3/20/2023 Flashcards
Balance Sheet
Assets = Liabilities + Net Worth
Another Word for Net Worth
Equity
Book Value
Net Worth (Equity)
Price/Book Ratio
Price per Share / Book Value per Share
what does book value per share mean
if the company went under you would get this $ amount
Debt to Equity Ratio
Liabilities/ Net Worth (Equity)
Shows a Companies Reliance on Debt
Debt to Asset Ratio
Liabilities / Assets
Contraction
The Part of the business cycle when markets are declining
Monetary Policy
FED regulating the Money Supply to try and stimulate the economy
FED can:
Raise/Lower Interest Rates
Raise/Lower the Reserve Requirement (is a quicker Fix)
It is a tool, different economic theories try to use that tool differently
Reserve Requirement
The amount Banks are required to be held in reserve and can’t be lent out.
FED sets this
FED Lowering RR = Attempting to Expand the Market
FED Increasing RR = Attempting to Contract the Market
Fiscal Policy
Government
Regulating Supply and Demand
and
Taxes
to try to stimulate the economy
It is a tool, different economic theories try to use that tool differently
Classical Economic Theory
Very similar to Supply-Side Theory
The belief that LOW Government Intervention and Taxes in the marketplace is what is best for ecomomic growth
Keynesians Theory
Very similar to Demand-Side Theory
The belief that HIGH Government Intervention and Taxes in the marketplace is what is best for economic growth
Supply-Side Theory
Very similar to Classical Economic Theory
The belief that Increasing the economy’s Ability to Supply (make/produce) more goods is what is best for economic growth
Less government intervention and Taxes
Demand-Side Theory
Very similar to Keynesian Theory
The belief that Increasing the economy’s Ability to Demand (buy/consume) more goods is what is best for economic growth
More Government Intervention and taxes
Balance of Payments
Who is paying Who
ie:
China US
If we buy goods from China we are giving them more money and we are ending up with less
that means the value of Chinese Currency is increasing compared to the US Currency
EPIC
To Protect against Currency Changes:
Exporting - you can buy Puts against the Foreign Currency
Importing - you can buy Calls against the Foreign Currency
Federal Funds Rate
The rate for - When banks borrow from each other
Discount Rate
Banks Borrow from FED Reserve
