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what is the difference between the federal budget deficit and the federal government debt | a federal budget deficit occurs when government spending outpaces revenue or income from taxes fees and investments deficits add to the national debt or federal government debt if government debt grows faster than gross domestic product gdp the debt to gdp ratio may balloon possibly indicating a destabilizing economy 3 | |
when was the last federal budget surplus | the last time the u s government had a federal budget surplus was in 2001 in every year since there has been a federal budget deficit 4 | |
what can the government do about a budget deficit | the government can work to cut back the budget deficit by using its fiscal policy toolbox to promote economic growth such as scaling back government spending and raising taxes | |
what causes a budget deficit to improve | budget deficits reflected as a percentage of gdp may decrease in times of economic prosperity as increased tax revenue lower unemployment rates and increased economic growth reduce the need for government funded programs such as unemployment insurance the bottom linebudget deficits are a negative balance between a government s spending and revenues when a government spends more than it collects in tax revenues there is a deficit conversely if there is more collected than spent there is a surplus | |
what is a budget surplus | the term budget surplus refers to a situation that occurs when income exceeds expenditures the term is often used to describe a corporation or government s financial state unlike individuals who have savings instead of budget surpluses a surplus indicates that a government s finances are being effectively managed the opposite of a budget surplus is a budget deficit which commonly occurs when spending exceeds income investopedia sabrina jiang | |
how a budget surplus impacts the economy | as noted above the term budget surplus is often used to define the financial situation of a company or government these entities often run in surpluses when income or revenue exceeds spending or when there are shifts in the economic climate or the way governments spend taxpayers money an increase in taxes can also result in a budget surplus individuals can also run surpluses but their surpluses are commonly called savings a surplus implies the government has extra funds which can be used for many different purposes including making purchases paying off debts or saving for future generations the following are some of the ways surpluses may be used a budget surplus can often be an indicator of a healthy economy but it is not necessary for a government to maintain a surplus the u s has rarely run a budget surplus and experienced long periods of economic growth while running a budget deficit which is the opposite of a surplus 31 a budget deficit occurs when expenditures exceed income money is borrowed and interest is paid when a deficit occurs a balanced budget on the other hand exists when expenditures equal income risks of a budget surplushaving funds in the coffers can be a sign of prudent spending but it doesn t mean that running a surplus is always beneficial as such it can sometimes come with its own problems the main risks of running a budget surplus are the decline in investment revenue and higher taxation when companies or governments run a surplus they re not spending or investing as much when investment drops returns aren t generated similarly when there s a drop in revenue there isn t enough money going through the economy in order to compensate and prevent deflation governments may have to raise taxes and companies may need to raise prices keynesian economics theory suggests that entities should run a surplus during times of prosperity and a deficit during a downcycle or depression this allows the company or government to save money when it is well off and to spend money on economic stimulus when the economy is less well off the size of the national deficit in the united states as of january 2023 2advantages and disadvantages of a budget surplusthere is no simple answer as to whether a budget surplus is good or bad running a surplus has its advantages the same way running a deficit does the best action depends on the entity s specific economic situation and priorities having said that we ve highlighted some of the most common pros and cons of running a budget surplus running a budget surplus means there is additional money to spend at the end of the accounting period which is generally a fiscal year this extra cash can be used to pay off debts or be reinvested in other projects it can even be returned to the public in the form of price or tax cuts a large surplus also reduces the need for borrowing through corporate or government bond issues this will reduce interest rates in that country allowing people and businesses to borrow money at a lower cost running a surplus is not always an unmixed blessing although it may seem wise for a government to save money those savings mean that the wider economy will not benefit from the multiplier effect of government spending in addition those savings could mean less spending on public services a budget surplus can also affect a company s economic standing or a country s inflation levels and gross domestic product gdp in the case of governments spending is one of the four components of gdp meaning that a government that struggles to reduce its spending will ultimately reduce its gdp since lower spending reduces the amount of money circulating in an economy deflation can occur facilitates the saving of moneyincreases credit ratings and reduces borrowing costslowers interest rates and encourages economic activitycan lead to price hikes or excessive taxationless economic stimulus from spendingreduces the amount of money circulating in an economy potentially causing deflationu s budget surplusesthe u s treasury releases government budget information on a monthly basis budget surplus or deficit data appears in the statements which summarize whether the government is spending or collecting more money than expected in addition the data records future collections or changes to the budget 4as noted above the u s government eliminated a large budget deficit while bill clinton was president this resulted in a budget surplus in the 2000 fiscal year revenue came in at 2 025 trillion while the total spending bill for the year ended up at 1 788 trillion this resulted in a budget surplus of about 236 billion 1this surplus ended just after the september 11 attacks in 2001 the federal government has been running at a deficit since then although the size of the deficit rose and fell in accordance with economic circumstances for instance the deficit grew to 1 41 trillion in 2009 in the aftermath of the great recession before slowly declining as the economy recovered this was the highest deficit of the 21st century at least until the covid 19 pandemic when the deficit again ballooned to more than 3 trillion 5 | |
is a budget surplus a good thing | a budget surplus is generally considered a good thing because it means that the government has money left over that can be reinvested or spent to pay off debts however it depends on how wisely the government is spending money if the government has a surplus because of high taxes or reduced public services that can result in a net loss for the economy as a whole | |
what is a budget surplus vs a budget deficit | a budget surplus is when a body such as the u s government spends less money during an accounting period than it takes in through revenue a deficit is when spending is higher than revenue requiring the government to borrow money in order to finance its activities | |
what is the current u s budget deficit | the u s budget is running a deficit of over 421 billion as of january 2023 2 | |
has the u s ever had a budget surplus | yes during the clinton presidency the federal government was able to reduce spending and increase revenues turning a large deficit into a small surplus the last year where the government ran a budget surplus was in 2001 the bottom linebudget surpluses occur whenever an entity has more income than it spends this includes companies and governments individuals can also have surpluses although they re normally called savings having a surplus can be beneficial because those funds can be used to pay off debt or fund new investments but there are risks to running a surplus which include increased taxation or pricing and a loss of revenue so whether an entity runs a surplus or a deficit can often be a double edged sword | |
what is a budget variance | a budget variance is a periodic measure used by governments corporations or individuals to quantify the difference between budgeted and actual figures for a particular accounting category a favorable budget variance refers to positive variances or gains an unfavorable budget variance describes negative variance indicating losses or shortfalls budget variances occur because forecasters are unable to predict future costs and revenue with complete accuracy budget variances can occur broadly due to either controlled or uncontrollable factors for instance a poorly planned budget and labor costs are controllable factors uncontrollable factors are often external and arise from occurrences outside the company such as a natural disaster investopedia paige mclaughlinunderstanding budget variancesthere are three primary causes of budget variance errors changing business conditions and unmet expectations significance of a budget variancea variance should be indicated appropriately as favorable or unfavorable a favorable variance is one where revenue comes in higher than budgeted or when expenses are lower than predicted the result could be greater income than originally forecast conversely an unfavorable variance occurs when revenue falls short of the budgeted amount or expenses are higher than predicted as a result of the variance net income may be below what management originally expected if the variances are considered material they will be investigated to determine the cause then management will be tasked to see if it can remedy the situation the definition of material is subjective and different depending on the company and relative size of the variance however if a material variance persists over an extended period of time management likely needs to evaluate its budgeting process budget variance in a flexible budget versus a static budgeta flexible budget allows for changes and updates to be made when assumptions used to devise the budget are altered a static budget remains the same however even if the assumptions change the flexible budget thus allows for greater adaptability to changing circumstances and should result in less of a budget variance both positive and negative for instance assuming production is cut variable costs are also going to be lower under a flexible budget this is reflected and results can be evaluated at this lower level of production under a static budget the original level of production stays the same and the resulting variance is not as revealing it is worth noting that most companies use a flexible budget for this very reason example of unfavorable varianceas an example let s say that a company s sales were budgeted to be 250 000 for the first quarter of the year however the company only generated 200 000 in sales because demand fell among consumers the unfavorable variance would be 50 000 or 20 the company would look at the sales mix variance for each product or product line to help identify problems similarly if expenses were projected to be 200 000 for the period but were actually 250 000 there would be an unfavorable variance of 50 000 or 25 | |
what are build america bonds | build america bonds babs were taxable municipal bonds that featured federal tax credits or subsidies for bondholders or state and local government bond issuers build america bonds babs were introduced in 2009 as part of president obama s american recovery and reinvestment act arra to create jobs and stimulate the economy the build america bonds program expired in 2010 1the build america bonds program expired in 2010 understanding build america bonds babs many savers were afraid to invest in anything other than federal government bonds right after the 2008 financial crisis investors were even staying away from municipal bonds the federal government introduced build america bonds babs to ensure that local municipalities and counties were able to raise much needed capital during the recession babs were introduced to encourage investment in local areas babs were debt securities issued by a state municipality or county to finance capital expenditures the interest rates on these bonds were subsidized by the federal government which made the cost of borrowing for infrastructure projects lower for state and local governments in addition investors at that time were more likely to opt for a bond issued by a government body corporate bonds had a high perceived default risk immediately following the 2008 financial crisis types of build america bonds babs in general there were two distinct types of babs tax credit babs and direct payment babs tax credit babs offered bondholders and lenders a 35 federal subsidy of the interest paid through refundable tax credits reducing the bondholder s tax liability if the bondholder s tax liability was insufficient to use the entire credit it could be carried forward to future years 2the direct payment babs offered a similar subsidy but it was paid to the bond issuer the u s treasury made a direct payment to build america bond issuers in the form of a 35 subsidy of the interest they owed to investors since the effective cost of borrowing fell for issuers they were able to offer the bonds to investors at competitive rates in the markets 2 california s 5 2 billion bab issue in early 2009 for example offered an interest rate of 7 4 to investors the state only had to pay 4 8 of that interest and the federal government paid for the rest 3restrictions on build america bonds babs some traditionally tax exempt issuers such as private party issuers and 501 c 3 organizations were not eligible to use the bab program 4 also the program was only open to new issue capital expenditure bonds issued before jan 1 2011 babs could not be issued for refinancing old debts 5build america bonds vs traditional muni bondsthe difference between build america bonds and traditional municipal bonds is that income generated from regular muni bonds is exempt from federal and some state taxes with babs the interest income was subject to tax at the federal level 6 | |
what is a build operate transfer bot contract | a build operate transfer bot contract is a model used to finance large projects typically infrastructure projects developed through public private partnerships the bot scheme refers to the initial concession by a public entity such as a local government to a private firm to both build and operate the project in question after a set time frame typically two or three decades control of the project is returned to the public entity | |
how build operate transfer bot contracts work | under a build operate transfer bot contract an entity usually a government grants a concession to a private company to finance build and operate a project the company operates the project for a period of time typically 20 or 30 years with the goal of recouping its investment then transfers control of the project back to the public entity 1bot projects are normally large scale greenfield infrastructure projects that would otherwise be financed built and operated solely by the government examples include a highway in pakistan a wastewater treatment facility in china and a power plant in the philippines in general bot contractors are special purpose companies formed specifically for a given project during the project period when the contractor is operating the project it has built revenues usually come from a single source an offtake purchaser with a binding agreement this may be a government or state owned enterprise 1power purchase agreements in which a government utility acts as offtaker and purchases electricity from a privately owned plant are an example of this arrangement under a traditional concession the company would sell directly to consumers without a government intermediary bot agreements often stipulate minimum prices the offtaker must pay variations on the build operate transfer bot contracta number of variations on the basic bot model exist under build own operate transfer boot contracts the contractor owns the project during the project period meanwhile under build lease transfer blt contracts the government leases the project from the contractor during the project period and takes charge of the operation other variations have the contractor design as well as build the project one example is a design build operate transfer dbot contract the bot approach was developed in the late 1970s against a backdrop of constrained budgets in developing countries and a downturn in work for international construction firms 2example of a build operate transfer bot contractthe elevated train system in bangkok thailand known as the bangkok mass transit system bts or bts skytrain was created from a 30 year bot concession agreement between the bangkok metropolitan administration the government entity that owns the line and thai transport firm bangkok mass transit system bmts public company limited 3under the terms of the agreement bmts was given the job of designing financing building and operating the transit system out of its own pocket in exchange for collecting all fares and advertising revenue when the train line went live 3based on its projections bmts figured it would recoup its costs within a decade with at least a 16 rate of return however it didn t pan out that way btsc ran into financial trouble after the number of people using the service fell way below its original prediction 3bot contracts are generally more prevalent in developing economies helping cash strapped local governments to finance large complicated infrastructure projects that they might otherwise be unable to manage and afford | |
what is the basic framework of a bot contract | a bot can be broken down into three distinct phases | |
what are the risks of bot contracts | one of the biggest risks is that the contract ends up losing money to be a success for all parties the project should provide a sufficient return on investment for the private entity while also benefiting the public entity financially and beating other available alternative options unfortunately this doesn t always happen big projects come with great risk and the finances can be under or overestimated | |
