111. What do you know about s&p500?

The S&P 500, or the Standard & Poor's 500, is an American stock market index based on the market capitalizations of 500 large companies having common stock listed on the NYSE or NASDAQ. The S&P 500 index components and their weightings are determined by S&P Dow Jones Indices. It differs from other U.S. stock market indices, such as the Dow Jones Industrial Average or the Nasdaq Composite index, because of its diverse constituency and weighting methodology. It is one of the most commonly followed equity indices, and many consider it one of the best representations of the U.S. stock market, and a bellwether for the U.S. economy. The National Bureau of Economic Research has classified common stocks, as a leading indicator of business cycles.

The committee selects the companies in the S&P 500 so they are representative of the industries in the United States economy. In order to be added to the index, a company must satisfy these liquidity-based size requirements:

• market capitalization is greater than or equal to US$4.0 billion

• annual dollar value traded to float-adjusted market capitalization is greater than 1.0

• minimum monthly trading volume of 250,000 shares in each of the six months leading up to the evaluation date.

The formula to calculate the S&P 500 Index value is:

where P is the price of each stock in the index and Q is the number of shares publicly available for each stock.

112. What do you know about factoring?

Factoring is a financial transaction and a type of debtor finance in which a business sells its accounts receivable (i.e., invoices) to a third party (called a factor) at a discount. A Business will sometimes Factor its Receivable Assets to meet its present and immediate Cash needs. Forfaiting is a Factoring arrangement used in International Trade Finance by Exporters who wish to sell their receivables to a forfaiter.

Factoring is not the same as invoice discounting (which is called an "Assignment of Accounts Receivable" in American Accounting - as propagated by FASB within GAAP). Factoring is the sale of receivables, whereas invoice discounting ("Assignment of Accounts Receivable" in American Accounting) is a borrowing that involves the use of the accounts receivable assets as collateral for the Loan. However, in some other markets, such as the UK, invoice discounting is considered to be a form of factoring, involving the "assignment of receivables", that is included in official factoring statistics. It is therefore also not considered to be borrowing in the UK. In the UK the arrangement is usually confidential in that the debtor is not notified of the assignment of the receivable and the seller of the receivable collects the debt on behalf of the factor. In the UK, the main difference between factoring and invoice discounting is confidentiality.

There are three parties directly involved: the factor who purchases the receivable, the one who sells the receivable, and the debtor who has a Financial Liability that requires him/her to make a payment to the owner of the invoice. The receivable, usually associated with an invoice for work performed or goods sold, is essentially a financial asset that gives the owner of the receivable the legal right collect money from the debtor whose Financial Liability directly corresponds to the receivable asset. The seller sells the receivables at a discount to the third party, the specialized financial organization (aka the factor) to obtain cash. This process is sometimes used in manufacturing industries when the immediate need for raw material outstrips their available cash and ability to purchase "on account".2014 Generally, both invoice discounting and factoring are used by businesses to ensure they have the immediate cash flow necessary to meet their current and immediate obligations

There are three principal parts to the factoring transaction, all of which are recorded separately by an accountant who is responsible for recording the factoring transaction: (a) the "fee" paid to the factor, (b) the Interest Expense paid to the factor for the advance of money prior to the receipt of payments from debtors, (c) the "Bad Debt expense" associated with portion of the receivables that the seller expects will remain unpaid and uncollectable, (d) the "factor's holdback receivable" amount to cover merchandise returns, and (e) any additional "Loss" or "Gain" the seller must attribute to the sale of the receivable Sometimes the factor's charges paid by the seller (the factor's "client") covers a discount fee, additional credit risk the factor must assume, and other services provided. The factor's overall profit is the difference between the price it paid for the invoice and the money received from the debtor, less the amount lost due to non-payment.