Prerequisite Review Flashcards
(442 cards)
1
Q
A priori probability
A
A probability based on logical analysis
rather than on observation or personal judgment.
2
Q
Absolute advantage
A
A country’s ability to produce a good or
service at a lower absolute cost than its trading partner
3
Q
Absolute dispersion
A
The amount of variability present without
comparison to any reference point or benchmark.
4
Q
Absolute frequency
A
The actual number of observations
counted for each unique value of the variable (also called
raw frequency).
5
Q
Accelerated methods
accounting
A
Depreciation methods that allocate a
relatively large proportion of the cost of an asset to the
early years of the asset’s useful life.
6
Q
Accounts payable
A
Amounts that a business owes to its vendors
for goods and services that were purchased from them but
which have not yet been paid.
7
Q
Accrued expenses
Also called accrued liabilities
A
Liabilities related to expenses that have been
incurred but not yet paid as of the end of an accounting
period—an example of an accrued expense is rent that has
been incurred but not yet paid, resulting in a liability “rent
payable.
8
Q
Addition rule for probabilities
A
A principle stating that the
probability that A or B occurs (both occur) equals the
probability that A occurs, plus the probability that B occurs,
minus the probability that both A and B occur.
9
Q
Aggregate demand
A
The quantity of goods and services that
households, businesses, government, and non-domestic
customers want to buy at any given level of prices.
10
Q
Aggregate demand curve
A
Inverse relationship between the
price level and real output.
11
Q
Aggregate income
A
The value of all the payments earned by
the suppliers of factors used in the production of goods
and services.
12
Q
Aggregate output
A
The value of all the goods and services
produced during a specified period.
13
Q
Aggregate supply
A
The quantity of goods and services producers
are willing to supply at any given level of price.
14
Q
Aggregate supply curve
A
The level of domestic output that
companies will produce at each price level.
15
Q
Alternative hypothesis
A
The hypothesis that is accepted if the
null hypothesis is rejected.
16
Q
Amortisation
A
The process of allocating the cost of intangible
long-term assets having a finite useful life to accounting
periods; the allocation of the amount of a bond premium
or discount to the periods remaining until bond maturity.
17
Q
Amortised cost
A
The historical cost (initially recognised cost)
of an asset, adjusted for amortisation and impairment
18
Q
Annual percentage rate
A
The cost of borrowing expressed as
a yearly rate.
19
Q
Annuity
A
A finite set of level sequential cash flows
20
Q
Annuity due
A
An annuity having a first cash flow that is paid
immediately.
21
Q
Arithmetic mean
A
The sum of the observations divided by the
number of observations.
22
Q
Assets
A
Resources controlled by an enterprise as a result of
past events and from which future economic benefits to
the enterprise are expected to flow.
23
Q
Autarkic price
A
The price of a good or service in an autarkic
economy.
24
Q
Autarky
A
Countries seeking political self-sufficiency with little
or no external trade or finance. State-owned enterprises
control strategic domestic industries.
25
Available-for-sale
Under US GAAP, debt securities not classified
as either held-to-maturity or held-for-trading securities.
The investor is willing to sell but not actively planning
to sell. In general, available-for-sale debt securities are
reported at fair value on the balance sheet, with unrealized
gains included as a component of other comprehensive
income.
26
Average fixed cost
Total fixed cost divided by quantity
produced.
27
Average product
Measures the productivity of inputs on
average and is calculated by dividing total product by
the total number of units for a given input that is used to
generate that output.
28
Average total cost
Total cost divided by quantity produced
29
Average variable cost
Total variable cost divided by quantity
produced.
30
Back-testing
The process that approximates the real-life investment
process, using historical data, to assess whether an
investment strategy would have produced desirable results
31
Backfill Bias
A problem whereby certain surviving hedge funds
may be added to databases and various hedge fund indexes
only after they are initially successful and start to report
their returns. Also see survivorship bias.
32
Balance of payments
A double-entry bookkeeping system that
summarizes a country’s economic transactions with the
rest of the world for a particular period of time, typically
a calendar quarter or year.
33
Balance of trade deficit
When the domestic economy is
spending more on non-domestic goods and services than
non-domestic economies are spending on domestic goods
and services.
34
Balance sheet
of financial position or statement of financial co
| Also called
## Footnote
statement of financial position or statement of financial condition
The financial statement that presents an entity’s
current financial position by disclosing resources the entity
controls (its assets) and the claims on those resources (its
liabilities and equity claims), as of a particular point in
time (the date of the balance sheet).
35
Bar chart
A chart for plotting the frequency distribution of
categorical data, where each bar represents a distinct category
and each bar's height is proportional to the frequency
of the corresponding category. In technical analysis, a bar
chart that plots four bits of data for each time interval—
the high, low, opening, and closing prices. A vertical line
connects the high and low prices. A cross-hatch left indicates
the opening price and a cross-hatch right indicates
the closing price.
36
Barter economy
An economy where economic agents as
house-holds, corporations, and governments “pay” for
goods and services with another good or service.
37
Bernoulli random variable
A random variable having the
outcomes 0 and 1.
38
Bernoulli trial
An experiment that can produce one of two
outcomes.
39
Bimodal
A distribution that has two most frequently occurring
values.
40
Binomial random variable
The number of successes in n
Bernoulli trials for which the probability of success is
constant for all trials and the trials are independent.
41
Binomial tree
all trials and the trials are independent.
Binomial tree The graphical representation of a model of asset
price dynamics in which, at each period, the asset moves
up with probability p or down with probability (1 − p).
42
Bottom-up analysis
An investment selection approach that
focuses on company-specific circumstances rather than
emphasizing economic cycles or industry analysis
43
Box and whisker plot
A graphic for visualizing the dispersion
of data across quartiles. It consists of a box with “whiskers”
connected to the box.
44
What is a Bernoulli trial?
An experiment that can produce one of two outcomes.
45
Define bimodal distribution.
A distribution that has two most frequently occurring values.
46
What is a binomial random variable?
The number of successes in n Bernoulli trials for which the probability of success is constant for all trials and the trials are independent.
47
What is a binomial tree?
The graphical representation of a model of asset price dynamics in which, at each period, the asset moves up with probability p or down with probability (1 − p).
48
What does bottom-up analysis focus on?
An investment selection approach that focuses on company-specific circumstances rather than emphasizing economic cycles or industry analysis.
49
What is a box and whisker plot?
A graphic for visualizing the dispersion of data across quartiles. It consists of a box with 'whiskers' connected to the box.
50
Define broad money.
Encompasses narrow money plus the entire range of liquid assets that can be used to make purchases.
51
What is a bubble line chart?
A line chart that uses varying-sized bubbles to represent a third dimension of the data.
52
What does the capital account measure?
A component of the balance of payments account that measures transfers of capital.
53
What is capital consumption allowance?
A measure of the wear and tear (depreciation) of the capital stock that occurs in the production of goods and services.
54
What is capital deepening investment?
Increases the stock of capital relative to labor.
55
Define capital stock.
The accumulated amount of buildings, machinery, and equipment used to produce goods and services.
56
What is the cash flow additivity principle?
