Flashcards in Unit 3 - Economic Factors and Business Information Deck (19):
plant and equipment orders,
average work week for production workers and average weekly claims for unemployment insurance.
manufacturing and trade sales,
and personal income minus transfer payments such as Social Security,
disability benefits and unemployment compensation
bank loans outstanding and bank interest rates.
If a corporation issues mortgage bonds, all of the following would be affected EXCEPT:
A) shareholder's equity.
B) total assets.
C) total liabilities.
D) working capital.
When issued, the corporation receives the net proceeds in cash, increasing current assets (and thus total assets). Simultaneously, the corporation's long-term liabilities increase reflecting the debt (and thus total liabilities). Working capital increases because of the increase in current assets. Shareholder's equity, or net worth, is only affected by the sale of new equity securities or by any profit or loss generated by the corporation.
Under the accrual basis of accounting, unpaid wages that have been earned by employees should be entered as 1) Wages Expense and 2) Wages Payable or Accrued Wages Payable. Wages Expense is an income statement account. Wages Payable is a current liability account that is reported on the balance sheet.
Dividend Payout Ratio
dividends paid per share divided by earnings per share or dividends / net income
net income plus depreciation expense for that year.
Company's net worth
Net worth is all of the company's assets minus its liabilities as found on the balance sheet. Operating income is found on the income statement and is neither an asset nor a liability.
suggest lower levels of taxation and more government spending
Classical Economist (Supply-Side Economics)
lower taxes and less government regulation benefits consumers through a greater supply of goods and services at lower cost
Tools of the Federal Reserve:
- Changes in reserve requirements
- Changes in the discount rate
- Open market operations
Reserve Requirements: by raising the amount of funds commercial banks must leave on deposit with the FED
Discount Rate: Rate the FED charges member banks when lending them money
Open Market Operations: Buys and sells US Treasury securities in the open market under direction of the FOMC
- a change from negative to positive GDP growth rate
- a high unemployment rate, increasing use of overtime and temp workers
- spending on consumer durable goods and housing
- a moderate or decreasing inflation rate
Real Rate of Interest
nominal rate of interest minus the expected rate of inflation
the most preferential interest rate on corporate loans at large US money centers
Profits not paid out in dividends yet - when cash dividend is declared, Retained earnings are lowered and current liabilities are increased
current assets - current liabilities
tangible assets - liabilities - par value of preferred / shares of common stock outstanding
(total portfolio return - risk free rate) - (portfolio beta x (market return - risk free rate))