Microeconomics

1
Micro-economics

• Corporate News
• April 7, 2001

2
Financial Documents

• Balance sheet
• Income statement
• Cash flow statement

3
Balance Sheet

• A snapshot of a companys financial strength as
  of a given point in time.
• Lists a companys assets and the portions of
  these assets financed by liabilities and owners
  equity.
• Usefulness how a company finances its operation
  and how profitable it is.

4
Income Statement

• Shows a companys revenues, costs of doing
  business and net profits over a specified period
  of time.
• Tells you how much money the company makes.

5
Cash Flows Statement

• How much cash a company generated over the period
  covered by the income statement and where it
  went.
• Cash is King What good are profits if you
  cant get cash out of them?

6
Health of a businessCheck out these ratios

• Current liquidity ratio
  current assets/current liabilities
• Quick asset ratio, or acid test (total assets
  - inventories)/current liabilities
• Net profit ratio net profit/net sales
  

7
Is the company a proper investment?

• Price/earnings ratio Share price/earnings
• low P/E stocks tend to be mature companies with
  slow growth
• Dividend payout ratio dividends/income
• mature companies have higher payout
• EBITDA - Earnings before interest, tax,
  depreciation and amortization

8
FORWARD RATE

• An exchange rate for forward delivery of foreign
  currency.
• Forward points are added or subtracted to the
  spot exchange rate to arrive at the outright
  price at which currency can be bought or sold for
  delivery longer than two business days.

9
Premium vs Discount

• Premium if the interest rate of the currency is
  lower than the domestic currency.
• Discount if the interest rate of the currency
  exceeds that of the domestic currency.

10
What moves forward rate

• Spot rate.
• Domestic interest rate
• Foreign interest rate
• Time horizon