Banking Machinary
Capital, then, is wealth invested in industry, finance is the machinery by which this process of investment is carried out, and international finance is the machinery by which the wealth of one country is invested in another.
Let us consider the case of a doctor in a provincial town who is making an annual income of about L800 a year, living on L600 of it and saving L200. Instead of spending this quarter of his income on immediate enjoyments, such as wine and cigars, and journeys to London, he invests it in different parts of the world through the mechanism of international finance, because he has been attracted by the advantages of a system of investment which was fashionable some years ago, which worked by what was called Geographical Distribution.
[2] This meant to say that the investors who practised it put their money into as many different countries as possible, so that the risk of loss owing to climatic or other disturbances might be spread as widely as possible. So here we have this quiet country doctor spreading all over the world the money that he gets for dosing and poulticing and dieting his patients, stimulating industry in many climates and bringing some part of its proceeds to be added to his store. Let us see how the process works.
First of all he has a bank, into which he pays day by day the fees that he receives in coin or notes and the cheques that he gets, each half year, from those of his patients who have an account with him. As long as his money is in the bank, the bank has the use of it, and not much of it is likely to go abroad. For the banks use most of the funds entrusted to them in investments in home securities, or in loans and advances to home customers. Part of them they use in buying bills of exchange drawn on London houses by merchants and financiers all over the world, so that even when he pays money into his bank it is possible that our doctor is already forming part of the machinery of international finance and involving us in the need for an explanation of one of its mysteries.
A bill of exchange is an order to pay. When a merchant in Argentina sells wheat to an English buyer, he draws a bill on the buyer (or some bank or firm in England whom the buyer instructs him to draw on), saying, “Pay to me” (or anybody else whom he may name) “the sum of so many pounds.” This bill, if it is drawn on a firm or company of well known standing, the seller of the wheat can immediately dispose of, and so has got payment for his goods. Usually the bill is made payable two or three, or sometimes six months after sight, that is after it has been received by the firm on which it is drawn, and “accepted” by it, that is signed across the front to show that the firm drawn on will pay the bill when it falls due.
These bills of exchange, when thus accepted, are promises to pay entered into by firms of first-rate standing, and are held as investments by English banks. Bills of exchange are also drawn on English houses to finance trade transactions between foreign countries, and also as a means of borrowing money from England. When they are drawn on behalf of English customers, the credit given is given at home, but as it is (almost always) given in connection with international trade, the transaction may be considered as part of international finance.
When they are drawn on behalf of foreign countries, trading with other foreigners, or using the credit to lend to other foreigners, the connection with international finance is obvious. They are readily taken all over the world, because all over the world there are people who have payments to make to England owing to the wide distribution of our trade, and it has long been England’s boast that bills of exchange drawn on London firms are the currency of international commerce and finance.
Some people tell us that this commanding position of the English bill in the world’s markets is in danger of being lost owing to the present war: in the first place because America is gaining wealth rapidly, while we are shooting away our savings, and also because the Germans will make every endeavour to free themselves from dependence on English credit for the conduct of their trade.
Certainly this danger is a real one, but it does not follow that we shall not be able to meet it and defeat it. If the war teaches us to work hard and consume little, so that when peace comes we shall have a great volume of goods to export, there is no reason why the bill on London should not retain much if not all of its old prestige and supremacy in the marts of the world. For we must always remember that finance is only the handmaid of industry. She is often a pert handmaid who steals her mistress’s clothes and tries to flaunt before the world as the mistress, and so she sometimes imposes on many people who ought to know better, who think that finance is an all-powerful influence.
Finance is a mighty influence, but it is a mere piece of machinery which assists, quickens, and lives on production. The men who make and grow things, and carry them from the place where they are made and grown to the place where they are wanted, these are the men who furnish the raw material of finance, without which it would have to shut up its shop.
Discover The Many Facets of Finances
The finance of a business is its lifeblood without which there is no point in putting up or maintaining one. At the end of the day, money is what matters in any kind of business and that is an established fact. Most of us know how elaborate money matters are. Loosely translated, that means dealing with finances is a pain. This is especially true for people who dont know the first thing about it and I believe that comprises majority of the population.
Mortgages, trusts, annuities, bonds and brokers are only a few of the facets of finances. If that doesnt make you cringe, the likes of auditing and secured loans will. Im tempted to say that rocket science would be easier to understand. Although I know that is not true, they do share an element of difficulty that the ordinary layperson would be hard pressed to comprehend. It would be grand if we didnt have to deal with finances. But just like death and taxes, we are sure to deal with money matters in the course of our lives.
