ECONOMICS

1. ECONOMICS BUSINESS ORGANIZATIONS FINANCIAL MARKETS

2. REVENUE VS PROFIT • Revenue is the money that comes into your business.  It does not take into account expenses and cash outflow.  As a result, revenue is not a good measure of sustainable success.  This is especially true when the necessary cost of doing business is high.

3. FYI • Profit is that money that your business retains after all expenses have been paid and accounts have been settled.  Profitability (and not revenue) is a much more accurate measure of the potential sustainability of your business success.

4. SINGLE PROPIETORSHIP • It's actually called a "sole" proprietorship. There are 3 main types of ownership (although, if you want to get fancy and start looking at LLCs, LLPs and FLPs, go to a lawyer).

5. FYI • First: sole proprietorship. You and your business are essentially one entity. You pay taxes on its income on your 1040 and if it gets sued (for whatever, a bad debt, an accident that was the fault of the business), you would be the one held liable.

6. CORPORATION • A corporation is a separate entity that files its own tax return... The purpose is to keep the business separate from the individual... for example, if someone has a business, it's best to incorporate in case the business gets sued for a lot of money... (also for tax benefits)...

7. FYI • If the company gets sued, the corporation is liable to pay, not the individual... in other words, the individual is not required to give up his money and assets to pay on a judgment against the company because the company is a separate entity...

8. COMMON STOCK PREFERRED STOCK • There are significant differences between common and preferred stock. Generally, you will want to issue common stock to founders and employees through the employee stock option program and offer preferred stock to investors.

9. FYI • Common stock should be thought of as a vehicle for issuance in exchange for effort, or "sweat equity." Preferred stock has preferential rights in matters such as liquidation and board representation. These are rights generally reserved for those who have invested cash in the business.

10. PREFERRED STOCK • Preferred Stock Preferred stock doesn't offer the same potential for profit as common stock, but it's a more stable investment vehicle because it guarantees a regular dividend that isn't directly tied to the market like the price of common stock.

11. FYI • This type of stock guarantees dividends, which common stock does not. The price of preferred stock is tied to interest rate levels, and tends to go down if interest rates go up and to increase if interest rates fall.

12. PREFERRED STOCK • The other advantage of preferred stock is that preferred stockholders get priority when it comes to the payment of dividends. In the event of a company's liquidation, preferred stockholders get paid before those who own common stock.

13. FYI • In addition, if a company goes bankrupt, preferred stockholders enjoy priority distribution of the company's assets, while holders of common stock don't receive corporate assets unless all preferred stockholders have been compensated (bond investors take priority over both common and preferred stockholders).

14. COMMON STOCK • The holders of common stock can reap two main benefits from the issuing company: capital appreciation and dividends.

15. FYI • Capital appreciation occurs when a stock's value increases over the amount initially paid for it. The stockholder makes a profit when he or she sells the stock at its current market value after capital appreciation..

16. COMMON STOCK • Dividends, which are taxable payments, are paid to a company's shareholders from its retained or current earnings.

17. FYI • Typically, dividends are paid out to stockholders on a quarterly basis. These payments are usually made in the form of cash, but other property or stock can also be given as dividends

18. LIMITED LIABILITY • Limited liability is a concept whereby a person's financial liability is limited to a fixed sum, most commonly the value of a person's investment in a company or partnership with limited liability. In other words, if a company with limited liability is sued, then the plaintiffs are suing the company, not its owners or investors.

19. FYI • A shareholder in a limited company is not personally liable for any of the debts of the company, other than for the value of his investment in that company.

20. LIABILITY • An obligation that legally binds an individual or company to settle a debt. When one is liable for a debt, they are responsible for paying the debt or settling a wrongfulact they may have committed. For example, if John hits Jane's car, John is liable for the damages to Jane's vehicle because

21. FYI • John is responsible for the damages. In the case of a company, a liability is recorded on the balance sheet and can include accounts payable, taxes, wages, accrued expenses, and deferred revenues. Current liabilities are debts payable within one year, while long-term liabilities are debts payable over a longer period.

22. UNLIMITED LIABILITY • The liability of the owner of a business for all the obligations of the business. An owner's personal assets can be seized if the business's assets are insufficient to satisfy claims against it.

23. FYI • The placement of personal assets at risk is a great disadvantage of proprietorships and general partnerships. The ability to limit the amount of liability to which an owner is subject is a major reason for the formation of corporations and limited partnerships. Compare limited liability.

24. PARTNERSHIP • general partnership A partnership in which each of the partners is liable for all of the firm's debts and the actions of one partner are binding on each of the other partners. Compare limited partnership.

