More Tips And Terms For The Stock Market

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What Is Amalgamation?

An amalgamation is a combination of two or more companies into a new entity. 

Amalgamation is distinct from a merger because neither company involved survives as a legal entity. Instead, a completely new entity is formed to house the combined assets and liabilities of both companies.

The term amalgamation has generally fallen out of popular use in the United States, being replaced with the terms merger or consolidation. But it is still commonly used in countries such as India.

---What Is a Merger?

A merger is an agreement that unites two existing companies into one new company. 

There are several types of mergers and also several reasons why companies complete mergers. Mergers and acquisitions are commonly done to expand a company’s reach, expand into new segments, or gain market share. 

All of these are done to increase shareholder value. Often, during a merger, companies have a no-shop clause to prevent purchases or mergers by additional companies.

---What Is Market Share?

Market share is the percent of total sales in an industry generated by a particular company. 

Market share is calculated by taking the company's sales over the period and dividing it by the total sales of the industry over the same period. 

This metric is used to give a general idea of the size of a company in relation to its market and its competitors. The market leader in an industry is the company with the largest market share.

---What Is an Industry?

An industry is a group of companies that are related based on their primary business activities. 

In modern economies, there are dozens of industry classifications. 

Industry classification are typically grouped into larger categories called sectors.

Individual companies are generally classified into an industry based on their largest sources of revenue. 

For example, while an automobile manufacturer might have a financing division that contributes 10% to the firm's overall revenues, the company would be classified in the automaker industry by most classification.

---What Is a Sector?

A sector is an area of the economy in which businesses share the same or a related product or service. 

It can also be thought of as an industry or market that shares common operating characteristics. 

Dividing an economy into different sectors allows for more in-depth analysis of the economy as a whole.

---What Are Business Activities?

Business activities include any activity a business engages in for the primary purpose of making a profit. 

This is a general term that encompasses all the economic activities carried out by a company during the course of business. 

Business activities, including operating, investing and financing activities, are ongoing and focused on creating value for shareholders.

---What Is a Shareholder?

A shareholder, also referred to as a stockholder, is a person, company, or institution that owns at least one share of a company’s stock, which is known as equity. 

Because shareholders are essentially owners in a company, they reap the benefits of a business’ success. 

These rewards come in the form of increased stock valuations, or as financial profits distributed as dividends. 

Conversely, when a company loses money, the share price invariably drops, which can cause shareholders to lose money, or suffer declines in their portfolios’ values.

[Important: While shareholder are entitled to collect proceeds that are left-over after a company liquidates its assets, creditors, bondholders, and preferred stockholders have precedence over common stockholders, who may be left with nothing.]

---What Is a Market Leader?

A market leader is a company with the largest market share in an industry that can often use its dominance to affect the competitive landscape and direction the market takes. 

A market leader typically enjoys the largest market share or the largest percentage of total sales in a given market. 

It may surpass its competitors according to other metrics, too, including brand loyalty, perceived value, distribution coverage, image, price, promotional spending, and profit.

Such a company may be the first to develop a product or service, which would allow it to set the tone for messaging, define the ideal product characteristics, and to become considered by the market as the brand that consumers associate with the offering itself.

---What Is Shareholder Value?

Shareholder value is the value delivered to the equity owners of a corporation due to management's ability to increase sales, earnings, and free cash flow, which leads to an increase in dividends and capital gains for the shareholders.

A company’s shareholder value depends on strategic decisions made by its board of directors and senior management, including the ability to make wise investments and generate a healthy return on invested capital. 

If this value is created, particularly over the long term, the share price increases and the company can pay larger cash dividends to shareholders. 

Mergers, in particular, tend to cause a heavy increase in shareholder value.

Shareholder value can become a hot button issue for corporations, as the creation of wealth for shareholders does not always or equally translate to value for employees or customers of the corporation.

---What Is Form 1040: U.S. Individual Tax Return?

Form 1040 is the standard Internal Revenue Service (IRS) form that individual taxpayers use to file their annual income tax returns. 

The form contains sections that require taxpayers to disclose their taxable income for the year to determine whether additional taxes are owed or whether the filer will receive a tax refund.

---What Is Form 1099?

While there are many types of 1099 forms, they all serve the same purpose; they are used by taxpayers to provide information to the Internal Revenue Service (IRS) about all of the different types of income they receive throughout the year outside of their regular salary. 

This type of income is also referred to as income from non-employment-related sources.

Taxpayers need to report all of their outside income to the IRS in order to avoid an audit. 

This income may include interest from your bank, dividends from investments, or compensation for freelance work.

Issuers of 1099 forms must send one copy to the IRS and another copy to the taxpayer, or the recipient of these payments. Some issuers send out 1099s by mail, while others provide them electronically.

---What Is a 501(C)(3) Organization?

Section 501(c)(3) is a portion of the U.S. Internal Revenue Code (IRC) and a specific tax category for nonprofit organizations. 

Organizations that meet the requirements of Section 501(c)(3) are exempt from federal income tax. 

While the Internal Revenue Service (IRS) recognizes more than 30 types of nonprofit organizations, organizations that qualify as 501(c)(3) organizations are unique because donations to these organizations are tax-deductible for donors.