1.
Building
–
A building or edifice is a structure with a roof and walls standing more or less permanently in one place, such as a house or factory. To better understand the term building compare the list of nonbuilding structures, Buildings serve several needs of society – primarily as shelter from weather, security, living space, privacy, to store belongings, and to comfortably live and work. A building as a shelter represents a division of the human habitat. Ever since the first cave paintings, buildings have become objects or canvasses of much artistic expression. In recent years, interest in planning and building practices has also become an intentional part of the design process of many new buildings. The word building is both a noun and a verb also an adverb, the structure itself and the act of making it. As a noun, a building is a structure that has a roof and walls and stands more or less permanently in one place, there was a building on the corner. In the broadest interpretation a fence or wall is a building, however, the word structure is used more broadly than building including natural and man-made formations and does not necessarily have walls. Structure is more likely to be used for a fence, as a verb, building is the act of construction. Structural height in technical usage is the height to the highest architectural detail on building from street-level, depending on how they are classified, spires and masts may or may not be included in this height. Spires and masts used as antennas are not generally included, the definition of a low-rise vs. a high-rise building is a matter of debate, but generally three storeys or less is considered low-rise. A report by Shinichi Fujimura of a shelter built 500000 years ago is doubtful since Fujimura was later found to have faked many of his findings. Supposed remains of huts found at the Terra Amata site in Nice purportedly dating from 200000 to 400000 years ago have also called into question. There is clear evidence of homebuilding from around 18000 BC, Buildings became common during the Neolithic. Single-family residential buildings are most often called houses or homes, residential buildings containing more than one dwelling unit are called a duplex, apartment building to differentiate them from individual houses. A condominium is an apartment that the occupant owns rather than rents, houses which were built as a single dwelling may later be divided into apartments or bedsitters, they may also be converted to another use e. g. an office or a shop. Building types may range from huts to multimillion-dollar high-rise apartment blocks able to house thousands of people, increasing settlement density in buildings is usually a response to high ground prices resulting from many people wanting to live close to work or similar attractors. Other common building materials are brick, concrete or combinations of either of these with stone, also if the residents are in need of special care such as a nursing home, orphanage or prison, or in group housing like barracks or dormitories
2.
Federal Reserve System
–
The Federal Reserve System is the central banking system of the United States. Over the years, events such as the Great Depression in the 1930s, the U. S. Congress established three key objectives for monetary policy in the Federal Reserve Act, maximizing employment, stabilizing prices, and moderating long-term interest rates. The first two objectives are sometimes referred to as the Federal Reserves dual mandate. S, the Fed conducts research into the economy and releases numerous publications, such as the Beige Book. S. member banks, and various advisory councils. The federal government sets the salaries of the seven governors. Nationally chartered commercial banks are required to hold stock in the Federal Reserve Bank of their region, thus, the Federal Reserve System has both private and public components to serve the interests of the public and private banks. The structure is considered unique among central banks and it is also unusual in that the United States Department of the Treasury, an entity outside of the central bank, prints the currency used. The U. S. Government receives all the annual profits, after a statutory dividend of 6% on member banks capital investment is paid. In 2015, the Federal Reserve made a profit of $100.2 billion, the primary motivation for creating the Federal Reserve System was to address banking panics. Before the founding of the Federal Reserve System, the United States underwent several financial crises, a particularly severe crisis in 1907 led Congress to enact the Federal Reserve Act in 1913. Today the Federal Reserve System has responsibilities in addition to ensuring the stability of the financial system. S. S and this practice is called fractional-reserve banking. As a result, banks usually invest the majority of the funds received from depositors, on rare occasions, too many of the banks customers will withdraw their savings and the bank will need help from another institution to continue operating, this is called a bank run. Bank runs can lead to a multitude of social and economic problems, the Federal Reserve System was designed as an attempt to prevent or minimize the occurrence of bank runs, and possibly act as a lender of last resort when a bank run does occur. Many economists, following Milton Friedman, believe that the Federal Reserve inappropriately refused to lend money to banks during the bank runs of 1929. Because some banks refused to clear checks from certain others during times of economic uncertainty, to address these problems, Congress gave the Federal Reserve System the authority to establish a nationwide check-clearing system. It took over this role from the private sector clearing houses which operated during the Free Banking Era, whether public or private, through its discount window and credit operations, Reserve Banks provide liquidity to banks to meet short-term needs stemming from seasonal fluctuations in deposits or unexpected withdrawals. Longer term liquidity may also be provided in exceptional circumstances, the rate the Fed charges banks for these loans is called the discount rate. By making these loans, the Fed serves as a buffer against unexpected day-to-day fluctuations in reserve demand and this contributes to the effective functioning of the banking system, alleviates pressure in the reserves market and reduces the extent of unexpected movements in the interest rates. For example, on September 16,2008, the Federal Reserve Board authorized an $85 billion loan to stave off the bankruptcy of international insurance giant American International Group
3.