what is the difference between bot and ppp | a public private partnership ppp is when a private entity takes over finances and operates large scale government projects such as public transportation networks parks and hospitals a bot contract is just one of a series of potential ppp agreements the bottom linebot contracts can make a lot of sense in theory they enable governments to transfer the cost and risk of big important infrastructure projects to a specialist private entity which has the potential to make lots of money from it if it turns into a success before handing it back sounds like a win win right in theory yes though sadly there are lots of variables that can turn what appears to be a dream arrangement into a complete nightmare especially for the risk bearing private company | |
what is a bull | a bull is an investor who thinks the market a specific security or an industry is poised to rise investors who adopt a bull approach purchase securities under the assumption that they can sell them later at a higher price bulls are optimistic investors who are attempting to profit from the upward movement of stocks with certain strategies suited to that theory understanding bullsbullish investors identify securities that are likely to increase in value and direct available funds toward those investments opportunities to assume the position of a bull investor exist even when an overall market or sector is in a bearish trend bull investors look for growth opportunities within the down market and may look to capitalize should market conditions reverse bullish characteristicscharacteristics of a bull market include bulls and risk mitigationto limit the risk of losses a bull may employ the use of stop loss orders this allows the investor to specify a price at which to sell the associated security should prices begin to move downward additionally these investors may purchase puts to help compensate for any risk present in a portfolio bulls can also use diversification to mitigate risk by spreading investments across different asset classes sectors styles and geographic regions investors can still remain bullish without putting too many eggs in one basket bull trapsbull investors must be mindful of what is commonly known as bull traps a bull trap exists when an investor believes a sudden increase in the value of a particular security is the beginning of a trend resulting in the investor going long this can lead to a buying frenzy where as more investors purchase the security the price continues to inflate once those interested in purchasing the security have completed the trades demand may decline and lower associated security prices as the price declines bull investors must choose whether to hold or sell the security if investors begin to sell the price may experience further decline this may prompt a new round of investors to sell their holdings and drive the price down even further in cases where a bull trap existed the associated stock price often does not recover bull vs beara bear is the opposite of a bull bear investors believe that the value of a specific security or industry is likely to decline in the future a bear market occurs when the market experiences prolong price declines typically when securities prices fall by 20 or more and there is negative investor sentiment if you are bullish on the s p 500 you attempt to profit from a rise in the index by going long bears however are pessimistic and believe that a particular security commodity or entity is set to suffer a decline in price bullishness and bearishness do not necessarily apply only to the stock market people can be bullish or bearish on any investment opportunity including real estate and commodities such as soybeans crude oil or even peanuts examples of a bullone of the best examples of a bull market was the sharp rise in us technology stocks during the late 1990s between 1995 and its highest point in march 2000 the nasdaq index gained a whopping 400 unfortunately the nasdaq crashed nearly 80 over the following several months essentially giving back all of the gains made during the bull run another famous example of a bull market was the extreme run up in u s housing prices in the mid 2000s it was fueled by easy money policies relaxed lending standards rampant speculation unregulated derivatives and irrational exuberance the housing bubble was directly related to and possibly the root cause of the 2007 2008 financial crisis always be on the lookout for early signs that a bull run may be coming to an end for instance u s homeownership had peaked at 69 2 in 2004 1 and in 2006 home prices began to fall yet the risks only became apparent to most investors in august 2007 bullish faqsbullish stocks are typically defined as stocks that display a bullish price pattern in order to identify bullish stocks there s no substitute for learning the ins and outs of technical analysis of course traders should also familiarize themselves with technical indicators such as overlays and oscillators some of the more common bullish patterns used by traders and investors include four of the most commonly used technical analysis indicators are a bullish reversal is a pattern that represents a price decline followed by a rebound common types of bullish reversal patterns include | |
what is the bull call spread | the bull call spread is a type of options trading strategy that involves two call options the bull call strategy is executed by purchasing call options at a specific strike or exercise price while also selling the same number of calls of the same asset at a higher strike price it should be noted that both options should have the same expiration date this type of strategy is used when the trader expects a moderate rise in the price of an underlying asset the goal of a bull call spreadthe goal of a bull call spread is to profit from a moderate increase in the price of the underlying asset if the price of the underlying asset rises moderately and is near or above the higher strike or exercise price at expiration the strategy will reach its maximum profit however if the price falls or does not rise significantly the strategy will incur a loss which is limited to the net premium paid to establish the spread the construction of a bull call spreadconstructing a bull call spread involves the following steps it should be noted that the maximum profit in a bull call spread is limited to the difference between the strike price of the two call options less the net premium paid the maximum loss is limited to the net premium paid to establish the spread calculating bull call spread gains losses and b ehere is an example of a bull call spread it should be noted that this example does not take into account transaction costs or taxes which can affect the profitability of the strategy a trader has identified the underlying asset as a stock called abc abc is currently trading at 50 and the trader thinks that the stock will rise moderately over the next month the trader then decides to set up a bull call spread to profit from this expected price increase the trader will buy a call option with a strike price of 50 that expires in a month s time this is called an at the money option because the strike price is equivalent to the current trading price the premium or cost of this option is 3 per share for 100 shares simultaneously the trader sells a call option on the same stock with a strike price of 55 that also expires in one month with a cost of 2 per share for 100 shares this option is called an out of the money option because the strike price of the call is higher than the current trading price of the underlying asset this trader has now put together a bull call spread with the initial values the maximum loss is the net premium paid for the options the formula for the maximum loss of a bull call spread is as follows since each options contract represents 100 shares the total maximum loss would be the maximum gain is the difference between the strike prices of the two options minus the net premium paid the formula for the maximum gain of a bull call spread is as follows plugging in the values results in the following since the options are for 100 shares multiply the gain by 100 the total maximum gain would be 400 the breakeven price is the market price an asset needs to reach for the spread to return the money spent the formula to breakeven is so the stock would need to rise to 51 by the expiration date for the trader to break even bull call spread pros and consinvestors can realize limited gains from an upward move in an asset s pricea bull call spread is cheaper than buying only an individual call optionthe bullish call spread limits the maximum loss of owning an asset to the net cost of the strategythe investor forfeits any gains in the asset s price above the strike of the sold call optiongains are limited given the net cost of the premiums for the two call optionsthe effect of volatility on a bull call spreadas it relates to a bull call spread the effect of volatility is somewhat neutralized this is due to the result of buying and selling call options on the same underlying asset with the same expiration date | |
when volatility rises the price of both options tends to increase this means that the value of the long call option would increase but at the same time the value of the short call option would also increase given that this options trading strategy is long one option and short another option the effects of a change in volatility on both options can offset each other to a large extent | in the language of options this is often referred to as a near zero vega vega measures the sensitivity of an option s price to changes in volatility a near zero vega implies that the price of the bull call spread changes very little when volatility changes assuming other factors remain constant it should be noted that the bull call spread is not completely immune to changes in volatility the exact impact can depend on other factors including how far the options are in or out of the money and how much time is left until expiration the impact of time on a bull call spreadthe impact of time on a bull call spread also known as time decay or theta is complex because the strategy involves two options a long call and a short call both of these options have different responses to the passage of time the time value portion of an option s total price decreases as expiration approaches but the overall impact of time decay on a bull call spread is dependent on the relationship of the stock price to the strike prices of the spread if the stock price is halfway between the strike prices then time erosion has little effect on the price of a bull call spread because both the long call option and the short call option decay at approximately the same rate for the long call option in a bull call spread time decay is detrimental as time passes all else being equal the value of the option that is bought decreases this is because the option has less time to make a profitable move thus it is less valuable if the stock price is near or below the strike price of the long call option the call option with the lower strike price then the price of the bull call spread decreases with the passing of time and would therefore lose money this happens because the long call is closest to the money and decreases in value faster than the short call option for the short call option in a bull call spread time decay works in favor of the trader as time passes the option that was sold decreases in value which is beneficial because the trader has the obligation under that option if the short call option expires worthless the trader keeps the entire premium received from selling it however if the stock price is near or above the strike price of the short call option the call option with the higher strike price then the price of the bull call spread increases with the passage of time and would therefore make money this happens because the short call option is closer to the money and decreases in value faster than the long call the impact of the underlying s price change in a bull call spreadthe price change of the underlying asset has a significant impact on a bull call spread a bull call spread strategy profits when the price of the underlying asset rises if the price of the underlying asset rises significantly and is above the strike price of the short call option at expiration the strategy reaches its maximum profit this is because the long call option increases in value while the short call option is offset by the increase in the underlying asset s price on another note if the price of the underlying rises moderately and is between the strike prices of the long call option and short call option at expiration the strategy will still profit but not as much as in the scenario above the long call option increases in value but the short call option also starts to gain in value which reduces the overall profit finally if the price of the underlying asset falls or does not rise significantly the bull call spread strategy will incur a net loss if the price is below the strike price of the long call option at expiration both options would expire worthless and the loss is limited to the net premium paid to establish the spread other factors to consider in a bull call spreadtraders consider several other factors these include it should be noted that while bull call spreads can limit risk as the maximum possible loss is the initial cost of the spread they also cap potential profits traders weigh these factors and consider their risk tolerance and market outlook before employing this strategy | |
which is better bull call spread or bull put spread | a bull put spread is a different bull spread where the trader sells one put option and buys another the short put has a higher strike than the long put whereas in the bull call spread the short call has a lower strike and the long call has a higher strike they are used for different bullish outlooks so neither is better than the other | |
what are the disadvantages of the bull call spread | the bull call spread loses money if the underlying doesn t increase and gains are capped | |
when to exit a bull call spread | a trader can sell the spread to another trader for more than the net premium for a profit if options prices cooperate otherwise time decay can devalue a spread so some traders close their spreads about 30 days before expiration the bottom linea bull call spread is an options trading strategy used when a trader expects a moderate rise in the price of an underlying asset it involves buying a call option at a specific strike or exercise price and selling another call option on the same asset at a higher strike price both with the same expiration date the goal is to profit from a moderate price increase with the maximum profit achieved when the asset s price is at or above the higher strike price at expiration this strategy also caps potential losses to the net premium paid when using a bull call spread traders should consider factors such as the risk of early assignment the impact of dividends transaction costs market conditions the choice of expiration date and the selection of strike prices the effects of changes in the underlying asset s price volatility and time decay also play a crucial role in the strategy s outcome | |
what is a bull market | bull market is the term used to describe a financial market in which prices are rising or are expected to rise it is most often used to refer to the stock market but can be applied to anything that is traded such as bonds real estate currencies and commodities prices of securities rise and fall continuously during trading but a bull market occurs over extended periods of time during which a large portion of security prices rise overall bull markets tend to last for numerous months or even years investopedia xiaojie liuunderstanding bull marketsbull markets are characterized by optimism investor confidence and expectations that strong results should continue for an extended period of time it is difficult to predict consistently when trends in the market might change part of the difficulty is due to the large roles that psychological effects and speculation can sometimes play in investing no specific and universal metric identifies a bull market nonetheless the most common gauge used is a 20 or more rise in stock prices from recent lows since the start of bull markets are tough to pinpoint in the moment analysts typically acknowledge them after they ve begun a notable bull market in recent history occurred during the period between 2003 and 2007 at this time the s p 500 increased by a significant margin after a previous decline as the 2008 financial crisis took effect major declines occurred putting a stop to the bull market run 12bull markets generally start when the economy is strengthening or is already strong they tend to coincide with a strong gross domestic product gdp a drop in unemployment and a rise in corporate profits growing investor confidence can keep bull markets moving the overall demand for stocks is positive along with the overall tone of the market however supply and demand for securities may seesaw e g supply will be weak while demand will be strong some investors will be eager to buy securities while few will be willing to sell in a bull market investors are more willing to take part to gain profits during a bull market several characteristics can be observed these include the longest bull market in the history of the s p 500 index lasted from march 2009 to february 2020 and saw the index gain over 300 3 it was characterized by strong earnings growth low interest rates and investor optimism in addition it was relatively volatile with several corrections and pullbacks along the way the technology sector significantly outperformed the broader market during this bull market | |
