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business reporting
| Question | Answer |
|---|---|
| GDP | total dollar value of all final goods that are produced and services that are performed in the US during a year; reported quarterly by Commerce Dept as annual percent change; given in 3 parts: advance, preliminary, & final |
| GDP= | C+I+G+NX (consumer spending + investment + government spending + net exports) - GDP driven by population growth & productivity growth |
| ideal GDP rate | about 3% |
| REAL vs NOMINAL GDP | real GDP takes inflation into account |
| business cycle | Movement from expansion (growing economy) to recession (shrinking economy) and back to expansion |
| recession | 2 or more quarters of negative economic growth |
| expansion | 2 or more quarters of positive growth |
| economic indicators | PPI, CPI, unemployment rate, consumer confidence index |
| leading indicators | start declines or expansions before most other indicators |
| lagging indicators | tend to increase or decline after most others |
| producer price index | released monthly by Commerce Dept, measures wholesale prices |
| consumer price index | released monthly by Commerce Dept, measures basket of goods consumers buy on regular basis |
| core CPI | excludes food & energy |
| inflation | general upward movement of prices of most goods and services |
| good inflation rate | about 2% |
| monetary policy | Federal Reserve policing inflation by changing interest rates |
| fiscal policy | government's ability to spend money or lower taxes |
| unemployment rate | Number of unemployed workers as percentage of total workforce |
| discouraged workers | people without jobs who aren’t looking for work because they don’t think any exists |
| labor force participation rate | percentage of total working age population that is in labor force |
| frictional unemployment | people either new to labor force or between jobs |
| structural unemployment | result of deep changes in economy |
| price-to-earnings ratio | Relationship between stock’s price and the company’s earnings for a 4 quarter period; current stock price divided by earnings per share for 4 quarters; high PE stocks expensive, low PE stocks inexpensive |
| dividends | Cash payments to shareholders from money company has earned; Typically only paid by large, well-established companies |
| dividend yield | Percentage of the purchase price an investor gets back through dividends every year; how much company pays out in dividends each year relative to its share price; annual dividend divided by company’s per share price |
| cyclical stock | tied to condition of economy |
| growth/defensive stock | shares of companies that have steady growth paths, even when the economy isn’t doing well |
| common stock | gives shareholder ownership stake, voting rights, and right to dividend payment if company makes one |
| preferred stock | have guaranteed dividend that is paid before dividends on common stock; usually belong to management |
| fundamental stock analysis | analyzes company through earnings, p/e ration, company strategy, competitors, and dividend payout |
| technical analysis | looking at charts of price movement, volume, etc., to ID price trends |
| market order | buying/selling shares at current market price |
| limit order | buying/selling shares at specific price |
| IPO | initial public offering; company gets proceeds of initial sale, but once stock begins trading, does not get any of that money; companies go public when they need money to grow or expand |
| venture capital | money wealthy investors, banks and investment companies are willing to risk on start-ups in exchange for role in how that company is run and a share of the profits |
| NYSE | Oldest market in US—started in 1792; Uses specialist trading; 1-3 letter tickers; physical trading floor |
| NASDAQ | Youngest market—started in 1971; Uses market makers; 4 letter tickers, sometimes 5; electronic trading |
| circuit breakers | stop trading, allowing investors to digest information and not make emotional decisions |
| Limit Up, Limit Down | has stocks trade in limited price band but does not halt trading altogether like circuit breakers do |
| Dow Jones Industrial Average | Made up of 30 stocks representing major industries; Price weighted; GE only stock that’s been with it since its beginnings |
| Standard & Poor's 500 Index | Typically used as benchmark by most investors and mutual fund managers; stocks selected by analysts and economists at S&P; Market-cap weighted |
| price weighted | add up closing prices of 30 stocks and divide by a divisor |
| market-cap weighted | a rise or fall in the index is determined by price and number of shares outstanding for each of the 500 companies |
| bear market | o stock prices are expected to decline or are already declining o investors aren’t optimistic about foreseeable future o -20% from high |
| bull market | o Stock prices are expected to go higher or are already going higher o Investors are optimistic, confident about economy o +20% from low |
| market capitalization | o total dollar value or all outstanding shares based on current prices o measure of corporate size o calculated by multiplying number of outstanding shares by current stock price |
| secondary offering | company that already had shares being bought and sold to public but wants or needs more capital or money might sell more shares to public |
| share repurchase | company may opt to buy back its shares of stock or repurchase them either gradually in the stock market or through tender offer, which gives shareholders the right to sell their stock to the company at a certain price |
| stock split | more shares available at lower price each but total market value of the stock remains the same |
| reverse split | fewer shares available at higher price each but total market value of the stock remains the same |
| stock option | right to buy or sell an asset at a set price on or before a specific date |
| exercise/strike price | price that option can be exercised |
| shorting a stock | o short sellers expect price of company’s share or stock to decline o process: rent stock from brokerage firm, sell it on market, buy same amount later when price has declined, return it to brokerage firm, pocket difference (minus trading/rent fees) |
| buying a stock on margin | investors put up 50% cash up front |
