Economics, Finance & Accounting

Economics, Finance & Accounting

When thinking of economics, the words supply and demand spring to many minds. And why would they fail to do so, if these are indeed the forces that control the free market? Most of the world’s markets today are mixed, they are largely free but there is some state involvement. Since the fall of the USSR and opening of the Chinese market, only a few exceptions keep operating as centrally planned economies. All in all, a centrally planned economy proved inefficient economically. However, not all free markets are competitive markets governed by what consumers want to buy, and what producers are willing to sell. For example, a firm that is a perfect monopoly plays by a different set of rules.

Economists have been criticized on many fronts. Apparently, they often disagree with each other and see individuals as more mercenary than they really are. Well, while most economists would certainly agree on mathematical concepts and many theoretical economics constructs, they often do have divergences of opinion on what ought to be done, this is the realm of normative economics.

Manhattan One Plaza. Photo by Elena

Also, most economists do recognize that although the ultimate goal of a business is to earn a profit, many other incentives are relevant and even more so at the personal level.

Around 2006, the profession Financial Consultant was one of the better remunerated and most sought after occupation in the United States of America. Although with the advent of the 2008 financial crisis, the industry may have lost some of its prestige (and a lot of persons in and out of the industry have been laid off), finance, as a field, is still important and may even hold the key to future economic prosperity.

In today’s day and age, accounting professionals are some of the people for whom it is easiest to find employment. Senior accountants working as Chief Financial Officers, Vice Presidents of Finance, Controllers and Treasurers, are also well paid. However, as most appealing prospects, the getting there can be quite tough. Some of the requirements are outlined in this part of the website.

Working in Finance or Economics

Finance is a branch of economics destined to study investing and financing operations of business firms. Economics, in turn is a social science focusing on attempting to satisfy an unlimited number of human wants with a finite amount of resources. Economics is subdivided into several disciplines, including macroeconomics, microeconomics, financial econometrics and finance.

Corporate finance is one of the branches of finance and deals with investing and financing activities of operating a business. Most businesses, regardless of their size need a healthy cash flow to survive and prosper. Indeed, firms are in business to make money, that is the reason why they entered the business world in the first place.

A squirrel posting with a business profit. Image: Elena

Costs can and have to be controlled in order for a business to ultimately record profits. Microeconomic theory focuses on costs. Thus, according to microeconomic theory cost can be variable, fixed or mixed. Naturally, mixed costs include elements of both fixed and variable costs.

Charity: For Goodness Sake

Charity: For Goodness Sake

There’s no shortage of good causes. These do the most with your dollars.

In days of yore, the clang of a coin or the drop of a dollar satisfied the conscience of most donors. Signing a check meant helping the have-nots. But charitable giving isn’t as straightforward anymore. A new provision of the tax law requires that donors have written acknowledgment for every gift over a determined sum if they intend to claim a deduction on their income tax form. Furthermore, you can’t be sure that your dollars are being put to good use – or, at least, the use that you intended. In recent years, numerous press and government reports exposing the scandalous practice of a few charities’ top dogs have left some almsgivers disillusioned.

The philanthropic fabric of the county remains strong, but knee-jerk donations are a thing of the past. Wary donors are demanding more information before pulling out their checkbooks. To make sure that your donations don’t end up lining the pockets of your favorite charity’s board of directors, you’ll need to do a little homework.

A good way to check up on the effectiveness of a charity is to zero in on how they are handling your funds. Managerial and fund-raising expenses invariably guzzle a god portion of charitable dollars. To feel confident that your offering is not consumed by high overhead costs, look to see if at least 60 percent of the revenues goes to programs. Although this yardstick may vary with the charity’s services, generally the higher the percentage of funds going to programs, the more efficient the charity and the more likely your offering reaches the intended recipients.

Yellow flower (iris), close up. Photo by Elena

Unfortunately, deciphering a charity’s financial documents can be painfully tedious (if you can even get a hold of them).

And if you do take the time to examine an annual report or IR form, neither one is likely to reveal potential skullduggery. Fortunately, there are watchdog groups out there evaluating the performance of charities for you.

