...retains earning. Those ways can different into 2 categories which are short term sources of finance and long term sources of finance. The first short term source of finance is debt factoring. Debt factoring a factoring company takes responsibility for collecting money relating to business’s invoices, and immediately pays that business part of the total amount owed on the invoices. End of the year of financial, the company Astion bhd. has RM 87665082 or 87million receivable at year 2012. By using debt factoring, company can immediately get a part of the total amount of receivable. The advantage are company can get the money immediately instead waiting receivable to pay. Company also enjoys the advantage such as reduce the rise of getting doubtful debt or bad debt. Getting money now is more relevant than future; it can generate more money to the company in the future. So the company can use this amount of money to invest in new project. The second short term sources of finance is bank overdraft. A bank overdraft is a limit on borrowing on a bank current account. With an overdraft the amount of borrowing may vary on a daily basis. Company can borrow money with bank to settle the payment which is urgent. Some of the advantages of bank overdraft are flexibility which the company can change the amount of borrowed within limited. Besides that, the interest also only paid on amounts borrowed. Beside the short team sources of finance, Astion bhd. also can choose the long team sources...
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...Money, according to our definition, A. has to be backed by something valuable, such as gold or silver. B. does not have to be generally accepted in payment of obligations. C. can include credit. D. has to be issued by government. E. none of the above Money, according to our definition, A. need not be in common use. B. is generally accepted to pay debt. C. has to be issued by government. D. does not need to be useful to pay off obligations. E. needs to be backed up by gold. Which of the following is not a function of money A. Unit of Account B. Medium of Exchange (Means of Payment) C. Store of Value D. Provider of Peace and Security E. Standard of Deferred Payments M1 money in our society includes A vault cash of commercial banks B. cash held by private citizens C. deposits of commercial banks in the Federal Reserve Bank D. saving account deposits of private citizens and businesses in banking institutions E. U.S. Government bonds The M1 definition of money in our society includes A. bonds held by the public B. checking account deposits C. cash in the vaults of banks D. deposits of banks at the Fed e. savings accounts Nobody likes high interest rates. One governmental official says that the government can keep interest rates down by putting lots of money into circulation. What do you think of this idea? A. It will work. More money in circulation will immediately lead to lower interest rates. B. It won't work. More...
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...Short term finance Hopefully you managed to get the right sources of short term finance in the drag and drop activity. Let us have a look in a bit more detail at each of the main types of short term finance. Bank Overdraft Most businesses have an account with a bank. The bank deals with all the deposits (money put into the account) and withdrawals (money taken out). Most banks know that businesses do not always receive money from sales straight away. If you run a sandwich bar in a local trading estate then you Sources of Finance Managing Financial Resources & Decisions might get money straight away when you sell your sandwiches. If you are a business selling electrical equipment to an electrical retailer then you may not get paid straight away when you deliver your goods. When differences occur in the money a business receives from sales (its revenue or turnover) and the money it has to pay out on labour, machinery, equipment, distribution and so on (its costs) the firm can face difficulties. The money flowing into a business from sales and the amount it spends on costs that go out of the business is called its cash flow. Cash inflows to a business Cash outflows from a business (Revenue from sales, loans, interest, sales of assets etc (Payment for raw materials, stock, labour, insurance, rent, rates etc.) A business might need to pay a bill on the 28th November for £1,500 but not have enough money in its account to pay the bill. It might know that it is due to receive...
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...Borrow money from another family member or friend, where length of loan, interest rate on loan and any other terms of the loan must be negotiated between parties. Advantages of a loan from family/friends is lower interest rates and more flexible repayment terms. Disadvantages of a loan from family/friends is lack of clarity with amount borrowed (the interest rate and the required payment terms) and also borrowing from friends and family can fracture relationships on a personal level Suitability Good Long or Short term finance option as terms of loan are decided between parties Interest rates are decided by parties Could be suitable source for Douglas Pty Ltd if family or friends have suitable amount of money for business and terms can be decided without affecting relationship. Bank Overdraft: Loan made by a bank in which the customer can withdraw more money from his or her bank account than has been deposited in the account. Advantages of bank overdraft is that it is a quick and flexible source of finance. They are easy and quick to arrange, with little fuss and It allows you to make essential payments when you need to borrow money. Disadvantages of bank overdraft are the costs as overdrafts carry interest (often at much higher than loans), Recall, the bank can recall the entire overdraft at any time. Security for overdrafts may need to be secured against your business assets, which put them at risk if you cannot meet repayments. Suitability Suitable for short term...
