Once shares have been sold a board of directors are usually formed that makes decisions on the matters of the company, while this board does not necessarily run day to day operations of the business they do often appoint the CEO (Corporate Executive Officer) of the company, and s/he would then make operational decisions of the company. So ultimately just like a democracy each shareholder would have their say in running of the company, the only difference is the more money you invest the more influence and power over the decision making process and the bigger share of the profit you would receive.

Each share is paid a dividend each year (sometimes quarterly or bi-annually) this is a share of profit given to each shareholder of the company. Once the profit for the year is calculated after paying for all the expenses the board of the company decided on which proportion of the profits should be distributed among shareholders and the rest is usually re-invested into the company. Sometimes if the company makes a loss in that particular time dividends are not paid out , or the board might decide to still pay a dividend out of the company reserves.

A share appreciates in value depending on the amount of dividend paid and also the value of the company, so as a shareholder you get rewarded twice. Some share investors reinvest the dividends they get to buy more shares so they portfolio would be always growing, this is a good way to keep your money working for you !

It might be worth mentioning another type of shares a company might sell, this is called preference shares, shareholders of these share are not entitled to vote or have a right to get a varied rate of profit, but rather they are given a fixed amount of money on their return, and is treated more like a creditor to the company than a part owner.

While you always have the option of selling shares anytime you want a lot of investors believe that to grow a stable amount of wealth in the stock market you have to focus on companies that grow and are stable, this way you don’t have to keep trading your shares all the time, and on the long run you will see a significant growth in the amount you first invested.  

The Supply curve is represented going upwards as price increases. As the price consumers are willing  to pay for any goods or service increase, the quantity producers are willing to supply increases. The incentive for the suppliers are selling more goods at higher prices(therefore increasing profit). In this example the suppliers are willing to supply 200 quantity of x for the price of $20, but as the price increase there is a greater interest and therefore they are willing to supply 300 units of x for $25  ; 400 units of X for $ 50 and 500 units of x for $100.

This is a site dedicated to give you a simple yet complete understanding on basic principles of economics.This site is free to use and our team would be more than happy to help you on any topic relating to economics. As we are still developing this blog we appreciate your patience. Any enquiries and questions pease direct to our e-mail.

A balance sheet is a statement showing all the assets, liabilities and owners equity at any given time it is drawn up. A balance sheet maybe produced due to periodic business analysis, to provide (to a lending organisation) an overall picture of the value of the business to take out a loan or to obtain figures to do business ratios. A balance sheet details the values of all the assets and liabilities the business has and the amount of owner’s equity invested in the business.

• Profit and loss statement

A profit and loss statement is a document showing how much money a company earned over a given period of time (usually a year). How we calculate this is by first summing up all the money the company eared over the time and subtract the amount the company incurred as expenses over that time, we get the profit or loss the company made over that period.

Sales/Revenue budget- It shows the amount of money that flows into the business at any point in time, then number of units (products or services) that would be sold and at what price they would be sold at. This information could help the organisation e.g. in hiring more staff to handle the expected rise in sales.

Production budget- It shows the current levels of stock and rate of production. It would also take note in the seasonal fluctuations in the sales budget to meet current demand. This could help the organisation maximise their storage and logistics and lower costs associated in these areas.

Cash budgets- This budget monitors the cash flows in the business, and the cash reserves. The main reason for monitoring this budget could be to make sure that the organisation is always at a position to pay its current liabilities and ensure there is no shortage of cash for operational expenses and day to day running of the organisation.

Purchases budget- A purchases budget records and controls the raw materials the organisation buys. It takes into account the production budget and matches the raw materials that would be required to keep inline with the rate of production.

Expenses budget- An expense budget is sub divied into 3 boroad catogeries,i.e.:Marketing,Sales and Financial. As sales grow or there is a new marketing campaign this is the budget that would monitor and controll the expenses that relates to these activities.This would simplify the cost ratio analisis.

Capital budget- A capital budget would accommodate the expense in buying a captal intensive asset, and example of an item that belongs to the capital budget could be a new delivert truck or an additional wharehouse.

