What It Is:
An investment bank is a financial intermediary that specializes primarily in selling securities and underwriting the issuance of new equity shares to raise capital funds. This is different from a commercial bank, which specializes in deposits and commercial loans.
How It Works/Example:
Investment banks mediate between companies that issue securities and the individuals or entities wishing to purchase them. In this respect, investment banks operate along two main lines: a "buy" side and a "sell" side. "Buy" side operations include services such as securities trading and portfolio management. "Sell" side activities include underwriting new lines of stock, marketing financial products, and publishing financial research.
To illustrate an investment bank's “buy side” role in securities trading, suppose an investor wants to purchase 100 shares of company XYZ. They can solicit the services of an investment bank, where a stock broker can place an order and deliver these shares.
To illustrate an investment bank's “sell side” role as an underwriter, suppose company XYZ plans to issue new shares of stock in an initial public offering (IPO). Company XYZ can solicit an investment bank to underwrite the shares, market and sell them to their clients. This way, the investment bank raises the funds that company XYZ hopes to gain from the issue of the new shares.
Regulation becomes a key issue for investment banks, because they operate on both (and often competing) sides of the same coin. Consequently, there is significant room for conflicts of interest between the buying and selling operations. Agencies such as the SEC provide strict guidelines to help ensure that operations on the "buy" and "sell" sides do not intersect and result in unfair market practices or ethics violations.
Why It Matters:
Investment banks bring investors together with companies that issue securities and broker securities. Investment banks are also beneficial to security-issuing companies, because, while they broker the securities a company may issue, they can help raise capital funds for such companies through underwriting new stock offerings.
http://www.investinganswers.com
Showing posts with label investment. Show all posts
Showing posts with label investment. Show all posts
Tuesday, February 23, 2010
Monday, February 22, 2010
Investor Relations
What It Is:
Investor relations(IR) refers to the function within a public company that is responsible for managing and communicating information to the public pertaining to the company's operations, managerial organization, and financial standing.
How It Works/Example:
Public companies manage their investor relations function either through an in-house IR department or by outsourcing to an external investor relations firm that specializes in these activities. The IR team is responsible for maintaining the company’s most up-to-date information with regard to its products and services. It also maintains the latest information about the company's operational and financial performance in its quarterly and annual reports, as well as its performance in the securities markets.
To illustrate, suppose an investor takes an interest in company XYZ as an investment prospect. If he wishes to receive detailed information about any aspect of company XYZ, he contacts XYZ's IR department. The IR department can provide him with descriptions of the company's products and services as well as financial statements, financial statistics, and an overview of the company's internal organization.
Perhaps the most important function of the IR team is to interface with investment analysts and other parties that represent institutional investors. Analysts frequently publish research and opinions regarding public companies which influence the investment community.
Why It Matters:
A company's IR department provides a channel through which the investment community, including investors, analysts, or any other interested party can easily access information about the company. This is particularly important for information transparency and for promoting a sense of integrity and trustworthiness on the part of the company.
http://investinganswers.com
Investor relations(IR) refers to the function within a public company that is responsible for managing and communicating information to the public pertaining to the company's operations, managerial organization, and financial standing.
How It Works/Example:
Public companies manage their investor relations function either through an in-house IR department or by outsourcing to an external investor relations firm that specializes in these activities. The IR team is responsible for maintaining the company’s most up-to-date information with regard to its products and services. It also maintains the latest information about the company's operational and financial performance in its quarterly and annual reports, as well as its performance in the securities markets.
To illustrate, suppose an investor takes an interest in company XYZ as an investment prospect. If he wishes to receive detailed information about any aspect of company XYZ, he contacts XYZ's IR department. The IR department can provide him with descriptions of the company's products and services as well as financial statements, financial statistics, and an overview of the company's internal organization.
Perhaps the most important function of the IR team is to interface with investment analysts and other parties that represent institutional investors. Analysts frequently publish research and opinions regarding public companies which influence the investment community.
