Financial Crises Analysis

In: Business and Management

Submitted By hirahamid
Words 1273
Pages 6
Topic Financial crises of 2008

Presented to

presented by

Date

Table of contents

Introduction

causes and factors

US government actions to solve the crises

Analysis and opinion regarding the likelihood of another financial crisis

Introduction:
The current financial crisis started in the US housing market in 2007. The crisis spread across the whole world and brutally hurt the economies of numerous countries, including the US, and reached a new level in September 2008 as a number of well-known US-based financial institutions, including AIG and Lehman Brothers, warped. It is considered by many economists to be the most terrible financial crisis since the immense Depression of the 1930s .Many causes have been anticipated, with varying weight assigned by experts. Both market based and regulatory solutions have been implemented or are under consideration, while significant risks remain for the world economy over the 2010–2011 periods.

Causes and factors: A: The US housing market 1: creation of a housing bubble
US house prices increase significantly from 1998 to 2005, more than doubling over this period and extreme faster than average wages. Further support for the existence of a bubble came from the ratio of house prices to renting costs which rocketed upwards around 1999. The rise in house prices reflected large increases in demand for housing and a rise in the supply of housing. The significant increase in the demand for housing is endorsed to a number of factors.

a. Low interest rates
Continues low interest rates from 1999 to 2004 made adjustable-rate mortgages appear very eye-catching to possible buyers. Low interest rates were driven by the large current account deficit run by the USA. The Fed and many of the world’s…...

Similar Documents

Financial Analysis

...Financial Analysis [Name of the Writer] [Name of the Institution] Profitability and Liquidity Ratios It is important for any company to evaluate its overall profit performance in relation to the resources available. This is usually done by calculating financial ratios relating to the profit performance of the business to overall investments which is usually called as return on investment. The liquidity ratios include current ratio and the acid test ratio. The current ratio shows the short term resources of an organization. Acid test ratio is considered as more stringent test of liquidity as it excludes the least liquid portion of current assets. Sources of Finance When initially financing a small business, an entrepreneur will typically rely on personal savings and then attempt to gain access to the savings of family and friends. Only if these sources are inadequate will the entrepreneur men to more formal channels of financing, such as banks and outside investors. Some sources of financing; such as hanks, business suppliers, asset-based lenders, and the government are essentially limited to providing debt financing. Equity financing for most entrepreneurs comes front personal savings and, in rare instances, from selling stock to the public. Other sources include friends and family, venture capitalists, investors, and large corporations. These sources may provide either debt or equity financing, depending on the situation. The use of these and other sources of......

Words: 1013 - Pages: 5

International Financial Crises

...International Financial Crisis and reasons The financial crisis of 2007–2008, also known as the Global Financial Crisis and 2008 financial crisis, is considered by many economists to be the worst financial crisis since the Great Depression of the 1930s. Many causes for the financial crisis have been suggested, with varying weight assigned by experts. The U.S. Senate's Levin–Coburn Report asserted that the crisis happened because of: 1-High risk 2 Complex financial products 3-Undisclosed conflicts of interest 4-The failure of regulators 5-The credit rating agencies 6-The market itself to rein in the excesses of Wall Street 7-Weak and fraudulent underwriting practices 8-Deregulation  9-Predatory lending 10-Increased debt burden or over-leveraging  11-Boom and collapse of the shadow banking system  12-Commodities boom Financial crisis in Pakistan and Reasons 1-One of the immediate causes is Political instability due to Musharaf’s position as president, delay in restoring judiciary and resultantly withdrawal of PML (N) from the alliance leaving behind ‘dead’ ministry of finance. In contrast the present government is not showing strong will to cope with the situation. Though some Positive Measures. To end Load Shedding till 14th August, 2009, Benazir income Scheme programmed, Distribution of Land in Sindh, tight Tariff System against luxury items 2-Suicide attacks in the industrial cities-fear among people, disinvestment and maximum......

