Covering Business 10 Things Every Journalist Needs to Know and Understand

1. The Dow Charles Dow The Dow Jones Industrial Average Founded in 1896 by Charles Dow, a journalist, and Edward Jones, a statistician It is a weighted average of 30 large companies that are publicly traded It’s intended to show in aggregate the movement of the market at any given moment during the day

Coca-Cola, Alcoa, General Electric, Intel, IBM, JP Morgan Chase, Travelers, Wal- Mart,, Home Depot, Exxon, Boeing, Amex, Disney, Kraft, Caterpillar, DuPont, Merck, Johnson & Jonson, McDonalds, Procter & Gamble, AT&T, Cisco Systems, 3M, Verizon, United Technologies, Microsoft, Pfizer,Hewlett-Packard, Chevron, Bank of America Stocks in the Dow today include:

Dow is not the Only Game in Town S&P 500 It’s an index of the 500 largest cap publicly held stocks Standard & Poors NASDAQ An index of 3,700 stocks Electronically traded, automatic quotations More trading value than any other exchange in the world

2. What’s a Stock? A stock represents a proportional share of a business or corporation. It means you own a fraction of that business. How much you own depends on the number of shares you hold and the number of shares available. Companies share the profits with their shareholders in the form of dividends.

NUMBER 3 : WHAT’S A BOND? A bond reflects a security issued by a corporation, a national government, a state government, a municipality. In essence, it represents a loan that represents a portion of the institution’s debt.

Number 4: Interest Rates Interest rates represent the cost of credit: how much you will pay to borrow and how much you can earn on your money Set by the Federal Reserve

IN SIMPLE TERMS When credit is tight, interest rates are high. COSTLY TO BORROW When credit is loose, interest rates are low. EASY LOANS

LIQUIDITY Money flows to where it can earn the highest interest

5. INFLATION Consumer Price Index Economic indicator that show the prices paid by urban consumers for a representative basket of goods and services Compiled by the Bureau of Labor Statistics Based on numbers gathered in 87 urban areas in 23,000 establishments What’s in the basket? Price of Milk and Wine Cost of Gasoline Insurance Premiums Cost of a TV set Movie Tickets Rents College tuition Cigarettes

Used as a Basis of Compairson In 2009 dollars, Gone with The Wind is the biggest U.S. box office winner ever. Gone with the Wind: $1,606,254,777 Avatar: $760,506,204

6. RECESSION—WHAT IS IT? It’s a slow down in the Gross Domestic Product for two consecutive quarters. What’s the Gross Domestic Product? A country’s economic output

7. DEFICIT –A 7-letter word THE BUDGET DEFICIT OF THE UNITED STATES THIS YEAR WILL REACH……. PLAIN AND SIMPLE-- It means you are spending more than what you have

$1,340,000,000, That’s $1.34 trillion dollars!!!! Source: Projections/Congressional Budget Office

DEBT IS DIFFERENT If you have a deficit, though you have to borrow to make up the difference. What you owe is your debt.

US DEBT…. … IS ESTIMATED TO REACH $19.6 TRILLION DOLLARS BY 2015

THAT’S EXPECTED TO EQUAL TO 102 PERCENT OF OUR 2015 GDP

8. A COMPANY IS PUBLIC.. SO WHAT?? BOUND BY RULES In 1934, the Securities and Exchange Commission set up to ensure companies follow rules and regulations so investors know what they’re getting into MUST BE TRANSPARENT Must file their financial results publicly All documents and results are available on The Edgar Database

REQUIRED DOCUMENTS INCLUDE: The 10 K (the annual report), the 10 Q,the Proxy, the 8 Q

9. FINANCIAL LINGO DEMYSTIFIED

BALANCE SHEET ASSETS: what a company owns LIABILITIES: what a company owes

BALANCE SHEET

FISCAL YEAR Some companies report on a calendar year, others do not

INCOME STATEMENT Second Financial Statement Required Records Profit & Loss Details Source of Income and Expenses

THEY ALL MEAN ONE AND THE SAME THING –WHAT A COMPANY POCKETS AFTER EXPENSES EARNINGS PROFITS NET INCOME

A COMPANY CAN EARN A PROFIT Translation: It earned more than it spent

OR IT CAN REGISTER A LOSS ….Meaning it spent more money than it took in

YOU’VE SEEN THESE KINDS OF HEADLINES BOEING'S EARNINGS INCREASE 35%; BEATING EXPECTATIONS

OR…. Sales Rise 7% As Boeing Doubles Profit

A SALES GAIN DOES NOT ALWAYS MEAN A COMPANY IS PROFITABLE But……

COME AGAIN Gap’s sales rose 3.4 percent, to $3.56 billion BUT Gap said net income dropped 26 percent, to $178 million, in the three months through May 5.

HOW CAN THIS BE? POST SCRIPT: Revenues and sales are the same thing

3 rd Financial Statement The Cash Flow It’s similar to a checking account—how much comes in (sales/deposits), how much goes out (checks/payments)

10. BANKRUPTCY Belly Up? Chapter 11? Same thing?

Not quite Chapter 11 means a company has entered into bankruptcy protection under a federal court… It will restructure A controlled sale of its assets will occur It’s all done under the auspices of a judge