Research Topics: Debt

Analysis of Long-Term Debt Alternatives for a City Hospital

PROGRAM CHARACTERISTICS   A. Payment Provisions   The city hospital must pursue this program since it enables them to make a single monthly payment that is distributed to their creditors. This erases the necessity to perform single payments to each and every creditor of the city hospital. Most of the creditors of the city hospital who are involved in this program will enable the city hospital to decrease its monthly payment and, after the hospital has included a payment history, will even remove interest and late charges. Therefore, in this process, more of the city hospital’s payment goes to reducing its debt, enabling the city hospital to move out of its debt easier. B. Payment Schedule / Provisions In this type of debt management program, the city hospital management has the prerogative to choose the payment date that’s best for them. The hospital’s management has the freedom to select any day from the 1st to the 28th of every month. C. Security This program honors the Fair Debt Collection Practices Act (FDCPA). This is a federal law that protects the city hospital from unwarranted threats that can be possibly done by their creditors and prevents creditors from producing fallacious statements against the city hospital. D. Terms of Financing / Fees This program is entitled to provide turnkey financing options as part of the total solution for the city hospital to recover from its financial handicap. This program’s main objective is to guarantee the city hospital of excellent financial structuring meant to answer the financial handicap of the city hospital, while at the same time remaining on the track of the latest hospital technologies and innovations. The terms of financing will also help the city hospital to maximize its limited budget yet still have the space to upgrade its technology. LONG-TERM DEBT ALTERNATIVE A. Debt Management Planning A Debt Management Plan would serve as the link between the established standards and practices in then city hospital. It would be able to articulate, organize, and most importantly integrate the content and processes of the city hospital policies with integration of appropriate technologies. It would facilitate multiple levels of city hospital policies and decision making.   In general, the debt management planning is an ongoing process that would translate the financial needs of the city hospital into concrete actions. It allows the city hospital to take advantage of the latest innovations in debt management while at the same time minimizing the negative impacts of unexpected challenges. Debt Management Planning provides a clear pathway for the implementation of the above mentioned program which could result into a more efficient expenditure of the city hospital’s resources and an improvement in their financial performance. The Debt management plan should reflect the policy and financial situation of the city hospital. However, the debt management plan cannot guarantee the needed changes. The debt management plan must ensure that the processes of debt management plan development, implementation, and evaluation are included as the integral components of the implementation of the necessary program. A well-designed debt management plan would be a dynamic tool that will serve as a guide for the city hospital’s innovations in debt management. This debt management plan would also represent opportunities for dialogue and professional development that enhance city hospital decision making in terms of financial issues. The Debt Management Planning for the City Hospital should: <ul type="disc" style="margin-bottom: 0in"> <li class="MsoNormal" style="color: black; text-align: justify; line-height: 200%"> Be an organized and continuous process, utilizing a simple yet direct planning model, and resulting into a document which would improve how the program are used for the city hospital’s debt management, assessment, and communications. </li> <li class="MsoNormal" style="color: black; text-align: justify; line-height: 200%"> Take into consideration the conventional mortgage, taxable bonds, tax-exempt bonds and FHA-insured mortgage. </li> <li class="MsoNormal" style="color: black; text-align: justify; line-height: 200%"> Be broad but realistic enough in terms of its scope. The debt management plan must also include economical and technically feasible solutions. </li> <li class="MsoNormal" style="color: black; text-align: justify; line-height: 200%"> Involve all the stakeholders—including the management, employees, staff members, clients, and experts–with experience in debt management.</li> <li class="MsoNormal" style="color: black; text-align: justify; line-height: 200%"> Identify the financial strengths and weaknesses of the city hospital and how each will impact the implementation of the program.</li> <li class="MsoNormal" style="color: black; text-align: justify; line-height: 200%"> Make a formalization of the city hospital’s procedures and methods for making debt management decisions, which should include also the setting of priorities and the evaluation, upgrading, and uses of finances and resources. </li> </ul>                       Credit:ivythesis.typepad.com

Analysis of Long-Term Debt Alternatives for a City Hospital

PROGRAM CHARACTERISTICS A. Payment Provisions The city hospital must pursue this program since it enables them to make a single...

Explain how the market for public and private debt were related in France and England between 1660 and 1775. How did major political events like the Glorious Revolution and the Law affair affect these markets?

The purpose of this paper is to discuss the effects of events such as the Glorious Revolution and Law Affairs in the public and private debt situation of England and France. It will attempt to explain how these importance events affected the market for private and public debt in the two country’s economy.             The Glorious revolution was a significant event in England because it created a social, political and economic condition favorable to trade, investment and lending. First of all, this event diminished the power of the Crown and the monarch. It became illegal to levy taxes and other payments to the people without the authorization of the parliament. Parliament in fact placed a restriction on the ability of the Crown to expropriate properties and this made property rights more secure. Because the interference of the Crown was negligible, Parliament was able to pass many pieces of legislations that addressed the financing of infrastructure of property rights in land. Property rights in public debt became safer and assured when restrictions and legal obstacles were placed against the power of the monarch.             In France, certain factors and political aspects negatively affected the market for private and public debt. This conditions stems from the very nature of the market for private and public debt in France. In this country there are two kinds of debts, the rentes which were perpetual annuities and obligations which are classified as obligatory bills. Small scale and large scale lenders were adamant in lending money to borrowers because of the high probability of default on the part of the borrower. Aside from these, there was also an issue with regards to the collateral that will be presented by the borrower to the lender. Collateral would refer to buildings, expensive jewelries and tracts of land. The lender cannot really be sure if the properly has not been previously mortgaged, if it is, he cannot claim his money from the borrower of he will be drawn into a long and expensive legal battle with the other lender who received the mortgage. Because of these vital conditions before lending, most loans went to wealthy nobles and rich individuals.             The state also complicated the problem on borrowing and lending. It frequently changed the value of its coin and required that all money will be remitted. The government also had a power to manipulate the value of the currency to erase the debts that it incurred in financing its wars and the crown also has the power to stop its payment of loans. These practices lead to the wholesale devaluation of the currency ruining many lenders. Lenders and financiers were also subjected to a chamber de justice that would strip them of their properties and rights to pursue their claims against the crown and other borrowers.             Another event that adversely affected the market for public and private debt in France is the programs implemented by . tried to solve the financial difficulty of France and to retool the fiscal stability of the crown by issuing regulations that ultimately backfired. first issued bank notes from his Banque Royale as a legal tender and because of these massive and widespread devaluation of the paper money was experienced by lenders and borrowers. This proved to be an advantageous position to a simple borrower because he can now pay his large debt because of the devaluation while a lender will suffer greatly because he will now receive a small portion of what he loaned. Since this effect was clearly disadvantageous to the lenders, many of them were adamant and wary in granting loans to borrowers thus seriously affecting the public and private debt markets. Credit:ivythesis.typepad.com

Explain how the market for public and private debt were related in France and England between 1660 and 1775. How did major political events like the Glorious Revolution and the Law affair affect these markets?