how to benefit from a bull market | investors who want to benefit from a bull market should buy early to take advantage of rising prices and sell them when they ve reached their peak of course it is hard to determine when the bottom and peak will take place but most losses that result from missing the bottom or top will be minimal and usually temporary as they re erased by the onward march of prices below we ll explore several prominent strategies investors utilize during bull markets bear in mind that these strategies like all others involve some degree of risk one of the most basic strategies in investing is the process of buying a particular security and holding onto it with the idea of selling it at a later date when prices have moved higher this strategy necessarily involves confidence on the part of the investor for this reason the optimism that s a hallmark of bull markets helps to fuel the buy and hold approach increased buy and hold is a variation of the straightforward buy and hold strategy and it involves additional risk the premise behind this approach is that an investor will continue to add to their holdings in a particular security so long as that security continues to increase in price one common method for increasing a position involves buying an additional fixed quantity of shares with every pre determined increase in the stock price a retracement is a brief reversal in the general upward trend of a security s price even during a bull market it s unlikely that stock prices will only ascend rather there are likely to be short periods of time in which small dips occur even as the overall trend continues upward some investors watch for retracements within a bull market and buy the dip the thinking behind this strategy is that the price of the security in question will quickly move back up and the investor will have booked a discounted purchase price perhaps the most aggressive way of attempting to capitalize on a bull market is the process known as full swing trading investors employing this strategy use short selling and other techniques to attempt to squeeze out maximum gains as shifts occur within the context of a larger bull market examples of historic bull marketsthere have been several significant bull markets throughout history each with its own unique characteristics and drivers here are a few examples 3bull vs bear marketsthe opposite of a bull market is a bear market a bear market is characterized by falling prices and investor pessimism it s commonly believed that the use of bull and bear to describe markets comes from the way the two animals attack their opponents a bull thrusts its horns up into the air while a bear swipes its paws downward these actions signify the movement of a market if the trend is up it s a bull market if the trend is down it s a bear market bull and bear markets often coincide with the economic cycle which consists of four phases expansion peak contraction and trough the onset of a bull market is often a leading indicator of economic expansion because public sentiment about future economic conditions drives stock prices the market frequently rises even before broader economic measures such as gross domestic product gdp growth begin to tick up likewise bear markets usually set in before economic contraction takes hold a look back at u s recessions reveals that a falling stock market usually comes several months ahead of gdp decline | |
why is it called a bull market when prices go up | the actual origin of the term bull market is subject to debate the terms bear for down markets and bull for up markets are thought by some to derive from the way in which each animal attacks its opponents a bull thrusts its horns up into the air while a bear swipes down others point to shakespeare s plays which make reference to battles involving bulls and bears in macbeth the ill fated titular character says his enemies have tethered him to a stake but bear like i must fight the course in much ado about nothing the bull is a savage but noble beast several other explanations also exist were we in a bull market in 2023 the s p 500 entered a bull market on june 8 2023 after rising 20 from its october 2022 lows the index had been in a bear market since june 2022 the dow jones industrial average and nasdaq had been in bull markets since nov 30 2022 and may 8 2023 respectively | |
what makes stock prices rise in a bull market | bull markets often exist alongside a strong and growing economy stock prices are affected by future expectations of profits and the ability of firms to generate cash flows a strong production economy high employment and rising gdp all suggest profits will grow and this is reflected in rising stock prices low interest rates and low corporate tax rates also are positive for corporate profitability and stock prices | |
when the economy hits a rough patch for instance in the face of recession or a spike in unemployment it can become difficult to sustain rising stock prices recessions are often accompanied by a negative turn in investor and consumer sentiment and market psychology that s more concerned with fear or reducing risk than greed or risk taking | the bottom linea bull market is a trend in a financial market characterized by rising prices and investor optimism it can occur in the stock market as well as the bond real estate currency and commodity markets bull markets tend to last for extended periods of time and are marked by increased demand for securities rising corporate profits and gdp and declining unemployment the opposite of a bull market is a bear market which is characterized by falling prices and investor pessimism the terms bull and bear are believed to come from the way these animals attack their opponents | |
what is a bull put spread | a bull put spread is an options strategy that an investor uses when they expect a moderate rise in the price of the underlying asset the strategy employs two put options to form a range consisting of a high strike price and a low strike price the investor receives a net credit from the difference between the premiums of the two options understanding a bull put spreadinvestors typically use put options to profit from declines in a stock s price since a put option gives them the ability though not the obligation to sell a stock at or before the expiration date of the contract each put option has a strike price which is the price at which the option converts to the underlying stock investors pay a premium to purchase a put option profits and loss from put optionsinvestors typically buy put options when they are bearish on a stock meaning they hope the stock will fall below the option s strike price however the bull put spread is designed to benefit from a stock s rise if the stock trades above the strike at expiry the put option expires worthless because no one would sell the stock at a strike lower than the market price as a result the investor who bought the put loses the value of the premium they paid on the other hand an investor who sells a put option is hoping the stock doesn t decrease but instead rises above the strike so the put option expires worthless a put option seller the option writer receives the premium for selling the option initially and wants to keep that sum however if the stock declines below the strike the put seller is on the hook the option holder has a profit and will exercise their rights selling their shares at the higher strike price in other words the put option is exercised against the seller the premium received by the seller would be reduced depending on how far the stock price falls below the put option s strike the bull put spread is designed to allow the seller to keep the premium earned from selling the put option even if the stock s price declines construction of the bull put spreada bull put spread consists of two put options first an investor buys one put option and pays a premium at the same time the investor sells a second put option with a strike price that is higher than the one they purchased receiving a premium for that sale note that both options will have the same expiration date since puts lose value as the underlying increases both options would expire worthless if the underlying price finishes higher than the highest strike therefore the maximum profit would be the premium received from writing the spread those who are bullish on an underlying stock could thus use a bull put spread to generate income with limited downside however there is a risk of loss with this strategy bull put profit and lossthe maximum profit for a bull put spread is equal to the difference between the amount received from the sold put and the amount paid for the purchased put in other words the net credit received initially is the maximum profit which only happens if the stock s price closes above the higher strike price at expiry the goal of the bull put spread strategy is realized when the price of the underlying moves or stays above the higher strike price the result is the sold option expires worthless the reason it expires worthless is that no one would want to exercise it and sell their shares at the strike price if it s lower than the market price a drawback to the strategy is that it limits the profit earned if the stock rises well above the upper strike price of the sold put option the investor would pocket the initial credit but miss out on any future gains if the stock is below the upper strike in the strategy the investor will begin to lose money since the put option will likely be exercised someone in the market would want to sell their shares at this more attractive strike price however the investor received a net credit for the strategy at the outset this credit provides some cushion for the losses once the stock declines far enough to wipe out the credit received the investor begins losing money on the trade if the stock price falls below the lower strike put option the purchased put both put options would have lost money and maximum loss for the strategy is realized the maximum loss is equal to the difference between the strike prices and the net credit received investors can earn income from the net credit paid at the onset of the strategy the maximum loss on the strategy is capped and known upfront the risk of loss at its maximum is the difference between the strike prices and the net credit paid the strategy has limited profit potential and misses out on future gains if the stock price rises above the upper strike price example of a bull put spreadlet s say an investor is bullish on apple aapl over the next month imagine the stock currently trades at 275 per share to implement a bull put spread the investor the investor earns a net credit of 6 50 for the two options or 8 50 credit 2 premium paid because one options contract equals 100 shares of the underlying asset the total credit received is 650 let s say apple rises and trades at 300 at expiry the maximum profit is achieved and equals 650 or 8 50 2 6 50 x 100 shares 650 once the stock rises above the upper strike price the strategy ceases to earn any additional profit if apple trades at 270 per share or below the low strike the maximum loss is realized however the loss is capped at 350 or 280 put 270 put 8 50 2 x 100 shares ideally the investor is looking for the stock to close above 280 per share on expiration which would be the point at which maximum profit is achieved correction dec 24 2021 a video in this article incorrectly labeled the graphs for bull put spreads and bear put spreads | |
what is a bull spread | a bull spread is an optimistic options strategy designed to profit from a moderate rise in the price of a security or asset a variety of vertical spread a bull spread involves the simultaneous purchase and sale of either call options or put options with different strike prices but with the same underlying asset and expiration date whether a put or a call the option with the lower strike price is bought and the one with the higher strike price is sold a bull call spread is also called a debit call spread because the trade generates a net debt to the account when it is opened the option purchased costs more than the option sold 1understanding a bull spreadif the strategy uses call options it is called a bull call spread if it uses put options it is called a bull put spread the practical difference between the two lies in the timing of the cash flows for the bull call spread you pay upfront and seek profit later when it expires for the bull put spread you collect money upfront and seek to hold on to as much of it as possible when it expires both strategies involve collecting a premium on the sale of the options so the initial cash investment is less than it would be by purchasing options alone 1 | |
how the bull call spread works | since a bull call spread involves writing a call option for a higher strike price than that of the current market in long calls the trade typically requires an initial cash outlay the investor simultaneously sells a call option aka a short call with the same expiration date in so doing he gets a premium which offsets the cost of the first long call he wrote to some extent the maximum profit in this strategy is the difference between the strike prices of the long and short options less the net cost of the options in other words the debit the maximum loss is only limited to the net premium debit paid for the options a bull call spread s profit increases as the underlying security s price increases up to the strike price of the short call option thereafter the profit remains stagnant if the underlying security s price increases beyond the short call s strike price conversely the position would have losses as the underlying security s price falls but the losses remain stagnant if the underlying security s price falls below the long call option s strike price the daily trading volume of all u s options markets as of dec 22 2023 2 | |
how the bull put spread works | a bull put spread is also called a credit put spread because the trade generates a net credit to the account when it is opened the option purchased costs less than the option sold since a bull put spread involves writing a put option that has a higher strike price than that of the long call options the trade typically generates a credit at the start the investor pays a premium for buying the put option but also gets paid a premium for selling a put option at a higher strike price than that of the one he purchased the maximum profit using this strategy is equal to the difference between the amount received from the sold put and the amount paid for the purchased put the credit between the two in effect the maximum loss a trader can incur when using this strategy is equal to the difference between the strike prices minus the net credit received benefits and disadvantages of bull spreadsbull spreads are not suited for every market condition they work best in markets where the underlying asset is rising moderately and not making large price jumps as mentioned above the bull call limits its maximum loss to the net premium debit paid for the options the bull call also caps profits up to the strike price of the short option the bull put on the other hand limits profits to the difference between what the trader paid for the two puts one sold and one bought losses are capped at the difference between strike prices less the total credit received at the creation of the put spread by simultaneously selling and buying options of the same asset and expiration but with different strike prices the trader can reduce the cost of writing the option limits lossesreduces costs of option writingworks in moderately rising marketslimits gainsrisk of short call buyer exercising option bull call spread calculating bull spread profits and lossesboth strategies achieve maximum profit if the underlying asset closes at or above the higher strike price both strategies result in a maximum loss if the underlying asset closes at or below the lower strike price breakeven before commissions in a bull call spread occurs at lower strike price net premium paid breakeven before commissions in a bull put spread occurs at upper strike price net premium received example of a bull spreadlet s say a moderately optimistic trader wants to try doing a bull call spread on the standard poor s 500 index spx the chicago board options exchange cboe offers options on the index assume the s p 500 is at 4402 the trader purchases one two month spx 4400 call for a price of 33 75 and at the same time sells one two month spx 4405 call and receives 30 50 the total net debit for the spread is 33 50 30 75 2 75 x 100 contract multiplier 275 00 by purchasing the bull call spread the investor is saying that by the expiration he anticipates the spx index to have risen moderately to a level above the break even point 4400 strike price 2 75 the net debit paid or an spx level of 4402 75 the investor s maximum profit potential is limited 4405 higher strike 4400 lower strike 5 00 2 75 net debit paid 2 25 x 100 multiplier 225 total this profit would be seen no matter how high the spx index has risen by expiration the downside risk for the bull call spread purchase is limited entirely to the total 275 premium paid for the spread no matter how low the spx index declines before expiration if the call spread purchase becomes profitable the investor is free to sell the spread in the marketplace to realize this gain on the other hand if the investor s moderately bullish outlook proves incorrect and the spx index declines in price the call spread might be sold to realize a loss less than the maximum | |
what is the difference between a bull spread and a bear spread | a bull spread is an options trading strategy that predicts a price increase in the underlying security the trader realizes a profit if the price closes at or above the anticipated price if the price of the security decreases the trader s losses should be limited if the spread is well executed | |
what is the most aggressive type of bull spread | in a bull call spread the options trader buys a call option for certain security and sells another call with a higher strike price the most aggressive bull spreads are those where both calls are initially out of the money because otm calls tend to be cheaper and riskier than in the money calls | |
is a bull call spread a good strategy | a well executed bull spread can provide reliable profits while reducing the trader s exposure to losses however a bull spread is not suitable for every market this strategy has the biggest advantages if the underlying is moderately trending upwards if the underlying is increasing in large sudden jumps a bull spread strategy could miss out on potential profits the bottom linea bull spread is an options trading strategy that allows traders to bet on the price growth of a security in this strategy the trader buys a call option at a certain strike price and sells another with the same expiration date but a lower strike price if the price closes above the strike price the trader makes money if not the trader s losses are limited to the net cost of the options | |
what is a bull trap | a bull trap is a false signal referring to a declining trend in a stock index or other security that reverses after a convincing rally and breaks a prior support level the move traps traders or investors that acted on the buy signal and generates losses on resulting long positions a bull trap may also refer to a whipsaw pattern 1the opposite of a bull trap is a bear trap which occurs when sellers fail to press a decline below a breakdown level understanding a bull trapa bull trap occurs when a trader or investor buys a security that breaks out above a resistance level a common technical analysis based strategy while many breakouts are followed by strong moves higher the security may quickly reverse direction these are known as bull traps because traders and investors who bought the breakout are trapped in the trade traders and investors can avoid bull traps by looking for confirmations following a breakout for example a trader may look for higher than average volume and bullish candlesticks following a breakout to confirm that price is likely to move higher a breakout that generates low volume and indecisive candlesticks such as a doji star could be a sign of a bull trap from a psychological standpoint bull traps occur when bulls fail to support a rally above a breakout level which could be due to a lack of momentum and or profit taking bears may jump on the opportunity to sell the security if they see divergences dropping prices below resistance levels which can then trigger stop loss orders the best way to handle bull traps is to recognize warning signs ahead of time such as low volume breakouts and exit the trade as quickly as possible if a bull trap is suspected stop loss orders can be helpful in these circumstances especially if the market is moving quickly to avoid letting emotion drive decision making example of a bull trapin this example the security sells off and hits a new 52 week low before rebounding sharply on high volume and lifting into trendline resistance many traders and investors jump on to the move anticipating a breakout above trendline resistance but the security reverses at resistance and turns sharply lower from these levels new bulls get trapped in long trades and incur rapid losses unless aggressive risk management techniques are undertaken the trader or investor could have avoided the bull trap by waiting for a breakout to unfold before purchasing the security or at least mitigated losses by setting a tight stop loss order just below the breakout level | |