The production possibility curve is a model used to show the output possibilities of an economy.

While a real economy produces hundreds of thousands of goods and services we use this simplified model to show the relationship in the opportunity cost of things and also demonstrate the capacity of the economy.

In the diagram we have production possibility curve for 2 products DVD players and microwave ovens.

The blue line represents all combinations of both products that could be produces simultaneously in an economy.

(Insert diagram here)

At point A in the diagram you could produce 2000 microwave ovens and 700 DVD players. The opportunity cost of producing the 2000 microwave ovens are the 300 more DVD players that could be produced if not for diverting resources for the production of the microwave ovens. The same could be said for 1000 more microwave ovens that could be produced if not for the production of 700 DVD players. In economics we call this the opportunity cost. (Hyper link to all pages with this word)

At point B we see that 1000 microwaves could be produced while producing 300 DVD players. At this point we see that there is opportunity to produce more of both products since we are well within the PPC we call this under production.

If we wanted to produce the combinations of both products at point D it is not possible with the resources available or utilized at the moment. This however is probable not be  a permanent situation. Better technology , more land, labour  and capital could result in the production possibility curve expanding on both horizons that far exceeds current production capacity. In economics we call this positive economic growth.

The international monetary fund was set up in 1944 at a United Nations conference in Bretton Woods, New Hampshire, U.S. . The main purpose of the fund was to set up a frame work to organise and coordinate economic co-corporation so countries would not make the same mistakes that to the great depression. The IMF helps nations overcome short term budget deficits and gives economic advice on developing sustainable growth in its member countries.

The study of economics is divided into 2 main parts Macroeconomics and Microeconomics.
Macroeconomics is dealing with the economy as a whole taking into consideration the whole economies Gross Domestic Product, inflation rates and Interest rates. In this we deal with the study of the economy as a whole and its trends and current and future predictions. E.g. Australian GDP in the years 2005 – 2006 had a positive growing while increases in inflation rates were low while interest rates kept going up.

(Insert diagram)

 Microeconomics deals with specific sectors and industries in an economy. In this field we look at growth rates and changes that take place within this industry over time, its current trends and future growth. E.g. In Australia in the year 2005- 2006 because of sustained growth and rising wages in the labour market there was a lot of pressure building up in the housing and real estate industry. This resulted in a rise in prises of real estate specially in metropolitan areas and suburbs. Because of the sustained economic growth the Federal Reserve of Australia raised interest rates, this drove down the pressure in this industry as less people could now afford to take out loans to buy housing. After a while (i.e. a few months) the demand for real estate kept rising again till the government hiked the interest rates yet again.

(Insert diagram)

However, investments can also be a breeding ground for dreadful losses. If you can have a thousand and one ways to earn more from your money, you can have the same amount of chances of losing them. That is why many people don’t take chances of gambling their money.

There are ways on how to save money on investments. In this way, you can be sure that you have only spent the right amount needed to earn the right profits.

If by any chance something happens because no one knows how to foresee the flow of the market, you will be able to cope up with your losses because you were able to save more on your investments.

So to get you started on saving more money on your investments, here are some tips to live by:

1. Never put money on something you can’t afford

An investment is one great risk. It would be better to put more risk by investing on something that you can afford.

Don’t try to borrow money just to invest it on something else. As they say, money doesn’t grow on trees. So never expect your money to grow instantly. It would be better if you will lessen the risk of losing your money by only investing on things that require little payments.

2. Do not go with the flow

Never invest on something that you aren’t positively sure why you want to do so. It is best not to invest on a particular venture if you don’t have an exact cause for doing so.

Even if many people are investing on stock exchange, don’t go with the flow if you think that you don’t have firm motives to engage in such investment.

If you know your motives, you will surely know what to do next. You cut back the possible unnecessary fees you will be required to pay.

3. Compare investments

Try to compare investments. In this way, you can evaluate those investments that only require little amount of money but can deliver higher chances of gaining profits.

Moreover, comparing investments will let you identify the right venture that can let you save more money.

Good decisions will always allow you to save more money. So if you have made good choices on investments, you can be sure of your family’s future with more savings than the usual.