Chapter 17 Flashcards
(33 cards)
fundamental analysis
The practice of evaluating the information contained in financial statements, industry reports, and economic factors to determine the intrinsic value of a firm
intrinsic value
The “true,” or economic, value of the firm
technical analysis
Examination of supply and demand for securities over time to determine trends in price movements of stocks or financial markets
fundamentalists
analysts who utilize fundamental analysis in an attempt to forecast future stock price movements
technicians
analysts who examine stocks and financial markets using technical analysis
business cycle
the movement in aggregate economic activity as measured by the GDP
expansion
increasing economic activity
contraction
declining economic activity
gross domestic product (GDP)
a measure of all goods and services produced in the economy during a specific time period.
recession
two consecutive quarters of economic contraction in the GDP
leading economic indicators
Economic measures that tend to move prior to, or precede, movements in the business cycle
lagging economic indicators
Economic measures that tend to move after, or follow, movements in the business cycle
coincident indicators
Economic measures that tend to mirror, or move at the same time as, business cycle
monetary policy
the means by which the Federal Reserve influences economic conditions by managing the U.S. money supply
fiscal policy
government spending, which is primarily supported by the government’s ability to tax individuals and businesses.
deficit spending
when the government spends more funds than it collects in taxes
cyclical industries
Industries that tend to perform best during expansions and worst during contractions
defensive (countercyclical) industries
Industries that tend to be the best performers when the economy is in a contraction of recession, and the wort performers in expanding economies
industry life cycle
The various phases of an industry with respect to its growth in sales and its competitive conditions
dividend discount model (DDM)
A model that utilizes the discounted cash flow principle to value common stock Value is represented by the present value of the dividends expected to be received from investing in the stock.
P/E Ratio
A ratio computed by dividing the current market price per share by the earnings per share
economic value added (EVA)
An analytical method that seeks to evaluate the earnings generated by a firm to determine whether they are sufficient to compensate the suppliers of funds-both the bondholders and the stockholders
bar chart
A graph that indicates the high, low, and closing price movements for a stock during a specified period
trend line
A line that indicates the direction of the stock price movement. It is drawn so that it touches either the high prices or the low prices for some of the trading days.
