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Flashcards in Chapter 17 Deck (33)
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1

fundamental analysis

The practice of evaluating the information contained in financial statements, industry reports, and economic factors to determine the intrinsic value of a firm

2

intrinsic value

The "true," or economic, value of the firm

3

technical analysis

Examination of supply and demand for securities over time to determine trends in price movements of stocks or financial markets

4

fundamentalists

analysts who utilize fundamental analysis in an attempt to forecast future stock price movements

5

technicians

analysts who examine stocks and financial markets using technical analysis

6

business cycle

the movement in aggregate economic activity as measured by the GDP

7

expansion

increasing economic activity

8

contraction

declining economic activity

9

gross domestic product (GDP)

a measure of all goods and services produced in the economy during a specific time period.

10

recession

two consecutive quarters of economic contraction in the GDP

11

leading economic indicators

Economic measures that tend to move prior to, or precede, movements in the business cycle

12

lagging economic indicators

Economic measures that tend to move after, or follow, movements in the business cycle

13

coincident indicators

Economic measures that tend to mirror, or move at the same time as, business cycle

14

monetary policy

the means by which the Federal Reserve influences economic conditions by managing the U.S. money supply

15

fiscal policy

government spending, which is primarily supported by the government's ability to tax individuals and businesses.

16

deficit spending

when the government spends more funds than it collects in taxes

17

cyclical industries

Industries that tend to perform best during expansions and worst during contractions

18

defensive (countercyclical) industries

Industries that tend to be the best performers when the economy is in a contraction of recession, and the wort performers in expanding economies

19

industry life cycle

The various phases of an industry with respect to its growth in sales and its competitive conditions

20

dividend discount model (DDM)

A model that utilizes the discounted cash flow principle to value common stock Value is represented by the present value of the dividends expected to be received from investing in the stock.

21

P/E Ratio

A ratio computed by dividing the current market price per share by the earnings per share

22

economic value added (EVA)

An analytical method that seeks to evaluate the earnings generated by a firm to determine whether they are sufficient to compensate the suppliers of funds-both the bondholders and the stockholders

23

bar chart

A graph that indicates the high, low, and closing price movements for a stock during a specified period

24

trend line

A line that indicates the direction of the stock price movement. It is drawn so that it touches either the high prices or the low prices for some of the trading days.

25

trend line penetration

The point at which the trading line crosses the trend line

26

Dow theory

A technique used to predict reversals in market patterns by examining the movements of the Dow Jones Industrial Average and the Dow Jones Transportation Average.

27

technical indicators

Measures used by technical analysts to forecast future movements in stock prices

28

market breadth indicators

Technical indicators that are used to measure the trading volume and the range of trading that takes place in the market

29

advance/decline line

A graph that depicts the difference between the number of advancing stocks and the number of declining stocks over some time period

30

sentiment indicators

Technical indicators that are used to monitor the "mood," or psychology, of the market