A strategic investment approach where an investor lowers the average price paid for a company's shares by purchasing additional shares as the price decreases.
Capital allocation refers to the deployment of funds across various units or projects within an organization based on calculated potential returns and risks, often employing techniques like value-at-risk (VaR) and contributing to metrics such as shareholder value and Economic Value Added (EVA).
Divestment is the process of selling off assets, subsidiaries, or business segments to realize value or streamline operations. It serves as the opposite of investment.
Flight to quality is an investment strategy where investors shift their capital to the safest possible assets, such as U.S. Treasury bills, to protect against loss during periods of market instability.
To allocate capital to an enterprise with the objective of securing income or profit for the investor.
The Marginal Efficiency of Capital (MEC) is the annual percentage yield earned by the last additional unit of capital. It is crucial for determining the profitability of investment projects. Also known as marginal productivity of capital, natural interest rate, net capital productivity, and rate of return over cost, MEC indicates which projects exceed the market rate of interest and are thus profitable to undertake.
Plow back refers to the practice of reinvesting a company's earnings back into the business rather than distributing those profits as dividends to shareholders. Typically employed by smaller, fast-growing companies, plow back is a strategy aimed at fueling further growth and expansion.
The ratio in which the profits or losses of a business are shared among its partners. For a partnership, the profit-sharing ratios will be defined in the partnership agreement, usually reflecting the amount, given as a percentage of the total profits, attributable to each partner.
RAROC is a performance measurement tool used by financial institutions to determine the risk-adjusted profitability of various units within the organization.
