...It is reasonable to say that the recent subprime mortgage crisis happened due to a complex combination of negligent practices by many of the multiple stakeholders directly involved in the real estate industry. That being said, the accounting profession, being the critical player that it was (and still is), played a critical role in the development of this economic crisis due to the practices that they used during the auditing process of key industry players in the market at that time. As a foundation to this argument, chapter one of the text states that, accounting is the process of identifying, measuring and communicating economic information about an organization for the purpose of making decisions and informed judgments. (Marshall-McManus-Viele). It is the accountants responsibility to identify and offer the relevant financial data necessary to make appropriate business decisions. In reading about cases such as the infamous New Century “mishap”, one gets the impression that the accounting methods used, completely misrepresented the current financial situation of the company which needed to show a strong financial situation in order to maintain it’s solid market position and continue to see a steady influx in transactions. After further review combined with KPMG’s involvement, they found themselves with inconsistencies that led to a more than significant hole in their numbers ultimately leading them to bankruptcy (along with other economic factors). Referring back...
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...happens while unemployment and bankruptcies rates go up (Andrews, 2009). Recessions crops up when there is a general drop in expenditure. It follows the rising of an economic bubble or an unpredictable supply shock. Governments respond to recessions through implementing expansionary macroeconomic strategies. They tend to raise the government’s expenditure, increase money supply and lessen the amount of tax paid by the citizens (Andrews, 2009). In 2007, a global financial predicament rapidly metamorphosed from the bursting of the property bubble in the United States to the most horrible recession ever witnessed on the planet. This paper will research on the causes of the 2008-2009 economic predicament and the policies executed by various key people liable for saving the U.S. economy. It will also explain the task, constitutional authority, and the policy view of some current holders of key positions that set policies for saving the U.S. economy. In 2007, a worldwide economic predicament spread its gloom on the financial outcomes of several nations (Simon, 2001). It ended with what was often termed as the worst recession (Simon, 2001). Its source that originated from the sub-prime segment of the United State real estate field as an isolated turmoil matured into a complete recession in 2007. The old well-known fact that the whole world sneezes when the United States seizes flu seemed to be justified (Baker, 2007). This is because vital economies like Japan and nations in the European...
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...| Research Paper Prospectus | Economics Capstone | 02/12/2012 | Since the U.S. banking crisis of 2007, more than 280 banks in the United States have failed and presently continue to do so. With the closures of these banks, jobs were lost; and the economy has suffered greatly. The banking crisis of 2007 has been considered the largest since the Great Depression. Many researchers, policymakers, economists, and other individuals blame the subprime mortgage market and its collapse for triggering the U.S crisis; many also wonder how such a relatively small market as subprime could cause so much trouble around in the U.S, especially financial institutions that did not get involved with subprime lending or with investment in subprime securities. This paper analyzes financial and economic circumstances associated with the United States financial turmoil that has led to the banking crisis. Section 1 analyzes the collapse of the subprime mortgage market in the United States and outlines factors associated with it. Section 2 outlines the economic factors that led to the banking crisis in 2007. Section 3 summarizes suggestions of research about how to remedy the current crisis and possibly avoid crises in the future. Section 4 will discuss the conclusion of the research. The first signs of the subprime mortgage market collapse in the United States were very high and unusual even for subprime market delinquency and foreclosure rates for mortgages originated in 2006 and 2007. Reinhart...
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...Based on analysis the operating and competitive characteristics of the balance sheets and some key financial ratios of five different industries, we can make a conclusion that A is the electric utility, B is the discount general merchandise retailer, C is the upscale apparel retailer, D is the Japanese automobile manufacturer, and E indicates the automated test equipment/systems company. According to the column A, the data indicates a highest property and equipment percentages (74.5%) and lowest sales/net property & equipment ratios (0.43) among all industries which means this particular industry requires a relative high cost for the property and equipment purchase and the sale prices is relatively lower. However, if we look at the net profit/net sales ratio, we found that this industry has the higher value (10.3%) compared to other industries, which indicates that the demand of this industry is pretty high and the economic crisis didn’t affect the overall customer purchase. Based on this analysis, the electric utility is the best choice, which needs a highest cost for the equipment and property set-up but the electricity is still an indispensable product and demands for it is hardly to be shrunk even during the economic crisis year. From column B, the percentage of receivables is 3.8% and the days of inventory is 4, which are the lowest values among other industries. These two numbers indicate that customers have strong purchase power to buy products quickly and this industry...
