Economics & Analysis Flashcards
Small businesses and individuals typically use the _______ accounting method
cash
Cash accounting records transactions on the date _______ is actually received
payment
Accrual accounting recognizes expenses based on the date the ______ is incurred
liability
Cash accounting recognizes revenue/expenses _____ than accrual accounting
later
Both sides of the balance sheet are arranged in order of _______
liquidity
CA/CL are due within ______
within 1 year
Accounts payable include:
AP, Wages, Taxes, and Interest (payable)
Long term capital =
LT liabilities + OE
D/E =
LT debt / total OE
10Ks are filed anywhere from ____ to ____ after year end
60 to 90 (larger companies with over $700m public float file within 60 days, smaller companies at 90 days)
10Qs are ______ and are filed anywhere from ____ to ______ after qarter-end
unaudited; filed anywhere from 40 to 45 days (bigger @ 40, smaller at 45)
Earned surplus is another name for _____
retained earnings
Falling inflation (measured via the CPI) will result in higher ____ prices and _____ prices
stock AND bond prices
Emerging growth stocks are brand new ventures that have high potential reward but NO _____ and typically can’t pay _____
track record; typically can’t pay dividends
A typical example of an income security is a ______ stock
utility
Counter-cyclical stocks include ______ and _____
food producers and gold mining stocks
Speculative stocks include _____ and ____ companies, they are ones that fly high during business cycle upturns
airplane manufacturers and toy companies
ROI is the ________ cash flow divided by the ______
average annual cash flow divided by the initial investment outlay
Total Return on an investment is =
income + growth
The Risk Free Rate is the expected return on _____
treasuries
The Sharpe Ratio =
(Total Return - RF) / Portfolio STdev
The higher the Sharpe ratio, the greater incremental reward for assuming _____
risk
The geometric mean takes into account ______ (when the ______ mean does not)
takes into account compounding, while the arithmetic mean does not
Expected Return is simply the _______ average of different scenarios
weighted average of different outcome scenarios
The shorter the holding period, the greater the _______
variability of returns (STdev)
Capital gains on munis are _____ taxable
fully (at Fed level too)
An active manager’s “active return” is the % by which they ______ the index
outperform/underperform
Time-weighted returns are used by ______ and show the growth of a _____ investment over a fixed period of time
used by mutual funds, show growth of a 1-time investment over a fixed time period
Time-weighted return is the same as ______
total return
An investor’s specific performance in a fund is the _______ return
dollar-weighted return
Dollar-weighted average return is the same thing as the ______
IRR
Often, _____ return is lower than _____
dollar-weighted return is lower than time-weighted
FV (for compounding) =
P * (1 + r)^n
Non-systematic risk is also known as _______
selection risk
Monte Carlo simulations are used to find a portfolio’s _______
value at risk
Examples of high beta companies would be _____ and _____
airlines and toy companies
Examples of low beta stocks would be ____ and _____
drug companies and utilities
If beta = 1, then portfolio only has _____ risk; if beta > 1, then portfolio has ______
= 1, has only systematic risk, if greater than 1 has non-systematic risk
Price volatility of options is measured using ____
delta
Weak form EMT states that you cannot predict future returns based on _____
historical data
Semi-strong EMT states that public information is already _______ stock prices
baked into
Strong form EMT states that stock prices reflect ______
all information (public or private)
The main risk of investing in a muni bond is ______
legislative risk (since the income isn’t subject to fed taxes)
What is the biggest risk for holding a zero coupon bond to maturity?
purchasing power risk (market risk goes away since you’ll get par back at maturity)
Tangible assets tend to keep pace with _______
inflation
During a time when the yield curve is inverted, issuers will likely sell ______ bonds
callable (since when it goes inverted typically all rates are higher)
Do corporate bonds have some level of marketability risk?
YES - more so than preferred stock
A way to hedge against systematic risk is to _______
buy puts
ROI =
Average annual cash returns / initial investment
LT bond PRICES are always more _____ than short term bond prices
MORE VOLATILE
For calculating Total Return, do you take the actual total of all the income and capital gains or do you annualize them?
ANNUALIZE them
The coupon on a TIPS is ALWAYS the _____
real rate of return (inflation adjusted)
Does business risk take fraud into account?
NO
Business risk, most simply, is the risk of buying _____
a single stock
