Notes On Credit Rating Agencies

Notes On Credit Rating Agencies
Literature review:
Dror Pranes (2008) said that the participants of the market have a divergent expectation. But they
can be classified as optimistic or pessimistic based on set of knowledge. He also argues that the
credit rating announcement does not give any undisclosed information to the investors or the
market. It only attempts to homogenize the investor's belief.
According to Adelson (2012) credit rating plays a vital role in providing an independent opinion
about the creditworthiness of the issuer and bridging the gap between lenders and borrowers.
Lazarescu (2003) says standardising the value judgement in relation to borrowers in the current
scenario of globalisation is contributed by credit rating agency.
De Haan and Amtenbrink(2011) argued that there are flaws in the use of credit rating agencies
judgement in regulation and accounting. The agencies have a substantial impact on the bonds and
their interest. But when the bond is downgraded it is harmful. There will be herd behaviour among
investors trying to liquidate investment. Additionally Mathis (2009) said that the construction of
issuer pays is a critical problem which may result in conflict of interest. This will make the issuers to
shop the ratings. They will go for the rating agency that provides the most favourable rating.
Journal of common market studies (2012) explains that the rating agencies suffer from
shortcomings. The rating agencies maintain transparency about the data sources and the indicators.
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The Implementation Of Credit Rating Agencies
Credit Rating Agencies (CRAs) have also been blamed for their role in promoting risk taking
behaviour. The Basel II Accord (2004) also gave CRAs a major role to play in financial markets.
The complexity of MBSs and CDOs increased overtime, making it difficult for the agencies to
assess their risk accurately. They underestimated the complexity of these mortgages and were slow
in downgrading the ratings during bad times, so that their ratings misled the market participants.
Overtime, various institutions made loans without verifying income and offered floating rate
mortgages with payments that were affordable only initially but increased greatly overtime.
Subprime lending became a norm rather than an exception. Eventually borrowers ... Show more
content on Helpwriting.net ...
The structure had always carried the risk of the crisis going global. Investor confidence stumbled
globally, the negative sentiment spread throughout the market and no one wanted to buy these
securities, leading to a crash in their prices. Banks, having to use Mark–to–Market accounting
practices, were forced to write–down losses on these securities into their balance sheets. This
resulted in large losses across the banking industry in the third and fourth quarters of 2007 (Tiller,
2010). Bear Stearns finally collapsed on March 16, 2008 and was later sold to JP Morgan Chase.
Lehman Brothers, one of the major investment banks in the US, held massive amounts of CDOs and
MBSs in their portfolio and was therefore nearing bankruptcy. The CRAs gave the bank the
ultimatum to find a buyer or else face a cut in its ratings. Lehman Brothers ultimately filed for
bankruptcy on September 14, 2008 due to its inability to raise capital or find a buyer. They had
expected that the government would bail them out but that did not happen. This came up as the first
big blow to the financial markets.
There was another instrument that aggravated the whole situation. These were the unregulated,
over–the–counter derivatives, including Credit Default Swaps (CDSs), that were sold as an
insurance against default on MBSs. AIG sold huge amounts of these insurance policies, without
having enough money to back them up when

