ROLE OF MONEY IN MACROECONOMICS 1. Introduction Money can be seen as the medium of exchange which is acceptable while transaction is being undertaken between two parties. Some of the common forms of money are: - Commodity money: This is when the value of the good represents its value in terms of money like gold or silver. - Fiat money: This is when the value of the good is less than the value it represents - Bank money: It is the accounting credits that can be used by the depositor Money serves a variety of crucial functions in the economy and this is why it has gained an unparalleled influence in the matters of economy at micro as well as macro levels. Some of the features of money that make it so important for any economy are as follows:
Currency fluctuations normally happen in countries where they practice the free exchange rate system. Currency fluctuation is a situation in an economy where the value of the value of the currency rises, fall or both frequently against its major trading currencies for a period. While some currencies fluctuate freely against each other, such as the Ghana Cedi, Japanese Yen and the US Dollar, others are tied. They may be pegged to the value of another currency, such as the US dollar or the Euro, or to a basket of currencies (Farlex, 2009). Changes in interest rate affect currency value and exchange rate.
It focuses on the sources and uses of cash through operating, investing and financing activities. Activities that result in the receipt of cash are cash inflows, and activities that result from the spending of cash are cash outflows. SEE APENDIX III STATEMENT OF FINANCIAL POSITION also known as the balance sheet presents the financial position of an entity at a given date. It is comprised of three main components: Assets, Liabilities, and Equity. Statement of financial position helps users of financial statements to assess the financial soundness of an entity in terms of liquidity risk, financial risk, credit risk and business risk.
Introduction “Capital market is a market where buyers and sellers engage in trade of financial securities like bonds, stocks, etc. The buying/selling is undertaken by participants such as individuals and institutions.” (Times, n.d.) As it describe capital market is the market which trade with the medium-long-term financing, the trade usually use the securities such as bonds,stock etc. The actor of the capital market are the companies but the intitution also use the capital market, such as the government. How does the capital market work ? The capital market consist with the two markets, the primary market and secondary market.
Another difference is the issuance period, where in Financial Accounting it is provided at the end of an accounting period (quarterly or annually) whereas in Managerial Accounting it is provided as per the management requirements and there is no set period for the issuance .Compliance to accounting standards too could be considered as another difference .Financial accounting information needs to be presented according to the Generally Accepted Accounting Principles(GAAP) as it is issued to external parties unlike Managerial Accounting information which does not need to be in compliance with various standards as it is for the internal use only . Also it could be stated that managerial accounting information is unique to an organization but Financial Accounting information has a standardized layout. Another difference is that, for managerial accounting the information needs to be specific and detailed to suit the management’s requirements e.g. - for each department or branch unlike financial accounting information which is general and contains less details as it is published for the whole
If the cash from operations exceeds cash flows from investment, that reflect a good sign of firm’s performance. Besides, a questionnaire will be created if the cash used from investing activities exceeds the cash provided from operating activities in the short term. However, a problem will rise about whether the ability of the firm could still generate cash if this situation happens too often. Marshall (2014) gives a conclusion that the statement of cash flow delivers important financial data to users that is really difficult to find in other financial statements such as the accrual basis income statement. Although this statement under accrual based accounting is related to revenue and expense, it does not contain information about cash flow form the three above activities.
(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
Before start talking about monetary growth we need to clearly understand how it is happening; what drives money, which money aggregates equipped and how it is structured. First of all, I would like to examine what is the money supply, because on this base is considered every money growth. Money supply (or money stock) - is the total amount or monetary assets available in an economy at a specific time. Another words we can say that it is the sum-total of cash in circulation, bank deposits and balances in the accounts at the disposal of individuals, legal entities and the state. Money supply makes movement of money stream, which called currency.
Cash flows provide more information about cash assets listed on a balance sheet and are related to net income on the income statement but not exactly the same, And so on. No one financial statement tells the complete story. The three financial statements together can provide a very powerful information for investors or
GK’s liquidity management process, as carried out within the Group through the ALCOs and treasury departments includes: o Monitoring future cash flows and liquidity on a daily basis o Maintaining a portfolio of highly marketable and diverse assets that can easily be liquidated as protection against any unforeseen interruption to cash flow o Maintaining committed lines of credit Currency Risk Currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. GK manages its foreign exchange risk by ensuring that the net exposure in foreign assets and liabilities is kept to an acceptable level by monitoring currency