what is a bullet bond | a bullet bond is a debt investment whose entire principal value is paid in one lump sum on its maturity date rather than amortized over its lifetime bullet bonds cannot be redeemed early by their issuer which means they are non callable bullet bonds issued by stable governments typically pay a relatively low rate of interest due to the negligible risk that the lender will default on that lump sum payment a corporate bullet bond may have to pay a higher interest rate if the corporation has a less than stellar credit rating in any case bullet bonds generally pay less than comparable callable bonds because the bullet bond does not give the lender the option of buying it back if interest rates change understanding bullet bondsboth corporations and governments issue bullet bonds in a variety of maturities from short to long term a portfolio made up of bullet bonds is generally referred to as a bullet portfolio a bullet bond is generally considered riskier to its issuer than an amortizing bond because it obliges the issuer to repay the entire amount on a single date rather than in a series of smaller repayments over time as a result issuers who are relatively new to the market or who have less than excellent credit ratings may attract more investors with an amortizing bond than with a bullet bond typically bullet bonds are more expensive for the investor to purchase compared to an equivalent callable bond since the investor is protected against a bond call if interest rates fall a bullet is a one time lump sum repayment of an outstanding loan made by the borrower bullet bonds vs amortizing bondsbullet bonds differ from amortizing bonds in their method of payment amortized bonds are repaid in regular scheduled payments that include both interest and part of the principal in this way the loan is entirely repaid at its maturity date in contrast bullet bonds may require small interest only payments or no payments at all until the maturity date on that date the entire loan plus any remaining accrued interest must be repaid example of a bullet bondpricing a bullet bond is straightforward first the total payments for each period must be calculated and then discounted to a present value using the following formula | |
where | for example imagine a bond with a par value of 1 000 its yield is 5 its coupon rate is 3 and the bond pays the coupon twice per year over a period of five years given this information there are nine periods for which a 15 coupon payment is made and one period the last one for which a 15 coupon payment is made and the 1 000 principal is repaid using the formula the payments will be as follows these 10 present values equal 912 48 which is the price of the bond | |
what is a bullet repayment | a bullet repayment is a lump sum payment made for the entirety of an outstanding loan amount usually at maturity it can also be a single payment of principal on a bond in terms of banking and real estate loans with bullet repayments are also referred to as balloon loans these types of loans are commonly used in mortgage and business loans to reduce monthly payments during the term of the loans a bullet repayment due at a loan s maturity often necessitates advanced planning to have a refinancing facility in place unless borrowers have the cash to pay off the large lump sum | |
how bullet repayments work | bullet repayments and balloon loans are not normally amortized over the duration of the loan the final balloon payment is often the only principal payment made but the balance might occasionally be amortized through other smaller incremental payments before the balloon payment comes due the final payment is nonetheless significantly larger than the others and it retires the loan the deferral of principal payments until the loan matures results in lower monthly payments during the life of the loan because these payments usually represent only interest but this presents a significant risk to borrowers who aren t prepared to make the large lump sum payment or who don t have other arrangements in place to deal with the bullet repayment bullet repayments have also been integrated with fixed income based exchange traded funds etfs giving them bond like predictability for investors bullet repayment vs amortizationthe difference between interest only payments on a loan with a bullet repayment and amortizing mortgage payments can be quite significant for example the yearly interest would be 9 600 and monthly payments would be 800 on a 15 year interest only mortgage of 320 000 with a 3 interest rate that same loan with amortization would have a monthly payment of 2 210 the monthly payment schedule clearly favors the interest only loan but the interest only borrower faces a bullet repayment of 320 000 example of etf bullet paymentsthe investors assume the role of lenders in etfs with bullet repayment dates while the funds act as the borrowers funds with bullet repayments are usually composed of bonds notes and fixed income vehicles with maturities preceding the bullet repayment date investors receive regular interest payments on their shares during the term of the fund and they re repaid the principal from the matured portfolio holdings on the bullet repayment date the key benefit of the bullet repayment for investors is the predictability of the return of principal on a specified date much like the maturity of a bond special considerationsa borrower basically has two options if money is not available to pay a loan in full as the bullet repayment date approaches the property can be sold with the proceeds used to pay the loan principal or the loan can be refinanced taking out a new loan to cover the bullet repayment under certain circumstances balloon lenders might offer borrowers the option to convert loans to traditional amortizing loans rather than face a huge one time payment | |
what is a bullish abandoned baby | the bullish abandoned baby is a type of candlestick pattern that is used by traders to signal a reversal of a downtrend it forms in a downtrend and is composed of three price bars the first is a large down candle followed by a doji candle that gaps below the first candle the next candle opens higher than the doji and moves aggressively to the upside the expectation is that the price will continue to move higher as the pattern shows that selling has been at least temporarily exhausted the bullish abandoned baby can be contrasted with a bearish abandoned baby pattern which marks the possible end of an uptrend understanding the bullish abandoned babytraders watch for bullish abandoned baby patterns to signal the potential end of a downtrend the pattern is fairly rare as the price movements need to meet specific criteria in order to create the pattern the psychology or idea behind the pattern is that the price has been dropping aggressively and just had a big sell off again first down candle the price then forms a doji which shows selling is leveling off as the open and close prices of the doji are nearly the same dojis are commonly associated with indecision in this case the doji means that sellers may be losing momentum and buyers are starting to step in the doji or dojis are followed by a strong advancing candle that typically gaps higher from the doji this shows that buyers have regained control and that the selling has at least temporarily been exhausted traders may manually search for the bullish abandoned baby or trade it when they see it but they can also scan for the pattern using trading software special considerationssome traders will allow for slight variations for example the doji may not gap below the close of the first candle instead opening near the prior close and staying there sometimes there are two or three dojis before the price makes its upward move this would be acceptable to some traders since the pattern is still showing a drop a leveling off and then a sharp rise trading the bullish abandoned babywhile there are multiple ways to trade the bullish abandoned baby pattern here are some general ideas on how to do it a profit target at a fibonacci retracement level could be used for example traders might set a profit target at a 50 retracement of the downtrend that preceded the bullish abandoned baby pattern other options may include setting a target at a fixed risk reward ratio for instance if risking 500 set a profit target at a 1 000 or 1 500 gain a trader could also use technical indicators or exit when the price drops below a chosen moving average example of a bullish abandoned babythe bullish abandoned baby is fairly rare since its pattern has strict requirements some traders allow the restrictions to be relaxed slightly which means more patterns will be found and the results can still be quite good a few variations of the pattern formed in macy s inc after the price declined on a number of occasions it formed a bullish abandoned baby bottom these patterns were followed by strong moves to the upside image by sabrina jiang investopedia 2021pattern one is a slight variation of the traditional pattern as the doji doesn t gap below the prior close and there are two dojis yet the sentiment of the pattern still shows a bullish shift the pattern has a strong drop indecision and leveling off and then a strong surge higher after the dojis pattern two is more traditional except there are once again two dojis this is acceptable and the price shot higher following the pattern pattern three is also a slight variation as the doji didn t gap below the prior candle s close the price moved higher following the doji though and an uptrend commenced similar patternsboth the bullish and bearish abandoned baby patterns are similar to the evening star and morning star formations the difference that makes the abandoned baby patterns so rare is the occurrence of the doji candle with a gap on either side the evening star and morning star formations do not require the middle candle to be a doji or to have gaps on either side the name doji like many of the names of candlestick patterns comes from a traditional usage among rice traders in japan steve nison is credited with first publishing this name in the popular press in 1991 though the name has been around in japanese trading for centuries this pattern is also similar to the bar chart pattern known as an island reversal but with only a single candle 1 | |
what is a bullish engulfing pattern | a bullish engulfing pattern is a white candlestick that closes higher than the previous day s opening after opening lower than the previous day s close it can be identified when a small black candlestick showing a bearish trend is followed the next day by a large white candlestick showing a bullish trend the body of which completely overlaps or engulfs the body of the previous day s candlestick a bullish engulfing pattern may be contrasted with a bearish engulfing pattern understanding a bullish engulfing patternthe bullish engulfing pattern is a two candle reversal pattern the second candle completely engulfs the real body of the first one without regard to the length of the tail shadows this pattern appears in a downtrend and is a combination of one dark candle followed by a larger hollow candle on the second day of the pattern the price opens lower than the previous low yet buying pressure pushes the price up to a higher level than the previous high culminating in an obvious win for the buyers it is advisable to enter a long position when the price moves higher than the high of the second engulfing candle in other words when the downtrend reversal is confirmed | |
what does a bullish engulfing pattern tell you | a bullish engulfing pattern is not to be interpreted as simply a white candlestick representing upward price movement following a black candlestick representing downward price movement for a bullish engulfing pattern to form the stock must open at a lower price on day 2 than it closed at on day 1 if the price did not gap down the body of the white candlestick would not have a chance to engulf the body of the previous day s black candlestick because the stock both opens lower than it closed on day 1 and closes higher than it opened on day 1 the white candlestick in a bullish engulfing pattern represents a day in which bears controlled the price of the stock in the morning only to have bulls decisively take over by the end of the day the white candlestick of a bullish engulfing pattern typically has a small upper wick if any that means the stock closed at or near its highest price suggesting that the day ended while the price was still surging upward this lack of an upper wick makes it more likely that the next day will produce another white candlestick that will close higher than the bullish engulfing pattern closed though it s also possible that the next day will produce a black candlestick after gapping up at the opening because bullish engulfing patterns tend to signify trend reversals analysts pay particular attention to them bullish engulfing pattern vs bearish engulfing patternthese two patterns are opposites of one another a bearish engulfing pattern occurs after a price moves higher and indicates lower prices to come here the first candle in the two candle pattern is an up candle the second candle is a larger down candle with a real body that fully engulfs the smaller up candle example of a bullish engulfing patternas a historical example let s consider philip morris pm stock the company s shares were a great long in 2011 and remained in an uptrend in 2012 though the stock was retreating on january 13 2012 a bullish engulfing pattern occurred the price jumped from an open of 76 22 to close out the day at 77 32 1 this bullish day dwarfed the prior day s intraday range where the stock finished down marginally the move showed that the bulls were still alive and another wave in the uptrend could occur bullish engulfing candle reversalsinvestors should look not only to the two candlesticks which form the bullish engulfing pattern but also to the preceding candlesticks this larger context will give a clearer picture of whether the bullish engulfing pattern marks a true trend reversal bullish engulfing patterns are more likely to signal reversals when they are preceded by four or more black candlesticks the more preceding black candlesticks the bullish engulfing candle engulfs the greater the chance a trend reversal is forming confirmed by a second white candlestick closing higher than the bullish engulfing candle acting on a bullish engulfing patternultimately traders want to know whether a bullish engulfing pattern represents a change of sentiment which means it may be a good time to buy if volume increases along with price aggressive traders may choose to buy near the end of the day of the bullish engulfing candle anticipating continuing upward movement the following day more conservative traders may wait until the following day trading potential gains for greater certainty that a trend reversal has begun limitations of using engulfing patternsa bullish engulfing pattern can be a powerful signal especially when combined with the current trend however they are not bullet proof engulfing patterns are most useful following a clean downward price move as the pattern clearly shows the shift in momentum to the upside if the price action is choppy even if the price is rising overall the significance of the engulfing pattern is diminished since it is a fairly common signal the engulfing or second candle may also be huge this can leave a trader with a very large stop loss if they opt to trade the pattern the potential reward from the trade may not justify the risk establishing the potential reward can also be difficult with engulfing patterns as candlesticks don t provide a price target instead traders will need to use other methods such as indicators or trend analysis for selecting a price target or determining when to get out of a profitable trade | |
what is a bullish harami | a bullish harami is a basic candlestick chart pattern indicating that a bearish trend in an asset or market may be reversing understanding a bullish haramia bullish harami is a candlestick chart indicator suggesting that a bearish trend may be coming to end some investors may look at a bullish harami as a good sign that they should enter a long position on an asset a candlestick chart is a type of chart used to track the performance of a security named for the rectangular shape depicted in the chart with lines protruding from the top and bottom which resembles a candle and wicks a candlestick chart typically represents the price data of stock on a single day including opening price closing price high price and low price investors looking to identify harami patterns must first look for daily market performance reported in candlestick charts harami patterns emerge over two or more days of trading and a bullish harami relies on initial candles to indicate that a downward price trend is continuing and that a bearish market looks to be pushing the price lower the bullish harami indicator is charted as a long candlestick followed by a smaller body referred to as a doji that is completely contained within the vertical range of the previous body to some a line drawn around this pattern resembles a pregnant woman the word harami comes from an old japanese word meaning pregnant for a bullish harami to appear a smaller body on the subsequent doji will close higher within the body of the previous day s candle signaling a greater likelihood that a reversal will occur the chart above depicts a bullish harami the first two black candles indicate a two day downward trend in the asset and the white candle represents a slightly upward trend on the third day which is completely contained by the body of the previous candle investors seeing this bullish harami may be encouraged by this diagram as it can signal a reversal in the market bullish harami bearish harami and advanced candlestick patternsanalysts looking for fast ways to analyze daily market performance data will rely on patterns in candlestick charts to expedite understanding and decision making while the bullish harami and its counterpart the bearish harami serve to predict upcoming reversals in the trending direction of prices candlestick chart analysis offers a wide range of patterns to predict future trends bullish and bearish haramis are among a handful of basic candlestick patterns including bullish and bearish crosses evening stars rising threes and engulfing patterns a deeper analysis provides insight using more advanced candlestick patterns including island reversal hook reversal and san ku or three gaps patterns | |