The principle that dollar amounts indexed at the same point in time are additive.
57
What is cash flow from operating activities?
The net amount of cash provided from operating activities.
58
What is cash flow from operations?
A cash profit measure over a period for an issuer’s primary business activities.
59
Define categorical data.
Values that describe a quality or characteristic of a group of observations.
60
What are central banks?
The dominant bank in a country, usually with official or semi-official governmental status.
61
What does the central limit theorem state?
The sum (and the mean) of a set of independent, identically distributed random variables with finite variances is normally distributed.
62
What is a classified balance sheet?
A balance sheet organized to group together various assets and liabilities into subcategories.
63
Define a closed economy.
An economy that does not trade with other countries; an autarkic economy.
64
What is the coefficient of variation?
The ratio of a set of observations’ standard deviation to the observations’ mean value.
65
What is a combination in statistics?
A listing in which the order of the listed items does not matter.
66
What is the combination formula?
The number of ways that we can choose r objects from a total of n objects is n C r = ( n! / (r!(n-r)!) ).
67
Define comparative advantage.
A country’s ability to produce a good or service at a lower relative cost than its trading partner.
68
What is the complement of an event?
The event not-S, written SC, given the event S.
69
What are complements in economics?
Goods that tend to be used together; two goods whose cross-price elasticity of demand is negative.
70
What is compounding?
The process of accumulating interest on interest.
71
Define comprehensive income.
All changes in equity other than contributions by, and distributions to, owners.
72
What is conditional probability?
The probability of an event given another event.
73
What is confidence level?
The complement of the level of significance.
74
What is a confusion matrix?
A grid used for error analysis in classification problems.
75
Define consumer surplus.
The difference between the value that a consumer places on units purchased and the amount of money that was required to pay for them.
76
What is a contingency table?
A table of the frequency distribution of observations classified on the basis of two discrete variables.
77
What is continuous data?
Data that can be measured and can take on any numerical value in a specified range of values.
78
Define continuous random variable.
A random variable for which the range of possible outcomes is the real line or some subset of the real line.
79
What is a contra account?
An account that offsets another account.
80
What does convergence refer to in economics?
The tendency for differences in output per capita across countries to diminish over time.
81
What is core inflation?
The inflation rate calculated based on a price index of goods and services except food and energy.
82
What is cost averaging?
The periodic investment of a fixed amount of money.
83
What is a coupon rate?
The interest rate promised in a contract used to calculate periodic interest payments.
84
What is credit analysis?
The evaluation of credit risk and the creditworthiness of a borrower or counterparty.
85
Define credit risk.
The expected economic loss under a potential borrower default over the life of the contract.
86
What are critical values in hypothesis testing?
Values of the test statistic at which the decision changes from fail to reject the null hypothesis to reject the null hypothesis.
87
What is cross-price elasticity of demand?
The percentage change in quantity demanded for a given percentage change in the price of another good.
88
Define cross-sectional data.
A list of the observations of a specific variable from multiple observational units at a given point in time.
89
What is cumulative absolute frequency?
Cumulates absolute frequencies in a frequency distribution from the first bin to the last bin.
## Footnote
Used to analyze the total counts of observations up to a certain point.
90
Define cumulative distribution function.
A function giving the probability that a random variable is less than or equal to a specified value.
## Footnote
It is essential for understanding probabilities in statistical analysis.
91
What does a cumulative frequency distribution chart plot?
Plots cumulative absolute frequency or cumulative relative frequency on the y-axis against the upper limit of the interval.
## Footnote
Helps visualize the number or percentage of observations below a certain value.
92
What is cumulative relative frequency?
A sequence of partial sums of the relative frequencies in a frequency distribution.
## Footnote
This provides insight into the proportion of data below a certain threshold.
93
What is the current account?
A component of the balance of payments account that measures the flow of goods and services.
## Footnote
Critical for assessing a country's economic health.
94
Define current assets.
Assets expected to be consumed or converted into cash in the near future, typically one year or less. Also called liquid assets.
## Footnote
Important for assessing a company's liquidity.
95
What is current cost in terms of assets?
The amount of cash or cash equivalents that would have to be paid to buy the same or an equivalent asset today.
## Footnote
Reflects the current market value of an asset.
96
Define current liabilities.
Short-term obligations expected to be settled in the near future, typically one year or less.
## Footnote
Includes accounts payable and wages payable.
97
What are cyclical companies?
Companies with sales and profits that regularly expand and contract with the business cycle.
## Footnote
Their performance is closely tied to economic fluctuations.
98
What is data?
A collection of numbers, characters, words, and text—as well as images, audio, and video—in a raw or organized format to represent facts or information.
## Footnote
Fundamental for analysis in various fields.
99
What is data snooping?
The practice of determining a model by extensive searching through a dataset for statistically significant patterns.
## Footnote
Can lead to overfitting if not done carefully.
100
What is days of inventory on hand?
An activity ratio equal to the number of days in the period divided by inventory turnover over the period.
## Footnote
Indicates how long inventory is held before it is sold.
101
Define dealing securities.
Securities held by banks or other financial intermediaries for trading purposes.
## Footnote
Important for liquidity management in financial institutions.
102
What are deciles?
Quantiles that divide a distribution into 10 equal parts.
## Footnote
Useful for analyzing distribution characteristics.
103
What is the default risk premium?
An extra return that compensates investors for the possibility that the borrower will fail to make a promised payment.
## Footnote
Reflects the risk associated with lending.
104
Define defensive companies.
Companies with sales and profits that have little sensitivity to the business cycle.
## Footnote
Often considered safer investments during economic downturns.
105
What is deferred income?
A liability account for money that has been collected for goods or services that have not yet been delivered.
## Footnote
Represents advance payments received.
106
Define deferred revenue.
A liability account for money that has been collected for goods or services that have not yet been delivered.
## Footnote
Synonymous with deferred income.
107
What are deferred tax assets?
A balance sheet asset arising when an excess amount is paid for income taxes relative to accounting profit.
## Footnote
Indicates future tax benefits.
108
What is the degree of confidence?
The probability that a confidence interval includes the unknown population parameter.
## Footnote
Important in statistical inference.
109
Define degrees of freedom.
The number of independent variables used in defining sample statistics, such as variance.
## Footnote
Essential for statistical testing.
110
What is a demand curve?
Graph of the inverse demand function showing the demand relation.
## Footnote
Visual representation of how quantity demanded changes with price.
111
What is a demand function?
A relationship that expresses the quantity demanded of a good or service as a function of own-price and possibly other variables.
## Footnote
Key for understanding consumer behavior.
112
What does it mean for events to be dependent?
The probability of one event occurring depends on the occurrence of another event.
## Footnote
Important concept in probability theory.
113
Define depreciation.
The process of systematically allocating the cost of long-lived (tangible) assets to the periods during which the assets provide economic benefits.
## Footnote
Key for financial reporting and tax purposes.
114
What are descriptive statistics?
The study of how data can be summarized effectively.
## Footnote
Provides essential tools for data analysis.
115
What are diluted shares?
The number of shares that would be outstanding if all potentially dilutive claims on common shares were exercised.
