Napkins – Economic – Napkin Finance

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NFTs

(Not So) Real World

An NFT, or non-fungible token, is a code that says you own a unique digital item.

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P/E Ratio

At Any Price

The price-to-earnings ratio (or P/E ratio) is a way to evaluate whether a company’s stock is cheap,...

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Quantitative Easing

Easy Money

Quantitative easing is when the Fed (or another country’s central bank) buys up large amounts of bonds....

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Invisible Hand

Helping Hand

The “invisible hand” is an economic theory developed by Adam Smith. It proposes that when people act...

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Game Theory

Roll the Dice

Game theory is an economic model for predicting people’s decisions in tricky situations.

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Fiscal vs. Monetary Policy

Tax and Spend

Fiscal and monetary policy are two tools the U.S. government can use to help the economy stay...

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Recession Shapes

Give Me a V

A recession is an economic downturn that lasts for at least several months and ripples throughout the...

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Campaign Finance

Follow the Money

Campaign finance describes the way political candidates raise and spend money to run for office.

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Volatility

Rocky Road

Volatility describes how much an investment bounces around in price. More volatile investments zigzag in price more...

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Valuing a Company

What’s it Worth?

A company’s value is the dollar figure that it might sell for if a person or another...

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Futures

Looking Ahead

A futures contract is an agreement to buy a specific investment at an agreed-upon price on an...

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Forex

Hard Currency

The foreign exchange, or forex, markets are where investors go to buy and sell currencies. Unlike the...

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Inflation

On the Up and Up

Inflation is when prices of things rise over time. For example, in 1980 you could buy a...

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Tariffs

Barriers to Entry

A tariff is a tax charged on goods coming into or out of a country. When a...

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Cryptocurrency

Tales of the Crypto

Cryptocurrency is digital money that can be sent electronically anywhere in the world.

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Bitcoin

Not So Silky Road

Bitcoin is the world’s first type of digital money, or cryptocurrency. Unlike traditional paper money, Bitcoin only...

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Bull or Bear Market

Into the Wild

Wall Street may be a bit of a rodeo, but there are no literal bulls or bears....

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GDP

Grossly Underrated

Gross domestic product, or GDP, measures the size of an economy. In essence, it puts a dollar...

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Break-Even Point

Point Break

A company is at its break-even point when its revenue equals its expenses. It is neither making...

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IRR

Crunch the Numbers

The internal rate of return, or IRR, is a measure of an investment’s or a project’s profitability....

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Financial Statements

State of Affairs

Financial statements are reports a company puts together to measure how it’s doing. Companies create their financial...

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Profit and Loss (P&L)

The Bottom Line

A profit and loss statement, or income statement, shows the money a company earned and what it...

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Remittance

Check’s in the Mail

Remittances, also known as remittance transfers or international wires, are when someone in one country sends money...

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Overhead

Keep the Lights On

Overhead refers to the expenses a business must pay just to stay open. Also known as “indirect...

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Blockchain

Chain Gang

Blockchain is the recordkeeping technology that serves as the foundation for Bitcoin and some other types of...

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Bankruptcy

Lose Your Shirt

Bankruptcy is the legal process for consumers or businesses to get help with their debt. Bankruptcy starts...

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Options

Coming Attractions

An option is the right, but not obligation, to buy or sell an investment at a specific...

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Recession

Feel the Pinch

A recession refers to a time when the economy shrinks instead of grows. More specifically, economists typically...

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Fixed vs. Variable Costs

At All Costs

Fixed and variable costs are types of expenses that businesses pay in order to operate.

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Equity

Own It

Equity is ownership. You can have equity—or an ownership stake—in any asset, meaning anything of value.

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Liquidity

Cashing Out

Liquidity refers to how easily you can sell an investment or asset at a fair price.

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ROI

Many Happy Returns

Return on investment, or ROI, is a ratio for measuring the profitability of an investment. It puts...

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Balance Sheet

Cook the Books

A balance sheet is a snapshot of financial health, showing what a company or person owns and...

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Currency

All About the Benjamins

Currency is anything that people use to store value or trade for goods or services. Currency can...

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Fiduciary Duty

Your Best Interest

A fiduciary duty is a legal obligation to act in another person’s best interest.

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Economies of Scale

The Bigger, the Better

Economies of scale occur when it’s cheaper to produce a lot of something than it is to...

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EBITDA

How You Slice It

EBITDA (pronounced “ee-bit-tah”) stands for “earnings before interest, taxes, depreciation, and amortization.” It’s one measure of a...

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Profit Margin

Margin of Error

A company’s profit margin measures the portion of its total sales that it gets to keep as...

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Liability

Much Obliged

A liability is something that will require you (or a company) to spend money or resources in...

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The Fed

Making a Federal Case

The Fed is the central bank of the U.S. Its overarching role is to make sure that...

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Opportunity Cost

Fork in the Road

Opportunity cost is the return or benefit you miss out on by choosing one option over the...

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Depreciation

Wear and Tear

Depreciation is a physical asset’s loss of value over time. Just as your once new car is...

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Securities

Market Maker

“Securities” is the term used to describe stocks, bonds, mutual funds, and other types of financial investments....

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