Sustainable growth rate
–
According to PIMS an important lever of business success is growth. Among 37 variables, growth is mentioned as one of the most important variables for success, market share, market growth, the question how much growth is sustainable is answered by two concepts with different perspectives, The Sustainable Growth Rate concept by Robert C. Higgins, describes optimal growth from a financial perspective assuming a given strategy with clear defined financial frame conditions/ limitations, Sustainable growth is defined as the annual percentage of increase in sales that is consistent with a defined financial policy. This concept provides a financial framework and formula for case/ company specific SGR calculations. This concept is based on statistical long-term assessments and is enriched by case examples and it provides an orientation frame for case/ company specific mid- to long-term growth target setting. The sustainable growth rate according to Robert C. Higgins is the growth rate a company can achieve consistent with the firms established financial policy. The sustainable growth rate can be a check if business plans are reasonable, due to this long time period, the authors consider their findings as to a large extent independent of specific economic cycles. In the long-term and across industries, total shareholder value creation rises steadily with increasing growth rates. The more long-term revenue growth companies realize, the more investors appreciate this, Return on Assets, Return on Sales and Return on Equity do rise with increasing revenue growth up to 10 to 25% and then fall with further increasing revenue growth rates. Also the combined ROX-index shows rises with increasing growth rates to a maximum in the range of 10 to 25% revenue growth per year. Gibrats law, sometimes called Gibrats rule of proportionate growth is a rule defined by Robert Gibrat stating that the size of a firm and its growth rate are independent. As described the growth rate concept by Robert C. Higgins is based on several assumptions such as constant profit margin. Therefore, general applicability of SGR concept in cases where these parameters are not stable is limited, the Optimal Growth concept by Martin Handschuh, Hannes Lösch, Björn Heyden et al. has no restrictions to certain strategies or business model and is therefore more flexible in its applicability. However, as a framework, it only provides an orientation for case/company specific mid- to long-term growth target setting. Additional company and market specific considerations, e. g. market growth, growth culture and this may lead to changes in the relationship of revenue growth rates and total shareholder value creation. Regular reviews of the optimal growth assessments may be used as an indicator for the development of stock markets appetite for rapid growth. Fonseka, Mohan, Tian, Gaoloang, The most appropriate Sustainable Growth Rate Model for Managers and Researchers, American Accounting Association Graeme, Deans, Kroeger, Fritz, Stretch. How Great Companies Grow in Good Times and Bad, John Wiley & Sons Handschuh, Martin, WHU Otto Beisheim School of Management lecture Handschuh, Martin, Loesch, Hannes, Optimal Growth – Does it exist and if so how to realize it
4.
Lease
–
An asset-backed security is a security whose income payments and hence value are derived from and collateralized by a specified pool of underlying assets. The pool of assets is typically a group of small and illiquid assets which are unable to be sold individually. The pools of underlying assets can include common payments from credit cards, auto loans, often a separate institution, called a special purpose vehicle, is created to handle the securitization of asset backed securities. The special purpose vehicle, which creates and sells the securities, uses the proceeds of the sale to pay back the bank that created, or originated and this allows banks to invest more of their capital in new loans or other assets and possibly have a lower capital requirement. In the first case, collateralized debt obligations and mortgage-backed securities, are subsets and it has also interpreted the phrase discrete pool to exclude those that can change in composition over time. However, such securities may be shelf-registered on Form S-3 only if the value of the leased property represents less than 20% of the original securitized pool balance. However, consistent with current practice, shelf registration on will be only if delinquent assets constitute 20% or less of the original asset pool. Exceptions to the Discrete Pool Requirement, the new rules generally codify the SEC staff’s position that a security must be backed by a discrete pool of assets in order to be considered an ABS. However, the new rules establish the following exceptions to address market practices, any security issued in a master trust structure would meet the definition of asset-backed security without limitation. Asset-backed securities will also include securities with a period of up to one year during which up to 50% of the offering proceeds may be used for subsequent purchases of pool assets. The new rules also include within the definition of asset-backed security securities with revolving periods during which new financial assets may be acquired, however, the new assets added to the pool during the revolving period must be of the same general character as the original pool assets. Investors typically refer to HELs as any nonagency loans that do not fit either the jumbo or alt-A loan categories. While early HELs were mostly second lien subprime mortgages, first-lien loans now make up the majority of issuance, Subprime mortgage borrowers have a less than perfect credit history and are required to pay interest rates higher than what would be available to a typical agency borrower. The second largest subsector in the ABS market is auto loans, auto finance companies issue securities backed by underlying pools of auto-related loans. Auto ABS are classified into three categories, prime, nonprime, and subprime, Prime auto ABS are collaterized by loans made to borrowers with strong credit histories, nonprime auto ABS consist of loans made to lesser credit quality consumers, which may have higher cumulative losses. Subprime borrowers will typically have lower incomes, tainted credited histories, owner trusts are the most common structure used when issuing auto loans and allow investors to receive interest and principal on sequential basis. Deals can also be structured to pay on a pro-rata or combination of the two, Securities backed by credit card receivables have been benchmark for the ABS market since they were first introduced in 1987. Credit card holders may borrow funds on a basis up to an assigned credit limit
5.