Words: 2046 - Pages: 9

European Financial Crises

...Eurozone debt crisis, which is also known as European Sovereign debt crisis is an on-going financial crisis that the countries within the Eurozone such as Ireland, Italy, Portugal, Greece and Spain varying a certain degree that faces struggles to repay or refinance their government debt without the assistance of third parties. This has caused much worries faced by the European Unions and hence to the above crisis, thus causing a great impact beyond the borders to the world as a whole. We will look into various roles undertaken by the European Commission (EC), the European Central Bank (ECB) and the International Monetary Fund (IMF) in helping to solve the euro zone Debt Crisis. European Central Bank (ECB) The ECB is one of the seven institutions of the European Union which was listed in the Treaty on European Union where it administers the monetary policy of the 17 EU members’ states where euro zone is consider one of the largest currency areas in the world. Founded in 1998, the central bank is one of the most important in the world with more than 500 billion euros in its reserves. Currently, the bank is based in Frankfurt, Germany and led by Jean-Claude Trichet. The primary function of ECB is basically to implement monetary policy for Euro zone, responsible for the care of foreign reserves of the European System of Central Banks, and to promote and conduct smooth operating of the financial markets and foreign exchange functions. In addition, ECB also handles exclusive......

Words: 2049 - Pages: 9

Global Financial Crises

...PRESENTATION ON “GLOBAL FINANCIAL CRISIS” SUBMITTED BY: M.ASWATHI ASHOK AND ANAGHA P.S CONTENTS * GLOBAL FINANCIAL CRISIS * DIFFERENCE BETWEEN US/ EUROPE AND INDIA * RBI’S POLICY, RESPONSE AND IMPACT * LESSONS FROM THE CRISIS * MEDIUM- TERM ISSUES AND CHALLENGES GLOBAL FINANCIAL CRISIS * Proximate causes & Fundamental causes * Current account balance * US monetary policy Policy 1: * Volatility in monetary policy in advanced economies. * Large volatility in capital flows to EMEs. Policy 2 : * US Monetary policy too loose during 2002-04; aggregate demand exceeded output; large current a/c deficit; mirrored in large surpluses in China and elsewhere. Policy 3 : * Large Fed cuts in 2007: strong boost to oil, other commodity and asset prices * Capital Flows to Emerging Market Economies * Worsening Global Economic Outlook DIFFERENCES BETWEEN FINANCIAL CRISIS IN US/EUROPE AND INDIA * What has not happened in India : * No bank losses threatening capital * No bank credit crunch * No mistrust between banks * Our Problems : * Reduction in capital flows * Stock markets * Monetary and liquidity impact * Fiscal stress * Oil, Fertiliser, Food subsidies * Pay Commission, Debt waiver, NRE * GFD/GDP ratio: 5.5-6.0% * India’s Approach to Managing Financial Stability: ......

Words: 403 - Pages: 2

The Us and European Financial Crises

...The US and European Financial Crises La inceputul verii lui 2007, prima data in SUA, apoi in Europa si Asia, criza financiara si-a facut aparitia relative neasteptat. Criza globala a erupt in septembrie 2008, cand datoriile din Grecia au ajuns la conditii extreme, care s-au stability in toamna lui 2009, dupa care a urmat Irlanda si toata Uniunea Europeana. Totul a inceput in Statele Unite ale Americii odata cu ipotecile din sectoarele imobiliare, care au crescut din 1995 pana in 2010 cand datoriile au cunoscut o cota negative. Aceasta situatie s-a extins si in Marea Britanie, Franta, Germania si chiar Australia, urmand acest exemplu negativ. Diferite organizatii financiare precum LIBOR au incercat sa remedieze situatia prin reducerea dobanzile la ipoteci spre exemplu, dar fara success aceasta interventie avantajand doar firma proprie. In jurul date de 10 august 2008 rezerva federala a SUA a achizitonat titluri de valoare valorand cateva miliarde de dolari pentru a introduce lichiditati pe piata creditelor. Totusi, fara interventia guvernului nu s-a putut rezolva nimic. Rezerva Federala si Trezoreria Statelor Unite ale Americii au incurajat sectorul bancilor private sa isi resolve singure problemele financiare, iar incercarea lor de a face aliante a dat din nou gres. In Uniunea Europeana, constituirea Zonei Euro a dus la libera miscare a capitalului, fenomen numit integrare financiara, insa tarile care au adoptat aceasta moneda nu mai poseda independent monedei......

