The components of the statement of cash flow shows how changes in balance sheet and income accounts affect cash and cash equivalents, and breaks the analysis down into operating, investing, and financing activities. The statement shows the current operating results for a period of time. These details are reflected in the balance sheet. As an analytical tool, the statement of cash flows is useful in determining the short-term viability of a company, particularly its ability to pay bills. o Which financial statement is the most important?
The four fundamental factors that affect the cost of money are production opportunities, time preferences for consumption, risk, and expected inflation. k. What are some economic conditions (including international aspects) that affect the cost of money? Some economic conditions are budgets deficits, federal reserve policies, budget surpluses, level of business activity and international trade deficits or surpluses. The international aspects are country risk and exchange rate
This policy is the cost the Feds ensue to depositing businesses when borrowing short-term loans. Each loan carries its specific terms and rates. The risk of uncertainty reflects the value of money in the future because it may earn interest. Similarly to bank’s lending with lower rates to customers, the Feds employ the same tactics to entice banks to borrow. Buying and selling of Treasury bills also affects open-market operations.
2. a. Critique Ace Repair’s current method of estimating its before-tax cost of debt. b. Is the earnings yield (E/P) an appropriate measure of the firm’s cost of equity? 3. a.
Why are capital gains and dividends taxed at a different rate than ordinary income? Has this always been the case? Discuss the economic and social implications the changes in tax rates for capital gains and dividends. Do you think the existing policies are fair? Why or why not?
Monetary Policy is used to make changes in the nation’s supply of money. These changes affect interest rates which affects the amount of spending. Monetary policy is supposed to get price levels stable increase employment and grow the economy. In chapter 15 of our text it shows a consolidated balance sheet of the Federal Reserve Banks. The Federal Reserve Banks (there are twelve Federal Reserve Banks) are really a “banker’s bank” (McConnell, Brue 2005).
The balance sheet connects to income statements, in turn also connected to cash flow statement. Occurrences or a change to the net cash activities of the cash flow statement affects the balance sheet. The balance sheet is useful when estimating the potential of the organization in order for them to achieve there long-term mission. However, cash flow statement displays the exchange of currency among an organization and external agents. For example, the cash flow can be affected when the company purchases products, and if the costs of the products are an outstanding amount in turn it will affect the assets on the balance sheet.
Of the several regulatory bodies, which has the most affect on companies? Why? What are some internal controls related to cash? Why is control over cash important? What are the pros and cons of segregation of duties over cash?
Discussion Questions DQ 1 What is meant by an in-substance defeasance, and how can a government use it to lower its interest costs? How must it recognize a gain or loss on defeasance if it accounts for the debt in a proprietary fund?How do the GASB standards pertaining to in-substance defeasances differ from those of the FASB? DQ 2 What is an encumbrance? How does an encumbrance affect expenses and expenditures? What is the impact of encumbrance accounting on a governmental budget?
Discuss surplus-enhancing transactions in markets 6. Explain how elasticity affects the way in which the burden of a per-unit tax is shared between buyers and sellers 7. Explain how elasticity affects the size of the deadweight loss created by a per-unit tax **NOTE: All of chapter 5 of Hubbard, Garnett, Lewis and O’Brien (2011) Microeconomics, 2nd edition, Pearson is required reading. 1. Consumer surplus The difference between the highest price a consumer is willing to pay for a good or service, and the price they actually pay.