Druga grupa Flashcards
(13 cards)
In an efficient account…
investors get exactly what they pay for when they buy securities, and firms receive exactly what their stocks and bonds are worth when they sell them
Balance sheet
- The balance sheet represents a picture taken at a specific point in time (date) that shows a firm’s assets and how those assets are financed
Assets, liability and equity
Assets are classified as current and fixed. Current being the ones held for trade or expected to liquidate/convert into cash within one year of recording them in the balance sheet. Fixed assets are generally used to manufacture and generate cash flows over longer period (equipment, land, buildings). To finance assets, firms use liabilities and equity. Liabilities represent loans the firm has outstanding, and they can be short-term or long-term. Equity represents stockholders’ ownership, which does not have to be paid off- esej
Volatility
The higher value of standard deviation of investment return is called volatility
What is the primary goal of a financial manager
The primary goal of a financial manager is to maximize shareholder wealth.
Role of financial market
A system consisting of individuals and institutions, instruments, and procedures that bring together borrowers and savers.
The primary role of financial markets is to facilitate the efficient allocation of capital, provide liquidity, and enable price discovery for financial assets, thereby supporting economic growth and stability.
How is a firms value measured
A firm’s value is typically measured by its market capitalization, which is the total market value of its outstanding shares of stock, calculated as share price multiplied by the number of shares outstanding.
4 factors that affect the cost of money:
Production opportunities, time preference for consumption, risk and inflation
Production opportunities
The return available within an economy from investment in a productive (cash-generating) asset. the higher the production opportunity—the higher his expected return on the investment would be, and the more he could afford to offer potential investors to attract their savings.
Time preferences for consumption
The preference of a consumer for current consumption as opposed to saving for future consumption. High time preference for consumption = spending more of our income now, we use it for immediate needs. Low time preference for consumption = we spend less today and save more. If everyone is barely getting by, people will want to use things right away, so they won’t save much. This means interest rates will be high, and it will be hard for people to build up savings and invest in things like businesses.
Risk
The higher the perceived risk, the higher the required rate of return.
Inflation
the higher the expected rate of inflation, the greater the return required to compensate investors for the loss in purchasing power caused by the inflation
Diversification of systematic and unsystematic risk
-Systematic risk is the risk that is inherent to the entire market and cannot be diversified away, while unsystematic risk is specific to individual assets and can be reduced through diversification.
