Financial Management Environment Flashcards
What are the different financial market efficiencies
Weak
Semi Strong
Strong
What are the yield curve shapes?
What are the factors that determin interest rates?
Treasury Management
Centralised:
Control
Consistent reporting up and down the corporate chain without duplication
Risk is controlled when the philosophy of the compnay is clear and implemented from a central process
Decentralised:
Responsiveness.
No need to waith for permission from central management
Fiscal Policy
Taxation and Government spending
Aim: Price tability, economic growth
Raise Tax:
Less to spend
More to the government to pass to companies
Lower tax:
more to spend
increase flow of money
Governments can borrow:
Treasury Bills
National savings certificates
Monetary Policy
Regulation of the money supply and interest rate
by a central bank
in order to control inflation and stabilise currency
High interest rate
Less to spend
Recession
Restrict growth and inflation
Competition Policy aims to ensure
Wider consumer choice
Technological innovation, and
Effective price competition
What does an intermediary do?
Saver —–> Intermediary —> Spender
Aggregate investments to meet needs of borrowers
Risk transformation - offfer low risk securiteies to primary investors
Maturity transformation - investors can deposit funds for a long period of time whol borrowers may require funds on a short-term basis only.
They do not create dividends
Risks and returns of securities
What is a contractionary fiscal policy?
Government budget surplus
Higher taxxes lower governemtn subsidies
Expansionary Monetary Policy
More money available
Low interest rates and more available credit
Which company benefits from situation with high inflation?
Company with long term payables
Securitisation
Conversion of illiquid assets into marketabl securities
Disintermediation
Borroweres deal directly with lenders
Governments for fiscal policy
Reducing tax while maintaining public spending
borrowing from capital markets and spending on public works
