The European sovereign debt crisis during 2010-2011 Essay - 1

The European sovereign debt crisis during 2010-2011 - Essay Example Matters involving liability crisis have in the recent years being reported globally, as the level of the sovereign arrears of some of the financial scheme of the world have risen, giving them a threat of failure to pay. A Financial network is thought to be in an obligation crisis once its government has failed to pay its debt. However, not any of the nations that are at present in debt disaster has defaulted, but they involve extremely high government debt balances, and their bond output spreads in the securities of the government have gone up, as a result, there is relegation of their sovereign ratings for credit. When an area suffers this crisis, it might be able to undergo a sudden discontinue of inflows from the foreign capital because of major loss of capitalist confidence regarding the economy. The Eurozone had kept an overall acceptable short-term financial credit between 1999 to the year 2007. However, there existed large as well as continuing inequities in the region.  "Greece, Spain, Portugal, and to a lesser extent Ireland†, sustained massive current account shortfalls, and Germany, Netherlands, along with Luxembourg, had profits in the account (Braga & Vincelette 222). The providers of the large plus extended current account losses are dissimilar across these countries. As years went by, the deficits balances of the current financial standing have been increasing, also, a decrease to the surpluses in the other countries. The existing crisis on debt commenced with the demise of the banking corporation in Iceland in the year 2008, and spread to some of the countries in Europe like the Ireland, Portugal, as well as Greece in the year 2009. At the beginning of the second half of this year, reports concerning the debt crisis on the United Sates also blew up (Economic Review 1; Braga & Vincelette 222-225). The crisis originated from various factors and had tremendous implications to the economy of the European countries. GDP Growth in the Euroz one, Q4 2009–Q1 2011 (Belkin, & Mix, & Nelson, 14) Source: International Monetary Fund, World Economic Outlook, April 2011 (Belkin, & Mix, & Nelson, 4). Reasons behind the Financial Crisis The debts predicaments are featured to pro-cyclical economic policy in the period preceding the economic crisis. The countries impinged on had being managing large and untenable fiscal deficits for several years, largely funded through borrowing. The Government of Greek used deficit spending to increase extraordinarily, the people’s standard of living as the debt funded the joblessness societal benefits, raised the remuneration of public workers along with pensioners’ income, and sustained a mutually respectful labor market. The evident cause of the â€Å"European Debt Crisis† is also the changing of the ‘European Monetary Union’ (EMU) from financial stimuli to fiscal consolidation in the year 2009. Until that year, the EMU together with the entire European Union (EU) and other main financial systems followed the IMF order in the upshot of Lehman Brother’s insolvency, to promote global demand by way of increasing government spending. The

2000 US Presidental Election :: essays research papers

The fourth principle of the rule of law state, "all persons must be given due process, that is, a fair chance to defend themselves against formal charges that they have violated the rules." The premise for this principle is the example that, the official body that hears and renders judgment on the charges may be biased against the defendant instead of impartial. The decision of the United States Supreme Court to discontinue the counting of "undervotes" in the state of Florida was not only a politically biased decision, it was also a decision that violated the rule of law. My argument is based on not so much the dissenting opinion of the minority, but of the concurring opinion of the majority of the Supreme Court. A political trial is one in which political considerations, not simply the law and the facts, affect the proceedings and verdict. Every human being has a certain set of morals and beliefs that they hold to be an important part of their character. This is no different for the judges of the Supreme Court. They too have a set of morals and beliefs that they live by. The difference is that their job description says that they have to make decisions not based on their morals and beliefs, but their decisions must be based on the rule of law. It is obvious to me that many of the judges on the Supreme Court, did not follow their job description and instead of basing their decision of Bush vs. Gore on the rule of law, they based it on who they voted for. Every conservative on that panel voted to stop the recount which in turn helped Bush win, and every liberal on the panel voted to continue the recount which would have given Gore a chance at winning. The concurring opinion of the majority seems to make it evident in some of the arguments they make that their opinion was based on politics and not on law. Much of the evidence they bring up only seems to contradict their decision more than support it. In Rehnquist's opinion, with whom Scalia and Thomas join, concurring, he brings up the case of Anderson v. Celebrezze, (1983), in which the court said ''In the context of a Presidential election, state-imposed restrictions implicate a uniquely important national interest. For the President and the Vice President of the United States are the only elected officials who represent all the voters in the Nation.

Major Parts of Corporate Entrepreneurship.

