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Exchange Rates – Staying Up on Exchange Rates

One of the most important pieces of information that an investor needs to keep updated on is currency exchange rates. There are few things that affect the value of an international investment more that exchange rates. In order to get a full appreciation for how important exchange rates are to doing business domestically and internationally, you need to understand how even the smallest change in a rate can affect your return on investment. People who deal in investing in currency are especially sensitive to the exchanges all over the world. But you would be surprised at how sensitive almost any rate can be when it comes to a variety of investments.

The most obvious scenario for watching the fluctuation of exchange rates is any investment that involves exchanging money in two different currencies. For example, an American investing in a hotel in Paris, France using American money could lose out on a significant profit if the exchange rates change before he gets his investment completed. If the value of the dollar or the franc changes a few percentage points overnight, then a deal that was originally worth $100,000 in American dollars of profit could drop to $80,000 or less. That is why international business people are always working to close deals and exchange currency so quickly. Both sides want to get the profit they are expecting before the rates change again.

The exchange rates have significant effects at the borders that the United States shares with Canada and Mexico. Every day, millions of dollars of goods are being shipped back and forth across both borders, and the exchange rates could cause havoc for manufacturers on both sides of the border. In most cases, you will find that commerce between borders is done on a pre-paid basis and not paid on delivery. The currency rates can change so quickly, that it makes more sense for businesses to take the chance on getting product pre-paid rather than losing money when the product arrives.

If you are going to get involved in any kind of international trade, then you need to become very familiar with currency exchange rates. Your profit margins and the financial future of your company are at the mercy of exchange rates when you trade with any international vendor for any period of time. Keep a close eye on currency rates when you do international business and always try to get your money up front before you agree to ship.

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Trading Portfolio Risk – Knowing the Basics

Trading is one of the most recognizable attributes of an open market, and millions of people buy and sell shares in one form or another.  As you buy and sell, you’ll build your portfolio accordingly.  Most experts agree that diversification is important when investing, since it can help to reduce your trading portfolio risk.  There are a few key types of risk that you may face when you start trading, and knowing the basics of each of them will help you protect yourself and your finances.  Once you know the risks you’ll be able to plan accordingly and make the smartest trades possible.

Trading portfolio risk can only be properly assessed by looking at a number of different factors.  The first is equity risk, and it is the easiest to recognize.  Equity risk is essentially linked to stock prices, and the chance of serious change in stock value is the main risk you’ll have to consider here.  A number of things can be done to assess this risk, and research is vital.  Another type of trading portfolio risk to be aware of is interest rate risk.  Loans and other forms of credit are influenced tremendously by interest rates, and the value of your portfolio could rise or fall depending on interest rates.

Foreign issues can contribute to trading portfolio risk as well.  Currency risk is what this is commonly referred to as, and it is directly impacted by foreign exchange rates.  If you’ve invested in currency or have overseas holdings, this type of trading portfolio risk may be a very real issue for you.  Finally, commodity risk is also worth considering depending upon the type of investments you’ve made.  That’s because some investments may be directly or indirectly impacted by commodity prices.  Things like oil, grain, corn, and copper may all play a role in your various stocks so be sure that you factor them into your trading decisions.

Obviously, there’s much more to trading portfolio risk than most realize at first.  It takes real diligence to ensure that you don’t run the risk of losing sizeable sums, and all of the previously mentioned risks are well worth factoring into your considerations.  Take the time to assess risks and to keep an eye on the various factors that influence your portfolio valuation and you’ll ensure that you don’t run the risk of losing your investments.  A bit of research and vigilance can go a long way.

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Risk Based Pricing – An Overview

There are plenty of different factors that will have an influence on finances, but one of the most obvious and important is that of mortgages and other loans.  It’s no secret that the burst of the housing bubble and the huge increase in mortgage issues had a major impact on the financial world, from banks and lenders to stock traders.  One of the biggest factors in loans, whether they’re mortgages or other types of loans, is that of risk based pricing.  This term has been used for years to help lenders learn more about just where they’re sending their money and what type of interest should be attached to it.

Basically, risk based pricing is nothing more than the charging of different interest rates on an identical loan to different people.  In other words, one person may face a higher interest rate on their mortgage than someone else who takes out an identical loan.  It’s seen as a type of adjustment based solely on the risk that a lender is taking when they extend a loan, and a number of different factors will influence risk based pricing in one manner or another.  Whether you’re about to take out a loan or are planning on extended one, it’s good to review this process.  And it even affects stock investing, making it all the more important to learn about.

