D076 - Finance for Managers Part 2

agency problem - when the agency (management) doesn't act in the best interests of the principal (owners) APR - Annual percentage rate; the annual rate of interest that is charged for using credit coincident economic indicators - indicators that show the current state of the economy, used jointly with leading and lagging indicators compound interest - total interest = principal times (1+interest rate)^# of periods - principal examples of coincident economic indicators - GDP, personal income examples of lagging economic indicators - unemployment rate, consumer price index examples of leading economic indicators - yield curve, stock market return how are stock market returns a leading economic indicator? - a rising market shows an improving economy while a declining market shows a worsening economy how does CPI indicate economic state? - a rising consumer price index means inflation, while a falling one indicates deflation lagging economic indicators - indicate the changes/patterns in the economy over time; identify long-term trends leading economic indicators - occur before the economy changes; used to avoid economic events