What is Bottom Line in Finance: Definition & Meaning Explained

Foreign Direct Investment

Foreign Direct Investment (FDI) is the act of acquiring a majority stake in a company located in a different country with the intention of assisting, growing, and managing the business.

FDIs and FPIs may seem similar but there is a major difference - lasting interest. When a company or investor obtains at least 10% control of foreign company with the intention of actively managing the business, it’s known as lasting interest.

A company that establishes a subsidiary in another country can also be classified as FDI. FDIs can also be made through mergers and acquisitions as well as collaborations with foreign companies

Holding Period

The holding period of a financial security is the time period between buying and selling the said security. It is the total amount of time for which the security has been held in the portfolio of an investor. At times, there’s a mandatory holding period attached to a security. During this mandatory holding period, the security can not be sold.

Bought Out Deal

A bought-out deal is a stock offering where an investment bank buys the entire issue of shares from a company. In turn, the investment bank will attempt to sell the shares to other investors. A deal of this kind has two benefits:

The company need not worry about subscription as the investment bank will purchase the entire offering
The investment bank can negotiate with the company and get the shares at a discount

That said, there are risks to a bought out deal like:

It is up to the investment bank to sell the shares to investors in order to recoup the principal or make a profit
The investment bank also runs the risk of receiving no interest in the shares from other investors
Guarantee purchase

If the issue size of the bought-out deal is large enough, the investment bank may team up with others to fulfil the purchase.

Convertible Bonds

A convertible bond is a hybrid security that’s initially designed to be a debt instrument that pays a fixed interest rate in exchange for a loan. Once the loan’s tenure ends, the holder can decide to take one of either action:

Don’t convert bond: face value of the bond is transferred to the holder on maturity

After Hours Trading

After hours trading means buying and selling securities after the end of regular market hours. In India, the stock market is open for regular trade from 9.15 AM to 3.30 PM.

After hours trading is allowed from 3.30 PM to 4 PM. Around the world, stocks are known to suffer from a lack of liquidity during after hours trading.

Bottom Line in Finance