInventory Turnover = Cost of Goods Sold/Average Inventory(It measures how quickly a company sells its inventory)Accounts Receivable Turnover = Net Credit Sales/Average Accounts Receivable(It measures how quickly a company collects its accounts receivable)Accounts Payable Turnover = Purchases/Average Accounts Payable(It measures how quickly a company pays its suppliers)PROFITABILITY INDICATORSGross Profit Margin = (Revenue - Cost of Goods Sold)/Revenue(It measures the profitability of a company's core operations)Net Profit Margin = Net Income/Revenue(It measures the overall profitability of a company)Return on Assets = Net Income/Total Assets(It measures the profitability of a company's assets)Return on Equity = Net Income/Total Equity(It measures the profitability of a company's shareholders' equity)LEVERAGE INDICATORSDebt Ratio = Total Debt/Total Assets(It measures the proportion of a company's assets that are financed by debt)Debt-to-Equity Ratio = Total Debt/Total Equity(It measures the proportion of a company's financing that comes from debt)Interest Coverage Ratio = EBIT/Interest Expense(It measures a company's ability to cover its interest payments with its earnings)

Higher than industrial average, this shows that assets are non-exploited correctly.

Quick Ratio = (Current Assets - Inventory)/Current Liabilities

(A result of 1 is considered to be the normal quick ratio, as it indicates that the company is fully equipped with exactly enough assets to be instantly liquidated to pay off its current liabilities. A company that has a quick ratio of less than 1 may not be able to fully pay off its current liabilities in the short term, while a company having a quick ratio higher than 1 can instantly get rid of its current liabilities. For instance, a quick ratio of 1.5 indicates that the company has $1.50 of liquid assets available to cover each $1 of its current liabilities.

Cash Ratio = Cash/Current Liabilities

(If the result is equal to 1 i.e. 10%, the company has exactly the same amount of current liabilities as it does cash and cash equivalents to pay off those debts. If a company's cash ratio is less than 1, there are more current liabilities than cash.

zing its cash resources and may not be investing in growth opportunities or paying off long-term debt. On the other hand, a low cash ratio may indicate that a company is at risk of defaulting on its short-term obligations and may need to rely on external financing to meet its financial obligations. It is important for investors and analysts to consider the cash ratio in conjunction with other financial ratios and indicators to get a comprehensive understanding of a company's financial health.