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kow [346]
2 years ago
12

The desired reserve ratio is 10 percent of deposits, and the currency drain ratio is 1 percent of deposits.

Business
1 answer:
Flauer [41]2 years ago
4 0

Answer:

Quantity of money changes by $50,000,000

Explanation:

Desired reserve ratio = 10% = 0.1

Currency drain ratio = 1% = 0.01

Money multiplier = (1+0.1) / (0.1+0.01) = 1.1/ 0.11 = 10

Value of securities purchased = $5 million

Change in quantity of money :

$5 million * 10 = $50 million

Currency created : currency drain ratio * change in quantity of money

0.01 * $50,000,000 = $500,000

Amount of bank deposit = quantity change - currency created

= $50,000,000 - $500,000 = $4,500,000

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3 years ago
Following is selected financial information from General Mills, Inc., for its fiscal year ended May 29, 2016 ($ millions):
mojhsa [17]

Answer:

General Mills, Inc.

1. Income Statement for the fiscal year ended May 29, 2016:

Revenue                    $16,563.1

Cost of goods sold   $10,733.6

Gross profit                $5,829.5

Total expenses          $4,092.7

Net Income                 $1,736.8

2. General Mills, Inc. Balance Sheet for the fiscal year ended May 29, 2016:

Cash                             $763.7

Non-cash assets      20,948.6

Total assets             $21,712.3

Total liabilities          16,405.2

Stockholders' equity 5,307.1

Total Liab. + equity $21,712.3

3. General Mills, Inc. Statement of Cash Flows for the fiscal year ended May 29, 2016:

Cash from operating activities    $2,629.8

Cash from investing activities             93.4

Cash from financing activities*     (2,293.7)

Net Cash Flows                               $429.5

Cash, beginning year                        334.2

Cash, ending year                           $763.7

Explanation:

a) Interestly, General Mills, Inc.'s income statement shows the financial performance (profit points) of the company when revenue is compared with the cost of goods sold and the expenses.  The first profit point is the gross profit, which is the difference between revenue and cost of goods sold.   The second profit point is the net income, which is the difference between the gross profit and the expenses incurred for the period in running the business.

b) On the other hand, General Mills, Inc.'s balance sheet shows the financial position of the company.  They show what the business owns (assets) and what it owes (liabilities) outsiders and the owners of the company (equity).

c) While, General Mills, Inc.'s statement of cash flows shows the cash flows from operating, financing, and investing activities of the company, and the net cash flows for the period, which can be reconciled to the beginning cash to obtain the ending cash balance.

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