The purpose of this paper is to discuss the effects of events such as the Glorious Revolution and Law Affairs in the public an...

Debt Management And Control

EFFECTIVE DEBT MANAGEMENT AND CONTROL         Debt Management is a plan, it can be a legal and verbal agreement or a negotiation strategy or personal management scheme to control, reduce or clear debt within a given period of time in order to demonstrate good business participation. An effective debt management and control can help a business or individual to grow a good harmonious relationship, mutual trust between creditor and debtor can be developed but without proper debt management participation a business and individual cannot gain the trust but competition, enemies and threat in their business are likely to achieve. It is easy to say but in order to eliminate these things from happening organizations and individual must think of ways to achieve a good credit standing within their means or never ask for loan at all if they cannot pay. Debt does not just put a person or company in deep burden but it can also destroy their reputation in the eyes of their customers.       So how does and effective debt management can be an advantage? If you don’t have any idea how it can be done you may try seeking the help of professionals who are expert in this field there are also relatives, friends and business partner who have already experience such issues in order to keep the cost low learn with them but the final decision is still up to you. Let us take for example a small family business running a computer shop, they have taken their first step to make a bank loan of about 00 US dollar in order to expand their business they have also ask for 0 US dollar from their friends and another 0 US dollar from their relatives. All in all the family has a 00 dollars in debt. The bank requires them to pay monthly interest while their friends want the money back within 3 months and their relatives does not make any conditions. They also have debt in their monthly rentals and mortgage of their new PC.       This condition can usually occur from business start-up. The first thing they need to do is to evaluate their payment priority which in this case is the bank who usually carries a legal contract between them and they are oblige to pay the monthly interest legally. The second priority would be the mortgage of their PC which also carry a legal contract and formal records of their payment. The third priority is the miscellaneous expenses that cannot be avoided these are the bills from electricity, salary of employees etc. Lastly their friends and family should not be limited in payment but they can be considered to be the last priority of payment since verbal settlement is easy with them. Expenses like these should be prioritized in order to gain confidence of the people who has been a part of your business. The cash left after the payment of expenses will also be the basis if your business is succeeding, break even or failing.       There may also be instances that non timely payment of debt may occur if the business is low, in this case you may need to plan a deeper understanding in order to control your debt and still gain good reputation from your creditors. In order to make the best decision you may consider the following;       1. Repair your credit – Banks can settle conditions and discretions of their customers debt through financial analysis and investigations they may even offer solution for good creditors including petty cash, terms of payment scheme or additional precautionary measures according to their law.       2. Debt settlement – this can be done by offering legal settlement such as debt consolidation that can lower the interest rate but given a longer term of payment, mortgage payment or offering collateral. This can be done in order achieve mutual interest in performing your obligation.        3. Credit for Payment – This is probably one of the most risky options, but this can also be helpful if debtors can have an opportunity to ask for another loan from sources who would trust them such as another bank, angel investors, new business partners etc. this can be a good opportunity for them to pay their debt and probably start a better operation. If the business person is wise enough, they can rekindle their business and be able to establish a new approach in order to regain their customer’s confidence. The negative impact of this strategy can be deep burden and more debt risk but they have to take it if this is the only option that is left.         4. Declaring a Bankruptcy – this can be the last resort but not recommended. Some companies can do this as a part of debt management and control but the truth is this is not and effective means to get away with your obligations, in most countries bankrupt companies still need to perform their obligations to their creditors and customers. But if it is really the situation as the needs arise and you are ready for lawsuit and grievances of customers, you may do so but mostly companies who do this could not continue their business in the later time since they cannot gain the creditors and customers support. They will need to divert or start a new business venture all over again.                Never doubt and never delay to pay your debt on time this may seem so simple but this is the most effective ways to gain good control over your business. Credit:ivythesis.typepad.com

Debt Management And Control

EFFECTIVE DEBT MANAGEMENT AND CONTROL Debt Management is a plan, it can be a legal and verbal agreement or a negotiation strate...

