Economics & Financial Reporting
Series 65 Section I: business cycles, economic indicators, reading financial statements, ratios, and how the exam classifies risk.
22 terms in this unit.
Business Cycle
The recurring pattern of expansion, peak, contraction, and trough.
Leading, Coincident & Lagging Indicators
Data series that move before, with, or after the business cycle.
Deflation vs. Disinflation
Falling prices versus a slowing rate of price increases.
Currency Valuation & Exchange Rates
What one currency buys of another, and who wins when it moves.
Sovereign Debt
Bonds issued by a national government.
Trade Deficit
A country imports more goods and services than it exports.
Income Statement
Revenue, expenses, and profit over a period of time.
Balance Sheet
Assets, liabilities, and equity at a single point in time.
Statement of Cash Flows
Where cash came from and where it went: operating, investing, financing.
Auditor's Opinion (Qualified vs. Unqualified)
The auditor's verdict on whether the financial statements are fairly presented.
Corporate SEC Filings (10-K, 10-Q, 8-K)
The annual, quarterly, and material-event reports public companies file.
Cash vs. Accrual Accounting
Recording transactions when cash moves versus when they are earned or incurred.
Current Ratio
Current assets divided by current liabilities - short-term liquidity.
Quick Ratio (Acid-Test Ratio)
Current assets minus inventory, divided by current liabilities.
Price-to-Book (P/B) Ratio
Share price divided by book value per share.
Mean, Median, Mode & Range
The four basic ways to summarize a set of numbers.
Opportunity Cost
The return given up by choosing one use of money over the next best.
Liquidation Priority (Capital Structure)
Who gets paid first when a company is liquidated.
Future Value & the Rule of 72
What money grows to at a given rate; 72 / rate = years to double.
Systematic vs. Unsystematic Risk (Exam Classification)
How the NASAA outline sorts the named types of risk.
Reinvestment Risk
The risk that coupons and principal must be reinvested at lower rates.
Currency Risk (Exchange Rate Risk)
The risk that exchange rate moves reduce the value of foreign investments.