Freeport Mcmoran Case Study
1. Introduction
Freeport–McMoRan also called Freeport or FCX in New York Stock Exchange, operates in
exploration, mining and refining of ore containing copper, gold and silver. Freeport's synergy in
creating the world's largest publicly traded natural resources was initiated through the merger and
acquisition (M&A) transactions. Investment banks, J.P. Morgan and Merrill Lynch play a key
role as a financial assistance to advice Freeport in the merger and acquisition transactions. On
November 19, 2006, media announced that Phelps Dodge (PD) is to be acquired by Freeport. This
opportunity will eventually benefit Freeport in the future growth, given that PD is known as world's
leading producer of molybdenum–based chemicals and ... Show more content on Helpwriting.net ...
of outstanding shares) + (short–term debt + long–term debt + capitalized leases + preferred stock –
cash on hand)
= ($119.72 x 203.5 million) + $(33.7 + 770.1 + 0 + 0 – 4947.4) million = $20.2 billion * EV/Sales
= ($20.2/$11.91) billion = 1.7 * ROE
= Net income/shareholder's equity
= $3017.8/$7690.4 = 39.24%
Theoretically, with the results of the P / E multiples, the company's value or performance can be
determined by multiplying the company's profit with this ratio upon the target company. Phelps's
P/E multiples have increased from the previous quarter in which attract companies' attention for
acquisition. Higher P/E means PD use stock as consideration more frequently. In addition to positive
EV/Sales, it shows that Phelps has more debt rather than cash. However, the growth of Phelps' P/E
targets a good prospect in future earnings. For ROE, as higher the return is better so, with this ROE,
FCX can use it to compare the other companies.
3. Question 2 c. Along the M&A activity centered around Freeport, J.P. Morgan and Merrill
Lynch were involved in nearly all acquisition processes up to capital raising. Each of investment
banks has coverage, M&A and capital market teams, sit as a financial assistance and
responsible for all of the due diligence and valuation work. Looking more closely, the metal and
mining industry coverage

Financial Crisis of 2008
The Financial Crisis of 2008 was the worst financial crisis since the Great Depression, however a lot
of American's want tougher law of be enforced against executives and companies they think started
the mess (Jost/Misconduct). Civil charges have been brought up against major banks for misleading
investors, but a federal judge rejected a proposed settlement saying it was too lenient
(Jost/Misconduct). The flood of subprime mortgages roiling the housing market in the U.S. is also
causing the worldwide credit crisis (Jost/Crisis). Investment banks everywhere are taking billion–
dollar losses, forcing them to revalue their belongings (Jost/crisis). This crisis started under the
surface for many years then emerged into the public in March 2008 ... Show more content on
Helpwriting.net ...
These realities require outstanding moral integrity, political independence with their heads, and top–
level technical expertise (Lagos). One way the government looks at this financial crisis is just a
symptom of a deeper crisis which is a crisis of its own.
The growing executive compensation
Manager's capitalism has replaced owner's capitalism
The failure of gatekeepers , this includes boards of directors, career politicians, auditors, and Wall
Street analysts
The management of earnings
These are the Bogle cities particular issues that caused the financial crisis. Mark Roeder, a former
executive at the UBS, conducted an analysis that suggested that large–scaled momentum "played a
pivotal role" in the global financial crisis, also known as the financial crisis of 2008 (Lagos).
Involvement of Private Sector The Reserve Bank has been verbal that they are uncomfortable about
wealthy Asian governments using savings when they use the savings to shop around for assets
(Saulwick). High levels of public sector involvement could hurt financial markets and the returns
countries are earning on their foreign investments (Saulwick). Dr. Lowe, the person that said this,
argued that the private sector in Asian countries needs to take on a greater role when it comes to
overseas investment. He also said the world was moving unavoidably towards financial institutions
in

Financial Analysis : Credit Rating Agencies
1 Executive Summary
Organisations and governments across the world have become increasingly dependent on debt over
the last few decades. Goods and services are provided on credit and debt is granted to organisations
and governments by lenders in different parts of the world. The providers of credit facilities, also
known as investors, require a certain level of comfort that the security issuer will be able to repay
the debt.
Investors must analyse the risk associated with the globalisation in the investment market, coupled
with diversification in the types and quantities of securities issued. Credit rating agencies provide
these investors with objective analyses and independent assessments of companies and countries
that issue such securities through a credit rating. A credit rating is a statistical method used to
determine the likelihood of an individual paying back the money borrowed.
Credit rating agencies have been in existence since 1900 but it was in 1975 when Securities and
Exchange Commission (SEC) based in the United States of America formally created the
nationally–recognized statistical ratings organizations (NRSRO) and instructed broker–dealers to
only use the NRSROs' ratings. Financial institutions were able to satisfy their capital requirements
by investing in securities that received favourable ratings by one or more of the organisations. These
NRSRO are subjected to regulation by SEC.
The increased demand for ratings services by investors and securities