Glorious Revolution and Law Affairs

The purpose of this paper is to discuss the effects of events such as the Glorious Revolution and Law Affairs in the public and private debt situation of England and France. It will attempt to explain how these importance events affected the market for private and public debt in the two country’s economy.             The Glorious revolution was a significant event in England because it created a social, political and economic condition favorable to trade, investment and lending. First of all, this event diminished the power of the Crown and the monarch. It became illegal to levy taxes and other payments to the people without the authorization of the parliament. Parliament in fact placed a restriction on the ability of the Crown to expropriate properties and this made property rights more secure. Because the interference of the Crown was negligible, Parliament was able to pass many pieces of legislations that addressed the financing of infrastructure of property rights in land. Property rights in public debt became safer and assured when restrictions and legal obstacles were placed against the power of the monarch.             In France, certain factors and political aspects negatively affected the market for private and public debt. This conditions stems from the very nature of the market for private and public debt in France. In this country there are two kinds of debts, the rentes which were perpetual annuities and obligations which are classified as obligatory bills. Small scale and large scale lenders were adamant in lending money to borrowers because of the high probability of default on the part of the borrower. Aside from these, there was also an issue with regards to the collateral that will be presented by the borrower to the lender. Collateral would refer to buildings, expensive jewelries and tracts of land. The lender cannot really be sure if the properly has not been previously mortgaged, if it is, he cannot claim his money from the borrower of he will be drawn into a long and expensive legal battle with the other lender who received the mortgage. Because of these vital conditions before lending, most loans went to wealthy nobles and rich individuals.             The state also complicated the problem on borrowing and lending. It frequently changed the value of its coin and required that all money will be reminted. The government also had a power to manipulate the value of the currency to erase the debts that it incurred in financing its wars and the crown also has the power to stop its payment of loans. These practices lead to the wholesale devaluation of the currency ruining many lenders. Lenders and financiers were also subjected to a chamber de justice that would strip them of their properties and rights to pursue their claims against the crown and other borrowers.             Another event that adversely affected the market for public and private debt in France is the programs implemented by John Law. Law tried to solve the financial difficulty of France and to retool the fiscal stability of the crown by issuing regulations that ultimately backfired. John Law first issued bank notes from his Banque Royale as a legal tender and because of these massive and widespread devaluation of the paper money was experienced by lenders and borrowers. This proved to be an advantageous position to a simple borrower because he can now pay his large debt because of the devaluation while a lender will suffer greatly because he will now receive a small portion of what he loaned. Since this effect was clearly disadvantageous to the lenders, many of them were adamant and wary in granting loans to borrowers thus seriously affecting the public and private debt markets. Credit:ivythesis.typepad.com

Glorious Revolution and Law Affairs

The purpose of this paper is to discuss the effects of events such as the Glorious Revolution and Law Affairs in the public an...

Company failure and its implication

The individual voluntary arrangement (IVA) starts with recognized bid to the creditors in order to disburse the concerned individuals debts and there is a  need to be relevant and the presence of help amid the insolvency practitioner as the conformity attained as the creditors will bind among them. The IVA works on the concerned case by firstly, finding possible authorized insolvency practitioner as set to act for the concerned individual and there requests to look into the local administrator receiver workplace. Aside, the individual should relate to the court for certain interim order – as the process stop the creditors in terms of presenting insolvency appeal and stops the concerned individual from enchanting certain action during the similar epoch without the permission of the court. Furthermore, insolvency practitioner informs the court regarding brief facts of such suggestion and the assembly of creditors are to be called to believe it and that just those creditors who have notice of conference are bound by the agreement, so it is significant that the concern party will provide precise minutes of creditors name as well as the address or else, the IVA agreement may fall short since the practitioner cannot speak to the creditors and connect them to the points of concern as the insolvency practitioner manages the Individual Voluntary Arrangement and disburses creditors in lieu to the established IVA proposal.     Thus, if the IVA agreement is approved, then the debtor and creditors are already sanctioned by the ways and commences the reality and although the IVA is still in succession, the debtor should create the agreed payment schemes and processes to the practitioner that will make account to everybody and disburse bonus to creditors and that, if the IVA finishes effectively then, the Supervisor propels the finished report and payment and then, the Supervisor will file a documentation of observance confirming a successful end of the IVA agreement.   Some Key Points to Consider for Individual Voluntary Arrangement The Individual Voluntary Arrangement can give the concern party height of defense against annoyed creditors. Ø  A person be able to place jointly a diagram of action and imbursement for the creditors to choose ahead Ø  A insolvency arrangement can possibly be cancelled upon the approval of the individual voluntary arrangement Ø  Individual voluntary arrangement will stay on the civic record within two years after the completion of the IVA agreement Ø  The debtor will have a seventy five percent of the creditors who voted for the IVA agreement to be accepted Ø  Thus, if  individual voluntary arrangement will not succeed so, the creditors can submit an application for the insolvency of the concerned individual or party Process Moreover, the primary step is the review as to whether the Individual Voluntary Arrangement is the appropriate arrangement for the party and if the individual feels that the decision will have to suggest other option alternative and have recognized that an IVA is appropriate for the situation, there determines how much the concerned party will sensibly pay for the arrangement and examine other aspects of financial situation like for instance, the worth of his possessions. Amicably, the party will need to meet whatever decided payments will be followed and upon fulfillment within the terms of the IVA agreement, the individual will attain freedom from such debts although he has just paid the portion of what can be payable. Aside, it must be bore in mind that IVAs are restrictive meaning, it is not just merely a process of setting up an IVA but the payment ways will be clear in percentage of the individuals liability away from the rest of what he owns.    The purpose of the IVA provisions as reflected in the Enterprise Act 2002 are:   Ø  Providing an accessible option to insolvency Ø  Ensuring that cancellation of the insolvency order is obtained once an IVA is being approved Ø  To develop proceeds to creditors Ø  To carry certain new start of insolvent   The major aim of the assessment is to give a complete evaluation of whether, what degree and how the requirements connecting to IVAs meet the policy objectives. The assessment also provide sequence and facts that would be use to notify potential rule decisions as the Insolvency Service had completed a commitment to the UK government to assume an appraisal of the Enterprise Act of 2002 within three years of inauguration of a range of provision. Since the Enterprise Act 2002, a comparable stage of annulment has been obtaining subsequent post-bankruptcy IVAs.  The standard time in use amid the approval of an IVA order has augmented the Enterprise Act 2002, although there is a probability of a considerable holdup in obtaining the process as the Enterprise Act 2002, has took seventy five days for the insolvency order to be void next support of post IVA, as being compared to one hundred twenty two days of Enterprise Act 2002 as it ranged from less than four weeks to over eight weeks of the Act. Aside, the Insolvency Service has amended its scientific leadership as regards to the insolvency arrangement followed by the approval of bankruptcy in IVA. A insolvent’s awareness in the family home is just like another asset and fraction of the land are accessible to the creditors. This can direct to cases wherein the years after discharge, a previous insolvent also has to report to the trustee for the profits of sale or can be required to be out of the family home that is, if the trustee decides to understand the concern person’s goals and interest. The information that the insolvent are making the fixed cost in the interim does not impede any ensuing assets added from development of the domains respectively. There should be consideration in terms of setting standards of top performance which educes doubt and unjust behavior as at times obvious. There implies a legislation to modify the circumstances regarding the family home as it can be viewed from such intended code of behavior have tried and did not solve the difficulty and change are only effected through legislation and give possible ways  that the insolvent’s curiosity cannot vest within the trustee unless he apply for an order. Thus, be able to provide a few confidence to the insolvent, the trustee and the creditors to the instance level within the insolvent’s home will be dealt in order to offer balance among welfare of the insolvent including his children, wife and family and the creditors by giving enough time for the clearance by the trustee of insolvent’s attention in his sole and the main home in a most suitable way and helping elevate the shame of liquidation.         Credit:ivythesis.typepad.com

Company failure and its implication

The individual voluntary arrangement (IVA) starts with recognized bid to the creditors in order to disburse the concerned individuals deb...