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...2013 ECON 214 D14 Principles of Macroeconomics 1. What impact will an unanticipated increase in the money supply have on the real interest rate, real output, and employment in the short run? How will expansionary monetary policy affect these factors in the long run? Explain. When income rises, more people are placed in the region above the no tax due cutoff. Others find themselves pushed into a higher tax brackets. Therefore, the process of an economical expansion, revenue from the personal income tax increases more swift than income. Over a short run, this will lead to improved margins in profit for businesses who will lead to the expansion of the output through utilization of more resources. In the short run, unemployment rate will fall. 2. How rapidly has the money supply (M1) grown during the past twelve months? State the rate of growth (use http://www.federalreserve.gov/releases/h6/) and the most recent release, use the seasonally adjusted figures. Calculate the rate of growth across the year by taking the (new amount of M1- old amount of M1)/old amount of M1). Given the state of the economy, should monetary authorities increase or decrease the growth rate of money? Explain why. The Money supply has grown in a steady state. In the year 2013 the rate of growth is: (26-24)/24 = 0.08333. The monetary authorities should increase the growth rate of money. The growth rate in this case is very low and cannot meet the required levels. 3. Is stability in the...
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...Money Market Report Introduction SIBOR Forecast Strategies Role as Price Maker For Consumers For Bank to Bank (Corporate) Products and Services Operational Costs Source of Funds Risks/Obstacles Introduction Money market is like a place for large institutions and government to manage their short-term cash needs. However, individual investors have access to the market through a variety of different securities. Money market securities are essentially IOUs issued by governments, financial institutions and large corporations. These instruments are very liquid and considered extraordinarily safe. Because they are extremely conservative, money market securities offer significantly lower returns than most other securities. Eg. Treasury Bills. SIBOR SIBOR stands for Singapore Interbank Offered Rate and is a daily reference rate based on the interest rates at which banks offer to lend unsecured funds to other banks in the Singapore money market (interbank market). The chart below shows 3 month SIBOR for the past 3 years. [pic] (6 Month and 12 month SIBOR chart can be found in appendix page) 3 month SIBOR is a common benchmark rate used by the banks to adjust their deposit rates. By monitoring it, you can get an indication of where banks are headed next with their fixed deposit and savings account rates. As shown, overall interest rate (SIBOR) has been declining since the year 2006. When SIBOR goes down, consumers...
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...Review of Short answer questions Ch 1 Q Why Do Foreigners Hold U.S. Currency? The dollar is preferred to many other currencies because it is a relatively stable source of purchasing power and widely accepted. It also tends to be the international pricing currency for products traded on a global market, and commodities such as oil, gold, etc The US dollar is one of the primary reserve currencies used worldwide. A reserve currency, also called an anchor currency, is a currency that is held in significant quantities by numerous governments and central banks as part of their foreign exchange reserves. These currencies are used to transact global business, and are the pricing currency for global trade. The amount of foreign exchange reserves that a country can claim is used as an indicator of the ability to repay foreign debt, and is used in sovereign credit ratings. Reserves are also used for currency defense—to halt downward or upward pressure on a currency against a benchmark currency The dollar is also very popular in Eastern Europe, especially in the former Soviet Union, where inflation, declining exchange rates, and currency recalls have made the ruble a poor store of value. China’s policy of intervening in currency markets to limit the appreciation of its currency against the dollar (and other currencies) has made it the world’s largest and fastest growing holder of foreign exchange reserves, especially U.S. dollars. China has invested a large share of these...