Risk based pricing begins with a background check.  Any lender will likely use a check of this nature to look into things like credit score, employment history, loan purpose, property type and use in the case of mortgages, loan amount, and much more.  While the credit score itself is the primary factor, a number of other issues could contribute as well.  All of the previously mentioned attributes will combine to help a lender learn more about whether or not the credit applicant comes with a higher risk than other applicants may be.

Simply put, if your credit history is poor then you’ll likely face a higher interest rate.  If your credit and financial history are good you’ll experience a better rate and possibly even better terms.  This is because lenders view poor histories as a sign that they may face a defaulting debtor by issuing a loan.  A higher interest rate increases their profit and reduces their risks significantly.  Because of risk based pricing, it’s imperative that you treat your credit score and financial history with the respect that they deserve.

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Reverse Mergers – Quick and Convenient

The process of becoming a company – especially a publicly traded one – can be lengthy and laborious.  While plenty of organizations go through the traditional method of making an initial public offering, many more seize on the benefits provided by reverse mergers.  It’s a quicker method that allows a company to go public while dodging a large amount of the red tape normally associated with the process, and usually for a bit less of an investment in time and money.  It has plenty of benefits and a few drawbacks but for many companies reverse mergers simply make more sense and are the better way to go public.

Speed is a major benefit of reverse mergers.  A traditional initial public offering can take more than a year to complete.  And over the course of that year, much can change.  Market conditions can dwindle, the company itself could lose traction or value, and much more.  A reverse merger takes as little as thirty days to complete, ensuring that there will be few changes in the company or in the overall landscape of the market unless major events unfold.  This speedy transition and avoidance of variables is perhaps the main reason that so many companies go public through this method.

The actual process of reverse mergers is usually cheaper on the whole as well, and there’s less overall stock dilution than there would be in a traditional IPO.  And since the process of raising capital and going public are separate from each other, there’s less money that actually needs to be raised and in many instances no additional money will be needed beyond the basic costs of completing the actual merger.  On the flipside of that, however, a company won’t receive the same large influx of cash that an IPO could bring to the table.

Reverse mergers are basically completed when a company that is private overtakes a public shell company.  These shell companies usually have little or no business operations and exist solely for business moves such as this.  The publicly traded company will, in effect, become the private one and its stocks will be linked to the once-private company.  Plenty of companies can assist in the process, and once you get the ball rolling it takes very little effort or time to complete the merger.  If you’re thinking of going public but the hassles associated with an IPO aren’t that appealing, taking a closer look at reverse mergers may be a good idea.

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Proxy Statement – Leading up to the Meeting

Business meetings are an integral part of operating in the business world.  Whether it’s a quarterly meeting or one called in special circumstances, few companies can move forward without first holding meetings of various functions.  As an annual meeting approaches, a wide range of different steps will be undertaken to ensure that the decisions made during that meeting are the ones that most feel are best for the company.  One of the most important components that lead into the annual meeting is the proxy statement, and it is not only vital to a company’s operations, but actually required by law.

Basically, a proxy statement is a document that contains a variety of different information on a company and its regular operations.  The Securities Exchange Commission requires any company that publicly sells shares to issue a proxy statement to shareholders since it is central to the operation of the company and can help the shareholders understand not only the basics of the company and its finances, but also to make them aware of any issues that are going to be addressed at the upcoming annual meeting.  In most cases, it facilitates proxy voting by giving shareholders the info they need to inform those at the meeting on what they feel a proper vote will be.

A number of things will be included on a proxy statement.  The compensation amounts of any directors or auditors will be present, along with executive or board compensations.  This may include bonuses, salary, travel expenses, stock option, and other perks that they’ve received.  It also details just who is on the audit committee, background info on the board members and other key executives, and a look at any potential conflicts of interest.  The proxy statement often also includes information on any votes that will be coming up in the annual meeting.

If positions on the board of directors or other factors that will affect the company are to be voted upon at the annual meeting, shareholders will use the proxy statement to determine the best course of action and may even seek assistance from various advisors.  Meetings are obviously important for any business, and the proxy statement ensures that shareholders are as informed as they possibly can be for any vote and that they understand all the various aspects of how the company works.  They’ve been used for years, and despite recent controversy will likely continue to be used for some time.