Cyclically adjusted price-to-earnings ratio
–
The cyclically adjusted price-to-earnings ratio, commonly known as CAPE, Shiller P/E, or P/E10 ratio, is a valuation measure usually applied to the US S&P500 equity market. It is defined as price divided by the average of ten years of earnings and it is not intended as an indicator of impending market crashes, although high CAPE values have been associated with such events. Value investors Benjamin Graham and David Dodd argued for smoothing a firms earnings over the past five to ten years in their classic text Security Analysis, Graham and Dodd noted one-year earnings were too volatile to offer a good idea of a firms true earning power. In a 1988 paper economists John Y, campbell and Robert Shiller concluded that a long moving average of real earnings helps to forecast future real dividends which in turn are correlated with returns on stocks. The idea is to take an average of earnings and adjust for inflation to forecast future returns. Shiller later popularized the 10-year version of Graham and Dodds P/E as a way to value the stock market, Shiller would share the Nobel prize in 2013 for his work in the empirical analysis of asset prices. The average CAPE value for the 20th century was 15.21, CAPE values above this produce corresponding lower returns, and vice versa. In 2014, Shiller expressed concern that the prevailing CAPE of over 25 was a level that has been surpassed since 1881 in only three previous periods, the years clustered around 1929,1999 and 2007, major market drops followed those peaks. The measure exhibits a significant amount of variation over time, and has criticised as not always accurate in signaling market tops or bottoms. One proposed reason for this variation is that CAPE does not take into account prevailing risk free interest rates. A common debate is whether the inverse CAPE ratio should be divided by the yield on 10 year Treasuries. This debate regained currency in 2014 as the CAPE ratio reached an all high in combination with historically very low rates on 10 year Treasuries. A high CAPE ratio has been linked to the phrase Irrational exuberance, after Fed President Alan Greenspan coined the term in 1996, the CAPE ratio reached an all-time high during the 2000 dot-com bubble. It also reached a high level again during the housing bubble up to 2007 before the crash of the great recession. Originally derived for the US equity market, the CAPE has since been calculated for 15 other markets, research by Norbert Keimling has demonstrated that the same relation between CAPE and future equity returns exists in every equity market so far examined. It also suggests that comparison of CAPE values can assist in identifying the best markets for future equity returns beyond the US market
6.
Internal rate of return
–
The internal rate of return is a method of calculating rate of return. The term internal refers to the fact that its calculation does not involve external factors and it is also called the discounted cash flow rate of return. In the context of savings and loans, the IRR is also called the effective interest rate, corporations use IRR in capital budgeting to compare the profitability of capital projects in terms of the rate of return. For example, a corporation will compare an investment in a new plant versus an extension of a plant based on the IRR of each project. To maximize returns, the higher a projects IRR, the more desirable it is to undertake the project, If all projects require the same amount of up-front investment, the project with the highest IRR would be considered the best and undertaken first. The internal rate of return is an indicator of the profitability, efficiency, quality and this is in contrast with the net present value, which is an indicator of the net value or magnitude added by making an investment. This is because an investment with a rate of return which exceeds the cost of capital has a positive net present value. In the example cited above, of a corporation comparing an investment in a new plant versus an extension of an existing plant, IRR is also to calculate yield to maturity and yield to call. Both the internal rate of return and the net present value can be applied to liabilities as well as investments, for a liability, a lower internal rate of return is preferable to a higher one. Corporations use internal rate of return to evaluate share issues and stock buyback programs, a share repurchase proceeds if returning capital to shareholders has a higher internal rate of return than candidate capital investment projects or acquisition projects at current market prices. Funding new projects by raising new debt may also involve measuring the cost of the new debt in terms of the yield to maturity, IRR is also used for private equity, from the limited partners perspective, as a measure of the general partners performance as investment manager. This is because it is the partner who controls the cash flows. Given a collection of pairs involved in a project, the rate of return follows from the net present value as a function of the rate of return. A rate of return for which this function being zero is the rate of return. Any fixed time can be used in place of the present, in the case that the cash flows are random variables, such as in the case of a life annuity, the expected values are put into the above formula. Often, the value of r that satisfies the equation cannot be found analytically. In this case, numerical methods or graphical methods must be used, If an investment may be given by the sequence of cash flows then the IRR r is given by N P V = −123400 +362001 +548002 +481003 =0. In this case, the answer is 5. 96%, since the above is a manifestation of the general problem of finding the roots of the equation N P V =0, there are many numerical methods that can be used to estimate r
7.
