# on 10-Oct-2017 (Tue)

#### Flashcard 1431547546892

Tags
#cfa #cfa-level-1 #economics #microeconomics #reading-14-demand-and-supply-analysis-consumer-demand #section-3-utility-theory #study-session-4
Question
If we ask a consumer to assign a number to each bundle of course, each of these possible bundles has a specific [...]
quantity of each of the goods and services.

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If we ask a consumer to assign a number to each bundle of course, each of these possible bundles has a specific quantity of each of the goods and services.

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3. UTILITY THEORY: MODELING PREFERENCES AND TASTES
them, he must assign the same number to both. Other than that, he is free to begin with any number he wants for the first bundle he considers. In this way, he is simply ordering the bundles according to his preferences over them. <span>Of course, each of these possible bundles has a specific quantity of each of the goods and services. So, we have two sets of numbers. One set consists of the pieces of paper he has laid on the bundles. The other is the set of numerical quantities of the goods that are contained in each of the respective bundles. Under “reasonable assumptions” (the definition of which is not necessary for us to delve into at this level), it is possible to come up with a rule that translates the quantities of goo

#### Flashcard 1439680826636

Tags
#cfa-level-1 #corporate-finance #reading-36-cost-of-capital #study-session-11
Question
By investing long-term, the company is produces value today. But, how much value?
The answer depends on the investments’ expected future cash flows and on the cost of the funds.

Borrowing is not costless. Neither is using owners’ funds.

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The company acquires the capital or funds necessary to make such investments by borrowing or using funds from owners. By applying this capital to investments with long-term benefits, the company is producing value today. But, how much value? The answer depends not only on the investments’ expected future cash flows but also on the cost of the funds. Borrowing is not costless. Neither is using owners’ funds.</b

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1. INTRODUCTION
A company grows by making investments that are expected to increase revenues and profits. The company acquires the capital or funds necessary to make such investments by borrowing or using funds from owners. By applying this capital to investments with long-term benefits, the company is producing value today. But, how much value? The answer depends not only on the investments’ expected future cash flows but also on the cost of the funds. Borrowing is not costless. Neither is using owners’ funds. The cost of this capital is an important ingredient in both investment decision making by the company’s management and the valuation of the company by investors. If a compa

#### Flashcard 1442155203852

Tags
#cfa #cfa-level-1 #economic-and-normal-profit #economics #microeconomics #reading-15-demand-and-supply-analysis-the-firm #section-2-objectives-of-the-firm #study-session-4
Question
In highly competitive market situations, firms tend to earn the normal profit level over time because [...] any economic profit over the long run.
ease of market entry allows for other competing firms to compete away

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In highly competitive market situations, firms tend to earn the normal profit level over time because ease of market entry allows for other competing firms to compete away any economic profit over the long run.

#### Original toplevel document

2. OBJECTIVES OF THE FIRM
00 – $48,000,000 =$2,000,000. Note that total accounting costs in either case include interest expense—which represents the return required by suppliers of debt capital—because interest expense is an explicit cost. <span>2.1.2. Economic Profit and Normal Profit Economic profit (also known as abnormal profit or supernormal profit ) may be defined broadly as accounting profit less the implicit opportunity costs not included in total accounting costs. Equation (3a)  Economic profit = Accounting profit – Total implicit opportunity costs We can define a term, economic cost , equal to the sum of total accounting costs and implicit opportunity costs. Economic profit is therefore equivalently defined as: Equation (3b)  Economic profit = Total revenue – Total economic costs For publicly traded corporations, the focus of investment analysts’ work, the cost of equity capital is the largest and most readily identified implicit opportunity cost omitted in calculating total accounting cost. Consequently, economic profit can be defined for publicly traded corporations as accounting profit less the required return on equity capital. Examples will make these concepts clearer. Consider the start-up company for which we calculated an accounting profit of €300,000 and suppose that the entrepreneurial executive who launched the start-up took a salary reduction of €100,000 per year relative to the job he left. That €100,000 is an opportunity cost of involving him in running the start-up. Besides labor, financial capital is a resource. Suppose that the executive, as sole owner, makes an investment of €1,500,000 to launch the enterprise and that he might otherwise expect to earn €200,000 per year on that amount in a similar risk investment. Total implicit opportunity costs are €100,000 + €200,000 = €300,000 per year and economic profit is zero: €300,000 – €300,000 = €0. For the publicly traded corporation, we consider the cost of equity capital as the only implicit opportunity cost identifiable. Suppose that equity investment is $18,750,000 and shareholders’ required rate of return is 8 percent so that the dollar cost of equity capital is$1,500,000. Economic profit for the publicly traded corporation is therefore $2,000,000 (accounting profit) less$1,500,000 (cost of equity capital) or $500,000. For the start-up company, economic profit was zero. Total economic costs were just covered by revenues and the company was not earning a euro more nor less than the amount that meets the opportunity costs of the resources used in the business. Economists would say the company was earning a normal profit (economic profit of zero). In simple terms, normal profit is the level of accounting profit needed to just cover the implicit opportunity costs ignored in accounting costs. For the publicly traded corporation, normal profit was$1,500,000: normal profit can be taken to be the cost of equity capital (in money terms) for such a company or the dollar return required on an equal investment by equity holders in an equivalently risky alternative investment opportunity. The publicly traded corporation actually earned \$500,000 in excess of normal profit, which should be reflected in the common shares’ market price. Thus, the following expression links accounting profit to economic profit and normal profit: Equation (4)  Accounting profit = Economic profit + Normal profit When accounting profit equals normal profit, economic profit is zero. Further, when accounting profit is greater than normal profit, economic profit is positive; and when accounting profit is less than normal profit, economic profit is negative (the firm has an economic loss ). Economic profit for a firm can originate from sources such as: competitive advantage; exceptional managerial efficiency or skill; difficult to copy technology or innovation (e.g., patents, trademarks, and copyrights); exclusive access to less-expensive inputs; fixed supply of an output, commodity, or resource; preferential treatment under governmental policy; large increases in demand where supply is unable to respond fully over time; exertion of monopoly power (price control) in the market; and market barriers to entry that limit competition. Any of the above factors may lead the firm to have positive net present value investment (NPV) opportunities. Access to positive NPV opportunities and therefore profit in excess of normal profits in the short run may or may not exist in the long run, depending on the potential strength of competition. In highly competitive market situations, firms tend to earn the normal profit level over time because ease of market entry allows for other competing firms to compete away any economic profit over the long run. Economic profit that exists over the long run is usually found where competitive conditions persistently are less than perfect in the market. 2.1.3. Economic Rent The surplus value known as economic rent results when a particular resource or good is fixed in supply (with a vertical su