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Ponzi Schemes – Taking Advantage of Investors

While they’ve taken place in various guises over the last century, Ponzi schemes recently raged back to headlines thanks to Bernie Madoff, who is responsible for the largest case of financial fraud in American history.  Whether you’re a regular investor or just someone who wants to understand more about what everyone means when they’re talking about these schemes, it’s easy to grasp the basic principle behind them and to understand just why they’re so detrimental.  Many people have lost virtually all of their savings due to Ponzi schemes, and oftentimes entire fortunes vanish as a result of them.  Here’s a bit of info on these fraudulent rackets.

Ponzi schemes take their name from Charles Ponzi, who ran a highly successful one in 1920.  The scheme wasn’t invented by Ponzi, but he had more success with it than anyone before him and he quickly rose to infamy as a result.  Basically, Ponzi schemes work by providing payments to investors from the money that they’ve already invested or from funds that new investors place into the scheme.  Fake records and account statements are usually used to help cover up the total lack of profits, and whenever a payment is requested it will simply be taken from new funds.

Obviously, Ponzi schemes can’t sustain themselves forever.  Madoff managed to perpetuate his particular scheme for quite some time, but eventually either phony securities will be noticed by enforcement agencies, investments slow to the point of rendering the scheme inoperable, or the perpetrator of the scheme simply vanishes.  In many cases, investors will actually reinvest their money at the request of the perpetrator – a fact that helps maintain them for some time.  Eventually, however, the steam will run out of the operation and it will come crashing to an end.  There are a few things you can remember to help yourself avoid these schemes.

First of all, just be sure that you’re actually following your investments.  Unregistered securities are a red flag for trouble.  Also, be sure that you understand that higher than average returns being promised to you that sound too good to be true very well could be.  Try to find investment brokers that you really trust and that your peers have faith in as well.  And be sure that you diversify your investments, just in case you accidentally become part of Ponzi schemes.  Judicious, carefully researched investment is the best prevention and the best protection for your money.

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Pink Sheets – Alternative Investments

Investment is a multifaceted world that can be as exciting as it is profitable.  And since so many companies exist, ready to be traded, finding the best ones and getting what you think is a good purchase can be fairly tricky.  One area of investing that some investors avoid while others embrace is in Over the Counter stocks, usually called pink sheets.  These stocks carry with them some advantages and some risks, and knowing a bit more about them can help you decide whether or not they’re the right call for your investment dollars.  Some love them, some hate them, but they’re nonetheless worth knowing about.

Basically, pink sheets are shares in companies just like traditional, better known stocks.  However, unlike those traded on a stock exchange these shares are in companies that either don’t meet the requirements to appear in listings like the New York Stock Exchange or NASDAQ, or haven’t filed with the SEC.  Many pink sheets companies are actually small businesses that are trying to move forward through selling shares, listing on Over the Counter lists to help raise capital.  The name itself come from the fact that the original shares were once printed on pink slips of paper, but today they simple end with the notation of .PK.

Basically, the benefits of investing in pink sheets are the facts that they are usually a good bit cheaper than other stocks will be and that they could have major rewards.  Investing in a small company early on could lead to serious profit if the company finds real success – a one dollar share could explode into a thirty dollar one.  Of course, pink sheets are also far riskier than traditional stocks since there are no real reporting requirements.  Also, the fact is that many businesses simply fail, and if you’ve invested in one of these you could be out a good deal of money.

While most investors agree that pink sheets are among the riskiest investments on the market, they can also be highly rewarding.  If you’re thinking of visiting the Over the Counter boards then you should take the time to ensure that any company you invest in is thoroughly researched.  You’re pouring your hard earned dollars into this company, after all, so be sure you know just what you’re getting yourself into.  With a little bit of research and some careful choices, pink sheets could provide you with some very rich rewards.

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Over the Counter Markets – The Basics

Most people have heard of the New York Stock Exchange and the NASDAQ, but even some investors shy away from other types of trading.  While countless people have made their fortunes trading on the major stock markets, there are plenty of other investment options out there that hold the potential to deliver very real financial rewards.  Of course, those rewards aren’t without risks, but if you learn a bit more about using over the counter markets then there’s a good chance you’ll at least want to dip your toes into their waters once or twice.  It could deliver a very real profit to you if you handle it with respect.

