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Economics & Finance
Articles by Pratik Kumbhare
19 articles
Zero-Based Budgeting
Zero-based budgeting (ZBB) is a budgeting approach that requires organizations to justify every expense from scratch for each budget period, starting from a "zero base." Unlike traditional budgeting that uses previous year's budget as a baseline, ZBB demands that all expenses be evaluated and approved based on their necessity and value to the organization. Key Concepts Zero-based budgeting (ZBB) fundamentally differs from conventional budgeting methods by requiring complete justification of all expenses. Every expenditure must be analyzed and approved based on its worth and necessity, regardless of historical spending patterns. This approach compels managers to evaluate ...
Read MoreWash Trading
Wash trading is a manipulative trading technique where an entity simultaneously buys and sells the same financial asset without genuine change in ownership. This practice creates artificial trading activity designed to mislead other market participants and distort market indicators. It undermines market integrity and is considered illegal in most jurisdictions worldwide. Key Concepts Wash trading involves a trader or institution acting as both buyer and seller of the same security. They execute trades at similar prices, creating the appearance of legitimate market activity while no actual ownership transfer occurs. The primary goals include manipulating market prices, generating fictitious ...
Read MoreVoluntary Delisting
Voluntary delisting occurs when a publicly traded company chooses to remove its shares from a stock exchange. This strategic decision is typically driven by factors such as mergers, acquisitions, cost reduction, or the desire for greater operational privacy and flexibility. Process of Voluntary Delisting Board Approval − The board of directors evaluates the rationale for delisting and assesses alignment with strategic objectives Shareholder Approval − The delisting proposal is submitted to shareholders for formal approval based on regulatory voting requirements Stock Exchange Notification − The company formally notifies the stock exchange of its intention to delist, providing required ...
Read MoreVA Loan
A VA loan is a mortgage benefit guaranteed by the U.S. Department of Veterans Affairs for eligible veterans, active-duty service members, and surviving spouses. This government-backed loan program enables qualified borrowers to purchase or refinance homes with favorable terms, including no down payment requirements and competitive interest rates. Key Features of VA Loans A VA loan is a type of mortgage guaranteed by the Department of Veterans Affairs rather than issued directly by the VA. The government backing reduces risk for lenders, allowing them to offer more favorable terms to borrowers. Unlike conventional mortgages, VA loans ...
Read MoreSoft Credit Inquiry
A soft credit inquiry is a type of credit check that allows lenders, employers, or individuals to view your credit report without impacting your credit score. Unlike hard inquiries, soft inquiries do not require your explicit permission and are typically used for background checks or pre-qualification purposes. Key Concepts A soft credit inquiry, also called a soft pull, is essentially a background check on your creditworthiness. When you check your own credit score, this is classified as a soft inquiry. These inquiries may be performed by employers conducting background checks, banks evaluating your eligibility for credit cards, or ...
Read MoreShort Interest
Short interest refers to the total number of shares of a particular stock that have been sold short but have not yet been covered or closed out. This metric serves as an important indicator of market sentiment, as it reveals how many investors are betting against a stock's price performance. Formula Short interest can be calculated and expressed in two ways: $$\mathrm{Short\ Interest\ Ratio = \frac{Number\ of\ Shares\ Sold\ Short}{Average\ Daily\ Trading\ Volume}}$$ $$\mathrm{Short\ Interest\ Percentage = \frac{Number\ of\ Shares\ Sold\ Short}{Total\ Outstanding\ Shares} \times 100}$$ Number of Shares Sold Short ...
Read MoreScalping
Scalping is a high-frequency trading strategy that involves making profits from small price movements in stocks or other financial instruments. Traders who use this technique, known as scalpers, typically hold positions for seconds to minutes, aiming to capture minimal price fluctuations multiple times throughout the day. Key Concepts of Scalping Scalping operates on the principle that small price movements are easier to capture than large ones. The strategy relies heavily on technical analysis and requires traders to execute numerous trades rapidly. Scalpers typically target highly liquid markets where they can enter and exit positions quickly without ...
Read MoreSanta Claus Rally
The Santa Claus Rally refers to the historical tendency of stock markets to increase during the final five trading days of December through the first two trading days of January. This seasonal phenomenon has been observed consistently in financial markets, with stock prices demonstrating an upward trend around this holiday period. Historical Performance Yale Hirsch first identified this pattern in 1972, noting in his Stock Trader's Almanac that from 1950 to 1971, the S&P 500 had increased by an average of 1.5% over those seven days. Since 1950, the broad market indicator has continued this trend with an ...
Read MoreRematerialization of Shares
Rematerialization is the process of converting electronic or dematerialized shares back into physical certificates. This procedure reverses dematerialization, allowing investors to obtain tangible ownership documents for their securities through their Depository Participant. Process of Rematerialization The rematerialization process involves several key participants and follows a structured workflow: Step 1 − Investor submits a Remat Request Form (RRF) to their Depository Participant (DP) Step 2 − DP blocks the investor's electronic holdings and forwards the request to NSDL/CDSL Step 3 − DP submits the application to the Issuer/Registrar & Transfer Agent (RTA) Step 4 − RTA prints ...
Read MoreQuarter on Quarter (QoQ)
Quarter on Quarter (QoQ) is a financial analysis method that compares data or metrics between two consecutive quarters to evaluate short-term performance trends. This sequential comparison helps businesses track momentum, identify patterns, and make informed decisions based on recent performance changes. Formula The Quarter on Quarter growth rate is calculated using the following formula: $$\mathrm{QoQ\ Growth\ Rate\ (\%) = \frac{Current\ Quarter\ Value - Previous\ Quarter\ Value}{Previous\ Quarter\ Value} \times 100}$$ Where: Current Quarter Value − The metric value for the most recent quarter Previous Quarter Value − The metric value ...
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