It is the total twelve months earnings divided by number of outstandingshares, divided by the recent price, multiplied by 100. The end result is shown in percentage terms. We often look at earnings yield because this avoids the problem of zero earnings in the denominator of the price-earning ratio. Easy money See: Tight money Eating stock When an underwriter can't find buyers for a stock and therefore has to buy them for his own account. ECN See: Emerging company marketplace Eclectic paradigm A theory that posits three types of advantages benefiting a multinational corporation: ownership-specific, location-specific, and market internalization advantages. Econometrics The quantitative science of modelling the economy. Econometric models help explain and predict variables of interest. Economic assumptions General market environment a firm expects to operate in over the life of a financial plan. Economic defeasance See: In-substance defeasance Economic dependence When the costs and/or revenues of one project depend on those of another. Economic earnings The real flow of cash that a firm could pay out forever in the absence of any change in the firm's productive capacity. Economic exposure The extent to which the value of a firm will change because of an exchange rate change. Economic growth An increase in the nation's capacity to produce goods and services. Usually refers to real GDP growth. Economic growth rate The annual percentage rate of change in the Gross National Product. Economic income Cash flow plus change in present value. Economic indicators The key statistics of the economy that reveal the direction the economy is heading in; for example, the unemployment rate and the inflation rate. Economic Life The time period over which an asset'sNPV is maximized. Economic life can be less than absolute physical life for reasons of technological obsolescence, physical deterioration, or product life cycle. Economic order quantity (EOQ) The order quantity that minimizes total inventory costs. Economic rents Profits in excess of the competitive level. Economic risk In project financing, the risk that the project's output will not be salable at a price that will cover the project's operating and maintenance costs and its debt service requirements. Economic shock Events that impact the economy which originate from outside it. They are unexpected and unpredictable (e.g., Hurricane Andrew in 1991, the rise in oil prices by OPEC). Economic surplus For any entity, the difference between the market value of all its assets and the market value of its liabilities. Economic union An agreement between two or more countries that allows the free movement of capital, labor, and all goods and services, and involves the harmonization and unification of social, fiscal, and monetary policies. Economic value added (EVA) A method of performance evaluation that adjusts accounting performance for investors' required return on investment. Suppose a division produces a 12% return on capital invested. Given the risk of the division's business line, if investors would usually require 14% on capital invested for this level of risk, the division destroyed shareholder value by the EVA metric. This Stern-Stewart has a trade mark on this term. Economics The study of the economy. See