Basically, over the counter markets are those that sell shares in companies that aren’t listed on the major exchanges.  OTC markets – often called pink sheets – aren’t even officially considered to be exchanges for just that reason.  These shares aren’t on major exchanges for one of two main reasons.  In most cases they either don’t meet the minimum requirements to be listed or don’t file their information through the Securities Exchange Commission.  This means that the companies themselves are less well-known and that far less information about their business structure, profits, and future is known.

Many investors stay away from over the counter markets because of the lack of filing and info on the companies.  This results in greater risks since it is much more difficult to determine if a company is selling shares fraudulently or whether or not it is more likely to be a failure in the long term.  However, investing in over the counter commodities could result in major benefits since the shares will be very cheap initially.  If the company finds major success, the shares you bought for next to nothing could become highly valuable and add significant profit margins to your bank account.

The real key to success with over the counter investing is research.  Since little information will actually be available to you, you’ll need to take the time to figure out if you’re placing your money in a reputable business yourself.  This will involve a good bit of research on your part, and it can be a time consuming affair.  However, many investors have made millions off of smart investing in pink sheets, so taking the time to consider it could pay off big.  There are huge risks, to be sure, but huge rewards as well.

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Operating Leverage – At a Glance

There are probably as many models and formulas used in the world of business as there are business types themselves.  Formulas can help figure up everything from profit margin to human resource effectiveness, but one of the most important formulas to familiarize yourself with is that of operating leverage.  This term refers to operating income and operating costs of a few different varieties, and it can influence the valuation of a company, its risk level, and much more.  It could even determine whether or not investors or lenders are willing to provide funds to the company.  In other words, it’s a vital cog in the business machine and one that is well worth learning more about.

In most cases, operating leverage is tied very closely to financial leverage – so much so that the two are practically analogous.  A number of figures can help you judge the operating leverage of company, but the most commonly used formula is simply the fixed costs plus the variable costs.  Adding these two figures together will give you the total costs.  For example, employee salaries, lease amount, and other similar costs will be fixed while things like restocking inventory or even marketing can be considered to be variable costs.

Another computation to address is debt plus equity to provide a look at total assets.  This will correlate with total costs and provide a clearer picture of operating leverage.  Various other factors also contribute to these figures, including things like the contribution margin, percentage of change in sales for a given time period, and much more.  In simple terms, the higher a company’s operating leverage, the more that sales volume will impact its bottom line.  A slow month of sales could nearly cripple a company with a very high OL, which makes it important for all business owners to keep an eye on their leverage at any given time.

Obviously, business owners aren’t the only ones who need to consider operating leverage.  Investors and lenders will take a close look at it as well before providing any kind of serious money to the business in question.  That’s because while investing or lending certainly isn’t without its risks, a variety of different factors can help reduce that risk to a more acceptable level.  Operating leverage is a perfect example of this and one of the main reasons that it’s so important.  While certain companies will be unable to control their leverage, just understanding it is important as well.

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MT760 Explained – MT760 at a Glance

There are so many different procedures in the world of finance and investing that it can be hard to keep track of all the different ones used.  For many, having an MT760 explained to them is important since this type of procedure can have many consequences, sometimes positive and sometimes very negative.  If you’re trying to learn more about an MT760 or are somehow involved in one, there are a few basic things to understand.  Once that you have a solid grasp on these principles you’ll be able to get a good comprehension of just what this procedure is and how it is used in finance.

Basically, an MT760 is a type of bank guarantee that serves not only as a letter of credit, but also puts a hold on any funds that are associated with the operation.  It functions very similarly to other types of guarantees but carries with it a far greater risk to the issuer while greatly reducing the risks experienced by the recipient.  The MT760 is an interbank communication that you’ll never actually see as far as getting a document or report on, but is still a major influence on your overall financial transactions if you are involved in one.

When an MT760 occurs, the bank will place a hold on the funds of the client and allow the person who the MT760 was issued for to use them at their discretion.  The original client can’t use the funds, but the person who received the hold will be able to utilize them.  Obviously this creates a high level of risk for those who issue this type of guarantee and it has indeed been used by more than one unsavory investor to scam others.  Because of this, it’s vital that you ensure this is the right call to make before you proceed with it.

Many people opt for a letter of credit instead of the MT760 since the latter is not negotiable after it has been issued.  If various conditions arise that affect the funds or the use of them, there’s really nothing that can be done to change the MT760.  It is certainly one type of financial procedure that you may never have any interaction with, but if you do then you owe it to yourself to fully understand the basics behind it and how it will impact both parties that are involved with it.  There may be better options, or this could be the best choice for your situation.

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