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...Case Study 1: Matsushita’s Culture Changes with Japan Japan suffered one of the worst economic hit in history when the economic bubble deflated steeply in the 1990s. Stock prices and real estate slumped enormously mostly due to domestic monetary policies. As a result, companies in Japan faced financial trouble which triggered the cultural change in Japan. Before the Economic crisis, employee and the company have a particularly close relationship. The company is involved in the live of the employee. For example, a lot of companies require their employee’s manager to sign before they can rent an apartment. On the other hand employees are also very loyal and obliged to their company. With the company’s guaranteed lifetime employment policy, few employees will fancy changing jobs. Moreover they work hard in response to the generous benefit by the company. However after the economic crisis, companies cannot afford to pay that many benefits to the employees so they finally had to lay them off, which they never did. This cultural change propagates to traditional value change eventually when employees see that loyalty does not guarantee anything. Since then, younger employees started to think more about individual as opposed to group. Japan is moving towards more individualism than collectivism after the economic bubble. Nonetheless, this is a good opportunity for Japan to adapt to the globalization world and be more competitive. The cultural change will lead to greater mobility...
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...Employment Sector Employment Working Paper No. 74 2011 Global economic crisis, gender and employment: The impact and policy response Naoko Otobe Employment Sector Copyright © International Labour Organization First published 2011 Publications of the International Labour Office enjoy copyright under Protocol 2 of the Universal Copyright Convention. Nevertheless, short excerpts from them may be reproduced without authorization, on condition that the source is indicated. For rights of reproduction or translation, application should be made to ILO Publications (Rights and Permissions), International Labour Office, CH-1211 Geneva 22, Switzerland, or by email: pubdroit@ilo.org. The International Labour Office welcomes such applications. Libraries, institutions and other users registered with reproduction rights organizations may make copies in accordance with the licences issued to them for this purpose. Visit www.ifrro.org to find the reproduction rights organization in your country. Otobe, Naoko Global economic crisis, gender and employment : the impact and policy response / Naoko Otobe ; International Labour Office, Employment Sector. - Geneva: ILO, 2011 1 v. (Employment working paper) ISBN: 9789221241690; 9789221241706 (web pdf) ISSN 1999-2939 (print); ISSN 1999-2947 (web pdf) International Labour Office; Employment Sector women workers / men workers / employment / unemployment / gender equality / employment policy / social policy / economic recession / developed...
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...| Name: Abhisek Rathi Matriculation Number: 22030512 Submitted To: Prof. Dr. Frank Brand Submission Date: December 17, 2012 Contents Introduction 3 Stock Market Co-Movement 4 Causes 4 Data Analysis 6 Observations 9 Implications 10 References 12 Introduction The global financial crisis of 2008 was the biggest economic crisis faced by the world since the great depression of 1929. The crisis started to brew in the US in 2007 and many believed it would be largely limited to the shores of the US. However, the collapse of Lehman Brothers in 2008 was sufficient to trigger a worldwide stock market collapse, the effects of which are felt to this day. The worldwide collapse of stock market can be understood by considering the world as a single big marketplace. Analysing the co-movement of various financial markets has gained importance in the recent past both for policy makers, in terms of policy co-ordination, and portfolio managers, for portfolio diversification. For policy makers, high co-movement would facilitate transition in local currency areas resulting in potential efficiency gains from stock market merger activities. This, in turn, will result in greater financial stability across the regions. However, for portfolio managers, high correlation between international stock markets would reduce the benefits of portfolio diversification creating the need of searching other assets with lower correlation. The past few decades have seen a continuous increase...
