What is GDP, and approximately how big is the U.S. GDP?
Gross Domestic Product is the sum of all of a country's economic activity, including Consumer spending, Government spending, and Business investment.
For 2014, the U.S. GDP was about $17 Trillion.
What are the four major business structures allowed in the U.S.?
Sole Proprietorships: one individual owns the business.
Partnerships: multiple individuals have ownership in the business.
Corporations: large businesses, legally separate from owners (this includes S corporations).
Limited Liability Companies (LLCs): typically smaller than corporations; up to 100 shareholders.
What is the difference between debt and a deficit?
A deficit is the difference between tax revenues and government spending for a specific period. The debt is the sum of all accumulated deficits plus accumulated off-budget surpluses.
In 2014, the U.S. government budget deficit was around $483 billion, and the cumulative U.S. government debt had reached nearly $18 trillion.
How does the government borrow money to finance its debt?
The Treasury sells bonds to domestic and foreign financial institutions, with a promise to pay those bonds back with interest.
What happens to economic activity when interest rates rise?
When interest rates rise, people are motivated to save more (rather than spend), and businesses become more hesitant to borrow money to invest in new innovation. As a result, economic growth slows.
What is inflation, and approximately what has been the range of U.S. inflation rates in the past few decades?
Inflation is a measure of price changes of goods & services. Since the early 80s, the U.S. inflation rate has been between 1 - 5% per year.
What is the U.S. Federal Reserve (aka "the Fed"), and what are its primary activities?
The Fed is the central bank of the U.S. It regulates banks and "sets" interest rates by influencing bond markets through its purchases and sales of government bonds. This interest rate manipulation helps stabilize economic growth.
What is traded on the stock market, and what are the two largest stock markets in the U.S.?
On a stock market, investors buy and sell stocks, which are small shares of ownership in public corporations that entitle shareholders to a dividend on future profits. The two largest U.S. stock markets are the New York Stock Exchange and the NASDAQ.
What is an IPO?
An Initial Public Offering (IPO) is the moment when a private corporation opens itself to investors from the general public.
Founders and early investors tend to "get rich" in IPOs, since there is finally a "liquid" market where they can sell their shares. The Facebook IPO (May 2012, on Nasdaq) was the largest-ever technology IPO.
What do investment banks do? What are some of the largest investment banks?
Investment banks "underwrite" large financial mergers, acquisitions, and initial public offerings.
Major investment banks include:
- Bank of America
- Goldman Sachs
- Deutsche Bank
- JP Morgan
- Morgan Stanley
- Salomon Brothers
- Credit Suisse
What is a venture capital firm? What are some of the largest venture capital firms?
Venture Capital firms (aka "VCs") are investor partnerships that invest in rapidly growing private companies, with hopes of "exiting" each investment in a large acquisition or IPO.
Some large VCs include:
What is a Private Equity firm? What are some of the largest private equity firms?
Private Equity (PE) firms make investments directly into large private companies or conduct buyouts of public companies (thus taking them off the stock market). Investors in PE firms consist of very wealthy individuals and private financial institutions.
Some of the largest PE firms include:
- Goldman Sachs Capital Partners
- TPG Capital
What is a hedge fund? What are some of the largest hedge funds?
A hedge fund allows groups of high net-worth investors to pool money and make large, risky investments, often in alternative assets like derivatives, foreign currencies, commodities, and high-risk stocks. Investment in hedge funds is only open to investors with large amounts of capital.
Some of the world's biggest and best known hedge funds include:
- Brevan Howard
In finance, what is a derivative?
Derivatives are complex financial instruments whose value is actually dependent on a different asset.
Common derivatives include commodities futures, stock options, forward contracts, and credit default swaps.
If the U.S. dollar decreases in value vs. other currencies, how does this affect U.S. businesses and consumers?
- U.S. businesses tend to benefit from a weaker dollar, since exports now "seem cheaper" abroad.
- U.S. consumers will suffer from a weaker dollar, since foreign imports are now more expensive.
What is a Trade Balance, Surplus, and Deficit?
- The balance of trade refers to the difference between imports and exports.
- A Trade Surplus occurs when exports are greater than imports, while a Trade Deficit occurs when imports are greater than exports.
What is a company's Gross Margin? How is this different than Net Profit?
Gross Margin (or Gross Profit) = Revenue - Cost of Goods Sold
Net Profit (or Net Income or Net Earnings) = Gross Margin - Operating Expenses
Which U.S. businessman developed mass production techniques for automobiles and released the Model T?
Which American investor, known as "The Oracle of Omaha," is the chairman and CEO of Berkshire Hathaway and is one of the wealthiest people in the world?
Who was the co-founder, CEO, and chairman of Apple until his death in 2011?
He also served as the CEO of Pixar and was the founder of NeXT.
Which American talk show host is one of the world's richest women, was the first black female billionaire, and is famous for her self-titled daytime talk show?
She remains an influential philanthropist, and according to some measures, the most influential woman in the world.
Who is the Founder and CEO of Facebook, and at one point the world's youngest billionaire?
Which American business magnate and real estate mogul hosts the television show The Apprentice?
Who is the co-founder and chairman of Microsoft and one of the wealthiest people in the world?
Which American businessman founded BET and in 2001 became the first African-American billionaire?
Robert L. Johnson
Who is the Founder and CEO of the media conglomerate News Corporation (which includes businesses such as Fox News and The Wall Street Journal)?
Which Greek-American journalist is the president and editor-in-chief of The Huffington Post Media Group?
Which English business magnate is the founder of Virgin Group, a conglomerate consisting of dozens of global brands?
Who is the former chairman of NASDAQ who, in 2009, pleaded guilty to having turned his wealth management business into the largest financial fraud in American history?
Which French heiress and businesswoman is the principal shareholder of L'Oréal and has an estimated net worth of over $23 billion?