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What "Blue Chip" Companies Are?

Updated on May 29, 2013

The phrase “blue chip companies”, according to the definitions is, “Large and creditworthy company. Company renowned for the quality and wide acceptance of its products or services, and for its ability to make money and pay dividends. Gilt-edged security.” (ANON, 2005, http://www.trading-glossary.com/b0167.asp). Thus, in general, we can say that blue chip companies are the ones with the largest market capitalization and largest liquidity. “Liquidity refers to how quickly and cheaply an asset can be converted into cash. Money (in the form of cash) is the most liquid asset.” (Moffatt, 2005, http://economics.about.com/cs/economicsglossary/g/liquidity.htm) Now, that these two phrases have been defined, it is now time to proceed with the actual valuation of the blue chip companies and their shares.

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