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#### Flashcard 1478510382348

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Question
Sometimes [...] do not represent the only differences between net income and operating income.
interest and taxes

Some companies separately report some income from discontinued operations.

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Sometimes interest and taxes do not represent the only differences between net income and operating income . For example, some companies separately report some income from discontinued operations.<

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2. COMPONENTS AND FORMAT OF THE INCOME STATEMENT
significant variations across companies. Operating profit is sometimes referred to as EBIT (earnings before interest and taxes). However, operating profit and EBIT are not necessarily the same. Note that in both Exhibits 1 and 2, <span>interest and taxes do not represent the only differences between earnings (net income, net earnings) and operating income. For example, both companies separately report some income from discontinued operations. Exhibit 3 shows an excerpt from the income statement of CRA International (NASDAQ GS: CRAI), a company providing management consulting services. Accordingly, CRA deducts co

#### Flashcard 1648802532620

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#math-is-fun
Question
Si elevas un numero negativo a una potencia par que signo tiene el resultado?
Positivo.

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#### Flashcard 1737951153420

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the latent variables for linear dynamical systems are [...].
Gaussian

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l> Here we focus on the two most important examples of state space models, namely the hid- den Markov model, in which the latent variables are discrete, and linear dynamical systems, in which the latent variables are Gaussian. Both models are described by di- rected graphs having a tree structure (no loops) for which inference can be performed efficiently using the sum-product algorithm

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#### Flashcard 1738583444748

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#measure-theory #stochastics
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Kolmogorov applied the new [...] to probability theory
real analysis

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What Kolmogorov did was to say that the new real analysis that had started with the PhD thesis of Henri Lebesgue (1902) and had been rapidly generalized to integrals of real-valued functions on arbitrary spaces by Radon, Fr´echet, and others (

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#### Flashcard 1739036953868

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#graphical-models
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In a graphical model, a graph expresses [...] between random variables.
the conditional dependence structure

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A graphical model or probabilistic graphical model (PGM) or structured probabilistic model is a probabilistic model for which a graph expresses the conditional dependence structure between random variables.

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Graphical model - Wikipedia
list of references, but its sources remain unclear because it has insufficient inline citations. Please help to improve this article by introducing more precise citations. (May 2017) (Learn how and when to remove this template message) <span>A graphical model or probabilistic graphical model (PGM) or structured probabilistic model is a probabilistic model for which a graph expresses the conditional dependence structure between random variables. They are commonly used in probability theory, statistics—particularly Bayesian statistics—and machine learning. [imagelink] An example of a graphical model. Each arrow indicates

#### Flashcard 1739039313164

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#graphical-models
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In a Bayesian network, the network structure of the model is a [...]

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In a Bayesian network, the network structure of the model is a directed acyclic graph, the model represents a factorization of the joint probability of all random variables. More precisely, if the events are then the joint probability satisfies where is

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Graphical model - Wikipedia
the properties of factorization and independences, but they differ in the set of independences they can encode and the factorization of the distribution that they induce. [1] Bayesian network[edit source] Main article: Bayesian network <span>If the network structure of the model is a directed acyclic graph, the model represents a factorization of the joint probability of all random variables. More precisely, if the events are X 1 , … , X n {\displaystyle X_{1},\ldots ,X_{n}} then the joint probability satisfies P [ X 1 , … , X n ] = ∏ i = 1 n P [ X i | p a i ] {\displaystyle P[X_{1},\ldots ,X_{n}]=\prod _{i=1}^{n}P[X_{i}|pa_{i}]} where p a i {\displaystyle pa_{i}} is the set of parents of node X i {\displaystyle X_{i}} . In other words, the joint distribution factors into a product of conditional distributions. For example, the graphical model in the Figure shown above (which is actually not a directed acyclic graph, but an ancestral graph) consists of the random variables

#### Flashcard 1739068411148

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#d-separation
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The idea of d-separation is complicated by defining exactly what is a [...], given that the edges are directed and some variables are already measured.
connecting path

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nce" with "connectedness" (i.e., the existence of a connecting path) and "independence" with "unconnected-ness" or "separation". The only twist on this simple idea is to define what we mean by <span>"connecting path", given that we are dealing with a system of directed arrows in which some vertices (those residing in Z) correspond to measured variables, whose values are known precisely. To account f

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Unknown title
d-SEPARATION WITHOUT TEARS (At the request of many readers) Introduction d-separation is a criterion for deciding, from a given a causal graph, whether a set X of variables is independent of another set Y, given a third set Z. <span>The idea is to associate "dependence" with "connectedness" (i.e., the existence of a connecting path) and "independence" with "unconnected-ness" or "separation". The only twist on this simple idea is to define what we mean by "connecting path", given that we are dealing with a system of directed arrows in which some vertices (those residing in Z) correspond to measured variables, whose values are known precisely. To account for the orientations of the arrows we use the terms "d-separated" and "d-connected" (d connotes "directional"). We start by considering separation between two singleton variables, x and y; the extension to sets of variables is straightforward (i.e., two sets are separated if and only if each el

#### Flashcard 1742447971596

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[...] offers a way to understand why managers do not always act in the best interests of stakeholders.

Agency theory

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Problems can arise in a business relationship when one person delegates decision-making authority to another. The principal is the person delegating authority, and the agent is the person to whom the authority is delegated. <span>Agency theory offers a way to understand why managers do not always act in the best interests of stakeholders. Managers and shareholders may have different goals. They may also have different attitudes towards risk. Information asymmetry. Managers a

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Subject 3. Principal-Agent and Other Relationships in Corporate Governance
Shareholder and Manager/Director Relationships Problems can arise in a business relationship when one person delegates decision-making authority to another. The principal is the person delegating authority, and the agent is the person to whom the authority is delegated. Agency theory offers a way to understand why managers do not always act in the best interests of stakeholders. Managers and shareholders may have different goals. They may also have different attitudes towards risk. Information asymmetry. Managers almost always have more information than shareholders. Thus, it is difficult for shareholders to measure managers' performance or to hold them accountable for their performance. Controlling and Minority Shareholder Relationships Ownership structure is one of the main dimensions of corporate governance. For firms with controllin

#### Annotation 1742538935564

 Subject 7. Corporate Governance and Stakeholder Management Risks and Benefits #cg-and-sm-risks-and-benefits #has-images #puerquito-session #reading-puerquito-verde From a corporation's perspective, risks of poor governance include: weak control systems or inefficient monitoring tools; ineffective decision making; legal, regulatory, and reputational risks; default and bankruptcy risks. Benefits of effective governance and stakeholder management include: better operational efficiency and control brought by effective monitoring tools and control mechanisms; better operating and financial performance; lower default risk and cost of debt.

#### Annotation 1742540770572

 Subject 8. Analyst Considerations in Corporate Governance and Stakeholder Management #analyst-consideration-in-cg-sm #has-images #puerquito-session #reading-puerquito-verde Economic Ownership and Voting Control What is the company's ownership and voting structure among shareholders? Why do some shareholders own a small portion of a company's stock but get most of the voting power? Does the practice really insulate managers from Wall Street's short-term mindset? Dual-class structures create an inferior class of shareholders, and may allow management to make bad decisions with few consequences. Board of Directors Representation Analysts should assess whether the experience and skill sets of board members match the needs of the company. Are they truly independent? Are there inherent conflicts of interest? Remuneration and Company Performance What are the main drivers of the management team's remuneration and incentive structure? Does the remuneration plan reward long-term or short-term growth? Is it based on the performance of the company relative to its competitors or other peers? Equity-based remuneration plans can offer the greatest incentives. Are they linked to the long-term performance of the company? What is the impact on the income statement? Investors in the Company What is the composition of investors in a company? Are there any significant investors in the company? Any sizable affiliated stockholders that can block the votes of the majority? Any activist shareholders that could bring rapid changes for the company? Strength of Shareholders' Rights How robust are the shareholder rights at the company? How robust compared to those of peers? Managing Long-Term Risks How effectively is the company managing long-term risks, such as securing access to necessary resources, managing human capital, exhibiting integrity and leadership, and strengthening the long-term sustainability of the enterprise?

#### Annotation 1742543916300

Subject 9. ESG Considerations for Investors
 ESG integration is the practice of considering environmental, social, and governance factors in the investment process. It can be implemented across all asset classes. ESG Factors in Investment Analysis Environmental factors include natural resource management, pollution prevention, water conservation, energy efficiency and reduced emissions, the existence of carbon assets, and adherence to environmental safety and regulatory standards. Social factors generally pertain to human rights and welfare concerns in the workplace, product development, and, in some cases, community impact. ESG Implementation Methods Asset managers and asset owners can incorporate ESG issues into the investment process in a variety of ways.
• Negative screening is a type of investment strategy that excludes certain companies or sectors from investment consideration because of their underlying business activities or other environmental or social concerns.

• Positive screening and best-in-class strategies focus on investments with favorable ESG aspects.

• Thematic investing focuses on a single factor, such as energy efficiency or climate change.

• Impact investing strategies are targeted investments, typically made in private markets, aimed at solving social or environmental problems.

#### Annotation 1743734312204

 #bisturi-session #has-images #reading-llave-de-tuercas The reading Financial Statement Analysis: An Introduction described a framework for conducting financial statement analysis. Consistent with that framework, prior to undertaking any analysis, an analyst should explore the purpose and context of the analysis. The purpose and context guide further decisions about the approach, the tools, the data sources, and the format in which to report results of the analysis, and also suggest which aspects of the analysis are most important. Having identified the purpose and context, the analyst should then be able to formulate the key questions that the analysis must address. The questions will suggest the data the analyst needs to collect to objectively address the questions. The analyst then processes and analyzes the data to answer these questions. Conclusions and decisions based on the analysis are communicated in a format appropriate to the context, and follow-up is undertaken as required. Although this reading will not formally present applications as a series of steps, the process just described is generally applicable.

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13; How can differences in accounting methods affect financial ratio comparisons between companies, and what are some adjustments analysts make to reported financials to facilitate comparability among companies. <span>The reading “Financial Statement Analysis: An Introduction” described a framework for conducting financial statement analysis. Consistent with that framework, prior to undertaking any analysis, an analyst should explore the purpose and context of the analysis. The purpose and context guide further decisions about the approach, the tools, the data sources, and the format in which to report results of the analysis, and also suggest which aspects of the analysis are most important. Having identified the purpose and context, the analyst should then be able to formulate the key questions that the analysis must address. The questions will suggest the data the analyst needs to collect to objectively address the questions. The analyst then processes and analyzes the data to answer these questions. Conclusions and decisions based on the analysis are communicated in a format appropriate to the context, and follow-up is undertaken as required. Although this reading will not formally present applications as a series of steps, the process just described is generally applicable. <span><body><html>

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Reading 33  Financial Statement Analysis: Applications Intro

#### Annotation 1743743749388

 #has-images #microscopio-session #reading-calculadora Macroeconomic analysis examines a nation’s: Aggregate output and income. Competitive and comparative advantages Productivity of its labor force. Price level and inflation rate. the actions of its national government and central bank.

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, the amount spent by all businesses on plant and equipment; total consumption, the amount spent by all households on goods and services; the rate of change in the general level of prices; and the overall level of interest rates. <span>Macroeconomic analysis examines a nation’s aggregate output and income, its competitive and comparative advantages, the productivity of its labor force, its price level and inflation rate, and the actions of its national government and central bank. The objective of macroeconomic analysis is to address such fundamental questions as: What is an economy’s aggregate output, and how is aggregate income measured? &#

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Reading 16  Aggregate Output, Prices, and Economic Growth Introduction
In the field of economics, microeconomics is the study of the economic activity and behavior of individual economic units, such as a household, a company, or a market for a particular good or service, and macroeconomics is the study of the aggregate activities of households, companies, and markets. Macroeconomics focuses on national aggregates, such as total investment, the amount spent by all businesses on plant and equipment; total consumption, the amount spent by all households on goods and services; the rate of change in the general level of prices; and the overall level of interest rates. Macroeconomic analysis examines a nation’s aggregate output and income, its competitive and comparative advantages, the productivity of its labor force, its price level and inflation rate, and the actions of its national government and central bank. The objective of macroeconomic analysis is to address such fundamental questions as: What is an economy’s aggregate output, and how is aggregate income measured? What factors determine the level of aggregate output/income for an economy? What are the levels of aggregate demand and aggregate supply of goods and services within the country? Is the level of output increasing or decreasing, and at what rate? Is the general price level stable, rising, or falling? Is unemployment rising or falling? Are households spending or saving more? Are workers able to produce more output for a given level of inputs? Are businesses investing in and expanding their productive capacity? Are exports (imports) rising or falling? From an investment perspective, investors must be able to evaluate a country’s current economic environment and to forecast its future economic environment in order to identify asset classes and securities that will benefit from economic trends occurring within that country. Macroeconomic variables—such as the level of inflation, unemployment, consumption, government spending, and investment—affect the overall level of activity within a country. They also have different impacts on the growth and profitability of industries within a country, the companies within those industries, and the returns of the securities issued by those companies. This reading is organized as follows: Section 2 describes gross domestic product and related measures of domestic output and income. Section 3 discusses short-run and long-

#### Annotation 1743769177356

 Investment Fund #has-images #investopedia An investment fund is a supply of capital belonging to numerous investors used to collectively purchase securities while each investor retains ownership and control of his own shares. An investment fund provides a broader selection of investment opportunities, greater management expertise and lower investment fees than investors might be able to obtain on their own. Types of investment funds include mutual funds, exchange-traded funds, money market funds and hedge funds.

Investment Fund
What is an 'Investment Fund' <span>An investment fund is a supply of capital belonging to numerous investors used to collectively purchase securities while each investor retains ownership and control of his own shares. An investment fund provides a broader selection of investment opportunities, greater management expertise and lower investment fees than investors might be able to obtain on their own. Types of investment funds include mutual funds, exchange-traded funds, money market funds and hedge funds. BREAKING DOWN 'Investment Fund' With investment funds, individual investors do not make decisions about how a fund's assets should be invested. Th

#### Annotation 1743780449548

 #has-images #reading-volante #volante-session Derivatives are financial instruments that derive their values from the performance of these basic assets.

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s, and commodity prices. These markets exist around the world and receive much attention in the financial and mainstream media. Hence, they are relatively familiar not only to financial experts but also to the general population. <span>Somewhat less familiar are the markets for derivatives , which are financial instruments that derive their values from the performance of these basic assets. This reading is an overview of derivatives. Subsequent readings will explore many aspects of derivatives and their uses in depth. Among the questions that this first reading will address are the following: What are the defining characteristics of derivatives? What purposes do d

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Reading 56  Derivative Markets and Instruments (Intro)
Equity, fixed-income, currency, and commodity markets are facilities for trading the basic assets of an economy. Equity and fixed-income securities are claims on the assets of a company. Currencies are the monetary units issued by a government or central bank. Commodities are natural resources, such as oil or gold. These underlying assets are said to trade in cash markets or spot markets and their prices are sometimes referred to as cash prices or spot prices , though we usually just refer to them as stock prices, bond prices, exchange rates, and commodity prices. These markets exist around the world and receive much attention in the financial and mainstream media. Hence, they are relatively familiar not only to financial experts but also to the general population. Somewhat less familiar are the markets for derivatives , which are financial instruments that derive their values from the performance of these basic assets. This reading is an overview of derivatives. Subsequent readings will explore many aspects of derivatives and their uses in depth. Among the questions that this first reading will address are the following: What are the defining characteristics of derivatives? What purposes do derivatives serve for financial market participants? What is the distinction between a forward commitment and a contingent claim? What are forward and futures contracts? In what ways are they alike and in what ways are they different? What are swaps? What are call and put options and how do they differ from forwards, futures, and swaps? What are credit derivatives and what are the various types of credit derivatives? What are the benefits of derivatives? What are some criticisms of derivatives and to what extent are they well founded? What is arbitrage and what role does it play in a well-functioning financial market? This reading is organized as follows. Section 2 explores the definition and uses of derivatives and establishes some basic terminology. Section 3 describes derivati

#### Annotation 1743837596940

 #board-of-directors-and-committees #composition-of-the-bod #has-images #puerquito-session #reading-puerquito-verde In a classified or staggered board, directors are typically elected in two or more classes, serving terms greater than one year. Proponents argue that by staggering the election of directors, a certain level of continuity and skill is maintained. However, staggered terms make it more difficult for shareholders to make fundamental changes to the composition and behavior of the board and could result in a permanent impairment of long-term shareholder value.

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Executive (internal) directors are employed by the company and are typically members of senior management. Non-executive (external) directors have limited involvement in daily operations but serve an important oversight role. <span>In a classified or staggered board, directors are typically elected in two or more classes, serving terms greater than one year. Proponents argue that by staggering the election of directors, a certain level of continuity and skill is maintained. However, staggered terms make it more difficult for shareholders to make fundamental changes to the composition and behavior of the board and could result in a permanent impairment of long-term shareholder value. <span><body><html>

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Subject 5. Board of Directors and Committees
Composition of the Board of Directors A board of directors is the central pillar of the governance structure, serves as the link between shareholders and managers, and acts as the shareholders' internal monitoring tool within the company. The structure and composition of a board of directors vary across countries and companies. The number of directors may vary, and the board typically includes a mix of expertise levels, backgrounds, and competencies. Board members must have extensive experience in business, education, the professions and/or public service so they can make informed decisions about the company's future. If directors lack the skills, knowledge and expertise to conduct a meaningful review of the company's activities, and are unable to conduct in-depth evaluations of the issues affecting the company's business, they are more likely to defer to management when making decisions. Executive (internal) directors are employed by the company and are typically members of senior management. Non-executive (external) directors have limited involvement in daily operations but serve an important oversight role. In a classified or staggered board, directors are typically elected in two or more classes, serving terms greater than one year. Proponents argue that by staggering the election of directors, a certain level of continuity and skill is maintained. However, staggered terms make it more difficult for shareholders to make fundamental changes to the composition and behavior of the board and could result in a permanent impairment of long-term shareholder value. Functions and Responsibilities of the Board Two primary duties of a board of directors are duty of care and duty of loyalty. Among other responsibilities, the

#### Annotation 1743859617036

 #factors-affecting-relationships-and-cg #has-images #puerquito-session #reading-puerquito-verde Stakeholder relationships and corporate governance are continually shaped and influenced by a variety of market and non-market factors.

Subject 6. Factors Affecting Stakeholder Relationships and Corporate Governance
Stakeholder relationships and corporate governance are continually shaped and influenced by a variety of market and non-market factors. Market Factors Shareholder engagement involves a company's interactions with its shareholders. It can provide benefits that include building support against short-te

#### Flashcard 1744368438540

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What is the central pillar of governance Structure?

A board of directors is the central pillar of the governance structure

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A board of directors is the central pillar of the governance structure, serves as the link between shareholders and managers, and acts as the shareholders' internal monitoring tool within the company.

