Application of Conditional Expectations in Investments
The conditional expectation, in the context of investments, refers to the expected value of an investment given a certain set of real world events that are relevant to that particular investment. This means that analysts calculate and predict the expected…
Tree Diagram
A tree diagram is a visual representation of all possible future outcomes and the associated probabilities of a random variable. Tree diagrams are particularly useful when we have several possible outcomes. They can help you record all the possibilities in…
Economies and Diseconomies of Scale
Economies of Scale Economies of scale refer to the cost advantage brought about by an increase in the output of a product. Economies of scale arise due to the inverse relationship between the per-unit fixed cost and the quantity produced…
Perfect Competition, Monopolistic Competition, Oligopoly, and Pure Monopoly
Market structure can be defined as the characteristics of a market, which can either be competitive or organizational. Moreover, market structure outlines the nature of the competition and the pricing procedure in a market. Therefore, it describes the number of…
Price, Marginal Revenue, Marginal Cost, Economic Profit, and the Elasticity of Demand
Marginal revenue (MR) and marginal cost (MC) affect how a company makes its production decisions. Marginal cost (MC) refers to the increase in cost that is occasioned by the production of an extra unit. It is the additional cost of…
Adjustments to a Company’s Financial Statements to Facilitate Comparison
Analysts frequently make adjustments to a company’s reported financial statements when comparing those statements to those of another company that uses different accounting methods, estimates, or assumptions. Adjustments include those related to investments, inventory, property, plant, and equipment; goodwill; and…
Tools and Techniques Used in Financial Analysis
Financial analysis is useful in the assessment of a company’s financial performance over time and identification of the trends in that performance. It can also be used in the valuation of a company’s equity securities, assessment of its financial risk…
