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Smart Contracts A smart contract is a self-executing program stored on a blockchain that automatically enforces, verifies, or executes the terms of an agreement when predefined conditions are met. Because they run on distributed ledgers, smart contracts make transactions traceable, tamper-resistant, and possible without a central intermediary. A common analogy is a vending machine: insert…

Smart Beta ETFs: Definition, Strategies, Benefits, and Risks What is a smart beta ETF? A smart beta ETF is an exchange-traded fund that uses a rules-based, systematic approach to select and weight holdings based on factors other than market capitalization. Unlike traditional cap-weighted index funds, smart beta funds apply predetermined financial metrics—such as dividends, volatility,…

Smart Beta Smart beta is an investment approach that blends features of passive and active management. Instead of following traditional market-capitalization-weighted indices, smart beta strategies use alternative, rules-based index construction to capture specific investment factors or market inefficiencies (for example, value, momentum, or low volatility) with the aim of improving risk-adjusted returns. Key takeaways Smart…

Small-Cap Stocks Definition Small-cap stocks are shares of publicly traded companies with market capitalizations typically between $250 million and $2 billion. Market capitalization (market cap) equals the current share price multiplied by the number of outstanding shares. Exact cutoffs vary by index and brokerage. Related categories: * Micro-cap: market cap under $250 million. * Mid-cap:…

Small Business Administration (SBA): What It Is and How It Helps Small Businesses What is the SBA? The Small Business Administration (SBA) is a U.S. government agency that supports the growth and competitiveness of small businesses. Its core mission is to expand access to capital, provide education and counseling, increase federal contracting opportunities, and advocate…

Small and Midsize Enterprises (SMEs) What is an SME? Small and midsize enterprises (SMEs) are businesses that fall between microenterprises and large corporations based on thresholds such as number of employees, revenue, or total assets. Exact definitions vary by country and sometimes by industry. Common roles and characteristics Outnumber large firms and account for a…

Understanding Slippage Slippage is the difference between the expected price of a trade and the price at which the trade is actually executed. It can be positive (a better-than-expected execution), negative (a worse-than-expected execution), or neutral. Slippage occurs whenever market prices change between the moment an order is placed and when it is filled —…

Skin in the Game: Meaning, Example, and SEC Rules Key takeaways * “Skin in the game” means owners, executives, or principals have a meaningful personal financial stake in the company or fund they run. * Personal investment aligns incentives and signals confidence to outside investors, but it can create conflicts of interest and regulatory constraints….

Skewness Skewness is a statistical measure of asymmetry in a distribution. It shows whether data concentrate more on one side of the central value (mean) and whether extreme values (tails) are heavier on one side. Key points Zero skewness: symmetric (e.g., ideal bell curve). Positive (right) skew: long/fatter tail to the right; mean > median….

Six Sigma: Concept, Method, Certifications, and Examples What is Six Sigma? Six Sigma is a data-driven methodology for improving business processes by identifying and eliminating defects, reducing variation, and increasing quality and efficiency. Originating at Motorola in the mid-1980s, Six Sigma combines statistical analysis, financial reasoning, and project management to meet customer requirements and improve…

Sinking Fund Key takeaways * A sinking fund is cash set aside to retire a specific debt or bonds over time. * It reduces default risk and can improve a borrower’s creditworthiness and borrowing costs. * Some bonds attach a sinking-fund feature that may allow the issuer to repurchase or call bonds early. * Sinking…

Simplified Employee Pension (SEP) IRA: A Clear Overview What is a SEP IRA? A Simplified Employee Pension (SEP) IRA is an employer-established individual retirement account used by small businesses and self-employed individuals. Employers make tax-deductible contributions to each eligible employee’s SEP IRA. SEP IRAs function like traditional IRAs for tax and distribution purposes but allow…

Simple Random Sample A simple random sample (SRS) is a subset of a population in which each member has an equal probability of being selected. It is designed to provide an unbiased, representative snapshot of the whole population without systematically favoring any subgroup. Key points Every member of the population has the same chance of…

Simple Moving Average (SMA) A Simple Moving Average (SMA) is a basic technical analysis tool that smooths price data by calculating the arithmetic mean of an asset’s prices over a chosen number of periods (typically using closing prices). SMAs help reveal underlying trends by reducing short-term volatility. How it works SMA = (A1 + A2…

Simple Interest Definition Simple interest is interest calculated only on the original principal amount of a loan or deposit. It does not compound — interest is not charged on previously accrued interest — which typically makes it less expensive for borrowers than compound interest. How simple interest works Interest is expressed as a percentage rate…

Simple Agreement for Future Tokens (SAFT) A Simple Agreement for Future Tokens (SAFT) is an investment contract used by cryptocurrency developers to raise early-stage capital from accredited investors in exchange for the promise of receiving tokens at a later date if specific development milestones are met. SAFTs are treated as securities under U.S. law and…

