10 Most Important Concepts in Economics
Without any doubt, economics is vast and it includes numerous topics and concepts which in themselves can become subjects for study. Among such a huge periphery, pinpointing only 10 most important concepts, needless to say, is like finding a pin in dark. However the purpose of selecting only 10 concepts in economics will provide us with brief overview of what economics is all about and what fundamentals we need to base upon to comprehend any or every concept of economics.
Market Structure: Monopoly, Oligopoly, Monopolistic and Perfect Competition
We have explored a lot about the capital structure of any company. However most of the time, the market structure is being ignored due to lack of comprehension about how a market structure can affect the total dimension of an economy.For defining market structure we first need to understand what market is? Market is a place where buyers and sellers meet and exchange goods or services.
Capital Asset Pricing Model and Beta Calculation
It is known that Risk and return are related. We expect higher return with higher risk. Think about gambling or betting, the chances are that one will lose all his money still people gamble because they are lured by unexpectedly high return. We expect higher returns while investing in stock market than in government bonds. But what return? Can we come out with number? The answer is yes. CAPM is one model which helps in calculating return expected from particular asset or stock.
Intangible Assets of a Company
It is human nature to draw a distinction between the assets that we can see and feel and the assets that we cannot and to feel a little more secure about the former. Included in the latter, though, are assets as diverse as goodwill, brand name, loyal employees and technological prowess. A common critique of valuation approaches, in general, and financial analysts, in particular, is that we pay little attention to intangible assets and consequently under value them.
Economies of Scale Definition
Economies of scale is one of the most important concepts of macro economics which emphasizes on the cost advantage a firm can obtain in long run. It’s not only a sole concept rather it has a connotation in the real life as well.An economy of scale is basically increasing the efficiency of the production process as the number of goods being produced increases. As a result of which, the more number of units one produces the average cost per unit decreases.
Why Micro, Small and Medium Enterprises (MSME) Need Rating?
The rating for MSMEs came alive when the MSMED act, 2006 emerged into the Indian market. It facilitated the promotion, development and competitiveness of micro, small and medium enterprises. As small and medium scale sector are major contributor to the growth of GDP (Gross Domestic Product) and employment generation in India, the rating of them is never an over-emphasis.
The Importance of Due Diligence in Financial Stock Market
In simplest form, due diligence is an investigation of a potential investment. Means you need to do your homework before you step into the market. No broker, no hot tip, no expert strategy are responsible for your success or your failure! You are responsible and here’s how you can take responsibility!
Diversification and Portfolio Risk Management Strategies
It is said “do not put all eggs in one basket”. The reason behind is that if basket falls all eggs will be broken. Similar is the motive behind the concept of diversification. Diversification is a way to reduce risk by investing in different asset classes. So even if one sector fails to generate expected profit, the impact can be nullify or reduced by gains of investments in other assets. It is similar to the saying that even if one basket slips all eggs will not be broken and one will not go hungry.
Derivative Market – Put and Call Options Trading Strategies
These are the financial instruments which derives its value from the underlying assets. Their character, value and risk depend on the assets from which they derive value. The most common assets are generally bonds, stocks, commodities, currencies or market indexes. Derivatives are contracts between two or more parties. The common derivatives are options, futures and swaps. The idea behind the development of derivatives is to distribute risks associated with the assets.
An Easy Guide to Understand Bond Investment Strategies
Bonds are not popular like stocks. The flashing news, hot topics, advertisement hoarders, every age of a business magazine and others mostly talk about stocks and put very less emphasis on bonds. Thus we get less programmed toward learning what bonds are all about! However, now is the time to break the pattern!