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Management Articles
Page 47 of 52
Difference between book value and market value.
The major differences between book value and market value are as follows −Book valueReal value of an asset.Reflects firm’s equity.Not related to financial market.Depreciation is taken into account.Book value = (assets – liabilities)/ number of outstanding shares.Book value = cost of asset – (depreciation + amortization).Frequency of fluctuations happens at periodic intervals.Accounted in balance sheet based on historical cost, amortized value or fair value.Market valueMaximum value of an asset/security which can be bought/sold in the market.Reflects current market price.Market value is dependent on financial market.In most cases, depreciation is not accountable.Market value = market price per share * number of ...
Read MoreCompare equity and commodity.
The major differences between equity and commodity are as follows −EquityCommodityInvestment/capital invested in a firm/entity to acquire ownership.Known as shareholder.Have ownership of that particular firm.Less volatile.Long term investments.Less risk compared to commodity trading.They get dividends.Better liquidity.Very few regulations, free market.Don’t need margin.Risk is not diversified.Do not have lot size.Traded on stock exchanges.long duration.Infosys, reliance etc.Refers to undifferentiated product on which traders can invest.Known as an option holder.No privileges are available.Highly volatile.Highly risky.Not eligible for dividends.Low liquidity compared to equity.Supervised by SEBI, derivative market.High margins required.Risk is diversified.Traded in lot size.Short term trades.Traded on commodity exchanges.They have time frame because they ...
Read MoreDifferentiate between investing and trading.
The major differences between investing and trading are as follows −InvestingCreates wealth over a long period of time.Buying and holding.Market fluctuations has no effect.Add on benefits − bonus, dividends etc.Fundamental indicators are EPS, price to earnings, current ratio etc.Long term period.Creates wealth by compound interest and dividends.Low risk.Industry, economics, financials, competitors etc. will be affected.Very few brokerage charges.Makes sound investments.TradingGenerates profit frequently.Buying and selling of stocks.Daily market fluctuations will effect.No add on benefits.Technical indicators: moving averages, stochastic oscillators etc.Short term period.High risk.Psychology of market, money management, risk rewards etc. will be affected.Have brokerage charges.Requires active environment.
Read MoreCompare stock market and commodity market.
The major differences between stock market and commodity market are as follows −Stock marketHave same security in same grades.All securities have same face value and characteristics.Doesn’t deteriorate over a period of time.Derive its value from an underlying asset.Supply is fixed.Commodity marketHave several grades/varieties of products/commodity.Grade may vary from other lots in same grade.Greater implications for buyers and sellers.Has basic role in future market.Supply is not fixed.
Read MoreCompare CAPEX and OPEX.
The major differences between CAPEX and OPEX are as follows −CAPEXBenefits organization more than one year.Also called as capital expenditure, capital expense.One-time purchase.Long term tenure.They are depreciated or amortized over the time.Listed as property or equipment.Earns profits slowly/gradually.Lending institutions act as source of finance.CAPEX comes in balance sheet.Examples − buying of fixed assets, expansion of buildings, purchasing vehicles etc.OPEXOngoing expenses to run day to day operations.Also called as operating expenses, operating expenditure, revenue expenditure.Pay as you go.Relatively shorter term tenure.Fully deducted in the accounting period in which they were incurred.Listed as operating cost.Earned profits for shorter time.Personal saving act as ...
Read MoreWrite the difference between present value and net present value.
The major differences between present value and net present value are as follows −Present valueSum of discounted value of cash flow at a particular discounting rate.Measures future cash flows today.Does not measures additional wealth.Does not provide any information about incremental value of a project/investment.Present value = Future value / (1 + r)^n.Calculates present value of future cash flow.Easier to use.Uses time value of money concept.Decision making by individuals.Net present valueSum of discounted value of future cash flows net of initial investments made by the company.Measures value of a project.Calculates additional wealth generated.Calculates incremental value.Net present value = present value of ...
Read MoreDifferentiate between invoice and bill.
The major differences between invoice and bill are as follows −InvoiceWill have detail list of purchased products, their quantity, price, taxes (if any) etc.Handed over by seller to buyer at any time (before/after service or product).Advanced has to be paid.Records all the items placed.Invoices may arrive along with the goods or after they arrive.If invoice bills arrive late, it serves as a record to cross-checked the contents with the buyer.Examples − amazon, bike showrooms etc.BillServes as request for payment.Handed over directly to buyer from seller.Payment is made immediately.Records sold items, their price, total cost, services etc.For online goods, there will ...
Read MoreCompare between private equity and venture capital.
The major differences between private equity and venture capital are as follows −Private equityInvestments made in those companies which are not publicly listed on any stock exchange.Buys from mature and public companies.Focus will be on all kind of industries.Want to acquire almost full stake of the company in an LBO.Combination structure (debt + equity).Investments made in few companies.Mainly focus on corporate governance.Less risk involved.Venture capitalFinancing small business.Invest mostly in start-up or early stage companies.Focus on technology, biotech and clean tech companies.Acquires minority stake (
Read MoreDifferentiate between ADR AND GDR.
The major differences between American Depository Receipt (ADR) and Global Depository Receipt (GDR) are as follows −American Depository Receipt (ADR)Main purpose is to acquire resources in USA.Main objective is to attract investments from foreign companies.Issued by US domestic capital market.Foreign companies can trade in US markets.US dollar as currency.Listed in The New York Stock Exchange (NYSE) or NASDAQ.Retail investor market.Negotiation done in US only.Legally complicated.Onerous disclosure of terms.Global Depository Receipt (GDR)Main purpose is to acquire resources in different parts of the world.Main objective is to invest in different parts of the world.Issued by European capital market.Foreign companies can trade anywhere ...
Read MoreWrite the difference between financial leverage and operating leverage.
The major differences between financial leverage and operating leverage are as follows −Financial leverageOperating leverageUse of capital structure to earn better returns and to reduce taxes.Tells about capital structure of the firm.Measures financial risk.Relates EBIT and EPS.More the financial leverage, more financial risk.Preferred high.DFL = EBIT/EBT.Rise to financial risk.Degree of financial leverage relates to liabilities side in balance sheet(different source of finance).Firm ability to use fix costs to generate more returns.Tells about fixed cost of the firm.Measures operating risk of the business.Relates sales and EBIT.Higher the operating leverage, more operating risk.Preferred low.Rise to business risk.DOL = Contribution/EBIT.Degree of operating leverage ...
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