Silo Mentality: Definition, Causes, Impact, and Solutions Key takeaways A silo mentality is the reluctance to share information across teams or departments. It often starts at the leadership level but can also come from individual employees or system limitations. Silos reduce efficiency, damage morale, and harm the customer experience. Breaking silos requires leadership, shared goals,…

Silk Route Key takeaways The Silk Route was a network of land and sea routes linking China with Europe, the Middle East, and North Africa from roughly the 2nd century B.C. to the 14th century A.D. It enabled large-scale exchange of goods (silk, spices, paper, gunpowder), technologies, religions, and ideas across Eurasia. The network evolved…

Silent Partner A silent partner (often called a limited partner) provides capital to a business but does not take part in daily management or decision-making. Their liability is typically limited to the amount they invest. Although not active in operations, silent partners may offer advice, business contacts, or mediate disputes if asked. Key takeaways Silent…

Signature Loan A signature loan is an unsecured personal loan that requires only the borrower’s signature and a promise to repay—no physical collateral such as a car title or home. Lenders approve these loans primarily based on credit history and income. They’re commonly used for debt consolidation, home improvements, medical bills, and other large expenses….

Shutdown Points A shutdown point is the level of output and price at which continuing operations yields no economic benefit and a firm is better off ceasing production (temporarily or permanently). At this point the firm’s revenue covers exactly its total variable costs; any further fall in price or rise in variable costs makes operating…

Understanding Shrinkage: Causes, Impact, and Solutions in Retail Key takeaways * Shrinkage is the difference between recorded (book) inventory and actual (physical) inventory. * Causes include shoplifting, employee theft, administrative errors, vendor fraud, and damaged goods. * Shrinkage reduces profits, raises operating costs, and can lead retailers to increase prices. * Common controls include regular…

Shortfall A shortfall occurs when required funds to meet a financial obligation exceed the cash or assets available to pay it. Shortfalls can be temporary or persistent; while short-term gaps are often resolved with borrowing or cash management fixes, persistent shortfalls typically signal deeper financial or structural problems that require more fundamental changes. Key points…

Short-Term Investments Short-term investments are liquid financial assets that can be converted to cash quickly—typically within a year, and often within three to twelve months. They are used to preserve capital while earning a modest return, and are common both for individuals managing emergency funds and for companies managing excess cash. How short-term investments work…

Short-Term Debt Short-term debt (current liabilities) is the total amount a company owes that must be paid within one year or within its operating cycle. On the balance sheet it appears under current liabilities and includes obligations arising from normal operations as well as short-term borrowings. Key points Short-term debt must be paid within 12…

Short Squeeze: Definition, Causes, and Examples A short squeeze occurs when a heavily shorted asset suddenly rises in price, forcing short sellers to buy shares to close their positions. Their buying pressure pushes the price even higher, creating a feedback loop that can produce rapid, large gains over a short period. Key takeaways A short…

Short Selling Short selling is a trading strategy that seeks to profit from a decline in a security’s price. A short seller borrows shares, sells them on the open market, and later buys them back (covers) hoping the repurchase price is lower than the sale price. Shorting can be used for speculation or to hedge…

Short Sale A short sale is an investment strategy in which an investor sells a security they have borrowed, expecting its price to fall so they can repurchase it later at a lower price and pocket the difference. Short selling can also refer to a real estate transaction where a property is sold for less…

Short Run in Economics: Definition, How It Works, and Examples Key takeaways The short run is a timeframe in which at least one input (commonly capital) is fixed while other inputs (like labor and materials) can vary. Firms optimize production in the short run by balancing marginal cost and marginal revenue. Short-run constraints — fixed…

Short Put: Definition, How It Works, Risks, and Example Key takeaways A short put (also called writing a put or a naked put) is an options position where you sell a put option and receive a premium. The seller (writer) is obligated to buy the underlying asset at the strike price if the option is…

Short Interest Ratio — Definition and Purpose The short interest ratio (also called “days to cover”) measures how many days it would take, at average daily trading volume, to buy back all shares currently sold short. It compares short-selling activity to a stock’s average daily trading volume and is used as a gauge of market…

Short Interest: What It Is, How It’s Measured, and How Traders Use It What is short interest? Short interest is the total number of shares of a stock that have been sold short and have not yet been covered (repaid). It’s a measure of how many investors are betting the stock’s price will fall. Short…

Understanding Short Covering Short covering is the process of buying back borrowed shares to close an open short position. Traders short a stock by borrowing shares and selling them, hoping to repurchase them later at a lower price. When they buy the shares back, either to lock in profits or to limit losses, that is…

Short Call Options: Strategy, Risks, and Potential Returns Key takeaways * A short call is a bearish options strategy where a trader sells (writes) a call option expecting the underlying asset’s price to fall or stay below the strike price. * The seller receives a premium up front; maximum profit is the premium collected. *…

What Is a Short Position? A short position is a trade that profits if a security’s price falls. The trader borrows shares (or another instrument) and sells them immediately, intending to buy them back later at a lower price and return the borrowed shares. Short positions can be created in equities, futures, and foreign exchange…