Economics and Business Information Flashcards
1
Q
Business Cycle
A
- expansion
- peak
- contraction
- trough
2
Q
Cyclical Industries
A
- do well during times of economic expansion
- automobile, steel industry
3
Q
Defensive industries
A
- no matter what happens in the economy
- food, clothing, utilities
4
Q
Counter Cyclical Industries
A
- does well in times of contraction, poorly in good times
- gold/precious metals
5
Q
Fiscal Policy
A
- government control
- spending and taxes
6
Q
Monetary Policy
A
- controlled by the FRB
- control inflation is primary role, tied to money supply
7
Q
How does Fed Reserve Board control money supply
A
- buy/sell government
- buying t bills from banks put more money in the banks hands increasing money in economy
- selling t bills to banks takes money from economy
- interest rates make money more available
8
Q
BEST
A
- buy = expand
- sell = tighten
9
Q
Interest Rates
A
- increase = take money out of economy
- decrease = put money into economy
10
Q
Inflation
A
- too much money chasing too few goods
- occurs when economy in strong
- FRB takes money out to control inflation
11
Q
Supply of Money effects value of currency
A
- put more money out there. Value of currency decreases
- take money out value increases
12
Q
Exports
A
- decreased currency increases exports improves trade deficit
- increased currency decreases exports worsen trade deficit
13
Q
Yield Curve
A
- normal = LT bonds have higher rates than ST
- inverted = ST bonds have higher rates than LT, precursor for recession
14
Q
Economic Indicators
A
- leading (where we will be 6-9 months down road)
- coincidence
- lagging
used to show where we are in business cycle
15
Q
Leading Indicators
A
- stock market
- unemployment claims
- Housing
16
Q
Coincidence Indicators
A
- current
- GDP
- manufacturing sales
- unemployment rate
17
Q
Lagging Indicators
A
- inventory
- duration of unemployment
18
Q
Balance of Payments
A
- keep track of monies in and out of country
- debit = when we buy foreign of pay dividends to foreign investors
- credits = foreign investors buy stock
19
Q
Financial Statements of Corporations
A
- Balance Sheet
- Income Statements
- Statement of Cash Flows
20
Q
Balance Sheets
A
- Assets = Liability + Stockholders Equity
- Current Assets (cash, cash equivalents, AR, inventory)
- Fixed Assets (plant and equipment)
- Current Liabilities (wages, AP, this years interest on outstanding loans)
- LT liabilities (remaining interest on outstanding debt)
- Stockholders Equities (Common Stock, retained Earnings)
21
Q
Liquidity Ratios
A
- current ratios (CA/CL) = ability to pay off short term debt / can they pay bills
- quick ratio (CA-inventory/CL) = ability to easily convert to cash / NOTE: all CA excluding Inventory
22
Q
Quantitative Analysis
A
- Time Value of Money (FV = PV (1+r)^t)
- Beta (volatility of your investment in comparison to market +1)
23
Q
Net Present Value
A
- FV - PV
- positive NPV is good, negative is bad
- PV = investment worth today
- FV = investment worth in future, dependent on IRR
- difference between FV and PV is NPV
- wants a net present value
24
Q
Beta
A
- measures market risk
- difference between current beta and historical beta is ALPHA
25
Q
Central Tendency
A
- Mean (arithmetic Avg)
- Median (middle)
- Mode (most often)
- Range (highest - lowest (add positive to negative))
26
Q
Correlation
A
- how 2 different investments react at the same time.
- if up at same time (pos correlation)
- if up when others go down (neg correlation)
- want the most negative correlation for best correlation
- diversification (-1)
27
Q
Systematic Risks
A
- market risk
- interest rate
- exchange rate (currency)
- reinvestment risks
- purchasing power
28
Q
Unsystematic Risks
A
- business risk
- finance risk
- political risk
- legislative risk
