The Federal Reserve keeps control of the nations money supply. (Schiller) They provide currency to banks who loan out all of their money in order to generate interest. Banks loan out their money(excess reserves) in order to generate interest which earns them a profit. These banks would then be taxed by the government which finances the government. Banks have a reserve requirement, which is set by the fed.
It reflects on how the country’s government spends efficiently as it is highly correlated to the economic growth. On the other hand, the government policy on budget deficit is also important in the political point of view of a country. In Malaysia, the government has been on budget deficit since 1999 until 2011. It is also budgeted that in 2012, the budget deficit will be 4.7% of GDP. According to the data from the Ministry of Finance, the highest budget deficit is in the year 2010 (ranging from year 1999 to 2011); 7% of GDP equivalent to USD 13.3 billion.
CRITICAL ISSUES * lack of smart and strong decision making because of owner and CEO’s different perspectives/priorities * sales have increased, but profitability have decreased * ineffective management of A/P and A/R have made the company insolvent * may lose loans because bank requires current ratio of 1.25 SITUATION ANALYSIS The major decisions for the company are taken by the owner rather than the CEO. The owner lacks business sense and his decisions are based on emotional feelings, not for the benefit of the company. The owner is not willing to outsource operations and wages are above industry average. From 2001 to 2005 sales have increased by 186%; whereas, COGS and selling and admin has increased by 199% and 166% respectively. High operating expenses and ineffective management of A/R have led the company to insolvency by demonstrating a quick ratio of 0.38.
My Recommendation: I recommend ASIB accept the offer for the following reasons: The financial market of 2008 is not optimistic. According to the background introduction in this case, the year 2008 witnessed a replay of earlier busts, availability of debt for transactions fell sharply from $340 billion in the second quarter of 2007 to only $8 billion in the fourth quarter through early December 2008. And the investors
Competition? Misguided strategies?) Princessa’s decline in sales was caused by a variety of reasons: - Canada was sliding into recession, following the economy crisis in the United States. 90% of Pricessa’s customers earned less than $45,000 annually and about half of these earned less than $25,000 annually. These low income people are likely to be affected severely by the recession, thus they would cut off their
The effects of a fall in consumer wealth will be to reduce confidence and consumer spending; equity withdrawal will slow down sharply – this has been a significant contributor to increasing AD in UK). Therefore, falling house prices will cause a fall in AD and is likely to cause a recession. This occurred in 1991 and 1992 when falling house prices caused a recession 2. Reduce House Price Volatility To prevent a house price crash, in the future, the government needs to reduce house price volatility and speculation. For example, the government could try these policies Encourage Fixed Rate Mortgages – Makes mortgages less sensitive to interest rate changes.
According to Robert E. Scott and Christian Weller, “further increases in real short - term interest rates herald a slowdown.” Further evidence that suggests a recession was on the horizon was information released from the National Bureau of Economic Research that states, “A peak marks the end of an expansion and the beginning of a recession.”(The Business Cycle Peak, March 2001.) During an expansion, however the economy is experiencing normalcy, and during this period the economy is between a trough and peak. The National Bureau of Economic Research, however, defines a recession as, “ a significant decline in activity spread across the economy, lasting more than a few months, visible in industrial production, employment, real income and the wholesale-retail trade.” (the Business Cycle Peak.) Therefore, when a peak date was determined in March 2001 it marked the end of an expansion that began in March 1991, and hence the beginning of a recession. This marked the end of the longest economic expansion that lasted ten years of rising incomes and employment.
Almost everyone has to accept that they have limited resources. As with households, governments must deal with limitations related to the spending of monies they can expect to receive as revenue in the foreseeable future. The government has the option to increase revenue by increasing the percentage of income tax of private citizens and businesses or the government can chose to borrow funds by issuing bonds. The budget deficit is described as the difference between what the government spends and what the government earns in revenue. Government spending consists of salaries for government employees, defense spending, aid programs, and other cash outflows.
We will be looking at 2 aspects of the economic cycle, here is an example of an economic cycle graph. We will be analysing the recession, which is the downward growth from the ‘boom’ to the ‘bust’ and the ‘boom’ itself. Recession is continuous negative growth of GDP for 2 quarters (6 months). Direct affects of this would be rising unemployment, a decrease in consumer expenditure, lower investment and therefore a low inflationary pressure. With these factors taken into consideration, a decrease in consumer expenditure would be a direct causation to a lowering of both organisations activity.
The whole luxury goods industry in the U.S. dropped over 14%, and R&R revenues declined 10%. Although R&R suspended new-store opening and hiring, the condition still struggle. So, now the CEO of R&R Linda Watkins not only has to cope with the SPH lawsuit and the huge amount of punitive payment, but also the reputation damage during this hard time. Central Issue How CEO of R&R Linda Watkins fix some flaw of the Ownership Culture (SPH program) during this hard time. Recommended Course of Action Linda should revise the Ownership Culture partly, such as adding extra commission for excellent sales.