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What is a Capital Account?
The Capital Account in a company is where paid-in capital, retained earnings, and treasury stock is accounted for. In macroeconomics, the Capital Account shows the national net change in ownership of assets. In accounting and bookkeeping, the Capital Account tracks the amount of Capital on hand at a company, which is the sum of the paid-in capital, the retained earnings, and the value of the treasury stock. Paid-in capital is the money collected from investors during an IPO or other stock issue. Continue reading...
What kind of hedge funds exist?
Hedge funds can employ many strategies and focus on virtually any kind of investing style or market. They also have the flexibility to change their strategy as they see fit. Morningstar and other services will group hedge funds into categories and provide benchmarks based on their average performances. As of 2016, there are over 12,000 hedge funds, and over half of those are required to report to the SEC. Continue reading...
What is Capital Accumulation?
Capital Accumulation is the act of acquiring more assets which will generate more profits or other benefits to the company or economy. Capital accumulation is sometimes discussed in relation to rumors that a company is preparing to acquire another company. This could be the case for one or two reasons. One would be that the company has actually been buying up shares in the target company for some time. Continue reading...
What is the Home Market Effect?
The Home Market Effect is a term used in macroeconomic theory describing a concentration of an industry’s production facilities being concentrated in the larger national economies where its primary consumers exist. The home market effect (HME) is a theoretical term used in trade theory economics. The domestic economy in this case has an effect on the international prices and economy related to these goods. Continue reading...
What is GDP?
Gross Domestic Product (GDP) measures the production of all industries within a country, to get a picture of how the national economy is doing. GDP is one of the most important number to economists, and it is calculated every quarter. Growth for the current quarter compared to the previous quarter is a good sign. Two consecutive quarters of decline in GDP are an indication of a recession, but it is not the only metric used to make that call. Continue reading...
What Is Microeconomics?
Microeconomics, often referred to as the study of the "small picture" in economics, is a branch of the discipline that delves into the nitty-gritty of individual and firm behavior in the market. This field is instrumental in deciphering the intricate web of choices, decisions, and incentives that guide our resource allocation, production, exchange, and consumption. At its core, microeconomics seeks to illuminate the consequences of decisions made by individuals and firms in response to changes in various factors, including incentives, prices, resources, and production methods. Continue reading...
What Is Economics?
Economics is a branch of social science that plays a pivotal role in understanding how societies allocate their resources to meet their diverse needs and desires. This complex field encompasses a wide range of topics, from individual decision-making to global economic systems. Let's delve into the world of economics by exploring its various dimensions, types, indicators, and systems. At its core, economics revolves around the study of how societies, organizations, and individuals manage limited resources to fulfill their unlimited wants and needs. It addresses the allocation of resources for the production, distribution, and consumption of goods and services. Continue reading...
What is bottom-up investing?
Bottom-up investing is the practice of looking for solid companies and investing in them as opposed to investing in indexes and basing that decision on broader market/macro conditions. In bottom-up investing, an investor or advisor takes the stance that the best investment portfolio will not be a broad allocation across market indices, but that an optimal portfolio should be built from the bottom-up with the stocks and bonds of individual companies whose fundamentals and individual potential have been analyzed. Continue reading...
What Are the Different Types of Economies and How Do They Influence Global Dynamics?
Economies, the lifeblood of societies, are intricate systems of production, consumption, and exchange. But what shapes these vast networks? This guide delves into the essence of economies, from their foundational principles to the indicators that gauge their health. Explore the spectrum from market-based to command-based economies, and understand the nuances of macroeconomics versus microeconomics. Discover pivotal indicators like GDP, unemployment, and inflation, and trace the historical arc of economic systems, from primitive barter to modern capitalism. With insights into economic theories, the role of economists, and the emerging field of behavioral economics, this comprehensive exploration offers a panoramic view of the forces that shape our economic landscapes. Whether you're a student, professional, or curious reader, this guide illuminates the multifaceted world of economies, empowering you with knowledge to navigate the complex terrain of global finance. Continue reading...
What is Demand?
Demand is a measure of consumer’s desire to purchase goods and services. High demand for a product typically puts upward pressure on price, and vice versa. Demand is a key metric in reading price trends and a company’s ability to set price point. Weaker demand on a global macro level implies that countries are investing less, developing less, and therefore focused less on growth. Sustained downtrends in demand will generally lead to recessionary conditions. Often times, central banks will try to step-in and stoke demand by lowering the cost of money (interest rates). Continue reading...
What Does Opportunity Cost Mean?
