An audio glossary of investment terms for young people and intending investors.
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Economies of scale are cost advantages reaped by companies when production becomes efficient. Companies can achieve economies of scale by increasing production and lowering costs. This happens because costs are spread over a larger number of goods. Costs can be both fixed and variable.
The business size generally matters when it comes to economies of scale. The larger the business, the more the cost savings. Economies of scale can be both internal and external. Internal economies of scale are based on management decisions, while external ones have to do with outside factors. Internal functions include accounting, information technology, and marketing, which are also considered operational efficiencies and synergies.
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2 Apr 2024TRANSCRIPT
Investment term for the Day - Attorney-in-Fact
An attorney-in-fact, also called an agent, is a person who is authorized to act on behalf of another person, known as the principal, typically to perform business or other official transactions.
The principal usually designates someone as their attorney-in-fact by assigning them power of attorney, although a court may choose to assign it if the person being represented is incapacitated. The rules regulating power of attorney vary from state to state.
An attorney-in-fact is not necessarily a lawyer. Power of attorney may also be granted to more than one person.
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25 Mar 2024TRANSCRIPT
Investment Term for the Day - Bank Bill Swap Rate
The Bank Bill Swap Rate, or Bank Bill Swap Reference Rate, is a short-term interest rate used as a benchmark for the pricing of Australian dollar derivatives and securities—most notably, floating rate bonds.
The BBSW is an independent reference rate that's used for pricing securities. Fixed-income investors use BBSW since it's the benchmark to price floating-rate bonds and other securities.
There is a risk premium added to the BBSW to compensate for the risk of the securities, as compared with the risk-free rate, which is typically based on government bonds.
The BBSW is calculated and published by the Australian Securities Exchange (ASX), which maintains this rate. The bank bill swap rate is Australia's equivalent of the London Interbank Offered Rate (LIBOR) and is used as a reference rate in much the same way on an institutional level.
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Inside a recent episode
Investment Term for the Day - Economies of Scale
Published 8 Apr 2024 · Transcript excerpt
[…] The size of the business generally matters when it comes to economies of scale. The larger the business, the more the cost savings. Economies of scale can be both internal and external. Internal economies of scale are based on management decisions, while external ones have to do with outside factors. […]
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