| types of corporations | o Inc. (incorporated) o Corp. (corporated) o Ltd. (limited) o SA (French or Italian share company) o GmbH (German) o NV (Dutch) |
| PC | o Professional corporation o Used by doctors, lawyers, other professionals to limit personal liability o Can be just one person or a firm |
| LLC | o Limited Liability Company o Cross between corporation and partnership |
| partnership | o General partnership o Each partner fully liable personally for all obligations of the business |
| LP | o Limited partnership o commonly capital hungry businesses o General partners run the business & are personally liable for its obligations o LPs: outside investors who have no management role and no personal liability beyond risk of their own investmen |
| income statement | sales minus costs and expenses = profit or loss |
| revenue/sales/top line | number of units sold multiplied by price per unit |
| cost of goods sold/cost of sales | costs a company incurs to purchase and convert raw materials into finished goods that it sells |
| gross profit | sales minus cost of goods sold |
| gross margin | gross profit divided by sales & expressed as a percent |
| operating expenses | daily expenses company has in running its business |
| operating income/profit/earnings/loss | gross profit minus operating expenses |
| interest income & income taxes | non-operating income and expense items |
| net income/net loss/bottom line | what a company had earned or lost when all costs and expenses are deducted from sales |
| diluted earnings per share | net income divided by number of diluted shares outstanding |
| extraordinary items | typically one-time events that can help or hurt a company's bottom line |
| continued vs. discontinued operations | continued are those company is keeping, discontinued are those being sold |
| cash basis | people account for transaction when cash is actually moved in or out |
| accrual basis | expenses occur when the company incurs the obligation to pay, not when it actually parts with cash |
| balance sheet | o what a company owns and owes on certain date o shows relationship between assets under management’s control and management’s responsibilities (liabilities) to creditors and owners |
| assets | what company owns, listed in order that they can be easily converted into cash |
| current assets | typically turned into cash within a year of balance sheet date and used to fund or pay for items |
| long-term assets | sometimes called fixed assets |
| liabilities | what a company owes |
| current liabilities | bills that will be paid within a year |
| long-term liabilities | • bill due one year or more after balance sheet date • long-term debt |
| shareholder's equity | o company’s net worth (how much it could be sold for) o capital/money shareholders have placed in company in exchange for a share of ownership o amount of earnings that have been retained in the company o assets - liabilities |
| cash flow statement | tells you if company is generating enough cash from its customers to finance operations and purchase items such as buildings and equipment |
| cash flow from operating activities | • cash earned from actual sales of good or services • healthy company should have 3-1 ratio of net income to operating cash flow • bad sign if company has positive earnings but negative operating cash flow |
| cash flow from investing activities | • cash earned or lost in financial markets or in subsidiaries • reflects purchase or sales of plants/equipment • can be negative without being bad sign for company if it’s a reflection of healthy capital investment for the future |
| cash flow from financing activities | cash received from issuing more shares of stock or from issuing debt minus dividends paid out to shareholders or cash spent on share repurchases |
| sales | when company actually ships something; income generated when sale is made |
| orders | only become sales when products ordered have left company & are on way to customer; increase company's backlog of products to be shipped and don't affect income statement |
| expenses | o pay for developing and selling of products and for running general and administrative aspects of a business o all business expenditures outside of manufacturing expenses |
| costs | o expenditures for raw materials, workers’ wages, manufacturing overhead, etc. o manufacturing expenses |
| depreciation | o decline in the useful value of a fixed, tangible asset o shows up as expense on income statement |
| amortization | o decline of useful value of intangible asset o shows up as expense on income statement |
| Form 10-K | o Annual report o Includes balance sheet, income statement |
| Form 10-Q | o Quarterly report o Not filed for 4th quarter |
| Form 8-K | o Current report o Anything material, no regular interval |
| Form PRE 14A | o Preliminary proxy material for annual meeting of shareholders o Reports executive compensation |
| Form DEF 14A | final proxy material |
| Form S-1, S-2, S-3, S-4 | registration of securities offered to the public |
| Form 13D | acquisition of 5 percent ownership of a publicly-held company, filed by purchaser of the stock |
| Form 144 | sale of stock by insider (officer, director, major shareholder) |
| Form 14D1F | tender offer for securities (an offer to buy them), filed by a shareholder; could be a sign of hostile takeover attempts |
| chairman | o Chairman of board of directors o Person in charge of overseeing entire company o Primary strategic thinker and guide for executive management |
| board of directors | o Sounding board for management, reviews strategy, watches out for best interest of shareholders, elects chairman o Elected by shareholders o Major capital investments require their approval |
| inside directors | work for company, typically in senior positions |
| outside directors | anyone not working for company |
| CEO | o Chief executive officer o Executes policies and strategies created by chairman & board of directors o “go-to” person—held accountable when things go wrong o sometimes serves as chairman or president |
| COO | o Chief operating officer o Also known as president o Guides and directs company’s operations o Person who knows what’s going on on day-to-day basis |
| CFO | o Chief financial officer o Oversees financial operations o Sole title o If no CFO, usually a controller |
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