Analytical procedures and going concern at the planning stage

Applicable Auditing Standards (based on HK Standard on Auditing 570)             Going concern is a fundamental principle in preparing financial reports and a vital assumption applied by the reporting entity. When going concern is claimed, the business necessarily means to continue operations for the foreseeable future with no indication to cease trade, liquidate, or seek protection from creditors to pay obligations.  It also indicates the strength of financial statements and components that are being reported such as realizing assets and discharging liabilities.  Going concern assumption undergoes auditing procedures to test if the assumption is appropriate and subsequently protect the decision-making implications of investors, creditor, suppliers, regulators and other users of financial statements.                       When the business has shown historically profitable activities and business stakes as well as provides evidence for easy access of financial resources, detailed analysis on going concert test need not be imposed.  Otherwise, the business will be applied with sequential audit trail set forth by pertinent auditing standards.  Going concern assumption is significantly injected with judgment of future outcomes for certain events/ conditions.  The soundness of these judgments is inclined on three notions.  As they are pushed further into the future, outcomes become more uncertain.  They are based on the contemporary facts relevant to the business.  Lastly, judgments are affected by size and complexity of the business, nature and condition of operations and degree of impact of external factors.             Some events/ conditions that may cause business risks and contribution to doubt on going concern assumption are the following: financial (net current liability position, excessive reliance on short-term loans, signs of withdrawal of support from creditors, negative operating cash flows, substantial degradation of valued assets, inability to pay on due dates, inability to comply with loan agreements, inability to obtain financing for new product, adverse financial ratios, etc.), operating (loss of key management yet to be replaced, loose of major market and business partners, shortages on factors of production, etc.) and other factors outside company’s control.  However, the business can mitigate the doubt by disclosing plans and strategies to solve the adversaries.                Two main tasks of auditors are assessing the validity of going concern assumption claimed by the business in preparing financial statements and evidence supporting such assessment.  Procedures of evaluation include identification of events/ conditions leading doubt to going concern, evidence and risks of misstatements.  In most cases, the management of the business executed preliminary evaluation that is required to be at least a going concern assumption for 12-month period.  However, the review of auditor can involve consideration of periods exceeding this required period if the effort significantly affect going concern assumption for the original time frame.  As judgment further in the future is more uncertain, evaluations exceeding the original period must have determined impact to going concern assumption.               The mitigation that management offers in the case the doubts to going concern validity is also audited to evidence feasibility and effectiveness.  One useful tool and basis is cash flow analysis where consideration is applied to reliability of inputs that generate the information, adequacy of supporting variables in reaching the forecasts, historical accounts and current performance.  When material uncertainty is proven, the financial statements of the business can gain an assessment that its contents have significant potential to mislead users.  However, if material uncertainty is proven but going concern is assumed, financial statements must show events/ conditions that can increase significant doubt to going concern validity or simply directly state doubt to such validity.  Regarding material uncertainty conclusions, the auditor can apply unqualified position where financial statements reflect them and sketch the important parts of the report that signal going concern issues.  If they are not reflected, qualified or adverse position can explicitly explain material uncertainty.        Financial Position of the Business (i.e. IOL)             Average collection period is increasing since 2006.  As a general rule, lower average collection period is optimal because the business need not wait long to receive cash payments from their credit sales.  The performance of the business for this ratio indicates that it has difficult time in converting account receivables into more liquid assets (i.e. cash).  It can also mean that the business is more exposed in acquiring bad debts and defaults.  Cash conversion cycle is adversely affected because of the pressure imposed by longer collection periods.  The time of outlaying cash and cash recovery is widened which signifies more time capital is tied-up to business processes (i.e. conversion of inputs to outputs).  Due to this, the business is required to source out additional capital to maintain daily operations because most of its current capital is tied-up.  This additional requirement is necessary to pay production expenditures, wages and overheads.  Failure to address these costs can lead to interruption and stoppage of work or even disposal of value-creating assets that suggest bigger problems.  High average collection period is aggravated/ mitigated by low/ high inventory turnover and high/ low average payment period.               Current ratio is decreasing since 2006.  From stronger liquidity in 2005, the business dropped to a ratio less than 1 suggesting that it cannot pay its obligations as they fall due.  These obligations are accounted to short-term liabilities such as debt and other payables while short-term assets that are used to pay them include cash, inventory and receivables.  With reduced current ratio, the business has more obligations than potential payments and signals the need to source financing to various channels.  The risk, however, is that the strain of overdue obligation which can force the business to enter credit agreements and other contracts that are obviously detrimental compared to options available if the strain is not too urgent or if it only has assets to pay them.  Lower current ratio is related to higher average collection period which implicated likelihood of bad debts.  With a more conservative analysis (i.e. getting the quick ratio), the exclusion of inventories, pre-paid expenses, and as proved, account receivables, can only aggravate the liquidity of the business.               Debt-equity ratio is rising since 2006.  This indicates that the business is becoming more dependent on interest-bearing debt financing than less risky internal or equity financing.  As a result, its earnings are also more volatile due to reductions by payment of the interest.  It can also put the business into greater agreement risks mentioned in current ratio such as collateral of value-creating assets and disposal when debts are long overdue.  In the case of dissolution, shareholders are in greater risks to recover investments because outside creditors are preferred in distribution of assets and may even demand the former to contribute to the losses.  In 2007, the business is sourcing debt that is two-times larger than proceeds from equity which can trigger the preceding consequences.  However, there is a need to investigate where the debt proceeds are invested.  This is important because debt-financed projects with significantly high returns compared to debt interest (i.e. debt coverage) can alternatively increase earnings.                Gross profit ratio is decreasing since 2006.  This can either mean that the business is generating fewer revenues or experiencing price increases on cost of goods sold than previous periods.  As a result, it decreases its opportunity to create savings for engagements in the future and payment of unexpected expenses.  Problems are likely rooted in ineffective production and marketing of products, inefficient relationship with suppliers and expensive logistics design.  On the other hand, the negative figures pertaining to profit after tax ratio show that the business has no earnings (i.e. at loss) from 2005 to 2007.  It is a difficult time for the business which various aggravations such as low collection period, current ratio and high debt-equity ratio.  