1. What is money? What are the 3 types?
Money is anything that is generally accepted in exchange for something. The three types of money are barter, commodity (also known as metal money), and fiat. There is also a new, fourth type of money that is called crypto.
2. Explain how economic profit is different from accounting profit? Which is larger?
Economic profit is different from accounting profit because economic profit is what is actually happening with cash flows, specifically, free cash flow. Account profit is larger than economic profit.
3. After liability has been satisfied, what are the 2 ways a corporation uses their residual funds?
The two ways a corporation uses their residual funds are paying out equity through dividends to stockholders
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Since, return on assets equals net income divided by total assets, it can cause companies not to invest in their total assets and abuse their workforce. Such as in the oil refinery example, they had no more total assets, and net income kept rising, the total assets worked harder and harder, which caused net income to rise against the flat total assets.
10. What are the 3 duties of the federal reserve?
The three duties of the federal reserve are regulate and supervise the banking system, serve as a bank for banks, and conduct monetary policy.
11. What is the agency dilemma?
The agency dilemma is when an agent has incentive to maximize his/her own interests instead of those of the principal. In addition, the agent has incentive to maximize its own welfare, signaling that every agent has incentive to maximize its own welfare.
12. What is fiduciary duty?
Fiduciary duty is the highest duty implied by law. An example is executive offices of a corporation owe a fiduciary duty to the shareholders.
13. What is flight to
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What are the components of the risk premium?
The three components of the risk premium are default premium, maturity premium, and illiquidity premium. These three components make up the interest rate.
17. Why is equity costlier than debt?
Debt financing is cheaper than financing because the debt holders are at a lower risk than the shareholders. In addition, equity is more expensive compared to debt. A corporate bond ranges between six and eight percent while equity is around twenty percent.
18. Explain or name two costs that are important in finance that are not in accounting?
Two costs that are important in finance that are not in accounting include replacement cost and opportunity costs.
19. What is the relationship between risk and return?
The greater the risk, the greater the expected return.
20. What is the Beta of a stock measure?
The beta of a stock measures the risk of the stock. However, is not not just any risk, it is the risk that you should expect to be rewarded for
This role is achieved through the implantation of the monetary policies. According to Arnold (2008), Fed has several tools at it disposal that it uses in the monetary polices. These are; the open market operations which involve buying and selling U.S government securities in the financial markets. Further the bank is charged with the responsibility of determining the required reserve ratio. This ratio is given to the commercial banks dictating the minimum amounts that they should hold in to their accounts as deposits and for lending. Finally the Fed sets the discount rates putting in to consideration the overall market rates s well as desired effect on borrowing that the Fed seeks to achieve. In addition to these three major roles, as a bank, the Federal Reserve Bank can play the roles played by the commercial banks as the rules are not entirely prohibitive as far as this duty is concerned.
Irrelevant Costs, Insurance (General Liability, Physical Damage, Workers Compensation, Health insurance), Security, Depreciation, Salaries Benefits, Bad Debt Expense, Permits, Rental Equipment, Payroll Taxes, Accounting Fees, Supplies, Computer Maintenance, Miscellaneous.
The Federal Reserve System was signed by President Woodrow Wilson in 1913 and began operating in 1914; to this day it is still the central banking system for the United States. The responsibilities of The Federal Reserve are un-ending and complex. Due to the frequent re- occurring financial issues occurring between the years 1906-1907, like many things The Fed has had to change in numerous ways to adjust to the growing need of our expanding and evolving economy. The income for The Federal Reserve comes from interest on the U.S government securities that are acquired through open market operations (Federal Reserve education). Three major responsibilities of The Federal Reserve are stabilizing prices, interest rate adjustments, conducting investigations
The process of transferring the cost of metal ores and other minerals removed from the earth to an
For an individual who pays personal income taxes at a rate of 30 percent, which of the following statements is most correct?
The difference between economic profit and business profit is that in economic profit, profit or loss is calculated by subtracting opportunity cost of the inputs from the revenue of sales. Business profit is the difference between the total revenue and total costs incurred to earn that
Even though most of these expenses are not of big magnitude their value can add up and affect the company’s finances. Some of these items are accrued time for employees, bonuses, benefits, utilities, improvements and taxes. Some additional sources of working capital include; cash reserves, profits, equity loans, line of credit, and long term loans.
With that said the basic function of the FED relates primarily to the maintenance of monetary and credit conditions favorable to sound business activity in all fields; agricultural, industrial and commercial. Among this some duties include the following: lending to member banks, open market operations, establishing discount rates, fixing reserve requirements and issuing regulations concerning these and other functions. Each Federal Reserve Bank is best described as a Bankers Bank. In a nutshell, member banks use their reserve accounts with their reserve banks similar to the way we use our own checking account. They may deposit in the reserve accounts the checks on other banks and surplus currency received from their customers, and they may withdrawal on the reserve. Thus a bank with excess in the reserve requirements can enlarge its extension of credit (loans). However, let's not forget that the Fed has the
The Federal Reserve System: Purposes & Functions (2015), the Fed has the responsibility for supervising and regulating the following segments of the banking industry to ensure safe and sound banking practices and compliance with banking laws:
Debt financing, by contrast, is cash borrowed from a lender at a fixed rate of interest and with a predetermined maturity date. The principal must be paid back in full by the maturity date, but
tangible assets, and therefore have to be restated differently. However, we do not know the costs
(5 points) In a world with no frictions (i.e., taxes, etc.), having debt is always better because it increases the value of the firm/projet.
It is a term of corporate law used to describe a corporate fiduciary’s honesty to the companies’ interest.
What is the objective of current cost accounting? Edwards and Bell express this fundamental problem in terms of three questions:
contractual savings institutions. Their liabilities (sources of funds) are contracts that generate periodic cash flows, such as insurance contracts and superannuation savings. Their accumulated funds are used to purchase both real and financial assets. Includes insurance offices and superannuation funds