* 4 major parts of corporate entrepreneurship. 1-New business venturing ( corporate venturing) Corporate venturing refers to the creation of a new business within an existing organization. Business dictionary defined corporate venturing as the practice where a large firm takes an equity stake in a small but innovative or specialist firm, to which it may also provide management and marketing expertise. Specifically, corporate venturing emphasized an internal capital resources, proprietary knowledge, and marketing expertise.The concept of corporate venturing has existed for many years in the US where many of the top companies have a venture capital fund or offer strategic alliances. While the number of companies involved is much smaller in this country, it has existed for many years and in many sectors. Traditionally corporate venturing has appealed to high-growth sectors such as pharmaceutical or technology companies. 2. Innovativeness It’s product and service innovation, with emphasis on development and innovation in technology.The innovation of product and services are crucially important to every economy. Innovation and new business development can be initiated by independent individuals or by existing enterprises. Corporate entrepreneurship is ever more considered as a valuable instrument for revitalizing existing companies. It is brought into practice as a tool for business development, revenue growth, and profitability enhancement for pioneering the development of new product, services and processes. 3. Self-renewalIt’s transformation through renewal of key ideas on which an organization is built. Self-renewal has strategic and organizational change implications and includes the redefinition of business concept, reorganization, and the introduction of system-wide changes for innovation. Self-renewal is entrepreneurial because it involves entrepreneurial efforts that result in significant changes to an organization’s business or corpora te level strategy. 4Proactiveness This term includes initiative, risk taking, competitive aggressiveness, and boldness.It attempts to lead rather than follow competitors. A proactive firm is inclined to take risk through experimentation. Some opinion conceives of proactiveness as a continuous search for market opportunities and experimentation with potential responses to changing environmental trend. Entrepreneurial proactiveness depends on the attractiveness of an opportunity and ability of the firm to grasp once it is perceived. Organizational performance depends on entrepreneurial proactiveness if there is uniqueness in the creation of new product from the available resource

Studying The Different Types Of Ratio Analysis Finance Essay - Free Essay Example