Words: 377 - Pages: 2

Imc in Financial Industry During Crises in Macedonia

...The importance of Integrated Marketing Communications during financial crises in the Republic of Macedonia Author: Ass. Prof. Ilijana Petrovska, Ph.D. University American College Skopje Address: Ul. 3 Makedonska Brigada bb, 1000 Skopje, Macedonia Tel / fax: +389 2 2463156 Mobile +389 78 383 112 e-mail: petrovska@uacs.edu.mk Co-author: Prof. Nada Sekulovska, Ph.D. University “Ss Cyril and Methodius”, Fakulty of Economics, Skopje Address: Bul. Krste Misirkov b.b., 1000 Skopje, Macedonia tel. 00389 2 3286 849 e-mail: nadas@eccf.ukim.edu.mk The importance of Integrated Marketing Communications during financial crises in the Republic of Macedonia Abstract The purpose of this paper is to implement a research regarding the marketing communications of the financial institutions during the last financial crises in the Republic of Macedonia. The last world financial crises had a big negative impact on the world economy, especially in the financial industry. However, the Republic of Macedonia didn’t suffered big financial implications in the financial industry, mainly because the investments in this sector are still underdeveloped and also the current financial actors are not active in the world financial markets. However the financial institutions’ marketing communications is showing changes in the world and in Macedonia, too. With the monitoring of the world banks’ marketing communications, the main conclusion is the change in the......

Words: 3286 - Pages: 14

Financial Analysis

...  Student Details Surname Azeez Given name Shamina Bhanu Student Number 1232702 Email shamina.azeez@gmail.com   Assignment Details Module name Accounting  & Financial Management Module Code 7AC002     For the attention of Mark Price Due date 14th April 2014   Assignment title Financial Analysis Report   All forms of plagiarism, cheating and unauthorized collusion are regarded seriously by the University and could result in penalties including failure in the unit and possible exclusion from the University. If you are in doubt, please read the following web page.   Student’s Declaration By submitting this assignment I SIGNAL & DECLARE my knowledge and agreement to the following: - Except where I have indicated, the work I am submitting in this assignment is my own work and has not been submitted for assessment in another unit or for any other purpose. This work conforms to the instructions and submission guidelines as contained in the assessment briefing and the module guide respectively.     This submission complies with University of Wolverhampton policies regarding plagiarism, cheating and collusion.   I acknowledge and agree that the assessor of this assignment may, for the purpose of assessing this assignment:   • Reproduce this assignment and provide a copy to another academic staff member; and/or • Communicate a copy of this assignment to a plagiarism-checking service. This web-based service will retain a copy of this work for......

Words: 8199 - Pages: 33

2008 Financial Crises

...The 2008 financial crises Introduction The financial meltdown which happened in 2007-2008 is considered to be a huge financial crises as it led to an economic recession throughout the world. That is the reason why this topic has been chosen for the study. The exposition here will first throw light on the factors that contributed towards the recession. I believe that certain steps could have been taken to avoid the build-up of the financial meltdown and the second part of this exposition would discuss such steps. Prior to the financial crises that occurred in 2007-2008, the U.S government was moving towards the extreme side of a free market. This approach ultimately led towards the biggest financial crises that was experienced worldwide. Analysis of events that led to the crises Growth in home loan market In 2000, $ 7.4 trillion was the value of outstanding home loans, and this vale rose to $ 10.6 trillion by 2008. The subprime mortgages were estimated at 1.3 Trillion dollars in 2007, and they represented about 21 percent of the outstanding loans. Such unprecedented growth was due to different factors. In November 2003, the interest rates were 5.82 percent and it made house purchasing costs relatively low as compared to rental alternative. The key contributing factor here was the change in the way how home loans were provided. Increase in banks’ exposure to CMO sector Traditionally, the banks provided loans secured against some house, they financed it through......