Going back to business and its financial aspect, who or where do you go to in order to get the much needed help? I presume financial advisers or accountants would be the first people that wed think of. But which financial adviser do we approach? What do we say when we get hold of one? Would they know what to do with our specific need immediately? The only logical thing to do would be to employ a skill that we have acquired way back in elementary school: research.
The Internet is always a good place to start when doing research. Business and financial sites are abundant in the net, you just have to sift through to find the good ones and ignore the irrelevant sites. The way to go would be to look for a good business portal. Portals are basically sites with a collection of topics or subjects that acts as a launch pad. This will enable you to spring to several sites that contain pertinent information about the subject that you are interested in. The apparent advantage when using a portal is that all the data and information that has to do with what you are looking for is already within reach.
You dont have to go to a search engine to look for a subject within the same topic. Take for example a business or financial portal. Ive mentioned about where to find good accountants earlier, heres the place. The obvious link to click on would be accountants in the portal. Details like services an accountant offers and how to pick the right one for your needs are discussed in-depth. After youre satisfied with the information youve gathered, you can simply go back to the portal and select another link that you might also be interested in like maybe loans or insurance and do the same thing again. Thats how convenient it is to use a business or financial portal. Information is indispensable in the realm of business. Find the right portal and get on the road to financial success.
Bank Of America Online Banking
Bank of America online banking is available to any customer who currently does business with the bank. Participation in the Bank of America online banking program is free and easy to set up.
One feature that sets the Bank of America online banking program apart from its competitors is the way it handles bill payments. Youd think a lot of data entry would be required, but thats not the case. The program already knows the billing addresses of the most commonly used payees.
To set up a payee such as your electric company, start by accessing the built-in list of payees that the Bank of America online banking program maintains. The program already knows the names of the major players in the community and maintains the names and billing addresses that most customers are likely to use such as electric, cable, and utility companies, area department stores and local major financial institutions. Pick the payee from the list, enter your loan or account number and in seconds, that payee is set up.
If the payee does not exist in the list, you enter payee details one time, and you never have to deal with a payee again until theres a change in address or other account details. When you have all your payees entered, they appear listed in alphabetical order. Next time you open the Bank of America online banking program to pay bills, you select the payee, enter the amount due and the day you want the payment to show up at the payee address.
Now heres the cool part about the Bank of America online banking bill paying option. The money for the payment is not debited from your account until the payment arrives at the payee billing address. Most other bill paying options debit the money the day the payment is mailed not delivered, meaning the bank has 4 7 days to earn interest on your money! So in effect, you actually earn money by using the Bank of America online banking option.
Debt Consolidation and Refinance Mortgages +
Mortgages are secured loans that are given to first time buyers, homeowners and people who have bad credit. Once you are accepted for the loan, you must repay the debt, which will include interest rates. Some refinancing loans have additional fees attached. The secured loans have collateral attached, means that if you fail to make payments, you are subject to foreclosure or repossession. The bank will come and take your home and sell it for the amount you owe.
This is why it is wise to make sure you know what you are getting into if you plan to refinance to consolidate your debts. Some loans permit buyers to repay the loans in 25 years, while others allow 30 repayments. Few of the lenders available on the Internet that offer refinance loans for consolidation of debts are aware that people go through hard times-or at least they don’t deal with people directly enough to actually feel this hardship through talking to them.
On the loans that offer lower interest rates, combine payments for debt consolidation. If you can manage to pay for the loan in the time stipulated, it is likely that you will take less time to pay back the loan amount borrowed. Once you find a lender to refinance your mortgage and combine your bills for debt consolidation, you will receive a loan based on capital and interest.
The Repayment loans for refinancing and consolidation make it easy, since the lenders will combine the interest and repayments into one monthly installment. Still, few lenders will allow you to repay the interest rates only; however, be aware that these types of loans do not combine your payments for consolidation; rather they put you at risk in some instances.
Still, there are several types of loans available that will help you refinance for debt consolidation, so keep an open mind and mull over your choices carefully before you make a final decision.
One of the most important tasks debtors must carry out to achieve in debt consolidation is keeping away from complications. When debtors have bills that are behind merely because they didn’t have the cash to repay the debts, then their stress will build. Some people may go on binge, spending instead of paying their bills, and procrastinating instead of working to restore their credit.
These people may believe that after three, seven or ten years the problem will end, since the credit reports remove any pending debts after seven years and any bankruptcies after ten years. The fact is, the problem doesn’t go away the problems only get bigger. Yes, it is true: after three years, if you manage to payoff a debt, then the debt is removed from your credit report. In addition, yes, it is true if after seven years you failed to make payments the debt is removed in most instances from your credit report.