Opportunity cost is a fundamental concept in economics and decision-making. It refers to the potential loss of choosing one option over another and helps individuals and organizations make informed decisions by considering the potential benefits and costs of each option. Opportunity cost also plays a significant role in macroeconomics, trade, and determining the price of goods and services. Understanding opportunity cost is essential for making trade-offs, allocating resources, and achieving long-term success. Continue reading...
What Is Interest and How Does It Impact Financial Transactions?
Interest, often seen as the cost of borrowing, is a cornerstone in the financial world. But what truly lies behind this percentage? From the ancient perceptions of interest to its modern-day complexities, this guide delves deep into the essence of borrowing costs. Discover the dynamic interplay between simple and compound interest, and how they shape financial decisions. Learn about the profound impact of interest rates on the broader economy, from invigorating growth to aligning with fiscal goals. Whether you're borrowing for a home, investing for the future, or simply curious about the numbers on your bank statement, understanding interest is crucial. As we navigate an ever-evolving financial landscape, interest remains at the heart of economic interactions. Equip yourself with the knowledge to make informed decisions in a world where every percentage point matters. Continue reading...
What Is an Industry?
An industry is a classification that refers to a group of companies related by their primary business activities. In this article, we will explore the definition of an industry, its importance, and how it fits into the broader economic landscape. An industry is essentially a grouping of companies that share common characteristics or are engaged in similar business activities. These commonalities can range from the products they manufacture or sell to the services they provide. The classification of companies into industries is a systematic way to categorize businesses, allowing for better analysis, comparison, and understanding of their operations. Continue reading...
What is foreign aid?
Wealthy countries and non-government organizations frequently donate or lend resources to help the population of a country in dire economic need. This can come in the form of educational assistance, funds, materials, construction, food, medicine, and so on. On a macroeconomic scale, foreign aid constitutes one of the major forms of asset transfer between different parts of the world. Governments, charitable organizations, and NGOs donate or lend resources to countries that cannot supply their own needs effectively. Aid can be given altruistically, that is, just for the sake of doing good deeds, or it can be used as a tool for influence or personal gain, which is common. Continue reading...
What are Materials Stocks?
Companies in the Materials sector have business interests in raw materials, such as steel, aluminum, and iron ore. The companies are generally involved in the discovery, processing, or sale of these raw materials. Materials companies rely on economic growth and infrastructure build-outs to thrive, so tend to perform better early in economic expansion cycles. Materials companies are categorically ‘cyclical’ stocks. Continue reading...
What is an Account Balance?
An account balance is the amount either credited to or owed on a ledger assigned to a particular entity or line-item. The balance of an account is the net debit or credit assigned to it after all transactions have been documented for a current period. Transactions might be deposits, withdrawals, interest credited, fees, or other activity. The account in question could be a personal savings or checking account, or a ledger account at a business or institution, or another form of account, such as the macroeconomic concept of current national account. Accounts are said to be “in the red” when there is a net debit (negative) amount, and “in the black” when there is a net positive balance (net credit). Continue reading...
Best Picks in Oil Field Services
The oilfield services/equipment industry is a critical component of the energy sector, playing an indispensable role in the exploration, extraction, and maintenance of oil and natural gas resources. This article delves into the top companies in this sector, particularly focusing on Schlumberger Limited (SLB) and Halliburton Company (HAL), exploring their market position, financial health, and future prospects. Continue reading...
How Has Gold's Value Fluctuated Through History and What Does It Mean for Today's Investor?
From ancient civilizations to modern trading floors, gold's value has seen dramatic shifts. But what drives its price, and how has it maintained its allure through millennia? Dive into an exploration of gold's price history, its investment potential, and the lessons it offers for today's investor. Continue reading...
What is the gordon growth model?
The Gordon Growth Model is also known as the dividend discount model (DDM). It is a model for pricing a stock that was developed by professor Myron J. Gordon in the 1960s. The model uses a stock’s present value relative to the present value of its future dividends to provide an intrinsic value for the stock. The model is a shaky one at best, especially given that companies these days often change the course of dividend payments, and many (particularly in the tech world) don’t pay any dividends at all. Continue reading...
What is negative correlation, and how is it different from positive correlation?
Venture into the intricate realm of negative correlation, a cornerstone of financial strategy. This deep dive unravels the mechanics behind this statistical phenomenon, its role in portfolio diversification, and its broader implications in macroeconomics. By understanding the dance between inversely related variables, investors can craft resilient portfolios and navigate market turbulence. Whether you're a seasoned financial expert or a budding investor, this exploration offers valuable insights into risk management and the art of diversification. Equip yourself with the knowledge to harness the power of negative correlation and steer your investments towards success. Continue reading...