## Footnote
Important for understanding company valuation.
116
What is the diminishing balance method?
An accelerated depreciation method that allocates a relatively large proportion of the cost of an asset to the early years of its useful life.
## Footnote
Commonly used for tax purposes.
117
Define diminishing marginal productivity.
When each additional unit of an input increases output by a smaller increment.
## Footnote
A key concept in production theory.
118
What is direct format in cash flow statements?
A format for presenting the statement where cash flow from operating activities is shown as operating cash receipts less operating cash disbursements.
## Footnote
Also called the direct method.
119
What is the direct write-off method?
An approach to recognizing credit losses on customer receivables where losses are recognized only after a customer has defaulted.
## Footnote
Used for simplicity in financial reporting.
120
What does it mean to discount a future payment?
To reduce the value of a future payment for how far away it is in time; to calculate the present value.
## Footnote
Fundamental concept in finance.
121
Define discouraged worker.
A person who has stopped looking for a job or has given up seeking employment.
## Footnote
Important for understanding labor market dynamics.
122
What is discrete data?
Numerical values that result from a counting process, limited to a finite number of values.
## Footnote
Often used in statistical analysis.
123
What is a discrete random variable?
A random variable that can take on at most a countable number of possible values.
## Footnote
Relevant in probability theory.
124
Define dispersion.
The variability of a population or sample of observations around the central tendency.
## Footnote
Important for understanding data spread.
125
What is double declining balance depreciation?
An accelerated depreciation method that involves depreciating the asset at double the straight-line rate.
## Footnote
Useful for tax strategy.
126
What is down transition probability?
The probability that an asset’s value moves down in a model of asset price dynamics.
## Footnote
Important for risk assessment in finance.
127
What is downside risk?
Risk of incurring returns below a specified value.
128
What does the Dutch Book Theorem state?
Inconsistent probabilities create profit opportunities.
129
Define economic costs.
The sum of total accounting costs and implicit opportunity costs.
130
What is economic profit?
Equal to accounting profit less implicit opportunity costs.
131
What is the effective annual rate?
An interest rate with a periodicity of one.
132
Define effective interest rate.
The borrowing rate incurred by a company at the time of bond issuance.
133
What does it mean when a good or service is described as elastic?
The magnitude of elasticity is greater than one.
134
What is elasticity?
The percentage change in one variable for a percentage change in another variable.
135
Define elasticity of demand.
A measure of the sensitivity of quantity demanded to a change in price: %ΔQD/%ΔP.
136
What is elasticity of supply?
A measure of the sensitivity of quantity supplied to a change in price: %ΔQS/%ΔP.
137
What is empirical probability?
The probability of an event estimated as a relative frequency of occurrence.
138
What does it mean to be employed?
The number of people with a job.
139
Define equity.
Ownership interest in an entity; a residual claim on assets after senior claims are satisfied.
140
What is an estimate?
A particular value calculated from sample observations using an estimator.
141
What is an estimator?
An estimation formula used to compute sample statistics.
142
What is an event in probability?
Any outcome or specified set of outcomes of a random variable.
143
Define exhaustive in index construction.
An index construction strategy that selects every constituent of a universe.
144
What is expected inflation?
The level of inflation that economic agents expect in the future.
145
What are expenses?
Outflows of economic resources that decrease equity, excluding distributions to owners.
146
What are exports?
Goods and services that an economy sells to other countries.
147
Define externalities.
Costs or benefits from production or consumption that affect others not involved in transactions.
148
What is face value?
The amount of principal on a bond, also known as par value.
149
Define fair value.
A market-based measure of an investment based on observable or derived assumptions.
150
What is the false discovery approach?
An adjustment in the p-values for tests performed multiple times.
151
Define false discovery rate.
The rate of Type I errors in testing a null hypothesis multiple times.
152
What is a finance lease?
A type of lease akin to the purchase or sale of the underlying asset.
153
What is a financial account?
A component of the balance of payments account that records investment flows.
154
Define financial flexibility.
The ability to react and adapt to financial adversity and opportunities.
155
What are financing activities?
Activities related to obtaining or repaying capital for business use.
156
Define first-degree price discrimination.
Where a monopolist charges each customer the highest price they are willing to pay.
157
What is fiscal policy?
The use of taxes and government spending to affect aggregate expenditures.
158
What does the Fisher effect state?
The real rate of interest is stable over time, with changes in nominal rates due to expected inflation.
159
What is foreign direct investment?
Direct investment by a firm in productive assets in a foreign country.
160
Define foreign portfolio investment.
Shorter-term investment in foreign financial instruments by individuals and firms.
161
What is a fractile?
A value at or below which a stated fraction of the data lies.
162
What is fractional reserve banking?
Banking in which reserves constitute a fraction of deposits.
163
Define free trade.
When there are no government restrictions on a country's ability to trade.
164
What is a frequency distribution?
A tabular display of data counting observations or tallying values into ordered bins.
165
What is a frequency polygon?
A graph of a frequency distribution obtained by connecting class frequencies with straight lines.
166
What is future value (FV)?
The amount to which a payment or series of payments will grow by a stated future date.
167
What is an FX swap?
The combination of a spot and a forward FX transaction.
168
Define gains in finance.
Asset inflows not directly related to the ordinary activities of the business.
169
What is the GDP deflator?
A gauge of prices and inflation measuring aggregate changes in prices across the economy.
170
What is the geometric mean?
A measure of central tendency computed by taking the nth root of the product of n non-negative values.
171
Define goodwill.
An intangible asset representing the excess of purchase price over the value of net identifiable assets.
172
What is gross domestic product?
The market value of all final goods and services produced within the economy during a given period.
173
Define gross margin.
Sales minus the cost of sales (cost of goods sold for a manufacturing company).
174
What is gross profit?
Sales minus the cost of sales (i.e., the cost of goods sold for a manufacturing company)
## Footnote
Gross profit is a key indicator of a company's financial health.
175
Define gross profit margin.
The ratio of gross profit to revenues
## Footnote
Gross profit margin is often expressed as a percentage.
176
What is a grouped bar chart?
A bar chart for showing joint frequencies for two categorical variables (also known as a clustered bar chart)
## Footnote
Grouped bar charts are useful for comparing different groups.
177
What does grouping by function refer to?
The grouping together of expenses serving the same function in an income statement, e.g., all items that are costs of goods sold
## Footnote
This method helps in analyzing expenses based on their role.
178
What does grouping by nature refer to?
The grouping together of expenses by similar nature in an income statement, e.g., all depreciation expenses
## Footnote
This method categorizes expenses based on their characteristics.
179
Who are growth investors?
Investors who seek to invest in high-earnings-growth companies
## Footnote
Growth investors focus on companies that are expected to grow at an above-average rate.
180
Define harmonic mean.
A type of weighted mean computed as the reciprocal of the arithmetic average of the reciprocals
## Footnote
Harmonic mean is often used in averaging ratios.
181
What is headline inflation?
The inflation rate calculated based on the price index that includes all goods and services in an economy
## Footnote
Headline inflation reflects the overall inflationary trend.
182
What is a heat map?