what is a bundle of rights | a bundle of rights is a term for the set of legal privileges that is generally afforded to a real estate buyer with the transfer of the title the bundle includes the following the average homebuyer can expect the whole traditional bundle of rights once the deal is done real estate ownership carries with it a complex set of rights and the bundle of rights concept traditionally has been how those rights are described and summarized it is a feature of many real estate license tests and first year law classes understanding a bundle of rightsthe average homebuyer can expect the whole traditional bundle of rights once the deal is done that is homebuyers expect to have the right of possession of control of exclusion of enjoyment and of disposition however these rights can be broken up and assigned to different parties this usually applies to commercial and investment property purchases for example the buyer of a rental property may have rights that are limited by local landlord tenant laws and regulations or the owner of a storefront property may share certain rights with the tenant who runs a business there in any case a real estate owner s bundle of rights can be exercised only with the boundaries of many other laws for example a homeowner s right of enjoyment may not be exercised beyond the limits of local noise control laws the right of possession simply states that the titleholder is the legal owner of the property the titleholder can use the property in any way that is not illegal in practice a homeowner association hoa can place additional restrictions on anything from garden ornaments to pet ownership though these rules are not laws the right of exclusion allows the titleholder to limit who may enter the property this one has few real limits easements may be in place permitting access to utility lines that override this right a warrant authorizing a search of the property trumps the right of exclusion additionally an owner of a rental property may not have right of exclusion for who their tenant lets on the property depending on the terms of the lease and local laws the right to enjoyment asserts the titleholder s right to participate in any activities that they find pleasurable while on the property this assumes once again that those activities are lawful the right of disposition protects the titleholder s right to transfer ownership permanently or temporarily to another party this right is fully realized only when the property is owned outright and not mortgaged an exclusion also applies if the property is subject to a lien | |
does homeowner association hoa authority supersede my rights as property owner | this depends on the state where you live and the covenants convictions and restrictions cc rs that you signed and agreed to when you purchased the property the homeowner association hoa may have the right to impose certain penalties on you if you do not follow their rules which can effectively restrict your rights as a property owner who has more rights landlord or tenant that depends on your local laws and how tenant friendly or landlord friendly they are in some states landlords have very few restrictions on entering property selling property evicting tenants and so on in other states tenants have more rights and for example must grant permission before a landlord can enter a property and must be given certain periods of notice before a landlord can sell the property in addition to local statutes each judiciary has purview to decide which cases to hear and when which puts some statutes in effect regardless of laws on the books | |
how does the bundle of rights work with multiple owners | if there are multiple owners on a property then the bundle of rights belongs to both equally which is both a protection and a hindrance depending on circumstances for example if a home is owned by a married couple and that couple gets divorced then one spouse would need permission from the other to sell the house the bottom lineas a property owner you get the rights of possession control exclusion enjoyment and disposition once you close on the property this bundle of rights gives you all of the rights that you would expect once you own a property however there are exclusions depending on the type of property you own and if you are renting it out to tenants | |
a bungalow is a one story house cottage or cabin that is generally small in terms of square footage although it is not uncommon to see very large bungalows bungalows were originally designed to provide affordable modern housing for the working class | learn more about what a bungalow is the features of a bungalow and whether this home style may be right for you | |
what is a bungalow | bungalows are typically one story houses although they often also include an additional half story usually with a sloped roof there are various types of bungalows including raised bungalows that have basements partially above ground to let in additional sunlight some bungalows do add additional levels such as lofts and half levels common features of the bungalow include a dormer window and a veranda bungalow characteristicsbungalows are single level homes cabins or cottages they are small and easy to maintain so they are great homes for aging adults or people with disabilities they are also cost efficient as heating and cooling costs tend to be lower and the property value tends to remain relatively high common key features of a bungalow include because bungalows occupy more square footage on one floor than multi story homes they generally allow more space for modifications and additions they also afford more privacy than most traditional homes as they re low to the ground and the windows can easily be blocked by trees shrubs and fences on the other hand bungalows tend to occupy a larger area of land than their multi story counterparts since they don t extend upwards they take up more square footage on the first floor they may cost more per square foot and may also require more material for roofing bungalows also tend to have smaller and fewer rooms extending off a larger living room as opposed to large bedrooms or an open floor plan because they re low to the ground they re more susceptible to break ins so consider investing in a home security system if you purchase a bungalow popular bungalow styles include california chicago and the chalet history of bungalowsbungalows were first built in the south asian region of bengal bungalows which derive their name from hindi were first identified as such by british sailors of the east india company in the 18th century over time a bungalow came to refer to a large dwelling often representing high social status in both britain and america the term bungalow as we now know it a small dwelling typically one story developed in the 20th century although its definition varies in different areas of the world for example in india today the term generally refers to any single family dwelling regardless of how many stories it has in canada and the united kingdom a bungalow almost exclusively refers to one story units australia tends toward the california bungalow a type of bungalow that was popular in the united states from about 1908 to 1940 and expanded abroad as hollywood became popular and increased the desirability of american made products the california bungalow is one to one and a half stories and features a large porch sloping roof and spanish inspired details other types of now popular bungalow styles include frequently asked questions faqs | |
what is the difference between a bungalow and a house | a bungalow is a type of home that is typically one story and smaller than the average size home other types of homes may be larger with more than one story | |
where are bungalows most common in the u s | bungalow homes can be found throughout the u s they are often associated with california but they can be found in any state | |
why are bungalows more expensive | if bungalow homes in your areas seem more expensive than other homes it may be due to several factors the price of a home is determined by demand so the bungalow homes that are more expensive per square foot may be in a desirable neighborhood or have desirable features the bottom linea bungalow is a homestyle beloved by many homebuyers this one story home has a number of advantages and disadvantages to consider including its smaller size and one floor layout it can offer convenience and affordability but it may also provide limited living space in some cases bungalows may be more expensive than other home styles depending on the market demands weigh the pros and cons of bungalows as you determine which house may be ideal for your situation | |
a bungalow is a one story house cottage or cabin that is generally small in terms of square footage although it is not uncommon to see very large bungalows bungalows were originally designed to provide affordable modern housing for the working class | learn more about what a bungalow is the features of a bungalow and whether this home style may be right for you | |
what is a bungalow | bungalows are typically one story houses although they often also include an additional half story usually with a sloped roof there are various types of bungalows including raised bungalows that have basements partially above ground to let in additional sunlight some bungalows do add additional levels such as lofts and half levels common features of the bungalow include a dormer window and a veranda bungalow characteristicsbungalows are single level homes cabins or cottages they are small and easy to maintain so they are great homes for aging adults or people with disabilities they are also cost efficient as heating and cooling costs tend to be lower and the property value tends to remain relatively high common key features of a bungalow include because bungalows occupy more square footage on one floor than multi story homes they generally allow more space for modifications and additions they also afford more privacy than most traditional homes as they re low to the ground and the windows can easily be blocked by trees shrubs and fences on the other hand bungalows tend to occupy a larger area of land than their multi story counterparts since they don t extend upwards they take up more square footage on the first floor they may cost more per square foot and may also require more material for roofing bungalows also tend to have smaller and fewer rooms extending off a larger living room as opposed to large bedrooms or an open floor plan because they re low to the ground they re more susceptible to break ins so consider investing in a home security system if you purchase a bungalow popular bungalow styles include california chicago and the chalet history of bungalowsbungalows were first built in the south asian region of bengal bungalows which derive their name from hindi were first identified as such by british sailors of the east india company in the 18th century over time a bungalow came to refer to a large dwelling often representing high social status in both britain and america the term bungalow as we now know it a small dwelling typically one story developed in the 20th century although its definition varies in different areas of the world for example in india today the term generally refers to any single family dwelling regardless of how many stories it has in canada and the united kingdom a bungalow almost exclusively refers to one story units australia tends toward the california bungalow a type of bungalow that was popular in the united states from about 1908 to 1940 and expanded abroad as hollywood became popular and increased the desirability of american made products the california bungalow is one to one and a half stories and features a large porch sloping roof and spanish inspired details other types of now popular bungalow styles include frequently asked questions faqs | |
what is the difference between a bungalow and a house | a bungalow is a type of home that is typically one story and smaller than the average size home other types of homes may be larger with more than one story | |
where are bungalows most common in the u s | bungalow homes can be found throughout the u s they are often associated with california but they can be found in any state | |
why are bungalows more expensive | if bungalow homes in your areas seem more expensive than other homes it may be due to several factors the price of a home is determined by demand so the bungalow homes that are more expensive per square foot may be in a desirable neighborhood or have desirable features the bottom linea bungalow is a homestyle beloved by many homebuyers this one story home has a number of advantages and disadvantages to consider including its smaller size and one floor layout it can offer convenience and affordability but it may also provide limited living space in some cases bungalows may be more expensive than other home styles depending on the market demands weigh the pros and cons of bungalows as you determine which house may be ideal for your situation | |
what is a bureaucracy | the term bureaucracy refers to a complex organization that has multilayered systems and processes the systems and processes that are put in place effectively make decision making slow they are designed to maintain uniformity and control within the organization a bureaucracy describes the methods that are commonly established in governments and large organizations such as corporations a bureaucracy is pivotal in the administration of the entity s rules and regulations 1 | |
how a bureaucracy works | the bureaucratic process lends itself to criticism and is synonymous with redundancy arbitrariness and inefficiency people often use terms like bureaucrat bureaucratic and bureaucracy in a negative context 2 for instance calling someone a bureaucrat implies they re a government official while the term bureaucratic implies that procedures are more important than efficiency but there is a more balanced way to look at a bureaucracy from a structural standpoint it stems from the effort to lead organizations through closed systems these systems are meant to be formal and rigid in order to maintain order perhaps the single most identifiable characteristic of a bureaucracy is the use of hierarchical procedures to simplify or replace autonomous decisions 1a bureaucrat makes implicit assumptions about an organization and how it operates one assumption is that the entity cannot rely on an open system of operations which is either too complex or too uncertain to survive instead a closed and rationally reviewed system should be implemented and followed procedural correctness is paramount within a bureaucracy bureaucracy vs governance vs administrationbureaucracy is not the same as governance or administration some administrative structures are not bureaucratic and many bureaucracies are not part of administrative structures so what s the difference the distinction lies in the objectives of each system bureaucracies ensure procedural correctness irrespective of the circumstances or goals governance includes processes procedures and systems that are implemented by an organization to an administration on the other hand directs organizational resources toward an objective goal such as generating profits or administering a service in modern industrial societies dual bureaucracies often exist between private companies and government regulatory agencies whenever a regulatory bureaucracy exists to impose rules on business activity the private company may create a bureaucracy to avoid violating such regulations bureaucracies are all around us for instance an oil company may establish a bureaucracy to compel its employees to complete safety checks when operating on an oil rig criticisms of a bureaucracybureaucratic structures tend to be backward looking identifying procedures that worked well in the past this backward perspective creates a conflict with entrepreneurs and innovators who prefer forward looking concepts and attempt to identify ways in which processes could be improved 4for example agile processes that make improvements through an iterative process characterized by self organization and accountability over time a rigid bureaucracy reduces operational efficiency particularly compared to rival organizations without large bureaucracies losses in efficiency are most pronounced in circumstances where bureaucracy is also used to insulate established power structures from the competition 4classic bureaucratic rigidity and protectionism are prevalent in the u s government for example firing poor performers is difficult because there is an arduous termination process that has been put in place examples of bureaucracyexamples of bureaucracy are all around us workplaces schools governments all typically have hierarchical structures with individuals filling positions based on skill or merit real or perceived in a harvard business review article james l heskett questioned whether bureaucracy is a good thing in government or private businesses the article describes bureaucracies as entities that focus on decision rights rather than decision making and states that they are not created to deliberate or think according to one reader reponse bureaucracies are far too often about themselves and expanding the power and influence of the people who head them 4other readers who served in government agencies defend the role of bureaucracy while recognizing that reforming bureaucracies could provide greater autonomy to decision makers another comment noted that the bureaucracy of the u s government was effective in its creation of the glass steagall act of 1933 which established the provisions for separating commercial and investment banking and the social programs created through the new deal the new deal was an initiative of president franklin d roosevelt also in 1933 whereby many social programs helped the united states to recover from the great depression 54origins of bureaucracythe concept of bureaucracy is fairly old going back to the han dynasty in china 6 but the modern interpretation of the idea dates back to 18th century france 7the term bureaucracy is a hybrid word whose roots go back to french and greek it s made up of the french word bureau which means desk or office and the greek term kratein which means to rule 8 the use of these two words together combine to loosely mean ruling by or from a desk or office the word was first officially in france used after the french revolution from there the word and concept spread throughout the rest of the world 719th century german sociologist max weber was one of the first scholars to use the term and expand its influence he described the concept of bureaucracy in a positive idealized sense and considered the ideal bureaucracy to be both efficient and rational he believed that bureaucracy clearly defined the roles of the individuals involved and helped narrow the focus of administrative goals for weber bureaucracy was key to capitalism since it allowed organizations to persist even as individuals come and go 9 | |
