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Investing Basics

Many analytic jobs involve developing views, writing reports, and disseminating them to the public or clients. 'Quants,' on the other hand, work behind the scenes, developing mathematical models to assist analysts in their predictions. Computer programmers and math majors may find a rewarding career in finance. A quant can earn tremendous sums of money, if a talented individual is able to build software or mathematical models that outperform the market on a regular basis. These jobs consist of looking for patterns in data, watching for market trends based on underlying economic or psychological factors, then forecasting market movements.

Along more traditional lines, NASDAQ offers a wealth of securities' investing tutorials, and live streams of data from it's online network of websites, headquartered at Nasdaq.com. At a minimum, browse their stock screener and financial analysis pages. Below, find links directly to Nasdaq pages, offering updated interactive charts, volume trading, summary quotes, and IPO disclosures.

Stocks
Options
Commodities
Bonds
Forex
Mutual Funds
Investing Tools
Stock Screener

NASDAQ Stock Market

Stock Quotes
Basic Charts
Interactive Charts
Most Active
Unusual Volume
IPO Summary

Company Data

Stock Reports
Financials
Analyst Research

Liquidity Ratios: Acid Test

Liquidity ratios are used to help assess whether a business has sufficient cash or equivalent current assets to be able to pay its debts as they fall due within the year. A business that finds that it does not have the cash to settle its debts becomes insolvent. The formula for the acid test ratio is Current Assets minus Inventory, divided by Liabilities. The reason is that not all assets can liquidated into cash at fair market value. Notably, raw materials and large inventories of product must first be sold, and then cash collected from debtor accounts.

The Acid Test Ratio, sometimes also called the Quick Ratio, adjusts the Current Ratio to eliminate those current assets that are not already in cash form. An acid test ratio of over 1.0 is good news; the business is well-placed to be able to pay its debts even if it cannot turn inventories into cash. Care has to be taken when interpreting the acid test ratio. The value of inventory that a business needs to hold will vary considerably. For example, you wouldn’t expect a law firm to carry inventory, but a major supermarket carries a large dollar value of inventory at any given time.

Credit Card Interest, Credit Scores

Student credit cards are easy to obtain via an online application, but monthly payments can be difficult to manage. As with most credit cards, the interest rates may be high, and there may be an annual fee to pay. Beyond this, however, be aware that the credit card company can raise your interest rates if you are late on even one payment. Student credit cards should be used as a last resort if you need to buy a computer for school, and have a steady job, or other regular income to pay off the credit card in full within a few months. You can get a free credit report online, or check your credit score at one of the 'Big 3' Credit Bureaus, Transunion, Experian, or Equifax.

Build your credit with a secured credit card for students. There are no application fees or activation fees, and the credit line varies, from $300-$4,900. Your maximum credit line is based on your income as well as the amount of your security deposit. Given that you make the minimum payment monthly, your credit history and credit card account information will be shared with all three major credit bureaus. After 12 months, your security deposit may be returned if your payment history has been excellent. Apply now for a secured credit card from Bank of America, or an American Express credit card.

You can improve your credit score dramatically by securing credit cards, and then simply not using your credit line. Your credit score is a ratio of your total available credit to the amount of debt that you carry. For example, if you get more credit cards, and don't use the credit, your available credit has increased, but your debt load has remained constant. Banks and credit unions naturally offer the easiest credit to the borrowers who need it least, and have strict employment and earnings requirements. You may also be asked to list your assets, or seek a co-signer, if you don't have sufficient income to qualify for a credit card on your own.

When applying for a credit card like the Wells Fargo Platinum Visa credit card, note that many cards promote no annual fee for the first year, but then hit you with a high annual fee in following years. You can also incur fees by taking out a cash advance, which is usually charged back at a higher interest rate, if not paid in full within the same billing period. You are told that you can get cash back on certain purchases, but no-one mentions that the interest charges over time may be higher in fact, than your savings. In addition, there are hidden transaction fees, and charges for using your credit card overseas. Using your credit card to buy things you don't really need, or to get cash advances, is just not smart financial planning. There are better ways to get the extra money that you need.

