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Macro 8.pdf
- 4. Quiz Master
- 5. Chapter 10 Stock Market and Personal Finance
- 7. What is a Market? Where buyers and sellers can discover value
- 9. $100 $0 $50 $75 $25 No Overlapping Value Range Seller Buyer No Price Discovery
- 10. Private information becomes public information when people act.
- 11. money put at risk over time money is time savers and borrowers (1+r)n insurance limited liability corporations double entry accounting Financial Capital
- 14. Dow Jones Industrial Average DJIA 30 leading companies
- 15. S&P 500 Weighted by size Better indicator NASDAQ 3,000+ Stocks smaller and high tech National Association of Securities Dealers Automated Quotations
- 17. Investment GDP: purchases of new capital Stocks and Bonds
- 18. Firm An organization that organizes capitals
- 21. Proprietorship one owner easy to create one tax unlimited liability hard to raise money ends with death
- 22. Partnership two or more owners easy to create combine talents all are liable disagreements ends with death
- 23. Corporation one to many owners limited liability raise financial capital does not die with shareholders harder to create more regulation double taxation
- 24. Number Revenues Proprietorships 70% 4% Partnerships 10% 16% Corporations 20% 80%
- 25. Dividends portion of profits paid to shareholders
- 26. Raising Money Borrow Retained Earnings Sell Ownership Shares
- 28. Income Statement Revenue - Expenses = Net Income What happened between two dates?
- 29. Balance Sheet What I own What is the status on a speci fi c date? What I owe What I am worth = Assets Liabilities Net Worth Must balance
- 30. Valuation Stock Price x Number of Shares $50 a share 1,000,000 shares $50,000,000 value
- 31. Valuation Share Price: $145 Share Outstanding: 16 billion Value ? $2.32 trillion
- 32. wolframalpha.com
- 33. Accounting Pro fi t Explicit Costs Explicit + Implicit Costs Economic Pro fi t
- 35. Finance Time - t or n Risk - r or i
- 36. Foundation Finance Formula (1 + r ) n r = risk rate n = time periods
- 37. number of periods Value r = 5% r = 10% r = 15% Value = (1 + r)n r = rate n = number of periods
- 38. number of periods Value r = 15% Value = (1 + r)n r = rate n = number of periods Future Value Present Value
- 39. FutureValue? Future Value = Amount Today x Factor Factor is the Growth Formula (1 + r ) n r = rate n = time periods
- 40. FutureValue? (1 + r ) n r = 10% or 0.10 n = 5 years (1 + 0.10)5 (1.10)5 1.61
- 41. FutureValue? Future Value = Amount Today x Factor $161 = $100 x 1.61 Future Value is compounding Future Value is multiplying
- 42. PresentValue? Present Value = Future Amount ÷ Factor Present Value = $500 ÷ 1.61 $310.56 = $500 ÷ 1.61 Present Value is discounting Present Value is dividing
- 43. Finance Unknown - Present Value or Future Value? Must know rate and number of periods Compute Factor with formula (1+r)n If FV multiply If PV divide
- 44. Present Future x Factor ? ÷ Factor ? Factor Formula = (1 + r ) n