This can also indicates that the projects the business is entering and financing are not contributing to profitability.  However, the ratio on profit after tax can be applied with tax holidays or incentives that can transform profit to positive figures.               Net asset per share is declining since 2006.  Assuming that shares outstanding are constant, this indicates that the assets of the business have lower values and new value-creating assets are yet to be included in its operations.  As a result, the interest and wealth of shareholders is not protected leading to their divestment.  The preceding possibility can aggravate the problem of the business on sourcing out safer funds to pay current obligations, prevent stoppage/ litigation and finally to report its financial statements as a going concern.  However, there is a need to investigate whether this ratio includes intangible assets which is eminent to the innovative products that the business is creating and planning to distribute.    Factors Evidencing Going Concern Problems             For the first product that the business launched into the market, it gained success although only temporary as shown by decline and moderate attention of the market for succeeding products.  With the promises of the new program developed over a three-year period, history of profitability is difficult to attach to its operations.  The market for Internet-based computer programs is exposed to numerous companies and similar products whose purchase decisions are unpredictable.  For example, computer programs bought in the internet through online payment is a transaction viewed risky by the market while bogus offers are inevitable.  As Internet business is global, predicting market response and demands is very difficult due to various culture, level of technology and economic status.  With cheap prices tagged on the product, the business is unsure that its investments for research and profit targets will be met.               Further, its access to financial resources is very limited especially with its adverse financial ratio.  It cannot rely on its debtors/ accounts receivables as it accumulated decreasing collection period, on its short-term creditors due to decreasing current ratio, on its long-term creditors due to increasing debt-equity ratio, on its retained earnings due to decreasing profit ratios and on its shareholders due to its decreasing assets per share.  The raising of funds to finalize and launch the new product has been possible because of sourcing from personal savings or borrowing with relatives as the company started with financing on this method.  Although this can evidence that the business has access to financial sources, additional working is required to validate the extent and depth of this kind of informal financing.  The absence of sufficient evidence of profitable history and access to financial resources is a sign that probable going concern problem is demanding for proof.               The launching of the new product is regarded as the breakthrough of the business in reversing previous trading problems with other lines of products.  However, this claim is inappropriate in judging events/ conditions to arrive at going concern assumption.  It is not based on facts at the time of judgment because past trading problems are undermined.  The success of the new product is related to the success of previous launchings.  Further, forecasting that the new product will be completed and launched in six months time triggered uncertain outcome as it is judged further in the future.  Three years that the product is under development and there is no evidence that its development is supported by a time-line.  The fast-paced and ever-changing level of Internet technology likely deemed innovativeness of the new product designed three years ago obsolete.  Its main features and forecasted reaction of the market are highly questionable with the level of technology today.               Forecasting the future performance of the new product is also exposed to several risks.  Although there is evidence that the business is issuing shares, the declining performance of post-first product launched and cheap price supports the idea that it is under the category of small and medium enterprises.  The environment is very competitive where big program developers can easily be pirated employees, sued due to infringement of trademark, and bought in case of financial difficulties.  It is also operating on a research extensive industry where earnings are not certain until a new product is not only successful in production but more importantly appealing to market preference.  There is also crucial emphasis on protection of proprietary and speed to market where the new product forecasted to be launched after six months can leak into the Internet or produced by other companies.  The nature and condition of the business and the industry are very unpredictable and bounded by changes in regulation (e.g. applying for patents).                   Solution to the Going Concern Problems             The business can present supporting details that can mitigate the implication of unhealthy financial statements.  For example, lower collection period can be trade-off by higher inventory turnover or lower payment period.  Lower current ratio can indicate high inventory turnover and shortage in cash assets is triggered by increase in bad debts due to lower collection period.  In effect, favorable data about inventory and payment terms of the business can mitigate going concern problem.  Further, high debt-equity ratio can reduce its inherent risk if loan documents can prove that most of the debts of the business are not interest-bearing.  This can relax the requirement for interest coverage and minimize the vitality of the success of the new product in its launching.  The negative profit after tax ratio can be relieved by government correspondence reflecting tax holidays that the business can use in the future.  Data about the current level of shares outstanding can verify the cause why net asset per share is reduced.  If it is caused by increases in issues, then the claim of the business that its assets are undervalued can gain ground.               Product features of the new product and its impact to purchasing decisions of users can be used.  It can also compare how the new product is similar to the first product to claim the former turnaround impact to sales.  Without this evidence, the forecasts that the new product is a breakthrough can only be assessed as having material uncertainty.  Information about target market, previous sales data, contribution of each specific segment, and other marketing reports is necessary.  The new product must also prove to assure that its features are compatible with the current needs of the market and the current level of technology.  Certifications that the product already has patent to prevent piracy and value-decreasing actions from competitors.  In simple terms, the business must provide information that the new product is supported by valuable, inimitable and non-substitutable features.               The business can also suggest plans on how to assure that the 6-month completion and launching of the new product is realistic.  It can present project plans, milestones, funding allocation and actions in case of project failure.  If the new product is proved to be valuable and has potential like the first product, the launching date is crucial to realize the cash flows and provide insight on how the business can protect its adverse financial ratios to becoming indication of bankruptcy.  Delay in project completion can reduced its value creation as the general rule states that the money hold today is more valuable than the money that will be hold tomorrow (i.e. time value of money).  Alternatively, the business can offer other plans to improve the current features of the product, increase investments in marketing, boosting relationships with business partners and the like.  This engagement must be supported by annual budgets, monthly performance reports, correspondence with suppliers and distributors and even performance appraisal of employees.          Bibliography Books   Electronic Sources                           Credit:ivythesis.typepad.com

Analytical procedures and going concern at the planning stage

Applicable Auditing Standards (based on HK Standard on Auditing 570) Going concern is a fundamental principle in preparing f...

