The Fx options trading Questions

Category: glossary , Asked by: Q. Foley from Ireland

A: A way to calculate the cost of a company's equity that gives different weight to different aspects of the equities. Instead of lumping retained earnings, common stock, and preferred stock together, WACE provides a more accurate idea of a companies total cost of equity. Determining an accurate cost of equity for a firm is integral for the firm to be able to calculate its cost of capital. In turn, an accurate measure of the cost of capital is essential when a firm is trying to decide if a future project will be profitable or not. Here is an example of how to calculate the WACE: First, calculate the cost of new common stock, the cost of preferred stock and the cost of retained earnings. Lets assume we have already done this and the cost of common stock, preferred stock and retained earnings are 24%, 10% and 20% respectively. Now, you must calculate the portion of total equity that is occupied by each form of equity. Again, lets assume this is 50%, 25% and 25%, for common stock, preferred stock and retained earnings respectively. Finally, you multiply the cost of each form of equity by its respective portion of total equity and sum of the values - which results in the WACE. Our example results in a WACE of 19.5%. WACE = (.24*.50) + (.10*.25) + (.20*.25) = 0.195 or 19.5%

Category: glossary , Asked by: B. Hodges from Cork, Ireland

A: A focused market that is only able to meet the need of one specific industry. This is only profitable when there are few suppliers of the particular good. Producers in a vertical market run the risk that their sole products may not be able to maintain positive cash flows.

Category: glossary , Asked by: Irvin N. From Luxembourg, Luxembourg

A: The currency used in published reports and financial documents. All annual and quarterly reports state the currency in which their results are listed. This is particularly important for companies that issue American depositary receipts (ADRs) which sometimes report earnings in a foreign currency, leaving investors with the task of doing the conversions.