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Glossary

Economic Attributes Framework

The Economic Attributes Framework is a structured method used to evaluate and compare investment opportunities based on various economic factors and attributes.

What is the economic attributes framework?

The economic attributes framework is a tool used to assist analysts and decision-makers in comprehending the economic implications of a proposed project or policy change. This framework takes into account various factors, including the costs and benefits of the proposed action, the distribution of these costs and benefits, and how they may evolve over time. By gaining insights into the economic consequences of a proposal, analysts can make more informed assessments of whether it is worth pursuing.

What are the 3 main economic attributes?

The three key economic attributes that drive financial models are GDP, inflation, and interest rates. GDP holds the utmost importance as it determines the overall market size in which a company operates. Inflation is also significant, affecting the prices of goods and services and potentially impacting a company's profitability. Interest rates are crucial for companies with debt, as they can influence the cost of that debt.

How do I use the economic attributes framework?

The economic attributes framework is employed to model a business's economic performance. This framework can be applied to model the entire business or specific aspects of it. It comprises a set of economic attributes and their interrelationships. The economic attributes are used to model the business's revenue, expenses, and profits. The relationships between these attributes help simulate the effects of changes in economic factors on the business.

What are the different types of economic attributes?

Economic attributes are factors that influence a company's profit-generation capabilities. The primary economic attributes include:

  1. The company's industry: Various industries have varying levels of profitability.
  2. . The company's competitive position: Profit generation depends on a company's competitive standing relative to its competitors.
  3. The company's scale: Profit generation relies on the company's size relative to its competitors.

What are the different types of economic attributes frameworks?

Various types of economic attributes frameworks aim to assist analysts and investors in comprehending the financial characteristics of a company or project. The most common type is the income statement, which categorizes a company's revenue and expenses. Other frameworks may focus on the balance sheet, cash flow, or return on equity, providing diverse perspectives on a company's financial health for making informed investment decisions.