The smaller investors are protected by these form price fluctuations. Functions in financial markets Distributing financial recourses to the potential users is the main responsibility of the financial institution. There are a number of financial institutions that collect and provide funds for necessary sector or individual. There are several institutions that act as a middleman and join the deficit and surplus unit. Investing money on behalf of the client is another of the variety of functions of financial institutions.
Managing Cash Conversion Cycle for Higher Profitability From the empirical studies above, managing cash conversion cycle is an effort to reduce the period at which it sold its inventory/stock, increase period at which its pay its suppliers as well as minimize the period its collect its receivables from customers that purchase its stocks. Specifically, cash conversion cycle can be managed on the basis of how firm’s devices strategies to defer payable period (AP), quickly sold its inventories and quickly collects its receivables from customers. On this basis, this paper recommends the following strategies firms can deploy to managing its cash conversion cycle from receivables, payables and inventory perspective. 1 Management of Accounts Receivable
(2003) stated that securitization is a process of packaging and transfer financial promises into form where it can be easily transfer to other investors. The value of financial promises is depends on the willingness and the ability of inndividual or company in term of making promises either good promise or bad promise. Securitization will become loans backed by general credit of the borrower and can become a securitization backed by legal obligations in term of forfeoture in certain asset and forcing in payment. In addition, according to Fabozzi & Kothari (2008) stated that securitization is also known as secured lending or asset based lending where there has a
Investment in property, buildings and major equipment are called capital expenditure. Such capital expenditure budgets allow management to forecast capital requirements, to on top of important capital projects, and to ensure the adequate cash is available to meet these expenditures as they come due. The balance sheet budget The balance sheet budget plans the amount of assets and liabilities for the end of the time period under considerations. A balance sheet budget is also known as a pro forma (projected) balance sheet. Analysis of the balance sheet budget may suggest problems or opportunities that will require managers to alter some of the other
The intersection of money supply and demand on the graph determines the equilibrium interest rate. This interest rate is set by the Central Bank to match the amount of money that public wants to hold. Additionally, at this interest rate, the money supply and demand will equalize. Determination of interest rate The change in demand and supply for money will affect interest rate. There are three different cases with different assumptions to depict the determination of interest rate.
It assumes that there are benefits to leverage with capital structure used until an optimal capital structure is attained. The theory recognized that debt interest is tax deductible. This reduces tax liability thus increasing tax shield. A high proportion of debt in a company makes it very risky for investors to invest in it hence they demand a high premium on stock or high dividend. The theory assumes that a firm has an optimum capital structure based on trade off between costs and benefits of using debt.
This means that the Group is exposed to currency risks in that unfavorable changes in exchange rates can have a negative effect on EBIT, shareholders’ equity and cash flow. b) Credit risk Byggmax has very low credit risk in relation to the Group’s customers in that the majority of sales are in cash and since the Group does not invoice external customers. Credit exposure primarily comprises accrued but as yet unpaid bonuses from suppliers. c) Liquidity risk Byggmax policy in respect of liquidity risk is to ensure that the Group has sufficient cash and cash equivalents to finance operations. The Board of Directors manages the liquidity risk exposure through ensuring that Byggmax has sufficient credit facilities in place to satisfy the future needs of the business.
When the Federal Reserve wants to adjust the money supply, it changes interest rates. If interest rates go up, the money supply tightens, as there are fewer projects that can meet the required rate of return to make them worth investing in. If the Fed raises interest rates, the demand for loans will decrease, and therefore the rate of increase of the money supply via the banking system will decrease as less money will be pumped into the system. Basically if the 'public' demands more money from the system, the Fed will make sure that it gets there. But if the Fed raises rates sufficiently
But, firms generally announce repurchase programs before embarking on them to avoid potential stockholder suits. 2. The firm may pay too much for the repurchased stock, to the disadvantage of remaining stockholders. If the firm seeks to acquire a relatively large amount of its stock, then the price may be bid above its equilibrium level and then fall after the firm ceases its buyback operations. Comments on Stock buyback: 1.
What it means: A credit derivative is a financial instrument which results in a trade between two parties. One of them is the protection buyer which makes periodic payments to another party, the protection seller. In this trade the protection seller indemnifies the protection buyer against any losses he experiences as a consequence of the default of some credit-risky reference asset. Credit derivative is one of the various instruments and techniques which are designed to separate and then transfer the credit risk. They effectively distribute the credit risk across the market and as a result help the institutions to deal with the risk management objectives and maintain customer relationships.