COVID-19

Definition

COVID-19 is a global pandemic caused by the novel coronavirus SARS-CoV-2, significantly impacting economic activities and financial markets. It has led to disruptions in supply chains, market volatility, and changes in consumer behavior, affecting corporate financial health and investment decisions.

5 Must Know Facts For Your Next Test

1. COVID-19 caused unprecedented market volatility, leading to sharp declines in stock prices followed by recovery periods.
2. The pandemic led to increased government spending and stimulus packages, affecting national debt levels and interest rates.
3. Corporate earnings were significantly impacted, altering key financial ratios like Price-to-Earnings (P/E) and Market-to-Book (M/B).
4. The yield curve experienced fluctuations as investors moved between risk-on and risk-off assets during different phases of the pandemic.
5. Risk management strategies became crucial for companies to navigate uncertainties brought about by COVID-19, including liquidity management and stress testing.

Review Questions

• How did COVID-19 impact market value ratios such as P/E and M/B?
• What changes occurred in the yield curve during the COVID-19 pandemic?
• Why did risk management strategies become more important for companies during COVID-19?

Related terms

Market Volatility:

Rapid and significant price movements in financial markets often due to macroeconomic events.

Stimulus Package: Government initiatives aimed at stimulating economic activity through spending or tax cuts.

Liquidity Management: The strategy of ensuring that an organization has access to cash or easily liquidated assets to meet short-term obligations.