Charity Begins With Your Budget

Put Your Money Where the Need Is

Each year, The NonProfit Times, a leading publication for nonprofit management, conducts an in-depth study of America’s leading charities to help people avoid giving in a willy-nilly manner. They are ranked according to how much of funding received is dedicated to programs. A look at a few stellar charities:

Human Services: Association for retarded citizen; American Red Cross; Salvation Army; Goodwill Industries Intl; Catholic Charities, USA.

Relief and Development (occurrence of natural disasters and world crises): Intl. Rescue Committee; Habitat for Humanity Intl; Christian Children’s Fund; Compassion International; Save the Children.

Conservation: National Wildlife Federation; Ducks Unlimited; The Nature Conservancy, World Wildlife Fund; National Audubon Society.

Health: United Cerebral Palsy Association; City of Hope; Muscular Dystrophy Association; National Easter Seal Society; American Heart Association.

Religion (support for organizations dedicated to transmitting spiritual values): Wycliffe Bible Translators; The Navigators; Campus Crusade for Christ; Focus on the Family; Billy Graham Evangelistic Association.

Rent-a-Masterpiece

Rent-a-Masterpiece

How about a limited edition, worth $3000, for $220 for three months?

A Picasso in your living room. A Degas in the music room. A Henry Moore sculpture in the garden. Not quite, but a slew of national art museums – including the Los Angeles County Museum of Art, the Philadelphia Museum of Art, and the Indianapolis Museum of Art – and local galleries are making it possible for shallow-pocketed connoisseurs to hang museum quality art on their walls. For the cost of a museum membership and charges depending on the value of the piece, a culture vulture can walk away with works of up-and-coming local artists as well as artists with well-established reputations.

The individual renter can’t, as cool as it might be and as much as you promise to treat it well, rent from the permanent exhibitions.

But how about a limited-edition Charles Cuniff photograph from the Seattle Art Museum worth $3000, for $220 for three months? Or a David Hockney lithograph from Art Dimension in Santa Monica, California, selling price $8,000, for $200 a month.

Museums differ in the number of months they’ll rent a piece for and whether they’ll renew. But all allow the satisfied customer to buy the pieces he or she rents, minus a percentage of the rental fee or of the money already spent renting. It’s a win-win situation, as galleries make money, the artist gets exposure and income, the public gets access to affordable artwork.

So far, the only hitches have been nasty little natural disasters like earthquakes. Please, the museums plead, along with your real fine taste, have real fine-art insurance.

Piece of art. Photo by Elena

Determinant 3: The degree of risk

Determinant 3: The degree of risk

Risk plays an important role in the stock market, no matter what your overeager broker may tell you. There is always a risk – and that’s what makes it so fascinating. Risk also affects the valuation of a stock. Some people think risk is the only aspect of a stock to be examined.

The more respectable a stock is – that is, the less risk it has – the higher its quality. Stocks of the so-called blue-chip companies, for example, are said to deserve a quality premium. (Why high-quality stocks are given an appellation derived from the poker tables is a fact known only to Wall Street). Most investors prefer less risky stocks and, therefore, these stocks can command higher price-earnings multiples than their risky, low-quality counterparts.

While there is general agreement that the compensation for higher risk must be greater future rewards (and thus lower current prices), measuring risk is well-nigh impossible. This has not daunted the economist, however. A great deal of attention has been devoted to risk measurement by both academic economists and practitioners. Indeed, risk measurement is so important that an entire part of this book (Part Three) is devoted to this subject.

According to one well-known theory, the bigger the swings – relative to the market as a whole – in an individual company’s stock prices (or in its total yearly returns, including dividends), the greater the risk. For example, a nonswinger such as AT&T gets the Good Housekeeping seal of approval for “Widows and orphans.” That’s because its earnings do not decline much if at all during recessions, and its dividend has never been cut.

Degree of Risk. Photo by Elena

Therefore, when the market goes down 20 percent, AT&T usually trails with perhaps only a ten percent decline. At&T is probably not as safe as it was before 1983 divestiture and deregulation, which led to increased competition in the telecommunications industry. Nevertheless, the stock still qualifies as one with less than average risk. Amdahl, on the other hand, has a very volatile past recorded and it characteristically falls by 40 percent or more when the market declines by 20 percent. It is called a “flyer,” or an investment that is a “businessman’s risk.” The investor gambles in owning stock in such a company, particularly if he may be forced to sell out during a time of unfavorable market conditions.

