1. Explain why total financial assets in the economy must equal total financial liabilities
Financial asset is intangible property from a contractual claim such as stocks, bank deposits, and bonds. All of them should be worth to receive monetary value.
Financial liability is a company's obligation or debt which a company has to pay back the amount of borrowing money.
Total financial assets and total financial should be equal it's because the balance sheet is based on accounting equation. Since the economy is volatile, a company has to make sure what the volume of its financial assets would be. Otherwise the company is not able to deliver the money which the company should pay back to third party.
When a company borrow $50,000 from a bank, the company has to hold financial assets that deserve the exact matched borrowing money which is $50,000. In the balance sheet, both of the financial asset and the …show more content…
What are two basic services that investment banks provide in the economy?
An investment bank is an organization which can be considered as an financial intermediary institution. There are two services that investment bank specializes in the economy which are to sell new debt or equity.
For example, there is a someone who needs money for an invest to accomplish his or her aim such as building new facilities, and also there is another who can afford an invest. The role of an investment bank is to bring them together and make them satisfied for there respective wants. Brokers and dealers are one of the examples. A broker is who asks to pay commission fee for him or her, but there is no risk for him or her because the broker dose not get involved in the contract or transaction. On the other hand, dealer is the part of trades as either a seller or buyer. Unlike brokers, dealers takes on risks.
3. When determining the real interest rate, what happens to businesses that find themselves with unfunded capital projects whose rate of return exceeds the cost of
Financial asset is intangible property from a contractual claim such as stocks, bank deposits, and bonds. All of them should be worth to receive monetary value.
Financial liability is a company's obligation or debt which a company has to pay back the amount of borrowing money.
Total financial assets and total financial should be equal it's because the balance sheet is based on accounting equation. Since the economy is volatile, a company has to make sure what the volume of its financial assets would be. Otherwise the company is not able to deliver the money which the company should pay back to third party.
When a company borrow $50,000 from a bank, the company has to hold financial assets that deserve the exact matched borrowing money which is $50,000. In the balance sheet, both of the financial asset and the …show more content…
What are two basic services that investment banks provide in the economy?
An investment bank is an organization which can be considered as an financial intermediary institution. There are two services that investment bank specializes in the economy which are to sell new debt or equity.
For example, there is a someone who needs money for an invest to accomplish his or her aim such as building new facilities, and also there is another who can afford an invest. The role of an investment bank is to bring them together and make them satisfied for there respective wants. Brokers and dealers are one of the examples. A broker is who asks to pay commission fee for him or her, but there is no risk for him or her because the broker dose not get involved in the contract or transaction. On the other hand, dealer is the part of trades as either a seller or buyer. Unlike brokers, dealers takes on risks.
3. When determining the real interest rate, what happens to businesses that find themselves with unfunded capital projects whose rate of return exceeds the cost of