Sample details Pages: 5 Words: 1465 Downloads: 2 Date added: 2017/06/26 Category Finance Essay Type Research paper Did you like this example? Ratio Analysis is a technique used for financial analysis in which the figures are converted according to the ratios allotted for some useful assessment in comparison with the ratios of the past years and setting a bench-mark for the future years. This technique is very useful so as to establish the trends and bring in light, the strengths and weaknesses of the firm. The ratio analysis includes ratios that which are made up from the financial statements of the firm and includes key factors like profitability ratios, return on capital employed, liquidity ratios, working capital management ratios and capital structure ratios along with the stock market ratios. Don’t waste time! Our writers will create an original "Studying The Different Types Of Ratio Analysis Finance Essay" essay for you Create order The health of any company is clearly visible in the ratio analysis and gives the interpreter a clear picture when it is compared with the performances of previous years and other similar industry competitors. (Droms W.G., 2003) RELEVANCE OF RATIO ANALYSIS: Helps in assessing the firms performance: This technique is highly beneficial in assessing the financial health, profitability and operational efficiency of the firm. It ensures that the weaknesses of any firm will not go unnoticed as each and every fine detail is mentioned in the statements which will again be reflected in the ratios found out. Easiness of comparison within industry competitors: This technique is essential so as to compare the returns of the concerned firm with the industry standards and other leaders of the industry. Determination of financial health: This technique is used by the firm so as to know about the financial health of the firm in regards with the improvement or deterioration. It helps in setting out the direction of a companys action as the output is right out in front. Beneficial for budgeting and forecasting: The technique is used by the firm so as to know about the financial health of the firm in regards with the improvement or deterioration. It helps in setting out the direction of a companys action as the output is right out in front. Long Term Solvency: This technique is also widely used for its relevance in determining the financial health of the company down the line after few years due to various ratios like leverage ratios and capital structure ratios. (Steffy W., Zearley T., Strunk J., 2007) Weakness of ratio analysis: Many big companies operate in different business departments, thus it is difficult for them to compare against industry average. Inflation has played a key role in distorting the balance sheets as the written value is sometimes not even near to the original value, since the depreciation charges and cost of inventory is substantially affected by it. Different accounting practices being followed in the industry makes it more difficult for them to compare with other competitors. (Brigham E.F., Houston J.F., 2007) Profitability ratios: This ratio basically tells the analyst whether the business is making profit or is at some loss. It also lets the management know whether their strategy has been successful, if any related to the increase of profit margin. Gross Profit ratio: (Gross profit/sales)*100 % For 2008 = (62784.73/313923.68)*100 = 19.99 % For 2009 = (82404.96/494429.8)*100 = 16.66 % For 2010 = (102025.19/682784.01)*100 = 14.94 % Net Profit ratio: (Net profit/sales)*100 % For 2008 = (31392.36/313923.68)*100 = 9.99 % For 2009 = (43164.5/494429.8)*100 = 8.73 % For 2010 = (53454.35/682784.01)*100 = 7.83 % These ratios indicate the capacity of the company to generate profit or to control its business. The firm has seen the gross profit ratio and net profit ratio decline from 2008 to 2010. This has been primarily due to the fact that the firm has seen the sales figure increasing and not so great increment in profit share in it which might be possible due to the poor management of the funds or assets of the company. Share-holders ROCE: (Profit/Shareholders fund)*100% For 2008 = (31392.36/46215.25)*100 = 67.92 % For 2009 = (43164.5/92640.79)*100 = 46.59 % For 2010 = (53454.35/150838.46)*100 = 35.44 % Overall ROCE: (Profit/ (Shareholders fund + Borrowed Capital))*100 % For 2008 = (31392.36/46215.25)*100 = 67.92 % For 2009 = (43164.5/92640.79)*100 = 46.59 % For 2010 = (53454.35/ (150838.46 + 14822.87))*100 = 32.26 % The firm has been experiencing a drastic drop in the return on capital employed. This has happened primarily due to drop in the increasing rate of profit and huge increments in sales happening. Liquidity ratios: Liquidity imitates any firms ability to meet the short term obligations against the assets owned by the company which are readily convertible into cash. Current assets are mentioned as working capital as this is the capital which is used in day to day expenditure of the company. Current ratio: (Current assets/ Current liability) For 2008 = (44584.73/11561.84) = 3.86 For 2009 = (100200.45/21344.94) = 4.69 For 2010 = (180632.43/29942.21) = 6.03 This ratio indicates the capacity of the firm to pay off its debts within the time frame of a year with current assets in hand. The industry standard is considered to be 2:1. In our case, the company has been experiencing a sharp increase in this ratio. This has happened due to the fact that the company is keeping most of the money from the profits or sales in banks and are not investing it into the business. Quick ratio: ((Current assets stocks)/ Current liability) For 2008 = (40879.01/11561.84) = 3.53 For 2009 = (92789.01/21344.94) = 4.35 For 2010 = (165809.56/29942.21) = 5.54 This ratio emphasizes on the fact that not all assets are easily and instantly convertible into cash including the likes of stocks. In our firm, it has increase a sharp increase in the ratio from 2008 to 2010. This is also due to the same reason for keeping most of the cash in the bank and not investing it into business. Working Capital Management: This ratio basically emphasizes on how well the assets or services of the company are being utilised. This would gauge a firms capability to use the credit it receives from the market and in turn receive the investment from the debtors as quickly as possible. Stock Holding Period: (Average stocks/cost of sales)*365 For 2008 = (3705.72/251138.95)*365 = ~ 6 days For 2009 = (7411.44/412024.84)*365 = ~ 7 days For 2010 = (14822.87/580758.82)*365 = ~ 10 days This ratio tells the analyst about the time frame that the firm has to keep the stocks with them before they are sold into the market. This ratio is increasing from 6 to 10 days in the end which is not a matter of concern. Debtors Collection period: (Debtors/ Total Sales)*365 For 2008 = (7411.44/313923.68)*365 = ~ 9 days For 2009 = (15564.02/494429.8)*365 = ~ 12 days For 2010 = (35574.9/682784.01)*365 = ~ 20 days This ratio tells us the capability of the firm to collect money from its debtors as not all business transactions are done in cash. Here we see that the time frame has increased more than double for collection which is not a good sign and the company should follow up closely with the clients and put a bit of pressure on them in the permissible limit. Creditors payment period: (Creditors/cost of sales)*365 For 2008 = (8300.81/251138.95)*365 = ~ 13 days For 2009 = (16601.62/412024.84)*365 = ~ 15 days For 2010 = (24605.97/580758.82)*365 = ~ 16 days This ratio tells us the time frame that the company takes before handing out the payments back to the creditors. The time frame has been increasing from 2008 to 2010. This is a good sign as this means that the money which is handed out late to the client can help the firm in any investment for that period or to earn interest on it. Capital Structure ratios: Financing of a company is done either by equity or debt. Equity allows the directors of the company to decide at their own discretionary. But, debt financing involves an element of greater risk and an obligation to pay off the investment along with the interest to the concerned institution or investor. Gearing ratio: (Borrowed Capital/ (Shareholders fund + Borrowed capital))*100 For 2010 = (14822.87(14822.87 + 150838.46)) = 8.95 % This ratio is not applicable for 2008 and 2009 as the company was all financed by equity capital and was not using any borrowed capital or long term loan. But, in 2010, the firm borrowed capital from the market which is a good sign as it helps the company in reducing the taxes as the interest paid for loan is included after deduction of interest. Interest cover: (Net Profit/ Interest) For 2010 = (53454.35/ 1482.29) = 36 times Since the company had no borrowed money in 2008 and 2009, thus it was not entitled to pay any interest. But, after borrowing money in 2010, it was clearly visible that the company had more than enough funds to cover the interest to be given to the concerned institution or investor investing in the firm. Dividend Cover: (Net Profit/ Dividends) For 2008 = (31392.36/3261.03) = 9.62 times For 2009 = (43164.5/4743.32) = 9.1 times For 2010 = (53454.35/5336.24) = 10.02 times The company is in a strong position to pay out the dividends to its share holders which would further instil confidence in the investors to invest more. CONCLUSION: After analysing through the reports of the company and glancing through the ratios, we come to the conclusion that the company is in desperate need of proper management which can take suitable actions. These actions include primarily increasing the gearing ratio of the firm which looks very low. This would in-turn solve most of the problems by saving the money from going into the tax and diverting it as interest. Another key suggestion might be to decrease the money in the bank and invest it into the company, so that the company can experience greater growth rates and an increased opportunity for the investors as well. The firm should also keep a close eye on the debtors collection period ratio as the time has more than double within 3 years which is not a good sign.