Capital Flight

Capital Flight Introduction In our everyday living, we cannot deny that we are not sometimes aware of the national money that we can get out of our pocket. We are also unaware of the resources that we are taken out of us. We only treasured its value as it was gone same thing with capital flight which most of us has no sufficient knowledge about its real definition and importance. It had been known that most of us do not necessarily understand the relevance to our life. The word capital flight is part of our everyday life though we cannot feel it or some of us do not know what it is. Other people say that the capital flight is the money that runs away in the certain country going abroad. This can cause be harmful to the home economy of the and to the society. There are also many reasons for this kind of incident as avoiding confiscation, avoiding taxation, higher return in somewhere, and the better treatment. In the case of the persecution of Nazi, the capital flight can be harmful if the capital is in fleeing of discrimination and it is illicit. These are the common definitions and ideas regarding the term capital flight. But, there are still many issues regarding this term in the field of the economics.[1]     Capital Flight In the economic aspect, the capital flight is the asset transfer in abroad so that it can reduce the principal loss, the control cost, and the loss of return which are over the wealth financially because of the sanction of government activities. The wealth confiscation fears can increase the wealth in the taxes or the regulations imposition which has the limits on the privilege on the holders of wealth are some of the examples of kind of activities of government which are in the mind. Therefore, the capital flight has the international capital which flows in trying to go out in the controls of the government or the government policies’ government. Additionally, it is phenomenon of the political inherent which involve in the government role and to the way in foreign exchange. [2] The capital is also connected to the in attempting the holders of wealth for the government policies avoidance. This can be avoided so that the unrecorded capital cash flow can also be avoided.[3] The capital flight is mostly defined as the symptom and not the cause of crisis in financials. On the other hand, the devaluation rumors can be the signal for the start of the capital cash outflow.  This can yield to be the devaluation expectation and can also transform to be the self-fulfilling when the reserves of central bank depletion is devalued. In the said scenario, the capital flight can be the source of the failing banks, and the financial instability.[4] The occurrence of the capital had been made for the two possible reasons which are generally for the approach of long-term in managing the asset. The primary reason for experiencing the capital flight is trough change in the field of economic conditions inside the certain country. This is because those investors can shift its assets to the more stable environment as it sees to the incident of undesirable movement in the economic condition of the certain country. The other reason for the having the capital flight is the diversification in the investment type for making the financial portfolio. In this case, the investor chose to divert its assets to the opportunities in the other countries which are facing the probability of acquiring the high percentage of improvement in economy.[5]   Factors in Capital Flight The emergence of the capital flight had been due to the investors’ confidence towards the domestic economy. The inflation is one of the factors of the economic conditions that have the results in choosing of the investors for the implementation of the capital flight. This varies when the unfavorable economic condition had still remain for the extend of the period of time and resulted to lost of interest of the investors and then move away to the international investment then suddenly went back to the domestic market.[6]  The investors also are facing risk in pursuing its plan to invest in the certain country. Includes in the factors that the investors are facing includes their capital risk, the risk in the country, the inflation, the return of their investment, the political risks, the risk or the return of trade-off , and the systematic risk.[7]   Capital Flight in Less Developed Countries The less-developed countries are primarily two unique compositions of economies. The first composition is primarily based in the higher level of the foreign currency. These economies are primarily dependent or under to the rich countries. The other unique distinction taken from the less developed countries is the domestic currency. This is the economy of subsistence which is primarily involved in those of no access in the foreign currency and this is also consisting of the transactions being conducted through the first barter using the domestic currency.[8] The overvaluation of the currencies can also attract the capital; this can also be an analogy to nectars of the flowers and attracting the bees. This can also be defined as overvaluing means that they are in demand vice versa. This can attract the other currencies while encouraging for savings. This had happened reversely for the undervalued currencies. These incidents had been experienced by most of the less-developed countries in their domestic savings which made to become the negative quantities when the incident of inflation rate had surpassed the interest rate. The larger investors prefer to invest their money in the conversion of the stronger currency and only meant that their savings are not available in the investment for domestic. This incident had been possible because of the phenomenon which is called the capital flight. This only means that it is greater than those of the illicit fund occasional dumping. According to William Darity, this phenomenon is still part of structure of economy of the less-developed countries which involves and connected to the expatriations of the savings in the stable returns and to the lower risks (Ibid). In short, for the less developed countries, the capital flight signifies different weak and strong currencies and not allowing having the economies of having weak currencies in the investment. It also cripples the production and the ownership which are already operating in the handicap of dominant cost while they are importing the credit and purchase for the purchases.[9] In the time of the 1980s’ the domestic savings loss to the less-developed countries had been exceeded to the investment abroad and going to the economies. This have many factors to consider as the retention of the savings, the prevention to the debt, and debt service had been wrecked most by majority of the economies by the back-breaking debt. The less-developed countries are commonly required for the guarantee in the industrial bond that can be purchased in the bond internationally to the large market and most of the large brokers. In the formation of the investment in the region, the less developed-countries are primarily depends on the investment on the developed countries. As an example, the regional banks made to have loans that are of the accessible terms and to the more interest rate. This can also possible as it was controlled by the region and they imposed in the same measure of austerity as into the International Monetary Fund. The less-developed countries can only negotiate but it was to be imposed better prices in their raw materials by the developed countries. It includes the minimum wages for the education, the training, and the managerial workers and other are the requirements of the Multinational Corporations.[10]     Contributes to the Debt of Less Developed Countries (LDC) According to Dornbush the origin of the debt problems in the Less Developed Countries or the LDC is cause by the deterioration and the domestic mismanagement in the economy of the world. In 1980s the result speculative caused by the foreign asset had the capital flight of more than billion. During the same time, the economic growth of the world soar real and slow interest rate resulted from the reduction of the exports that had been increase and earned in exporting for the interest in foreign debt cost. This had been resulted to the American and to the debtors of the LDC cannot have the external debt. The debt of the LDC cannot make an improvement starting from 1982 when it came to the point that the Mexico cannot meet its payment of foreign debt. This problem is then considered to be liquidity and insolvency. In this case most of the debtors of the LDC made to have a continued borrow and increase their debt without any idea and expectation of the interest they going to pay. Taking out the spending of the government as well as the other measures of austerity by the debtors of LDC, the worldwide problems regarding debt had made to be worst due to the American Banks, the International lending agency and the U.S. government made to have a policy to follow as quoted as “involuntary debt service” which can yield to the extra cost for the debtors as well as to the trading interest in the other countries creditors.[11] In the year of 1980s, the value of the dollar begun to move upward from the loss of its lows four years before which was cause by the currency which not producing oils. This had been resulted in the movement of the debts which was schedule in 1982 by Mexico. As the incident of inclination of the dollar had been started, the LDC had started t experience as well the inflation which had been resulted to the acceleration of the exchange rate in the midst of the indebtedness and to the US dollar. This also added to the hardships of the LDC on the problems regarding debt due to the large sums of US. In short, in 1970s, the LDCs borrowed dollars that are worth considerable less than the dollars which they have to pay in return in the year 1980s. This is just a simple yet truthful that the LDCs has less ability to service their obligations regarding debt which will create the debt crisis in the world.[12]   Conclusion and Recommendation As a conclusion, the supply theories of the Reagan administration had been resulted to budget deficit of the U.S. which drew the dollars of US out in the market globally which can be fund in the debt of US and majority of which can be used as the taken from the industrialized countries. In the 1980s the US dollar made to have the considerable value compared to the developed countries and of course to the LDCs which had been experience inflation in the given period. Rescheduling had been done immediately by the LDC worlds indebted. To prevent the debt of the Less Developed Countries, it should have a new approach in solving for the problems of the LDC debt added to the review of the proposal which can contemplate in the reverse of the capital flight. This is possible due to the capital flight condition are still present in the LDC. The swaps n the equity of debt in the investors or in the banks which are LDC acquisition is the market changes as only secondary on the equity position debt in the certain company that had been sold by the government of LDC. It is also applicable to have a macroeconomics view regarding the debt problems which can best contribute for the stability of finances of the real economy evenly. It is also important to reduce the budget deficit of the government and it is particularly important in the alleviation of the stress financially. Additionally, the restriction relaxation on the expansion of products ad geographic can also be applicable.     Bibliography Capital Flight 1993, Economics Library, McLeod, viewed 14 March, 2008, http://www.econlib.org/library/Enc/CapitalFlight.html Capital Flight 2003, Wise Geek, viewed 14 March, 2008, http://www.wisegeek.com/what-is-capital-flight.htm Capital Flight 2008, Investopedia, viewed 14 March, 2008, http://www.investopedia.com/terms/c/capitalflight.asp Epstein, G 2005, Capital Flight and Capital Control in Developing Countries, Edward Elgar Publishing Hanson, J 1996, The Next Cold War?: American Alternatives for the Twenty-First Century, Greenwoods Publishing Group Higgins, B n.d., Symposium Overview: Debt, Financial Stability, and Public Policy Rahnama-Moghadam et.al., Doing Business in Less Developed Countries:Financial Opportunities and Risks, Greenwood Publishing Group   [1] Epstein, G 2005, Capital Flight and Capital Control in Developing Countries, Edward Elgar Publishing [2] Ibid [3] Ibid [4] Capital Flight 1993, Economic Library, http://www.econlib.org/library/Enc/CapitalFlight.html   [5] Capital Flight 2003, Wise Geek, http://www.wisegeek.com/what-is-capital-flight.htm. [6] Ibid. [7] Capital Flight 2008, Investopedia, http://www.investopedia.com/terms/c/capitalflight.asp.   [8] Hanson, J 1996, The Next Cold War? American Alternatives for the Twenty-First Century, Greenwoods Publishing Group  [9] Ibid. [10] Ibid. [11] Higgins, n.d. [12] Rahnama-Moghadam et. al., Doing Business in Less Developed Countries: Financial Opportunities and Risks, Greenwoods Publishing Group. Credit:ivythesis.typepad.com

