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Industrial Production: measure of the activity/output in the industrial or productive segment of the economy
Generally, production goes C, economy goes C
Monetary Policy
Other Factors
What It Tracks
Predicts direction of GDP Consumer buying habits Consumer attitudes Growth of economy & inflation Inflation Business Production Availability & cost of money
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The value of a stock is influenced by the financial performance of the company that issued the stock
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Where Do We Start?
Interpreting Financial Statements Using Financial Ratios Fundamental analysis is often the most demanding and most time-consuming phase of stock selection
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Standard & Poors or Moody Reports Internet financial portals Brokerage firm reports
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Liquidity Ratios
Current Ratio: how many dollars of short-term assets are available for every dollar of short-term liabilities owed
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Activity Ratios
Accounts Receivable Turnover: how quickly the
company is collecting its accounts receivable (sales to customers on credit)
Annual sales Accounts receivable turnover ! Accounts receivable
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Leverage Ratios
Debt-Equity Ratio: how much debt the company is using to support its business compared to how much stockholders equity it is using to support its business
Long-term debt Debt-equity ratio ! Stockholders equity
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Profitability Ratios
Net Profit Margin: amount of profit earned from sales and other operations
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Investors want to know if ROA is moving up (or down) because of improvement (or deterioration) in the companys profit margin and/or its total asset turnover.
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Investors want to know if ROE is moving up (or down) because of how much debt the company is using or because of how the firm is managing its assets and operations.
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Annual dividends paid to common stock Dividends per share ! Number of common shares outstanding
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