A type of graphic that organizes and summarizes data in a tabular format and represents it using a color spectrum
## Footnote
Heat maps are effective for visualizing complex data.
183
Define histogram.
A chart that presents the distribution of numerical data by using the height of a bar or column to represent the absolute frequency of each bin or interval in the distribution
## Footnote
Histograms are useful for understanding data distributions.
184
What is historical cost in reference to assets?
The amount paid to purchase an asset, including any costs of acquisition and/or preparation
## Footnote
Historical cost is a fundamental accounting principle.
185
What is a hypothesis?
A proposed explanation or theory that can be tested
## Footnote
Hypotheses are essential for scientific research.
186
Define hypothesis testing.
The process of testing hypotheses about one or more populations using statistical inference
## Footnote
Hypothesis testing helps in validating assumptions in research.
187
What is the implicit price deflator for GDP?
A gauge of prices and inflation that measures the aggregate changes in prices across the overall economy
## Footnote
It reflects the overall price level changes in an economy.
188
Define imports.
Goods and services that a domestic economy purchases from other countries
## Footnote
Imports are a crucial component of international trade.
189
What is income in economic terms?
Increases in economic benefits in the form of inflows or enhancements of assets, or decreases of liabilities that result in an increase in equity (other than increases resulting from contributions by owners)
## Footnote
Income is a key indicator of financial performance.
190
What does income elasticity of demand measure?
The responsiveness of demand to changes in income, defined as the percentage change in quantity demanded divided by the percentage change in income
## Footnote
This measure helps understand consumer behavior.
191
What is income tax payable?
The income tax owed by the company on the basis of taxable income
## Footnote
This liability affects a company's cash flow.
192
What are increasing marginal returns?
When the marginal product of a resource increases as additional units of that input are employed
## Footnote
This concept is important in production theory.
193
What does independent mean in terms of events?
The property that the occurrence of one event does not affect the probability of another event occurring
## Footnote
Independence is a core principle in probability theory.
194
Define indirect format in cash flow statements.
A format for the presentation of the statement which, in the operating cash flow section, begins with net income then shows additions and subtractions to arrive at operating cash flow
## Footnote
Also called the indirect method.
195
What is inelastic demand?
Said of a good or service when the magnitude of elasticity is less than one; insensitive to price changes
## Footnote
Inelastic goods are typically necessities.
196
Define inferior goods.
A good whose consumption decreases as income increases
## Footnote
This contrasts with normal goods, where consumption increases with income.
197
What is inflation?
The percentage increase in the general price level from one period to the next; a sustained rise in the overall level of prices in an economy
## Footnote
Inflation can erode purchasing power.
198
What is an inflation premium?
An extra return that compensates investors for expected inflation
## Footnote
This premium is often factored into interest rates.
199
Define inflation uncertainty.
The degree to which economic agents view future rates of inflation as difficult to forecast
## Footnote
High inflation uncertainty can impact investment decisions.
200
What is input productivity?
The amount of output produced by workers in a given period of time—for example, output per hour worked; measures the efficiency of labor
## Footnote
Higher input productivity indicates better labor efficiency.
201
Define intangible assets.
Assets without a physical form, such as patents and trademarks
## Footnote
Intangible assets can have significant value.
202
What is interest?
Payment for lending funds
## Footnote
Interest is commonly expressed as a percentage rate.
203
What is an interest rate?
A rate of return that reflects the relationship between differently dated cash flows; a discount rate
## Footnote
Interest rates are crucial in financial markets.
204
What is the interest rate effect?
The effect through which price level changes, through demand for money, impact interest rate, which in turn impacts investment and consumption
## Footnote
This effect is a key concept in macroeconomics.
205
What is the interquartile range?
The difference between the third and first quartiles of a dataset
## Footnote
It measures the spread of the middle 50% of data.
206
What is an interval in grouped data?
A set of values within which an observation falls
## Footnote
Intervals are commonly used in statistics for data analysis.
207
Define inventory investment.
Net change in business inventory
## Footnote
Inventory investment can indicate business growth or decline.
208
What is inventory turnover?
An activity ratio calculated as cost of goods sold divided by average inventory
## Footnote
Higher turnover indicates efficient inventory management.
209
What is an inverse demand function?
A restatement of the demand function in which price is stated as a function of quantity
## Footnote
This function is useful in economic modeling.
210
What are investing activities?
Activities associated with the acquisition and disposal of property, plant, and equipment; intangible assets; other long-term assets; and both long-term and short-term investments in the equity and debt (bonds and loans) issued by other companies
## Footnote
Investing activities are a major component of cash flow statements.
211
What is investment property?
Property used to earn rental income or capital appreciation (or both)
## Footnote
Investment properties are typically held for income generation.
212
Define joint frequencies.
The entry in the cells of the contingency table that represent the joining of one variable from a row and the other variable from a column to count observations
## Footnote
Joint frequencies help in analyzing relationships between variables.
213
What is joint probability?
The probability of the joint occurrence of stated events
## Footnote
Joint probability is used in various statistical analyses.
214
What is the labor force?
Everyone of working age (ages 16 to 64) who either is employed or is available for work but not working
## Footnote
The labor force is a key component of economic analysis.
215
Define labor productivity.
The quantity of goods and services (real GDP) that a worker can produce in one hour of work
## Footnote
Labor productivity is a measure of economic efficiency.
216
What is the law of demand?
The principle that as the price of a good rises, buyers will choose to buy less of it, and as its price falls, they will buy more
## Footnote
This law describes the behavior of consumers in a market.
217
What is the law of diminishing marginal returns?
The observation that a variable factor’s marginal product must eventually fall as more of it is added to a fixed amount of the other factors
## Footnote
This law is important in production theory.
218
What is the law of diminishing returns?
The smallest output that a firm can produce such that its long run average costs are minimized
## Footnote
This concept is crucial for understanding cost structures.
219
What is the level of significance?
The probability of a Type I error in testing a hypothesis
## Footnote
It is a critical component of hypothesis testing.
220
What are liabilities?
Present obligations of an enterprise arising from past events, the settlement of which is expected to result in an outflow of resources embodying economic benefits
221
What is the LIFO reserve?
The difference between the reported LIFO inventory carrying amount and the inventory amount that would have been reported if the FIFO method had been used
222
Define line chart.
A type of graph used to visualize ordered observations, typically a plot of price data with a line connecting the points
223
What is linear interpolation?
The estimation of an unknown value on the basis of two known values that bracket it, using a straight line between the two known values
224
What does liquidity refer to?
The extent to which a company is able to meet its short-term obligations using cash flows and assets that can be readily transformed into cash
225
Define liquidity premium.
An extra return that compensates investors for the risk of loss relative to an investment’s fair value if the investment needs to be converted to cash quickly
226
What are long-lived assets?
Assets that are expected to provide economic benefits over a future period of time, typically greater than one year
227
What is look-ahead bias?
A bias caused by using information that was unavailable on the test date
228
Define losses in a business context.
Asset outflows not directly related to the ordinary activities of the business
229
What is macroeconomics?
The branch of economics that deals with aggregate economic quantities, such as national output and national income
230
Define marginal cost.
