Notesale: Turn your study into money

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Money and International Finance :
 Batering system: trading goods or services between two or more parties without the use of
money
...
It loans the money deposited by the
saver to the borrower for interests
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 Financial Market: is an institution where bonds, securities and stocks are sold or bought
...

 Liquidity is when people can easily convert an asset into cash with little transaction costs
...
Also called
a transactional account, it’s the account that you will use to pay your bills and make most of
your financial transactions
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 Savings Account: it’s the contrary to checking account
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 Business cycle: describes the rise and fall in production output (GDP) of goods and services in an
economy
...

 Real GDP: calculated with the removal of the effect of inflation
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 Full-bodied money: money which has a face value not in excess of its intrinsic value as a
commodity
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 Premium: is the amount of money to be paid for insurance
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 Liability: debt, financial obligation
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It controls: inflation rate, Business cycle (GDP) and Interest rates
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It includes three types: M1, M2, and M3
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 Near money (M2): non-cash assets that are highly liquid, such as bank deposits, certificates of
deposit (CDs) and Treasury Bills
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 Direct finance: when net savers can lend directly to businesses through the financial markets
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 Transactions costs: are costs to be paid in order to withdraw your money
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 Stocks are long-term security
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 Commercial Paper: is a short-term loan issued by a well-known corporation with a
maturity of 270 days max
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 Certificate of Deposit: is an agreement to deposit money for a fixed period with a bank
that will pay you interest
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 U
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 U
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 Dual banking system: an US system where there is State bank and National bank,
supervised by state government and federal government respectively
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 Speculation: is the act of buying something purely in hopes that its price will rise
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 Capital adequacy: is when private banks invest to maintain enougn internal resources
and to guard against the effect of an unforeseeable withdrawals
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Too much spending
2
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High companies’ profits (due to lack of competitiveness)
4
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Spending:
1
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Program spending
3
...
)
4
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Taxing:
1
...
Sales tax

3
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Wealth tax
5
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Neoliberalism policy




Neoliberalism is an ideology based on freeing the economy from the government
regulation, and encouraging vast privatization of all economy sectors of activity and
production
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Open markets
2
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Privatize industries
4
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Money Market
Maturity less than 1yr
Highly liquid
Financial
Instruments
Capital Market (Contains
common stocks)
Maturity great than 1yr

 Money market includes all short-term securities:
 US Treasury Bills
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 Banker's Acceptance
 Certificate of Deposit
 Repurchase agreement
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 Capital market includes all long-term securities:
 US Treasury Notes and bonds
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 Mortgage
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It insures the deposits of each depositor in commercial banks up to $250,000
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When a bank fails, it is the FDIC who seizes the bank’s assets, buys them to return the
money to the depositors
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Multinational Enterprises:
 Forms of business organizations:
 Proprietorship (sole person)
 Partnership (2 or more persons)
 Corporation (several shareholders)
 Initial Public Offer: is the first time the corporation began selling its stocks to the public
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 Bonds are also a source of capital, it’s a loan that can be sold or bought
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Bonds
2
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Taxes
4
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Common stockholders
 Mature economy: is the economy of a nation with a stable population and slowing economic
growth
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 Open market: is characterized by the absence of tariffs, taxes, licensing requirements, subsidies
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It, thus, benefits from great sales margins due to low-prices
sales
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They guarantee a price of the stock, and they sell it for a higher price, to earn a profit
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 Underwrite: to issue a new stock
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 The Securities Exchange Commission: is a federal agency auditing investment banks
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Only a specialist can enter these
exchanges
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The latter matches the prices between seller and buyer for a commission for
each transaction
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 Market index: measures broad movements in a financial market
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 Basis point: in market index for currencies, bonds, or indexes, up 50 basis points, that means it
is up 0
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 Bubble: is a dramatic rise in asset’s prices
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 Insurance companies: provide protection for people who buy insurance policies, those are
named policyholders, they pay premiums periodically
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Financial statements:
Financial statements are written records that convey the financial activities and conditions of a
business or entity and consist of four major components:
1
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It can show whether the
company has earned a profit or a loss
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Balance Sheet:
It shows the financial position of a business on a specific date
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Retained Earnings: is the equity after all dividends are paid
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Assets: divide into: current assets and fixed assets
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3
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Any investment or withdrawal will affect the equity
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Statement of Cash Flows
Financial analysts view the cash flow statement importantly because future business expansion impacts
the cash flows over time
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Types of stakeholders:
 Banks, owners and stockholders
 Customers & suppliers
 The state (through fees & taxes)
 Employees & mangers
Revenues can be divided into two categories: revenues received from selling products are called
sales
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Costs used to earn revenue are called expenses
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Account receivable: is the sum of money, value of goods or services, that the customers must
pay off to the corporation, that is, the enterprise has made a sale on credit
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Retained earnings statement: is a portion of the enterprise’s net income that is retained in the
business (not distributed as dividends) for use in expanding/investing operations
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 High-growth youth corporations don’t distribute dividends
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Balance sheet: based on the accounting equation:
Assets= liabilities + stockholders’ equity
This equation should be balanced
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For example, creditors are interested in determining whether the company’s
operating activities are generating enough positive cash flow to repay their debts
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A business cannot survive in the long term
unless it generates positive cash flows from operating activities
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Narrow money: coins and notes circulated in economy
Broad money: all liquid assets
Money supply:
Quantity of money X Velocity of money circulation = Average prices level



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