01:03 01:12 Year over year measures performance in one time period versus performance in a previous time period. Investors use year over year performance to determine a company or investment’s financial condition. It’s often applied to recurring performance over the same quarter from year to year.
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Net income and profit both deal with positive cash flow, but there are important differences between the two concepts. Net income, also called net profit, is an income statement’s bottom line. It’s the figure that most comprehensively reflects a business’s profitability. Net income accounts for every dime that flows in and out of a company. It includes expenses for product manufacturing, operations, debt payments and other obligations, as well as additional income streams from subsidiary holdings, asset sales, and other considerations. Profit is the revenue that remains after expenses are paid, and it can refer to a number of figures at a number of levels. For example, gross profit is revenue less the cost of goods sold. Operating profit is revenue minus the cost of goods sold and operating expenses. Companies calculate profit at different stages to see which expenses take the biggest bite out of the bottom line.
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Balance sheets and profit and loss statements provide investors with crucial analysis. They contain similar information, but they have some important differences, as well. Basically, the balance sheet shows how much a company is worth, while the P&L statement reveals if a company is profitable or not. The balance sheet sums up a company’s financial position for one specific point in time. The P&L statement shows revenues and expenses during a set period of time. The P&L statement provides net income, and is more focused than either the cash flow statement or the balance sheet. It shows if a company is in the red or the black.
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01:14 01:14 The Federal Reserve System is the central bank of the United States. It regulates monetary policy and supervises the nation’s banking system. The Fed includes the central Board of Governors and 12 regional Federal Reserve Banks. Among the Fed’s main duties is its responsibility to make sure the money supply doesn’t grow too quickly or too slowly. It uses monetary policy to control that growth. The Fed can change reserve requirements, which are the percentages of deposits that banks must retain. It can also change the interest rate, called the discount rate, paid by member banks when they borrow money. Or it can buy or sell Treasury securities to increase or decrease the money supply.
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On October 19, 1987, the Dow Jones dropped 508 points, or almost 22% in a single day. That was Black Monday. At that point, Black Monday represented the Dow’s biggest single-day drop. Before the month ended, however, most major exchanges had fallen by more than 20%.
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