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Chapter 15c - expenses and earnings over a particular...

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Financial Planning Online: Trading Stocks Online Go to: https://us.etrade.com/e/t/home This Web site provides information that you can use when making investment decisions. It also illustrates how you can trade stocks online, which typically reduces your transaction costs Buying stock on margin On margin: purchasing a stock with a portion of the funds borrowed from a brokerage firm Federal Reserve limits margin to 50 percent Margin call: a request from a brokerage firm for the investor to increase the cash in the account in order to bring the margin back up to the minimum level Analysis of the Firm Annual report Balance sheet: a financial statement that indicates a firm’s sources of funds and how it has invested its funds as of a particular point in time Income statement: a financial statement that measures a firm’s revenues,
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Unformatted text preview: expenses, and earnings over a particular period of time • Technical analysis: the valuation of stocks based on historical price patterns • Fundamental analysis: the valuation of stocks based on an examination of fundamental characteristics such as revenue or earnings, or the sensitivity of the firm’s performance to economic conditions • Focus on Ethics: Accounting fraud Many firms recently used fraudulent financial statements Motivation for fraud Manager compensation Short-term focus The Enron and WorldCom scandals Over-reported revenue and under-reported expenses Many stockholders lost their entire investment Preventing future accounting fraud Use independent auditor New rules from Security and Exchange Commission...
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