Structure Why do Financial Institutions Exist? (Why is Indirect Finance so Important?) Chapter 8 Chapter Preview W e take a closer look at why financial institutions exist and how they promote economic efficiency. Topics include: • A Few Basic Facts About Financial Structure • Transaction Costs • Asymmetric Information: Adverse Selection and Moral Hazard Chapter Preview (cont.) • The Lemons Problem: How Adverse Selection Influences Financial Structure • How Moral Hazard Affects the
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------------------------------------------------- Chapter 7 Case Study - 1. Review the data-flow diagrams you developed for questions in the Petrie’s Electronics case at the end of Chapter 6 (or diagrams given to you by your instructor). Study the data flows and data stored on these diagrams and decide whether you agree with the team’s conclusion that the only six entity types needed are listed in the case and in PE Figure 7-1. If you disagree‚ define additional entity types‚ explain why
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Case#8 Countrywide Financial: The Subprime Meltdown Questions: 1. Are subprime loans an unethical financial instrument‚ or are they ethical but misused in a way that created ethical issues? The Countrywide Financial case showed subprime loans easily contribute to unethical behavior. I think the idea of the loan isn’t unethical in itself‚ but the way it was packaged. If you take away the fraudulent behavior‚ the idea of a subprime mortgage isn’t too corrupt. Subprime borrowers generally have bad
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Case 10-8 Ellie Enterprises An investment that is not one of the three traditional asset types such as stocks‚ bond and cash are considered as an alternative investment. “These types of investments include hedge funds‚ managed futures‚ real estate‚ commodities and derivative contracts.” (www.investopedia.com). These are subject to less regulation and use leverage and derivative instruments to optimize their returns. “In spite of many pensions and private endowments beginning to invest in these
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ANSWERS TO END-OF-CHAPTER QUESTIONS 14-2 The two principal reasons for holding cash are for transac¬tions and compensating balances. The target cash balance is not equal to the sum of the holdings for each reason because the same money can often partially satisfy both motives. 14-4 The four elements in a firm’s credit policy are (1) credit standards‚ (2) credit period‚ (3) discount policy‚ and (4) collection policy. The firm is not required to accept the credit policies employed by its
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Section I. Introduction In this case study‚ “Miller’s Problem”‚ Miller enjoyed his job as a proficient pocket setter on the production line for 27 years. Unfortunately‚ Miller felt frustrated with his new job when his company wanted to improve productivity and was going to quit his job. This case study aims to look at issues with a solution to improve productivity in Miller’s company and tries to develop recommendations to solve the problems from an individual‚ supervisor‚ and organization
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Overview of TVCC Treasure Valley Construction Company (TVCC) was originally a partnership which was a well-established contractor in the Boise area. A Storm Window Division was created in 1997. Demand Analysis At the end of the first quarter of 1998‚ sales levels for TVCC within the storm window market (private home owners) were estimated at approximately 60% in Boise‚ Idaho. With first years sales expected to exceed 1.2 million dollars. Target market consists of private home owners who require
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Case Study 8 1. List 6 risk factors for DVT. Inheriting a blood clot disorder Prolonged bed rest‚ such as long hospital stay Injury or surgery Pregnancy Birth control pills or hormone replacement Being overweight or obese 2. Identify at least 5 problems from L.J.’s history that represent his personal risk factors. Smoking history Personal history of DVT Prolonged bed rest Age of above 60 years old Sitting for long period of times (Bus Driving) 3. Something is missing from the scenario. Based on
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Case 09-8 Classified Information Lads and Lassies (L&L)‚ an SEC registrant‚ has its year end on the Saturday closest to January 31. Fiscal 2012‚ 2011‚ and 2010‚ which include 52 weeks each‚ ended on January 28‚ 2012‚ January 29‚ 2011‚ and January 30‚ 2010‚ respectively. L&L manufactures and sells exclusive children’s clothing to the most discerning clientele. Its products offer high quality and modern style‚ including everything from a colorful collection of cashmere sweaters to perfect vintage
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Chapter 8 Segment and Interim Reporting Chapter Outline I. FASB Accounting Standards Codification Topic 280‚ Segment Reporting (FASB ASC 280)‚ provides current guidance on segment reporting. A. ASC 280 follows a management approach in which segments are based on the way that management disaggregates the enterprise for making operating decisions; these are referred to as operating segments. B. Operating segments are components of an enterprise which meet three criteria. 1. Engage in business
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