
Friday, December 25, 2009
Finance and its importance

World Financial Crisis Not Over

I think that there is a growing gap between what is the asset prices and the real economy
"I see an economy where the consumers are shopped out, debt burdened, they have to cut back consumption and save more."The financial system is damaged... and for the corporate sector I don't see a lot of capital spending because there is a glut of capacity."Mr Roubini believes US house prices have further to fall, straining America's fragile recovery.Property prices have already declined sharply. According to the National Association of Realtors, the national median has dropped almost 13% from a year ago to $177,700 (£110,100). Many believe the crises in the residential market could spread to the commercial real estate market causing more headaches for the banks. So where does the "froth" in the markets come from?Mr Roubini - like many other economists - believes it is engineered by the Federal Reserve and the government which has been pumping cash into the economy to dampen the pain of the recession"There is a wall of liquidity chasing assets," he said. "But I think that there is a growing gap between what is the asset prices and the real economy."Although he thinks there will be a correction, he believes some of the mistakes of the past can be avoided if reforms are implemented .
Thursday, December 3, 2009
Breakeven analysis

contribution (p.u) = selling price (p.u) - variable cost (p.u)
break even point (for sales) = fixed cost / contribution (pu) * sp (pu)
Wednesday, December 2, 2009
Cash flow statement

Investment

Investment comes with the risk of the loss of the principal sum. The investment that has not been thoroughly analyzed can be highly risky with respect to the investment owner because the possibility of losing money is not within the owner's control. The difference between speculation and investment can be subtle. It depends on the investment owner's mind whether the purpose is for lending resource to someone else for economic purpose or not.
In the case of investment, rather than store the good produced or its money equivalent, the investor chooses to use that good either to create a durable consumer or producer good, or to lend the original saved good to another in exchange for either interest or a share of the profits. In the first case, the individual creates durable consumer goods, hoping the services from the good will make his life better. In the second, the individual becomes an entrepreneur using the resource to produce goods and services for others in the hope of a profitable sale. The third case describes a lender, and the fourth describes an investor in a share of the business. In each case, the consumer obtains a durable asset or investment, and accounts for that asset by recording an equivalent liability. As time passes, and both prices and interest rates change, the value of the asset and liability also change.
The term "investment" is used differently in economics and in finance. Economists refer to a real investment (such as a machine or a house), while financial economists refer to a financial asset, such as money that is put into a bank or the market, which may then be used to buy a real asset.
Savings Account

All savings accounts offer itemized lists of all financial transactions, traditionally through a passbook, but also through a bank statement.
Financial ratio

Ratios may be expressed as a decimal value, such as 0.10, or given as an equivalent percent value, such as 10%. Some ratios are usually quoted as percentages, especially ratios that are usually or always less than 1, such as earnings yield, while others are usually quoted as decimal numbers, especially ratios that are usually more than 1, such as P/E ratio; these latter are also called multiples. Given any ratio, one can take its reciprocal; if the ratio was above 1, the reciprocal will be below 1, and conversely. The reciprocal expresses the same information, but may be more understandable: for instance, the earnings yield can be compared with bond yields, while the P/E ratio cannot be: for example, a P/E ratio of 20 corresponds to an earnings yield of 5%.
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