#### Original toplevel document

Subject 5. Board of Directors and Committees
Composition of the Board of Directors A board of directors is the central pillar of the governance structure, serves as the link between shareholders and managers, and acts as the shareholders' internal monitoring tool within the company. The structure and composition of a board of directors vary across countries and companies. The number of directors may vary, and the board typically includes a mix of expertise levels, backgrounds, and competencies. Board members must have extensive experience in business, education, the professions and/or public service so they can make informed decisions about the company's future. If directors lack the skills, knowledge and expertise to conduct a meaningful review of the company's activities, and are unable to conduct in-depth evaluations of the issues affecting the company's business, they are more likely to defer to management when making decisions. Executive (internal) directors are employed by the company and are typically members of senior management. Non-executive (external) directors have limited involvement in daily operations but serve an important oversight role. In a classified or staggered board, directors are typically elected in two or more classes, serving terms greater than one year. Proponents argue that by staggering the election of directors, a certain level of continuity and skill is maintained. However, staggered terms make it more difficult for shareholders to make fundamental changes to the composition and behavior of the board and could result in a permanent impairment of long-term shareholder value. Functions and Responsibilities of the Board Two primary duties of a board of directors are duty of care and duty of loyalty. Among other responsibilities, the

#### Annotation 1746732715276

 #cg-and-sm-risks-and-benefits #has-images #puerquito-session #reading-puerquito-verde From a corporation's perspective, risks of poor governance include: weak control systems or inefficient monitoring tools; ineffective decision making; legal, regulatory, and reputational risks; default and bankruptcy risks.

Subject 7. Corporate Governance and Stakeholder Management Risks and Benefits
From a corporation's perspective, risks of poor governance include: weak control systems or inefficient monitoring tools; ineffective decision making; legal, regulatory, and reputational risks; default and bankruptcy risks. Benefits of effective governance and stakeholder management include: better operational efficiency and control brought by effective mon

#### Annotation 1746734288140

 #cg-and-sm-risks-and-benefits #has-images #puerquito-session #reading-puerquito-verde Benefits of effective governance and stakeholder management include: better operational efficiency and control brought by effective monitoring tools and control mechanisms; better operating and financial performance; lower default risk and cost of debt.

Subject 7. Corporate Governance and Stakeholder Management Risks and Benefits
; weak control systems or inefficient monitoring tools; ineffective decision making; legal, regulatory, and reputational risks; default and bankruptcy risks. <span>Benefits of effective governance and stakeholder management include: better operational efficiency and control brought by effective monitoring tools and control mechanisms; better operating and financial performance; lower default risk and cost of debt. <span><body><html>

#### Annotation 1746739268876

 #analyst-consideration-in-cg-sm #has-images #puerquito-session #reading-puerquito-verde Economic Ownership and Voting Control What is the company's ownership and voting structure among shareholders? Why do some shareholders own a small portion of a company's stock but get most of the voting power? Does the practice really insulate managers from Wall Street's short-term mindset? Dual-class structures create an inferior class of shareholders, and may allow management to make bad decisions with few consequences.

Subject 8. Analyst Considerations in Corporate Governance and Stakeholder Management
Economic Ownership and Voting Control What is the company's ownership and voting structure among shareholders? Why do some shareholders own a small portion of a company's stock but get most of the voting power? Does the practice really insulate managers from Wall Street's short-term mindset? Dual-class structures create an inferior class of shareholders, and may allow management to make bad decisions with few consequences. Board of Directors Representation Analysts should assess whether the experience and skill sets of board members match the needs of the company. Are they truly in

#### Annotation 1746740841740

 #analyst-consideration-in-cg-sm #has-images #puerquito-session #reading-puerquito-verde Board of Directors Representation Analysts should assess whether the experience and skill sets of board members match the needs of the company. Are they truly independent? Are there inherent conflicts of interest?

Subject 8. Analyst Considerations in Corporate Governance and Stakeholder Management
3; Does the practice really insulate managers from Wall Street's short-term mindset? Dual-class structures create an inferior class of shareholders, and may allow management to make bad decisions with few consequences. <span>Board of Directors Representation Analysts should assess whether the experience and skill sets of board members match the needs of the company. Are they truly independent? Are there inherent conflicts of interest? Remuneration and Company Performance What are the main drivers of the management team's remuneration and incentive structure? Does the remuneration plan reward lo

#### Annotation 1746744511756

 #analyst-consideration-in-cg-sm #has-images #puerquito-session #reading-puerquito-verde Remuneration and Company Performance What are the main drivers of the management team's remuneration and incentive structure? Does the remuneration plan reward long-term or short-term growth? Is it based on the performance of the company relative to its competitors or other peers? Equity-based remuneration plans can offer the greatest incentives. Are they linked to the long-term performance of the company? What is the impact on the income statement?

Subject 8. Analyst Considerations in Corporate Governance and Stakeholder Management
Board of Directors Representation Analysts should assess whether the experience and skill sets of board members match the needs of the company. Are they truly independent? Are there inherent conflicts of interest? <span>Remuneration and Company Performance What are the main drivers of the management team's remuneration and incentive structure? Does the remuneration plan reward long-term or short-term growth? Is it based on the performance of the company relative to its competitors or other peers? Equity-based remuneration plans can offer the greatest incentives. Are they linked to the long-term performance of the company? What is the impact on the income statement? Investors in the Company What is the composition of investors in a company? Are there any significant investors in the company? Any sizable affiliated stock

#### Annotation 1746746084620

 #analyst-consideration-in-cg-sm #has-images #puerquito-session #reading-puerquito-verde Investors in the Company What is the composition of investors in a company? Are there any significant investors in the company? Any sizable affiliated stockholders that can block the votes of the majority? Any activist shareholders that could bring rapid changes for the company?

Subject 8. Analyst Considerations in Corporate Governance and Stakeholder Management
e to its competitors or other peers? Equity-based remuneration plans can offer the greatest incentives. Are they linked to the long-term performance of the company? What is the impact on the income statement? <span>Investors in the Company What is the composition of investors in a company? Are there any significant investors in the company? Any sizable affiliated stockholders that can block the votes of the majority? Any activist shareholders that could bring rapid changes for the company? Strength of Shareholders' Rights How robust are the shareholder rights at the company? How robust compared to those of peers? Managing Long-Term Risks

#### Annotation 1746747657484

 #analyst-consideration-in-cg-sm #has-images #puerquito-session #reading-puerquito-verde Strength of Shareholders' Rights How robust are the shareholder rights at the company? How robust compared to those of peers?

Subject 8. Analyst Considerations in Corporate Governance and Stakeholder Management
a company? Are there any significant investors in the company? Any sizable affiliated stockholders that can block the votes of the majority? Any activist shareholders that could bring rapid changes for the company? <span>Strength of Shareholders' Rights How robust are the shareholder rights at the company? How robust compared to those of peers? Managing Long-Term Risks How effectively is the company managing long-term risks, such as securing access to necessary resources, managing human capital, exhibiting in

#### Annotation 1746749230348

 #analyst-consideration-in-cg-sm #has-images #puerquito-session #reading-puerquito-verde Managing Long-Term Risks How effectively is the company managing long-term risks, such as securing access to necessary resources, managing human capital, exhibiting integrity and leadership, and strengthening the long-term sustainability of the enterprise?

Subject 8. Analyst Considerations in Corporate Governance and Stakeholder Management
y? Any activist shareholders that could bring rapid changes for the company? Strength of Shareholders' Rights How robust are the shareholder rights at the company? How robust compared to those of peers? <span>Managing Long-Term Risks How effectively is the company managing long-term risks, such as securing access to necessary resources, managing human capital, exhibiting integrity and leadership, and strengthening the long-term sustainability of the enterprise? <span><body><html>

#### Annotation 1746753686796

 ESG integration can be implemented across all asset classes.

Subject 9. ESG Considerations for Investors
ESG integration is the practice of considering environmental, social, and governance factors in the investment process. It can be implemented across all asset classes. ESG Factors in Investment Analysis Environmental factors include natural resource management, pollution prevention, water conservation, energy efficiency and

#### Annotation 1746755259660

 #esg-considerations-for-investors #has-images #puerquito-session #reading-puerquito-verde ESG Factors in Investment Analysis Environmental factors include natural resource management, pollution prevention, water conservation, energy efficiency and reduced emissions, the existence of carbon assets, and adherence to environmental safety and regulatory standards. Social factors generally pertain to human rights and welfare concerns in the workplace, product development, and, in some cases, community impact.

Subject 9. ESG Considerations for Investors
/head> ESG integration is the practice of considering environmental, social, and governance factors in the investment process. It can be implemented across all asset classes. ESG Factors in Investment Analysis Environmental factors include natural resource management, pollution prevention, water conservation, energy efficiency and reduced emissions, the existence of carbon assets, and adherence to environmental safety and regulatory standards. Social factors generally pertain to human rights and welfare concerns in the workplace, product development, and, in some cases, community impact. ESG Implementation Methods Asset managers and asset owners can incorporate ESG issues into the investment process in a variety of ways.

#### Annotation 1746756832524

 ESG Implementation Methods Asset managers and asset owners can incorporate ESG issues into the investment process in a variety of ways.
• Negative screening is a type of investment strategy that excludes certain companies or sectors from investment consideration because of their underlying business activities or other environmental or social concerns.

• Positive screening and best-in-class strategies focus on investments with favorable ESG aspects.

• Thematic investing focuses on a single factor, such as energy efficiency or climate change.

• Impact investing strategies are targeted investments, typically made in private markets, aimed at solving social or environmental problems.

Subject 9. ESG Considerations for Investors
d adherence to environmental safety and regulatory standards. Social factors generally pertain to human rights and welfare concerns in the workplace, product development, and, in some cases, community impact. <span>ESG Implementation Methods Asset managers and asset owners can incorporate ESG issues into the investment process in a variety of ways. Negative screening is a type of investment strategy that excludes certain companies or sectors from investment consideration because of their underlying business activities or other environmental or social concerns. Positive screening and best-in-class strategies focus on investments with favorable ESG aspects. Thematic investing focuses on a single factor, such as energy efficiency or climate change. Impact investing strategies are targeted investments, typically made in private markets, aimed at solving social or environmental problems. <span><body><html>

#### Annotation 1748402310412

 The collection of languages associated with context-free grammars are called the context-free languages

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Question
The collection of languages associated with context-free grammars are called the [...]
context-free languages

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The collection of languages associated with context-free grammars are called the context-free languages

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#### Flashcard 1748405456140

Question
a class of machines recognizing the context-free languages?
pushdown automata

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#### Annotation 1748407815436

 A grammar consists of a collection of substitution rules, also called produc- tions. Each rule appears as a line in t he grammar, comprising a symbol and a string separated by an arrow. The symbol is c alled a variable. The s tring consists of variables and other symbols called terminals. T he variable symbols often a re represented by capit al letters. The terminals are analogous to the in- put alphabet and often are represented by lowercase letters, numbers, or special symbols. One variable is designated as the start variable. It usually occurs on the left-hand side of the topmost rule

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#### Flashcard 1748409388300

Question
The sequence of substitutions to obtain a string is called a
derivation

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#### Flashcard 1748412271884

Question
the language of all strings of pro perly nested parentheses
S → aSb | SS | ε

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#### Annotation 1748415155468

 You can convert any DFA into an equivalent CFG as follows. Make a variable R i for each state q i of the DFA. Add the rule R i → aR j to the CFG if δ(q i , a) = q j is a transition in the DFA. Add the rule R i → ε if q i is an acc ept state of the DFA. Make R 0 the start variable of the grammar, where q 0 is the start state of the machine. Verify o n your own that the resulting CFG generates the same language that the DFA recognizes

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#### Annotation 1748416728332

 If a grammar generates the same string in several different ways, we say that the string is derived ambiguously in that grammar

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#### Flashcard 1748418301196

Question
If a grammar generates the same string in several different ways, we say that the string is derived [...] in that grammar
ambiguously

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If a grammar generates the same string in several different ways, we say that the string is derived ambiguously in that grammar

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#### Annotation 1748427476236

 #has-images #microscopio-session #reading-mano In a general sense, economics is the study of production, distribution, and consumption and can be divided into two broad areas of study: macroeconomics and microeconomics.

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In a general sense, economics is the study of production, distribution, and consumption and can be divided into two broad areas of study: macroeconomics and microeconomics. Macroeconomics deals with aggregate economic quantities, such as national output and national income, and is rooted in microeconomics , which deals with markets and decision making of i

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Reading 14  Topics in Demand and Supply Analysis
In a general sense, economics is the study of production, distribution, and consumption and can be divided into two broad areas of study: macroeconomics and microeconomics. Macroeconomics deals with aggregate economic quantities, such as national output and national income, and is rooted in microeconomics , which deals with markets and decision making of individual economic units, including consumers and businesses. Microeconomics is a logical starting point for the study of economics. Microeconomics classifies private economic units into two groups: consumers (or households) and firms. These two groups give rise, respectively, to the theory of the consumer and the theory of the firm as two branches of study. The theory of the consumer deals with consumption (the demand for goods and services) by utility-maximizing individuals (i.e., individuals who make decisions that maximize the satisfaction received from present and future consumption). The theory of the firm deals with the supply of goods and services by profit-maximizing firms. It is expected that candidates will be familiar with the basic concepts of demand and supply. This material is covered in detail in the recommended prerequisite readings. I

#### Annotation 1748429049100

 #has-images #microscopio-session #reading-mano Macroeconomics deals with aggregate economic quantities, such as national output and national income, and is rooted in microeconomics , which deals with markets and decision making of individual economic units, including consumers and businesses. Microeconomics is a logical starting point for the study of economics.

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In a general sense, economics is the study of production, distribution, and consumption and can be divided into two broad areas of study: macroeconomics and microeconomics. Macroeconomics deals with aggregate economic quantities, such as national output and national income, and is rooted in microeconomics , which deals with markets and decision making of individual economic units, including consumers and businesses. Microeconomics is a logical starting point for the study of economics.

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Reading 14  Topics in Demand and Supply Analysis
In a general sense, economics is the study of production, distribution, and consumption and can be divided into two broad areas of study: macroeconomics and microeconomics. Macroeconomics deals with aggregate economic quantities, such as national output and national income, and is rooted in microeconomics , which deals with markets and decision making of individual economic units, including consumers and businesses. Microeconomics is a logical starting point for the study of economics. Microeconomics classifies private economic units into two groups: consumers (or households) and firms. These two groups give rise, respectively, to the theory of the consumer and the theory of the firm as two branches of study. The theory of the consumer deals with consumption (the demand for goods and services) by utility-maximizing individuals (i.e., individuals who make decisions that maximize the satisfaction received from present and future consumption). The theory of the firm deals with the supply of goods and services by profit-maximizing firms. It is expected that candidates will be familiar with the basic concepts of demand and supply. This material is covered in detail in the recommended prerequisite readings. I

#### Annotation 1748430621964

 #has-images #lingote-de-oro-session #reading-jens Fundamental analysis uses information about the economy, industry, and company as the basis for investment decisions. Examples of fundamentals are unemployment rates, gross domestic product (GDP) growth, industry growth, and quality of and growth in company earnings.

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ell recommendations. What information is gathered and how it is processed depend on the analyst and the purpose of the analysis. Technical analysis uses such information as stock price and trading volume as the basis for investment decisions. <span>Fundamental analysis uses information about the economy, industry, and company as the basis for investment decisions. Examples of fundamentals are unemployment rates, gross domestic product (GDP) growth, industry growth, and quality of and growth in company earnings. Whereas technical analysts use information to predict price movements and base investment decisions on the direction of predicted change in prices, fundamental analysts use information

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Reading 49  Equity Valuation: Concepts and Basic Tools (Intro)
Analysts gather and process information to make investment decisions, including buy and sell recommendations. What information is gathered and how it is processed depend on the analyst and the purpose of the analysis. Technical analysis uses such information as stock price and trading volume as the basis for investment decisions. Fundamental analysis uses information about the economy, industry, and company as the basis for investment decisions. Examples of fundamentals are unemployment rates, gross domestic product (GDP) growth, industry growth, and quality of and growth in company earnings. Whereas technical analysts use information to predict price movements and base investment decisions on the direction of predicted change in prices, fundamental analysts use information to estimate the value of a security and to compare the estimated value to the market price and then base investment decisions on that comparison. This reading introduces equity valuation models used to estimate the intrinsic value (synonym: fundamental value ) of a security; intrinsic value is based on an analysis of investment fundamentals and characteristics. The fundamentals to be considered depend on the analyst’s approach to valuation. In a top-down approach, an analyst examines the economic environment, identifies sectors that are expected to prosper in that environment, and analyzes securities of companies from previously identified attractive sectors. In a bottom-up approach, an analyst typically follows an industry or industries and forecasts fundamentals for the companies in those industries in order to determine valuation. Whatever the approach, an analyst who estimates the intrinsic value of an equity security is implicitly questioning the accuracy of the market price as an estimate of value. Valuation is particularly important in active equity portfolio management, which aims to improve on the return–risk trade-off of a portfolio’s benchmark by identifying mispriced securities. This reading is organized as follows. Section 2 discusses the implications of differences between estimated value and market price. Section 3 introduces three major categor

#### Annotation 1748432194828

 #has-images #lingote-de-oro-session #reading-jens Whereas technical analysts use information to predict price movements and base investment decisions on the direction of predicted change in prices, fundamental analysts use information to estimate the value of a security and to compare the estimated value to the market price and then base investment decisions on that comparison.

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information about the economy, industry, and company as the basis for investment decisions. Examples of fundamentals are unemployment rates, gross domestic product (GDP) growth, industry growth, and quality of and growth in company earnings. <span>Whereas technical analysts use information to predict price movements and base investment decisions on the direction of predicted change in prices, fundamental analysts use information to estimate the value of a security and to compare the estimated value to the market price and then base investment decisions on that comparison. <span><body><html>

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Reading 49  Equity Valuation: Concepts and Basic Tools (Intro)
Analysts gather and process information to make investment decisions, including buy and sell recommendations. What information is gathered and how it is processed depend on the analyst and the purpose of the analysis. Technical analysis uses such information as stock price and trading volume as the basis for investment decisions. Fundamental analysis uses information about the economy, industry, and company as the basis for investment decisions. Examples of fundamentals are unemployment rates, gross domestic product (GDP) growth, industry growth, and quality of and growth in company earnings. Whereas technical analysts use information to predict price movements and base investment decisions on the direction of predicted change in prices, fundamental analysts use information to estimate the value of a security and to compare the estimated value to the market price and then base investment decisions on that comparison. This reading introduces equity valuation models used to estimate the intrinsic value (synonym: fundamental value ) of a security; intrinsic value is based on an analysis of investment fundamentals and characteristics. The fundamentals to be considered depend on the analyst’s approach to valuation. In a top-down approach, an analyst examines the economic environment, identifies sectors that are expected to prosper in that environment, and analyzes securities of companies from previously identified attractive sectors. In a bottom-up approach, an analyst typically follows an industry or industries and forecasts fundamentals for the companies in those industries in order to determine valuation. Whatever the approach, an analyst who estimates the intrinsic value of an equity security is implicitly questioning the accuracy of the market price as an estimate of value. Valuation is particularly important in active equity portfolio management, which aims to improve on the return–risk trade-off of a portfolio’s benchmark by identifying mispriced securities. This reading is organized as follows. Section 2 discusses the implications of differences between estimated value and market price. Section 3 introduces three major categor

#### Annotation 1748434029836

 #has-images #lingote-de-oro-session #reading-jens This reading introduces equity valuation models used to estimate the intrinsic value (synonym: fundamental value ) of a security; intrinsic value is based on an analysis of investment fundamentals and characteristics.

