This document provides an overview of corporations for journalism students. It discusses why companies exist, the difference between private and public companies, key industries, how public companies function, costs and profit, types of corporate stories to cover, and earnings announcements. The document is from a class on economics for journalists that focuses on reviewing supply and demand, examining the economic efficiency of gifts, and discussing corporations.

1. Economics for Journalists
Week 3: Corporations
Jeffrey Timmermans
Tuesday, 5 February, 13

2. Review: Supply & Demand
Tuesday, 5 February, 13

3. Economic Efficiency of Christmas
& Birthdays
✤ This exercise is designed to examine the economic efficiency of
Christmas & Birthday gifts.
✤ Record at least three gifts that you received, from whom you received
the gifts, the amount you think was paid for the gift, and – not
counting the sentimental value – what you would be willing to pay
for them yourself.
Tuesday, 5 February, 13

4. Your gift record
Amount Amount
Gift From
paid for gift you’d pay
for gift
Tuesday, 5 February, 13

5. Valuing your gifts
✤ Were any gifts "good values"? That is, are there any gifts that you
value more than what you think was paid for them? Who tended to
give you these gifts?
✤ Were any gifts "bad values"? That is, are there any gifts that you value
less than what you think was paid for them? Who tended to give you
these gifts?
Tuesday, 5 February, 13

6. Price Vs. Value of Gifts
$150
$120
Price $90
Value
$60
$30
$0
Aunt/Uncle Sibling Parents Sig. Other Grandparent Friend All
Source: Survey of Yale Undergrads on the perceived value & price of christmas gifts
received, from “The Deadweight Loss of Christmas” by Joel Waldfogel; N=246
Tuesday, 5 February, 13

7. Consumer Surplus
D S
Price
Consumer
Surplus
Price Paid
Producer
Surplus
0
Quantity
Tuesday, 5 February, 13

8. Group Discussion
✤ In your groups, please think of at least three ideas for stories based
on, or using, these data.
Tuesday, 5 February, 13

9. Corporations
Tuesday, 5 February, 13

10. Why companies exist
✤ Allow individuals to pool capital and share risk
✤ To accomplish complicated tasks like international trade & creation of
complex products
✤ To make money (profit) for its owners
Tuesday, 5 February, 13

11. Private vs. Public
✤ Private companies (“closely held”)
✤ Family-owned
✤ Private-equity owned
✤ Public companies
✤ Owned by shareholders
✤ Shares traded on stock exchange
Tuesday, 5 February, 13

12. Public corporations
✤ Legal entities registered in a particular location
✤ Add value to raw materials or provide services, and sell them for a
profit (hopefully)
✤ Sell shares in the company to the public
✤ Disclose details on performance every three or six months
Tuesday, 5 February, 13

13. Key industries
✤ Agriculture ✤ Transportation ✤ Admin/Waste Mgmt
✤ Mining ✤ Information ✤ Educational Services
✤ Utilities ✤ Finance & Insurance ✤ Health Care
✤ Construction ✤ Real Estate ✤ Arts & Entertainment
✤ Manufacturing ✤ Professional Services ✤ Accommodation &
Food
✤ Wholesale Trade ✤ Management of
Companies ✤ Other Services & Public
✤ Retail Trade Administration
Source: 2012 North American Industry Classification System
Tuesday, 5 February, 13

14. How public companies function
Initial
capital
Additional
share/bond
Produce goods or sales
services
Use profit to grow
Sell goods for more company or
than cost of production compensate owners
for risk
Tuesday, 5 February, 13

15. Costs
✤ Fixed costs
✤ Overhead (rent etc.)
✤ Variable costs
✤ Raw materials
✤ Labor
Tuesday, 5 February, 13

16. Profit
✤ Profit is what’s left from revenue after all costs of doing business are
subtracted
✤ A public company’s main responsibility to shareholders is to
maximize profit
✤ Maximize revenue/minimize costs
✤ Because profit is what’s used to pay dividends and grow the business
Tuesday, 5 February, 13

17. Types of corporate stories
✤ Initial public offering (first sale of shares to public)
✤ New product/line of business
✤ Top executive changes
✤ Fundraising: secondary share sales & bond issues
✤ Mergers & acquisitions
✤ Earnings announcements
Tuesday, 5 February, 13

18. Earnings announcements
✤ Three main types of corporate disclosure documents:
✤ Profit & Loss Statement (also called P&L or income statement)
✤ Balance Sheet
✤ Cash Flow Statement
Tuesday, 5 February, 13

19. The Balance Sheet Barrier
Tuesday, 5 February, 13