The cost of producing an additional unit of a good
231
What are marginal frequencies?
The sums determined by adding joint frequencies across rows or across columns in a contingency table
232
What does marginal product measure?
Measures the productivity of each unit of input, calculated by taking the difference in total product from adding another unit of input
233
Define marginal propensity to consume.
The proportion of an additional unit of disposable income that is consumed or spent
234
What is marginal propensity to save?
The proportion of an additional unit of disposable income that is saved (not spent)
235
Define marginal revenue.
The change in total revenue divided by the change in quantity sold; the additional revenue from selling one more unit
236
What is a marginal value curve?
A curve describing the highest price consumers are willing to pay for each additional unit of a good
237
Define market rate of interest.
The rate demanded by purchasers of bonds, given the risks associated with future cash payment obligations of the particular bond issue
238
What are market-oriented investors?
Investors whose investment disciplines cannot be clearly categorized as value or growth
239
What is a maturity premium?
An extra return that compensates investors for the increased sensitivity of the market value of debt to a change in market interest rates as maturity is extended
240
Define mean absolute deviation.
The mean of the absolute values of deviations from the sample mean
241
What is a measure of central tendency?
A quantitative measure that specifies where data are centered
242
What is a measure of value?
A standard for measuring value; a function of money
243
What are measures of location?
Quantitative measures that describe the location or distribution of data, including measures of central tendency and percentiles
244
Define median.
The value of the middle item of a set of items that has been sorted into ascending or descending order
245
What is a medium of exchange?
Any asset that can be used to purchase goods and services or to repay debts; a function of money
246
What is microeconomics?
The branch of economics that deals with markets and decision making of individual economic units, including consumers and businesses
247
Define modal interval.
The interval containing the greatest number of observations in grouped data
248
What is mode?
The most frequently occurring value in a distribution
249
Who are monetarists?
Economists who believe that the rate of growth of the money supply is the primary determinant of the rate of inflation
250
What is monetary policy?
Actions taken by a nation’s central bank to affect aggregate output and prices through changes in bank reserves, reserve requirements, or its target interest rate
251
Define money.
A generally accepted medium of exchange and unit of account
252
What is money creation?
The process by which changes in bank reserves translate into changes in the money supply
253
What is the money multiplier?
Describes how a change in reserves is expected to affect the money supply; in its simplest form, 1 divided by the reserve requirement
254
What is money neutrality?
The thesis that an increase in the money supply leads in the long-run to an increase in the price level, while leaving real variables like output and employment unaffected
255
What is a multi-step format in income statements?
A format that presents a subtotal for gross profit (revenue minus cost of goods sold)
256
Define multinational corporation.
A company operating in more than one country or having subsidiary firms in more than one country
257
What is the multinomial formula?
The number of ways that n objects can be labeled with k different labels
258
What is the multiple testing problem?
The risk of getting statistically significant test results when performing a test multiple times
259
What is the multiplication rule for counting?
If one task can be done in n1 ways, and a second task can be done in n2 ways, then the number of ways the k tasks can be done is (n1)(n2)...(nk)
260
Define multiplication rule for independent events.
When two events are independent, the joint probability of A and B equals the product of the individual probabilities of A and B
261
What is the multiplication rule for probability?
The joint probability of events A and B equals the probability of A given B times the probability of B
262
What is a multivariate distribution?
A probability distribution that specifies the probabilities for a group of related random variables
263
What is a multivariate normal distribution?
A probability distribution for a group of random variables defined by the means, variances, and correlations between pairs of variables.
## Footnote
It encompasses the behavior of multiple random variables simultaneously.
264
What does mutually exclusive mean?
Indicates that only one event can occur at a time.
## Footnote
Events cannot happen simultaneously.
265
Define n factorial.
For a positive integer n, the product of the first n positive integers; 0 factorial equals 1 by definition, written as n!.
## Footnote
Example: 5! = 5 × 4 × 3 × 2 × 1 = 120.
266
What is narrow money?
The notes and coins in circulation in an economy, plus other very highly liquid deposits.
## Footnote
It represents the most liquid forms of money.
267
What is the natural rate of unemployment?
The effective unemployment rate below which pressure emerges in labor markets.
## Footnote
It reflects the long-term rate of unemployment in an economy.
268
Define net book value.
The remaining (undepreciated) balance of an asset’s purchase cost.
## Footnote
For liabilities, it is the face value of a bond minus any unamortized discount, or plus any unamortized premium.
269
What are net exports?
The difference between the value of a country’s exports and the value of its imports.
## Footnote
Calculated as value of exports minus imports.
270
What is net realizable value?
Estimated selling price in the ordinary course of business less the estimated costs necessary to make the sale.
## Footnote
It is used for inventory valuation.
271
Define net revenue.
Revenue after adjustments for estimated returns or amounts unlikely to be collected.
## Footnote
It provides a more accurate reflection of actual income.
272
What is a node in a binomial tree?
Each value on a binomial tree from which successive moves or outcomes branch.
## Footnote
Nodes represent potential outcomes in a decision tree.
273
What is nominal data?
Categorical values that are not amenable to being organized in a logical order.
## Footnote
Example: classification of publicly listed stocks into sectors.
274
Define nominal GDP.
The value of goods and services measured at current prices.
## Footnote
It does not account for inflation.
275
What is the nominal risk-free interest rate?
The sum of the real risk-free interest rate and the inflation premium.
## Footnote
It reflects the interest rate without considering inflation.
276
What is the non-accelerating inflation rate of unemployment?
The effective unemployment rate below which pressure emerges in labor markets.
## Footnote
It is a key concept in macroeconomic theory.
277
Define non-current assets.
Assets expected to benefit the company over an extended period of time, usually more than one year.
## Footnote
Examples include property, plant, and equipment.
278
What are non-current liabilities?
Obligations that represent a probable sacrifice of economic benefits in periods generally greater than one year in the future.
## Footnote
Examples include long-term loans and bonds payable.
279
Define non-renewable resources.
Finite resources that are depleted once consumed, such as oil and coal.
## Footnote
They cannot be replenished within a human timescale.
280
What are normal goods?
Goods consumed in greater quantities as income increases.
## Footnote
Demand rises with an increase in consumer income.
281
Define normal profit.
The level of accounting profit needed to cover implicit opportunity costs ignored in accounting costs.
## Footnote
It is the minimum profit necessary to keep resources in their current use.
282
What is a null hypothesis?
The hypothesis that is tested.
## Footnote
It typically states that there is no effect or no difference.
283
Define numerical data.
Values that represent measured or counted quantities as a number, also called quantitative data.
## Footnote
Examples include height, weight, and temperature.
284
What are objective probabilities?
Probabilities that generally do not vary from person to person; includes a priori and empirical probabilities.
## Footnote
They are based on observed data or logical deduction.
285
Define observation in statistics.
The value of a specific variable collected at a point in time or over a specified period.
## Footnote
Observations are the data points used in analysis.
286
What are odds against E?
The reciprocal of odds for E.
## Footnote
It represents the likelihood of an event not occurring.
287
Define odds for E.
The probability of E divided by 1 minus the probability of E.