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This reading introduces equity valuation models used to estimate the intrinsic value (synonym: fundamental value ) of a security; intrinsic value is based on an analysis of investment fundamentals and characteristics. The fundamentals to be considered depend on the analyst’s approach to valuation. In a top-down approach, an analyst examines the economic environment, identifies sectors that are expect

#### Original toplevel document

Reading 49  Equity Valuation: Concepts and Basic Tools (Intro)
Analysts gather and process information to make investment decisions, including buy and sell recommendations. What information is gathered and how it is processed depend on the analyst and the purpose of the analysis. Technical analysis uses such information as stock price and trading volume as the basis for investment decisions. Fundamental analysis uses information about the economy, industry, and company as the basis for investment decisions. Examples of fundamentals are unemployment rates, gross domestic product (GDP) growth, industry growth, and quality of and growth in company earnings. Whereas technical analysts use information to predict price movements and base investment decisions on the direction of predicted change in prices, fundamental analysts use information to estimate the value of a security and to compare the estimated value to the market price and then base investment decisions on that comparison. This reading introduces equity valuation models used to estimate the intrinsic value (synonym: fundamental value ) of a security; intrinsic value is based on an analysis of investment fundamentals and characteristics. The fundamentals to be considered depend on the analyst’s approach to valuation. In a top-down approach, an analyst examines the economic environment, identifies sectors that are expected to prosper in that environment, and analyzes securities of companies from previously identified attractive sectors. In a bottom-up approach, an analyst typically follows an industry or industries and forecasts fundamentals for the companies in those industries in order to determine valuation. Whatever the approach, an analyst who estimates the intrinsic value of an equity security is implicitly questioning the accuracy of the market price as an estimate of value. Valuation is particularly important in active equity portfolio management, which aims to improve on the return–risk trade-off of a portfolio’s benchmark by identifying mispriced securities. This reading is organized as follows. Section 2 discusses the implications of differences between estimated value and market price. Section 3 introduces three major categor

#### Annotation 1748435602700

 #has-images #lingote-de-oro-session #reading-jens In a top-down approach, an analyst examines the economic environment, identifies sectors that are expected to prosper in that environment, and analyzes securities of companies from previously identified attractive sectors.

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estimate the intrinsic value (synonym: fundamental value ) of a security; intrinsic value is based on an analysis of investment fundamentals and characteristics. The fundamentals to be considered depend on the analyst’s approach to valuation. <span>In a top-down approach, an analyst examines the economic environment, identifies sectors that are expected to prosper in that environment, and analyzes securities of companies from previously identified attractive sectors. In a bottom-up approach, an analyst typically follows an industry or industries and forecasts fundamentals for the companies in those industries in order to determine valuation. Whateve

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Reading 49  Equity Valuation: Concepts and Basic Tools (Intro)
Analysts gather and process information to make investment decisions, including buy and sell recommendations. What information is gathered and how it is processed depend on the analyst and the purpose of the analysis. Technical analysis uses such information as stock price and trading volume as the basis for investment decisions. Fundamental analysis uses information about the economy, industry, and company as the basis for investment decisions. Examples of fundamentals are unemployment rates, gross domestic product (GDP) growth, industry growth, and quality of and growth in company earnings. Whereas technical analysts use information to predict price movements and base investment decisions on the direction of predicted change in prices, fundamental analysts use information to estimate the value of a security and to compare the estimated value to the market price and then base investment decisions on that comparison. This reading introduces equity valuation models used to estimate the intrinsic value (synonym: fundamental value ) of a security; intrinsic value is based on an analysis of investment fundamentals and characteristics. The fundamentals to be considered depend on the analyst’s approach to valuation. In a top-down approach, an analyst examines the economic environment, identifies sectors that are expected to prosper in that environment, and analyzes securities of companies from previously identified attractive sectors. In a bottom-up approach, an analyst typically follows an industry or industries and forecasts fundamentals for the companies in those industries in order to determine valuation. Whatever the approach, an analyst who estimates the intrinsic value of an equity security is implicitly questioning the accuracy of the market price as an estimate of value. Valuation is particularly important in active equity portfolio management, which aims to improve on the return–risk trade-off of a portfolio’s benchmark by identifying mispriced securities. This reading is organized as follows. Section 2 discusses the implications of differences between estimated value and market price. Section 3 introduces three major categor

#### Annotation 1748437175564

 #has-images #lingote-de-oro-session #reading-jens In a bottom-up approach, an analyst typically follows an industry or industries and forecasts fundamentals for the companies in those industries in order to determine valuation.

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roach to valuation. In a top-down approach, an analyst examines the economic environment, identifies sectors that are expected to prosper in that environment, and analyzes securities of companies from previously identified attractive sectors. <span>In a bottom-up approach, an analyst typically follows an industry or industries and forecasts fundamentals for the companies in those industries in order to determine valuation. Whatever the approach, an analyst who estimates the intrinsic value of an equity security is implicitly questioning the accuracy of the market price as an estimate of value. Valuation i

#### Original toplevel document

Reading 49  Equity Valuation: Concepts and Basic Tools (Intro)
Analysts gather and process information to make investment decisions, including buy and sell recommendations. What information is gathered and how it is processed depend on the analyst and the purpose of the analysis. Technical analysis uses such information as stock price and trading volume as the basis for investment decisions. Fundamental analysis uses information about the economy, industry, and company as the basis for investment decisions. Examples of fundamentals are unemployment rates, gross domestic product (GDP) growth, industry growth, and quality of and growth in company earnings. Whereas technical analysts use information to predict price movements and base investment decisions on the direction of predicted change in prices, fundamental analysts use information to estimate the value of a security and to compare the estimated value to the market price and then base investment decisions on that comparison. This reading introduces equity valuation models used to estimate the intrinsic value (synonym: fundamental value ) of a security; intrinsic value is based on an analysis of investment fundamentals and characteristics. The fundamentals to be considered depend on the analyst’s approach to valuation. In a top-down approach, an analyst examines the economic environment, identifies sectors that are expected to prosper in that environment, and analyzes securities of companies from previously identified attractive sectors. In a bottom-up approach, an analyst typically follows an industry or industries and forecasts fundamentals for the companies in those industries in order to determine valuation. Whatever the approach, an analyst who estimates the intrinsic value of an equity security is implicitly questioning the accuracy of the market price as an estimate of value. Valuation is particularly important in active equity portfolio management, which aims to improve on the return–risk trade-off of a portfolio’s benchmark by identifying mispriced securities. This reading is organized as follows. Section 2 discusses the implications of differences between estimated value and market price. Section 3 introduces three major categor

#### Annotation 1748438748428

 #has-images #lingote-de-oro-session #reading-jens Whatever the approach(Top-Down or Bottom-up), an analyst who estimates the intrinsic value of an equity security is implicitly questioning the accuracy of the market price as an estimate of value.

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ties of companies from previously identified attractive sectors. In a bottom-up approach, an analyst typically follows an industry or industries and forecasts fundamentals for the companies in those industries in order to determine valuation. <span>Whatever the approach, an analyst who estimates the intrinsic value of an equity security is implicitly questioning the accuracy of the market price as an estimate of value. Valuation is particularly important in active equity portfolio management, which aims to improve on the return–risk trade-off of a portfolio’s benchmark by identifying mispriced securit

#### Original toplevel document

Reading 49  Equity Valuation: Concepts and Basic Tools (Intro)
Analysts gather and process information to make investment decisions, including buy and sell recommendations. What information is gathered and how it is processed depend on the analyst and the purpose of the analysis. Technical analysis uses such information as stock price and trading volume as the basis for investment decisions. Fundamental analysis uses information about the economy, industry, and company as the basis for investment decisions. Examples of fundamentals are unemployment rates, gross domestic product (GDP) growth, industry growth, and quality of and growth in company earnings. Whereas technical analysts use information to predict price movements and base investment decisions on the direction of predicted change in prices, fundamental analysts use information to estimate the value of a security and to compare the estimated value to the market price and then base investment decisions on that comparison. This reading introduces equity valuation models used to estimate the intrinsic value (synonym: fundamental value ) of a security; intrinsic value is based on an analysis of investment fundamentals and characteristics. The fundamentals to be considered depend on the analyst’s approach to valuation. In a top-down approach, an analyst examines the economic environment, identifies sectors that are expected to prosper in that environment, and analyzes securities of companies from previously identified attractive sectors. In a bottom-up approach, an analyst typically follows an industry or industries and forecasts fundamentals for the companies in those industries in order to determine valuation. Whatever the approach, an analyst who estimates the intrinsic value of an equity security is implicitly questioning the accuracy of the market price as an estimate of value. Valuation is particularly important in active equity portfolio management, which aims to improve on the return–risk trade-off of a portfolio’s benchmark by identifying mispriced securities. This reading is organized as follows. Section 2 discusses the implications of differences between estimated value and market price. Section 3 introduces three major categor

#### Annotation 1748441107724

 #has-images #lingote-de-oro-session #reading-jens Valuation is particularly important in active equity portfolio management, which aims to improve on the return–risk trade-off of a portfolio’s benchmark by identifying mispriced securities.

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r the companies in those industries in order to determine valuation. Whatever the approach, an analyst who estimates the intrinsic value of an equity security is implicitly questioning the accuracy of the market price as an estimate of value. <span>Valuation is particularly important in active equity portfolio management, which aims to improve on the return–risk trade-off of a portfolio’s benchmark by identifying mispriced securities. <span><body><html>

#### Original toplevel document

Reading 49  Equity Valuation: Concepts and Basic Tools (Intro)
Analysts gather and process information to make investment decisions, including buy and sell recommendations. What information is gathered and how it is processed depend on the analyst and the purpose of the analysis. Technical analysis uses such information as stock price and trading volume as the basis for investment decisions. Fundamental analysis uses information about the economy, industry, and company as the basis for investment decisions. Examples of fundamentals are unemployment rates, gross domestic product (GDP) growth, industry growth, and quality of and growth in company earnings. Whereas technical analysts use information to predict price movements and base investment decisions on the direction of predicted change in prices, fundamental analysts use information to estimate the value of a security and to compare the estimated value to the market price and then base investment decisions on that comparison. This reading introduces equity valuation models used to estimate the intrinsic value (synonym: fundamental value ) of a security; intrinsic value is based on an analysis of investment fundamentals and characteristics. The fundamentals to be considered depend on the analyst’s approach to valuation. In a top-down approach, an analyst examines the economic environment, identifies sectors that are expected to prosper in that environment, and analyzes securities of companies from previously identified attractive sectors. In a bottom-up approach, an analyst typically follows an industry or industries and forecasts fundamentals for the companies in those industries in order to determine valuation. Whatever the approach, an analyst who estimates the intrinsic value of an equity security is implicitly questioning the accuracy of the market price as an estimate of value. Valuation is particularly important in active equity portfolio management, which aims to improve on the return–risk trade-off of a portfolio’s benchmark by identifying mispriced securities. This reading is organized as follows. Section 2 discusses the implications of differences between estimated value and market price. Section 3 introduces three major categor

#### Annotation 1748442680588

 #has-images #paracaidas-session #reading-chris-schoening Credit analysis has a crucial function in the debt capital markets—efficiently allocating capital by properly assessing credit risk, pricing it accordingly, and repricing it as risks change. How do fixed-income investors determine the riskiness of that debt, and how do they decide what they need to earn as compensation for that risk?

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in the debt market to fund current operations; buy equipment; build factories, roads, bridges, airports, and hospitals; acquire assets, and so on. By channeling savings into productive investments, the debt markets facilitate economic growth. <span>Credit analysis has a crucial function in the debt capital markets—efficiently allocating capital by properly assessing credit risk, pricing it accordingly, and repricing it as risks change. How do fixed-income investors determine the riskiness of that debt, and how do they decide what they need to earn as compensation for that risk? <span><body><html>

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Reading 55  Fundamentals of Credit Analysis (Intro)
With bonds outstanding worth many trillions of US dollars, the debt markets play a critical role in the global economy. Companies and governments raise capital in the debt market to fund current operations; buy equipment; build factories, roads, bridges, airports, and hospitals; acquire assets, and so on. By channeling savings into productive investments, the debt markets facilitate economic growth. Credit analysis has a crucial function in the debt capital markets—efficiently allocating capital by properly assessing credit risk, pricing it accordingly, and repricing it as risks change. How do fixed-income investors determine the riskiness of that debt, and how do they decide what they need to earn as compensation for that risk? This reading covers basic principles of credit analysis, which may be broadly defined as the process by which credit risk is evaluated. Readers will be introduced to the definition of credit risk, the interpretation of credit ratings, the four Cs of traditional credit analysis, and key financial measures and ratios used in credit analysis. The reading explains, among other things, how to compare bond issuer creditworthiness within a given industry as well as across industries and how credit risk is priced in the bond market. The reading focuses primarily on analysis of corporate debt; however, credit analysis of sovereign and non-sovereign, particularly municipal, government bonds will also be addressed. Structured finance, a segment of the debt markets that includes securities backed by pools of assets, such as residential and commercial mortgages as well as other consumer loans, will not be covered here. The key components of credit risk—default probability and loss severity—are introduced in the next section along with such credit-related risks as spread risk, credit migra

#### Annotation 1748444253452

 #has-images #paracaidas-session #reading-chris-schoening Structured finance, a segment of the debt markets that includes securities backed by pools of assets, such as residential and commercial mortgages as well as other consumer loans, will not be covered here.

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The reading focuses primarily on analysis of corporate debt; however, credit analysis of sovereign and non-sovereign, particularly municipal, government bonds will also be addressed. Structured finance, a segment of the debt markets that includes securities backed by pools of assets, such as residential and commercial mortgages as well as other consumer loans, will not be covered here.

#### Original toplevel document

Reading 55  Fundamentals of Credit Analysis (Intro)
With bonds outstanding worth many trillions of US dollars, the debt markets play a critical role in the global economy. Companies and governments raise capital in the debt market to fund current operations; buy equipment; build factories, roads, bridges, airports, and hospitals; acquire assets, and so on. By channeling savings into productive investments, the debt markets facilitate economic growth. Credit analysis has a crucial function in the debt capital markets—efficiently allocating capital by properly assessing credit risk, pricing it accordingly, and repricing it as risks change. How do fixed-income investors determine the riskiness of that debt, and how do they decide what they need to earn as compensation for that risk? This reading covers basic principles of credit analysis, which may be broadly defined as the process by which credit risk is evaluated. Readers will be introduced to the definition of credit risk, the interpretation of credit ratings, the four Cs of traditional credit analysis, and key financial measures and ratios used in credit analysis. The reading explains, among other things, how to compare bond issuer creditworthiness within a given industry as well as across industries and how credit risk is priced in the bond market. The reading focuses primarily on analysis of corporate debt; however, credit analysis of sovereign and non-sovereign, particularly municipal, government bonds will also be addressed. Structured finance, a segment of the debt markets that includes securities backed by pools of assets, such as residential and commercial mortgages as well as other consumer loans, will not be covered here. The key components of credit risk—default probability and loss severity—are introduced in the next section along with such credit-related risks as spread risk, credit migra

#### Annotation 1748445826316

 #has-images #paracaidas-session #reading-chris-schoening The reading focuses primarily on analysis of corporate debt; however, credit analysis of sovereign and non-sovereign, particularly municipal, government bonds will also be addressed.

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The reading focuses primarily on analysis of corporate debt; however, credit analysis of sovereign and non-sovereign, particularly municipal, government bonds will also be addressed. Structured finance, a segment of the debt markets that includes securities backed by pools of assets, such as residential and commercial mortgages as well as other consumer loans, will

#### Original toplevel document

Reading 55  Fundamentals of Credit Analysis (Intro)
With bonds outstanding worth many trillions of US dollars, the debt markets play a critical role in the global economy. Companies and governments raise capital in the debt market to fund current operations; buy equipment; build factories, roads, bridges, airports, and hospitals; acquire assets, and so on. By channeling savings into productive investments, the debt markets facilitate economic growth. Credit analysis has a crucial function in the debt capital markets—efficiently allocating capital by properly assessing credit risk, pricing it accordingly, and repricing it as risks change. How do fixed-income investors determine the riskiness of that debt, and how do they decide what they need to earn as compensation for that risk? This reading covers basic principles of credit analysis, which may be broadly defined as the process by which credit risk is evaluated. Readers will be introduced to the definition of credit risk, the interpretation of credit ratings, the four Cs of traditional credit analysis, and key financial measures and ratios used in credit analysis. The reading explains, among other things, how to compare bond issuer creditworthiness within a given industry as well as across industries and how credit risk is priced in the bond market. The reading focuses primarily on analysis of corporate debt; however, credit analysis of sovereign and non-sovereign, particularly municipal, government bonds will also be addressed. Structured finance, a segment of the debt markets that includes securities backed by pools of assets, such as residential and commercial mortgages as well as other consumer loans, will not be covered here. The key components of credit risk—default probability and loss severity—are introduced in the next section along with such credit-related risks as spread risk, credit migra

#### Annotation 1748447399180

 #concerta-session #has-images #reading-computadora This reading presents the basics of describing and analyzing data, the branch of statistics known as descriptive statistics. The reading supplies a set of useful concepts and tools, illustrated in a variety of investment contexts.

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analyzing data and drawing conclusions from them. Whether we are analyzing asset returns, earnings growth rates, commodity prices, or any other financial data, statistical tools help us quantify and communicate the data’s important features. <span>This reading presents the basics of describing and analyzing data, the branch of statistics known as descriptive statistics. The reading supplies a set of useful concepts and tools, illustrated in a variety of investment contexts. One theme of our presentation, reflected in the reading’s title, is the demonstration of the statistical methods that allow us to summarize return distributions. <span><body><

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Reading 8  Statistical Concepts and Market Returns Introduction
Statistical methods provide a powerful set of tools for analyzing data and drawing conclusions from them. Whether we are analyzing asset returns, earnings growth rates, commodity prices, or any other financial data, statistical tools help us quantify and communicate the data’s important features. This reading presents the basics of describing and analyzing data, the branch of statistics known as descriptive statistics. The reading supplies a set of useful concepts and tools, illustrated in a variety of investment contexts. One theme of our presentation, reflected in the reading’s title, is the demonstration of the statistical methods that allow us to summarize return distributions.1 We explore four properties of return distributions: where the returns are centered (central tendency); how far returns are dispersed from their center (dispersion); whether the distribution of returns is symmetrically shaped or lopsided (skewness); and whether extreme outcomes are likely (kurtosis). These same concepts are generally applicable to the distributions of other types of data, too. The reading is organized as follows. After defining some basic concepts in Section 2, in Sections 3 and 4 we discuss the presentation of data: Section 3 describes the organ

#### Annotation 1748449496332

 #globo-terraqueo-session #has-images #reading-agustin-carsten Decisions of households or single business don't affect much but, the decisions made by governments can have an enormous impact on even the largest and most developed of economies for two main reasons. First, the public sectors of most developed economies normally employ a significant proportion of the population, and they are usually responsible for a significant proportion of spending in an economy. Second, governments are also the largest borrowers in world debt markets.