Capital Flight

Capital Flight Introduction In our everyday living, we cannot deny that we are not sometimes aware of the national money that we can get...

Effect of credit and bad debt management on organizational productivity, growth and profitability

Effect of credit and bad debt management on organizational productivity, growth and profitability   Participating in a debt management plan could make it difficult for you to qualify for additional credit, and some debt-management plans prohibit consumers from applying for new credit anyway. Debt-counseling agencies get their operating money by receiving a percentage of each client’s payments back from creditors. If you’re current on your bills, you may want to try negotiating new payment amounts and lower interest rates with creditors on your own. You never know what kind of deal you may land. And you may be able to make real headway on your debt by simply tightening your belt for a few months and freeing up more cash for debt payments. Changing one part of the organization may inadvertently manifest changes in others, so in order to make positive and appropriate change, companies have to look across the organization to see how proposed change will affect other functions and departments. Credit and collection departments must, today, measure the full customer-to-cash process, from establishing the customer relationship all the way to cash in the bank. After all, to improve any department, initiative or organization, the right elements must be measured and tracked across the entire organization in order to take corrective actions resulting in better cash flow and increased profitability.   Developing proper metrics for any organization is one of the toughest challenge company can undertake. It can be extremely complex because it involves identifying the right measures taking into account the myriad objectives of each part of the business understanding how those measures affect the overall organization and its individual parts, and, finally, actual implementation. It is task rife with pitfalls that should not be taken lightly.  Following is detailed description on how to implement proper metric systems in credit and collections departments, including aligning business objectives, avoiding common pitfalls, and learning what to measure and how to measure them and to improve the bottom line.  Metrics are standard measures used to assess performance. Unfortunately banks play a large role in the high credit card debt that many consumers are carrying. With lucrative offers of low interest rates that expire after year with no annual fees to rewards card that have everything from free flyer miles to cash bonuses, cardholders snap these cards up in a hurry in order to be able to take advantage of the many bonus offers. Unfortunately, many of these offers are targeted at young peoplenew high school graduates, college students, and recent college graduateswho are not yet emotionally mature enough to understand the importance of having good credit or even how to handle credit card. With this early lack of knowledge about credit cards comes a future of financial chaos. Sometimes those in serious credit card debt will apply for another credit with higher limit and lower interest rate with the original intention to get rid of the other cards and use the new card. Some may even take out a consolidation loan, and after the balances are paid on their credit cards, they start using them again instead of getting rid of them. For some the reality does not hit home until the bill collectors are knocking on the door, the judgments are issued, and they attempt to apply for loan only to find that their credit is so severely damaged that they can’t even borrow a few hundred dollars to buy some furniture. Credit Counseling If you’re not disciplined enough to create a workable budget and stick to it, can’t work out repayment plan with your creditors, or can’t keep track of mounting bills, consider contacting credit counseling organization. Reputable credit counseling organizations can advise you on managing your money and debts, help you develop a budget, and offer free educational materials and workshops. Counselors discuss your entire financial situation with you, and help you develop a personalized plan to solve your money problems. Debt Management Plan If your financial problems stem from too much debt or your inability to repay your debts, credit counseling agency may recommend that you enroll in debt management plan. A DMP alone is not credit counseling, and DMPs are not for everyone. You should sign up for one of these plans only after a certified credit counselor has spent time thoroughly reviewing your financial situation, and has offered you customized advice on managing your money. Even if DMP is appropriate for you, reputable credit counseling organization still can help you create budget and teach you money management skills.       Credit:ivythesis.typepad.com