Words: 2538 - Pages: 11

Islamic Finance: Can It Be a Remedy for Financial Crises

...ISLAMIC FINANCE: CAN IT BE A REMEDY FOR FINANCIAL CRISES? I. INTRODUCTION The financial system is at the heart of the modern economy. When this system works well, it enables to allocate resources that maximize the productivity of the economy. On the contrary when it does not work properly, the whole economy starts to decline. Because financial system must be considered as an in-built part of real economy in terms of credit mechanism. The recent global financial crisis began in August 2007 and after this time it spread gradually to the financial markets in the world. Although it is not severe as in its beginning phase but recovery is not but its aftershock is still going on. There has been numerous research conducted by many economists and analysts. According to the many of these studies, risky transactions, lack of surveillance, and greed that underlie this financial crisis. The relationship between Islamic finance and the financial crises has been discussed by many authors in some of these research. All those works has been done after the beginning of the global financial crisis. Thanks to its strength aspects include risk sharing mechanism, strict Sharia governance rules, tighter supervision and transparency policy, almost all of these works have been concluded that Islamic finance may make significant contributions to prevent financial crises like the current one. Also the reality of the limited impact of the current global financial crisis on Islamic Finance-based......

Words: 3382 - Pages: 14

Financial Analysis

...Financial Analysis of Coca-Cola and PepsiCo, Inc. Kyla D. Smith XACC/280 Financial Accounting Axia College Financial Analysis Two of the major competing companies that manufacture drinks are Coca-Cola, and Pepsi. They both produce regular water, flavored water, and soft drinks of many kinds. While this essay will explain what vertical and horizontal analysis is, it will also explain each company’s vertical and horizontal analyses. Also the ratios for each company will be given, and several examples as to how each company can improve in their financial status. The financial analysis of both companies is very important so both businesses can understand how they are being managed. It is very important for a company to keep up to date financial documents, audits, taxes, and other financial statements. This is the information needed to show what a company is doing with their finances and what they have done in the past. This information is also very useful for management to use and know what to do differently in future months or years. Information like this allows a company to grow, and have healthy production going forward. Having this data also helps management, investors, and creditors know if there are any issues that have come up in the past that need to be worked on. While in competition, these two companies have continued to grow in size, market value, and profit sales. Since the beginning of their competition, both companies have ventured into new areas of......

Words: 2009 - Pages: 9

Financial Analysis

...Financial Analysis – Week Five Final Assignment ACC 205 Principles of Accounting I July 4, 2000 Financial Analysis As an introduction, financial analysis provides an opportunity to make informed decisions about the health and viability of the company under review. The analysis can be done in several ways, but most commonly the business activities of a particular entity are compared internally from one year to the next. Similarly, the company is compared to an external but similar company in the same industry. Alternatively, one could also compare the activity of the company under review with that of an industry average of similar companies. The various financial analysis techniques used by accountants and analysts are all designed to provide the best possible estimate of financial viability of a company on a go forward basis. The company selected for this project is a publicly held healthcare corporation based in Boca Raton, Florida and named Cross Country Healthcare. As an overview, the company is comprised of three segments: contingent nurse and allied healthcare provider staffing, physician staffing, and other human capital management services, the latter of which provides education and training programs to the healthcare industry, as well as retained search services for physicians and healthcare executives in the United States. Competitors of Cross Country Healthcare would be companies similar to Staff Care, Maxim, Delta Staffing, Onyx MD, and others...

