Notes, summaries, assignments, exams, and problems for Economy

The Model of Valuation of Financial Assets by the Arbitrage Pricing Theory

Stephen Ross developed this theory in 1976. It is an equilibrium model for asset valuation. Its central idea is the expected return on an asset must be a linear function of its systematic risk. The APT considers that the only risk that the market is willing to remunerate is the systematic one, since the rest of the risk can be eliminated via diversification. According to this model, the systematic risk is the fundamental explanatory factor of the performance of the profitability of financial assets, although that is not measured only by the beta coefficient of the profitability of an individual asset with respect to the profitability of the market portfolio, but by a... Continue reading "Understanding the Arbitrage Pricing Theory for Financial Asset Valuation" »

Understanding Credit, Debt, and Insurance

Credit Rule of Thumb: Product should outlive its payment; don't use credit if the purchase is beyond earnings capability.

Factors That Influence Credit Score:

• Billing history (35%)
• Length of bill payment history (15%)
• Amount owed (30%)
• New credit lines (10%)
• Types of credit (10%)

FICO Score:

300-850; above 800 is great; below 620 is not good (high risk); 40% of Americans have a score under 600.

Credit Bureaus:

TransUnion, Equifax, Experian (each has its own credit score).

Types of Entries in a Credit Report:

• Identifying Info
• Public Records (bankruptcies, civil judgments, and tax liens)
• Inquiries
  • Soft Inquiries (i.e., a credit

Understanding the Marketing Environment

Actors and Forces Shaping Marketing Success

A company's marketing environment encompasses the actors and forces beyond marketing that influence marketing management's capacity to cultivate and sustain successful relationships with target consumers. Companies must vigilantly monitor and adapt to the ever-changing environment. The marketing environment comprises two key components:

• Microenvironment: This includes actors close to the company that impact its ability to engage and serve customers effectively.
• Macroenvironment: This consists of broader societal forces that shape the microenvironment, including demographic, economic, natural, technological, political, and cultural factors.

The marketing environment... Continue reading "Understanding Marketing Environment and Consumer Behavior" »

Supply Defined

Supply: The amount of goods and services producers are willing to sell at various prices at a particular time.

Market Supply

Market supply: The total output of all the individual companies within a market.

Law of Variable Proportions

Law of variable proportions: Highlights the relationship between the input of a factor of production and the supply of a good or service.

Production Schedule

Production schedule: Shows how the quantity supplied changes as the number of workers increases.

Stages of Production

Stage of production: Is based on a change in marginal product, including diminishing returns.

Elasticity of Supply

Elasticity of supply: Is measured by how quickly the quantity supplied changes as a result of a change in price.

Understanding

Chapter 7: Business Accounting

What are Accounts and Why are They Necessary?

Accounts are financial records of a firm's transactions that are kept up to date by accountants, who are qualified professionals responsible for keeping accurate accounts and producing the final accounts.

Every end of the year, final accounts must be produced, which give details of:

• Profits and losses made
• Current value of the business
• Other financial results

Limited companies are bound by law to publish these accounts, but not other businesses.

Financial Documents Involved in Buying and Selling

Accountants use various documents that are used for buying and selling over the year for their final accounts. They can help the accountant to:

• Keep records of what the firm bought and

Economic Boom and the Great Depression

A period of general prosperity in the 1920s ended with the collapse of the Great Depression in the 1930s.

Key Factors and Events

• Bull Market: A stock market in which stock prices were steadily increasing. In the bull market of the 1920s, stock prices became vastly inflated.
• Buying on Margin: Purchasers were able to buy stocks on margin, putting only 10% down and borrowing 90%.
• Speculation Boom: Refers to the practice of buying real estate, stocks, or anything else to sell later at a profit.
• Black Tuesday: The market crash on October 29th.
• Smoot-Hawley Tariff: Reduced international trade.

Key Figures and Groups

• Herbert Hoover: Republican who believed in Laissez-faire economics. He did not think the federal government

Benefits of eMarketing Over Traditional Marketing

Demographics and Targeting

Internet users represent a desirable demographic for marketers, often possessing greater buying power and skewing towards the middle class. The internet's structure allows users to organize into focused groups, providing marketers easy access to niche markets. This targeted approach maximizes the effectiveness of marketing messages.

Adaptivity and Closed-Loop Marketing

Closed-loop marketing relies on constant measurement and analysis of marketing campaign results. Real-time analysis of responses allows for continuous adjustments, minimizing wasted advertising spend. This dynamic approach, combined with the internet's immediacy, allows for maximum marketing efficiency... Continue reading "The Power of eMarketing" »

European Union Energy Market Regulations

1st package- Directives 96.92 concern common rules for the internal market in electricity and 98.30 internal market of natural gas. Liberalization was to be progressive, applying gradually to different categories of consumers. Introduce a partial opening of national markets to competition, both required liberalization of certain segments of their electric and gas markets to enlarge. 2nd- 2003.55-54 liberalization process took place at different speeds in different member states aiming at the creation of an internal market. Required national gas and electric markets to be liberalized for large consumers by 2004 and 2007, respectively. 3rd- Directive on electric, on gas, security of supply electric, regulate... Continue reading "European Union Energy and Financial Market Regulations" »

Charts and Graphs

• Pie chart
• Line graph
• Bar chart
• Table
• Flow chart
• Organigram

Types of Lines in Graphs

• Solid line
• Curve
• Fluctuating line
• Dotted line (puntos)
• Axis
• Undulating line
• Broken line

Describing Trends: Increase

• To increase = raise (aumentar)
• Rise = go up (subir)
• Grow
• Boom / soar / climb (remontar)
• Jump = skyrocket (dispararse)
• To reach a peak (pico)

Describing Trends: Decrease

• To decrease
• Fall
• Plunge (picado)
• Drop
• Go down
• Decline
• Collapse

Describing Trends: Stability

• To remain stable
• Stay constant
• Stabilize

Describing Trends: Leveling Off

• To level off / out = flatten out (nivelar)
• Stop or start falling / rising

Trend Modifiers: Size

• Dramatically
• Vastly
• Hugely
• Significantly
• Considerably
• Slightly (leve)

Trend Modifiers: Speed

• Substantially
• Rapidly
• Suddenly
• Gradually

Incoterms

• EXW: Ex

Parent > Subsidiaries: Gain

Proceeds from Sale (Cost)

Carrying Amount of Plant Sold (Capital Proceed)

Plant (Profit)

DTA (of Profit)

Income Tax Expense (of Profit)

Accumulated Depreciation (of DTA)

Depreciation Expense (of DTA)

Income Tax Expense (of Dep)

DTA (of Dep)

Years After Sale

Retained Earnings (Profit x 0.70)

Plant (Profit x 0.70)

Subsidiaries > Parent: Gain

Plant (Profit)

Proceeds from Sale (Cost)

Carrying Amount of Plant Sold (Capital Proceed)

Income Tax Expense (of Profit)

DTL (of Profit)

Depreciation Expense (of DTA)

Accumulated Depreciation (of DTA)

DTL (of Dep)

Income Tax Expense (of Dep)