What are Dividends? There are advantages and disadvantages relative to investing in stocks with dividends vs stocks without dividends. Dividends are periodic payments made by companies to owners of its stock. They are a means for a company to share some of its revenue with those who own an equity interest in the company. Dividends…
What is the Operating Ratio? The operating ratio is a measure of efficiency that is used by management to determine day-to-day operational performance. This metric compares operating expenses, also known as OPEX, to net sales. The desired outcome is a lower ratio of operating expenses. The operating ratio metric assesses how effective an organization or…
What is a Monopoly? A monopoly is a market with a single seller (called the monopolist) but with many buyers. In a perfectly competitive market, which comprises a large number of both sellers and buyers, no single buyer or seller can influence the price of a commodity. Unlike sellers in a perfectly competitive market, a…
What is Inelastic Demand? Inelastic demand occurs when a buyer’s demand for a product does not change significantly in response to a change in price. When the price increases by 20% and demand decreases by only 1%, demand is considered inelastic. This situation typically occurs with everyday household products and services. When the price increases,…
What is the European Central Bank (ECB)? The European Central Bank (ECB) is one of the seven institutions of the EU and the central bank for the entire Eurozone. It is one of the most critically important central banks in the world, supervising over 120 central and commercial banks in the member states. The ECB…
What is Quantitative Easing? Quantitative easing (QE) is a monetary policy of printing money, that is implemented by the Central Bank to energize the economy. The Central Bank creates money to buy government securities from the market in order to lower interest rates and increase the money supply. These economic conditions will then trigger financial institutions…
What is Cyclical Unemployment? Cyclical unemployment is a type of unemployment where labor forces are reduced as a result of business cycles or fluctuations in the economy, such as recessions (periods of economic decline). When the economy is at its peak or experiences continuous growth, the rate of cyclical unemployment is low. During the period,…
What is a Market Economy? A market economy is defined as a system in which the production of goods and services is determined by the changing desires and abilities of market participants. It allows the market to operate freely in accordance with the law of supply and demand, set by individuals and corporations rather than…
What is a Command Economy? Most economic activity in countries around the world exists on a spectrum that ranges from a pure free market economy to an extreme command economy. The command economy is a type of system where the government plays the principal role in planning and regulating goods and services produced in the…
