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SIE Exam 2024 > Chapter 3: Economic Factors > Flashcards

Chapter 3: Economic Factors Flashcards

1
Q

Boom

A

Period of rapid growth

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2
Q

Recession

A

Period of economic decline or negative growth

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3
Q

Four Stages of the Economic Cycle

A

-Expansion
-Peak
-Contraction
-Trough

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4
Q

Expansion

A

Stage when businesses are prospering

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5
Q

Peak

A

Stage when businesses have reached the pinnacle of their growth

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6
Q

Contraction

A

Stage when economic growth is slow

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7
Q

Trough

A

Stage when economic growth is negative

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8
Q

Economic Indicators

A

Signs that point to current and future economic performance

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9
Q

Examples of Economic Indicators

A

-Leading Indicators
-Building Permits
-Manufacturers’ New Orders, Consumer Goods, Non-defense Capital Goods
-S&P 500 Index
-Initial Claims for Unemployment Insurance
-Interest Rate Spreads

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10
Q

Leading Indicators

A

Predict changes in economic performance before the economy starts to move in a particular direction

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11
Q

Coincident Indicators

A

Increase and decrease with current economy (coincide)

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12
Q

Examples of Coincident Indicators

A

-The Index of Industrial Production
-Employees on Nonagricultural Payrolls
-Disposable Personal Income

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13
Q

Lagging Indicators

A

Factors observed to change after an economic shift in the business cycle

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14
Q

Examples of Lagging Indicators

A

-Change in Consumer Price Index (CPI)
-Average Prime Rate
-Average Duration of Unemployment

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15
Q

Interest Rate

A

Represents the extra sum a lender levies on the borrower over and above the primary amount

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16
Q

Prime Rate

A

Interest rate that banks charge most creditworthy customers

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17
Q

Discount Rate

A

Interest rate that the central bank charges all other banks

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18
Q

Federal Funds Rate

A

Interest rate commercial banks charge each other for overnight lending and borrowing their extra reserves

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19
Q

Call Money Rate

A

Interest rate banks charge brokers, who lend to investors to fund margin accounts

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20
Q

Cyclical Stocks

A

Move with the economy; perform well when the economy is good, decline when it’s weak

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21
Q

Defensive Stocks

A

Least affected by the overall stock market; produce stable dividends throughout the year and are more reliable

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22
Q

Growth Stocks

A

Currently performing well in the stock market and expected to frow faster in the future

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23
Q

Value Stocks

A

Current share value is less than intrinsic value, get better with time

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24
Q

Nano-cap Stocks

A

Smallest stock by market cap, <$50 million

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25
Micro-cap Stocks
Market capitalization between $50 million-$300 million
26
Small-cap Stocks
Market capitalization between $300 million-$2 billion, high growth potential
27
Mid-cap Stocks
Market capitalization between $2 billion-$10 billion, produce consider profit and have potential to grow
28
Large-cap Stocks
Market capitalization above $10 billion, long history of success, well established, low risk
29
Monetary Policy
Measures implemented by the central bank to impact the quantity of credit and money circulating within an economy
30
Fiscal Policy
Encompasses government's actions concerning taxation and expenditure
31
Regulation T
-Tool used to control extensions made by securities brokers and dealers -Controls the margin requirements for stocks purchased on margin
32
Discount Rate
Tool used to implement monetary policies by adjusting the interest rates it charges banks
33
Reserve Requirement
-Regulation about the amount of money commercial banks can hold in their reserves as liquid assets -Tool enables Fed to manage how much money the banks can lend
34
Federal Open Market Committee (FOMC)
Committee of the Federal Reserve System to regulate the country's open market operations
35
International Economic Factors
-Balance of Payments -GDP & GNP -Exchange Rates
36
Balance of Payments (BOP)
Records all international financial transactions made by a country's residents, including government, businesses, and individuals
37
Gross National Product (GNP)
Tracks all economic activity carried out by businesses and citizens of a nation, regardless of location
38
Gross Domestic Product (GDP)
Measures productivity and economic activities withing a nation's borders
39
Exchange Rate
Rate at which one currency is exchanged for another
40
Foreign Exchange
Trading one currency for another during the trade of goods or services between two countries
41
Balance Sheet
Provides a snapshot of the company's financial position at a specific moment
42
What is the key idea of the balance sheet?
Total value of the assets should equal the combined value of the liabilities and shareholder's equity
43
Assets
Possessions of a company
44
Fixed Asset
Tangible piece of property a company owns for the long term and used to generate wealth
45
Long-term Liabilities
Debts of a company that are due beyond a year
46
Intangibles
Non-physical assets
47
Shareholders'' Equity
Amount a company's owners have invested in their business
48
Income Statement
Financial document that summarizes a company's revenue and expenses
49
Income Statement includes:
-Revenue -Gross Profit -Operating Income -Earnings Before Interest and Taxes -Taxable Income -Net Income/Loss
50
Revenue
Money brought in by normal business operations
51
Gross Profit
Amount obtained by subtracting the cost of production from the revenue
52
Operating Income
Adjusted revenue of a business after subtracting all operating costs and depreciation
53
Operating Expenses
Costs paid to maintain the operation of the business
54
Earnings Before Interest & Taxes (EBIT)
Shows company's profit and considers all revenues and costs without interest and income tax
55
EBIT=
Revenue - Cost of Goods Sold (COGS) - Operating Expenses
56
Taxable Income
Basis on which an income tax system charges tax aka the amount of income the government will tax
57
Net Income/Loss
Calculated by subtracting all the expenses, interest, and taxes from revenue; if positive, profit! if negative, loss
58
Consume Price Index (CPI)
Represents the average fluctuation in prices consumers pay for various goods and services
59
The CPI is a key metric for measuring...
Inflation and evaluating the efficacy of government policies
60
Inflation
Upward movement of prices for goods and services within a specific time frame, typically a year
61
Deflation
Decline in the price of goods and services over a specific period

SIE Exam 2024 (20 decks)

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