COMMERCE 3FH3 Chapter Notes - Chapter 1-5: Managed Futures Account, Commodity Trading Advisor, Hedge Fund
6 Feb 2017
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Cash flows: an objective measure of the creation of economic value. Accounting measures provide an indication of economic value creation if we look at a firm"s financial statements. To accurately calculate and understand the economic value created we must use cash flows. For bondholder or debt investor: cash in vs. cash out, cash flow available and free after providing for all operating and investing claims on the assets of the business. For equity investor: cash in vs. cash out, cash flow available and free after providing for all non-equity claims on the assets of the business. Investment made to reduce risk of adverse price movements in a security by taking offsetting position in related security. A fund that can: take both long and short positions, use arbitrage, buy/sell undervalued securities, trade options or bonds. Invest in opportunities to get impressive gains at reduced risk.