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...The Great Depression of 1929 put into context of the Global Financial crisis Economic development over the last years has been very volatile, so many comparisons have been made to past economic crises. This incident puts the Great Depression into a very recent context. The aim this paper is to outline the causes and effects of the Great Depression for both the USA and Europe. The Great Depression which started in October 1929 turned into the most severe global economic slump ever. After a brief introduction to the topic more detailed background information has been provided. The initial economic downturn directly tied in with the boom years of the Golden Twenties. It was mainly caused by over leveraged speculation and a decrease in the value of gold. The effects on the population in America and Europe were especially unemployment and the vaporization of saving because of an enormous stock market crash. For the economy the Great Depression meant that international trade nearly came to a standstill and a vicious circle was created as banks failed and credit was barely available. As a reaction to the Great Depression stock market- and banking regulations were put in place and welfare systems have been introduced in America and Great Britain. A step to fight the ongoing crisis was the foundation of the Salvation Army. The entrance into World War II marked a major mile stone for America. Especially new warfare related industries gave labour to American women while...
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...i ACFI 2005 : Finance - Tutorial Solutions Tute 1: 07/09/12 Chapter 1 A modern financial system: an overview 2. (a) Discuss the role of money in a financial system. • Money is a financial asset that facilitates financial and economic transactions. • Money is a medium of exchange—swapped for goods and services. • Money is a store of value—wealth is held or measured in money terms. • Money is a standard of deferred payment—used to record indebtedness. • Money is a unit of account—transactions are priced in money terms. • Currency is generally divisible, portable and durable. (b) Does money have to be currency? If not, what are some alternatives? • Money is anything that is universally acceptable as a medium of exchange. • Further, money generally has the characteristics of being divisible and a store of value. • Examples—currency, EFTPOS and digital money. 4. The major financial institutions within the international markets fall into five classifications. Identify and briefly explain each of these classifications. Give an example of different types of institutions that operate within a classification were appropriate. • Depository financial institutions—they attract savings from depositors and investors and provide loans to borrowers. Examples: commercial banks, building societies and credit unions. • Contractual savings institutions—there liabilities (sources of funds) are contracts that generate periodic cash flows, such...
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...downturn, discussed in the opening profile and throughout this chapter, impacted jobs outsourcing in the BPO industry? Starting out as a mortgage crises in the United States the economic crisis spread globally and lead to a worldwide recession. In such a difficult time, companies need to reduce costs and improve their performance in order to remain competitive on the market. Obviously, Outsourcing provides many benefits, such as improvement of process performance, reduction of fixed costs, increased flexibility, greater focus on core competencies and strategic business operations. The BPO service market presents growth estimated in 10 to 20% in the period 2008-2009, particularly in the last two quarters of 2008 and first quarters of 2009. However, in the short term, companies might not consider outsourcing as a solution in a financial crisis due to upfront investment and lack of managerial capabilities. In the first place, companies’ primary goal is to survive. They won’t start new projects. Thus, in times of crisis, company prefer cost reduction and investment delays rather than BPO and Offshoring. Nevertheless, in the long term, the economic crisis would result in an increase in demand for BPO services once the economy starts recovering. Furthermore, delay of other projects in times of crisis and recession also contributes to the expansion in the BPO industry. Companies will want to achieve more flexible organization structures in order to be better prepared to deal with future...
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...The financial crisis which began in July 1997 in the East Asian countries, Thailand, Indonesia, Malaysia and Korea, has had devastating effects on their economies. Growth rates in these countries which were in excess of five percent before 1997, turned sharply negative in 1998 and, at the time of this writing it is not yet clear when these economies will turn the corner and resume positive rates of growth. This paper examines why these countries, which were part of what has been termed "the Asian miracle" and were able to eradicate so much poverty, are now undergoing severe economic contractions, with such harmful effects on their populations. A breakdown of information in financial markets is the key factor that has driven this crisis. After laying out an asymmetric information view of the Asian financial crisis, this paper goes on to use this framework to explore lessons from this crisis. 1. An Asymmetric Information View of the Asian Crisis The financial system plays a critical role in the economy because, when it operates properly, it channels funds from those who have saved surplus funds to those who need these funds to engage in productive investment opportunities. The major barrier to the financial system performing this job properly is asymmetric information, the fact that one party to a financial contract does not have the same information as the other party, which results in moral hazard and adverse selection problems. An asymmetric information view of financial...
