Chapter 36 - Capital Management Flashcards
1
Q
Capital management of financial products provide involves
A
Sufficient solvency and capital to meet:
- existing liabilities
- future growth aspitarition
Maximizing reported profits
2
Q
Capital needs
Individuals
A
Cushion against unexpected events
Save for future
3
Q
Capital needs
Company
A
Financial consequences of adverse events Cushion against fluctuating trading volume Finance expansion Finance stock and work in progress Premises, staff, equipment
4
Q
Capital needs
Providers of financial products
A
Meet benefits before sufficient premiums Development expenses Cushion against unexpected events Statutory/solvency requirements Invest more freely Sell.products woth guarantees Financial strength to attract business Smooth reported profits Achieve strategic aims
5
Q
Capital needs
State
A
Fluctuations in balance of payments and economic cycle
Timing difference between income and outgo
6
Q
Meeting capital needs
A
Proprietary - raise capital through share issues
Mutual - raise capital through subordinate debt
7
Q
Capital management tools
A
Reinsurance Financial Reinsurance (FinRe) Securitisation Subordinate debt Banking products Derivatives Equity capital Internal restructuring