Financial Job Descriptions

There are several credentials that finance professionals must possess to begin working. If you are planning to break into finance as a broker, you'll need a Series 7 license, as well as a Series 63 license. These will allow you to sell stocks, bonds, and other securities in those states that your firm is registered in. For those that wish to work as equity traders, this field requires a Series 55 license. Exams are difficult and will require preparation. Analysts are required to pass the Series 16 supervisory analyst exam, which permits distribution of analytical reports. Further, analysts may take the Chartered Financial Analyst (CFA) exam.

Hedge funds are well-known for taking on greater risk, focusing on very high returns. Hedge funds have few restrictions on how they can invest, so your job security rests squarely on your ability to earn above-market returns. In order to prove yourself in this highly-competitive field, expect very long hours, and high stress. Large firms manage a variety of asset classes, while boutique firms focus on a particular market niche, such as small-cap stocks or high-yield bonds. While hedge funds and money managers buy and sell securities, private equity firms purchase entire corporations, seeking to either resell the companies outright, or take them public. Your job duties may include analyzing potential purchases, negotiating deals, raising financing, or working directly on portfolio profitability.

Real estate firms attempt to either develop new real estate projects or purchase existing projects. Finance jobs at a real estate company include working as a financing specialist, analyst or deal manager. Institutional investment managers invest money for a pension fund, sovereign wealth fund, or an insurance company, in an effort to generate returns over time. Your role may be that of an investment analyst, portfolio manager or currency trader.

Banks are at the heart of the finance industry, financing trade or infrastructure deals, and managing the money of wealthy people. The range of careers in banking is enormous, and often includes beginning as a teller, or accountancy, then working up into branch management or corporate positions. Work is available in specialist areas such as insurance, lending, foreign currency, investment management, trade finance, and financial control. Investment banks give strategic advice to corporations, provide corporate financing, and trade in stocks, bonds, and other securities, often using automated, high-speed trading software. One of the primary functions of investment banks is raising capital. This function falls upon the underwriting department. Bankers in the underwriting department specialize either in debt underwriting or equity. Private equity jobs can be found within an investment bank but most are found at specialist firms. Some of the largest private equity firms include Blackstone, KKR and TPG.

Accounting Balance Sheet

The accounting balance sheet is one of the major financial statements used by accountants and business owners. The other major financial statements are the income statement, statement of cash flows, and statement of stockholders' equity. The balance sheet presents a company's financial position at the end of a specified date. Because the balance sheet informs the reader of a company's financial position, as well as what it owes to other parties, this is valuable information.

Assets are the resources of the company, and have future economic value that can be measured in dollars. Assets commonly cover cash on hand, accounts receivable, buildings and equipment, but also include costs paid in advance such as prepaid advertising, prepaid insurance, prepaid legal fees, and prepaid rent. Examples of asset accounts that are reported on the balance sheet may include, but are not limited to:

• Cash
• Petty Cash
• Temporary Investments
• Accounts Receivable
• Inventory
• Supplies
• Prepaid Insurance
• Land & Improvements
• Buildings
• Equipment
• Goodwill
• Bond Issue Costs
• Allowance for Doubtful Accounts
• Accumulated Depreciation - Land & Buildings
• Accumulated Depreciation - Equipment
• Accumulated Depletion


Accounting Liabilities are obligations of the company, amounts owed to creditors for a past transaction, or payables such as wages, rents, or taxes. Along with owner's equity, liabilities can be thought of as a source of the company's assets, as well as a claim against a company's assets. Liabilities may also include amounts received in advance for future services, reported as Unearned Revenues or Customer Deposits. Typical liabilities include the following:

• Notes Payable
• Accounts Payable
• Salaries Payable
• Wages Payable
• Interest Payable
• Other Accrued Expenses Payable
• Income Taxes Payable
• Customer Deposits
• Warranty Liability
• Lawsuits Payable
• Unearned Revenues
• Bonds Payable
• Discount on Notes Payable
• Discount on Bonds Payable

A company's commitment to purchase goods may be legally binding, but is not considered a liability on the balance sheet until actual services or goods have been received. Commitments must be disclosed in the notes appending the balance sheet. Similarly, the leasing of an asset may appear to be a rental cost, but in substance it may involve an agreement to purchase the asset and finance it through monthly payments. Therefore, accountants must look past outward appearances, and focus on the substance of business transactions.