## Footnote
It expresses the likelihood of an event occurring.
288
What is a one-dimensional array?
The simplest format for representing a collection of data of the same data type.
## Footnote
It can be visualized as a single row or column of data.
289
Define a one-sided hypothesis test.
A test in which the null hypothesis is rejected only if the evidence indicates that the population parameter is greater than or less than the hypothesized parameter.
## Footnote
It is used when the alternative hypothesis is directional.
290
What is an open economy?
An economy that trades with other countries.
## Footnote
It allows for imports and exports of goods and services.
291
Define operating activities.
Activities that are part of the day-to-day business functioning of an entity, such as selling inventory and providing services.
## Footnote
They are essential for generating revenue.
292
What is operating cash flow?
The net amount of cash provided from operating activities.
## Footnote
It indicates the cash generated from core business operations.
293
Define operating profit.
A company’s profits on its usual business activities before deducting taxes, also called operating income.
## Footnote
It reflects the profitability of core business operations.
294
What is opportunity cost?
The value that investors forgo by choosing a particular course of action; the value of something in its best alternative use.
## Footnote
It is a critical concept in economics.
295
Define ordinal data.
Categorical values that can be logically ordered or ranked.
## Footnote
Examples include rankings and survey responses.
296
What is an ordinary annuity?
An annuity with a first cash flow that is paid one period from the present.
## Footnote
It contrasts with an annuity due, where the first cash flow is paid immediately.
297
What is other comprehensive income?
Items of comprehensive income that are not reported on the income statement; comprehensive income minus net income.
## Footnote
It includes unrealized gains and losses.
298
Define out-of-sample test.
A test of a strategy or model using a sample outside the period on which the strategy or model was developed.
## Footnote
It assesses the model's predictive power.
299
What is an outcome?
A possible value of a random variable.
## Footnote
Outcomes are the results of random experiments.
300
Define own price.
The price of a good or service itself, as opposed to the price of something else.
## Footnote
It is a key factor in demand and supply analysis.
301
What is own-price elasticity of demand?
The percentage change in quantity demanded for a percentage change in good’s own price, holding all other things constant.
## Footnote
It measures consumer responsiveness to price changes.
302
Define owners’ equity.
The excess of assets over liabilities; the residual interest of shareholders in the assets of an entity after deducting liabilities.
## Footnote
Also called shareholders’ equity or shareholders’ funds.
303
What is a p-value?
The smallest level of significance at which the null is rejected.
## Footnote
It helps determine the strength of the evidence against the null hypothesis.
304
What is a paired comparisons test?
See test of the mean of the differences.
## Footnote
It is used to compare two related samples.
305
Define panel data.
A mix of time-series and cross-sectional data containing observations through time on characteristics across multiple observational units.
## Footnote
It allows for more complex analyses than pure cross-sectional or time-series data.
306
What is per capita real GDP?
Real GDP divided by the size of the population, often used as a measure of a country’s average standard of living.
## Footnote
It provides insight into economic well-being.
307
What are percentiles?
Quantiles that divide a distribution into 100 equal parts that sum to 100.
## Footnote
They are used to understand the distribution of data.
308
Define perfectly elastic demand.
When the quantity demanded of a given good is infinitely sensitive to a change in the value of a specified variable.
## Footnote
Price changes result in an infinite change in quantity demanded.
309
What is perfectly inelastic demand?
When the quantity demanded of a given good is completely insensitive to a change in the value of a specified variable.
## Footnote
The quantity demanded remains constant regardless of price changes.
310
Define permutation.
An ordered listing.
## Footnote
It is important in counting and probability problems.
311
What is the permutation formula?
The number of ways that we can choose r objects from a total of n objects, when order matters, is n P r = n! / (n - r)!.
## Footnote
It is used to calculate arrangements.
312
What is a perpetuity?
A perpetual annuity, or a set of never-ending level sequential cash flows, with the first cash flow occurring one period from now.
## Footnote
It represents a constant cash flow indefinitely.
313
Define point estimate.
A single numerical estimate of an unknown quantity, such as a population parameter.
## Footnote
It provides a specific value based on sample data.
314
What is a population in statistical terms?
All members of a specified group.
315
Define potential GDP.
The maximum amount of output an economy can sustainably produce without inducing an increase in the inflation rate.
316
What does the power of a test refer to?
The probability of correctly rejecting the null hypothesis when it is false.
317
What are precautionary money balances?
Money held to provide a buffer against unforeseen events that might require money.
318
What is a prepaid expense?
A normal operating expense that has been paid in advance of when it is due.
319
What is present value (PV)?
The present discounted value of future cash flows.
320
What does the principal refer to in finance?
The amount that an issuer agrees to repay the debtholders on the maturity date.
321
What is probability?
A number between 0 and 1 describing the chance that a stated event will occur.
322
Define probability density function.
A function with non-negative values such that probability can be described by areas under the curve graphing the function.
323
What is a probability distribution?
A distribution that specifies the probabilities of a random variable’s possible outcomes.
324
What does a probability function specify?
The probability that the random variable takes on a specific value.
325
What is a production function?
Provides the quantitative link between the levels of output that the economy can produce and the inputs used in the production process.
326
Define productivity.
The amount of output produced by workers during a given period.
327
What is profit?
The return that owners of a company receive for the use of their capital and the assumption of financial risk.
328
What is a profit and loss (P&L) statement?
A financial statement that provides information about a company’s profitability over a stated period.
329
What is a promissory note?
A written promise to pay a certain amount of money on demand.
330
What are property, plant, and equipment?
Tangible assets that are expected to be used for more than one period.
331
What is a quantile?
A value at or below which a stated fraction of the data lies.
332
What is the quantity equation of exchange?
An expression that the amount of money used to purchase all goods and services in an economy is equal to the monetary value of this output.
333
What does the quantity theory of money assert?
Total spending is proportional to the quantity of money.
334
What are quartiles?
Quantiles that divide a distribution into four equal parts.
335
What are quintiles?
Quantiles that divide a distribution into five equal parts.
336
What is a quoted interest rate?
An interest rate that does not account for compounding within the year.
337
Define random variable.
A quantity whose future outcomes are uncertain.
338
What is the range in a dataset?
The difference between the maximum and minimum values.
339
What is raw data?
Data available in their original form as collected.
340
What is the real exchange rate effect?
The effect through which changing price level impacts real exchange rate, which in turn impacts net exports and aggregate demand.
341
What is real GDP?
The value of goods and services produced, measured at base year prices.
342
What is real income?
Income adjusted for the effect of inflation on the purchasing power of money.
343
What is the real interest rate?
Nominal interest rate minus the expected rate of inflation.
344
What is the real risk-free interest rate?
The single-period interest rate for a completely risk-free security if no inflation were expected.
345
Define realizable (settlement) value.
The amount of cash or cash equivalents that could currently be obtained by selling the asset.
346
What is a recession?
A period during which real GDP decreases for at least two successive quarters.
347
What does relative dispersion measure?
The amount of dispersion relative to a reference value or benchmark.
348
Define relative frequency.
The absolute frequency of each unique value of the variable divided by the total number of observations.