When business is good and the market mounts a sustained upward drive, however, Amdahl can be expected to outdistance AT&T. But if you are like most investors, you value stable returns over speculative hopes, freedom from worry about your portfolio over sleepless nights, and limited loss exposer over the possibility of a downhill roller-coaster ride. You will prefer the more stable security, other things being the same. This leads to a third basic rule of security valuation.

Rule 3: A rational (and risk-averse) investor should be willing to pay a higher price for a share, other things being equal, the less risky the company’s stock.

We should warn the reader that a “relative volatility” measure may not fully capture the relevant risk of a company. Part Three will present a thorough discussion of this important risk element in stock valuation.

Reykjavík Highlights

Reykjavík Highlights

Viewpoints

Everybody loves a good view and Reykjavík has some amazing vistas of mountains and fjords as well as multi-coloured rooftops. Perlan at Öskuhlíð is a great place to see Esja, the beautiful mountain and surrounding fjords.

Another high point is the Hallgrímskirkja Cathedral at the top of Skólavörðurstigur, from which a whole panorama opens up. A fee is charged to go up the bell tower.

Museum Walks

This small city has a good reputation of being safe, despite the hectic nightlife that might go on until all hours of the morning. Most attractions are within walking distance and if not, there are various shuttles and buses to main attractions.

The Hop-On-Hop-Off bus is a good way to tour the city and can be booked through TripGuide Iceland. Most museums are located downtown and accept the Reykjavik City Card as well as some art galleries. The Harpa Concert Hall is a magnificent edifice on the waterfront which hosts various cultural events and concerts. Guided tours through the building reveal architectural genius.

Late Night Walks

Most walking paths are well-lit and neighbourhoods are calm, so going for a midnight stroll to see the midnight sun or northern lights is taken for granted by the locals. Two major walking paths are along the seashore of the city. One is from Harpa Concert Reykjavík must surely be the smallest capital in the northern hemisphere and as such bears this status with pride. Most tourists don‘t feel like they are in the country’s biggest city, as distances between attractions are not huge, traffic is not overwhelming and downtown Reykjavík is laid-back and interesting. The main shopping streets are geared primarily towards tourists and their needs. Reykjavík, however, has the trappings of any major centre which soon becomes apparent when dining out or spending a night on the town. Quality is the keyword when visiting the capital of Iceland. The highlights of Reykjavík might not always be obvious, but they are plentiful, depending on what you seek from the city.

The Pearl (Perlan) 1963, a great volcanic eruption below sea level, close to the Westman Islands, forms a new island named Surtsey.

Hall along the seaboard with a view of boat activity from the harbour and Viðey Island. The other is from the Grandi area to Grótta lighthouse. Cycling in the dark is also a favourite pasttime for some.

Swimming, Whale Watching and Horse Riding

Reykjavík has its own sandy beach with a giant hot tub at Nauthólsvik which is a favourite of local ocean swimmers. There are also 7 public swimming pools each with their own setup and character. Getting in touch with nature doesn‘t take much in Reykjavík where shuttles will take you to horse riding activities in the suburbs and beyond. Whale watching from the central harbour is a great activity while in Reykjavík. We recommend booking your activities in advance through TripGuide Iceland. (www.tripguide.is) Besides all of the above, the actual highlight of Reykjavík is that it is so close to amazing landscape and wide open spaces from where the real Iceland beckons.

A glaive. Photo by Olga

There is no better way to discover the wonders of Reykjavík than exploring it on foot. A stroll along the city streets will reveal both its history as well as a flourishing modern culture.

Reykjavík On Foot or Bike Reykjavík “CLASSIC” (2 - 3 hrs. / 2.4 km.)

