Game Theory

Game theory is a theoretical framework for understanding and trying to take advantage of social situations. Using game theory, actors that are competing against one another can use game theory to determine an optimal outcome. Game theory works best when actors understand what the other is likely to do. Without knowledge of the other actors, game theory can’t be applied effectively. Game theory also works for pricing competition and product releases, where the various outcomes can be laid out in a matrix format. Game theory was formally created by mathematicians John von Neumann and John Nash, and economist Oskar Morgenstern.

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Gross domestic product (GDP) is a broad measure of a nation’s productivity. GDP is defined as the monetary value of all finished goods and services a nation produces within its borders in a specific time period.

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General Ledger

A general ledger is a double-entry form of accounting. Each transaction records an entry to a debit and credit account. One side of the general ledger is the sum of debits, while the other side is the sum of credits. The sum of all debits and credits should be equal. The debit side includes entries for assets, expenses, losses, and dividends. The credit side includes liabilities, gains, income, revenues, and equity. As an example of how the ledger works, when paying utilities, a debit is recorded to utilities expense while a credit is recorded to cash. The general ledger is what the company’s financial statements (income statement and balance sheet) derive from.

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General Market Factors

General market factors refers to the overall conditions within a defined market that affect all properties within that market.

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General Partnership

A general partnership consists of two or more people sharing the ownership of a business (i.e., a jointly-owned business). The individuals are responsible for all business expenses and liabilities. Meaning, they can be held personally liable for the business. Each partner is able to share in the business’ profits as well. Taxes do not flow through a general partnership, which means that each partner is responsible for his/her personal tax liability and that of the general partnership. A general partnership costs less to form than a corporation.

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Generally Accepted Accounting Principles (GAAP)

GAAP stands for Generally Accepted Accounting Principles, which is a set of accounting standards, procedures, and rules that public companies must follow. GAAP is issued by the Financial Accounting Standards Board (FASB). GAAP ensures that all publicly traded companies follow the same accounting reporting standards, which makes it easier for investors to compare the financials of different companies.

Some reporting areas covered by GAAP include revenue recognition, balance sheet classification, and materiality. For publicly traded companies, they must use GAAP reporting as mandated by the U.S. Securities and Exchange Commission (SEC).

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Gentrification is a process that transforms a neighborhood from low value to high value. Home prices rise as a neighborhood becomes more gentrified. Overall, the neighborhood improves but not without negative side effects. Those residents who were in the neighborhood before gentrification began are often pushed out by rising home prices, rents, and an overall increase in living expenses. As more people with higher-paying jobs move into the neighborhood, the cost of living goes up. New businesses move in as well and traffic often increases. The speed of gentrification can be fast but it depends on the area.

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Go Dark Provision

A go dark provision is clause often used in retail leases which governs whether or not a tenant may vacate a space, while continuing to pay rent, prior to lease maturity. Opposite of a continuous operating covenant, go dark provisions allow a tenant to cease business operations when they turn unprofitable. Landlords often dislike this type of provision, as they can lead to rolling vacancies and gradually shrinking traffic in a retail center.

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Going-in Cap Rate

Going-in-cap rate is the cap rate based on the ratio of the first year of net operating income to the property purchase price. 

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Goodwill is an intangible asset typically measured or recorded when one company purchases another. Goodwill is calculated by the difference between the purchase price of the company and the sum of its fair market values of assets and liabilities.

Goodwill = P – (A + L)

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Grant means to transfer an interest in real property by deed or other legal instrument.
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Grantee is one to whom the grant is made. The recipient who will be taking title, as named in the legal document used to transfer the real estate. 

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A grantor is the person or entity making the grant. For example, if Alice sells her property to Bob, then Alice would be the Grantor.

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Grants In Aid

A federal grant in aid is basically a grant awarded to states, local municipalities, or individuals. These grants are awarded for specific projects. The government places restrictions on how grant money can be spent. The government is able to monitor how grant money is used based on information from grant applications. Grant recipients are required to indicate on their application how the money will be spent. Grants are not loans and therefore do not need to be paid back. Federal grants are funded through income taxes paid to the government. Many grants require recipients to meet certain requirements and, in some cases, demographics. The pursuit of grant money is very competitive.

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Gross Absorption

Gross absorption measures total square feet absorbed or leased without regard for vacated space during the same period,

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Gross Income

Gross income is a term used to describe an individual’s or a business’s total earnings in a given period of time. For individuals, gross income is primarily derived from wages and salary as well as other forms of passive income such as interest, dividends, rental income and pensions.

