Fed Policy: Why Do Rates Hikes Hurt Stock Markets? On December 18th, the Federal Reserve announced a rate hike of 25 basis points. For the U.S. economy, this is the fourth increase of 2018 and it brings the Fed funds rate to a range of 2.25% to 2.5%. The move came despite strong opposition from … Continue reading Fed Policy: Why Do Rates Hikes Hurt Stock Markets?
Consumer Economics: What is the Market Absorption Rate? In school, some students avoid economics because they might feel as though the lessons have little-or-no application in the real world. Unfortunately, this is usually not actually the case. Economics concepts play many roles in our daily lives – and if we can understand how these concepts … Continue reading Consumer Economics: What is the Market Absorption Rate?
Opportunity cost sounds like a dry topic, but it is a concept that can be applied to many aspects of daily life. I recently found a quote from a famous author and realized that it applies to life, business, economics, opportunity cost, and just about every other aspect of our waking moments. “For every opportunity … Continue reading What is Opportunity Cost?
Five Cash Flow Analysis Tools This post continues a discussion about cash flow, net present value, interest rates and NPV, and IRR, which you can read by clicking on the specific links. This post deals with the topic of using these tools for conduction cash flow analysis. The methods of evaluating the opportunity of an … Continue reading Top Five Analyses to Evaluate Cash Flow
Continuing a discussion on the introductory article on financial terms and explanations, this article discussion common share dilution. Firstly, some background for EPS, let’s use a firm’s Net Income (NI), in this case on a per-share basis. The formula to derive this figure would be: Earnings per share (EPS) = NI / # of common … Continue reading Dilution and Earnings Per Share: Financial Terms and Explanations
Definitions on Income Statements Here is a brief synopsis of key financial terms for introductory finance majors and business folks regarding income statements and balance sheets. Firstly, defining some terms: Income Statement : A statement measuring a firm’s financial performance over a period of time. Generally, it records revenues and expenses to derive income over … Continue reading Financial Statements – Terms and Explanations
Calculating and Interpreting Internal Rate of Return (IRR) This post continues a discussion about cash flow, net present value, and interest rates and NPV, which you can read by clicking on the specific links. This post deals with the topic of internal rate of return. IRR is an indicator of the efficiency or quality of … Continue reading Internal Rate of Return, Cash Flow, and NPV
We started a discussion on the importance and description of cash flow for the operating firm. You can find that post here: cash flow intro. Moving forward now to the topic of net present value of cash flow (or NPV). An investment project generally should be undertaken if benefits outweigh costs. In order to compare … Continue reading Determining Net Present Value of Cash Flow
Net Present Value and Sensitivity to Interest Rates This post continues a discussion about cash flow and net present value which you can read by clicking on the specific links. This post deals with a major factor on NPV which is the fluctuating interest rate. This variable can change outlook in a hurry. The NPV … Continue reading NPV and Interest Rates for Discount Purposes
Cash flow analysis is one of the most important pieces of financial information for a firm. Before approving a loan banks analyze the cash flow of firms to decide whether the companies have the ability to repay a loan. As well, the cash flow analysis before an investment project is crucial in order to decide … Continue reading Project Evaluation – Cash Flow Analysis Intro