The Subprime Mortgage Crisis Devastated From The Global...
Writing Assignment #2
Financial Market
Yuxue Zhang
The 2008 subprime mortgage crisis devastated from the global financial market. People believed
that the "Big Three" credit rating agencies played a significant role at various stages in the crisis.
The Reuters, in an article published in 2011, even claimed that credit rating agencies triggered the
financial crisis. The Reuters believed that Moody's Corp and Standard and Poor triggered the worst
financial crisis in decades by downgrading the rating on complex mortgages securities triggered the
worst financial crisis in decades. However, the problems of rating agencies have existed for quite a
long time and accelerated the crash down in some extend. In my opinion, despite the significance of
the "trigger", the credit rating agencies served as the "catalyst" for the crisis by inducing the investor
to enter under–served markets. First, there is too much trust and investors are over confident about
the rating from the "Big Three". Rating agencies are remarkably profitable businesses, and they
exhibit exceptional influential in the global financial market. As the global capital market grows
rapidly, investors seek trustworthy and standardized tool to help their investment decisions.
Therefore, when Moody first introduced the rating system in his "Moody's Analyses Railroad
Investment", the system gained recognition quickly and became popular to investors. When
problems of credit risk quickly escalated as financial market grew,

Credit Rating Agencies Essay
1.1 History of Credit Rating Agencies
Credit rating agencies (CRAs) have been playing a significant role in financial markets around the
world since the beginning of the twentieth century. The industry of credit rating originated when
John Moody, a Wall Street analyst and the institutor of one of the biggest CRAs in present day,
introduced a system of credit rating for railroad bonds by publishing "Moody's Manual of Industrial
and Miscellaneous Securities" in 1909. Until today, there are now approximately 150 CRAs
operating around the world.
Despite the fact that CRAs are now a crucial element in financial markets, it has not always been the
case. There was an explanation that financial markets were well operated prior to the existence of
the CRAs in the United States. Since the early of the seventeenth century, the Dutch Republic
already had in place all fundamental components of a modern financial system including securities
markets, a banking system, a central bank, a stable money and a strong public credit. Influenced by
the Dutch Republic, England also managed to have all such elements in the late seventeenth century
and subsequently, the United States had all components in the last decade of the eighteenth century.
It can be seen at that time that financial markets were already functioned properly without the
existence of CRAs because investors had confidence in the governments that issued public bonds.
Most investments in Europe during the nineteenth century

UST Case Solution Essay
Key Issue: Is $1b appropriate to enhance UST's firm value and ultimately shareholder value?
Higher leverage is very likely to create value for a firm considering capital structure change by
exerting financial discipline and more efficient corporate strategy changes.
Before evaluating whether $1b is value enhancing in quantitative measure, ability to cope with pre–
requisite interest payment and potentially dividend payment (possibly dividend growth
maintenance) should be considered.
Required debt rate and pro forma income statement
Risk determinants
Credit rating agencies take a wide range of factors – debt raising purpose, industry outlook,
corporate profile and financial measures into account when performing corporate bond ... Show
more content on Helpwriting.net ...
Pro–forma income statement and interest payment ability
Pro–forma income statement to illustrate interest and dividend payment ability is based on various
assumptions as shown in Exhibit 1. Expected cases are the measures used in the following
discussion. Conservatism is adopted throughout the assumptions especially sales growth rate, credit
rating and Medicaid penalty assumptions.
Pro–forma income statement and key credit rating determinants are shown in Exhibit 2 and 3
respectively. Remaining share no. of 158.3m after repurchase is based on proportional value
addition distribution between cash–out and remaining shareholders and this number is inserted to
calculate earning per share and corresponding immediate share price change after announcement of
repurchase program. According to Exhibit 3 and industrial average of relevant grades, only fund
flow/ total debt and total debt/ capital measures are not comparable with A credit rating. Considering
EBIT and EBITDA interest coverage are two most important criteria and equity market value is so
substantially different from book value which leads to a healthy