25. LIMITED PARTNERSHIP • A partnership in which some of the partners have a limited liability to the firm's creditors. Compare general partnership. See also master limited partnership.

26. FYI • What type of investor should participate in a limited partnership? The target market for investors who could participate in most limited partnerships is composed of high net worth clients who have tax problems and significant income.

27. BOARD OF DIRECTORS • The group of people responsible for supervising the affairs of a corporation. The board of directors generally sets broad corporate policy rather than participating in day-to-day managerial decisions, although selection of the chief executive officer is the board's responsibility..

28. FYI • Members are elected by the firm's stockholders and may or may not be stockholders themselves. See also chairman, classified board, inside director, interlocking directorates, outside director, staggered terms

29. SEPARATE OWNERSHIP AND CONTROL • A corporation is an institution that is granted a charter recognizing it as a separate legal entity having its own privileges, and liabilities distinct from those of its members.[1] There are many different forms of corporations, most of which are used to conduct business.

30. FYI • Corporations exist as a product of corporate law, and their rules balance the interests of the management who operate the corporation, creditors who provide loans, shareholders who invest capital, and employees who contribute their labor

31. FYI • .[2] In modern times, corporations have become an increasingly dominant part of economic life.

32. STOCK EXCHANGE • A stock exchange is an entity which provides "trading" facilities for stock brokers and traders, to trade stocks and other securities. Stock exchanges also provide facilities for the issue and redemption of securities

33. FYI • As well as other financial instruments and capital events including the payment of income and dividends. The securities traded on a stock exchange include shares issued by companies, unit trusts, derivatives, pooled investment products and bonds.

34. NASDAQ • The NASDAQ Stock Market, also known as the NASDAQ, is an American stock exchange. "NASDAQ" originally stood for "National Association of Securities Dealers Automated Quotations,"

35. FYI • but the exchange's official stance is that the acronym is obsolete.[2] It is the largest electronic screen-based equity securities trading market in the United States

36. DIVIDEND • Dividends are payments made by a corporation to its shareholder members. It is the portion of corporate profits paid out to stockholders.[1]

37. FYI • When a corporation earns a profit or surplus, that money can be put to two uses: it can either be re-invested in the business (called retained earnings), or it can be paid to the shareholders as a dividend..

38. FYI • Many corporations retain a portion of their earnings and pay the remainder as a dividend

39. INTEREST • Interest is a fee paid on borrowed assets. It is the price paid for the use of borrowed money,[1] or, money earned by deposited funds

40. FYI • .[2]Assets that are sometimes lent with interest include money, shares, consumer goods through hire purchase, major assets such as aircraft, and even entire factories in finance lease arrangements.

41. FYI • The interest is calculated upon the value of the assets in the same manner as upon money. Interest can be thought of as "rent of money".

42. INTEREST • When money is deposited in a bank, interest is typically paid to the depositor as a percentage of the amount deposited; when money is borrowed, interest is typically paid to the lender as a percentage of the amount owed.

43. FYI • The percentage of the principal that is paid as a fee over a certain period of time (typically one month or year), is called the interest rate.

44. SECURITIES & EXCHANGE COMMISSION • The U.S. Securities and Exchange Commission (frequently abbreviated SEC) is a federal agency[1] which holds primary responsibility for enforcing the federal securities laws and regulating the securities industry, the nation's stock and options exchanges, and other electronic securities markets in the United States.

45. FYI • In addition to the 1934 Act that created it, the SEC enforces the Securities Act of 1933, the Trust Indenture Act of 1939, the Investment Company Act of 1940, the Investment Advisers Act of 1940, the Sarbanes-Oxley Act of 2002 and other statutes.

46. SEC: • and commonly referred to as the 1934 Act). • The SEC was created by section 4 of the • Securities Exchange Act of 1934 (now codified as 15 U.S.C.§ 78d

47. DJIA • The Dow Jones Industrial Average, also referred to as the Industrial Average, the Dow Jones, the Dow 30, or simply the Dow, is one of several stock market indices created by Wall Street Journal editor and Dow Jones & Company co-founder Charles Dow.

48. FYI • The average is named after Dow and one of his business associates, statisticianEdward Jones. It is an index that shows how 30 large, publicly owned companies based in the United States have traded during a standard trading session in the stock market.[1]

49. FYI • It is the second oldest U.S. market index after the Dow Jones Transportation Average, which Dow also created.

50. DOLLAR COST AVERAGE • DCA: Dollar cost averaging is a timing strategy of investing equal dollar amounts regularly and periodically over specific time periods (such as $100 monthly) in a particular investment or portfolio.