...Evaluate the case for and against using a buffer stock scheme to stabilise the price of a commodity such as sugar or tin. A buffer stock is an intervention system that aims to limit the fluctuations of the price of a commodity. A commodity is a good that is traded, but usually refers to raw materials or semi-manufactured goods that are traded in bulk. In free markets agricultural prices fluctuates from year to year depending on the level of output affecting both the famers’ income and ability to make long term plans. In some cases this has led to setting up buffer stocks to ensure consistent supply and income to farmers. The authorities sell from the stock when harvests are poor and buy in stock when harvests are good. This prevents huge price increases in bad times and low famers’ incomes when harvests are good. One reason why using a buffer stock scheme to stabilise the price of a commodity such as sugar or tin is a good idea is that it prevents fluctuations in the price of a commodity. This is because when the output of a commodity increases or decreases the government will be able to buy the excess stock and store it, or release the stock that they have stored. This means that, in the case of sugar and tin, there will not be a shortage causing an increase in price because the government will be able to release stock that they have previously stored to maintain the output and price, therefore leading to no fluctuations in the price of sugar and tin. Another reason why...
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...Evaluate the case for and against using a buffer stock scheme to stabilise the price of a commodity such as sugar or tin. A buffer stock scheme is an intervention carried out by the government which aims to limit fluctuations in the price of a commodity. It involves the government and/or local authorities buying these storage stocks and selling them back to the famer. Price stability is indicated by low inflation whereby the value of money is also stable. A buffer stock is an attempt at stabilising the prices of key commodities. Extract C states that ‘when prices fall governments are more likely to be concerned’ this may be because more people are likely to buy them so the government is more likely to have to buy more from the farmer. The free market usually determine the prices of commodities such as sugar and tin, yet, without intervention, the prices of coffee and sugar have been unstable as Extract A shows a significant increase in the price of coffee in 2008 and sugar in 2005. Should there be a large rise in supply due to better than expected yields at harvest time, the market supply will shift out – putting downward pressure on the free market equilibrium price. In this situation, the intervention agency will have to intervene in the market and buy up the surplus stock to prevent the price from falling. It is easy to see how if the market supply rises faster than demand then the amount of wheat bought into storage will grow. The stable prices help maintain...
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...PAGE 1 OF 2 Evaluate the case for and against using a buffer stock scheme to stabilise the price of a commodity such as sugar or tin. A buffer stock scheme is an intervention carried out by the government which aims to limit fluctuations in the price of a commodity. It involves the government and/or local authorities buying these storage stocks and selling them back to the famer. Price stability is indicated by low inflation whereby the value of money is also stable. A buffer stock is an attempt at stabilising the prices of key commodities. Extract C states that ‘when prices fall governments are more likely to be concerned’ this may be because more people are likely to buy them so the government is more likely to have to buy more from the farmer. The free market usually determine the prices of commodities such as sugar and tin, yet, without intervention, the prices of coffee and sugar have been unstable as Extract A shows a significant increase in the price of coffee in 2008 and sugar in 2005. Should there be a large rise in supply due to better than expected yields at harvest time, the market supply will shift out – putting downward pressure on the free market equilibrium price. In this situation, the intervention agency will have to intervene in the market and buy up the surplus stock to prevent the price from falling. It is easy to see how if the market supply rises faster than demand then the amount of wheat bought into storage will grow. The stable prices help...
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....................................................................................................................................3 Introduction ...............................................................................................................................1 A. Strengthening the global capital framework ....................................................................2 1. 2. 3. 4. Raising the quality, consistency and transparency of the capital base ..................2 Enhancing risk coverage........................................................................................3 Supplementing the risk-based capital requirement with a leverage ratio ...............4 Reducing procyclicality and promoting countercyclical buffers ..............................5 Cyclicality of the minimum requirement .................................................................5 Forward looking provisioning .................................................................................6 Capital conservation...............................................................................................6 Excess credit growth ..............................................................................................7 5. B. 1. 2. 3. C. D. I. Addressing systemic risk and interconnectedness...
