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Debt to equity ratio |
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Debt to equity ratioNet borrowings of a company divided by shareholders' funds. The ratio shows the amount of financing that is provided by sources other than the shareholders.Net borrowings means the total borrowings of the company from banks, other financial institutions, debenture holders and preference shareholders, less any cash that is readily available and any short term cash holdings.Both figures can be found in a company's balance sheet. The ratio is often multiplied by 100 and expressed as a percentage. The higher the percentage, the more risky for lenders to the company. Most lenders like the percentage to be below 50%. If it is above 100%, the company is said to be highly geared.Similar MatchesOwners equityOwners equityPaid-in capital plus donated capital plus retained earnings less liabilities. Equity risk premiumEquity risk premiumThe concept that justifies investment in stocks, where your capital is at risk, rather than gilt-edged bonds which are as safe an investment as you can get and where your capital is not at risk provided you hold the bond til maturity.The theory goes that it is only worth investing in stocks if the return you get exceeds the return you could get on gilts - otherwise, why would you take on the extra risk? The difference in returns is known as the equity risk premium.Every historical analysis of returns achieved by stocks compared to bonds shows that stocks outperform bonds in the long term. This is why you repeatedly hear pundits say that the stock market, while risky in the short term, is not risky in the long term. The key thing, as a private investor, is to leave your money in the market for long enough for the long term benefit to eradicate the short term risk. Stick your money in the market for two months, and it might go down 20% if you are unlucky. Stick it in a well-diversified portfolio for 30 years, and it should produce returns that comfortably exceed what you could have got from bonds. Growing Equity Mortgage (gem)Growing Equity Mortgage (gem)A fixed rate, graduated payment loan allowing low beginning payments and a shorter term because of higher payments as the loan progress. Based on the theory of increasing income by the buyer and, therefore. ability to make higher future payments. When state law applies, usury laws in some states may not presently allow such loans when less than interest only payments create interest on interest. Dual syndicate equity offeringDual syndicate equity offeringAn international equity placement that splits the offering is split into two branches - domestic and foreign - and each grantee is handled by a separate lead manager. Equity linked EurobondsEquity linked EurobondsA Eurobond including a convertibility option or warrant. Further SuggestionsEquity fundingEquity linked mortgage Salomon Brothers World Equity Index (SBWEI) personal equity plan Stockholder equity Return on equity (ROE) Equity floor high equity Foreign equity market Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA) Top down equity management style Deferred equity Registered equity market maker TEFRA (Tax Equity and Fiscal Responsibility Act of 1983) Equity options Equity kicker Prices (of equity) Debt/equity swap negative equity Unlevered cost of equity Stratified equity indexing World Equity Benchmark Series (WEBS) Equity homeowners equity account Shared equity transaction |
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