Bad Credit Rating Essay
A large variety of factors can affect your credit rating. Perhaps you didn't understand how your
student loans worked when you got out of college, and your credit rating took a hit. Or perhaps you
lost your job and fell behind on your payments a few years ago, and those few months of
unemployment are still hurting your credit score. Here are three tips that will help you secure
financing for a vehicle when you have a bad credit score.
#1 Shop For Used Car Dealers That Cater To People With Bad Credit Scores
One of the first things you should do is find used car dealerships that cater to individuals who have
low credit scores in your area. Many of these dealerships work with private loan providers that
provide them with a cut for setting–up loans; this provides these dealerships with incentives for
helping out individuals with poor credit. Often times these types of dealers will advertise that they
will provide you with financing even if you have bad credit, poor credit or no credit. These types of
dealerships are generally privately owned, smaller dealership. Most larger dealerships associated
with a specific car brand do not target customers with poor credit. ... Show more content on
Helpwriting.net ...
If you want to purchase a vehicle that is worth $15,000 and you have already saved up to $7,500 for
the down payment, that will show a loan provider that you have been able to work hard and save
money, despite having a low credit score. A large down payment will back up your claims that you
are brining in a steady paycheck. The larger the down payment you are able to provide, the more
likely it is that you will get the financing that you need.
#3 Build Up Your Work

Essay On Money Market
Emerging Economies Selected: India and China
Money Market
1. India
It is a market where short–term funds with maturity ranging from overnight to one year in India
which are close substitutes of money even the financial instruments. It had diversified from
conventional platform of treasury bills and call money to commercial paper, certificates of deposit,
repos, forward rate agreements and most recently interest rate swaps.
"The money market fulfils the borrowing and investment requirements of providers and users of
short–term funds, and balances the demand for and supply of short–term funds by providing an
equilibrium mechanism" (Money Market in India, 2017). It serves as a mechanism through which
central bank's intervention in the ... Show more content on Helpwriting.net ...
Commercial Paper
"It is an unsecured, short–term debt instrument issued by a corporation, typically for the financing of
accounts receivable, inventories and meeting short–term liabilities." Maturities on commercial paper
is usually below one year. It's issued at a discount from face value and shows market interest rates. It
has collateral and so it is unsecured. It is usually issued by firms which have high credit rating.
India
It was introduced in India in 1990 and it is issued in the form of promissory note. "It was introduced
in India with a view to enabling highly rated corporate borrowers to diversify their sources of short–
term borrowings and to provide an additional instrument to investors" (Singhania, Singh, &
Prajapat, 2016). "Subsequently, primary dealers and all–India financial institutions were also
permitted to issue CP to enable them to meet their short–term funding requirements for their
operations" (Singhania, Singh, & Prajapat, 2016).
China
"In an effort to promote the direct funding of corporations, improve the liquidity of the shortened of
the interest rate market and foster a more responsive pricing of credit risk, in May 2005 the PBoC
allowed non–financial firms to issue commercial paper (CP)" ("BRICs and Beyond", 2007). At
End–September 2006, this segment of the market was already worth ($33bn, or 1.3% of GDP),
representing just over half of all non–bank corporate interest–bearing liabilities and nearly 5% of the
total market.

The Crisis Of The Fiscal Crisis
The 2007–2008 US 'credit crunch', also known as 'subprime mortgage crisis', is one of the largest
financial distortions that has recently struck US economy and resulted in the huge slump in the
economic activity. Actually, there most likely exists no single reason that has led to the financial
crisis of such degree but rather a simultaneous combination of several practices in the US economy
of that time. Experts usually distinguish the following diverse causes of 2007–2008 US 'credit
crunch': the increase in the spread of the structured finance products which lacked transparency,
deregulation of financial sector and lack of financial institutions' supervision, inappropriate credit
ratings assigned by credit rating agencies on complex financial products, excessive lending activities
that has led to the increase in credit risk, lack of adequate liquid reserves to back the existing
commitments and some others. Generally, all these causes can be divided into two main groups: one
attributed to the fails of government regulations and supervision and the other attributed to the
increased popularity of financial innovations. This essay will discuss all major reason that
contributed to the start of the crunch and prove that credit risk attributed to lending activities is not
the root cause but rather one of consequences of the spread of financial innovations and thoughtless
government policy. The structure of the essay is the following. The essay starts with giving a brief
overview