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...Integrative Case 7 a. Operating cycle (OC) = average age of inventory + average collection period = 110 days + 75 days = 185 days Cash conversion cycle = OC - average payment period (CCC) = 185 days - 30 days = 155 days Resources needed = cost of operating cycle investment x CCC 365 = $ 26,500,000 x 155 365 = $11,253,424.66 b. Industry OC = 83 days + 75 days = 158 days Industry CCC = 158 days - 39 days = 119 days Industry resources needed = $26,500,000 x 119 365 = $8,639,726.03 c. Casa de Diseno's cost of operational inefficiency : Needed resources $11,253,424.66 Less: needed industry resources $8,639,726.03 $2,613,698.63 x 15% $392,054.79 d. 1. Offering 3/10 net 60 : Average Collection period = 75 days x (100%-40%) (average collection could be reduced by 40%) = 45 days Operating cycle = 83 days + 45 days = 128 days Cash conversion cycle = 128 days - 29 days = 89 days Resources needed = $ 26,500,000 x 89 365 = $6,461,643.84 Additional saving = $2,178,082.19 = $326,712.33 2. Reduction in revenues as a result of the discount : = $40,000 x 45% x 3% = 540,000.00 3. Reduction in investment...
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...Exam Study Chapter 3-What is Money * Medium of Exchange: * Eliminates the trouble of finding a double coincidence of needs (reduces transaction costs) * Promotes specialization * A medium of exchange must * be easily standardized * be widely accepted * be divisible * be easy to carry * not deteriorate quickly * Unit of Account: * used to measure value in the economy * reduces transaction costs * Store of Value: * used to save purchasing power over time. * other assets also serve this function * Money is the most liquid of all assets but loses value during inflation * M1 (most liquid assets) = currency + traveler’s checks + demand deposits + other checkable deposits. * M2 (adds to M1 other assets that are not so liquid) = M1 + small denomination time deposits + savings deposits and money market deposit accounts + money market mutual fund shares. Chapter 4- Interest Rates Four types of credit market instruments * Simple Loan-pv= fv/(1+i)1 * Fixed Payment Loan-same cash flow every period throughout the life of the loan * Coupon Bond-add the fv at the end * Discount Bond- ytm>coupon ROR vs Interest Rate * The return equals the yield to maturity only if the holding period equals the time to maturity * A rise in interest rates is associated with a fall in bond prices, resulting in a capital loss if time to maturity is longer than...
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...Chapter 14 List and briefly explain the advantages that money has over barter? How do the three functions of money get around the problems of barter? 1) Money is a medium of exchange, allowing it to be used to buy any of the items available in the market. Barter on the other hand exchanges items for other items, and these items are limited in what they can be traded to get. 2) Money is also a unit of account. Societies use monetary units such as dollars in an effort to measure the worth of a wide array of goods, services, and resources. In the barter system it is a lot harder to place a price on one object and the value of another item that will be exchanged for it. 3) Money is a store of value that allows people to transfer purchasing power from the present to the future. However, in the barter system the value of each particular item can vary and change over time. What backs our money? What is important about that? The money supply in the United State is backed by the government’s ability to keep the value of money relatively stable. This is important because the purchasing power of the U.S. dollar is in the government’s hand and can fluctuate. Why is the supply of money in an economy so important? Money derives its value from its scarcity relative to its utility. Therefore, the economy’s demand for money depends on the total dollar volume of transactions in any period plus the amount of money that is held for future transactions. List and briefly...
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...What is meant by cash flow? Cash is a liquid asset, meaning that i can be spent on goods and services any time. Many business experience cash flow problems, meaning that they do not have enough cash to do what they want to do. Cash flow means "the flow of money in and out of a business". These are ways cash flow can occur: Cash inflows: * Sale of goods for cash. * Payment from debtors. * Borrowing from a source (but will inevitably lead to cash outflow in the future). * Sale of unwanted assets. * Investment from investors: shareholders and owners Cash outflows: * Purchasing goods for cash. * Payment of wages, salaries and others in cash. * Purchasing fixed assets. * Repaying loans. * Repaying creditors. Cash flow cycle A cash flow cycle explains the stages that are involved in the process of cash out and finally into the business. This is what happens: The longer it takes for cash to get back to the business, the more they will needworking capital to pay off their short-term debts. This cycle also helps us understand the importance of cash flow planning. This is what happens when a company is short on cash: * Not enough to pay for materials, therefore sales will fall. * The company will want to insist customers on paying in cash, but they might lose them to competitors who let them pay in credit. * There could be a liquidity crisis when it does not have enough cash to pay for overheads (bills, rent, etc.) and the...