349
What are renewable resources?
Resources that can be replenished, such as a forest.
350
What is rent?
Payment for the use of property.
351
What is the reserve requirement?
The requirement for banks to hold reserves in proportion to the size of deposits.
352
What is the revaluation model under IFRS?
The process of valuing long-lived assets at fair value.
353
What is revenue?
The amount charged for the delivery of goods or services in the ordinary activities of a business.
354
What does the Rule of 72 state?
The approximate number of years necessary for an investment to double is 72 divided by the stated interest rate.
355
What does sales generally refer to?
A synonym for revenue, understood to refer to the sale of goods.
356
What is a sample in statistics?
A subset of a population.
357
What is the sample mean?
The sum of the sample observations divided by the sample size.
358
What is sample selection bias?
Bias introduced by systematically excluding some members of the population according to a particular attribute.
359
What is the sample standard deviation?
The positive square root of the sample variance
## Footnote
Sample standard deviation is a measure of the dispersion of a set of values.
360
Define sample statistic.
A quantity computed from or used to describe a sample
## Footnote
Sample statistics are used to estimate population parameters.
361
What is sample variance?
The sum of squared deviations around the mean divided by the degrees of freedom
## Footnote
Sample variance quantifies how much the values in a sample differ from the mean.
362
Describe a scatter plot.
A two-dimensional graphical plot of paired observations of values for the independent and dependent variables in a simple linear regression
## Footnote
Scatter plots help visualize relationships between variables.
363
What is a scatter plot matrix?
A tool for organizing scatter plots between pairs of variables
## Footnote
It makes it easy to inspect all pairwise relationships in one combined visual.
364
What does screening refer to in investments?
The application of a set of criteria to reduce a set of potential investments to a smaller set having certain desired characteristics
## Footnote
Screening helps investors identify suitable investment options.
365
Define second-degree price discrimination.
When the monopolist charges different per-unit prices using the quantity purchased as an indicator of how highly the customer values the product
## Footnote
This strategy allows firms to capture consumer surplus.
366
What is shareholders’ equity?
Total assets minus total liabilities
## Footnote
It represents the ownership interest of shareholders in a company.
367
Explain simple interest.
The interest earned each period on the original investment; interest calculated on the principal only
## Footnote
Simple interest is different from compound interest, which is calculated on the principal plus accrued interest.
368
What is the single-step format in relation to the income statement?
A format that does not subtotal for gross profit (revenue minus cost of goods sold)
## Footnote
This format presents all revenues and expenses in a single step.
369
Define speculative demand for money.
The demand to hold speculative money balances based on the potential opportunities or risks that are inherent in other financial instruments
## Footnote
Also called portfolio demand for money.
370
What are speculative money balances?
Monies held in anticipation that other assets will decline in value
## Footnote
Investors hold speculative balances to take advantage of potential price drops.
371
Describe a stacked bar chart.
An alternative form for presenting the frequency distribution of two categorical variables, where bars representing sub-groups are placed on top of each other
## Footnote
Each sub-section is shown in a different color to represent the contribution of each sub-group.
372
What is stagflation?
The combination of a high inflation rate with a high level of unemployment and a slowdown of the economy
## Footnote
Stagflation presents a challenge for economic policy.
373
Define standard deviation.
The positive square root of the variance; a measure of dispersion in the same units as the original data
## Footnote
Standard deviation indicates how spread out the values in a data set are.
374
What is a standard normal distribution?
The normal density with mean (μ) equal to 0 and standard deviation (σ) equal to 1
## Footnote
It serves as a reference for comparing other normal distributions.
375
What does standardizing involve?
A transformation that involves subtracting the mean and dividing the result by the standard deviation
## Footnote
Standardizing allows for comparison of data from different distributions.
376
Define stated annual interest rate.
A quoted interest rate that does not account for compounding within the year
## Footnote
Also called quoted interest rate.
377
What is the statement of changes in equity?
A financial statement that reconciles the beginning-of-period and end-of-period balance sheet values of shareholders’ equity
## Footnote
It provides information about all factors affecting shareholders’ equity.
378
What does the statement of financial condition present?
An entity’s current financial position by disclosing resources the entity controls (its assets) and the claims on those resources (its liabilities and equity claims)
## Footnote
It is also referred to as the balance sheet.
379
Define the statement of operations.
A financial statement that provides information about a company’s profitability over a stated period of time
## Footnote
This statement is critical for assessing a company's financial performance.
380
What is a statistic?
A summary measure of a sample of observations
## Footnote
Statistics are used to infer characteristics about a population.
381
What does statistically significant mean?
A result indicating that the null hypothesis can be rejected
## Footnote
It often suggests that the corresponding population regression coefficient is different from zero.
382
Define store of wealth.
Goods that depend on the fact that they do not perish physically over time, and on the belief that others would always value the good
## Footnote
Examples include gold and real estate.
383
What is the straight-line method?
A depreciation method that allocates evenly the cost of a long-lived asset less its estimated residual value over the estimated useful life of the asset
## Footnote
This method is commonly used for financial reporting.
384
What is structured data?
Data that are highly organized in a pre-defined manner, usually with repeating patterns
## Footnote
Examples include databases and spreadsheets.
385
Define subjective probability.
A probability drawing on personal or subjective judgment
## Footnote
It contrasts with objective probability, which is based on statistical analysis.
386
What are substitutes in economics?
Two goods or services such that if the price of one increases the demand for the other tends to increase
## Footnote
Examples include butter and margarine.
387
What is survivorship bias?
Relates to the inclusion of only current investment funds in a database
## Footnote
It excludes the returns of funds that have been liquidated.
388
Define sustainable rate of economic growth.
The rate of increase in the economy’s productive capacity or potential GDP
## Footnote
It is crucial for long-term economic stability.
389
What is a tag cloud?
See word cloud
## Footnote
A visual representation of text data where the size of each word indicates its frequency.
390
Define target semideviation.
A measure of downside risk, calculated as the square root of the average of the squared deviations of observations below the target
## Footnote
Also called target downside deviation.
391
What does technology refer to in a business context?
The process a company uses to transform inputs into outputs
## Footnote
It encompasses both physical and digital processes.
392
What are terms of trade?
The ratio of the price of exports to the price of imports
## Footnote
It represents those prices by export and import price indexes, respectively.
393
What is the test of the mean of the differences?
A statistical test for differences based on paired observations drawn from samples that are dependent on each other
## Footnote
It is often used in before-and-after studies.
394
Define third-degree price discrimination.
When the monopolist segregates customers into groups based on demographic or other characteristics and offers different pricing to each group
## Footnote
This allows firms to maximize revenue based on consumer willingness to pay.
395
What is the time value of money?
The principles governing equivalence relationships between cash flows with different dates
## Footnote
It emphasizes that a dollar today is worth more than a dollar in the future.
396
What is time-period bias?
The possibility that when we use a time-series sample, our statistical conclusion may be sensitive to the starting and ending dates of the sample
## Footnote
It can affect the validity of statistical analyses.
397
Define time-series data.