Why You Need to Do a Credit Rating Check Essay
Why You Need to Do a Credit Rating Check
A credit check is, in simple terms, a way for a financial institution to estimate how well you will
manage credit. Your credit score gives these institutions a way to assess the risk involved in giving
you credit, and helps to decide what kind of interest rates they can offer you. Since your credit rating
will be very important in many of the decisions you make, it is extremely valuable to know where
your score falls and what that number means.
The Importance of Your Credit Rating
Every time you apply for credit of any kind, whether it is a car loan, a credit card, or a mortgage,
your credit score will be a main deciding factor. Often times, the decision isn't necessarily whether
or not the ... Show more content on Helpwriting.net ...
This is simply because each of these companies receives their information from different sources. It
is not that one company is more or less accurate than another; they just don't necessarily contain the
exact same data. A credit report is intended to give a general overview of your past with credit, so
minor discrepancies between reports shouldn't have much of an impact.
How Your Credit Rating is Used
There is no specific system to determine what scores will award what kind of credit, and this
information is never published. It frequently differs between financial institutions, so you may be
offered two different interest rates for a mortgage of the same amount when applying at two banks.
It may seem strange that this process isn't more universal, although it reiterates the importance of
getting a credit rating check. Especially when you are intending to take out credit of any kind, you
should approach this process with an understanding of how credit rating works, and where your
score falls on the spectrum. You want to ensure that you receive the best possible rates and in turn,
save yourself as much money as possible.
Your credit score is something that will stick with you as long as you're alive, so it is important to
take charge as soon as possible. It is vital to your financial security that you get a credit rating check,
and even better to make it annual habit.

The Subprime Mortgage Crisis Devastated The Global...
Writing Assignment #2
Financial Market
Yuxue Zhang
The 2008 subprime mortgage crisis devastated the global financial market. People believed that the
"Big Three" credit rating agencies played a significant role at various stages in the crisis. The
Reuters, in an article published in 2011, even claimed that credit rating agencies triggered financial
crisis. The Reuters believed that Moody's Corp and Standard and Poor's action of downgrading the
rating on complex mortgages securities triggered the worst financial crisis in decades. However, the
problems of rating agencies have existed for quite a long time and accelerated the crash down in
some extend. Therefore, besides the "trigger", I regard the credit rating agencies as the ... Show
Investors assume the credit rating agencies, which full of experienced finance experts, can present a
trust worthy and correct rating of credit risks. By implementing the external credit rating
information, excessive trust in the system of credit rating agencies weakens investors' risk
management practices. Therefore, when those big, authoritative rating agencies rate those subprime
mortgages as AAAs, investors put more money in the subprime market and expected to make big
money. At first, the investors did make a lot of money in subprime investments, and they invested
more and more, until they saturated the market. When the analysts in credit rating agencies
eventually realized the bubble of the subprime market and they began to downgrade large amounts
of mortgage securities, it was too late. When people saw the decline of subprime market and an
abrupt downgrading of mortgage securities, the investors panicked and the market crashed. The
rating from credit rating agencies accelerated the flourish of subprime mortgage market at the
beginning, and eventually pushed the process of the financial crisis. Then, why people should not
trust the credit ratings? In the year 2007, Moody downgraded over 5,000 mortgage securities. The
downgraded mortgage–backed securities were totaled to $1.9 trillion; some securities that had

