When examining the balance sheet of a typical company you would see categories such as inventory, accounts payable, or accounts receivable, in a commercial bank balance sheet under assets you would find areas like loans and investments, and under liabilities you would find categories such as deposits and borrowings. This is a large factor in which separates the final statements of commercial banks and the final statements of your everyday company. Commercial banks accept various types of deposits from their clients; they then provide those funds to borrowers such as homeowners and small businesses, in which they can receive interest on these loans. They gain profit from the difference between the rate they pay for funds and the rate that they receive from the borrowers. The goal of the bank is to create a flow of funds so from the many deposits, the bank can lend out to a wide variety of borrowers and this creates the flow of funds, which is crucial in the banking system.
In return, the bank uses the deposits for lending activities to earn a profit. It gives banks a great societal and economical responsibility, as they do not strictly save the deposits until withdrawal. In contrast to non-financial firms, bank governance is characterized by the duality of shareholders and other stakeholders. In general, the group of shareholders control the firm, while the other stakeholders make up the body that can be seen as the customers of the bank. These other stakeholders include creditors (of which a majority are depositors), the deposit insurance agency and the government (Laeven, 2003, p. 1).
TRUE AACSB: Reflective Thinking Skills Bloom's: Understanding Difficulty: Easy Learning Objective: 2-1 3. Smaller businesses are especially dependent upon internally generated funds. TRUE AACSB: Reflective Thinking Skills Bloom's: Understanding Difficulty: Hard Learning Objective: 2-1 4. An individual can only save and invest in a corporation by lending money to it or by purchasing additional shares. FALSE AACSB: Reflective Thinking Skills Bloom's: Understanding Difficulty: Medium Learning Objective: 2-1 2-1 Chapter 002 Why Corporations Need Financial Markets and Institutions 5.
Answer: F 1-8 Because bank loans have a shorter maturity than most debt contracts, FIs typically exercise less monitoring power and control over the borrower. Answer: F 1-9 FIs typically provide secondary claims to household savers that have inferior liquidity than primary securities of corporations such as equity and bonds. Answer: F 1-10 Because the average maturity of assets and the average maturity of liabilities are often different on an FIs balance sheet, the FI is exposed to liquidity risk. Answer: F 1-11 When an FI functions as a broker, they are selling a financial asset that they have created and will continue to hold on their balance sheet. 1-1 Chapter 01 - Why Are Financial Institutions Special?
2. The company can estimate the amount of the loss. The FASB Statement No. 5 also shows that the company recognizes the loss contingencies as liabilities in a financial statement. The disclosure shows the loss contingency and states the estimate of loss.
e. Although its stockholders are insulated by limited legal liability, the corporation's legal status does not protect the firm's managers in the same way; i.e., bondholders can sue its managers if the firm defaults on its debt, even if the default is the result of poor economic conditions. 3. Which of the following statements is CORRECT? a. In a regular partnership, liability for other partners' misdeeds is limited to the amount of a particular partner's investment in the business.
Le ctu Pr of. re Az by ar m i Transaction Exposure What are the two major forms of currency risks that a company with subsidiaries in foreign countries faces? Transaction (or contractual) exposure Translation exposure Le ctu Pr of. re Az by ar m i What is transaction exposure? It refers to gains and losses that may be incurred, when monetary transactions are settled in a foreign currency.
Accrual basis accounting is used by the large businesses in the United States, Canada, and in most foreign countries for the statements is prepared according to the generally accepted accounting principle (GAAP). Most businesses use the accrual statements like the GAAP to get loans from banks and get a better focus on the company’s business for the future. So the accrual accounting is necessary for small companies and a private company that what to focus on their outlook for the future. Some company’s prefers not to use the accrual basis for it is costly and some do use it for it shows the loss and profit of the
Question 1: There are crucial differences between the US and Japanese Corporate Governance Systems, which affect the rights and influence of different stakeholders in the keiretsu system. a) Financiers: Financial institutions play a crucial role in the keiretsu system and in most cases are major shareholders in the companies. For example, in Koito 40.6% are owned by financial service providers. The banks are the main suppliers of capital and act as monitoring systems for the companies. They have the right to intervene directly and even force bankruptcy if the bank suspects that financial troubles will arise in the near future.
A. size of the firm B. growth rate of the firm C. gross profit per unit produced D. market value per share of outstanding stock E. total sales 5. Essay List and briefly describe the three general areas of responsibility for a financial manager. The three areas of responsibility for a financial manager are capital budgeting, capital structure and working capital. Capital budgeting are the long term fixed asset investments (plants, products, systems). A good retail example would be the opening of a new Wal-Mart because the store is expected to generate more cash flow which will be adding value to the company.