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the real economy and on corporate profits. But individual corporations can rarely affect large economies on their own; the decisions of a single household concerning consumption will have a negligible impact on the wider economy. <span>By contrast, the decisions made by governments can have an enormous impact on even the largest and most developed of economies for two main reasons. First, the public sectors of most developed economies normally employ a significant proportion of the population, and they are usually responsible for a significant proportion of spending in an economy. Second, governments are also the largest borrowers in world debt markets. <span><body><html>

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Reading 18  Monetary and Fiscal Policy Introduction
The economic decisions of households can have a significant impact on an economy. For example, a decision on the part of households to consume more and to save less can lead to an increase in employment, investment, and ultimately profits. Equally, the investment decisions made by corporations can have an important impact on the real economy and on corporate profits. But individual corporations can rarely affect large economies on their own; the decisions of a single household concerning consumption will have a negligible impact on the wider economy. By contrast, the decisions made by governments can have an enormous impact on even the largest and most developed of economies for two main reasons. First, the public sectors of most developed economies normally employ a significant proportion of the population, and they are usually responsible for a significant proportion of spending in an economy. Second, governments are also the largest borrowers in world debt markets. Exhibit 1 gives some idea of the scale of government borrowing and spending. Exhibit 1 Panel A. Central Government Debt to GDP, 2009 Panel B. Public Sector Spending to GDP, 2009 Note: All data are for 2009. Source: Thomson Financial. Government policy is ultimately expressed through its borrowing and spending activities. In this reading, we identify and discuss two types of government policy that can affect the macroeconomy and financial markets: monetary policy and fiscal policy. Monetary policy refers to central bank activities that are directed toward influencing the quantity of money and credit in an economy.1 By contrast, fiscal policy refers to the government’s decisions about taxation and spending. Both monetary and fiscal policies are used to regulate economic activity over time. They can be used to accelerate growth when an economy starts to slow or to moderate growth and activity when an economy starts to overheat. In addition, fiscal policy can be used to redistribute income and wealth. The overarching goal of both monetary and fiscal policy is normally the creation of an economic environment where growth is stable and positive and inflation is stable and low. Crucially, the aim is therefore to steer the underlying economy so that it does not experience economic booms that may be followed by extended periods of low or negative growth and high levels of unemployment. In such a stable economic environment, householders can feel secure in their consumption and saving decisions, while corporations can concentrate on their investment decisions, on making their regular coupon payments to their bond holders and on making profits for their shareholders. The challenges to achieving this overarching goal are many. Not only are economies frequently buffeted by shocks (such as oil price jumps), but some economists believe that natural cycles in the economy also exist. Moreover, there are plenty of examples from history where government policies—either monetary, fiscal, or both—have exacerbated an economic expansion that eventually led to damaging consequences for the real economy, for financial markets, and for investors. The balance of the reading is organized as follows. Section 2 provides an introduction to monetary policy and related topics. Section 3 presents fiscal policy. The interact

#### Flashcard 1748455263500

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Question
[...] is the analysis of a specific branch of manufacturing, service, or trade.

status measured difficulty not learned 37% [default] 0

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Industry analysis is the analysis of a specific branch of manufacturing, service, or trade. Understanding the industry in which a company operates provides an essential framework for the analysis of the individual company—that is, company analysis . Equity analysis and credit

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Reading 48  Introduction to Industry and Company Analysis (Intro)
Industry analysis is the analysis of a specific branch of manufacturing, service, or trade. Understanding the industry in which a company operates provides an essential framework for the analysis of the individual company—that is, company analysis . Equity analysis and credit analysis are often conducted by analysts who concentrate on one or several industries, which results in synergies and efficiencies in gathering and interpreting information. Among the questions we address in this reading are the following: What are the similarities and differences among industry classification systems? How does an analyst go about choosing a peer group of companies? What are the key factors to consider when analyzing an industry? What advantages are enjoyed by companies in strategically well-positioned industries? After discussing the uses of industry analysis in the next section, Sections 3 and 4 discuss, respectively, approaches to identifying similar companies and industry

#### Annotation 1748457622796

 #has-images #lingote-de-oro-session #reading-chimenea-industrial Understanding the industry in which a company operates provides an essential framework for the analysis of the individual company

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Industry analysis is the analysis of a specific branch of manufacturing, service, or trade. Understanding the industry in which a company operates provides an essential framework for the analysis of the individual company—that is, company analysis . Equity analysis and credit analysis are often conducted by analysts who concentrate on one or several industries, which results in synergies and efficiencies

#### Original toplevel document

Reading 48  Introduction to Industry and Company Analysis (Intro)
Industry analysis is the analysis of a specific branch of manufacturing, service, or trade. Understanding the industry in which a company operates provides an essential framework for the analysis of the individual company—that is, company analysis . Equity analysis and credit analysis are often conducted by analysts who concentrate on one or several industries, which results in synergies and efficiencies in gathering and interpreting information. Among the questions we address in this reading are the following: What are the similarities and differences among industry classification systems? How does an analyst go about choosing a peer group of companies? What are the key factors to consider when analyzing an industry? What advantages are enjoyed by companies in strategically well-positioned industries? After discussing the uses of industry analysis in the next section, Sections 3 and 4 discuss, respectively, approaches to identifying similar companies and industry

#### Annotation 1748459195660

 #globo-terraqueo-session #has-images #reading-fajo-de-pounds Given the globalization of the world economy, most large companies depend heavily on their foreign operations (for example, by some estimates about 40 percent of S&P 500 Index earnings are from outside the United States).

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Even investors adhering to a purely “domestic” portfolio mandate are increasingly affected by what happens in the foreign exchange market. Given the globalization of the world economy, most large companies depend heavily on their foreign operations (for example, by some estimates about 40 percent of S&P 500 Index earnings are from outside the United States). Almost all companies are exposed to some degree of foreign competition, and the pricing for domestic assets—equities, bonds, real estate, and others—will also depend on demand from fore

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Reading 20  Currency Exchange Rates Introduction

#### Annotation 1748461030668

 #bascula-session #has-images #reading-grifo The cash-based information provided by the cash flow statement contrasts with the accrual-based information from the income statement. For example, the income statement reflects revenues when earned rather than when cash is collected; in contrast, the cash flow statement reflects cash receipts when collected as opposed to when the revenue was earned.

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The cash flow statement provides information about a company’s cash receipts and cash payments during an accounting period. The cash-based information provided by the cash flow statement contrasts with the accrual-based information from the income statement. For example, the income statement reflects revenues when earned rather than when cash is collected; in contrast, the cash flow statement reflects cash receipts when collected as opposed to when the revenue was earned. A reconciliation between reported income and cash flows from operating activities provides useful information about when, whether, and how a company is able to generate cash from its op

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Reading 26  Understanding Cash Flow Statements Introduction

#### Annotation 1748462603532

 #bascula-session #has-images #reading-grifo A reconciliation between reported income and cash flows from operating activities provides useful information about when, whether, and how a company is able to generate cash from its operating activities.

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om the income statement. For example, the income statement reflects revenues when earned rather than when cash is collected; in contrast, the cash flow statement reflects cash receipts when collected as opposed to when the revenue was earned. <span>A reconciliation between reported income and cash flows from operating activities provides useful information about when, whether, and how a company is able to generate cash from its operating activities. Although income is an important measure of the results of a company’s activities, cash flow is also essential. As an extreme illustration, a hypothetical company that makes all sales on

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Reading 26  Understanding Cash Flow Statements Introduction

#### Annotation 1748464176396

 #bascula-session #has-images #reading-grifo Although income is an important measure of the results of a company’s activities, cash flow is also essential. As an extreme illustration, a hypothetical company that makes all sales on account, without regard to whether it will ever collect its accounts receivable, would report healthy sales on its income statement and might well report significant income; however, with zero cash inflow, the company would not survive.

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posed to when the revenue was earned. A reconciliation between reported income and cash flows from operating activities provides useful information about when, whether, and how a company is able to generate cash from its operating activities. <span>Although income is an important measure of the results of a company’s activities, cash flow is also essential. As an extreme illustration, a hypothetical company that makes all sales on account, without regard to whether it will ever collect its accounts receivable, would report healthy sales on its income statement and might well report significant income; however, with zero cash inflow, the company would not survive. The cash flow statement also provides a reconciliation of the beginning and ending cash on the balance sheet. <span><body><html>

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Reading 26  Understanding Cash Flow Statements Introduction

#### Annotation 1748465749260

 #bascula-session #has-images #reading-grifo The cash flow statement provides a reconciliation of the beginning and ending cash on the balance sheet.

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es on account, without regard to whether it will ever collect its accounts receivable, would report healthy sales on its income statement and might well report significant income; however, with zero cash inflow, the company would not survive. <span>The cash flow statement also provides a reconciliation of the beginning and ending cash on the balance sheet. <span><body><html>

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Reading 26  Understanding Cash Flow Statements Introduction

#### Annotation 1748469681420

 #bisturi-session #has-images #reading-llave-de-tuercas The reading Financial Statement Analysis: An Introduction described a framework for conducting financial statement analysis. Consistent with that framework, prior to undertaking any analysis, an analyst should explore the purpose and context of the analysis.

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The reading Financial Statement Analysis: An Introduction described a framework for conducting financial statement analysis. Consistent with that framework, prior to undertaking any analysis, an analyst should explore the purpose and context of the analysis. The purpose and context guide further decisions about the approach, the tools, the data sources, and the format in which to report results of the analysis, and also suggest which aspect

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Reading 33  Financial Statement Analysis: Applications Intro

#### Annotation 1748471254284

 #bisturi-session #has-images #reading-llave-de-tuercas The purpose and context of the Analysis guide further decisions about the approach, the tools, the data sources, and the format in which to report results of the analysis, and also suggest which aspects of the analysis are most important. Having identified the purpose and context, the analyst should then be able to formulate the key questions that the analysis must address. The questions will suggest the data the analyst needs to collect to objectively address the questions. The analyst then processes and analyzes the data to answer these questions. Conclusions and decisions based on the analysis are communicated in a format appropriate to the context, and follow-up is undertaken as required.

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ncial Statement Analysis: An Introduction described a framework for conducting financial statement analysis. Consistent with that framework, prior to undertaking any analysis, an analyst should explore the purpose and context of the analysis. <span>The purpose and context guide further decisions about the approach, the tools, the data sources, and the format in which to report results of the analysis, and also suggest which aspects of the analysis are most important. Having identified the purpose and context, the analyst should then be able to formulate the key questions that the analysis must address. The questions will suggest the data the analyst needs to collect to objectively address the questions. The analyst then processes and analyzes the data to answer these questions. Conclusions and decisions based on the analysis are communicated in a format appropriate to the context, and follow-up is undertaken as required. Although this reading will not formally present applications as a series of steps, the process just described is generally applicable. <span><body><html>

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Reading 33  Financial Statement Analysis: Applications Intro

#### Annotation 1748473875724

 #casita-session #has-images #reading-casita Some investors hope alternative investments will provide positive returns throughout the economic cycle; this goal is an absolute return objective.

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Some investors hope alternative investments will provide positive returns throughout the economic cycle; this goal is an absolute return objective. Alternative investments are not free of risk, however, and their returns may be negative and/or correlated with other investments, including traditional investments, especially in perio

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Reading 58  Introduction to Alternative Investments (Intro)
Assets under management in vehicles classified as alternative investments have grown rapidly since the mid-1990s. This growth has largely occurred because of interest in these investments by institutions, such as endowment and pension funds, as well as high-net-worth individuals seeking diversification and return opportunities. Alternative investments are perceived to behave differently from traditional investments. Investors may seek either absolute return or relative return. Some investors hope alternative investments will provide positive returns throughout the economic cycle; this goal is an absolute return objective. Alternative investments are not free of risk, however, and their returns may be negative and/or correlated with other investments, including traditional investments, especially in periods of financial crisis. Some investors in alternative investments have a relative return objective. A relative return objective, which is often the objective of portfolios of traditional investment, seeks to achieve a return relative to an equity or fixed-income benchmark. This reading is organized as follows. Section 2 describes alternative investments’ basic characteristics and categories; general strategies of alternative investment portfo

#### Annotation 1748475448588

 #casita-session #has-images #reading-casita Alternative investments are not free of risk, however, and their returns may be negative and/or correlated with other investments, including traditional investments, especially in periods of financial crisis.

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Some investors hope alternative investments will provide positive returns throughout the economic cycle; this goal is an absolute return objective. Alternative investments are not free of risk, however, and their returns may be negative and/or correlated with other investments, including traditional investments, especially in periods of financial crisis. Some investors in alternative investments have a relative return objective. A relative return objective, which is often the objective of portfolios of traditional investment, seeks to a

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Reading 58  Introduction to Alternative Investments (Intro)
Assets under management in vehicles classified as alternative investments have grown rapidly since the mid-1990s. This growth has largely occurred because of interest in these investments by institutions, such as endowment and pension funds, as well as high-net-worth individuals seeking diversification and return opportunities. Alternative investments are perceived to behave differently from traditional investments. Investors may seek either absolute return or relative return. Some investors hope alternative investments will provide positive returns throughout the economic cycle; this goal is an absolute return objective. Alternative investments are not free of risk, however, and their returns may be negative and/or correlated with other investments, including traditional investments, especially in periods of financial crisis. Some investors in alternative investments have a relative return objective. A relative return objective, which is often the objective of portfolios of traditional investment, seeks to achieve a return relative to an equity or fixed-income benchmark. This reading is organized as follows. Section 2 describes alternative investments’ basic characteristics and categories; general strategies of alternative investment portfo

#### Annotation 1748477021452

 #casita-session #has-images #reading-casita Some investors in alternative investments have a relative return objective. A relative return objective, which is often the objective of portfolios of traditional investment, seeks to achieve a return relative to an equity or fixed-income benchmark.

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is an absolute return objective. Alternative investments are not free of risk, however, and their returns may be negative and/or correlated with other investments, including traditional investments, especially in periods of financial crisis. <span>Some investors in alternative investments have a relative return objective. A relative return objective, which is often the objective of portfolios of traditional investment, seeks to achieve a return relative to an equity or fixed-income benchmark. <span><body><html>

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Reading 58  Introduction to Alternative Investments (Intro)
Assets under management in vehicles classified as alternative investments have grown rapidly since the mid-1990s. This growth has largely occurred because of interest in these investments by institutions, such as endowment and pension funds, as well as high-net-worth individuals seeking diversification and return opportunities. Alternative investments are perceived to behave differently from traditional investments. Investors may seek either absolute return or relative return. Some investors hope alternative investments will provide positive returns throughout the economic cycle; this goal is an absolute return objective. Alternative investments are not free of risk, however, and their returns may be negative and/or correlated with other investments, including traditional investments, especially in periods of financial crisis. Some investors in alternative investments have a relative return objective. A relative return objective, which is often the objective of portfolios of traditional investment, seeks to achieve a return relative to an equity or fixed-income benchmark. This reading is organized as follows. Section 2 describes alternative investments’ basic characteristics and categories; general strategies of alternative investment portfo

#### Annotation 1748479905036

 #has-images #puerquito-session #reading-garrafon-lleno-de-monedas-de-diez-pesos 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.

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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 company invests in projects that produce a return in excess of the cost of capital, the company has created value; in contrast, if the company invests in projects whose returns are

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Reading 36  Cost of Capital 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 company invests in projects that produce a return in excess of the cost of capital, the company has created value; in contrast, if the company invests in projects whose returns are less than the cost of capital, the company has actually destroyed value. Therefore, the estimation of the cost of capital is a central issue in corporate financial management. For the analyst seeking to evaluate a company’s investment program and its competitive position, an accurate estimate of a company’s cost of capital is important as well. Cost of capital estimation is a challenging task. As we have already implied, the cost of capital is not observable but, rather, must be estimated. Arriving at a cost of capital estimate requires a host of assumptions and estimates. Another challenge is that the cost of capital that is appropriately applied to a specific investment depends on the characteristics of that investment: The riskier the investment’s cash flows, the greater its cost of capital. In reality, a company must estimate project-specific costs of capital. What is often done, however, is to estimate the cost of capital for the company as a whole and then adjust this overall corporate cost of capital upward or downward to reflect the risk of the contemplated project relative to the company’s average project. This reading is organized as follows: In the next section, we introduce the cost of capital and its basic computation. Section 3 presents a selection of methods for estimat

#### Annotation 1748481477900

 #has-images #puerquito-session #reading-garrafon-lleno-de-monedas-de-diez-pesos If a company invests in projects that produce a return in excess of the cost of capital, the company has created value; in contrast, if the company invests in projects whose returns are less than the cost of capital, the company has actually destroyed value.

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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 company invests in projects that produce a return in excess of the cost of capital, the company has created value; in contrast, if the company invests in projects whose returns are less than the cost of capital, the company has actually destroyed value. Therefore, the estimation of the cost of capital is a central issue in corporate financial management. For the analyst seeking to evaluate a company’s investment program and its competi

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Reading 36  Cost of Capital 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 company invests in projects that produce a return in excess of the cost of capital, the company has created value; in contrast, if the company invests in projects whose returns are less than the cost of capital, the company has actually destroyed value. Therefore, the estimation of the cost of capital is a central issue in corporate financial management. For the analyst seeking to evaluate a company’s investment program and its competitive position, an accurate estimate of a company’s cost of capital is important as well. Cost of capital estimation is a challenging task. As we have already implied, the cost of capital is not observable but, rather, must be estimated. Arriving at a cost of capital estimate requires a host of assumptions and estimates. Another challenge is that the cost of capital that is appropriately applied to a specific investment depends on the characteristics of that investment: The riskier the investment’s cash flows, the greater its cost of capital. In reality, a company must estimate project-specific costs of capital. What is often done, however, is to estimate the cost of capital for the company as a whole and then adjust this overall corporate cost of capital upward or downward to reflect the risk of the contemplated project relative to the company’s average project. This reading is organized as follows: In the next section, we introduce the cost of capital and its basic computation. Section 3 presents a selection of methods for estimat

#### Annotation 1748485934348

 #has-images #investopedia An investment fund is a supply of capital belonging to numerous investors used to collectively purchase securities while each investor retains ownership and control of his own shares.

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An investment fund is a supply of capital belonging to numerous investors used to collectively purchase securities while each investor retains ownership and control of his own shares. An investment fund provides a broader selection of investment opportunities, greater management expertise and lower investment fees than investors might be able to obtain on their own.

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Investment Fund
What is an 'Investment Fund' <span>An investment fund is a supply of capital belonging to numerous investors used to collectively purchase securities while each investor retains ownership and control of his own shares. An investment fund provides a broader selection of investment opportunities, greater management expertise and lower investment fees than investors might be able to obtain on their own. Types of investment funds include mutual funds, exchange-traded funds, money market funds and hedge funds. BREAKING DOWN 'Investment Fund' With investment funds, individual investors do not make decisions about how a fund's assets should be invested. Th

#### Annotation 1748487507212

 #has-images #investopedia An investment fund provides a broader selection of investment opportunities, greater management expertise and lower investment fees than investors might be able to obtain on their own.

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An investment fund is a supply of capital belonging to numerous investors used to collectively purchase securities while each investor retains ownership and control of his own shares. An investment fund provides a broader selection of investment opportunities, greater management expertise and lower investment fees than investors might be able to obtain on their own. Types of investment funds include mutual funds, exchange-traded funds, money market funds and hedge funds.