Deluxe Corporation Case
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By: Michael Malone
Statement of the Problem Rajat Singh, a managing director at Hudson Bancorp, needs to find a way
to rejuvenate the paper check corporation. One main part that needs to be calculated is the
appropriate mixture of debt and equity for the firm. The company needs to determine the correct
mixture so that they can both minimize the cost of capital and increase the shareholders value. I will
analyze the current and future situation of the company, trying to find the correct credit rating to use
that will increase income. With the new credit rating, I will be able to recommend a certain amount
of debt for the company to take on and be profitable.
Facts and Assumptions When trying to accurately calculate the cost ... Show more content on
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Analysis Using CAPM to provide the calculation for the equity, this presents both positive and
negative effects.
Advantages
1. Calculates the amount of compensation the investor demands for taking additional risk 2.
Compares the returns of the asset to the market over a period of time (Beta)
Disadvantages
1. Based on historical data onto the future (Beta is an estimate) 2. Simplifies assumptions about the
market and how investors will actually behave.
Taking the CAPM equation, we were able to figure out eh cost of equity and in its credit range
CAPM = Rf + (Rm–Rf) β
=3.45%+(11.03%3.45%)*0.85
CAPM= 9.89%
With this, we can then find each of the costs for equity by averaging them within each of the bond
rating categories. This showed a very flat performance in cost of equity. I we compare that to the
market beta, our answer for CAPM would change from the 9.89% to the 11.03%. According to
exhibit 8 in the case, a cost of equity of 11.03% is between a BBB and BB bond rating. Therefore, if
they were to repurchase stock from investors, there share prices would in theory go up because they
are investing more and more money into the company. With the three debt instruments in the case,
hundreds of millions of dollars would become readily available to the company and be at their
disposal. Each of the financing opportunities provides their own money in different forms. Great
companies need these different financing ideas to

AAA Credit Rating
Environmentally friendly production of goods and services
Environmentally friendly production is when natural resources are conserved and aren't exploited.
The benefits to this type of production is lower costs (reduce, reuse, recycle), attract new customers
as being environmentally friendly makes a business/country stand out from the rest, and there is
improved sustainability. There are various methods to be applied to the production of goods and
services in order for it to become more beneficial to the environment.
We need to incorporate renewable energy for power and electricity through resources such as
sunlight (solar panels), wind (turbines), rain (micro hydro systems), and geothermal heat (power
plants) instead of using fossil fuels. ... Show more content on Helpwriting.net ...
We need to increase and maintain our free trade agreements so that our international relations
increase so countries can continue to sell and buy products where a larger variety of goods and
services are attainable at a lower price.
Maintenance should be carried out through analysis of the disadvantages of FTA:
An effect of FTA is an increased job outsourcing. Countries concerned about outsourcing can insist
that foreign companies build local factories as part of the deal. They can require that these
companies share technology and train local workers in the latest techniques.
Following that, there is degradation of natural resources through deforestation and strip–mining
which reduce their jungles and fields to become wastelands. As a solution, we should regulate the
environmental impact through environmental safe guard. More labour laws enforcing satisfactory
working

Trust Deed Affects Credit Rating
Will a Trust Deed affect my credit rating?
Yes, a Trust Deed will remain on your credit file for 6 years – or until it completes, in the unlikely
event that it lasts longer than six years. Any default notices that are received after your Trust Deed is
signed, can be back–dated to the date of signing, so they will only stay on your credit file for a
maximum of 6 years from the date your Trust Deed is signed.
Is there a minimum debt level for a Trust Deed?
Yes, you need to owe a minimum amount of £5,000 to your unsecured creditors. Any secured loans
(such as mortgages and hire purchase) are not included in this amount. Similarly, student loans and
Court Fines cannot be included in a Trust Deed.
How long will it take to set up a Trust Deed?
The timeframe to set up a Trust Deed varies depending on your individual circumstances. However,
on average it will take between 8–10 ... Show more content on Helpwriting.net ...
Can I borrow money whilst in a Trust Deed?
It is advisable not to take out any further credit. However, in some circumstances this is
unavoidable. We would always advise you to discuss this with us before taking out any further
credit.
Any credit taken out after you have signed the Trust Deed will not be included within your Trust
Deed as a debt – and you will then have to make the monthly payments to this debt separately out of
your income. It may be difficult to make the monthly Trust Deed payment and repay this debt at the
same time – which could lead to difficulties.
It is likely that any credit taken out once you're in a Trust Deed will attract a high interest rate, as
your credit rating will be adversely affected while you are in the Trust Deed. With any credit taken
out after the Trust Deed is signed, the creditor could still take legal action against you if you were to
fall behind with payments.
What happens after I complete my Trust