what is a bureaucrat | the term bureaucrat refers to someone who is a member of a bureaucracy this can allude to someone who is a government official or someone in a position of power such as a chief executive officer or board member of a company or another organization 10 | |
what s good about a bureaucracy | bureaucracies can help organizations run smoothly and efficiently this allows large organizations to streamline processes and bring order to systems and procedures management becomes easier and processes become less chaotic bureaucracies tend to include a division of labor with clearly defined roles 1 they also ensure that everyone is treated equally and fairly which means there is no bias toward any one entity for instance the government makes everyone fill out the same often cumbersome paperwork for benefits like student loans | |
what s bad about a bureaucracy | bureaucracies are often looked down upon because people view them as valuing procedures over efficiency many people feel that rules and paperwork can pile up under bureaucracies this is often referred to as the red tape people and companies need to overcome in order to achieve certain goals like establishing a business rules and regulations can often be difficult to navigate and may even favor some people over others such as the wealthy 2 | |
what are the most common characteristics of a bureaucracy | some of the most common characteristics of a bureaucracy include a hierarchy rules and regulations and specialization 1 the hierarchy establishes scales of power those with the most power are at the top while individuals who have the least fall at the bottom rules and regulations are typically formal and indicate how processes and functions are to be conducted specialization entails the use of training to allow people to do their jobs properly under the structure the bottom linebureaucracies are all around us from the companies for which we work to the governments that rule our world s countries they are in place to ensure that things run efficiently and by the book that is that people follow the rules whether that s to conduct health and safety checks while on the job to get a permit for a building project or to access government benefits as much as they re supposed to help keep everyone on track bureaucracies are often criticized for being cumbersome and for putting the emphasis on procedure and policy rather than efficiency regardless of how you feel about them whether it s positive or negative bureaucracies aren t going away they are in fact a part of the structure of many organizations | |
what is the burn rate | the burn rate represents the speed at which an unprofitable company consumes its cash reserves it s the rate at which a startup company is spending its venture capital to finance overhead before generating positive cash flow from operations it s a measure of negative cash flow burn rate is most often a consideration for young life sciences or technology companies without profits and revenue in some cases it s usually quoted in terms of cash spent per month it would mean that a company is spending 1 million per month if it s said to have a burn rate of 1 million investopedia jiaqi zhouunderstanding the burn ratethe burn rate is used by startup companies and investors to track the amount of monthly cash that a company spends before it starts generating income a company s burn rate is also used as a measuring stick for what s referred to as its runway the amount of time the company has before it runs out of money a company s runway would be 10 months if it has 1 million in the bank and spends 100 000 a month derived as that would be a company can reduce its gross burn rate by producing revenue and or cutting costs such as reducing staff or seeking cheaper means of production | |
how to calculate the burn rate | there are two types of burn rates net burn and gross burn a company s gross burn rate is simply the total amount of operating costs it incurs in expenses each month 1 it s expressed as a company s net burn rate is the total amount of money it loses each month this can t be greater than the gross burn rate but it can be less a technology startup s gross burn rate would be 30 000 if it spends 5 000 monthly on office space 10 000 on monthly server costs and 15 000 on salaries and wages for its engineers its net burn rate would be different however if the company is producing revenue this would be calculated as let s say that the above company with a gross burn rate of 30 000 also has revenues of 20 000 a month from selling goods let s put the costs of those goods to the company at 10 000 a month the company s net burn rate would be 20 000 derived as the actual amount it s losing per month is only 20 000 even if the company is spending 30 000 every month this is an important distinction because it alters the financial runway the company s runway would be five months rather than three months if it had 100 000 in the bank the longer period will affect both how the managers outline the company s strategy and the amount of money that an investor might be willing to put into the company the usual recourse is to reduce the burn rate regardless of how much money is in the bank if the burn rate begins to exceed its forecast or if revenue fails to meet expectations this requires rethinking the startup s cost structure and usually means reducing staff and or other major cost drivers such as office lease technology and marketing | |
what is a good burn rate | the general recommendation for a startup business is to have three to six months of expenses on hand a good burn rate would fall between 33 334 three months and 16 667 six months if the company has 100 000 in the bank 2 | |
how is the burn rate calculated | burn rates and be gross or net the gross burn rate is simply the total amount of money spent each month the net burn rate is the amount of money lost each month and takes into account any possible company revenue it s calculated using the following formula monthly revenue cost of goods sold gross burn rate net burn rate | |
is burn rate the same as expenses | it s the same if you re calculating the gross burn rate you must also factor in whatever revenue the company may be generating if you want the net burn rate however the bottom linethe burn rate is an important metric for any company but it s particularly important for startups that aren t yet generating revenue it tells managers and investors how fast the company is spending its capital the burn rate is used to pinpoint when a company will be going into debt and is expressed as the company s financial runway a company has no choice but to lower its structural costs by reducing what it is spending on staff housing marketing and or technology if its burn rate is too high | |
what is a business | the term business refers to an organization or enterprising entity engaged in commercial industrial or professional activities the purpose of a business is to organize some sort of economic production of goods or services businesses can be for profit entities or non profit organizations fulfilling a charitable mission or furthering a social cause businesses range in scale and scope from sole proprietorships to large international corporations the term business also refers to the efforts and activities undertaken by individuals to produce and sell goods and services for profit alex dos diaz investopediaunderstanding a businessthe term business often refers to an entity that operates for commercial industrial or professional reasons the concept begins with an idea and a name and extensive market research may be required to determine how feasible it is to turn the idea into a business 1businesses often require business plans before operations begin a business plan is a formal document that outlines the company s goals and objectives and lists the strategies and plans to achieve these goals and objectives business plans are essential when you want to borrow capital to begin operations 1determining the legal structure of the business is an important factor to consider since business owners may need to secure permits and licenses and follow registration requirements to begin legal operations 1 corporations are considered to be juridical persons in many countries meaning that the business can own property take on debt and be sued in court 2a good name is often one of the most valuable assets of a business so it s important that business owners choose their name wisely 3most businesses operate to generate a profit commonly called for profit however some businesses that have a goal to advance a certain cause without profit are referred to as not for profit or nonprofit these entities may operate as charities arts culture educational and recreational enterprises political and advocacy groups or social services organizations 4business activities often include the sale and purchase of goods and services business activity can take place anywhere whether that s in a physical storefront online or on the roadside anyone who conducts business activity with financial earnings must report this income to the internal revenue service irs 5a company often defines its business by the industry in which it operates for example the real estate business advertising business or mattress production business are examples of industries business is a term often used to indicate transactions regarding an underlying product or service for example exxonmobil conducts its business by providing oil types of businessesthere are many ways to organize a business and there are various legal and tax structures that correspond with each businesses are commonly classified and generally structured as business sizessmall owner operated companies are called small businesses commonly managed by one person or a small group of people with less than 100 employees these companies include family restaurants home based companies clothing books and publishing companies and small manufacturers 9 as of 2021 33 2 million small businesses in the united states with 61 7 million employees were operating 10the small business administration sba uses the number of employees working at a company and its annual revenue to formally define a small business for 229 industry sectors from engineering and manufacturing to food service and real estate the sba sets sizing standards every five years 11businesses that meet the standards of the sba can qualify for loans grants and small business set asides contracts where the federal government limits competition to help small businesses compete for and win federal contracts 12there is no definitive specification in the u s to define a mid sized or medium sized company however when large u s cities such as philadelphia baltimore and boston evaluate the landscape of operating businesses a medium sized company is defined as one with 100 to 249 employees or 10 million to less than 1 billion in annual gross sales 1314large businesses commonly have 250 or more employees and garner more than 1 billion in gross receipts 13 they may issue corporate stock to finance operations as a publicly traded company large enterprises may be based in one country with international operations they are often organized by departments such as human resources finance marketing sales and research and development unlike small and mid sized enterprises owned by a person or group of people large organizations often separate their tax burden from their owners who usually do not manage their companies but instead an elected board of directors enacts most business decisions 9examples of well known businessesapple aapl is known for its innovative products including its personal computers smart devices and music and video streaming services founded in 1977 by steve jobs and steve wozniak apple became the first publicly traded company whose value hit 1 trillion 15 the company s stock ended the trading day at about 172 on may 23 2023 its market cap was almost 2 7 billion the company employs more than two million people including 80 000 individuals who work as direct apple employees the remaining jobs include suppliers manufacturers and others who are supported through the apple store 16 the company reported net sales of 394 33 billion for the 12 months ending sept 24 2022 17apple s key to success lies in its family of products and its ability to innovate the company focuses on design and quality two key elements that were a key part of jobs corporate vision the products that apple creates and markets can be used under the same operating system which allows consumers to sync them together thus lowering corporate costs apple s ability to create develop and market new products and services also put it ahead of its competition 18walmart wmt is one of the world s largest retailers and operates as a multinational corporation the company was founded in 1962 by sam walton in arkansas 19 it has more than 10 500 locations in more than 20 different countries and employs over 2 1 million people 2019the company went public in 1970 and trades on the new york stock exchange nyse walmart stock traded above 148 with a market cap of 399 79 billion on may 23 2023 the company earned 611 3 billion in revenue for the full year of 2022 which is an increase of 6 7 from the previous fiscal year 21walmart s success can be attributed to several factors including its brand name pricing diversification especially with the addition of its online marketplace efficient supply chain management and its financial strength 20 | |
how do you start a business | there are several steps you need to hurdle to start a business this includes conducting market research developing a business plan seeking capital or other forms of funding choosing a location and business structure picking the right name submitting registration paperwork obtaining tax documents employer and taxpayer ids and pulling permits and licenses it s also a good idea to set up a bank account with a financial institution to facilitate your everyday banking needs 1 | |
how do you launch an online business | starting an online business involves some of the same steps as a traditional business with a few exceptions you still need to do your market research and develop a business plan before anything else once that s done choose a name and structure for your business then file any paperwork to register your organization rather than finding a physical location choose a platform and design your website before launching your business you should find a way to build up your target market whether that s through traditional marketing means or more creative ways like social media 1 | |
how do you come up with a business name | your business name should fit the type of organization you plan to run and it should be catchy something that people will gravitate toward and remember not to mention associate with you as well as the products and services you plan to sell originality is key and most importantly it should be a name that isn t already in use by someone else go online and do a business name search to see if it s available or already registered 3 | |
how do you write a business plan | business plans are essential to running your business and can help you secure the funding you need to start your operations you can choose between a traditional or lean plan a traditional business plan has a lot of details including a summary of the company how it plans to succeed market information management products and services marketing and sales projections lean formats are concise with very useful information such as partnership details outlines of the business activities and customer relationships cost structures and revenue streams templates are available online or you can design your own business plan 22 | |
how do you get a business loan | necessary funding for a business often comes via a loan a traditional lender or a government backed loan such as those offered through the small business administration are two options prospective lenders want to see business details especially for new start ups make sure you have your business plan ready including outlines of costs and revenue streams and ensure you have a good credit score you may need to put down some collateral to secure the loan if you re approved 23the bottom linebusinesses are the backbone of an economy they provide products and services that can be purchased by individuals and other companies businesses range in size from small to large and operate in many different industries business structures also vary from sole partnerships to major corporations that provide shareholder equity to their owners | |
what are business activities | business activities refer to all actions a business undertakes with the primary aim of generating profit this general term encompasses all the economic activities carried out by a company in its daily operations a company s cash flow statements categorize these activities into three main types operating investing and financing 1 each type is crucial in a company s continuous efforts to create shareholder value understanding business activitiesbusiness activities are categorized into three main types operating investing and financing these activities are detailed in the cash flow statement which reconciles net income from an accrual basis to cash flow the cash flow statement starts with net income from the income statement and adjusts for changes in the balance sheet to reflect actual cash inflows and outflows to determine cash flow non cash items previously deducted from net income are added back while non cash items that were added to net income are subtracted the result is a report that gives the investor a summary of the company s business activities on a cash basis segmented by type of activity 3the first section of the cash flow statement is cash flow from operating activities this section includes various items from both the income statement and the current portion of the balance sheet the cash flow statement adjusts certain non cash items such as depreciation and amortization it also incorporates changes in balance sheet accounts like accounts receivable and accounts payable adjusting for their previous impacts on net income these line items impact the net income on the income statement but don t result in a movement of cash in or out of the company if a company shows negative cash flows from operating activities it indicates that the company is financing its operations through either investing or financing activities consistently negative operating cash flow is rare outside of nonprofit organizations which often maintain endowments that act as financial buffers to reduce the risk of revenue fluctuations 4investing activities are detailed in the second section of the statement of cash flows these are business activities that have been capitalized for more than one year the purchase of long term assets such as equipment or property with a useful life of more than one year is recorded as a cash outflow in this section 5 likewise real estate sales are shown as a source of cash the line item capital expenditures is considered an investing activity and can be found in this section of the cash flow statement the final section of the cash flow statement covers financing activities or any business activity related to raising funds or managing financial obligations this includes transactions where a company issues new shares to raise capital for various projects secondary offerings and debt financing it also details cash outflows for dividends share repurchases and interest payments | |