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...supply control of raw material. Supply chain management involves creating balance between customers need at the same time minimising wastage of product including raw material. It is believed to be very tough to balance. In order to fulfil changing taste of customers, McDonald’s needs to introduce new products to their existing menu, which in turns make it even harder to minimise wastage. Importance of required change In early days, stock ordering was so easy at all McDonald’s restaurants. Stock ordering was responsibility of restaurant manager. They order stock using their local knowledge, as well as data on what the store sold previous day, week and month. For example, if last week's sales figures showed they sold 100 units of coffee and net sales were rising at 10%, they would expect to sell 110 units this week. However, this was a simple method and involved no calculations to take account of factors such as national promotions or school holidays. By this most of the restaurant managers were spending lot of time to look up the stock and leaving behind no time for concentrating on the quality of food they aims to supply to their customers. Supply chain management – The new system After...
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...suggestions for how to answer questions. Don’t try to pass them off as your own work. AS Micro Essays 1.Evaluate the case for and against governments intervening to try to stabilise the price of copper, for example, through setting up a buffer stock scheme. 2.Evaluate advantages and disadvantages of various methods of government intervention to correct market failure arising from aircraft emissions. 3. Discuss the likely effects on the retail market for coffee if there is a large increase in city centre rents. 4.In the UK, students face increasing tuition fees. Discuss the benefits and costs to society of abolishing all tuition fees. 5.Discuss three policies to reduce the level of cigarette smoking amongst under 21s. 6.Discuss the extent to which governments should subsidise companies who are developing cars which run on clean fuels such as hydrogen? 7.Discuss whether the government is mistaken to worry about monopoly power? 8.Discuss the advantages and disadvantages of the government intervening in agricultural markets? 9.Discuss the effects on UK business of a rise in fuel prices. 10. Discuss whether the government should end free health care for people and make them take out private health care insurance like in the US? 11. Discuss the role that pollution permits could play in reducing global warming 12. Discuss the case for implementing a congestion charge for driving into Birmingham city centre. 13. Discuss the micro...
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...a future policy to meet the combined impacts of these rules (BCBS et al.). The Basel 3 rules that a bank should hold 4.5%of the common equity. This essentially consists of common shares in addition to retained earnings. The rules call for banks to have 4.5% of common equity (Kane, E.J 88). The total Tier 1 requirement rises from 4% to 6% under the rule. This implies that other forms of Tier 1 requirement will account for up to 1.5% of Tier 1 capital. The entire minimum capital requirements stand at 8%, subject to a new capital buffer. Nevertheless, 6% of capital has to be Tier 1, which denotes that Tier 2 can account for less than 2% of capital. Tier 3, which is used exclusively for market risk purposes, will be removed entirely. Under Basel III, deductions from capital have to be made from ordinary equity Tier 1. All banks will be requisite to hold enough capital to achieve the minimum capital ratios, in addition to having a capital conservation buffer over the minimum...
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...parameters learn about various types of inventory policies appreciate the role of selective inventory management know the exchange curve concept for aggregate inventory planning get a feel of some mathematical models of inventory analysis perform sensitivity analysis on a type of model compute safety stocks understand the problems of slow moving items appreciate the role of computers in inventory control have a brief idea about recent developments in inventory management. Structures 17.1 17.2 17.3 17.4 17.5 17.6 17.7 17.8 17.9 17.10 17.11 17.12 17.13 17.14 Introduction to Inventory Systems Functions of Inventory Classification of Inventory Systems Selective Inventory Management Exchange Curve and Aggregate Inventory Planning Deterministic Inventory Models Probabilistic Inventory Models Inventory Control of Slow Moving Items Recent Developments in Inventory Management Concluding Remarks Summary Key Words Self-assessment Exercises Further Readings 17.1 INTRODUCTION TO INVENTORY SYSTEMS Concept of Inventory . Inventory' may be defined as usable but idle resource'. If resource is some physical and tangible object such as materials, then it is generally termed as stock. Thus stock or inventory are synonymous terms though inventory has wider implications. Broadly speaking, the problem of inventory management is one of maintaining, for a given financial investment, an adequate supply of something to meet an expected demand pattern. This could be raw materials work in progress finished...
