Notes

What makes up the M1 and M2
M1 is cash and checking
M2 needs to add time deposits and money market accounts. M2 is also immediate
New York fed has the gold vault
The treasury secretary is Janet Yellen
Flooding the market with dollars causes inflation
The fed can do monetary policy (increase/decrease the money supply)
If you reduce the money supply, you might slow down the economy (recession)
Adam Smith: There is an invisible hand, things will probably right itself
In 2009 the banking system collapse (Credit driven mortgage recession)
Biggest recession/depression was in 1929
Dodd-Frank was "now our old laws we couldn't imprison/fine them b/c of one thing: corporate fail. Couldn't be sued/fined personally if you have a corporation"
There are 2 kinds of markets: Primary (IPO's) and secondary markets.
The bigger market is the secondary market, b/c they have thousands of good stocks
IPO's are introductory. Once IPO happens, then you can start trading stocks
Debt and equity financing
If a company wants money, they can float debt or they can float stocks (equity)
If you float debt, you must pay interest. If you float equity, you don't have to pay dividends
Why would someone buy equity stocks anyways? -> You're counting on the fact that you guessed right. Don't know what will happen
Markowitz says you must diversify. (Father of portfolio analysis)
Bond Market: You can float bonds and now you need to pay interest. Increases its debt
Floating stocks: For companies, there's no repayment/obligation to do nothing
If you're a corrupt company, you blame the CEO and chairmain of the board (money manipulations)
Investment criteria: Every investment has a payout.
Liquidity: When do you cash out
If you invest in muni or treasury bonds, you don't have to pay taxes
Baruch's vertical campus was financed by muni bonds
Stocks split: 3 for 1 means you have 3 times the number of shares in the future. 1 for 3 means you have 1/3 the number of shares. Before = After (sentiment)
ETF is a computerized fund
Top business uses of accountants: Tax/Auditing
There are 4 major ratios
Liquidity ratios: How liquid are you? Can you pay off your debts?
Current ratio: Current assets/current liabilities
Quick ratio: don't include inventory
Debt to equity ratio: total liabilities/owner's equity (long-term debt)
Profitability ratio: Profitability = Operating Success
Activity ratio: How efficient is your inventory? Cost of goods sold/avg inventory. Big ratios is not good for activity ratios
Corporate report: Read, read the auditors report, read 3 major statements
Skills most needed by CFOs is analysis (analytical thinking)
CFOs job is to make sure numbers are right
CFO's get their financial info from newspapers
Financial planning: There are many types of financial plans and budgets
Cash budget: the immediate needs you need cash to pay inventory
Capital budget: Is a wishlist. Budget of the long-term assets/needs (CEO saying it would be nice to build a new factory)
Operating budget: How many people do you need to run something? (weekly/monthly income statement)
Firms need funds for short and long term funds
Only people that can't issue debt are regular people
Venture capitalists need to have lots of investments
Debt to equity ratio is a good ratio to look at for long-term outlook of the company