how is the cash flow statement linked to business activities | the cash flow statement is linked to all three business activities operating investing and financing to comply with generally accepted accounting principles gaap financial statements must include a statement of cash flows 6 it provides a detailed reconciliation of net income on an accrual basis to actual cash flow the process begins by taking net income from the bottom of the income statement adjustments are then made to account for the cash impact of changes in balance sheet items converting accrual based net income to cash based figures non cash items previously deducted from or added to net income are reversed to reflect true cash flow the result is a report that gives the investor a summary of business activities within the company on a cash basis segregated by the specific types of activity | |
what are operating business activities | cash flow from operating business activities usually the first section of the cash flow statement includes items from both the income statement and the current portion of the balance sheet the cash flow statement adjusts net income by adding back non cash items like depreciation and amortization it then accounts for changes in balance sheet items such as accounts receivable and accounts payable by adding or subtracting their impact on net income these line items impact the net income on the income statement but don t result in a movement of cash in or out of the company it s uncommon for organizations except nonprofits to have routinely negative operating cash flow | |
what are investing business activities | investing business activities are capitalized over more than one year and usually appear as the second section of the cash flow statement in this section the purchase of long term assets is recorded as a use of cash likewise real estate sales are shown as a source of cash the line item capital expenditures is considered an investing activity and can be found in this section of the cash flow statement | |
what are financing business activities | the cash flow statement s final section includes financing business activities these include initial public offerings ipos secondary offerings and debt financing the section also lists the amount of cash being paid out for dividends share repurchases and interest any business activity related to financing and fundraising efforts is included in this section of the cash flow statement the bottom linebusiness activities are all actions a corporation undertakes to generate a profit it s a general term that comprises all economic activities a company carries out during business business activities are divided into three main types operating investing and financing and each type plays a crucial role in the company s efforts to create shareholder value understanding these activities provides insight into how a company operates and manages its financial resources | |
what is a business asset | a business asset is an item of value owned by a company business assets span many categories they can be physical tangible goods such as vehicles real estate computers office furniture and other fixtures or intangible items such as intellectual property | |
how business assets work | business assets are itemized and valued on the balance sheet which can be found in the company s annual report they are listed at historical cost rather than market value and appear on the balance sheet as items of ownership most business assets can be written off taken as an expense on the income statement either as one large expense in the year of purchase or by being depreciated which is the process of spreading the cost of an asset over time some large expensive assets may qualify to be expensed entirely in the year of purchase under section 179 assets are listed in order of liquidity which is the ease in which they can be quickly bought or sold in the market without affecting their price business asset accounting is arguably one of the most important jobs of company management a financial ratio called return on net assets rona is used by investors to establish how effectively companies put their assets to work special considerationsbusiness assets are divided into two sections on the balance sheet current assets and non current assets current assets are business assets that will be turned into cash within one year such as marketable securities cash inventory and receivables debts owed to a company by its customers for goods or services that have been delivered or used but not yet paid for these assets may only have value for a short while but they are still treated as business assets non current assets or long term assets on the other hand are less liquid assets that are expected to provide value for more than one year in other words the company does not intend on selling or otherwise converting these assets in the current year non current assets are generally referred to as capitalized assets since the cost is capitalized and expensed over the life of the asset in a process called depreciation this includes items such as property buildings and equipment tangible or physical business assets are depreciated while intangible business assets are amortized the process of spreading the cost of an intangible asset over the course of its useful life when businesses amortize and depreciate expenses they help tie an asset s costs to the revenues it generates depreciation is calculated by subtracting the asset s salvage value or resale value from its original cost the difference between the cost of the asset and salvage value is divided by the useful life of the asset if a truck has a useful life of 10 years costs 100 000 and has a salvage value of 10 000 the depreciation expense is calculated as 100 000 minus 10 000 divided by 10 or 9 000 per year in other words instead of writing off the entire amount of the asset capitalized business assets are only expensed by a fraction of the full cost each year the value of business assets varies and can change over time many current tangible assets such as vehicles computers and machinery equipment tend to age and some may even become obsolete as newer more efficient technologies are introduced financial institutions will frequently use return on average assets roaa which is the blended value of all assets to rate a company companies can spend money to buy new assets or improve their existing assets this is known as capital addition and the business records these capital expenditures capex on its balance sheet | |
what is business banking | business banking is a company s financial dealings with an institution that provides business loans credit savings accounts and checking accounts specifically designed for companies rather than for individuals business banking occurs when a bank or division of a bank only deals with businesses a bank that deals mainly with individuals is generally called a retail bank while a bank that deals with capital markets is known as an investment bank there are some banks that deal with both types of clients understanding business bankingbusiness banking is also called commercial or corporate banking banks provide financial and advisory services to small and medium businesses as well as larger corporations these services are tailored to the specific needs of each business these services include deposit accounts night depositories non interest bearing products real estate loans commercial loans and credit card services banks may also offer asset management and securities underwriting to their corporate and business clients some companies might allow employees to deposit funds into their accounts using a warm card these cards allow only deposits and are not debit cards in the past investment banks and retail commercial banks were required to be separate entities under the glass steagall act also known as the banking act of 1933 that changed in 1999 after parts of the act were repealed under the new rules banks could offer business retail and investment banking services under one roof demand for business banking is increasing in the united states as the business sector continues to grow the number of commercial banks has been declining since 2002 when there were 7 870 commercial banks compared to 4 708 in 2018 this has primarily been due to mergers and acquisitions the companies with the highest market share of corporate or business banking are wells fargo jpmorgan chase and bank of america with jpmorgan chase being the largest commercial bank in the u s with 2019 revenues of 142 billion it s important to note these banks also operate as investment banks and retail banks allowing them to be diversified in both clients and products offered services offered by business banksbusiness banks provide a wide range of services to companies of all sizes aside from business checking and savings accounts business banks offer financing options cash management solutions payroll services and fraud protection bank financing is a primary source of capital for business expansion acquisitions and equipment purchases or simply to meet growing operating expenses depending on a company s needs business banks can offer fixed term loans short and long term loans lines of credit and asset based loans banks provide equipment financing either through fixed loans or equipment leasing some banks cater specifically to certain industries such as agriculture construction and commercial real estate also referred to as treasury management cash management services help businesses achieve greater efficiency in managing their receivables payables cash on hand or liquidity business banks set up specific processes for businesses that help streamline their cash management resulting in lower costs and more cash on hand banks provide businesses with access to automated clearing house ach and electronic payment processing systems to accelerate money transfers they also allow for the automatic movement of money from idle checking accounts into interest bearing savings accounts so the cash surplus is put to work while the business checking account has just enough for the day s payments businesses have access to a customized online platform that links their cash management processes to their checking and savings accounts for a real time view of their cash in action many banks are able to provide payroll services for small businesses if your business is new or too small to incur the expense of a bookkeeper many banks provide software or specific services specifically geared towards payroll management aside from banks there are many independent payroll service providers it s worth comparing the costs and benefits of the two fraud insurance is offered by banks to protect businesses from any sort of fraud that has occurred in their checking accounts these can include problematic checks from customers or employee fraud that can result from too many people having access to accounts making transactions difficult to trace | |
what is a business continuity plan bcp | a business continuity plan bcp is a system of prevention and recovery from potential threats to a company the plan ensures that personnel and assets are protected and are able to function quickly in the event of a disaster understanding business continuity plans bcps bcp involves defining any and all risks that can affect the company s operations making it an important part of the organization s risk management strategy risks may include natural disasters fire flood or weather related events pandemics acts of terrorism or cyber attacks once the risks are identified the plan should also include bcps are an important part of any business threats disruptions or halts to the business activity for any period of time mean not only losses and higher costs but also difficulty to start back again which leads to a drop in profitability financial loss and protential bankruptcy and liquidations and businesses can t rely on insurance alone because it doesn t cover all the costs or the customers who move to the competition it is generally conceived in advance and involves input from key stakeholders and personnel business impact analysis recovery organization and training are all steps corporations need to follow when creating a business continuity plan benefits of a business continuity planbusinesses are prone to a host of disasters that vary in degree from minor to catastrophic business continuity planning is typically meant to help a company continue operating in the event of major disasters such as fires bcps are different from a disaster recovery plan which focuses on the recovery of a company s information technology system after a crisis consider a finance company based in a major city it may put a bcp in place by taking steps including backing up its computer and client files offsite if something were to happen to the company s corporate office its satellite offices would still have access to important information an important point to note is that bcp may not be as effective if a large portion of the population is affected as in the case of a disease outbreak nonetheless bcps can improve risk management preventing disruptions from spreading they can also help mitigate downtime of networks or technology saving the company money | |
how to create a business continuity plan | there are several steps many companies must follow to develop a solid bcp they include companies may also find it useful to come up with a checklist that includes key details such as emergency contact information a list of resources the continuity team may need where backup data and other required information are housed or stored and other important personnel along with testing the continuity team the company should also test the bcp itself it should be tested several times to ensure it can be applied to many different risk scenarios this will help identify any weaknesses in the plan which can then be corrected in order for a business continuity plan to be successful all employees even those who aren t on the continuity team must be aware of the plan business continuity impact analysisan important part of developing a bcp is a business continuity impact analysis it identifies the effects of disruption of business functions and processes it also uses the information to make decisions about recovery priorities and strategies fema provides an operational and financial impact worksheet to help run a business continuity analysis the worksheet should be completed by business function and process managers who are well acquainted with the business these worksheets will summarize the following completing the analysis can help companies identify and prioritize the processes that have the most impact on the business s financial and operational functions the point at which they must be recovered is generally known as the recovery time objective 2business continuity plan vs disaster recovery planbcps and disaster recovery plans are similar in nature the latter focuses on technology and information technology it infrastructure bcps are more encompassing focusing on the entire organization such as customer service and supply chain bcps focus on reducing overall costs or losses while disaster recovery plans look only at technology downtimes and related costs disaster recovery plans tend to involve only it personnel which create and manage the policy however bcps tend to have more personnel trained on the potential processes frequently asked questions | |
why is business continuity plan bcp important | businesses are prone to a host of disasters that vary in degree from minor to catastrophic and business continuity plans bcps are an important part of any business bcp is typically meant to help a company continue operating in the event of threats and disruptions this could result in a loss of revenue and higher costs which leads to a drop in profitability and businesses can t rely on insurance alone because it doesn t cover all the costs and the customers who move to the competition | |
what should a business continuity plan bcp include | business continuity plans involve identifying any and all risks that can affect the company s operations the plan should also determine how those risks will affect operations and implement safeguards and procedures to mitigate the risks there should also be testing procedures to ensure these safeguards and procedures work finally there should be a review process to make sure that the plan is up to date | |
what is business continuity impact analysis | an important part of developing a bcp is a business continuity impact analysis which identifies the effects of disruption of business functions and processes it also uses the information to make decisions about recovery priorities and strategies fema provides an operational and financial impact worksheet to help run a business continuity analysis these worksheets summarize the impacts both financial and operational that stem from the loss of individual business functions and processes they also identify when the loss of a function or process would result in the identified business impacts 3the bottom linebusiness continuity plans bcps are created to help speed up the recovery of an organization filling a threat or disaster the plan puts in place mechanisms and functions to allow personnel and assets to minimize company downtime bcps cover all organizational risks should a disaster happen such as flood or fire | |
