Economic Philosophers & Vocabulary

Economic Philosophers

• Adam Smith advocated for the "invisible hand"
• The "invisible hand" describes how a free market, without government intervention, allows individuals to pursue their own goals, ultimately benefiting the economy
• John Keynes was an economist
• Keynes believed government intervention is necessary to stimulate the economy during downturns through deficit spending

Vocabulary

• GDP (Gross Domestic Product) measures a country's economic health and activity
• Revenue is the total money received from sales, services, or taxes in a period
• Profit is what a business keeps after covering all costs
• Market capitalization is a company's total value, calculated by multiplying the current share price by the total outstanding shares: Market Cap = Share Price × Total Shares Outstanding
• Stocks represent ownership shares in a company, which makes the purchaser a shareholder
• Bonds are loans to companies or governments in exchange for regular interest payments and the return of the principal; they can be bought and sold
• A stock index tracks the performance of a group of stocks; the S&P 500 includes 500 of the largest U.S. companies
• A 10K report is an audited annual report providing a comprehensive overview of a company’s financial health
• A 10Q report is an unaudited quarterly report with more frequent financial updates
• Balance sheets show what a company OWNS, including assets, liabilities, and shareholders' equity at a specific point in time
• Income statements show a company's revenues, expenses, and profits over a period
• Cash flow statements show the inflow and outflow of cash within a company over a specific period
• Monetary policy involves the Federal Reserve changing interest rates to control the economy

SEC and Financial Analysts

• The SEC (Securities and Exchange Commission) regulates financial markets for transparency and investor protection
• There are three types of Financial Analysts: investment, corporate finance and risk
• Investment analysts study stocks and bonds
• Corporate finance analysts manage money and budgets within companies
• Risk analysts focus on identifying and managing financial risks

Securities, EPS, P/E Ratio and Company Guidance

• Securities are financial assets like stocks (ownership) and bonds (loans)
• EPS (Earnings Per Share) measures a company's profit per share, calculated by dividing total profit by the number of shares
• The P/E (Price-to-Earnings) ratio compares a company's share price to earnings per share; a high P/E may mean high growth expectations, while a low P/E may indicate undervaluation
• Company guidance is when companies share expectations for future financial results, typically given at the end of the year or quarter

The 2008 Recession

• Two factors that led to the 2008 recession were the housing bubble and risky mortgages
• The housing bubble was caused by the belief that home prices would keep rising, leading to risky buying
• Risky mortgages involved banks giving loans to people who couldn't afford them, leading to defaults

ULTA

• Kecia Steelman is the CEO
• Erik Lopez is the Chief Supply Chain Officer