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...Sample Article: The Financial Crisis in Spain Summary Unemployment in Spain has reached 17.4 percent, according to figures released April 24 by the National Statistics Institute. Even without the global recession, Spain's economy likely would be going through a rough patch now due to the country's overheated housing market; with the recession, it is also suffering from a banking crisis and an industrial slump. Analysis Spain's unemployment rate rose from 13.9 percent in the fourth quarter of 2008 to 17.4 percent in the first quarter of 2009, increasing the ranks of the unemployed to more than 4 million, according to National Statistics Institute (INE) figures released on April 24. Spanish Economy Minister Elena Salgado said that the first quarter of 2009 will be the worst in terms of increasing unemployment. The International Monetary Fund (IMF) predicts that unemployment in Spain will reach 17.7 percent in 2009 and 19.3 percent in 2010, but the INE figures seem to indicate that unemployment could exceed 20 percent by the end of 2009. Of all the European countries, Spain has in many ways been one of the most gravely affected by the global economic crisis. Even without the global recession, Spain would most likely be undergoing a correction this year due to its extremely overheated housing market. But it is facing a severe housing market correction, an industrial slump, and a banking crisis caused by the housing correction and the recession's overall effects -- simultaneously...
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...bank in economic crises. To address our topic, we will first read through the text book- Koch, Timothy W, Management of Banking, 6th ed. (2006), Thomson South-Western that sir teaches on the lecture. After have a clear understanding of what is means by risk management of banking, we will start to search the information for our topic. Besides, we will take the sources that related to economic crises from news paper to make it as our example in answering this topic. We will also search online for more abroad information. 1. Introduction of bank management 2. Introduction of bank roles in economic crisis- * Explanation what does it means by economic crises(causes and consequences) * explanations of bank roles in economic crisis * what roles of bank play during economic downturn or crisis * responsibility of bank before economic crisis and how bank manage to overcome the risk Jia li Soo toh (minimum 3 pages) 3....
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...VICTORIOUS TEAM Countries For The Project for the Period 2011 : 1] China 2] India 3] USA Team Members and Students IDS : Nikita Bhivate A2604 ( U.S.A.) Li Jianwei A2394 ( China ) Tingting Hao A2319 ( India ) MBA 531 International Financial Management. Prof. Jayant Kanitkar. INTRODUCTION : Introduction Of China : During the period from 2007 to 2011, the whole world has been suffering from global economic recession and financial crisis. From US subprime to EU sovereign debt crisis, China, as the second largest economy in the world, experienced internal and external economic impacts. In the year of 2007, China’s economic development reached its pick. With the expectation of CNY appreciation, hot money flooded into China. As a result of this, the price of investment asset surged up sharply. The housing price tripled, and the Shanghai stock index reached to a historical level of 6300 from less than 3000 with in one year. The wealth effect from the high investment asset price stimulated consumption. Moreover, China was keeping its high net exports trading volume and fixed asset investment. The GDP growth rate exceeded 10%. However, the financial bubble broke in the US, and a chain reaction directly affected China. In 2008, all economic indictors shown that China’s development slowed down. Stock market can be regarded as the forecaster of economic. The Shanghai stock index dropped to 1900 from 6300. Affected by recession in international...
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...RESEARCH METHODS FOR FINANCE The IFRS measures impact on French bank securities volatility during the financial crisis In Group with Mr Duchemin and Mr Melloul Benjamin CNUDDE Introduction: The world of finance is from now global and has huge repercussions all over the planet as we could see during those last years of the recent recession. The subprime crisis triggered in the United States during the second half of 2006 has quickly turned into an international financial crisis with huge repercussions on the European financial markets. Banks and financial intermediaries were particularly affected by it because of the fair value accounting for financial instruments. As we all know, the real estate crisis in the United States has been the triggering element of the financial crisis which has initiated the international financial crisis we are facing now. Credit rarefaction and an obvious rise of market volatility were the fundamental consequences of the crisis. And to stop the proliferation of the crisis worldwide (especially provoked by the “toxic” assets owned by banks) comes the International Accounting Standards Board (IASB) intervention. We will discuss if such an intervention has managed to prevent a rise of the French banks securities volatility. In the financial crisis we are passing through, many personalities criticized the installation of IFRS (International Financial Reporting Standards), and notably concerning the impact on fair value. According to Christine Lagarde...
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