A sequence of observations for a single observational unit of a specific variable collected over time
## Footnote
Data is typically collected at discrete and equally spaced intervals.
398
What is top-down analysis?
An investment selection approach that begins with consideration of macroeconomic conditions and then evaluates markets and industries based upon such conditions
## Footnote
This method contrasts with bottom-up analysis.
399
What is total comprehensive income?
The change in equity during a period resulting from transaction and other events, other than those changes resulting from transactions with owners in their capacity as owners
## Footnote
It includes all changes in equity apart from owner transactions.
400
What is total cost?
The summation of all costs, classified as fixed or variable.
## Footnote
Total cost includes both fixed and variable costs incurred in the production process.
401
Define total factor productivity.
A scale factor that reflects the portion of growth unaccounted for by explicit factor inputs (e.g., capital and labor).
## Footnote
It measures the efficiency with which inputs are transformed into outputs.
402
What is total fixed cost?
The summation of all expenses that do not change as the level of production varies.
## Footnote
Examples include rent and salaries.
403
What constitutes total invested capital?
The sum of market value of common equity, book value of preferred equity, and face value of debt.
## Footnote
It represents the total amount of capital used for the company's operations.
404
Explain the total probability rule.
A rule explaining the unconditional probability of an event in terms of probabilities of the event conditional on mutually exclusive and exhaustive scenarios.
## Footnote
This is often used in probability theory and statistics.
405
What is total variable cost?
The summation of all variable expenses.
## Footnote
Variable costs change with the level of production.
406
Define trade payables.
Amounts that a business owes to its vendors for goods and services that were purchased from them but which have not yet been paid.
## Footnote
Trade payables are considered a current liability.
407
What are trade protection policies?
Government policies that impose restrictions on trade, such as tariffs and quotas.
## Footnote
These measures aim to protect domestic industries.
408
What is a trade surplus?
When the value of exports is greater than the value of imports.
## Footnote
The opposite is a trade deficit.
409
Define trading securities.
A category of debt securities held by a company with the intent to trade them. Also called held-for-trading securities.
## Footnote
These are classified under US GAAP.
410
What are transactions money balances?
Money balances that are held to finance transactions.
## Footnote
This includes cash and deposits that are readily available.
411
What is a Tree-Map?
A graphical tool for displaying categorical data, consisting of a set of colored rectangles to represent distinct groups, with area proportional to the value of the group.
## Footnote
Useful for visualizing hierarchical data.
412
What is a trimmed mean?
A mean computed after excluding a stated small percentage of the lowest and highest observations.
## Footnote
This method reduces the impact of outliers.
413
Define trimodal distribution.
A distribution that has the three most frequently occurring values.
## Footnote
This is a type of multimodal distribution.
414
What is a two-dimensional rectangular array?
A popular form for organizing data for processing by computers, comprised of columns and rows to hold multiple variables and multiple observations.
## Footnote
Also known as a data table.
415
What is a two-sided hypothesis test?
A test in which the null hypothesis is rejected in favor of the alternative hypothesis if evidence indicates that the population parameter is either smaller or larger than a hypothesized value.
## Footnote
The alternative hypothesis is stated as not equal to the hypothesized population parameter.
416
Define Type I error.
The error of rejecting a true null hypothesis; a false positive.
## Footnote
This type of error can lead to incorrect conclusions in hypothesis testing.
417
What is Type II error?
The error of not rejecting a false null hypothesis; false negative.
## Footnote
This means failing to identify a true effect.
418
What does underemployed mean?
A person who has a job but has the qualifications to work a significantly higher-paying job.
## Footnote
This situation reflects inefficiencies in the labor market.
419
Define unearned revenue.
A liability account for money collected for goods or services that have not yet been delivered; payment received in advance.
## Footnote
Also referred to as deferred revenue or deferred income.
420
Who are considered unemployed?
People who are actively seeking employment but are currently without a job.
## Footnote
This definition includes those who are not engaged in part-time work.
421
What is the unemployment rate?
The ratio of unemployed to the labor force.
## Footnote
It is a key indicator of economic health.
422
What is unexpected inflation?
The component of inflation that is a surprise.
## Footnote
This can affect economic decisions and expectations.
423
Define unimodal distribution.
A distribution with a single value that is most frequently occurring.
## Footnote
This is the simplest form of distribution in statistics.
424
What does unit elastic mean?
An elasticity with a magnitude of negative one. Also called unitary elastic.
## Footnote
This indicates that the percentage change in quantity demanded equals the percentage change in price.
425
What is unit labor cost?
The average labor cost to produce one unit of output.
## Footnote
This metric is important for assessing productivity.
426
What is a unit normal distribution?
The normal density with mean (μ) equal to 0 and standard deviation (σ) equal to 1.
## Footnote
It is a standard reference for statistical analysis.
427
What is the units-of-production method?
A depreciation method that allocates the cost of a long-lived asset based on actual usage during the period.
## Footnote
This method reflects the asset's actual wear and tear.
428
Define univariate distribution.
A distribution that specifies the probabilities for a single random variable.
## Footnote
This is the most basic form of distribution analysis.
429
What is unstructured data?
Data that do not follow any conventionally organized forms.
## Footnote
Examples include text, images, and videos.
430
What is up transition probability?
The probability that an asset’s value moves up.
## Footnote
This is a key concept in financial modeling.
431
Who are value investors?
Investors focused on paying a relatively low share price in relation to earnings or assets per share.
## Footnote
They aim to find undervalued stocks.
432
Define variable in economic terms.
A characteristic or quantity that can be measured, counted, or categorized and that is subject to change.
## Footnote
Also referred to as a field, an attribute, or a feature.
433
What are variable costs?
Costs that fluctuate with the level of production and sales.
## Footnote
Examples include raw materials and labor.
434
What is variance?
The expected value of squared deviations from a random variable's expected value.
## Footnote
It measures the dispersion of a set of data points.
435
What does visualization in data mean?
The presentation of data in a pictorial or graphical format for the purpose of increasing understanding and gaining insights into the data.
## Footnote
Common tools include charts, graphs, and infographics.
436
What does voluntarily unemployed mean?
A person voluntarily outside the labor force, such as a jobless worker refusing an available vacancy.
## Footnote
This reflects personal choice rather than economic necessity.
437
What is the wealth effect?
An increase (decrease) in household wealth increases (decreases) consumer spending out of a given level of current income.
## Footnote
This concept is important in understanding consumer behavior.
438
Define weighted mean.
An average in which each observation is weighted by an index of its relative importance.
## Footnote
This can provide a more accurate measure in certain contexts.
439
What is a Winsorized mean?
A mean computed after assigning a stated percentage of the lowest values equal to one specified low value and a stated percentage of the highest values equal to one specified high value.
## Footnote
This method helps reduce the influence of outliers.
440
What is a word cloud?
A visual device for representing textual data, consisting of words extracted from a source of textual data with size proportional to frequency.
## Footnote
Also known as a tag cloud.
441
Define working capital.
The difference between current assets and current liabilities.
## Footnote
It indicates a company's short-term financial health.
442
What is world price?
The price prevailing in the world market.
## Footnote
This can influence domestic prices and trade balances.
