finance 12
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37 terms
Terms | Definitions |
|---|---|
 fundamental analysis | the analysis of determinants of value such as earning prospects |
| exchange rate | rate at which domestic currency can be converted into foreign currency |
| gross domestic product | the measure of the economy's total production of goods and services (market value of g/s produced over a period of time) |
| unemployment rate | ratio of the number of people classified as unemployed to the total labor force; measured extent to which economy is operating at full capacity |
| inflation | rate at which general level of prices for goods and services is rising |
| budget deficit | the amount by which government spending exceeds government revenues |
| sentiment | beliefs influence how much consumption and investment will be pursued and affect aggregate demand for g/s |
| factors that determine level of interest rates | supply of funds from savers, demands for funds from business, government's net supply and/or demand for funds, expected rate of inflation |
| nominal interest rate | add expected inflation rate to equilibrium rate |
| demand shock | an event that affects the demand for goods and services in the economy |
| positive demand shocks | reductions in tax rates, increases in money supply, increases in gov't spending, increases in foreign export demand |
| supply shock | an event that influences production capacity and costs in economy |
| fiscal policy | the use of government spending and taxing for the specific purpose of stabilizing the economy |
| monetary policy | actions taken by the Board of Governors of the Federal Reserve System to influence the money supply or interest rates |
| open market operations | Fed buy/sells Treasury bonds for its own account; tool of monetary policy |
| discount rate | interest rate the Fed charges banks on short-term loans; tool of monetary policy |
| reserve requirement | the fraction of deposits that banks must hold as cash on hand or as deposits with the Fed; tool of monetary policy |
| federal funds rate | interest rate at which banks make short-term, usually overnight, loans to each other; tool of monetary polciy |
| supply side policies | treat the issues of the productive capacity of the economy, goal is to create env in which wokers and owners of capital have max incentive and ability to produce/develop goods, focus on incentives and marginal tax rates |
| business cycle | recurring patterns of recession and recovery |
| peak | transition from the end of an expansion to the start of a contraction |
| trough | transition point between recession and recovery |
| cyclical industries | industries with above-average sensitivity to the state of the economy |
| defensive industries | have little sensitivity to the business cycle |
| leading economic indicators | economic series that tend to rise or fall in advance of the rest of the economy |
| coincident indicators | indicators that tend to change directly with the economy |
| lagging indicators | indicators that tend to follow the lag of economic performance |
| NAICS codes | classification of firms into industry groups using numerical codes to identify industries |
| operating leverage | division between fixed and variable costs |
| financial leverage | use of borrowing |
| sector rotation | investment strategy that entails shifting the portfolio into industry sectors that are expected to outperform others based on macroeconomic forecasts |
| industry life cycles | stages through which firms typically pass as they mature |
| start up stage | rapid and increasing sales growth; new tech or product; difficult to predict which firms will be industry leaders |
| consolidation stage | stable sales growth, industry leaders emerge, performance of firms will closely track performance of overall industry |
| maturity stage | product has reached its potential for use by consumers; slowing sales growth; cash cows |
| relative decline | minimal or negative sales growth |
| determinants of competition | threat of entry, rivalry between existing competitors, pressure from substitute products, bargaining power of buyers/sellers |
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