For businesses, gross income is measured as the firm’s total revenue less its cost of goods sold. It is ultimately a measure of a firm’s profitability, measuring the firm’s ability to derive profit from the production of goods or services prior to servicing other costs related to administrative activities, taxes and other costs of running a business.

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Gross Lease

A gross lease is a lease in which the tenant pays a flat sum for rent out of which the landlord must pay all expenses such as taxes, insurance, maintenance, utilities, etc. 

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Gross Margin

Gross margin is a method that investors can use to determine a company’s operating efficiency. Gross margin is the profit that a company keeps from every dollar of revenue. Gross margin is represented as a percentage. The formula for it is:

Gross Margin = Net Sales − COGS

Where net sales are the same as revenue and COGS is the cost of goods sold. Basically, gross margin is the profit remaining after removing direct costs (COGS). Direct costs are those costs that are directly related to creating the product. Salaries and administrative overhead are not direct costs.

When investors use gross margin, they want to compare gross margin across companies to determine which companies are performing the best. Gross margin should only be compared against similar companies or those within the same industry. Each industry has an average gross margin. Investors can compare a company to the industry’s average as a baseline (i.e., is the company doing better or worse than the industry average). Then they can compare to the top-performing companies within the industry. These comparisons provide investors with great insight into the company’s operating efficiency and where it stands against its top competitors.

As an example, assume a company makes $500,000 per year on one product line. It spends $200,000 on supplies and $100,000 on labor to create its products. That’s a total COGS of $300,000. The gross margin for this product line is $500,000 - $300,000 = $200,000 then $200,000/$500,000 = 40%. The company’s gross margin is 40%. If the industry average gross margin is 35%, the company is performing better than half of its peers.

Note that gross margin does not equal profits. Selling/general/administrative costs and taxes still need to be deducted from gross margin to find the profit value.

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Gross National Product (GNP)

Gross national product is a measure of the total value of goods and services produced by a nation in a given period of time by that nation’s residents. It is a sum of personal consumption expenditure (PCE), private domestic investment (PDI), government expenditure (GE), net exports (NE) of a nation and the total income earned by a nation’s residents’ income from investments outside of the country, less the income earned by investments within the domestic economy. It ultimately is a measure of the output of a country’s residents and is very similar to gross domestic product (GDP). GDP seeks to measure a similar level of activity but excludes the difference of investment income earned on investments outside the domestic economy and within it.
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Gross Proceeds

Gross proceeds are the amount that a seller receives from the sale of an asset. These proceeds include all costs and expenses. Gross proceeds are often not the taxable amount from the sale. Instead, net proceeds are used for that calculation. Net proceeds are the amount after subtracting out fees and expenses. This is the actual amount the seller takes home. Costs and expenses can be a substantial amount of gross proceeds, leading to a smaller amount of net proceeds.

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Gross Profit

Gross profit is the amount of company income remaining after subtracting the cost of goods sold (COGS). Gross profit appears on the income statement. COGS includes the cost of materials, labor, and other costs related to producing goods. Gross profit is a pre-tax number.

Gross profit can be used to measure a company’s efficiency compared to its competitors. Those with a higher gross profit have lower COGS and can be said to be more efficient. Another way to measure gross profit is gross margin, which is (revenue - COGS)/revenue. Gross margin represents gross profit as a percentage of revenue.

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Gross Rent

Gross rent is rent charged to occupy a premise without any additional rent for operating or other expenses.

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Gross Rent Multiplier (GRM)

An investment property valuation method which is the ratio of a property’s price to its gross revenue.

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Gross Square Footage

Gross square footage is the total square footage of a building including all rentable spaces as well as all “non-rentable” space including common areas, 

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Ground Lease

Ground lease is a lease of the land only, on which the tenant usually owns a building or is required to build as specified in the lease.

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Growth Rate

A growth rate is used to determine the future growth of a company or economy. Although it can also be used to calculate historical growth. To calculate the growth rate, use the following formula: [(end value) - (beg. value)] / (beg. value) all times 100. For example, if ABC started the quarter with $5MM and ended with $6MM, its quarterly growth rate would be (6-5)/5 x 100 = 20%. Typically, growth rates are expressed as an annualized value.

The growth rate is just one forecasting tool used amongst many. Companies don’t rely on growth only. Instead, they create a broader picture of growth. However, the growth rate is very important as it signifies if the company’s growth efforts are working or not.

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