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...the prices of credit,the cost of money,the earning rate on financial assets.It can also be defined as a fee paid on borrowed capital. Generally speaking, a higher real interest rate reduces the broad money supply. The "real interest rate" is the nominal interest rate minus the inflation rate. Zimbabwe continues to have negative real interest rates. These rates discourage investment and production but aid undesirable levels of speculation and in turn aid and abet inflation.For example in 1992 because of high interest rates companies like the GMB could not be able to supply maize in such a way that we had donors from USA donating yellow maize(Kenya). Gearing is fundamental analysis ratio of a company's level of long-term debt compared to its equity capital. Gearing is expressed is percentage form. If you have taken out a loan to fund your investments, such as a margin loan to invest in managed funds or a mortgage to buy direct property, increases in interest rates will increase your loan repayments Interest rates have an effect on consumer and business confidence. A rise in interest rates reduces the net return to investment thereby discouraging investment; it makes firms and consumers less willing to take out risky investments and purchases. Therefore, higher interest rates will tend to reduce consumer spending and investment. This will lead to a fall in Aggregate Demand According to the quantity theory of money, increases in the money supply lead to inflation. This means...
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...Production/sale of service: healthcare services, no inventory. c. Billing: refers to the release or discharge of a patient and the generation of a bill. d. Collection: the generation of a bill and the actual collection of the cash from the patient or the patient’s third-party payer. 2. What are the three primary sources of short-term funds? Three primary sources of short-term funds are: a. Single-payment loan: a loan that requires the payment repaid at the end of its duration instead of in monthly installments. b. Line of credit: agreement that permits a firm to borrow up to a specified limit during a defined loan period. c. Revolving credit agreement: similar to a line of credit except that it is usually for a period longer than 1 year. 3. An organization's short-term investment options for idle cash include what four areas? List and provide their characteristics a. Short-term working capital needs: a business needs funds to handle the standard and usual expenses associated with the operation of the company. It is safe to assume that most healthcare firms should carry approximately 20 days of expected cash transactions at any point in time to meet normal short-term working capital needs for cash. However, it is not safe to say that a not-for-profit healthcare firm would need only 20 days of cash. b. Capital investment needs: a non-profit healthcare organization needs funds to finance replacement and renovation of existing capital assets as well as investment in new product and...
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...voted for them.one of such cities is Newark (New Jersey) where they still face problems of unemployment, health care cost and decrease in retirement benefits. The article shows how different cities are facing big debts because they borrowed a lot of money to take care of short term problems. These immediate problems included balancing city budget in order to take care of things like retirement benefit and the rising health care. Many leaders are forced to borrow money from financial institutions which force them to pay big interest later, these are such big decisions to make. Although cities face a lot of challenges, leaders are able to borrow money to take care of immediate problems to fix budget issues but the money borrowed comes with a big price of putting cities in long time debts which affect the development of various projects.Unemploymet is the biggest problem because people are forced to ask for help from their local governments through food and housing because many people cannot afford food and pay rent, this has led to overspending hence putting cities in more debts. According to the article, these long time debts are caused by leaders who don’t have financial knowledge that end up just borrowing money to solve short term problems hence putting cities in big debts down the road by paying big interests. According to the article, the financial meltdown that happened in America in recent years has affected the central government and cities across the country. In order...
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...Balance Sheet: Suppliers, trade bill payables 3.600 Capital ??? Trade receivables, trade bill receivables 3.200 Money in cash 4.800 Tables and chairs 2.400 Computers 1.800 Pins 12.000 Current payables to suppliers of fixed assets in 1 month 6.000 Suppliers 4.800 Shop and warehouse 14.400 Vehicles 3.000 Calculate the amount of Capital contributions made by the shareholders and prepare the Balance Sheet. 2. Desperate SA, whose main activity is the buying and selling of furniture, has recorded the following items belonging to the company’s worth: Contribution made by the shareholders, from the outside of the company 6.000 Loss made during the period 2.000 Short-‐term receivables over buyers of goods, documented in trade bills 3.000 Money deposited in a bank account 6.000 National currency deposited in the company ...
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