Starting at Lækjartorg square, follow Austurstræti to the corner of Pósthússtræti. There you take a right turn and continue down to Reykjavík old harbour where you can observe the fishermen working. Continue west passing the Grófin area, a cluster of beautifully restored buildings, and through to Aðalstræti, the oldest street in Reykjavík. At the square opposite The Settlement Exhibition, turn right and follow Túngata to find the Catholic Church at Landakot. Proceed on Hávallagata to Garðastræti and take a right turn to Kirkjustígur to enjoy the old cemetery, filled with beautiful sculptures and gravestones. Leaving the cemetery, follow Suðurgata to Skothúsvegur and enjoy a little detour around the City Pond. Continue along Fríkirkjuvegur and make a stop at the National Art Gallery which is well worth seeing. Proceed towards the city centre, to the City Hall where you find the main Tourist Information Office and from there to Alþingi Parliament House and Dómkirkjan church.

Walk onwards to Lækjargata and continue in the direction of the Lækjartorg square. Pass the giant outdoor chess board, the statue Vatsnberinn and Bernhöfts torfan, a set of renovated buildings which house gourmet restaurants. Proceed to the statue of Ingólfur Arnarson, the first settler in Iceland, on the top of Arnarhóll. End the tour at Harpa concert hall.

Reykjavík “GRAND TOUR” (5 - 6 hrs. / 4.3 km.)

Starting at Lækjartorg square, follow Lækjargata towards the pond and head for City Hall, Tourist Information Centre, where you can take a look at a giant relief map of Iceland. Continue from the City Hall to Dómkirkjan church and the Parliament House. From there walk towards Aðalstræti, which was the first, and in fact the only street in the early days of Reykjavík. This is the oldest part of the city and here you can find some of its oldest houses and trees. On the right side of the street is an old well which used to be one of the city’s main water sources until the establishment of the Water Works in 1909. The tiny square opposite The Settlement Exhibition used to be a cemetery and you can still see some old gravestones there. Proceed to the Grófin area, past Restaurant Reykjavík and continue down to Reykjavík harbour where you will find an old steam locomotive which was used to transport building materials for the harbour when it was under construction. Walk on along the harbour, take a look at the fishermen landing their catch and follow the footpath by the seaside leading to “Sólfarið”, a beautiful sculpture and an excellent viewpoint. Continue to Höfði, the famous meeting place of Reagan and Gorbachev in 1986. Walk up Höfðatún until you reach Laugavegur street and follow it down to Hlemmur Bus Terminal. Proceed up Rauðarárstígur until you find Kjarvalsstaðir museum where you can enjoy the classics of Icelandic art. Find your way from Kjarvalsstaðir museum to Hallgrímskirkja church and go up the tower to get the best view of the city. Continue down Skólavörðustígur and Bankastræti towards the Government house, which used to serve as a prison. The tour comes to an end at Arnarhóll under the statue of Ingólfur Arnarson, the first settler in Iceland. Höfði in Borgartún Reykjavík On Foot or Bike 1971 The first Icelandic manuscripts are brought back to Iceland from Denmark, after being kept there since the 18th century.

Ægisíða – Nauthólsvík (1.5 - 2 hrs.)

Start your walk at Landakotskirkja and walk from there along Hofsvallagata down to the coast at Ægisíða. Follow the path past the old fish huts and various other reminders of the city’s fishing heritage. Continue past the domestic airport all the way to Nauthólsvík, a beautiful little beach with white sand where you can bathe in the heated seawater, or maybe, if you are adventurous, paddle out in a kayak into the sunset.

Öskjuhlíð – Perlan (1 - 1,5 hrs.)

Öskjuhlíð hill played an important rôle during the Second World War when the British Army used it as a military location. Today it is still important but now as an outdoor resort for anyone who likes a good walk in pleasant surroundings. It offers excellent paths, benches, an artificial geyser and amongst the trees you can still find some traces of the army “settlement”, shelters and trenches. After having enjoyed the surroundingsfor a while you can treat yourself to a nice cup of coffee at Perlan and take a look at the city from the viewing point at the top.

