In the second part of the book, Chapters 5-8, Wickham continues to cover the most essential and important numbers that journalists run into on a daily basis. I learned a great deal from these chapters, information which I have heard before and needed reminding of, as well as information that I had forgotten over time.
Chapter 5 talked about the importance of polls and surveys. For journalists, pools and surveys make numbers real–they give the readers palatable information that they can take away from a reading. It’s important to discern the difference between a poll and a survey. A poll is an estimate of public opinion, and are based around a single question. A survey usually includes multiple questions in which the reader has an opportunity to respond. Both polls and surveys are used to gauge the general interest among a representative sample of the population.
One essential thing to both an effective poll and an effective survey is to have a good sample audience. It’s important to have an assortment of people within a sample to get a variety of answers. This can best be determined by having a subset of a population, such as a zip code or a school.
Chapter 5 also talked about margin of error and confidence level, and how it relates to polls and surveys. Margin of error, Wickham says, indicates the degree of accuracy in the research. Over time, the margin of error increases as the confidence level increases. This is because there are more people being surveyed.
Chapter 6 begins to talk about common business terms that are used by journalists, and parts of business that are used in reporting — press releases, quarterly reports, annual reports, etc — to display information to a wider audience. The chapter also detailed the importance of business terms in reporting. For example, with financial statements, numbers are typically written in “thousands” or “millions”, where the last three to six zeroes are deleted. Also, when talking about net income, it’s important to display this amount over a certain period of time, so the audience can catch on to trends in the net income.
An important formula that is introduced in Chapter 6 is gross margin, which can be derived from the following formula:
Gross margin = selling price – cost of goods sold
The example the book uses is someone re-selling newspapers. If he buys a newspaper for 90 cents and resells it at $1.25, his gross margin is 1.25 – .9 = 35 cents.
Net profit is another term that was introduced in this chapter, and can be derived from the following formula:
Net profit = gross margin – overhead
In the example above, we see that the seller has a margin of 35 cents per paper. If he sells 50 papers, his cross profit is:
35 cents x 50 = $17.50
A balance sheet is a written financial statement of a company’s assets, liabilities and equities. It shows the financial stability of the company. Assets can be derived from the following formula:
Assets = Liabilities + Equity
There are many definitions associated with balance sheets that are defined in this chapter, including fixed assets, liabilities, and dividends, among others.
Fixed assets include property, plants, equipment and deferred charges.
Liabilities are obligations, such as loans, that need to be paid at some later date.
Dividends are payments to shareholders that represent the distribution of the company’s assets.
This chapter really helped with legal and business definitions that can be tricky to understand, especially, for those who aren’t business majors.
Chapter 7 discussed stocks and bonds, discussing two important ways that businesses earn money.
Stocks are sold by corporations to raise money, while the public buys stock to be used as investments.
The chapter discusses important statistics that are often included with stocks that can be confusing. 52-week High/Low figures indicate the highest and lowest stock prices over the past year.
The stock itself is the letter symbol which is the shortened version of the company name. The div is the most recent annual dividend that the company paid to shareholders, per share.
Bonds are defined as loans from an investor to the government or other organization selling the bond.
With bonds, it’s important to derive the current yield, which is derived from the following formula:
Current yield = (interest rate x face value) / price
Chapter 8 discusses property taxes, which are defined by Wickham as the largest single source of income for local governments, school districts and other municipal organizations.
Property tax is determined by taking the total amount of money the governing body needs, and dividing it among the property owners in the taxing community.
The appraisal value of a property is based on many factors, including:
-The property’s use (residential, business, farm, etc.)
-The property’s characteristics (location, square footage, age, etc.)
-Current market conditions as determined by sales in the immediate area over a specific number of years.
and
-A visual inspection of the property by trained appraisers.
Calculating tax is an important thing for journalists to understand, as it can make the assessed value of a property easier to understand. The formula for calculating tax can be derived from the following formula:
Tax owed = tax rate x (assessed value of the property / $100).
The information in chapters five through eight helped me better understand the intricacies of business, and how I can better display that seemingly cumbersome information effectively as a journalist.
Examples:
Bond cost:
A town decides to issue $6 million worth of 20-year bonds to pay for a new community recreation center. If the bond coupon is 5 percent, how much will the town pay in interest over the life of the bonds?
$6 million x .05 x 20 years = $6 million
Current yield:
A man paid $700 for a $1,000 bond with a 5 percent interest rate. What is his current yield?
Current yield = (5% x $1000) / $700 = 7.1% current yield
Current ratio:
Coca Cola has $150 million in current assets and $39 million in current liabilities. What is its current ratio?
150,000,000 / 39,000,000 = 3.85
Coca Cola has $3.85 in assets for each dollar in liabilities.
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