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Definition
| Often the overall health of the economy has a direct impact on the performance of an individual business. Investors should consider data such as the unemployment rate, general inflation rate, and changes in interest rates. |
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| Certain events have a major impact on each company within an industry, but only a minor impact of other companies outside the industry. |
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Term
| Individual company factors |
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Definition
| To properly analyze a company, good analysts do not rely only on the information contained in the financial statements. They visit the company, but its products, and read about it in the business press. |
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Definition
| Under this strategy, companies offer products with unique benefits, such as high quality or unusual style or features. These unique benefits allow a company to charge higher prices. In general higher prices yield higher profit margins, which lead to higher returns on equity. |
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Definition
| Under this strategy, companies attempt to operate more efficiently than their competitors, which permits them to offer lower prices to attract customers. The efficient use of resources is captured in the asset turnover ratio, and as the ROE model illustrates, higher asset turnover ratio leads to higher return on investment. |
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Term
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Definition
| Information on a single company is compared over time. |
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Term
| Comparison with similar companies |
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| By comparing a company with another one in the same line of business, an analyst can gain better insight into its performance. |
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Definition
| Analytical tool that measures the proportional relationship between two financial statement amounts. |
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Term
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Definition
| Express each item on a particular financial statementas a percentage of a single base amount. |
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Definition
| Compare income with one or more primary activities. |
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Definition
| Proportion of assets acquired with funds supplied by owners. |
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Term
| Financial Leverage Percentage |
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Definition
| Ratio describes the relationship between the return on equity and the return on assets. |
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Definition
| Property, Plant, and Equipment |
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| Ratios that measure a company's ability to meet its currently maturing obligations. |
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| Inventory item arrive just when it is needed. |
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| Ratios that measures a company's ability to meet its long-term obligations. |
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| Ratios that tend to measure the market worth of a share of stock. |
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Definition
| Growth in total sales volume does not always indicate that a company is successful. Sales volume from new stores may obscure the fact that existing stores are not meeting customer needs and are experiencing declines in sales. |
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Definition
| Some growth-oriented companies will open stores in less desirable locations if good locations cannot be found. These poor locations can cause a company's average productivity to decline. |
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Definition
| Vital information about a company is not contained in the annual report. |
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Term
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Definition
| Markets react very quickly to new information in an unbiased manner (doesn't systematically overreact or underreact to new information. Price of security fully reflects all available information. |
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