Furthermore, it is true that in many cases, after ten years, bankruptcy is removed from your credit report. If you have the patience to wait this long, can tolerate the hassling phone calls and letters, and don’t mind worrying about going to court for this long, then by all means procrastinate.
Bills and debt consolidation is optional, however bill and debt reduction is your best bet. You can do this by start paying as much every month on your bills as possible to reduce your debts.
Bank of America – A long road to the countries
Bank of America – A long road to the countries top credit card issuer.
Bank of America is currently the largest issuer of both credit and debit cards in the United States. It is also third in the nation when measured by assets and handles about 10% of deposits made in the country.
Open for business in 29 states, it’s a safe assumption that Bank of America is a large force in credit and banking. More evidence supporting my very vague claim can be drawn from the bank’s purchase of MBNA last year. MBNA was formerly the largest issuer of credit cards in the country.
More interesting than its acquisitions and statistics is Bank of America’s history. The bank’s roots, while wide-ranging, can be followed all the way back to the Bank of Massachusetts, which was the hot new thing on the block back in ‘84. 1784, that is.
Perhaps more interesting than a few lame history facts would be Bank of America’s curious checking policy that landed them in court in 1999. The policy is that the biggest check is processed first, regardless of chronology. Some people (namely the sort that filed the lawsuit over this) felt that it was a technique to drive up overdraft charges. For example, say you have $11 in your checking account. Like I do. Maybe $11.50. Anyway, you have $11 and you cut a check for $0.25, for a piece of bubble gum. Then you issue another check, this time for a chocolate bar for $0.75. Then another check for a movie, we’ll say a matinee for $5.00. Finally you go home and pay a utility bill for $396.78. Clearly you will be hit with an overdraft charge. However, Bank of America would process the bill first, then the movie, then the chocolate, then the gum. You would be charged four overdraft charges. Quirky, isn’t it? Well, maybe not so much. Wachovia, Chase, and Citibank also do the same thing. The suit ended with a $9 million settlement.
That wouldn’t be the last time Bank of America would find itself in court. In 2004 the bank was accused of assisting in the fraudulent activities of a quaint little company called Enron (settled for $63 million). The same year a California jury decided the bank illegally tampered over a million customers’ Social Security Benefits. That case may cost the company over $1 billion.
But hey, you know, it’s America, half of our idols are in court all the time. We shouldn’t begrudge Bank of America for doing what banks do, which is usually finding clever ways to make more money at the everyday person’s expense.
So aside from a tainted recent reputation, the bank still does plenty of business issuing more debit and credit cards than anyone else. That’s not a combined figure, Bank of America tops both types of cards. Their recent $35 billion dollar acquisition of MBNA rounded out their line-up with a plethora of affinity and specialty credit cards second-to-none. Take a look at your card, you might not be too surprised to see who issued it.
Business Credit Is One Of Its Key Assets When It
Business Credit Is One Of Its Key Assets When It Comes To Its Success
New businesses are seldom profitable at first, and even a successful business can have dry periods where profits are not enough to cover necessary financial; obligations. Many businesses use a business credit card for their expense accounts. This is why it so important to have the business credit necessary to utilize financing options when the need arises.
Borrowing money is one of the most common sources of funding for a small business, but obtaining a loan is not always easy. Even getting a business credit card can have stringent requirements. Before approaching a lender for a loan, it is a good idea to understand as much as possible about the factors the lender will evaluate when considering your business credit loan application.
The lender will undoubtedly consider your businesss ability to repay the loan. After all, this is the biggest risk and source of profitability for the lender. They generally seek two sources of repayment: cash flow from the business, plus a secondary source such as collateral. Select lenders will also make approval decisions based on credit alone.
Credit history is therefore very important to business credit. One of the first thinks a lender will determine when a person or business requests a loan is whether their personal and business credit is positive or not. You should probably obtain a copy of your personal and/or business credit report and review the information yourself before submitting an application.
A business credit line can give a business the flexibility and adaptability it needs to remain viable. This is an excellent financial asset for any small business to have. The funds from a business line can be used for a variety of purchases, including growth, renovations, payroll, inventory or marketing. A business credit line gives your company the flexibility and stability it needs to be successful.
A business credit line offers a lump sum of pre approved money. This is essentially the same as applying for a large loan, even if you dont have a need for the funds. But thats the great part. You can utilize as much of the credit line as you need, leaving the rest in the account. Should the need for extra money occur, you already have the pre approved balance that you can withdraw from virtually instantaneously. With your business line of credit, you always have a pre approved balance waiting for you. This means you wont have to go through another loan process, or face the possibility of being denied should your credit change.
