Understanding Financial Concepts and Investment Strategies
What is Unsystematic Risk and How Can It Be Eliminated?
Unsystematic risk, also known as stock-specific risk, affects a single stock price but not the entire market. It can be eliminated through diversification by purchasing various securities or equities. For example, Apple reporting a bad quarter would be considered unsystematic risk.
How Does Beta Differ From Standard Deviation as a Measure of Risk?
Beta (Systematic Risk)
Measures the risk of the market as a whole and total volatility.
Standard Deviation
Read MoreInternational Trade Theories and Policies: A Comprehensive Guide
International Trade and Globalization
Outsourcing and Offshoring
Outsourcing: The contracting out of a business function, commonly one previously performed in-house, to an external provider.
Offshoring: The relocation by a company of a business process from one country to another, typically an operational process, such as manufacturing or supporting processes.
Multilateralism and Regionalism
Multilateralism: Exemplified by the World Trade Organization (WTO), multilateralism involves a group of countries
Read MoreBusiness Objectives and Growth Strategies
Benefits and Cons of Expansion
Benefits:
- Benefit from economies of scale leading to lower average costs
- Have more access to sources of finance
- Can afford to diversify
- Can afford to carry out research and development (R&D)
- Have greater status and power
- Can afford specialist managers
- Reduce risk of takeover
Cons:
- Become too big and difficult to control, leading to inefficiency
- PLCs suffer from a divorce of ownership and control between shareholders and managers
- Greater risks as more capital is invested
- Need
Principles of Microeconomics: Chapters 6, 10, 11, 14, 15 & 16 Summary
Chapter 10: Public Goods, Common Resources, and Merit Goods
Common Resources
Common resources are rival but not excludable. People tend to use common resources excessively. Governments try to limit their use.
Merit Goods
Merit goods are provided by the public sector but are either over or under consumed.
Chapter 11: Externalities
When one party’s actions affect another, it’s called an externality.
Negative Externalities
Negative externalities cause the socially optimal quantity in a market to be less than
Read MoreCurrent Assets and Bank Reconciliation
Current Assets:
Current Assets include Cash, banks and temporary investments, clients, petty cash, and inventory.
Bank Reconciliation
1. When the bank balance does not match the company’s balance:
a. Deposits in transit: These are deposits that were made after the cutoff date of the statement or that are not yet reflected by the bank due to processing time.
b. Checks receivable: These are checks received by the company that have not yet been cleared by the bank.
c. Bank errors: These include charges or
Read MoreMacroeconomics Principles
Measuring a Nation’s Income
Microeconomics
The study of how individual households and firms make decisions and how they interact with one another in markets.
Macroeconomics
The study of the economy as a whole. Its goal is to explain the economic changes that affect many households, firms, and markets at once. It answers questions like:
- What determines the average income?
- Why do some prices rise rapidly in some time periods?
- Why do production and employment expand?
Gross Domestic Product (GDP)
A measure of
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