Marketing Analysis : Mgm Resorts International
MGM Resorts International
Denise Watson
Professor Framan
July 21, 2015
Target Market
Geographical Segmentation
MGM serves both local and international customers for their range of businesses. The company
targets nearby, destination and convenience customers by operating in strategic locations and states
Demographic markets
Previously, casinos were known to serve the older generation as their target market. However, the
resort style amenities of MGM appeals to the younger generations. The entertainment segment also
attracts the younger generation with resort–style complexes, gourmet restaurants, and trendy
nightclubs. MGM appeals to both older and young customers.
Behavioral segmentation
The MGM attracts five types of customers; recognition seekers, escapist, reward seekers,
socializers, and professionals. Escapist seek a getaway to entertainment sections and resorts located
in different areas. The reward seekers are driven to visit the business due to their vested interest in
rewards that casinos tend to offer. Socializers require a form of engagement where they get to meet
different people as a form of distraction out of the ordinary way of life. Professionals make a living
out of casinos and pay close attention to what a casino offers.
Psychographics
The casino marketing is directed to individuals who want to have fun and those who are willing to
risk their mortgages (Klebanow, 2009)
Importance of identifying target markets to MGM Resorts International.
Not

Financial Innovation Is Constantly Reshaping The World
Financial innovation is constantly reshaping the world. However, the subprime crisis since 2008 has
drawn great attention all over the world, highlighting the limitations and hazards of financial
innovation. The financial turmoil began in the United States, at which time, the subprime mortgage
lenders were going bankrupt, investment funds were forced to close and the value of the stock
declined significantly. According to Sánchez, the Deputy Governor of Mexican Central Bank, the
subprime crisis since 2008 was mainly caused by the phenomenon that the innovation of many
complex financial instruments were extensively used without appropriate regulation (Sánchez,
2010). As financial innovation involves a large number of products and cannot analyze all of them,
this essay will only focus on MBS, which has been one of the most important and widely–used
financial innovation since the 1960s. By the end of 2006, the total amount of MBS was $6.4 trillion,
49% larger than the market for Treasury debt (Fabozzi, Bhattacharya and Berliner, 2010).
Although MBS is only one form of financial innovation, this essay aims to demonstrate that it was a
major contributory factor to the subprime crisis in 2008. The first part will introduce the background
of MBS, then analyze the reason for the subprime crisis. After that, it will find out problems the
financial crisis exposed. Finally, it will recommend building a regulatory system to reduce the risk
of MBS. It will be argued in this essay that

Moody's Conflict Of Interests
There was clearly a conflict of interest in Moody's. This occurred in terms of the profits that were
received from clients. Unlike a normal credit rating company, they were selling their credit rating to
the highest bidder and whoever paid can have their rating be in their favor. Naïve to their actions,
they basically in return caused mortgage lenders to push out as more and more loans. Moody's was
irresponsible in their decision making and should have performed a better approach to the
impending trouble that was rapidly approaching. Moody's lowered their ratings to lure in lenders
and with the intention of getting them to use their services over their competitors such as S&P and
Fitch. In the timespan of two years (2003–2005), WaMu and Washington Mutual the numbers of
subprime loans tripled from 11% ... Show more content on Helpwriting.net ...
The main conflict that has plagued Moody's was they were paid by the same institution that issued
the bonds it rated. The core of Moody's business was rating the safety and the security of the bonds
issued by companies, government, and the public agencies alike. Their main goal was to satisfy the
bond issuers who naturally would seek out the highest possible rating. However, this conflicted with
investors who were more interested in seeking out a naturally accurate rating that was not false.
Moody's was also tasked to rate to the creditworthiness of the various branches of the mortgage–
backed security. Investors had no ideas as to how to assert the safety and security because products
were grouped and sold in multiple shares to other investors. To resolve the conflict the relationship
between the issuer of bonds and rating agencies should be better handled. This can occur in the form
of the Securities and Exchange Commission to determine the best possible approach for this to
occur. As well as for the house of representative to audit credit rating companies, investors, and