You are not charged interest on the unused portion of the credit line. You can write checks or withdraw cash out of your business credit line balance. Your business line of credit can be paid back at any time to increase your available credit.
A business credit line strengthens a small business with a great measure of security and protection. A business owner can relax about future unpredictable events by knowing he or she has the access to the finances to cover them. Furthermore, it is like having instant funding should the business choose to make innovations for its growth.
Beta in the Context of the Capital Asset Pricing Model
Beta in the Context of the Capital Asset Pricing Model
The economic model used for securities valuation and stocks are a part of the Capital Asset Pricing Model in terms of the expected return and comparative risk. According to the login which is fundamental for CAPM, shareholders are willing to take on extra risk only in case of additional expected return. As a result, the price for stock is negotiated of the free of risk security added to the risk premium which results from additional risk.
Formula of CAPM is Probable Security Return = Free of Risk Return + Beta * Probable Promote Risk Premium, Beta in this formula is the general risk which results from savings in a large market, for example, New York Stock Exchange.
In case of CAPM, Beta can receive a definition of the stock instability of a certain investment selection in relation to the economy. According to the definition, Beta of a market is 1.0, where separate stocks are assessed against the Betas market value. Risks which are associated with savings rise with Beta and, the other way, reduce if investment is not as risky. Beta, as the significant element of CAPM, expands proportionately with the price of funds discount rate, while the reduction rate is depressingly related with the current value of upcoming cash flows. Thats why, Beta is the main element in valuation of the company.
Beta coefficient is resulting from the analysis of linear regression. Beta coefficient is estimated from the income of a portfolio during a specific period of time and the profits from distinct asset during a particular period of time. The drop line consequent is referred to like the Security Characteristic Line. Betas are usually calculated by deep-rooted brokerage companies that are later published in a book of beta. It must be noted, that admission to such book if oftentimes limited to usual investors. Nevertheless, other online sources like Yahoo Finance as well have beta coefficients published and calculated. The value of Beta of 0.00 means that the stock is fresh and has no historic performance.
Are New Bankruptcy Laws Going To Help You?
There are 2 sides to the changes in bankruptcy rules. It will be a lot harder to file bankruptcy under chapter 7 and get a totally clean slate.
For businesses, relying on issuing credit, the new personal bankruptcy law is doing great, reducing personal bankruptcy claims from the thousands to double digits.(In the short run).
However, lawyers working with the actual people filing for bankruptcy say that the new law is seriously flawed because it puts more financial burdens on already broke clients and reduces potential debt repayment to small businesses.
And then of course you have the credit card companies charging high interest rates which in quite a few cases caused the bankruptcy in the first place.
According to some financial specialists, much of the debt people accumulate is a result of keeping up with the Joneses and not thinking ahead.
For 80% of clients counseled each month, the debt is credit card related and averages $32,000 – a result of six to eight cards. Consumer credit organizations say the new law provides debt-reducing strategies for those considering filing bankruptcy and curbs abuse.
Under the new law it has become a requirement that the person filing bankruptcy obtains credit counseling both before and after filing for which that person will be charged..
So now the consumer would then know the advantages and disadvantages of declaring bankruptcy. Yet it seems merely another expense for an already financially stressed individual.
People filing bankruptcy in general are not overspenders, but merely faced with temporary financial disasters such as medical costs, layoffs, a divorce, gambling debts or other crises. Before you can file bankruptcy,you are now required to complete credit counseling with an agency approved by the U.S. Trustees office.
This credit counseling is designed to help you determine whether or not bankruptcy is appropriate.
Once you complete your bankruptcy, the law requires you to attend another credit counseling session.
These are new requirements, before this law was passed the law did not require a person to go through counseling either before or after the filing of bankruptcy.
Second, under the old law, a person could decide to file under Chapter 7 or Chapter 13. Under the new law, the court will look at your monthly income and apply a means test relating to the state in which you live. If your income is less than or equal to the medium income then you will be allowed to file Chapter 7 which in effect will give you a clean slate.
This medium income can vary from $28,000 in Missouri to $56,000 in Alaska. If your income is greater, you may be forced to file Chapter 13 unless you can demonstrate you do not have enough disposable income.
Under Chapter 13 you will not get a clean slate but will have to make payments on your debts.
Also, your attorney now has to personally certify that your bankruptcy filing is accurate. This means more work for the attorney, with higher legal fees.
Advantages of declaring Bankruptcy:
Legal protection from creditors
Takes care of all or most debt
In some cases, can keep home and car
May stop complete financial ruin
Provides a fresh start
Disadvantages of declaring Bankruptcy:
Bad credit
May have to repay partial debt load and return collateral to creditors
May lose assets, including house and car (If the house is worth more than a certain amount).