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Investment Fund
What is an 'Investment Fund' <span>An investment fund is a supply of capital belonging to numerous investors used to collectively purchase securities while each investor retains ownership and control of his own shares. An investment fund provides a broader selection of investment opportunities, greater management expertise and lower investment fees than investors might be able to obtain on their own. Types of investment funds include mutual funds, exchange-traded funds, money market funds and hedge funds. BREAKING DOWN 'Investment Fund' With investment funds, individual investors do not make decisions about how a fund's assets should be invested. Th

#### Annotation 1748489080076

 #has-images #investopedia Types of investment funds include: mutual funds (Splinter)exchange-traded funds (Mystique)money market funds (Santana Americano Yo)hedge funds. (Sony the Hedgehog)

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investor retains ownership and control of his own shares. An investment fund provides a broader selection of investment opportunities, greater management expertise and lower investment fees than investors might be able to obtain on their own. <span>Types of investment funds include mutual funds, exchange-traded funds, money market funds and hedge funds. <span><body><html>

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Investment Fund
What is an 'Investment Fund' <span>An investment fund is a supply of capital belonging to numerous investors used to collectively purchase securities while each investor retains ownership and control of his own shares. An investment fund provides a broader selection of investment opportunities, greater management expertise and lower investment fees than investors might be able to obtain on their own. Types of investment funds include mutual funds, exchange-traded funds, money market funds and hedge funds. BREAKING DOWN 'Investment Fund' With investment funds, individual investors do not make decisions about how a fund's assets should be invested. Th

#### Annotation 1748494585100

 What is a Mutual Fund #has-images #investopedia A mutual fund is an investment vehicle made up of a pool of moneys collected from many investors for the purpose of investing in securities such as stocks, bonds, money market instruments and other assets. Mutual funds are operated by professional money managers, who allocate the fund's investments and attempt to produce capital gains and/or income for the fund's investors. A mutual fund's portfolio is structured and maintained to match the investment objectives stated in its prospectus.

Mutual Fund
What is a 'Mutual Fund' <span>A mutual fund is an investment vehicle made up of a pool of moneys collected from many investors for the purpose of investing in securities such as stocks, bonds, money market instruments and other assets. Mutual funds are operated by professional money managers, who allocate the fund's investments and attempt to produce capital gains and/or income for the fund's investors. A mutual fund's portfolio is structured and maintained to match the investment objectives stated in its prospectus. BREAKING DOWN 'Mutual Fund' Mutual funds give small or individual investors access to professionally managed portfolios of equities, bonds and oth

#### Annotation 1748499041548

 #has-images #investopedia A mutual fund is an investment vehicle made up of a pool of moneys collected from many investors for the purpose of investing in securities

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A mutual fund is an investment vehicle made up of a pool of moneys collected from many investors for the purpose of investing in securities such as stocks, bonds, money market instruments and other assets. Mutual funds are operated by professional money managers, who allocate the fund's investments and attempt to produce ca

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Mutual Fund
What is a 'Mutual Fund' <span>A mutual fund is an investment vehicle made up of a pool of moneys collected from many investors for the purpose of investing in securities such as stocks, bonds, money market instruments and other assets. Mutual funds are operated by professional money managers, who allocate the fund's investments and attempt to produce capital gains and/or income for the fund's investors. A mutual fund's portfolio is structured and maintained to match the investment objectives stated in its prospectus. BREAKING DOWN 'Mutual Fund' Mutual funds give small or individual investors access to professionally managed portfolios of equities, bonds and oth

#### Annotation 1748500614412

 #has-images #investopedia Mutual funds are operated by professional money managers, who allocate the fund's investments and attempt to produce capital gains and/or income for the fund's investors.

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ody> A mutual fund is an investment vehicle made up of a pool of moneys collected from many investors for the purpose of investing in securities such as stocks, bonds, money market instruments and other assets. Mutual funds are operated by professional money managers, who allocate the fund's investments and attempt to produce capital gains and/or income for the fund's investors. A mutual fund's portfolio is structured and maintained to match the investment objectives stated in its prospectus. <body><html>

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Mutual Fund
What is a 'Mutual Fund' <span>A mutual fund is an investment vehicle made up of a pool of moneys collected from many investors for the purpose of investing in securities such as stocks, bonds, money market instruments and other assets. Mutual funds are operated by professional money managers, who allocate the fund's investments and attempt to produce capital gains and/or income for the fund's investors. A mutual fund's portfolio is structured and maintained to match the investment objectives stated in its prospectus. BREAKING DOWN 'Mutual Fund' Mutual funds give small or individual investors access to professionally managed portfolios of equities, bonds and oth

#### Annotation 1748502187276

 #has-images #investopedia A mutual fund's portfolio is structured and maintained to match the investment objectives stated in its prospectus.

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ities such as stocks, bonds, money market instruments and other assets. Mutual funds are operated by professional money managers, who allocate the fund's investments and attempt to produce capital gains and/or income for the fund's investors. <span>A mutual fund's portfolio is structured and maintained to match the investment objectives stated in its prospectus. <span><body><html>

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Mutual Fund
What is a 'Mutual Fund' <span>A mutual fund is an investment vehicle made up of a pool of moneys collected from many investors for the purpose of investing in securities such as stocks, bonds, money market instruments and other assets. Mutual funds are operated by professional money managers, who allocate the fund's investments and attempt to produce capital gains and/or income for the fund's investors. A mutual fund's portfolio is structured and maintained to match the investment objectives stated in its prospectus. BREAKING DOWN 'Mutual Fund' Mutual funds give small or individual investors access to professionally managed portfolios of equities, bonds and oth

#### Annotation 1748503760140

 #has-images #reading-volante #volante-session Equity, fixed-income, currency, and commodity are said to trade in cash markets or spot markets and their prices are sometimes referred to as cash prices or spot prices , though we usually just refer to them as stock prices, bond prices, exchange rates, and commodity prices. These markets exist around the world and receive much attention in the financial and mainstream media. Hence, they are relatively familiar not only to financial experts but also to the general population.

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rading the basic assets of an economy. Equity and fixed-income securities are claims on the assets of a company. Currencies are the monetary units issued by a government or central bank. Commodities are natural resources, such as oil or gold. <span>These underlying assets are said to trade in cash markets or spot markets and their prices are sometimes referred to as cash prices or spot prices , though we usually just refer to them as stock prices, bond prices, exchange rates, and commodity prices. These markets exist around the world and receive much attention in the financial and mainstream media. Hence, they are relatively familiar not only to financial experts but also to the general population. <span><body><html>

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Reading 56  Derivative Markets and Instruments (Intro)
Equity, fixed-income, currency, and commodity markets are facilities for trading the basic assets of an economy. Equity and fixed-income securities are claims on the assets of a company. Currencies are the monetary units issued by a government or central bank. Commodities are natural resources, such as oil or gold. These underlying assets are said to trade in cash markets or spot markets and their prices are sometimes referred to as cash prices or spot prices , though we usually just refer to them as stock prices, bond prices, exchange rates, and commodity prices. These markets exist around the world and receive much attention in the financial and mainstream media. Hence, they are relatively familiar not only to financial experts but also to the general population. Somewhat less familiar are the markets for derivatives , which are financial instruments that derive their values from the performance of these basic assets. This reading is an overview of derivatives. Subsequent readings will explore many aspects of derivatives and their uses in depth. Among the questions that this first reading will address are the following: What are the defining characteristics of derivatives? What purposes do derivatives serve for financial market participants? What is the distinction between a forward commitment and a contingent claim? What are forward and futures contracts? In what ways are they alike and in what ways are they different? What are swaps? What are call and put options and how do they differ from forwards, futures, and swaps? What are credit derivatives and what are the various types of credit derivatives? What are the benefits of derivatives? What are some criticisms of derivatives and to what extent are they well founded? What is arbitrage and what role does it play in a well-functioning financial market? This reading is organized as follows. Section 2 explores the definition and uses of derivatives and establishes some basic terminology. Section 3 describes derivati

#### Annotation 1748510838028

 #board-of-directors-and-committees #composition-of-the-bod #has-images #puerquito-session #reading-puerquito-verde In a classified or staggered board, directors are typically elected in two or more classes, serving terms greater than one year.

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In a classified or staggered board, directors are typically elected in two or more classes, serving terms greater than one year. Proponents argue that by staggering the election of directors, a certain level of continuity and skill is maintained. However, staggered terms make it more difficult for shareholders to

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Subject 5. Board of Directors and Committees
Composition of the Board of Directors A board of directors is the central pillar of the governance structure, serves as the link between shareholders and managers, and acts as the shareholders' internal monitoring tool within the company. The structure and composition of a board of directors vary across countries and companies. The number of directors may vary, and the board typically includes a mix of expertise levels, backgrounds, and competencies. Board members must have extensive experience in business, education, the professions and/or public service so they can make informed decisions about the company's future. If directors lack the skills, knowledge and expertise to conduct a meaningful review of the company's activities, and are unable to conduct in-depth evaluations of the issues affecting the company's business, they are more likely to defer to management when making decisions. Executive (internal) directors are employed by the company and are typically members of senior management. Non-executive (external) directors have limited involvement in daily operations but serve an important oversight role. In a classified or staggered board, directors are typically elected in two or more classes, serving terms greater than one year. Proponents argue that by staggering the election of directors, a certain level of continuity and skill is maintained. However, staggered terms make it more difficult for shareholders to make fundamental changes to the composition and behavior of the board and could result in a permanent impairment of long-term shareholder value. Functions and Responsibilities of the Board Two primary duties of a board of directors are duty of care and duty of loyalty. Among other responsibilities, the

#### Annotation 1748512410892

 #board-of-directors-and-committees #composition-of-the-bod #has-images #puerquito-session #reading-puerquito-verde Proponents of classified or staggered boards argue that by staggering the election of directors, a certain level of continuity and skill is maintained.

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In a classified or staggered board, directors are typically elected in two or more classes, serving terms greater than one year. Proponents argue that by staggering the election of directors, a certain level of continuity and skill is maintained. However, staggered terms make it more difficult for shareholders to make fundamental changes to the composition and behavior of the board and could result in a permanent impairment of l

#### Original toplevel document

Subject 5. Board of Directors and Committees
Composition of the Board of Directors A board of directors is the central pillar of the governance structure, serves as the link between shareholders and managers, and acts as the shareholders' internal monitoring tool within the company. The structure and composition of a board of directors vary across countries and companies. The number of directors may vary, and the board typically includes a mix of expertise levels, backgrounds, and competencies. Board members must have extensive experience in business, education, the professions and/or public service so they can make informed decisions about the company's future. If directors lack the skills, knowledge and expertise to conduct a meaningful review of the company's activities, and are unable to conduct in-depth evaluations of the issues affecting the company's business, they are more likely to defer to management when making decisions. Executive (internal) directors are employed by the company and are typically members of senior management. Non-executive (external) directors have limited involvement in daily operations but serve an important oversight role. In a classified or staggered board, directors are typically elected in two or more classes, serving terms greater than one year. Proponents argue that by staggering the election of directors, a certain level of continuity and skill is maintained. However, staggered terms make it more difficult for shareholders to make fundamental changes to the composition and behavior of the board and could result in a permanent impairment of long-term shareholder value. Functions and Responsibilities of the Board Two primary duties of a board of directors are duty of care and duty of loyalty. Among other responsibilities, the

#### Annotation 1748514770188

 #board-of-directors-and-committees #composition-of-the-bod #has-images #puerquito-session #reading-puerquito-verde Staggered terms of Boards make it more difficult for shareholders to make fundamental changes to the composition and behavior of the board and could result in a permanent impairment of long-term shareholder value.

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or staggered board, directors are typically elected in two or more classes, serving terms greater than one year. Proponents argue that by staggering the election of directors, a certain level of continuity and skill is maintained. However, <span>staggered terms make it more difficult for shareholders to make fundamental changes to the composition and behavior of the board and could result in a permanent impairment of long-term shareholder value. <span><body><html>

#### Original toplevel document

Subject 5. Board of Directors and Committees
Composition of the Board of Directors A board of directors is the central pillar of the governance structure, serves as the link between shareholders and managers, and acts as the shareholders' internal monitoring tool within the company. The structure and composition of a board of directors vary across countries and companies. The number of directors may vary, and the board typically includes a mix of expertise levels, backgrounds, and competencies. Board members must have extensive experience in business, education, the professions and/or public service so they can make informed decisions about the company's future. If directors lack the skills, knowledge and expertise to conduct a meaningful review of the company's activities, and are unable to conduct in-depth evaluations of the issues affecting the company's business, they are more likely to defer to management when making decisions. Executive (internal) directors are employed by the company and are typically members of senior management. Non-executive (external) directors have limited involvement in daily operations but serve an important oversight role. In a classified or staggered board, directors are typically elected in two or more classes, serving terms greater than one year. Proponents argue that by staggering the election of directors, a certain level of continuity and skill is maintained. However, staggered terms make it more difficult for shareholders to make fundamental changes to the composition and behavior of the board and could result in a permanent impairment of long-term shareholder value. Functions and Responsibilities of the Board Two primary duties of a board of directors are duty of care and duty of loyalty. Among other responsibilities, the

#### Flashcard 1748520013068

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Question
Stakeholder relationships and corporate governance are continually shaped and influenced by a variety of [...] and [...] factors.
Market

Non-Market

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Stakeholder relationships and corporate governance are continually shaped and influenced by a variety of market and non-market factors.

#### Original toplevel document

Subject 6. Factors Affecting Stakeholder Relationships and Corporate Governance
Stakeholder relationships and corporate governance are continually shaped and influenced by a variety of market and non-market factors. Market Factors Shareholder engagement involves a company's interactions with its shareholders. It can provide benefits that include building support against short-te

#### Annotation 1748522372364

 #has-images #portfolio-session #reading-tiburon All businesses and investors manage risk in the choices they make, even if not conciously. Business and investing are about allocating resources and capital to chosen risks. In their decision process, businesses and investors may take steps to avoid some risks, pursue the risks that provide the highest rewards, and measure and mitigate their exposure to these risks as necessary. Risk management processes and tools make difficult business and financial problems easier to address.

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All businesses and investors manage risk in the choices they make, even if not conciously. Business and investing are about allocating resources and capital to chosen risks. In their decision process, businesses and investors may take steps to avoid some risks, pursue the risks that provide the highest rewards, and measure and mitigate their exposure to these risks as necessary. Risk management processes and tools make difficult business and financial problems easier to address. Risk is not just a matter of fate; it can be actively controled with decisions, within a risk management framework . Risk is an integral part of the business or investment process. Eve

#### Original toplevel document

Reading 40  Risk Management: An Introduction Intro

#### Annotation 1748523945228

 #has-images #portfolio-session #reading-tiburon Risk is not just a matter of fate; it can be actively controled with decisions, within a risk management framework. Risk is an integral part of the business or investment process.

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to avoid some risks, pursue the risks that provide the highest rewards, and measure and mitigate their exposure to these risks as necessary. Risk management processes and tools make difficult business and financial problems easier to address. <span>Risk is not just a matter of fate; it can be actively controled with decisions, within a risk management framework . Risk is an integral part of the business or investment process. Even in the earliest models of modern portfolio theory, such as mean–variance portfolio optimization and the capital asset pricing model, investment return is linked directly to risk bu

#### Original toplevel document

Reading 40  Risk Management: An Introduction Intro

#### Annotation 1748525518092

 #has-images #portfolio-session #reading-tiburon Even in the earliest models of modern portfolio theory, such as mean–variance portfolio optimization and the capital asset pricing model, investment return is linked directly to risk but requires that risk be managed optimally.

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difficult business and financial problems easier to address. Risk is not just a matter of fate; it can be actively controled with decisions, within a risk management framework . Risk is an integral part of the business or investment process. <span>Even in the earliest models of modern portfolio theory, such as mean–variance portfolio optimization and the capital asset pricing model, investment return is linked directly to risk but requires that risk be managed optimally. Proper identification and measurement of risk, and keeping risks aligned with the goals of the enterprise, are key factors in managing businesses and investments. Good risk management r

#### Original toplevel document

Reading 40  Risk Management: An Introduction Intro

#### Annotation 1748527090956

 #has-images #portfolio-session #reading-tiburon Proper identification and measurement of risk, and keeping risks aligned with the goals of the enterprise, are key factors in managing businesses and investments. Good risk management results in a higher chance of a preferred outcome—more value for the company or portfolio or more utility for the individual.

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tment process. Even in the earliest models of modern portfolio theory, such as mean–variance portfolio optimization and the capital asset pricing model, investment return is linked directly to risk but requires that risk be managed optimally. <span>Proper identification and measurement of risk, and keeping risks aligned with the goals of the enterprise, are key factors in managing businesses and investments. Good risk management results in a higher chance of a preferred outcome—more value for the company or portfolio or more utility for the individual. <span><body><html>

#### Original toplevel document

Reading 40  Risk Management: An Introduction Intro

#### Flashcard 1748528663820

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Question
This reading talks about the risk management of [...] and [...] risk management.
enterprises in general

portfolio

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This reading takes talks about the risk management of enterprises in general and portfolio risk management . The principles underlying portfolio risk management are generally applicable to the risk management of financial and non-financial institutions as well.

#### Original toplevel document

Reading 40  Risk Management: An Introduction Intro

#### Annotation 1748531023116

 #has-images #portfolio-session #reading-tiburon The principles underlying portfolio risk management are generally applicable to the risk management of financial and non-financial institutions as well.

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This reading takes talks about the risk management of enterprises in general and portfolio risk management . The principles underlying portfolio risk management are generally applicable to the risk management of financial and non-financial institutions as well.

#### Original toplevel document

Reading 40  Risk Management: An Introduction Intro

#### Annotation 1748532595980

 #has-images #portfolio-session #reading-tiburon Although many large entities formally practice risk management, most individuals practice it informally and disorderly, oftentimes responding to risk events after they occur, and they ignore more subtle risks often.

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The concept of risk management applies to individuals. Although many large entities formally practice risk management, most individuals practice it informally and disorderly, oftentimes responding to risk events after they occur, and they ignore more subtle risks often. Many individuals simply do not view risk management as a formal, systematic process that would help them achieve not only their financial goals but also the ultimate end result of happi

#### Original toplevel document

Reading 40  Risk Management: An Introduction Intro

#### Flashcard 1748534168844

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Question
Does the concept of risk management apply to companies and portfolios only?
No, it also applies to individuals.

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The concept of risk management applies to individuals. Although many large entities formally practice risk management, most individuals practice it informally and disorderly, oftentimes responding to risk events after they occur, and they i

#### Original toplevel document

Reading 40  Risk Management: An Introduction Intro

#### Annotation 1748536528140

 #has-images #portfolio-session #reading-tiburon Although often viewed as defensive, risk management is a valuable offensive weapon in the manager’s arsenal. In the quest for preferred outcomes, such as higher profit, returns, or share price, management does not usually get to choose the outcomes but does choose the risks it takes in pursuit of those outcomes.

