Minute Markets 4/24/24
Key Events 👉 The FTC bans noncompetes The Federal Trade Commission (FTC), which is responsible for fostering fair competition, bans the use of non-compete employee contracts in the US, arguing that that theyRestrict the freedom of workersSuppress wagesSlow down new business formation. Non-compete clauses are contractual clauses that prohibit employees from engaging in certain competitive activities such as working for
Callable Bonds
What are callable bonds? A bond is a fixed-income instrument. It is a stream of cash flows that the issuer agrees to pay to the lender within a specified time. It is a fixed contract. If DropoutEdu issues a bond with a face value of $1,000, a coupon rate of 5% paid annually, and a 5-year maturity, this means that
Risks of Too Much Leverage
What are the risks of taking on more leverage? Well leverage can work for or against you. It all depends on the direction of your absolute returns. If you generate a positive return, leverage further increases your returns. If you generate a negative return, leverage further decreases your returns. For instance, say you bought an asset for $100. Over the
Deadlines Get Stuff Done
Things get done when I am involved. Why? Is it because I have some crazy work ethic or pace? Maybe. Is it because I am intense? Maybe. But, really it’s because of when, not whether, I get involved. That is, I usually get involved in things near the deadline. I especially struggle with starting things ahead of time. I only
Working Capital is Like Negative Splits
Negative splitting in running terms means that your last lap was faster than your previous. Good runners start slower and get faster as the race progresses. I am notoriously bad at this. Starting fast then slowing down. So, what do I do? Well, on my 9th 400, I slowed down my pace to 90 seconds. So that on the 10th
Why Use So Much Debt?
Why do private equity firms want to invest the least amount of money into a deal? Don’t private equity firms have a lot of money to invest? Yes. Isn’t it because they want to diversify their holdings? Maybe. But, the real reason is math. By that, I mean that mathematically you generate the highest relative returns when you invest the
The Value Lies in the Uncertainty
Entrepreneurship is the uncertainty of doing work that may never pay off. The feeling that you wasted years chasing something that fails. This is by far one of the hardest things about entrepreneurship. The uncertainty. I find it easy for my friends from the outside in to tell me that life must be great. Making money. Working on your own
Question of the Day 4/23
Question In January, DropoutEdu sold and delivered $100 worth of textbooks to customers. Assuming a 25% tax rate, how much would DropoutEdu report in earnings in January? Answer Answer: 75 Explanation: First, the goods were transferred in January, it aligns with the reporting period (January) on the statement. Second, revenue affects earnings to common shareholders. So, this transaction will show
Minute Markets 4/22/24
Last 3 weeks we saw a bifurcation in this market. Tech, not too hot. Non-tech doing great. Tech bounced today. Key Events 👉 TikTok preps for legal battle against US The House passes divest-or-ban bill 360 to 58. This could be the first full blown social media ban by the US government. The Senate will vote on the bill this
Types of Equity Capital in LBOs
Equity can come from two primary sources in LBO financing. The amount of sponsor equity that is usually invested is the difference between the total uses and the maximum amount of debt capital the firm was able to access. Total Uses – Debt = Equity The private equity firms invested capital is called sponsor equity. The management’s invested capital is