#### Annotation 1704952466700

 No diálogo, Sócrates é questionado por dois homens, Crátilo e Hermógenes, sobre se os nomes são "convencionais" ou "naturais"

Crátilo (diálogo) – Wikipédia, a enciclopédia livre
Ir para: navegação, pesquisa Crátilo ( do grego antigo Κρατύλος, Kratulos) é um diálogo platónico. A maioria dos académicos contemporâneos acreditam ter sido essencialmente escrito no período intermédio de Platão [1] <span>No diálogo, Sócrates é questionado por dois homens, Crátilo e Hermógenes, sobre se os nomes são "convencionais" ou "naturais", isto é, se a linguagem é um sistema de símbolos arbitrários ou se as palavras possuem uma relação intrínseca com as coisas que elas significam. Ao fazer isto, este texto tornou-se numa

#### Flashcard 1704954563852

Tags
#filosofia #platão
Question
No diálogo, Sócrates é questionado por dois homens, [nome do diálogo] e [...] , sobre se os nomes são "convencionais" ou "naturais"
Crátilo
Hermógenes

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No diálogo, Sócrates é questionado por dois homens, Crátilo e Hermógenes, sobre se os nomes são "convencionais" ou "naturais"

#### Original toplevel document

Crátilo (diálogo) – Wikipédia, a enciclopédia livre
Ir para: navegação, pesquisa Crátilo ( do grego antigo Κρατύλος, Kratulos) é um diálogo platónico. A maioria dos académicos contemporâneos acreditam ter sido essencialmente escrito no período intermédio de Platão [1] <span>No diálogo, Sócrates é questionado por dois homens, Crátilo e Hermógenes, sobre se os nomes são "convencionais" ou "naturais", isto é, se a linguagem é um sistema de símbolos arbitrários ou se as palavras possuem uma relação intrínseca com as coisas que elas significam. Ao fazer isto, este texto tornou-se numa

#### Annotation 1704966360332

 Sócrates — Isso mesmo, Teeteto, para que eu próprio me contemple e veja como tenho o rosto. Diz Teodoro que é parecido com o teu. Porém, se cada um de nós tivesse uma lira e ele declarasse que ambas estavam com igual afinação, dar-lhe-íamos crédito de imediato, ou primeiro procuraríamos certificar-nos se ele entende de música, para falar com autoridade?

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#### Annotation 1704986021132

 FINANCIAL FOOTNOTES (THINK OF IMAGE) #cfa #reading-21-fra-intro #subject-3-other-financial-information-sources Financial footnotes are an integral part of financial statements. They provide information about the accounting methods, assumptions and estimates used by management to develop the data reported in the financial statements. They provide additional disclosure in such areas as fixed assets, inventory methods, income taxes, pensions, debt, contingencies such as lawsuits, sales to related parties, etc. They are designed to allow users to improve assessments of the amounts, timing, and uncertainty of the estimates reported in the financial statements.

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#### Annotation 1704988380428

 SUPPLEMENTARY SCHEDULES (SEVER CON UN CALENDARIO) #cfa #reading-21-fra-intro #subject-3-other-financial-information-sources Supplementary Schedules: In some cases additional information about the assets and liabilities of a company is provided as supplementary data outside the financial statements. Examples include oil and gas reserves reported by oil and gas companies, the impact of changing prices, sales revenue, operating income, and other information for major business segments. Some of the supplementary data is unaudited.

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#### Annotation 1704990739724

 MANAGEMENT DISCUSSION AND ANALYSIS (BOB CON BOLSITA M) #cfa #reading-21-fra-intro #subject-3-other-financial-information-sources Management Discussion and Analysis (MD&A) This requires management to discuss specific issues on the financial statements, and to assess the company's current financial condition, liquidity, and its planned capital expenditure for the next year. An analyst should look for specific concise disclosure as well as consistency with footnote disclosure. Note that the MD&A section is not audited and is for public companies only.

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#### Annotation 1704993623308

 OTHER SOURCES OF INFORMATION (IMAGE) #cfa #reading-21-fra-intro #subject-3-other-financial-information-sources Other Sources of Information • Interim reports. Publicly held companies must file form 10-Q (interim report) on a quarterly basis. It is far less detailed than annual financial statements, as it contains unaudited basic financial statements, unaudited footnotes to financial statements, and management discussion and analysis. • Proxy statements. An analyst should look for litigation, executive compensation, and related-party transactions, known as proxy statements. Proxy statements should be considered an integral part of the financial report, and they may contain special compensation "perks" for officers and directors, as well as lawsuits and other contingent obligations facing the company. • Companies' websites, press releases, and conference calls.