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Although often viewed as defensive, risk management is a valuable offensive weapon in the manager’s arsenal. In the quest for preferred outcomes, such as higher profit, returns, or share price, management does not usually get to choose the outcomes but does choose the risks it takes in pursuit of those outcomes. The choice of which risks to undertake through the allocation of its scarce resources is the key tool available to management. An organization with a comprehensive risk management cultu

#### Original toplevel document

Reading 40  Risk Management: An Introduction Intro

#### Annotation 1748538101004

 #has-images #portfolio-session #reading-tiburon The choice of which risks to undertake through the allocation of its scarce resources is the key tool available to management. An organization with a comprehensive risk management culture in place, in which risk is integral to every key strategy and decision, should perform better in the long-term, in good times and bad, as a result of better decision making.

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sive weapon in the manager’s arsenal. In the quest for preferred outcomes, such as higher profit, returns, or share price, management does not usually get to choose the outcomes but does choose the risks it takes in pursuit of those outcomes. <span>The choice of which risks to undertake through the allocation of its scarce resources is the key tool available to management. An organization with a comprehensive risk management culture in place, in which risk is integral to every key strategy and decision, should perform better in the long-term, in good times and bad, as a result of better decision making. <span><body><html>

#### Original toplevel document

Reading 40  Risk Management: An Introduction Intro

#### Annotation 1748539936012

 #has-images #investopedia Credit risk refers to the risk that a borrower may not repay a loan and that the lender may lose the principal of the loan or the interest associated with it.

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Credit risk refers to the risk that a borrower may not repay a loan and that the lender may lose the principal of the loan or the interest associated with it. Credit risk arises because borrowers expect to use future cash flows to pay current debts; it's almost never possible to ensure that borrowers will definitely have the funds to repay th

#### Original toplevel document

Credit Risk
What is 'Credit Risk' <span>Credit risk refers to the risk that a borrower may not repay a loan and that the lender may lose the principal of the loan or the interest associated with it. Credit risk arises because borrowers expect to use future cash flows to pay current debts; it's almost never possible to ensure that borrowers will definitely have the funds to repay their debts. Interest payments from the borrower or issuer of a debt obligation are a lender's or investor's reward for assuming credit risk. BREAKING DOWN 'Credit Risk' When lenders offer borrowers mortgages, credit cards or other types of loans, there is always an element of risk that the

#### Annotation 1748541508876

 #has-images #investopedia Credit risk arises because borrowers expect to use future cash flows to pay current debts; it's almost never possible to ensure that borrowers will definitely have the funds to repay their debts. Interest payments from the borrower or issuer of a debt obligation are a lender's or investor's reward for assuming credit risk.

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Credit risk refers to the risk that a borrower may not repay a loan and that the lender may lose the principal of the loan or the interest associated with it. Credit risk arises because borrowers expect to use future cash flows to pay current debts; it's almost never possible to ensure that borrowers will definitely have the funds to repay their debts. Interest payments from the borrower or issuer of a debt obligation are a lender's or investor's reward for assuming credit risk.

#### Original toplevel document

Credit Risk
What is 'Credit Risk' <span>Credit risk refers to the risk that a borrower may not repay a loan and that the lender may lose the principal of the loan or the interest associated with it. Credit risk arises because borrowers expect to use future cash flows to pay current debts; it's almost never possible to ensure that borrowers will definitely have the funds to repay their debts. Interest payments from the borrower or issuer of a debt obligation are a lender's or investor's reward for assuming credit risk. BREAKING DOWN 'Credit Risk' When lenders offer borrowers mortgages, credit cards or other types of loans, there is always an element of risk that the

#### Annotation 1748543081740

 #has-images #paracaidas-session #reading-chris-schoening Readers will be introduced to: The definition of credit risk. The interpretation of credit ratings,The four Cs of traditional credit analysis.Key financial measures and ratios used in credit analysis.

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Readers will be introduced to the definition of credit risk, the interpretation of credit ratings, the four Cs of traditional credit analysis , and key financial measures and ratios used in credit analysis. The reading explains, among other things, how to compare bond issuer creditworthiness within a given industry as well as across industries and how credit risk is priced in the bond mark

#### Original toplevel document

Reading 55  Fundamentals of Credit Analysis (Intro)
With bonds outstanding worth many trillions of US dollars, the debt markets play a critical role in the global economy. Companies and governments raise capital in the debt market to fund current operations; buy equipment; build factories, roads, bridges, airports, and hospitals; acquire assets, and so on. By channeling savings into productive investments, the debt markets facilitate economic growth. Credit analysis has a crucial function in the debt capital markets—efficiently allocating capital by properly assessing credit risk, pricing it accordingly, and repricing it as risks change. How do fixed-income investors determine the riskiness of that debt, and how do they decide what they need to earn as compensation for that risk? This reading covers basic principles of credit analysis, which may be broadly defined as the process by which credit risk is evaluated. Readers will be introduced to the definition of credit risk, the interpretation of credit ratings, the four Cs of traditional credit analysis, and key financial measures and ratios used in credit analysis. The reading explains, among other things, how to compare bond issuer creditworthiness within a given industry as well as across industries and how credit risk is priced in the bond market. The reading focuses primarily on analysis of corporate debt; however, credit analysis of sovereign and non-sovereign, particularly municipal, government bonds will also be addressed. Structured finance, a segment of the debt markets that includes securities backed by pools of assets, such as residential and commercial mortgages as well as other consumer loans, will not be covered here. The key components of credit risk—default probability and loss severity—are introduced in the next section along with such credit-related risks as spread risk, credit migra

#### Annotation 1748544654604

 #has-images #paracaidas-session #reading-chris-schoening The reading explains, among other things, how to compare bond issuer creditworthiness within a given industry as well as across industries and how credit risk is priced in the bond market.

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y> Readers will be introduced to the definition of credit risk, the interpretation of credit ratings, the four Cs of traditional credit analysis , and key financial measures and ratios used in credit analysis. The reading explains, among other things, how to compare bond issuer creditworthiness within a given industry as well as across industries and how credit risk is priced in the bond market. <body><html>

#### Original toplevel document

Reading 55  Fundamentals of Credit Analysis (Intro)
With bonds outstanding worth many trillions of US dollars, the debt markets play a critical role in the global economy. Companies and governments raise capital in the debt market to fund current operations; buy equipment; build factories, roads, bridges, airports, and hospitals; acquire assets, and so on. By channeling savings into productive investments, the debt markets facilitate economic growth. Credit analysis has a crucial function in the debt capital markets—efficiently allocating capital by properly assessing credit risk, pricing it accordingly, and repricing it as risks change. How do fixed-income investors determine the riskiness of that debt, and how do they decide what they need to earn as compensation for that risk? This reading covers basic principles of credit analysis, which may be broadly defined as the process by which credit risk is evaluated. Readers will be introduced to the definition of credit risk, the interpretation of credit ratings, the four Cs of traditional credit analysis, and key financial measures and ratios used in credit analysis. The reading explains, among other things, how to compare bond issuer creditworthiness within a given industry as well as across industries and how credit risk is priced in the bond market. The reading focuses primarily on analysis of corporate debt; however, credit analysis of sovereign and non-sovereign, particularly municipal, government bonds will also be addressed. Structured finance, a segment of the debt markets that includes securities backed by pools of assets, such as residential and commercial mortgages as well as other consumer loans, will not be covered here. The key components of credit risk—default probability and loss severity—are introduced in the next section along with such credit-related risks as spread risk, credit migra

#### Flashcard 1748547013900

Tags
Question

[...] : Presenting an “average” performance history that excludes portfolios whose poor performance was weak enough to result in termination of the firm.

Survivorship Bias

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Misleading practices included: Survivorship Bias : Presenting an “average” performance history that excludes portfolios whose poor performance was weak enough to result in termination of the firm.

#### Original toplevel document

Reading 4  Introduction to the Global Investment Performance Standards (GIPS®)
nvestment performance data. Several performance measurement practices hindered the comparability of performance returns from one firm to another, while others called into question the accuracy and credibility of performance reporting overall. <span>Misleading practices included: Representative Accounts: Selecting a top-performing portfolio to represent the firm’s overall investment results for a specific mandate. Survivorship Bias: Presenting an “average” performance history that excludes portfolios whose poor performance was weak enough to result in termination of the firm. Varying Time Periods: Presenting performance for a selected time period during which the mandate produced excellent returns or out-performed its benchmark—making comparison with other firms’ results difficult or impossible. Making a valid comparison of investment performance among even the most ethical investment management firms was problematic. For example, a pension fund seeking to

#### Annotation 1748554091788

 Subject 1. What is Money? #analyst-notes #has-images #money #reading-agustin-carsten Fiscal policy refers to the use of government expenditure, tax, and borrowing activities to achieve economic goals. Monetary policy refers to central bank activities to control the supply of money. Their goals are maximum employment, stable prices, and moderate long-term interest rates. The Functions of Money Money performs three basic functions. • It serves as a medium of exchange to buy and sell goods and services. Money simplifies and reduces the costs of transactions. In the absence of money, a barter economy would exist. Acquiring a belt, for example, would entail finding a belt maker who happened to want what you had to offer in exchange, making transactions tedious, enormously costly, and inefficient. Money permits us to realize the enormous gains from the specialization, division of labor, and mass-production processes that underlie our modern standard living. It is used as an accounting unit to compare the value and cost of things. As a unit of measurement, like a centimeter, money is used by people to post prices and keep track of revenues and costs. It provides a way of storing value to allow the movement of purchasing power from one period to another. Although it is not the only way of storing value, it is the most liquid of all assets, due to its function as the medium of exchange. However, many methods of holding money do not yield an interest return and the purchase power of money will decline during a time of inflation. The Money Creation Process Reserves are the cash in a bank's vault and deposits at Federal Reserve Banks. Under the fractional reserve banking system, a bank is obligated to hold a minimum amount of reserves to back up its deposits. Reserves held for that purpose, which are expressed as a percentage of a bank's demand deposits, are called required reserves. Therefore, the required reserve ratio is the percentage of a bank's deposits that are required to be held as reserves. Banks create deposits when they make loans; the new deposits created are new money. Example Suppose the required reserve ratio in the U.S. is 20%, and then suppose that you deposit $1,000 cash with Citibank. Citibank keeps$200 of the $1,000 in reserves. The remaining$800 of excess reserves can be loaned out to, say, John. After the loan is made, the money supply increases by $800 (your$1,000 + John's $800). After getting the loan, John deposits the$800 with Bank of America (BOA). BOA keeps $160 of the$800 in reserves and can now loan out $640 to another person. Thus, BOA creates$640 of money supply. The process goes on and on. With each deposit and loan, more money is created. However, the money creation process does not create an infinite amount of money. The money multiplier is the amount by which a change in the monetary base is multiplied to calculate the final change in the money supply. Money Multiplier = 1/b, where b is the required reserve ratio. In our example, b is 0.2, so money multiplier = 1/0.2 = 5. Definitions of Money There are different definitions of money. The two most widely used measures of money in the U.S. are: The M1 Money Supply: cash, checking accounts and traveler's checks. This is the narrowest definition of the money supply. This definition focuses on money's function as a medium of exchange. The M2 Money Supply: M1 + savings + small time deposits + retail money funds. This definition focuses on money's function as a medium of exchange and store of value. Credit cards are not purchasing power, but instead are a convenient means of arranging a loan. Credit is a liability acquired when one borrows funds, while money is a financial asset that provides the holder with future purchasing power. However, the widespread use of credit cards will tend to reduce the average...

#### Annotation 1748562480396

 #analyst-notes #has-images #money #reading-agustin-carsten Fiscal policy refers to the use of government expenditure, tax, and borrowing activities to achieve economic goals. Monetary policy refers to central bank activities to control the supply of money. Their goals are maximum employment, stable prices, and moderate long-term interest rates.

Subject 1. What is Money?
Fiscal policy refers to the use of government expenditure, tax, and borrowing activities to achieve economic goals. Monetary policy refers to central bank activities to control the supply of money. Their goals are maximum employment, stable prices, and moderate long-term interest rates. The Functions of Money Money performs three basic functions. • It serves as a medium of exchange to buy and sell goods and services. Money simplif

#### Annotation 1748564053260

 The Functions of Money #analyst-notes #has-images #money #reading-agustin-carsten The Functions of Money Money performs three basic functions. It serves as a medium of exchange to buy and sell. It is used as an measurement unit to compare the value and cost of things. It provides a way of storing value to allow the movement of purchasing power from one period to another. Although it is not the only way of storing value, it is the most liquid of all assets, due to its function as the medium of exchange. If both Y and V are constant, then the equation indicates that an increase in money supply will lead to a proportional increase in price level. This equation of exchange leads to the quantity theory of money, which hypothesizes that a change in the money supply will cause a proportional change in the price level because velocity and real output are unaffected by the quantity of money.

Subject 1. What is Money?
tax, and borrowing activities to achieve economic goals. Monetary policy refers to central bank activities to control the supply of money. Their goals are maximum employment, stable prices, and moderate long-term interest rates. <span>The Functions of Money Money performs three basic functions. • It serves as a medium of exchange to buy and sell goods and services. Money simplifies and reduces the costs of transactions. In the absence of money, a barter economy would exist. Acquiring a belt, for example, would entail finding a belt maker who happened to want what you had to offer in exchange, making transactions tedious, enormously costly, and inefficient. Money permits us to realize the enormous gains from the specialization, division of labor, and mass-production processes that underlie our modern standard living. It is used as an accounting unit to compare the value and cost of things. As a unit of measurement, like a centimeter, money is used by people to post prices and keep track of revenues and costs. It provides a way of storing value to allow the movement of purchasing power from one period to another. Although it is not the only way of storing value, it is the most liquid of all assets, due to its function as the medium of exchange. However, many methods of holding money do not yield an interest return and the purchase power of money will decline during a time of inflation. If both Y and V are constant, then the equation indicates that an increase in money supply will lead to a proportional increase in price level. This equation of exchange leads to the quantity theory of money, which hypothesizes that a change in the money supply will cause a proportional change in the price level because velocity and real output are unaffected by the quantity of money. The Money Creation Process Reserves are the cash in a bank's vault and deposits at Federal Reserve Banks. Under the fractional reserve banking system,

#### Annotation 1748570344716

 #analyst-notes #has-images #money #reading-agustin-carsten If both Y and V are constant, then the equation indicates that an increase in money supply will lead to a proportional increase in price level. This equation of exchange leads to the quantity theory of money, which hypothesizes that a change in the money supply will cause a proportional change in the price level because velocity and real output are unaffected by the quantity of money.

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s a way of storing value to allow the movement of purchasing power from one period to another. Although it is not the only way of storing value, it is the most liquid of all assets, due to its function as the medium of exchange. <span>If both Y and V are constant, then the equation indicates that an increase in money supply will lead to a proportional increase in price level. This equation of exchange leads to the quantity theory of money, which hypothesizes that a change in the money supply will cause a proportional change in the price level because velocity and real output are unaffected by the quantity of money. <span><body><html>

#### Original toplevel document

Subject 1. What is Money?
tax, and borrowing activities to achieve economic goals. Monetary policy refers to central bank activities to control the supply of money. Their goals are maximum employment, stable prices, and moderate long-term interest rates. <span>The Functions of Money Money performs three basic functions. • It serves as a medium of exchange to buy and sell goods and services. Money simplifies and reduces the costs of transactions. In the absence of money, a barter economy would exist. Acquiring a belt, for example, would entail finding a belt maker who happened to want what you had to offer in exchange, making transactions tedious, enormously costly, and inefficient. Money permits us to realize the enormous gains from the specialization, division of labor, and mass-production processes that underlie our modern standard living. It is used as an accounting unit to compare the value and cost of things. As a unit of measurement, like a centimeter, money is used by people to post prices and keep track of revenues and costs. It provides a way of storing value to allow the movement of purchasing power from one period to another. Although it is not the only way of storing value, it is the most liquid of all assets, due to its function as the medium of exchange. However, many methods of holding money do not yield an interest return and the purchase power of money will decline during a time of inflation. If both Y and V are constant, then the equation indicates that an increase in money supply will lead to a proportional increase in price level. This equation of exchange leads to the quantity theory of money, which hypothesizes that a change in the money supply will cause a proportional change in the price level because velocity and real output are unaffected by the quantity of money. The Money Creation Process Reserves are the cash in a bank's vault and deposits at Federal Reserve Banks. Under the fractional reserve banking system,

#### Annotation 1748571917580

 #analyst-notes #has-images #money #reading-agustin-carsten Money performs three basic functions. It serves as a medium of exchange to buy and sell. It is used as an measurement (Accounting) unit to compare the value and cost of things. It provides a way of storing value to allow the movement of purchasing power from one period to another. Although it is not the only way of storing value, it is the most liquid of all assets, due to its function as the medium of exchange.

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The Functions of Money Money performs three basic functions. It serves as a medium of exchange to buy and sell. It is used as an measurement unit to compare the value and cost of things. It provides a way of storing value to allow the movement of purchasing power from one period to another. Although it is not the only way of storing value, it is the most liquid of all assets, due to its function as the medium of exchange. If both Y and V are constant, then the equation indicates that an increase in money supply will lead to a proportional increase in price level. This equation of exch

#### Original toplevel document

Subject 1. What is Money?
tax, and borrowing activities to achieve economic goals. Monetary policy refers to central bank activities to control the supply of money. Their goals are maximum employment, stable prices, and moderate long-term interest rates. <span>The Functions of Money Money performs three basic functions. • It serves as a medium of exchange to buy and sell goods and services. Money simplifies and reduces the costs of transactions. In the absence of money, a barter economy would exist. Acquiring a belt, for example, would entail finding a belt maker who happened to want what you had to offer in exchange, making transactions tedious, enormously costly, and inefficient. Money permits us to realize the enormous gains from the specialization, division of labor, and mass-production processes that underlie our modern standard living. It is used as an accounting unit to compare the value and cost of things. As a unit of measurement, like a centimeter, money is used by people to post prices and keep track of revenues and costs. It provides a way of storing value to allow the movement of purchasing power from one period to another. Although it is not the only way of storing value, it is the most liquid of all assets, due to its function as the medium of exchange. However, many methods of holding money do not yield an interest return and the purchase power of money will decline during a time of inflation. If both Y and V are constant, then the equation indicates that an increase in money supply will lead to a proportional increase in price level. This equation of exchange leads to the quantity theory of money, which hypothesizes that a change in the money supply will cause a proportional change in the price level because velocity and real output are unaffected by the quantity of money. The Money Creation Process Reserves are the cash in a bank's vault and deposits at Federal Reserve Banks. Under the fractional reserve banking system,

#### Annotation 1748575325452

 #analyst-notes #has-images #money #reading-agustin-carsten The Money Creation Process Reserves are the cash in a bank's vault and deposits at Federal Reserve Banks. Under the fractional reserve banking system, a bank is obligated to hold a minimum amount of reserves to back up its deposits. Reserves held for that purpose, which are expressed as a percentage of a bank's demand deposits, are called required reserves. Therefore, the required reserve ratio is the percentage of a bank's deposits that are required to be held as reserves. Banks create deposits when they make loans; the new deposits created are new money. Example Suppose the required reserve ratio in the U.S. is 20%, and then suppose that you deposit $1,000 cash with Citibank. Citibank keeps$200 of the $1,000 in reserves. The remaining$800 of excess reserves can be loaned out to, say, John. After the loan is made, the money supply increases by $800 (your$1,000 + John's $800). After getting the loan, John deposits the$800 with Bank of America (BOA). BOA keeps $160 of the$800 in reserves and can now loan out $640 to another person. Thus, BOA creates$640 of money supply. The process goes on and on. With each deposit and loan, more money is created. However, the money creation process does not create an infinite amount of money. The money multiplier is the amount by which a change in the monetary base is multiplied to calculate the final change in the money supply. Money Multiplier = 1/b, where b is the required reserve ratio. In our example, b is 0.2, so money multiplier = 1/0.2 = 5.