Effect of credit and bad debt management on organizational productivity, growth and profitability

Effect of credit and bad debt management on organizational productivity, growth and profitability Participating in a debt management ...

The Impact of Credit Facility on Commercial Banks

The Impact of Credit Facility on Commercial Banks Introduction Most of the banking institutions are identified in their strategy because of the appropriate management and assessment of the risks which include the credit and non-performing loans. Through the assessment of the risks, the organization can create a weighted decision and well plan. This all can help the success draw out from the process. In the classification of various system that are involved in the assessing and managing the risk, the credit risk management is an emerging activity that lies within the organization. Facilitating the Credits The failures in lessening the poor performance of the banks can be tested through the procedures and the processes involved in their nature of work. From the simple transaction, different problems may arise. The failure of the customer to disclose any personal information during the application can be the greatest reason that might influence the overall performance of the banks. It is an specific factor that a customer should give the honest information during the loan application to avoid or prevent any further casualties on the side of the banks. Credit Risk Management The credit risk management is popular among the banks and other financial resources. The main purpose of the credit risk management is to lessen or diminish the effects of the non-performing loans came from the consumers. The procedures and processes of the banks and their affiliates create a great impact in the flow of the financial resources. However, various economic uncertainties, international markets, or financial constraints can cause the financial status to be unstable. Aside from the financial deficiencies, the other causes of the financial constraints are the lack of confidence among the financial market to provide external help for the needed consumers, lack of capability to gather the information of the consumers, and the lack of push to have an aggressive debt collecting. The non-performing loans can definitely cause too much stagnation of the financial sources. To provide the credit risk management effectively, the banks and other financial institutions should asses the credibility of the loaners. In terms of an enterprise, the assessment of their credit portfolio is enough to provide a system that continuously promotes the reviewing the risks and the capability of the business enterprise to pay. It is very common that the banking process limits the occurrence of the risks during every transaction; therefore, the bank managers should also rely on the effectiveness of the imposed regulations to anticipate the future risks.  From the different financial indicators, the position of the institution on the market failure are still depends on the internal process and the actions of the people. The economic theory in banking encompasses the interest and income theory in which is the basis of the cash flow approach in bank lending (Akperan, 2005). Credit risk management needs to be a robust process that enables the banks to proactively manage the loan portfolios to minimize the losses and earn an acceptable level of return to its shareholders. The importance of the credit risk management is recognized by banks for it can establish the standards of process, segregation of duties and responsibilities such in policies and procedures endorsed by the banks (Focus Group, 2007). Credit risks appear in banking institution because of the uncertainties plagued the financial system. The uncertainties remain a major challenge in country. Still, the major approaches applied by the banks are the continuing efforts on research and close monitoring. Banks believe that the research and monitoring are the key sources of uncertainties like data generating institutions and the treasury (Uchendu, 2009). The market structure is important in banking for it influences the competitiveness of the banking system and companies to access to funding or credit investment. The economic growth affects the structure and development of the banking system. In addition, the vast knowledge in risk assessment and managerial approach is recognized as part of the development. Moreover, because the banks and the processes are highly regulated, it became very useful in assessing the effects or impact of the credit risk management in the banks and even in other financial sources (Gonzalez, 2009). Conclusion The lack of aggressiveness is popular in the developing countries and this is perceived as the banks specific factor that can also contribute to the non performing debt problem. Banks should understand that the non-performing loans are closely related the banking crisis. In the economic development of the country, it is impossible to perform when there is a financial crisis and partnered on the economic downturn.   References: Akperan, J., (2005) Bank Regulation, Risk Assets and Income of Banks in Nigeria [Online] Available at: http://www.ndic-ng.com/pdf/adam.pdf [Accessed 12 October 2010]. Focus Group, (2007) Credit Risk Management Industry Best Practices [Online] Available at: http://www.bangladesh-bank.org/mediaroom/corerisks/creditrisks.pdf [Accessed 12 October 2010]. Gonzalez, F., (2009) Determinants of Bank-Market Structure: Efficiency and Political Economy Variables, Journal of Money, Credit &Banking, 41(4) Unchendu, O., (2009) Monetary Policy Management in Nigeria in the Context of Uncertainty. [Online] Available at: http://www.naijalowa.com/wp-content/uploads/2009/08/Monetary-Policy-Management-in-Nigeria-in-the-context-of-uncertainty.pdf [Accessed 12 October 2010].     Credit:ivythesis.typepad.com

The Impact of Credit Facility on Commercial Banks

The Impact of Credit Facility on Commercial Banks Introduction Most of the banking institutions are identified in their strategy because...