What special role do CRAs play in financial markets and how successful have they been? · Credit ratings play an important role in financial markets. These ratings synthesise the vast array of information available about an issuer or borrower, its market and its economic environment. This gives investors and lenders a better understanding of the risks associated with borrowing or lending from a particular entity or investing in a particular debt-like financial product. (asic.gov.au) · As the financial markets became mainstream and matured, the access to capital markets and their scrutiny have both increased.
Compute the book value weights that the comptroller currently uses for the company’s capital structure. Common stock weight 28.6% Preferred stock weight 14.3% Long-term debt 57.1% c. Based on the suggestion that the focus should be on market values, compute the weights of debt, preferred stock, and common stock. MV debt weight 19.4% MV preferred weight 4.2% MV common stock weight 76.3% d. Are book value or market value weights better for calculating the firm’s weighted average cost of capital? Market value weights are better for calculating the firms WACC because market value is the worth today and is more like the current situation and it can change daily. 2. a.
Which of the following choices regarding the fiduciary fund financial statements is true? A. Fiduciary fund financial statements include the Statement of Fiduciary Net Assets and Statement of Changes in Fiduciary Net
3% + 2.5% + (.1 x 3%) = 5.8% c. 3% + 2.5% + .3% + 1.3% + .5% = 7.6% d. 3% + (3 x 2% + 5 x 4%) / 8 + .7% = 6.95% e. 3% + 3.25% + .7% + 1.3% + .5% = 8.75% f. Inflation in 9 years = 5.5% Questions 6-2: Short term rates fluctuate more because they are more responsive to conditions in the economy and long term rates have a lot to do with the rate of inflation. 6-3: I believe that if there is a recession, in order to gain more capital, you should borrow on a long-term basis because that way, there is a longer amount of time to pay back these loans, and if the recession continues, at least the payments will be smaller because the loan is spread out over a longer period of time. Compared to borrowing short term, where there would be bigger payments and if there is a recession, where is the money going to come from fast enough? 6-5: 6-9: A trade deficit means that we are receiving more imports than we are exports. This will increase interest rates because the trade deficit will demand loans from the foreign countries.
Capital is used to generate income, capital, or money is used to make investments that will generate more income. Capital is also obtained by selling stocks which is monies used to build the business or for operations aka working capital Debt: monies owed. Debt is what is borrowed and be repaid. Loans, a debt security is one form a debt and the issuance of bonds is another form of debt Yield: is simply a return on an investment. Yield are expressed in percentages designating the amount expected to receive on an investment in the form of interest and/or
Since, the FED set the interest rate in which the banks borrow from, Edgars’ ability to borrow enough money or establish a line of credit to start his business will be affected by inflation, interest rate and financial policies. However, in some situations, an unanticipated inflation can benefit Edgar, as this type of situation whenever inflation rates are underestimated for the life of a loan, the bank loses and Edgar will
In the case of our government, debt is managed primarily by selling bonds. The process is cyclical as the government has to sell new bonds to pay for older bonds that have matured. It is important to realize that debt should be judged in relation to assets. While debt is probably never a good thing, in the case of the U.S. economy it is not as bad as it seems. When we view some of the assets of the United States such as natural resources, skilled workforce, and tax revenue generating businesses, we see that our assets have enough value to sustain our current debt level
The components of the statement of cash flow shows how changes in balance sheet and income accounts affect cash and cash equivalents, and breaks the analysis down into operating, investing, and financing activities. The statement shows the current operating results for a period of time. These details are reflected in the balance sheet. As an analytical tool, the statement of cash flows is useful in determining the short-term viability of a company, particularly its ability to pay bills. o Which financial statement is the most important?
The income statement and the balance sheet can often be misleading to an investor as there are many ways to record the dispensing of an asset or other types of financial obligations (Financial Statements: A Step-by-Step Guide to Understanding and Creating Financial Reports, 2009). The cash flow statement contains three sections: the cash flows from operating activities, which shows how much money the business received from operating the business; the cash flows from investing activities, which shows the money the business has gained or loss from investing; and the cash flow from financing activities, which shows the money that was taken in or paid out to finance the different business activities. Using the cash flow statement allows an investor to see if a business is generating more money than is used to operate the business. If this is happening regularly, the business is considered healthy and should be a good
Cash Inflows Income from sales: The money earned from selling goods and services creates an inflow of cash to the business. This is often called sales revenue or turnover. Loans from banks: it is common for a new business to borrow money in order to buy new items such as vehicles, machinery or property. When the loan is given to the business, this becomes a cash flow for the business. Money invested by the business’ owners: When a business is first started, its owners (sole traders or shareholders, for example) may invest money into the business, resulting in a cash flow.