Subject 1. What is Money?
liquid of all assets, due to its function as the medium of exchange. However, many methods of holding money do not yield an interest return and the purchase power of money will decline during a time of inflation. <span>The Money Creation Process Reserves are the cash in a bank's vault and deposits at Federal Reserve Banks. Under the fractional reserve banking system, a bank is obligated to hold a minimum amount of reserves to back up its deposits. Reserves held for that purpose, which are expressed as a percentage of a bank's demand deposits, are called required reserves. Therefore, the required reserve ratio is the percentage of a bank's deposits that are required to be held as reserves. Banks create deposits when they make loans; the new deposits created are new money. Example Suppose the required reserve ratio in the U.S. is 20%, and then suppose that you deposit $1,000 cash with Citibank. Citibank keeps$200 of the $1,000 in reserves. The remaining$800 of excess reserves can be loaned out to, say, John. After the loan is made, the money supply increases by $800 (your$1,000 + John's $800). After getting the loan, John deposits the$800 with Bank of America (BOA). BOA keeps $160 of the$800 in reserves and can now loan out $640 to another person. Thus, BOA creates$640 of money supply. The process goes on and on. With each deposit and loan, more money is created. However, the money creation process does not create an infinite amount of money. The money multiplier is the amount by which a change in the monetary base is multiplied to calculate the final change in the money supply. Money Multiplier = 1/b, where b is the required reserve ratio. In our example, b is 0.2, so money multiplier = 1/0.2 = 5. Definitions of Money There are different definitions of money. The two most widely used measures of money in the U.S. are: The M1 Money Su

#### Annotation 1748579781900

 #analyst-notes #has-images #money #reading-agustin-carsten The money multiplier is the amount by which a change in the monetary base is multiplied to calculate the final change in the money supply. Money Multiplier = 1/b, where b is the required reserve ratio. In our example, b is 0.2, so money multiplier = 1/0.2 = 5.

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n out $640 to another person. Thus, BOA creates$640 of money supply. The process goes on and on. With each deposit and loan, more money is created. However, the money creation process does not create an infinite amount of money. <span>The money multiplier is the amount by which a change in the monetary base is multiplied to calculate the final change in the money supply. Money Multiplier = 1/b, where b is the required reserve ratio. In our example, b is 0.2, so money multiplier = 1/0.2 = 5. <span><body><html>

#### Original toplevel document

Subject 1. What is Money?
liquid of all assets, due to its function as the medium of exchange. However, many methods of holding money do not yield an interest return and the purchase power of money will decline during a time of inflation. <span>The Money Creation Process Reserves are the cash in a bank's vault and deposits at Federal Reserve Banks. Under the fractional reserve banking system, a bank is obligated to hold a minimum amount of reserves to back up its deposits. Reserves held for that purpose, which are expressed as a percentage of a bank's demand deposits, are called required reserves. Therefore, the required reserve ratio is the percentage of a bank's deposits that are required to be held as reserves. Banks create deposits when they make loans; the new deposits created are new money. Example Suppose the required reserve ratio in the U.S. is 20%, and then suppose that you deposit $1,000 cash with Citibank. Citibank keeps$200 of the $1,000 in reserves. The remaining$800 of excess reserves can be loaned out to, say, John. After the loan is made, the money supply increases by $800 (your$1,000 + John's $800). After getting the loan, John deposits the$800 with Bank of America (BOA). BOA keeps $160 of the$800 in reserves and can now loan out $640 to another person. Thus, BOA creates$640 of money supply. The process goes on and on. With each deposit and loan, more money is created. However, the money creation process does not create an infinite amount of money. The money multiplier is the amount by which a change in the monetary base is multiplied to calculate the final change in the money supply. Money Multiplier = 1/b, where b is the required reserve ratio. In our example, b is 0.2, so money multiplier = 1/0.2 = 5. Definitions of Money There are different definitions of money. The two most widely used measures of money in the U.S. are: The M1 Money Su

#### Annotation 1748582141196

 #analyst-notes #has-images #money #reading-agustin-carsten Reserves are the cash in a bank's vault and deposits at Federal Reserve Banks. Under the fractional reserve banking system, a bank is obligated to hold a minimum amount of reserves to back up its deposits. Reserves held for that purpose, which are expressed as a percentage of a bank's demand deposits, are called required reserves. Therefore, the required reserve ratio is the percentage of a bank's deposits that are required to be held as reserves. Banks create deposits when they make loans; the new deposits created are new money.

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#### Annotation 1748603374860

 #globo-terraqueo-session #has-images #reading-fajo-de-pounds Current estimates put daily turnover at approximately USD4 trillion for 2010

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Current estimates put daily turnover at approximately USD4 trillion for 2010. This is about 10 to 15 times larger than daily turnover in global fixed-income markets and about 50 times larger than global turnover in equities.

#### Original toplevel document

Reading 20  Currency Exchange Rates Introduction

#### Annotation 1748605734156

 #globo-terraqueo-session #has-images #reading-fajo-de-pounds Daily turnover if FX is about 10 to 15 times larger than daily turnover in global fixed-income markets and about 50 times larger than global turnover in equities.

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Current estimates put daily turnover at approximately USD4 trillion for 2010. This is about 10 to 15 times larger than daily turnover in global fixed-income markets and about 50 times larger than global turnover in equities.

#### Original toplevel document

Reading 20  Currency Exchange Rates Introduction

#### Annotation 1748608355596

 #has-images #puerquito-session #reading-garrafon-lleno-de-monedas-de-diez-pesos The cost of capital is not observable but, rather, must be estimated.

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Cost of capital estimation is a challenging task. The cost of capital is not observable but, rather, must be estimated. Arriving at a cost of capital estimate requires a host of assumptions and estimates.

#### Original toplevel document

Reading 36  Cost of Capital 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 company invests in projects that produce a return in excess of the cost of capital, the company has created value; in contrast, if the company invests in projects whose returns are less than the cost of capital, the company has actually destroyed value. Therefore, the estimation of the cost of capital is a central issue in corporate financial management. For the analyst seeking to evaluate a company’s investment program and its competitive position, an accurate estimate of a company’s cost of capital is important as well. Cost of capital estimation is a challenging task. As we have already implied, the cost of capital is not observable but, rather, must be estimated. Arriving at a cost of capital estimate requires a host of assumptions and estimates. Another challenge is that the cost of capital that is appropriately applied to a specific investment depends on the characteristics of that investment: The riskier the investment’s cash flows, the greater its cost of capital. In reality, a company must estimate project-specific costs of capital. What is often done, however, is to estimate the cost of capital for the company as a whole and then adjust this overall corporate cost of capital upward or downward to reflect the risk of the contemplated project relative to the company’s average project. This reading is organized as follows: In the next section, we introduce the cost of capital and its basic computation. Section 3 presents a selection of methods for estimat

#### Annotation 1748609928460

 #has-images #puerquito-session #reading-garrafon-lleno-de-monedas-de-diez-pesos Arriving at a cost of capital estimate requires a host of assumptions and estimates.

#### Parent (intermediate) annotation

Open it
Cost of capital estimation is a challenging task. The cost of capital is not observable but, rather, must be estimated. Arriving at a cost of capital estimate requires a host of assumptions and estimates.

#### Original toplevel document

Reading 36  Cost of Capital 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 company invests in projects that produce a return in excess of the cost of capital, the company has created value; in contrast, if the company invests in projects whose returns are less than the cost of capital, the company has actually destroyed value. Therefore, the estimation of the cost of capital is a central issue in corporate financial management. For the analyst seeking to evaluate a company’s investment program and its competitive position, an accurate estimate of a company’s cost of capital is important as well. Cost of capital estimation is a challenging task. As we have already implied, the cost of capital is not observable but, rather, must be estimated. Arriving at a cost of capital estimate requires a host of assumptions and estimates. Another challenge is that the cost of capital that is appropriately applied to a specific investment depends on the characteristics of that investment: The riskier the investment’s cash flows, the greater its cost of capital. In reality, a company must estimate project-specific costs of capital. What is often done, however, is to estimate the cost of capital for the company as a whole and then adjust this overall corporate cost of capital upward or downward to reflect the risk of the contemplated project relative to the company’s average project. This reading is organized as follows: In the next section, we introduce the cost of capital and its basic computation. Section 3 presents a selection of methods for estimat

#### Annotation 1748612812044

 #globo-terraqueo-session #has-images #monetary-policy #money #reading-agustin-carsten A drawbacks to a barter economy is that the exchange of goods for other goods would require both economic agents in the transaction to want what the other is selling. This means that there has to be a double coincidence of wants

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There are many drawbacks to a barter economy. First, the exchange of goods for other goods (or services) would require both economic agents in the transaction to want what the other is selling. This means that there has to be a double coincidence of wants . It might also be impossible to undertake transactions where the goods are indivisible—that is, where one agent wishes to buy a certain amount of another’s goods, but that a

#### Original toplevel document

Money
To understand the nature, role, and development of money in modern economies, it is useful to think about a world without money—where to purchase any good or service, an individual would have to “pay” with another good or service. An economy where such economic agents as households, corporations, and even governments pay for goods and services in this way is known as a barter economy . There are many drawbacks to such an economy. First, the exchange of goods for other goods (or services) would require both economic agents in the transaction to want what the other is selling. This means that there has to be a double coincidence of wants . It might also be impossible to undertake transactions where the goods are indivisible—that is, where one agent wishes to buy a certain amount of another’s goods, but that agent only has one indivisible unit of another good that is worth more than the good that the agent is trying to buy. Another problem occurs if economic agents do not wish to exchange all of their goods on other goods and services. This may not be a problem, however, when the goods they have to sell can be stored safely so that they retain their value for the future. But if these goods are perishable, they will not be able to store value for their owner. Finally, in a barter economy, there are many measures of value: the price of oranges in terms of pears; of pears in terms of bread; of bread in terms of milk; or of milk in terms of oranges. A barter economy has no common measure of value that would make multiple transactions simple. 2.1.1. The Functions of Money The most generic definition of money is that it is any generally accepted medium of exchange. A medium of exchange is an

#### Annotation 1748615171340

 #globo-terraqueo-session #has-images #monetary-policy #money #reading-agustin-carsten A drawback to a barter economy is that it might also be impossible to undertake transactions where the goods are indivisible—that is, where one agent wishes to buy a certain amount of another’s goods, but that agent only has one indivisible unit of another good that is worth more than the good that the agent is trying to buy.

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economy. First, the exchange of goods for other goods (or services) would require both economic agents in the transaction to want what the other is selling. This means that there has to be a double coincidence of wants . <span>It might also be impossible to undertake transactions where the goods are indivisible—that is, where one agent wishes to buy a certain amount of another’s goods, but that agent only has one indivisible unit of another good that is worth more than the good that the agent is trying to buy. Another problem occurs if economic agents do not wish to exchange all of their goods on other goods and services. This may not be a problem, however, when the goods they have

#### Original toplevel document

Money
To understand the nature, role, and development of money in modern economies, it is useful to think about a world without money—where to purchase any good or service, an individual would have to “pay” with another good or service. An economy where such economic agents as households, corporations, and even governments pay for goods and services in this way is known as a barter economy . There are many drawbacks to such an economy. First, the exchange of goods for other goods (or services) would require both economic agents in the transaction to want what the other is selling. This means that there has to be a double coincidence of wants . It might also be impossible to undertake transactions where the goods are indivisible—that is, where one agent wishes to buy a certain amount of another’s goods, but that agent only has one indivisible unit of another good that is worth more than the good that the agent is trying to buy. Another problem occurs if economic agents do not wish to exchange all of their goods on other goods and services. This may not be a problem, however, when the goods they have to sell can be stored safely so that they retain their value for the future. But if these goods are perishable, they will not be able to store value for their owner. Finally, in a barter economy, there are many measures of value: the price of oranges in terms of pears; of pears in terms of bread; of bread in terms of milk; or of milk in terms of oranges. A barter economy has no common measure of value that would make multiple transactions simple. 2.1.1. The Functions of Money The most generic definition of money is that it is any generally accepted medium of exchange. A medium of exchange is an

#### Annotation 1748617530636

 #globo-terraqueo-session #has-images #monetary-policy #money #reading-agustin-carsten A problem occurs in a Barter Economy if economic agents do not wish to exchange all of their goods on other goods and services. This may not be a problem, however, when the goods they have to sell can be stored safely so that they retain their value for the future. But if these goods are perishable, they will not be able to store value for their owner.

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re the goods are indivisible—that is, where one agent wishes to buy a certain amount of another’s goods, but that agent only has one indivisible unit of another good that is worth more than the good that the agent is trying to buy. <span>Another problem occurs if economic agents do not wish to exchange all of their goods on other goods and services. This may not be a problem, however, when the goods they have to sell can be stored safely so that they retain their value for the future. But if these goods are perishable, they will not be able to store value for their owner. Finally, in a barter economy, there are many measures of value: the price of oranges in terms of pears; of pears in terms of bread; of bread in terms of milk; or of milk in t

#### Original toplevel document

Money
To understand the nature, role, and development of money in modern economies, it is useful to think about a world without money—where to purchase any good or service, an individual would have to “pay” with another good or service. An economy where such economic agents as households, corporations, and even governments pay for goods and services in this way is known as a barter economy . There are many drawbacks to such an economy. First, the exchange of goods for other goods (or services) would require both economic agents in the transaction to want what the other is selling. This means that there has to be a double coincidence of wants . It might also be impossible to undertake transactions where the goods are indivisible—that is, where one agent wishes to buy a certain amount of another’s goods, but that agent only has one indivisible unit of another good that is worth more than the good that the agent is trying to buy. Another problem occurs if economic agents do not wish to exchange all of their goods on other goods and services. This may not be a problem, however, when the goods they have to sell can be stored safely so that they retain their value for the future. But if these goods are perishable, they will not be able to store value for their owner. Finally, in a barter economy, there are many measures of value: the price of oranges in terms of pears; of pears in terms of bread; of bread in terms of milk; or of milk in terms of oranges. A barter economy has no common measure of value that would make multiple transactions simple. 2.1.1. The Functions of Money The most generic definition of money is that it is any generally accepted medium of exchange. A medium of exchange is an

#### Annotation 1748619889932

 #globo-terraqueo-session #has-images #monetary-policy #money #reading-agustin-carsten Finally, in a barter economy, there are many measures of value: the price of oranges in terms of pears; of pears in terms of bread; of bread in terms of milk; or of milk in terms of oranges.

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ces. This may not be a problem, however, when the goods they have to sell can be stored safely so that they retain their value for the future. But if these goods are perishable, they will not be able to store value for their owner. <span>Finally, in a barter economy, there are many measures of value: the price of oranges in terms of pears; of pears in terms of bread; of bread in terms of milk; or of milk in terms of oranges. A barter economy has no common measure of value that would make multiple transactions simple. <span><body><html>

#### Original toplevel document

Money
To understand the nature, role, and development of money in modern economies, it is useful to think about a world without money—where to purchase any good or service, an individual would have to “pay” with another good or service. An economy where such economic agents as households, corporations, and even governments pay for goods and services in this way is known as a barter economy . There are many drawbacks to such an economy. First, the exchange of goods for other goods (or services) would require both economic agents in the transaction to want what the other is selling. This means that there has to be a double coincidence of wants . It might also be impossible to undertake transactions where the goods are indivisible—that is, where one agent wishes to buy a certain amount of another’s goods, but that agent only has one indivisible unit of another good that is worth more than the good that the agent is trying to buy. Another problem occurs if economic agents do not wish to exchange all of their goods on other goods and services. This may not be a problem, however, when the goods they have to sell can be stored safely so that they retain their value for the future. But if these goods are perishable, they will not be able to store value for their owner. Finally, in a barter economy, there are many measures of value: the price of oranges in terms of pears; of pears in terms of bread; of bread in terms of milk; or of milk in terms of oranges. A barter economy has no common measure of value that would make multiple transactions simple. 2.1.1. The Functions of Money The most generic definition of money is that it is any generally accepted medium of exchange. A medium of exchange is an

#### Annotation 1748621462796

 #globo-terraqueo-session #has-images #monetary-policy #money #reading-agustin-carsten A barter economy has no common measure of value that would make multiple transactions simple.

#### Parent (intermediate) annotation

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store value for their owner. Finally, in a barter economy, there are many measures of value: the price of oranges in terms of pears; of pears in terms of bread; of bread in terms of milk; or of milk in terms of oranges. <span>A barter economy has no common measure of value that would make multiple transactions simple. <span><body><html>

#### Original toplevel document

Money
To understand the nature, role, and development of money in modern economies, it is useful to think about a world without money—where to purchase any good or service, an individual would have to “pay” with another good or service. An economy where such economic agents as households, corporations, and even governments pay for goods and services in this way is known as a barter economy . There are many drawbacks to such an economy. First, the exchange of goods for other goods (or services) would require both economic agents in the transaction to want what the other is selling. This means that there has to be a double coincidence of wants . It might also be impossible to undertake transactions where the goods are indivisible—that is, where one agent wishes to buy a certain amount of another’s goods, but that agent only has one indivisible unit of another good that is worth more than the good that the agent is trying to buy. Another problem occurs if economic agents do not wish to exchange all of their goods on other goods and services. This may not be a problem, however, when the goods they have to sell can be stored safely so that they retain their value for the future. But if these goods are perishable, they will not be able to store value for their owner. Finally, in a barter economy, there are many measures of value: the price of oranges in terms of pears; of pears in terms of bread; of bread in terms of milk; or of milk in terms of oranges. A barter economy has no common measure of value that would make multiple transactions simple. 2.1.1. The Functions of Money The most generic definition of money is that it is any generally accepted medium of exchange. A medium of exchange is an

#### Annotation 1748623035660

 #function-of-money #globo-terraqueo-session #has-images #monetary-policy #money #reading-agustin-carsten Because precious metals like gold had a high value relative to their bulk and were not perishable, they could act as a store of wealth .