Contingent Liabilities include warranty of a company's products, the guarantee of another party's loan, and lawsuits filed against a company. If the contingent loss is highly probable, and the amount of the loss can be estimated, the company needs to record a liability on its balance sheet and a loss on its income statement. However, if the contingent loss is only a remote possibility, no liability or loss is recorded and there is no need at that time to include the matter in notes to the financial statements.

Income Statement

The income statement is often referred to as a profit and loss statement (P&L), statement of operations, or statement of income. The income statement is important because it shows the profitability of a company during the time interval specified in its heading. The income statement shows revenues, expenses, gains, and losses, but it does not include cash receipts nor cash disbursements. This information is collected in a Statement of Cash Flows.

Revenues from primary activities are often referred to as operating revenues. The primary activities of a business are purchasing merchandise or raw materials and selling products, referred to as sales revenues or sales. The primary activities of a company that provides services involve selling expertise to clients. For companies providing services, the revenues from their primary services are referred to as service revenues or fees. It is common in business to extend a modest amount of time to repeat customers to pay for purchases. For example, if a retailer gives customers 30 days to pay, revenues occur (and are reported) when the merchandise is sold to the buyer, not when the cash is received 30 days later.

Non-operating Revenues are amounts a business earns outside of purchasing and selling goods and services. For example, when a retail business earns interest on some of its idle cash, or sells an commodity investment for a capital gain, these revenues result from an activity outside of buying and selling merchandise. As a result the revenues are reported on the income statement separate from its primary activity of sales or service income.

Expenses involved in primary activities are expenses that are incurred in order to earn normal operating revenues. Under the accrual basis of accounting, the cost of goods sold and expenses are matched to sales and the accounting period when they are used, not the period in which they are paid. Because of the cost principle and inflation, the expenses shown on the income statement reflect costs that may have different present values. An accountant, though, is not allowed the luxury of waiting until things are known with certainty, so in order to properly account for revenues when they are earned, and expenses when they are incurred, accountants must often use cost estimates.

Secondary Expenses are referred to as non-operating expenses. For example, interest expense is a non-operating expense because it involves the finance function of the business, rather than the primary activities of buying, producing and selling merchandise. Losses such as the loss from the sale of long-term assets, or the loss on lawsuits result from a transaction that is outside of a business's primary activities. A loss is reported as the net of two amounts: the amount listed for the item on the company's books (book value) minus the proceeds received from the sale. A loss occurs when the proceeds are less than the original book value.

Net Income occurs when the net amount of revenues and gains minus expenses and losses is positive, the bottom line of the company's performance. If the net amount is negative, there is a net loss. A company's ability to operate profitably is paramount to both lenders and investors, company management, labor unions, and government regulators.

 

Finance Program Rankings - Undergraduate

Beyond preparing you for graduate programs in business, studying finance can open doors for you in the fields of investment banking, securities analysis, and business start-ups.
 1. Stanford University - Stanford, CA
 2. University of Chicago - Chicago, IL
 3. University of Pennsylvania - Philadelphia, PA
 4. New York University (NYU) - New York, NY
 5. Princeton University - Princeton, NJ
 6. University of Michigan - Ann Arbor, MI
 7. Duke University - Durham, NC
 8. University of Texas Austin - Austin, TX
 9. Northwestern University - Evanston, IL
10. Boston College - Chestnut Hill, MA
11. Carnegie Mellon University - Pittsburgh, PA
12. Michigan State University - East Lansing, MI
13. Penn State University - State College, PA
14. Purdue University - West Lafayette, IN
15. University of Illinois Urbana-Champaign - Champaign, IL
16. University of North Carolina (UNC) - Chapel Hill, NC
17. University of Southern California (USC) - Los Angeles, CA
18. University of Wisconsin - Madison, WI
19. Georgetown University - Washington, DC
20. University of Oregon - Eugene, OR
21. Indiana University - Bloomington, IN
22. Johns Hopkins University - Baltimore, MD
23. Rutgers University - Camden, NJ
24. University of California San Diego (UCSD) - La Jolla, CA
25. University of Florida - Gainesville, FL
26. University of Maryland - College Park, MD
27. University of Virginia - Charlottesville, VA
28. Brigham Young University - Provo, UT
29. City University of New York (CUNY) - New York, NY
30. Iowa State University - Ames, IA

    Source: US News, Forbes, and Bloomberg

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