The stock variable thus refers to the quantity or value of certain economic variables given at a point in time. Capital and quantity of money are some of the major examples of stock variables. Meaning of Flow Variables A flow can be defined as a quantity calculated over a specified period.
What are stock variables?
Examples of Stock Variables Stock variables, on the other hand, mean those variables that are measured at a point in time. At any given time as we measure our system, we may take a snapshot, so to speak, of variables such as debt, wealth, employment, money supply and capital stock (such as factories, inventory and infrastructure).
What are the financial statements for stocks?
For stocks, financial statements include revenues, future growth, balance sheets, income statements, profit margins, cash flow statements, and other relevant data. These financial factors can help investors assess the intrinsic value of the stock.
What is the difference between the balance sheet and income statement?
Unlike the balance sheet, which lists out all stock variables affecting an individual’s financial position, the income statement lists out all flow variables affecting an individual’s financial position. The sample personal income statement shown above lists John’s monthly income and expenses.
What is the difference between personal income and stock variables?
The individual earns personal income over the course of the pay period, which may be a week, two weeks or a month. Stock variables, on the other hand, mean those variables that are measured at a point in time.
Which variables are stock variables?
A stock variable is a quantified variable that is measured at a particular point of time. Since, stock of capital, total money supply, and number of persons employed are a quantities measured at a particular point of time, these are stock variables.
What is a stock variable in accounting?
stock variable (plural stock variables) (economics, accounting) A variable whose value depends on an instant rather than on a period of time.
Which one of the following is a stock variable?
The correct answer is Option 3, i.e Wealth. Stocks are defined at a particular point of time. So, Wealth is a stock variable as it can be measured at a particular time. Hence, option 3 is correct.
What is an example of a stock variable?
An example of a stock variable would be wealth. We measure wealth at a “point in time.” For example my wealth at the end of the year. An example of a flow variable would be income. We measure income over a period of time.
Is inventory a stock variable?
Inventory is a stock variable because it is measured at a point of time and change in inventory is a flow variable because it ts measured for a period of time.
Is capital a stock variable?
Capital is a stock variable. On a particular date (say, 1st April, 2011), a country owns and commands stock of machines, buildings, accessories, raw materials, etc. It is stock of capital. Like a balance-sheet, a stock has a reference to a particular date on which it shows stock position.
Which of the following is NOT stock variable?
Revenue is not a stock variable as it is a flow variable and measured for a period of time.
Is GDP a stock variable?
For example, U.S. nominal gross domestic product refers to a total number of dollars spent over a time period, such as a year. Therefore, it is a flow variable, and has units of dollars/year.
Is saving a stock variable?
Wealth is measured in dollars at a point in time and is a stock variable. Saving is measured in dollars per unit time and is a flow variable.
Is current account balance a stock or flow variable?
Similarly, current account is also a flow variable.
The Personal Balance Sheet
The balance sheet part of the personal financial statement lists the individual’s assets Monetary Assets Monetary assets carry a fixed value in terms of currency units (e.g., dollars, euros, yen).
The Income Statement
Unlike the balance sheet, which lists out all stock variables affecting an individual’s financial position, the income statement lists out all flow variables affecting an individual’s financial position.
Why use a Personal Financial Statement?
A personal financial statement can be a very valuable tool in planning out one’s finances. It is usually goal-oriented and can help an individual reach his or her financial goals, especially for young professionals entering the workforce for the first time.
Download the Free Template
Enter your name and email in the form below and download the free template now!
Personal Financial Statement
Download the free Excel template now to advance your finance knowledge!
Introduction
The stock market is often considered unpredictable. But most people share a common intuition: a company’s performance and its stock price should be correlated. If a company performs well, investors will buy its stock and the price should go up, and vice versa.
Data retrieval & processing
Data are sourced from Yahoo Finance (with python libraries yfinance and yahoofinancials for prices and statements respectively).
Modeling
Following the data preparation steps, we can now implement a classification model whose aim will be to predict if a stock’s return for the next year will outperform the NASDAQ index, based on the 33 variables extracted from the stock’s previous financial statements and its price history.
Backtesting & Strategy analysis
Now that we are convinced (at least I am) that the model can help to choose a performant investment strategy, the question is: How should it be used?
Conclusion
Considering the elements presented in this article, reaching a definitive conclusion on the possibility to use machine learning to predict stocks’ returns based on financial statements seems impossible.
What is stock in economics?
A stock is a quantity which is measurable at a particular point of time, e.g., 4 p.m., 1st January, Monday, 2010, etc. Capital is a stock variable. On a particular date (say, 1st April, 2011), a country owns and commands stock of machines, buildings, accessories, raw materials, etc. It is stock of capital.
What are some examples of flows?
Other examples of flows are: expenditure, savings, depreciation, interest, exports, imports, change in inventories ( not mere inventories), change in money supply, lending, borrowing, rent, profit, etc. because magnitude (size) of all these are measured over a period of time.
What are the variables that have time dimension?
Similarly, all other economic variables which have time dimension, i.e., whose magnitude can be measured over a period of time are called flow variables. For instance, income of a person is a flow which is earned during a week or a month or any other period. Likewise, investment (i.e., addition to the stock of capital) is a flow as it pertains ...
What is flow in advertising?
ADVERTISEMENTS: A flow is a quantity which is measured with reference to a period of time. Thus, flows are defined with reference to a specific period (length of time), e.g., hours, days, weeks, months or years. It has time dimension. National income is a flow.
Is a stock a time dimension?
It is stock of capital. Like a balance-sheet, a stock has a reference to a particular date on which it shows stock position. Clearly, a stock has no time dimension (length of time) as against a flow which has time dimension.
Is wealth a stock or a flow?
A flow shows change during a period of time whereas a stock indicates the quantity of a variable at a point of time. Thus, wealth is a stock since it can be measured at a point of time, but income is a flow because it can be measured over a period of time.
How to calculate the value of a company?
According to Warren Buffet, the best way to calculate the value of a company is to add the percentage of net profit to the percentage of dividends paid and divide that sum by the P/B ratio.
Why do investors use fundamental analysis?
Investors use fundamental analysis to determine whether it’s worth buying the stock or not.
What is fundamental analysis?
In the financial world, fundamental analysis is the concept of investigating the financial statements of a company to help determine if its stock is a good investment opportunity. For stocks, financial statements include revenues, future growth, balance sheets, income statements, profit margins, cash flow statements, and other relevant data.
Why is fundamental analysis important?
The basic goal of stock fundamental analysis is to find the stock’s intrinsic value. This will help you determine whether or not a stock is undervalued or overvalued.
What is the price to earnings ratio?
The price to earnings ratio is a way to calculate how much you need to invest in order to receive one dollar of that company’s earnings. The P/E ratio is probably the first thing investors look for when evaluating a company.
What is profit margin ratio?
Basically, the stock profit margins show the degree to which a company makes money and how profitable is. For example, if a company reports a profit margin of 40% during the last quarter, it means that has generated $0.4 net profit for each dollar of sales generated.
What is debt to equity ratio?
The debt to equity ratio is also known as the leverage ratio and it measures the degree to which a company is financed with debt. The more debt a company has, the more it will eat into the cash flow of a company. The more debt a company has on its balance sheet the riskier the stock becomes.