Economics

Question 1

What are some characteristics of contraction=s

Answer 1

rising number of bankruptcies and bond defaults
higher consumer debt
falling sto prices
rising inventories - bec of weaker demand in hard times)
decreasing GDP

Question 2

What are signs of the trough

Answer 2

high unemployment
flat GDP
low inflation
low but stable consumer demand

Question 3

What are signs of expansion

Answer 3

rising sto, RE, and GDP
increasing industrial production
increasing consumer demand

Question 4

whats a recession and depression

Answer 4

6mo contraction vs 18mo contraction

Question 5

What are signs of the peak

Answer 5

very low unemployment
slowdown in inflation
slowing GDP growth
steady consumer demand

Question 6

What is used to compare GDP from different periods

Answer 6

real GDP which uses CPI to adjust for inflation or deflation

Question 7

What is another term for CPI

Answer 7

constant dollar measurement

Question 8

What is Gross National Product

Answer 8

measures the activities of citizens and US based entities not just everything that happens here

Question 9

What is an example of GNP

Answer 9

comp based in Japan, builds factory here - Adds to GDP not GNP
comp based in US, builds factory in Japan - Adds to GNP not GDP

Question 10

What are some leading indicators of economic conditions

Answer 10

money supply (M2)
building permits (housing starts)
average weekly initial claims for state unemployment compensation
average work week in manufacturing
new orders for consumer goods
machine tool orders
changes in inventory of durable goods
changes in sensitive materials prices
sto prices
changes in business and consumer borrowing

Question 11

What are some coincident indicators of economic conditions

Answer 11

number of hours worked
unemployment rate
nonagricultural employment
personal income
industrial production
manufacturing and trade sales
GDP

Question 12

What are some lagging indicators of economic conditions

Answer 12

corporate profits
average duration of unemployment
labor cost per unit of output
ratio of inventories to sales
commercial and industrial loans outstanding
ratio of consumer installment credit to personal income

Question 13

What is stagflation

Answer 13

inflation and high unemployment

Question 14

Consid for stagflation and inflation

Answer 14

inflation doesnt need to be high just present

Question 15

4 broad categories of industries

Answer 15

cyclical
noncyclical
countercyclical
growth

Question 16

What is a cyclical industry

Answer 16

highly sensitive to the business cycle and inflation trends
usu produce durable goods like heavy equipment or automobiles, and raw materials like steel and concrete

Question 17

What are non cycylical industries

Answer 17

also known as defensives
decline less in contractions, rise less in expansions
food
clothes
tobacco
pharma
utilities
liquor

Question 18

What are the two primary financial reports comps provide and when are they released

Answer 18

balance sheet
income statement
quarterly or annually

Question 19

What does a balance sheet show

Answer 19

current assets like
cash/highly liquid assets like accounts receiveable
fixed assets like RE and equipment
other assets like trademarks or intellectual property

Liabilities like:
current liabilities like taxes, acrued wages, accs payable, and interest payments
longterm lias like debts

Networth:
pref sto
com sto par value
money in excess of par value of com sto
retained earnings (earnings set as

Question 20

What are 4 ratios/numbers that can be used for analysis from a balance sheet

Answer 20

working capital
current ratio
acid test/quick ratio
debt ratio

Question 21

What is the working cap number

Answer 21

amount comp can spend/lose and remain operational
current assets - current liabilities

Question 22

What is the current ratio

Answer 22

used to find the liquidity of the company
cur ass / cur lias
expressed as a ratio
ex: 50/20 = 2.5:1

Question 23

What is acid test / quick ratio

Answer 23

test companies liquidity in really bad times
cur ass - inventrory / curr lias

Question 24

What is the debt ratio

Answer 24

test long term solvency, how much of the net worth is coming from debt
said to be highly leverage if debt ratio is higher than industry average
long term debt - (long term debt + net worth)
expressed as a percentage

Question 25

What is the income statement

Answer 25

also known as profit and loss statement
shows revenue and expenses for fiscal period

Question 26

What calculations are derived from the income statement

Answer 26

Earnings per share
P/E ratio

Question 27

What is Earnings per share

Answer 27

earnings available to common sto / outstanding shares

Question 28

What is P/E ratio

Answer 28

measure amount of earnings compared to the current market value
CMV / EPS

Question 29

Operating income is sometimes referred to as

Answer 29

earnings before interest and taxes EBIT or as EBITDA (earnings before interest taxes depreciation and amortization)