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Tip of the Day Diversify Your Portfolio

Diversify Your Portfolio - One sure-fire way to lose money in the stock market it to invest too much money into one share or one company. The best way...

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Depreciation

Definition: Long-term assets are depreciated to account for the reduction in economic value over time. 

For example, if you bought a car for $20,000 and intended to keep it for 5 years, it wouldn't make much sense to have it valued at $20,000 on the books at year five.  Instead, you would depreciate it over its useful life.  In year 5, it may only be worth $6,000.

Advice: Depreciation is a figure that many companies may try fidgeting with.  By simply extending the useful life of their assets, this will reduce depreciation expense.  Or some companies will try to reduce the useful life to increase depreciation expense and reduce their taxes.

Depreciation expense is also more important in some industries than others.  For example, it's not very important in real estate because buildings tend to increase in value.

 

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Definition of the Day Allocation Efficiency

Allocation Efficiency - Allocation efficiency is defined by how effective an economy or a market is in the dispersion of its capital. The dispersion of capital refers to the distribution of values related to specific categories whether they be standard deviations, ranges, or averages used to calculate in statistical date....

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