Why It Matters:
A company's IR department provides a channel through which the investment community, including investors, analysts, or any other interested party can easily access information about the company. This is particularly important for information transparency and for promoting a sense of integrity and trustworthiness on the part of the company.
http://investinganswers.com
Investment Grade
What It Is:
Investment grade
is a quality designation ascribed by rating agencies to bonds that have little risk of default.
How It Works/Example:
Municipal and corporate bonds are rated by credit agencies, such as Standard & Poor's and Moody's, based on the creditworthiness of the issuer. Investment grade indicates that a bond is a safe, low-risk debt instrument on which the issuer is unlikely to default.
Ratings of BBB- or higher by Standard & Poor's or ratings of Baa3 or higher by Moody's designate a bond as investment grade. Ratings are subject to change depending of the financial health of the issuer.
Why It Matters:
Credit ratings allow investors to better gauge the risks level associated with a specific bond. Investors seeking lower-risk debt tend to choose investment-grade bonds.
Bond investors should be aware that a decline in a bond's rating could adversely affect its market value.
http://investinganswers.com
Investment grade
is a quality designation ascribed by rating agencies to bonds that have little risk of default.
How It Works/Example:
Municipal and corporate bonds are rated by credit agencies, such as Standard & Poor's and Moody's, based on the creditworthiness of the issuer. Investment grade indicates that a bond is a safe, low-risk debt instrument on which the issuer is unlikely to default.
Ratings of BBB- or higher by Standard & Poor's or ratings of Baa3 or higher by Moody's designate a bond as investment grade. Ratings are subject to change depending of the financial health of the issuer.
Why It Matters:
Credit ratings allow investors to better gauge the risks level associated with a specific bond. Investors seeking lower-risk debt tend to choose investment-grade bonds.
Bond investors should be aware that a decline in a bond's rating could adversely affect its market value.
http://investinganswers.com
Investment Real Estate
What It Is:
Investment real estate refers to any residential structure owned solely for the purpose of generating investment returns, either through rental income or through market value appreciation.
How It Works/Example:
Often, an individual may own numerous residential properties and live in only one of them. The additional properties may be used to generate rental income or profits from increases in market value. When used for such purposes, these properties qualify as investment real estate.
To illustrate, person X owns a two-family house in addition to the house that person X lives in year-round. Person X rents out the two-family house and receives $1000 each month in rental income. This qualifies the two-family house as investment real estate.
To illustrate, from a market perspective, suppose person X keeps a watchful eye on the market value of that two-family house. One day person X sees a major jump in the house's value, and decides it's time to sell. Even if the house was not rented to tenants at the time, it would still qualify as investment real estate, because since person X does not inhabit it and is selling it in order to make a profit.
Why It Matters:
Investment real estate, though residential, exists for the sole purpose of generating income for the owner(s) either through rent or market speculation. For this reason, investment real estate is taxed differently from real estate (e.g. private home) that the owner inhabits.
http://investinganswers.com
Investment real estate refers to any residential structure owned solely for the purpose of generating investment returns, either through rental income or through market value appreciation.
How It Works/Example:
Often, an individual may own numerous residential properties and live in only one of them. The additional properties may be used to generate rental income or profits from increases in market value. When used for such purposes, these properties qualify as investment real estate.
To illustrate, person X owns a two-family house in addition to the house that person X lives in year-round. Person X rents out the two-family house and receives $1000 each month in rental income. This qualifies the two-family house as investment real estate.
To illustrate, from a market perspective, suppose person X keeps a watchful eye on the market value of that two-family house. One day person X sees a major jump in the house's value, and decides it's time to sell. Even if the house was not rented to tenants at the time, it would still qualify as investment real estate, because since person X does not inhabit it and is selling it in order to make a profit.
Why It Matters:
Investment real estate, though residential, exists for the sole purpose of generating income for the owner(s) either through rent or market speculation. For this reason, investment real estate is taxed differently from real estate (e.g. private home) that the owner inhabits.
http://investinganswers.com
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