Microeconomics
1. Microeconomics is the study of decisions made
by people and businesses, regarding the
allocation of resources, and prices at which they
trade goods and services. It considers taxes,
regulations, and government legislation.
2. Microeconomics focuses on supply and demand,
and other forces that determine price levels,
making it a bottom-up approach.
3. Investors can use microeconomics in their
investment decisions.
4. For example, microeconomics examines how a
company could maximize its production and
capacity so that it could lower prices and better
compete.  national income, rates of growth and price levels.
Payment
1. Payment is the transfer of money from one
individual/firm to another in acceptable
proportions that have been previously agreed
upon by all parties involved.
2. It is a type of cash flow, which depends on which
side you are. If you are on receiving end then this
payment can act as cash inflow for you.
3. But generally, payments are made, that is they
are cash outflow since money is going out.
Ordinary annuity
1. If payments occur at the end of each period, then
we have an ordinary (or deferred) annuity.
2. Payments on mortgages, car loans, and student
loans are ordinary annuities.
Macro Economics
1. Macroeconomics studies the behavior of a country
and how its policies impact the economy. It analyzes
entire industries and economies, rather than
individuals or specific companies.
2. Macroeconomics takes a top-down approach and
looks at the economy, trying to determine its course
and nature.
3. While macroeconomics is an analytical tool mainly
used to craft economic and fiscal policy.
3. Macroeconomics examines economy-wide
phenomena such as gross domestic product (GDP) and
how it is affected by changes in unemployment,
Cash Flow
1. The actual rupees or dollar coming into or out of the
treasure of a firm. A cash flow occurs when money is
transferred from one organization or individual to
other. Thus, cash flow represents the economic effects
of an alternative in terms of money spend or received.
4. Cash Inflow or Positive Cash Flow: Actual rupee or
dollar coming into firm. i.e., receipts or incomes.
5. Cash Outflow or Negative Cash Flow: Actual rupee or
dollar paid out by a firm. i.e., expenditures or
payment.
6. Net Cash Flow: Difference between total cash inflows
(receipts) and the total cash outflows for a specified
period. e.g., one year.
Annuity due
1. If the payments are made at the begginning of each
period, then we have an annuity due.
2. Rental lease payments, life insurance premiums, and
lottery payoffs are examples of annuities due.
3. an ordinary annuity is most advantageous for a 3. the PV & FV of an annuity due must be greater than
consumer when they are making payments.  that of a similar ordinary annuity due to inflation and
the time value of money.
4. an annuity due is most advantageous for a consumer
when they are collecting payments.

 Economics is defined as the study of allocation of scarce resources among unlimited ends
(or wants)
 All engineering decisions involve number of feasible alternatives or options. These
feasible alternatives must be properly evaluated before implementing them. If there is no
alternative, there is no need of economic study.
 Economists developed the notion that an asset’s value is based on the future cash flows
the asset will provide, and accountants provided information regarding the likely size of
those cash flows.
 Financial management, also called corporate finance, focuses on decisions relating to
how much and what types of assets to acquire, how to raise the capital needed to buy
assets, and how to run the firm to maximize its value.
 Capital markets relate to the markets where interest rates, along with stock and bond
prices, are determined.
 A dollar in hand today is worth more than a dollar to be received in the future—if you
had the dollar now you could invest it, earn interest, and end up with more than one
dollar in the future.
 The process of going forward, from present values (PVs) to future values (FVs), is called
compounding.
 Finding present values is called discounting.
 If the payments are equal and are made at fixed intervals, then we have an annuity.
 If payments occur at the end of each period, then we have an ordinary (or deferred)
annuity.
 If the payments are made at the beginning of each period, then we have an annuity due.