Bankruptcy becomes public record, and
Remains on credit record for seven to 10 years
In the past, a bankruptcy offered a fresh start for the filer, said Columbia attorney Gwen Froeschner Hart. The new federal legislation offers language directed at helping creditors.
If you analyze credit card expenses for most people you’ll see that they often include medical bills and day-to-day expenses for the elderly or those earning low or fixed incomes. Records show that 50% of credit card holders do not pay their full credit card bills every month.
33% of the population can’t afford medical insurance so have to charge their prescription drugs.
With the recent Medicaid cuts and rigid bankruptcy legislation who knows what is going to happen to these people.
There are some who say consumers are abusing creditors. The irony is that credit card companies are begging for customers and offering large amounts of unsecured credit, yet at the same time, lobbying for stricter debt controls.
Benefits of Financing Business Assets rather than Paying Cash
With interest rates so cheap these days, most small medium sized businesses are choosing to finance their business assets rather than paying cash. These assets include , trucks, plant and machinery.These assets are increasingly being turned over every 4 5 years as technology improves, general wear and tear increases from demanding work loads and the taxation life of assets shortens.
So why not just pay cash!! Its been a great year in business, we have plenty of cash and we may as well just pay for the asset outright.
Well this might be true, but what happens next year if sales slow and funds are not there to cover business overheads and expenses. This is where financing becomes a valuable part of any business and following are many of the benefits associated with doing so.
1. Lock in a fixed interest rate for up to 5 years depending on the asset being financed. These rates vary but at present are approximately 7.5% fixed depending on what asset is being financed and term of loan
2. Use a particular finance product such as , Hire Purchase, or Finance Lease. With a Chattel Mortgage customer owns the asset from the day one, can claim GST up front and interest / depreciation over the term of loan. Hire Purchase Hire it now with an option to own later. Claim interest / depreciation over the term of loan. Finance Lease Finance company purchases the asset; you enjoy full benefit of asset for regular repayments, with finance company disposing of asset at end of term. (always check these which product best suites with your accountant)
3. Structure your repayments to preserve cash flow in business. This is achieved by electing 1 5 year terms with or without balloon / residual payments. These final payments must fit within ATO guidelines and are available to the products as mentioned above.
4. Stay ahead of your competitors with the latest technology by upgrading your asset more frequently. This would be an enormous drain on your cash if you were drawing upon your cash reserves.
5. Establish excellent credit ratings with financiers that allow further lending in the future to grow and accelerate your business above other competitors
These are just some of the common benefits of financing rather than paying cash. As each business differs some of these may not relate to your business, but overall these points are certainly worth considering when acquiring your new business asset.
Alternatives To Filing Bankruptcy?
There is just no easy way to get out of debt, you have to face up to the consequences. A bankruptcy is not always the answer, as the effects are long lasting. There are four ways to handle debts that are out of control, listed in best to worst in regards to the effect it will have on your credit:
If your credit isn’t in terrible shape, can you reduce your other expenses, even if it means making hard choices or just change your lifestyle to fit your income? Some ways to do this:
Alternatives:
Selling the second car
Pulling equity out of your home
Applying for a non secured signature loan
Obtaining a loan from a relative
Selling your home and paying off your debts with the proceeds and then renting
Cashing out your 401K/retirement benefits
Selling family heirlooms, jewelry, etc
Filing Bankruptcy – Final Solution
If your credit is already gone or one of the above isn’t an option, go through Consumer Credit Counseling Services. Check your yellow pages for the local number. In this way you’re paying off your debts as if you were in a Chapter 13 bankruptcy, but you don’t file a bankruptcy.
If CCCS won’t take you, you may want to consider bankruptcy. Filing a Chapter 13 takes longer, but your credit is in a little better standing than if you file a Chapter 7. In Chapter 13 you are given up to 5 years to pay off your debts. The disadvantage is that you’re in bankruptcy for up to 5 years plus your credit report shows your bankruptcy for 7 more years after you have finished paying off your debts.
If you are so far in debt that you can never repay it, then the best solution may be a Chapter 7 bankruptcy. Chapter 7 is the least desirable credit wise, but you are typically out of bankruptcy in 6 months and you don’t have to repay any debt.
Disadvantages of Filing Bankruptcy
The disadvantage is that this shows on your credit report for 10 years from the date of filing your bankruptcy, and creditors are starting to tighten their credit requirements, and you may have a tough time getting future financing. Depending upon how complicated your financial situation is, you may want to consult a lawyer before proceeding.
There is no magic solution. Don’t believe anyone who tells you otherwise.