Entertainment in Greater Reykjavík

The Greater Reykjavík Area has plenty of entertainment on offer and everyone should be able to find something of interest. Many visitors come to Iceland to experience the fantastic nature and popular winter activities are skiing at Bláfjöll Ski Resort, Ice-Skating or hunting for northern lights. For colder days there are plenty of indoor activities such as visiting one of Reykjavik’s cinemas, the Bowling Palace in Egilshöll Grafarvogur, or burning off some excess energy at the Climbing Centre. During the summer, longer daylight hours allow for outdoor enjoyment well into the late evening. Other outdoor entertainment includes ATV Quad biking, Go-Kart racing, caving on the outskirts of Reykjavik or horse riding. The summer is filled with festivals and cultural venues, so everyone should find something fun to do during their Reykjavík stay.

The Old Harbour Area

The charming Old Harbour was transformed into a dynamic neighborhood when a group of energetic individuals renovated old fishermen’s huts to revamp this historic area. Just a few minutes’ walk from the city centre, the Old Harbour Area is now a hub of delicious seafood restaurants, whale and bird watching tours, stylish design boutiques, arts and crafts, souvenir and coffee shops as well as a cinema. Enjoy the view of the ocean from one of the waterfront restaurants, the boats, the bustle of a genuine working harbour and the smell of the sea. Old Harbour Souvenirs is a treasure trove of Icelandic crafts and souvenirs. Among the good restaurants in the area is the 101 Harbour, Slippbarinn at Icelandair Hotel Marina, The Steakhouse and two Icelandic fish and chips restaurants across the street. The Seabaron is popular for its lobster soup and Kopar, focuses on Icelandic ingredients. A few meters away is Mar Restaurant. Iceland’s original burger joint, Hamborgarabúllan, is a favourite place for locals to grab a quick bite. Raw on the inside, this popular place is housed in the iconic rounded building on a street called Burgerjoint at the start of the whale watching pier.

Grandi District

Walking further along the Old Harbour area, past the Icelandair Marina hotel and the ship yard and along the waterfront to the Maritime Museum (read about the museum in the culture chapter), you will have reached the Grandi District. This area is a wonderful example of how tourism is taking over the fishing industry. A host of art galleries and designers‘ workshops are located in disused fishermen‘s baiting sheds or store rooms. Fish processing plants still exist in the area and Grandi is still the hub for fishermen and their catch.

Grandagarður consists of a long row of baiting sheds that have been revitalized by artists and designers, bringing art and food to the area. Food speciality stores such as Búrið, the cheese specialist or Valdís, the ice-cream connoisseur have their place next to Krinolín a design store where animal and fish skin, as well as wool and other natural materials, are used to create high fashion items. If you can´t get to see the northern lights on your tour, don‘t despair, Aurora Reykjavik at the roundabout on Grandagarður is the perfect substitute to see this celestial spectacle.

Moving onto the next street, Fiskislóð, Whales of Iceland has an informative display of life-size whales. Cheaper grocery stores Bónus, Nettó and Krónan are also located on this street. The Grandi District is definitely a place to take your time, relax and shop. Or just sit in the sun at one of the coffee shops and watch the activity in the harbour.

Kopavogur

Six good reasons to enjoy Kópavogur

Salurinn Concert Hall

Tel: 441 7500

www.salurinn.is

Kópavogur Art Museum

Gerdarsafn

Tel: 441 7600

www.gerdarsafn.is

Natural History Museum

Tel: 441 7200

www.natkop.is

Public Library

Tel : 441 6800

www.bokasafnkopavogs.is

Aquatic Centre

Tel: 570 0470

3 km from Reykjavík Centre

Kopavogur Church

Tel: 554 1898

What to do in Gardabaer

Museum of Design and Applied Art. Kraum design shop is situated in the museum.

Tel : 512 1525.

Hofsstadir Archeology Site. Historic park. Remains of a Viking-Age-longhouse.

Krokur at Gardaholt. A small gabled farmhouse built in 1923.

Gardabaer Thermal Pool. Friendly outdoor pool, steambath.

Alftanes Thermal Pool. The country's only wave pool, a 10 m. high, 80 m. long waterslide.

SKAPARINN AUGLÝSINGASTOFA

Kópavogslaug

Borgarholtsbraut 17

50 m outdoor pool

Salalaug

Versölum 3

25 m outdoor pool

Indoor & Outdoor Pools,

Hot Tubs, Jacuzzi, Steambaths, Waterslides and Childrens Pool

Bus No. 1 runs to Kópavogur from Reykjavík.