Answer: Option(d) is correct.
Explanation:
Correct option: Neither desired net exports nor desired net capital outflow
If there is increase in the exchange rate, then there will be depreciation of the home currency. This means that now a person have to pay more for the same amount of imported goods.
The exports of a country also increases with increase in the exchange rate. So, the economy became more stronger.
And an economy rises exchange rate for stabilizing the foreign interest rate and domestic interest rate.
If the domestic interest rate is higher than the foreign interest rate then there is a inflow of capital in the home country. So, an economy increases the exchange rate to equal the foreign interest rate and domestic interest rate.
Answer:
Explanation:
Reserve Ratio is the amount of liabilities that are held reserved by the commercial banks. The ratio indicated the amount which the bank has to hold as a reserve. Any amount in access of this ratio can be invested or held in bank reserves.
So in this question, the reserve ratio is 11%, of $132000, which is 14520 dollars. So 117480 dollars are left which can be invested to deposited in the total reserves. So A bank has $132000 in excess reserves and the required reserve ratio is 11%. This means the bank could have $14520 in checkable deposit liabilities and $117480 in total reserves.
Answer:
$14 million
Explanation:
Operating working capital = Operating current assets - Operating current liabilities
Operating working capital = $20 million - $6 million
Operating working capital = $14 million
The total net operating capital that XYZ, Inc. has is $14 million
It should generate another major event around 2050-2060
Answer:
a. Describe how the average accounting return is usually calculated and describe the information this measure provides about a sequence of cash flows. What is the AAR criterion decision rule?
Average accounting return = average net income / average investment
The problem with AAR is that net cash flows are not equal to net income since depreciation expense and changes in net working capital are not accounted for by AAR.
The criterion decision rule is that projects with an AAR above a certain measure.
b. What are the problems associated with using the AAR as a means of evaluating a project’s cash flows? What underlying feature of AAR is most troubling to you from a financial perspective? Does the AAR have any redeeming qualities?
it doesn't consider net cash flows, nor time value of money. Personally, accounting is an extremely important tool but it only reflects a partial perspective of a business. E.g. a business might have a huge net income but if it doesn't have enough cash to function, it will go bankrupt. In finance, cash is king.
Personally, my biggest problem with AAR is that it doesn't consider net cash flows. I've been on situations where the company I worked for was apparently doing great, but our accounts receivables were huge and we couldn't collect money fast enough. My job was basically go to different banks and convince them of loaning us cash. The worst part was that even without being able to collect cash, we still had to pay taxes and that was another huge problem.
I believe that AAR is still used because of its simplicity. Also, taxes are paid based on accounting profits and many firms base they compensation plans on them.