what is a business cycle | business cycles are a type of fluctuation found in the aggregate economic activity of a nation a cycle that consists of expansions occurring at about the same time in many economic activities followed by similarly general contractions this sequence of changes is recurrent but not periodic the business cycle is also called the economic cycle understanding the business cyclein essence business cycles are marked by the alternation of the phases of expansion and contraction in aggregate economic activity and the co movement among economic variables in each phase of the cycle aggregate economic activity is represented by not only real i e inflation adjusted gdp a measure of aggregate output but also the aggregate measures of industrial production employment income and sales which are the key coincident economic indicators used for the official determination of u s business cycle peak and trough dates popular misconceptions are that the contractionary phase is a recession and that two consecutive quarters of decline in real gdp an informal rule of thumb means a recession it s important to note that recessions occur during contractions but are not always the entire contractionary phase also consecutive declines in real gdp are one of the indicators used by the nber but it is not the definition the organization uses to determine recessionary periods 12on the flip side a business cycle recovery begins when that recessionary vicious cycle reverses and becomes a virtuous cycle with rising output triggering job gains rising incomes and increasing sales that feedback into a further rise in output the recovery can persist and result in a sustained economic expansion only if it becomes self feeding which is ensured by this domino effect driving the diffusion of the revival across the economy of course the stock market is not the economy therefore the business cycle should not be confused with market cycles which are measured using broad stock price indices measuring and dating business cyclesthe severity of a recession is measured by the three d s depth diffusion and duration a recession s depth is determined by the magnitude of the peak to trough decline in the broad measures of output employment income and sales its diffusion is measured by the extent of its spread across economic activities industries and geographical regions its duration is determined by the time interval between the peak and the trough an expansion begins at the trough or bottom of a business cycle and continues until the next peak while a recession starts at that peak and continues until the following trough the national bureau of economic research nber determines the business cycle chronology the start and end dates of recessions and expansions for the united states accordingly its business cycle dating committee considers a recession to be a significant decline in economic activity spread across the economy lasting more than a few months normally visible in real gdp real income employment industrial production and wholesale retail sales 3the great depression featured many recessions one of which lasted for 44 months 4the dating committee typically determines recession start and end dates long after the fact for instance after the end of the 2007 09 recession it waited to make its decision until revisions in the national income and product accounts were released on july 30 and aug 27 2010 and announced the june 2009 recession end date on sept 20 2010 5u s expansions have lasted longer than u s contractions on average between 1945 and 2019 the average expansion lasted about 65 months the average recession lasted approximately 11 months 6between the 1850s and world war ii the average expansion lasted about 26 months and the average recession about 21 months the longest expansion was from 2009 to 2020 which lasted 128 months 6stock prices and the business cyclethe biggest stock price downturns tend to occur but not always around business cycle downturns e g contractions and recessions for example the dow jones industrial average and the s p 500 took steep dives during the great recession the dow fell 51 1 and the s p 500 fell 56 8 between oct 9 2007 to march 9 2009 7there are many reasons for this but primarily it is because businesses assume defensive measures and investor confidence falls during contractionary periods many events occur before people in an economy are aware they are in a contraction but the stock market trails what is going on in the economy so if there is speculation or rumors about a recession mass layoffs rising unemployment decreasing output or other indications businesses and investors begin to fear a recession and act accordingly businesses assume defensive tactics reducing their workforces and budgeting for an environment of falling revenues investors flee to investments known to preserve capital demand for expansionary investments falls and stock prices drop it s important to remember that while stock prices tend to fall during economic contractions the phase does not cause stock prices to fall fear of a recession causes them to fall | |
what are the stages of the business cycle | in general the business cycle consists of four distinct phases expansion peak contraction and trough | |
what does a business cycle describe | a business cycle describes the fluctuations in an economy over a period of time generally the period from the start of one recession to the start of the next this would include periods when the economy grows | |
are business cycles predictable | generally business cycles are not predictable economies are complex machines that function in a variety of ways and are intertwined in as many ways the ability to predict how they will move is extremely difficult there can be signs of changes in an economy such as changes in inflation and production but to predict an all out change in the business cycle is very tough if not impossible the bottom linethe business cycle is the time it takes the economy to go through all four phases of the cycle expansion peak contraction and trough expansions are times of increasing profits for businesses and rising economic output and are the phase the u s economy spends the most time in contractions are times of decreasing profits and lower output and are the phase in which the least amount of time is spent | |
what is a business development company bdc | a business development company bdc is an organization that invests in small and medium sized companies as well as distressed companies a bdc helps these firms grow in the initial stages of their development with distressed businesses the bdc helps the companies regain sound financial footing similar to closed end investment funds many bdcs are public companies whose shares trade on major stock exchanges such as the american stock exchange amex nasdaq and others as investments they are high risk but offer higher rewards understanding business development companies bdcs the u s congress created business development companies in 1980 to fuel job growth and assist emerging u s businesses in raising funds bdcs are closely involved in mentoring and developing the companies in their portfolios because it is in a bdc s best interest to help them become successful bdcs invest in private companies and small public firms that have low trading volumes or are in financial distress they raise capital through initial public offerings or by issuing corporate bonds and equities or forms of hybrid investment instruments to investors the raised capital is then used to provide funding for the struggling companies bdcs can use different financial instruments to provide capital but in general most issue loans or purchase stocks or convertible securities from the companies some business development companies are publicly traded entities others are not publicly traded and are known as non traded bdcs to qualify as a bdc a company must be registered in compliance with section 54 of the investment company act of 1940 in addition it must be a domestic company whose class of securities is registered with the securities and exchange commission sec the bdc must invest at least 70 of its assets in private or public u s firms with market values of less than us 250 million these companies are often young businesses seeking financing or firms suffering or emerging from financial difficulties also the bdc must provide managerial assistance to the companies in its portfolio business development companies avoid corporate income taxes by distributing at least 90 of their income to shareholders bdcs vs venture capitalif bdcs sound similar to venture capital funds they are however there are some key differences one relates to the nature of the investors each seeks venture capital funds are primarily available to large institutions and wealthy individuals through private placements in contrast bdcs allow smaller nonaccredited investors to invest in them and by extension in small growth companies venture capital funds keep a limited number of investors and must meet specific asset related tests to avoid being classified as regulated investment companies on the other hand bdc shares are typically traded on stock exchanges and are constantly available as investments for the public bdcs that decline to list on an exchange must follow the same regulations as listed bdcs however less stringent provisions for the amount of borrowing related party transactions and equity based compensation make the bdc an appealing form of incorporation to venture capitalists who were previously unwilling to assume the burdensome regulation of an investment company advantages and disavantages of bdc investmenthigh dividend yieldsopen to retail investorsliquiddiversityhigh risksensitive to interest rate spikesilliquid opaque holdingscan magnify lossesdividends taxed as income | |
how to invest in a bdc | a business development company is a publicly traded firm with stocks trading on public exchanges so you can purchase stocks through your broker some bdc stocks are included in exchange traded funds and mutual funds for example the vaneck bdc income etf is offered through many brokers and is available to retail investors 1 | |
how does a bdc make money | business development companies can make money in several different ways one of the most common is to purchase equity from the companies they provide funding for and sell it when it appreciates if a bdc buys convertible bonds from a company it has invested in it can receive yields from the bonds and later convert them to equity once converted the equity can be held for appreciation or sold for capital gains lending is another way bdcs make money similar to a consumer borrowing from a bank a bdc charges interest on the loans it makes | |
what are the benefits of a bdc | business development companies provide investors with higher yields and returns | |
how does a bdc make money | bdcs make money by lending capital to and purchasing equity or bonds from the companies in their portfolio | |
what is bdc lending | business development company lending is when a bdc lends capital to a company it has invested in the bottom linebusiness development companies are firms that exist to assist smaller or financially struggling businesses bdcs use fundraising techniques to raise capital for themselves from investors and then use that money to invest in these smaller businesses they were created by congress in 1980 to help small businesses grow while attempting to shield them from predatory tactics sometimes used to take over struggling businesses bdcs generally have higher returns than mutual funds and exchange traded funds but with these returns comes an equal increase in risk and volatility if you re considering investing in bdcs it helps to talk to a professional financial advisor to determine if they meet your investing goals and risk tolerance | |
what is business economics | business economics is a field of applied economics that studies the financial organizational market related and environmental issues faced by corporations business economics assesses certain factors impacting corporations business organization management expansion and strategy using economic theory and quantitative methods research topics in the field of business economics might include how and why corporations expand the impact of entrepreneurs interactions among corporations and the role of governments in regulation understanding business economicsin the broadest sense economics refers to the study of the components and functions of a particular marketplace or economy such as supply and demand and the impact of the concept of scarcity within economics production factors distribution methods and consumption are important subjects of study business economics focuses on the elements and factors within business operations and how they relate to the economy as a whole the field of business economics addresses economic principles strategies standard business practices the acquisition of necessary capital profit generation the efficiency of production and overall management strategy business economics also includes the study of external economic factors and their influence on business decisions such as a change in industry regulation or a sudden price shift in raw materials types of business economicsmanagerial economics is a field of study within business economics that focuses on the microeconomic factors that influence the decision making processes with an organization the strategic decisions of corporations result in either a profit or a loss for the company managerial economic principles are intended to influence and guide corporate strategy and decisions toward the best outcomes for a company the study of managerial economics is applied to both the public and private sectors as well as to for profit and not for profit organizations all of these types of organizations must effectively assess the economic climate in order to remain solvent because all organizations require a source of funding to continue operations across all sectors of the business world the main goal of managerial economics is to use all available resources within an organization specifically maximizing production while at the same time minimizing any waste while nonprofit organizations and for profit organizations may have different goals both of these types of organizations perform similar business functions and require similar expertise in addition they must also strive to limit waste and maximize the overall usefulness of their available resources in order to maintain their viability as enterprises both nonprofit organizations and for profit organizations have to maintain the necessary capital to continue working within the economy this requires them to use many of the same principles for example all types of organizations engage in advertising community or customer support and need leadership to make appropriate strategic decisions special considerationsthere are various organizations associated with the field of business economics in the u s the national association for business economics nabe is the professional association for business economists nabe is the largest international association of applied economists strategists academics and policy makers committed to the application of economics the mission of the organization is to provide leadership in the use and understanding of economics in the united kingdom the equivalent organization is the society of professional economists spe spe is the leading organization serving professional economists in the u k and europe | |
what is a business ecosystem | a business ecosystem is the network of organizations including suppliers distributors customers competitors government agencies and so on involved in the delivery of a specific product or service through both competition and cooperation the idea is that each entity in the ecosystem affects and is affected by the others creating a constantly evolving relationship in which each entity must be flexible and adaptable in order to survive as in a biological ecosystem understanding a business ecosystemin the 1930s british botanist arthur tansley introduced the term ecosystem to describe a community of organisms interacting with each other and their environments air water earth etc in order to thrive these organisms compete and collaborate with each other on available resources co evolve and jointly adapt to external disruptions business strategist james moore adopted this biological concept in his 1993 harvard business review article predators and prey a new ecology of competition in which he paralleled companies operating in the increasingly interconnected world of commerce to a community of organisms adapting and evolving to survive moore suggested that a company be viewed not as a single firm in an industry but as a member of a business ecosystem with participants spanning across multiple industries 1like natural ecosystems the firms involved in business ecosystems compete for survival with adaptation and sometimes extinction advances in technology and increasing globalization have changed ideas about the best ways to do business and the idea of a business ecosystem is thought to help companies understand how to thrive in this rapidly changing environment moore defined the business ecosystem as follows in effect the business ecosystem consists of a network of interlinked companies that dynamically interact with each other through competition and cooperation to grow sales and survive an ecosystem includes suppliers distributors consumers government processes products and competitors when an ecosystem thrives it means that the participants have developed patterns of behavior that streamline the flow of ideas talent and capital throughout the system ecosystems and competitionecosystems create strong barriers to entry for new competition as potential entrants not only have to duplicate or better the core product but they must also compete against the entire system of independent complementing businesses and suppliers that form the network being a part of a business ecosystem provides mechanisms to leverage technology achieve excellence in research and business competence and compete effectively against other companies some other goals of a business ecosystem include it is for these reasons that in today s rapidly changing business world a company creates its own ecosystem or comes up with a way to join an existing ecosystem by providing an advantage that is currently lacking in that ecosystem | |
what is business ethics | business ethics is the moral principles policies and values that govern the way companies and individuals engage in business activity it goes beyond legal requirements to establish a code of conduct that drives employee behavior at all levels and helps build trust between a business and its customers investopedia katie kerpelunderstanding business ethicsbusiness ethics ensure that a certain basic level of trust exists between consumers and various forms of market participants with businesses for example a portfolio manager must give the same consideration to the portfolios of family members and small individual investors as they do to wealthier clients these kinds of practices ensure the public receives fair treatment the concept of business ethics began in the 1960s as corporations became more aware of a rising consumer based society that showed concerns regarding the environment social causes and corporate responsibility the increased focus on social issues was a hallmark of the decade 1since that time the concept of business ethics has evolved business ethics goes beyond just a moral code of right and wrong it attempts to reconcile what companies must do legally vs maintaining a competitive advantage over other businesses firms display business ethics in several ways business ethics ensure a certain level of trust between consumers and corporations guaranteeing the public fair and equal treatment principles of business ethicsthere are generally 12 business ethics principles |
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