Words: 1702 - Pages: 7

Financial Analysis

...Financial analysis Accountancy Financial analysis (also referred to as financial statement analysis or accounting analysis) refers to an assessment of the viability, stability and profitability of a business, sub-business or project. It is performed by professionals who prepare reports using ratios that make use of information taken from financial statements and other reports. These reports are usually presented to top management as one of their bases in making business decisions. Continue or discontinue its main operation or part of its business; Make or purchase certain materials in the manufacture of its product; Acquire or rent/lease certain machineries and equipment in the production of its goods; Issue stocks or negotiate for a bank loan to increase its working capital; Make decisions regarding investing or lending capital; Other decisions that allow management to make an informed selection on various alternatives in the conduct of its business. Financial analysts often assess the firm's: 1. Profitability -its ability to earn income and sustain growth in both short-term and long-term. A company's degree of profitability is usually based on the income statement, which reports on the company's results of operations; 2. Solvency - its ability to pay its obligation to creditors and other third parties in the long-term; 3. Liquidity - its ability to maintain positive cash flow, while satisfying immediate obligations; Both 2 and 3 are based on the......

Words: 826 - Pages: 4

Financial Analysis

...Financial Analysis Christina Scheier Axia College of University of Phoenix Coca Cola and PepsiCo have been making and distributing soft drinks for over a century. Both companies have survived many hardships, but which one is the strongest? The following report will demonstrate financial information about both companies. I will identify and analyze both companies and determine which company would be the better choice for an investor. Coca Cola and PepsiCo have been competing for a long time in a global market. This report will show what each company has done to build their company and improve their business as individuals and as similar industries. Coca Cola is the largest manufacturer and distributor of non-alcoholic beverage concentrates and syrups in the world. The company has ownerships interests in numerous bottling and canning operations. Finished beverage products are sold in more than 200 countries worldwide. Coca Cola’s major products are: Coca Cola, Sprite, Fanta, Diet Coke, POWERade, Fruitopia, Minute Maid juices, Dasani water and various coffees and teas. Coca Cola was invented by a pharmacist in the year 1886 when he was experimenting for a recipe for headache and an energizer. Nowadays Coke serves as one of the number one recognized brands of the world with a unit sales close to 3200 servings. Coke followed a path of being known as a tonic and a healer with caffeine’s in late 1890’s to being number one beverage in 1900 till present.......

Words: 1822 - Pages: 8

Financial Analysis

...Financial Analysis of DG Khan Cement Company Ltd. Preface As the world is growing rapidly, the businesses are also moving to become the huge one. And by that result, more and more people want to become a master in these businesses. The main purpose in the finance field is to know how the financial analysis is done. We all know that finance is the blood of any business and without it no business can run. Financial analysis of a company is very difficult and the most important task and by doing this I am able to know the whole financial position and financial structure of the company. Simply by looking at how much cash a company has does not provide enough information. The financial statements need to be analyzed to measure a company’s performance and to compare it with other firm’s in the same industry. The resulting information is intended to be useful to owners, potential investors, creditors, analysts, and others as the analysis evaluates the past performance, future potential and financial position of the firm. This report is an analysis of financial statements of D.G. Khan Cement Company Ltd. This report has been prepared with an objective to develop analytical skills required to interpret the information (explicit as well as implicit) provided by the financial statements and to measure the company’s performance during the past few years. The financial statements are analyzed using traditional evaluation techniques such as horizontal analysis,......

Words: 16113 - Pages: 65

Financial Analysis

...three years and also shows the forecast of the company for financial year 2012. This would help investors and researchers to decide on investing to SWM or not. SWM has been analyzed step by step in order to find out its true value in the industry. The analysts have first looked into SWM business and strategy where it has been noted that SWM was a result of merger of seven group holdings and Australian West Newspaper in order to expand and use their resources efficiently. Secondly, SWM accounting policies and procedures have been analyzed where they showed that the company is following the accounting standards and using their flexibility that was given by the standard in order to measure some accounts in the financial statement. This flexibility was compared to the industry where it has noted that the company is valuing these accounts in a proper way. Thirdly, a financial analysis was also undertaken. It has been understood that the company, though there was a merger, is managing their resources well that resulted to positive book and cash returns. Lastly, the forecasts of the said company, where the analyst has determined the company’s value and the full set of financial statement for 2012, were estimated and calculated intelligently. With the help of the four steps of business analysis, the group has recommended that it is safe to invest to seven west media even if merger has occurred twice in the last three financial year. I. INTRODUCTION In order for a......

Words: 1963 - Pages: 8