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...the word inventory, as a stock of goods, but the generally accepted meaning of the word ‘goods’ in the accounting language, is the stock of finished goods only. In a manufacturing organization, however, in addition to the stock of finished goods, there will be stock of partly finished goods, raw materials and stores. The collective name of these entire items is ‘inventory’. The term ‘inventory’ refers to the stockpile of production a firm is offering for sale and the components that make up the production. The inventory means aggregate of those items of tangible personal property which are held for sale in ordinary course of business, are in process of production for such sales, they are to be currently consumed in the production of goods or services to be available for sale. Inventories are expandable physical articles held for resale for use in manufacturing a production or for consumption in carrying on business activity such as merchandise, goods purchased by the business which are ready for sale. Management of Inventories Inventories consist of raw materials, stores, spares, packing materials, coal, petroleum products, works-in-progress and finished products in stock either at the factory or deposits. The maintenance of inventory means blocking of funds and so it involves the interest and opportunity cost to the firm. In many countries especially in Japan great emphasis is placed on inventory management. Efforts are made to minimize the stock of inputs and outputs...
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...Theory of Constraints John Blackstone (2010), Scholarpedia, 5(5):10451. | doi:10.4249/scholarpedia.10451 | revision #91862 [link to/cite this article] | Curator and Contributors 1.00 - John Blackstone * John Blackstone, University of Georgia The Theory of Constraints is the name given to a series of decision making techniques first created by Dr. Eliyahu M. Goldratt beginning around 1980 and later applied and augmented by a number of others. The Theory of Constraints has been applied to production planning, production control, project management, supply chain management, accounting and performance measurement, and other areas of business as well as such not-for-profit facilities as hospitals and military depots. It has also been applied to decision making in educational settings. Dr. Goldratt holds a Ph. D. in physics; he has often stated that in developing the Theory of Constraints he is applying the techniques of the hard sciences, such as cause-and-effect analysis, to soft sciences such as business management. The Theory of Constraints states that constraints determine the performance of a system. A constraint is anything that prevents a system from achieving a higher performance relative to its goal. A system is any collection of interconnected parts sharing a common goal. The Theory of Constraints was first applied to business systems. Dr. Goldratt defines the goal of a for-profit business as to make more money now and in the future. This definition is in keeping...
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...with time. In terms of materials acquired for inclusion in the total inventory, this means understanding how long it takes for a supplier to process an order and execute a delivery. Inventory management also demands that a solid understanding of how long it will take for those materials to transfer out of the inventory be established. Knowing these two important lead times makes it possible to know when to place an order and how many units must be ordered to keep production running smoothly. Calculating what is known as buffer stock is also key to effective inventory management. Essentially, buffer stock is additional units above and beyond the minimum number required to maintain production levels. For example, the manager may determine that it would be a good idea to keep one or two extra units of a given machine part on hand, just in case an emergency situation arises or one of the units proves to be defective once installed. Creating this cushion or buffer helps to minimize the chance for production to be...
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...The Theory of Constraints is the name given to a series of decision making techniques first created by Dr. Eliyahu M. Goldratt beginning around 1980 and later applied and augmented by a number of others. The Theory of Constraints has been applied to production planning, production control, project management, supply chain management, accounting and performance measurement, and other areas of business as well as such not-for-profit facilities as hospitals and military depots. It has also been applied to decision making in educational settings. Dr. Goldratt holds a Ph. D. in physics; he has often stated that in developing the Theory of Constraints he is applying the techniques of the hard sciences, such as cause-and-effect analysis, to soft sciences such as business management. The Theory of Constraints states that constraints determine the performance of a system. A constraint is anything that prevents a system from achieving a higher performance relative to its goal. A system is any collection of interconnected parts sharing a common goal. The Theory of Constraints was first applied to business systems. Dr. Goldratt defines the goal of a for-profit business as to make more money now and in the future. This definition is in keeping with the traditional definition of the goal of a business which is to maximize the owners’ or stockholders’ wealth. Constraints may be resource constraints such as a person or department that cannot keep up with market demand. If this department could...