Fixed cost
–
In economics, fixed costs, indirect costs or overheads are business expenses that are not dependent on the level of goods or services produced by the business. They tend to be time-related, such as salaries or rents being paid per month and this is in contrast to variable costs, which are volume-related. On the other hands, the costs of the bakery are variable. The relation between fixed cost and variable cost can be modelled by an analytical formula, in management accounting, fixed costs are defined as expenses that do not change as a function of the activity of a business, within the relevant period. For example, a retailer must pay rent and utility bills irrespective of sales, in marketing, it is necessary to know how costs divide between variable and fixed costs. This distinction is crucial in forecasting the earnings generated by changes in unit sales. In a survey of nearly 200 senior marketing managers,60 percent responded that they found the variable, fixed costs are not permanently fixed, they will change over time, but are fixed in relation to the quantity of production for the relevant period. For example, a company may have unexpected and unpredictable expenses unrelated to production, such as warehouse costs, by definition, there are no fixed costs in the long run, because the long run is a sufficient period of time for all short-run fixed inputs to become variable. Investments in facilities, equipment, and the organization that cant be significantly reduced in a short period of time are referred to as committed fixed costs. Discretionary fixed costs usually arise from annual decisions by management to spend on certain fixed cost items, examples of discretionary costs are advertising, machine maintenance, and research & development expenditures. Discretionary fixed costs can be expensive, in business planning and management accounting, usage of the terms fixed costs, variable costs and others will often differ from usage in economics, and may depend on the context. Some cost accounting practices such as activity-based costing will allocate fixed costs to business activities for profitability measures and this can simplify decision-making, but can be confusing and controversial. In accounting terminology, fixed costs will include almost all costs which are not included in cost of goods sold
8.
Depreciation
–
Businesses depreciate long-term assets for both tax and accounting purposes. The former affects the balance sheet of a business or entity, generally the cost is allocated, as depreciation expense, among the periods in which the asset is expected to be used. This expense is recognized by businesses for financial reporting and tax purposes, methods of computing depreciation, and the periods over which assets are depreciated, may vary between asset types within the same business and may vary for tax purposes. These may be specified by law or accounting standards, which may vary by country, there are several standard methods of computing depreciation expense, including fixed percentage, straight line, and declining balance methods. Depreciation expense generally begins when the asset is placed in service, for example, a depreciation expense of 100 per year for five years may be recognized for an asset costing 500. In determining the profits from an activity, the receipts from the activity must be reduced by appropriate costs, one such cost is the cost of assets used but not immediately consumed in the activity. Depreciation is any method of allocating such net cost to those periods in which the organization is expected to benefit from use of the asset, the asset is referred to as a depreciable asset. Depreciation is technically a method of allocation, not valuation, even though it determines the value placed on the asset in the balance sheet, any business or income producing activity using tangible assets may incur costs related to those assets. If an asset is expected to produce a benefit in future periods, the business then records depreciation expense in its financial reporting as the current periods allocation of such costs. This is usually done in a rational and systematic manner, Cost generally is the amount paid for the asset, including all costs related to acquisition. In some countries or for some purposes, salvage value may be ignored, the rules of some countries specify lives and methods to be used for particular types of assets. However, in most countries the life is based on experience. When a depreciable asset is sold, the business recognizes gain or loss based on net basis of the asset and this net basis is cost less depreciation. Accounting rules also require that an impairment charge or expense be recognized if the value of assets declines unexpectedly, such charges are usually nonrecurring, and may relate to any type of asset. Many companies consider write-offs of some of their assets because some property, plant. Accountants reduce the assets carrying amount by its fair value, for example, if a company continues to incur losses because prices of a particular product or service are higher than the operating costs, companies consider write-offs of the particular asset. These write-offs are referred to as impairments, there are events and changes in circumstances might lead to impairment. Some examples are, Large amount of decrease in value of an asset