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Because precious metals like gold had a high value relative to their bulk and were not perishable, they could act as a store of wealth . However, their ability to act as a store of wealth not only depended on the fact that they did not perish physically over time, but also on the belief that others would always value pre

#### Original toplevel document

Money
: the price of oranges in terms of pears; of pears in terms of bread; of bread in terms of milk; or of milk in terms of oranges. A barter economy has no common measure of value that would make multiple transactions simple. <span>2.1.1. The Functions of Money The most generic definition of money is that it is any generally accepted medium of exchange. A medium of exchange is any asset that can be used to purchase goods and services or to repay debts. Money can thus eliminate the debilitating double coincidence of the “wants” problem that exists in a barter economy. When this medium of exchange exists, a farmer wishing to sell wheat for wine does not need to identify a wine producer in search of wheat. Instead, he can sell wheat to those who want wheat in exchange for money. The farmer can then exchange this money for wine with a wine producer, who in turn can exchange that money for the goods or services that she wants. However, for money to act as this liberating medium of exchange, it must possess certain qualities. It must: be readily acceptable, have a known value, be easily divisible, have a high value relative to its weight, and be difficult to counterfeit. Qualities (i) and (ii) are closely related; the medium of exchange will only be acceptable if it has a known value. If the medium of exchange has quality (iii), then it can be used to purchase items of relatively little value and of relatively large value with equal ease. Having a high value relative to its weight is a practical convenience, meaning that people can carry around sufficient wealth for their transaction needs. Finally, if the medium of exchange can be counterfeited easily, then it would soon cease to have a value and would not be readily acceptable as a means of effecting transactions; in other words, it would not satisfy qualities (i) and (ii). Given the qualities that money needs to have, it is clear why precious metals (particularly gold and silver) often fulfilled the role of medium of exchange in early societies, and as recently as the early part of the twentieth century. Precious metals were acceptable as a medium of exchange because they had a known value, were easily divisible, had a high value relative to their weight, and could not be easily counterfeited. Thus, precious metals were capable of acting as a medium of exchange. But they also fulfilled two other useful functions that are essential for the characteristics of money. In a barter economy, it is difficult to store wealth from one year to the next when one’s produce is perishable, or indeed, if it requires large warehouses in which to store it. Because precious metals like gold had a high value relative to their bulk and were not perishable, they could act as a store of wealth . However, their ability to act as a store of wealth not only depended on the fact that they did not perish physically over time, but also on the belief that others would always value precious metals. The value from year to year of precious metals depended on people’s continued demand for them in ornaments, jewellery, and so on. For example, people were willing to use gold as a store of wealth because they believed that it would remain highly valued. However, if gold became less valuable to people relative to other goods and services year after year it would not be able to fulfill its role as a store of value , and as such might also lose its status as a medium of exchange. Another important characteristic of money is that it can be used as a universal unit of account. As such, it can create a single unitary measure of value for all goods and services. In an economy where gold and silver are the accepted medium of exchange, all prices, debts, and wealth can be recorded in terms of their gold or silver coin exchange value. Money, in its role as a unit of account, drastically reduces the number of prices in an economy compared to barter, which requires that prices be established for a good in terms of all other goods for which it might be exchanged. In summary, money fulfills three important functions, it: acts as a medium of exchange; provides individuals with a way of storing wealth; and provides society with a convenient measure of value and unit of account. 2.1.2. Paper Money and the Money Creation Process Although precious metals like gold and silver fulfilled the required functions of money

#### Annotation 1748624608524

 #function-of-money #globo-terraqueo-session #has-images #monetary-policy #money #reading-agustin-carsten The ability of precious metals, like gold, to act as a store of wealth not only depended on the fact that they did not perish physically over time, but also on the belief that others would always value precious metals.

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Because precious metals like gold had a high value relative to their bulk and were not perishable, they could act as a store of wealth . However, their ability to act as a store of wealth not only depended on the fact that they did not perish physically over time, but also on the belief that others would always value precious metals. The value from year to year of precious metals depended on people’s continued demand for them in ornaments, jewellery, and so on. For example, people were willing to use gold as a store

#### Original toplevel document

Money
: the price of oranges in terms of pears; of pears in terms of bread; of bread in terms of milk; or of milk in terms of oranges. A barter economy has no common measure of value that would make multiple transactions simple. <span>2.1.1. The Functions of Money The most generic definition of money is that it is any generally accepted medium of exchange. A medium of exchange is any asset that can be used to purchase goods and services or to repay debts. Money can thus eliminate the debilitating double coincidence of the “wants” problem that exists in a barter economy. When this medium of exchange exists, a farmer wishing to sell wheat for wine does not need to identify a wine producer in search of wheat. Instead, he can sell wheat to those who want wheat in exchange for money. The farmer can then exchange this money for wine with a wine producer, who in turn can exchange that money for the goods or services that she wants. However, for money to act as this liberating medium of exchange, it must possess certain qualities. It must: be readily acceptable, have a known value, be easily divisible, have a high value relative to its weight, and be difficult to counterfeit. Qualities (i) and (ii) are closely related; the medium of exchange will only be acceptable if it has a known value. If the medium of exchange has quality (iii), then it can be used to purchase items of relatively little value and of relatively large value with equal ease. Having a high value relative to its weight is a practical convenience, meaning that people can carry around sufficient wealth for their transaction needs. Finally, if the medium of exchange can be counterfeited easily, then it would soon cease to have a value and would not be readily acceptable as a means of effecting transactions; in other words, it would not satisfy qualities (i) and (ii). Given the qualities that money needs to have, it is clear why precious metals (particularly gold and silver) often fulfilled the role of medium of exchange in early societies, and as recently as the early part of the twentieth century. Precious metals were acceptable as a medium of exchange because they had a known value, were easily divisible, had a high value relative to their weight, and could not be easily counterfeited. Thus, precious metals were capable of acting as a medium of exchange. But they also fulfilled two other useful functions that are essential for the characteristics of money. In a barter economy, it is difficult to store wealth from one year to the next when one’s produce is perishable, or indeed, if it requires large warehouses in which to store it. Because precious metals like gold had a high value relative to their bulk and were not perishable, they could act as a store of wealth . However, their ability to act as a store of wealth not only depended on the fact that they did not perish physically over time, but also on the belief that others would always value precious metals. The value from year to year of precious metals depended on people’s continued demand for them in ornaments, jewellery, and so on. For example, people were willing to use gold as a store of wealth because they believed that it would remain highly valued. However, if gold became less valuable to people relative to other goods and services year after year it would not be able to fulfill its role as a store of value , and as such might also lose its status as a medium of exchange. Another important characteristic of money is that it can be used as a universal unit of account. As such, it can create a single unitary measure of value for all goods and services. In an economy where gold and silver are the accepted medium of exchange, all prices, debts, and wealth can be recorded in terms of their gold or silver coin exchange value. Money, in its role as a unit of account, drastically reduces the number of prices in an economy compared to barter, which requires that prices be established for a good in terms of all other goods for which it might be exchanged. In summary, money fulfills three important functions, it: acts as a medium of exchange; provides individuals with a way of storing wealth; and provides society with a convenient measure of value and unit of account. 2.1.2. Paper Money and the Money Creation Process Although precious metals like gold and silver fulfilled the required functions of money

#### Annotation 1748627229964

 #function-of-money #globo-terraqueo-session #has-images #monetary-policy #money #reading-agustin-carsten The value from year to year of precious metals depended on people’s continued demand for them in ornaments, jewellery, and so on.

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able, they could act as a store of wealth . However, their ability to act as a store of wealth not only depended on the fact that they did not perish physically over time, but also on the belief that others would always value precious metals. <span>The value from year to year of precious metals depended on people’s continued demand for them in ornaments, jewellery, and so on. For example, people were willing to use gold as a store of wealth because they believed that it would remain highly valued. However, if gold became less valuable to people relative to o

#### Original toplevel document

Money
: the price of oranges in terms of pears; of pears in terms of bread; of bread in terms of milk; or of milk in terms of oranges. A barter economy has no common measure of value that would make multiple transactions simple. <span>2.1.1. The Functions of Money The most generic definition of money is that it is any generally accepted medium of exchange. A medium of exchange is any asset that can be used to purchase goods and services or to repay debts. Money can thus eliminate the debilitating double coincidence of the “wants” problem that exists in a barter economy. When this medium of exchange exists, a farmer wishing to sell wheat for wine does not need to identify a wine producer in search of wheat. Instead, he can sell wheat to those who want wheat in exchange for money. The farmer can then exchange this money for wine with a wine producer, who in turn can exchange that money for the goods or services that she wants. However, for money to act as this liberating medium of exchange, it must possess certain qualities. It must: be readily acceptable, have a known value, be easily divisible, have a high value relative to its weight, and be difficult to counterfeit. Qualities (i) and (ii) are closely related; the medium of exchange will only be acceptable if it has a known value. If the medium of exchange has quality (iii), then it can be used to purchase items of relatively little value and of relatively large value with equal ease. Having a high value relative to its weight is a practical convenience, meaning that people can carry around sufficient wealth for their transaction needs. Finally, if the medium of exchange can be counterfeited easily, then it would soon cease to have a value and would not be readily acceptable as a means of effecting transactions; in other words, it would not satisfy qualities (i) and (ii). Given the qualities that money needs to have, it is clear why precious metals (particularly gold and silver) often fulfilled the role of medium of exchange in early societies, and as recently as the early part of the twentieth century. Precious metals were acceptable as a medium of exchange because they had a known value, were easily divisible, had a high value relative to their weight, and could not be easily counterfeited. Thus, precious metals were capable of acting as a medium of exchange. But they also fulfilled two other useful functions that are essential for the characteristics of money. In a barter economy, it is difficult to store wealth from one year to the next when one’s produce is perishable, or indeed, if it requires large warehouses in which to store it. Because precious metals like gold had a high value relative to their bulk and were not perishable, they could act as a store of wealth . However, their ability to act as a store of wealth not only depended on the fact that they did not perish physically over time, but also on the belief that others would always value precious metals. The value from year to year of precious metals depended on people’s continued demand for them in ornaments, jewellery, and so on. For example, people were willing to use gold as a store of wealth because they believed that it would remain highly valued. However, if gold became less valuable to people relative to other goods and services year after year it would not be able to fulfill its role as a store of value , and as such might also lose its status as a medium of exchange. Another important characteristic of money is that it can be used as a universal unit of account. As such, it can create a single unitary measure of value for all goods and services. In an economy where gold and silver are the accepted medium of exchange, all prices, debts, and wealth can be recorded in terms of their gold or silver coin exchange value. Money, in its role as a unit of account, drastically reduces the number of prices in an economy compared to barter, which requires that prices be established for a good in terms of all other goods for which it might be exchanged. In summary, money fulfills three important functions, it: acts as a medium of exchange; provides individuals with a way of storing wealth; and provides society with a convenient measure of value and unit of account. 2.1.2. Paper Money and the Money Creation Process Although precious metals like gold and silver fulfilled the required functions of money

#### Annotation 1748628802828

 #function-of-money #globo-terraqueo-session #has-images #monetary-policy #money #reading-agustin-carsten People were willing to use gold as a store of wealth because they believed that it would remain highly valued.

#### Parent (intermediate) annotation

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perish physically over time, but also on the belief that others would always value precious metals. The value from year to year of precious metals depended on people’s continued demand for them in ornaments, jewellery, and so on. For example, <span>people were willing to use gold as a store of wealth because they believed that it would remain highly valued. However, if gold became less valuable to people relative to other goods and services year after year it would not be able to fulfill its role as a store of value , and as such might als

#### Original toplevel document

Money
: the price of oranges in terms of pears; of pears in terms of bread; of bread in terms of milk; or of milk in terms of oranges. A barter economy has no common measure of value that would make multiple transactions simple. <span>2.1.1. The Functions of Money The most generic definition of money is that it is any generally accepted medium of exchange. A medium of exchange is any asset that can be used to purchase goods and services or to repay debts. Money can thus eliminate the debilitating double coincidence of the “wants” problem that exists in a barter economy. When this medium of exchange exists, a farmer wishing to sell wheat for wine does not need to identify a wine producer in search of wheat. Instead, he can sell wheat to those who want wheat in exchange for money. The farmer can then exchange this money for wine with a wine producer, who in turn can exchange that money for the goods or services that she wants. However, for money to act as this liberating medium of exchange, it must possess certain qualities. It must: be readily acceptable, have a known value, be easily divisible, have a high value relative to its weight, and be difficult to counterfeit. Qualities (i) and (ii) are closely related; the medium of exchange will only be acceptable if it has a known value. If the medium of exchange has quality (iii), then it can be used to purchase items of relatively little value and of relatively large value with equal ease. Having a high value relative to its weight is a practical convenience, meaning that people can carry around sufficient wealth for their transaction needs. Finally, if the medium of exchange can be counterfeited easily, then it would soon cease to have a value and would not be readily acceptable as a means of effecting transactions; in other words, it would not satisfy qualities (i) and (ii). Given the qualities that money needs to have, it is clear why precious metals (particularly gold and silver) often fulfilled the role of medium of exchange in early societies, and as recently as the early part of the twentieth century. Precious metals were acceptable as a medium of exchange because they had a known value, were easily divisible, had a high value relative to their weight, and could not be easily counterfeited. Thus, precious metals were capable of acting as a medium of exchange. But they also fulfilled two other useful functions that are essential for the characteristics of money. In a barter economy, it is difficult to store wealth from one year to the next when one’s produce is perishable, or indeed, if it requires large warehouses in which to store it. Because precious metals like gold had a high value relative to their bulk and were not perishable, they could act as a store of wealth . However, their ability to act as a store of wealth not only depended on the fact that they did not perish physically over time, but also on the belief that others would always value precious metals. The value from year to year of precious metals depended on people’s continued demand for them in ornaments, jewellery, and so on. For example, people were willing to use gold as a store of wealth because they believed that it would remain highly valued. However, if gold became less valuable to people relative to other goods and services year after year it would not be able to fulfill its role as a store of value , and as such might also lose its status as a medium of exchange. Another important characteristic of money is that it can be used as a universal unit of account. As such, it can create a single unitary measure of value for all goods and services. In an economy where gold and silver are the accepted medium of exchange, all prices, debts, and wealth can be recorded in terms of their gold or silver coin exchange value. Money, in its role as a unit of account, drastically reduces the number of prices in an economy compared to barter, which requires that prices be established for a good in terms of all other goods for which it might be exchanged. In summary, money fulfills three important functions, it: acts as a medium of exchange; provides individuals with a way of storing wealth; and provides society with a convenient measure of value and unit of account. 2.1.2. Paper Money and the Money Creation Process Although precious metals like gold and silver fulfilled the required functions of money

#### Annotation 1748631424268

 #function-of-money #globo-terraqueo-session #has-images #monetary-policy #money #reading-agustin-carsten
if gold became less valuable to people relative to other goods and services year after year it would not be able to fulfill its role as a store of value , and as such might also lose its status as a medium of exchange.

#### Parent (intermediate) annotation

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to year of precious metals depended on people’s continued demand for them in ornaments, jewellery, and so on. For example, people were willing to use gold as a store of wealth because they believed that it would remain highly valued. However, <span>if gold became less valuable to people relative to other goods and services year after year it would not be able to fulfill its role as a store of value , and as such might also lose its status as a medium of exchange. <span><body><html>

#### Original toplevel document

Money
: the price of oranges in terms of pears; of pears in terms of bread; of bread in terms of milk; or of milk in terms of oranges. A barter economy has no common measure of value that would make multiple transactions simple. <span>2.1.1. The Functions of Money The most generic definition of money is that it is any generally accepted medium of exchange. A medium of exchange is any asset that can be used to purchase goods and services or to repay debts. Money can thus eliminate the debilitating double coincidence of the “wants” problem that exists in a barter economy. When this medium of exchange exists, a farmer wishing to sell wheat for wine does not need to identify a wine producer in search of wheat. Instead, he can sell wheat to those who want wheat in exchange for money. The farmer can then exchange this money for wine with a wine producer, who in turn can exchange that money for the goods or services that she wants. However, for money to act as this liberating medium of exchange, it must possess certain qualities. It must: be readily acceptable, have a known value, be easily divisible, have a high value relative to its weight, and be difficult to counterfeit. Qualities (i) and (ii) are closely related; the medium of exchange will only be acceptable if it has a known value. If the medium of exchange has quality (iii), then it can be used to purchase items of relatively little value and of relatively large value with equal ease. Having a high value relative to its weight is a practical convenience, meaning that people can carry around sufficient wealth for their transaction needs. Finally, if the medium of exchange can be counterfeited easily, then it would soon cease to have a value and would not be readily acceptable as a means of effecting transactions; in other words, it would not satisfy qualities (i) and (ii). Given the qualities that money needs to have, it is clear why precious metals (particularly gold and silver) often fulfilled the role of medium of exchange in early societies, and as recently as the early part of the twentieth century. Precious metals were acceptable as a medium of exchange because they had a known value, were easily divisible, had a high value relative to their weight, and could not be easily counterfeited. Thus, precious metals were capable of acting as a medium of exchange. But they also fulfilled two other useful functions that are essential for the characteristics of money. In a barter economy, it is difficult to store wealth from one year to the next when one’s produce is perishable, or indeed, if it requires large warehouses in which to store it. Because precious metals like gold had a high value relative to their bulk and were not perishable, they could act as a store of wealth . However, their ability to act as a store of wealth not only depended on the fact that they did not perish physically over time, but also on the belief that others would always value precious metals. The value from year to year of precious metals depended on people’s continued demand for them in ornaments, jewellery, and so on. For example, people were willing to use gold as a store of wealth because they believed that it would remain highly valued. However, if gold became less valuable to people relative to other goods and services year after year it would not be able to fulfill its role as a store of value , and as such might also lose its status as a medium of exchange. Another important characteristic of money is that it can be used as a universal unit of account. As such, it can create a single unitary measure of value for all goods and services. In an economy where gold and silver are the accepted medium of exchange, all prices, debts, and wealth can be recorded in terms of their gold or silver coin exchange value. Money, in its role as a unit of account, drastically reduces the number of prices in an economy compared to barter, which requires that prices be established for a good in terms of all other goods for which it might be exchanged. In summary, money fulfills three important functions, it: acts as a medium of exchange; provides individuals with a way of storing wealth; and provides society with a convenient measure of value and unit of account. 2.1.2. Paper Money and the Money Creation Process Although precious metals like gold and silver fulfilled the required functions of money

#### Flashcard 1748633783564

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A crucial development in the history of money was the [...]

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A crucial development in the history of money was the promissory note . The process began when individuals began leaving their excess gold with goldsmiths, who would look after it for them. In turn the goldsmiths would give the depositors a receipt, stating

Money

#### Annotation 1748636142860

 #globo-terraqueo-session #has-images #monetary-policy #paper-money-creation-process #reading-agustin-carsten The process of the promissory note began whith individuals leaving their gold with goldsmiths, to take care of it. Goldsmiths would give the depositors a receipt, stating how much gold they had deposited. Eventually these receipts were traded directly for goods and services, rather than there being a physical transfer of gold from the goods buyer to the goods seller. These depository receipts represented a promise to pay a certain amount of gold on demand. This paper money therefore became a proxy for the precious metals on which they were based, that is, they were directly related to a physical commodity.

#### Parent (intermediate) annotation

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A crucial development in the history of money was the promissory note . The process began when individuals began leaving their excess gold with goldsmiths, who would look after it for them. In turn the goldsmiths would give the depositors a receipt, stating how much gold they had deposited. Eventually these receipts were traded directly for goods and services, rather than there being a physical transfer of gold from the goods buyer to the goods seller. Of course, both the buyer and seller had to trust the goldsmith because the goldsmith had all the gold and the goldsmith’s customers had only pieces of paper. These depository receipts represented a promise to pay a certain amount of gold on demand. This paper money therefore became a proxy for the precious metals on which they were based, that is, they were directly related to a physical commodity. Many of these early goldsmiths evolved into banks, taking in excess wealth and in turn issuing promissory notes that could be used in commerce.

Money

#### Annotation 1748639812876

 #definitions-of-money #globo-terraqueo-session #has-images #monetary-policy #money #reading-agustin-carsten Most central banks produce both a narrow and broad measure of money, plus some intermediate ones too.