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...POLICY RESEARCH WORKING PAPER 1667 Dealing with Commodity Price Uncertainty Plantos Varangis Dont Larson Market liberalization has increased the appeal of commodity derivative instruments (such as futures, options, swaps, and commodity-linked notes)as a means of managing price uncertainty. many In emerging countries both government and the private sector are increasinglyusing these instruments. The World Bank International Economics Department Commodity Policy and Analysis Unit October 1996 POLICYRESEARCH WORKINGPAPER1667 Summary findings Liberalization in commodity markets has brought profound changes in the way price risks are allocated and managed in commodity subsectors. Price risks are increasingly allocated to private traders and farmers rather than absorbed by the government. The success of market reform depends on the ability of the emerging private sector to make full use of the available range of modern commodity marketing, price risk management (such as futures, options, swaps, commodity bonds, and so on), and financing instruments. Because farmers do not generally have direct access to these instruments, interinediaries must be developed. Larger private traders and banks are in the best position to become these intermediaries. Preconditions needed for accessing modern commodity marketing, price risk management, and financing instruments are: * Creating an appropriate legal, regulatory, and institutional framework. * Reducing government...
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...Case Study of the LJM2 Partnership in the Powers Report Criminal Justice 331 Professor Vaurio February 04, 2009 Case Study of the LJM2 Partnership in the Powers Report LJM, which stands for Lea, Jeffrey, Michael, the names of Andrew Fastow's wife and children, was a company created in 1998 by Enron's CFO, Andrew Fastow, to buy Enron's poorly performing stocks and stakes and bolster Enron's financial statements. Fastow proposed in October 1999 to Enron's finance Board the creation of LJM2 Co-Investment L.P. Fastow would act as general director of a much larger private equity fund that would be funded with $200 million of institutional funds. The question of Fastow’s dual role as Enron's CFO and LJM2's general director was not viewed as a conflict of interest was easily laid aside. LJM2, which is a partnership created to buy assets owned by the Enron Corporation to help move debt off of the balance sheet and transfer risk for their other business ventures. These Special Purpose Entities (SPEs) was established to keep Enron's credit rating stay high, which was very important in their fields of business. A special purpose entity is a trust, corporation, limited partnership, or other legal vehicle authorized to carry out specific activities as enumerated in its establishing legal document. LJM2 entered into 26 deals with Enron to help the company move debt and assets off its books. The SPEs provides its sponsor with financing and liquidity while...
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...end - April 2012. It may be recalled that draft proposals on Basel III capital regulations were issued vide circular DBOD.No.BP.BC.71/ 21.06.201/ 2011-12 dated December 30, 2011. 2. The final guidelines on Basel III capital regulations are enclosed. These guidelines would become effective from January 1, 2013 in a phased manner. The Basel III capital ratios will be fully implemented as on March 31, 2018. 3. The capital requirements for the implementation of Basel III guidelines may be lower during the initial periods and higher during the later years. While undertaking the capital planning exercise, banks should keep this in view. 4. RBI is currently working on operational aspects of implementation of the Countercyclical Capital Buffer. Guidance to banks on this will be issued in due course. Besides, certain other proposals viz. ‘Definition of Capital Disclosure Requirements’, ‘Capitalisation of Bank Exposures to Central Counterparties’ etc., are also engaging the attention of the Basel Committee 1 at present. Therefore, the final proposals of the Basel Committee on these aspects will be considered for implementation, to the extent applicable, in future. 5. For the financial year ending March 31, 2013, banks will have to disclose the capital ratios computed under the existing guidelines (Basel II) on capital...
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