Financial Management Of The Healthcare Industry
Slide 1 Credit in the Healthcare Industry Hospitals are seen as organizations established to protect
the health and enhance the quality of life of the communities they serve. While this is indeed true,
hospitals are also a business, and as such have the burden of remaining profitable. Chief Financial
Officers of health care organizations are tasked with the daunting job of balancing the budget. In an
industry of constantly changing methodology and technological advances, credit ratings are
increasingly important. IT IS important to understand what lenders look for when they lend money
because companies often need to borrow money for various reasons: increase cash reserves,
refinance existing debt, pay regular operating expenditures, research and development, capital
expenditure, product development, expansion into new markets, strategic acquisitions, etc. There are
five criteria that most lenders use to assess a borrower's creditworthiness: 1. Capacity to generate
sufficient cash flows to service the loan; 2. Collateral to secure the loan in case the borrower
defaults; 3. Capital that shareholders have invested in the business; 4. Conditions prevailing in the
borrower's industry and broader economy; and 5. Character and track record of the borrower and the
borrower's management. Taken together, these five criteria indicate a borrower's ability and
willingness to repay its debts. It is important to keep in mind that lenders don't give equal weight to
each criterion

Business Matrix
ACCOUNTING TRANSPARENCY
Charles Katoroogo
Prof Brandy Havens
ACC 303
12/1/2013
ACCOUNTING TRANSPARENCY
Accounting is mainly concerned with general rules, concepts and principles that are established with
the purpose of governing different fields of financial reporting. Accounting principles are also
known as accounting principles and guidelines, these acts as the base on which more complex and
critical rules are based. The authority responsible for issuing the accounting standards (i.e. financial
accounting standard board) also uses these basic principles to formulate the accounting standards in
a more efficient manner.
Generally accepted accounting principles (GAAP) consist of various rules and principles which are
used for ... Show more content on Helpwriting.net ...
Ratio Analysis is used for evaluation of performance of the company by internal as well as external
users. These comprises of managers, equity investors, long–term creditors and short–term creditors.
The managers are interested in the profitability and asset utilization ratios of the company as their
incentives and appraisal are based on the profitability and efficiency of asset utilization of their
respective divisions. Higher the profitability, higher is the chances of promotion. Thus, managers are
always very keen to analyze the different financial ratios of the company.
Those who invest in equity are always interested in knowing about the profitability, Market and
solvency ratios of the company. Higher profitability ratio is helpful in increasing the market value of
the company. The market ratios like dividend yield, price earnings ratio, earnings per share etc. is
useful in determining the exact position of the company's market share. Favorable market ratio
indicates the increase in market capitalization for investors and vice versa. The equity investors are
also interested in knowing the solvency ratio as high debt will pose danger to the ownership of the
company. Higher debt is harmful for the liquidity position of the company and in some worst cases;
the company even faces the risk of liquidation.
The long–term creditors and short term creditors are majorly concerned about the liquidity and
solvency position of an organization. The increase in the debt

Ust Case Solution
Key Issue 2: Is $1b appropriate to enhance UST's firm value and ultimately shareholder value?
Higher leverage is very likely to create value for a firm considering capital structure change by
exerting financial discipline and more efficient corporate strategy changes.
Before evaluating whether $1b is value enhancing in quantitative measure, ability to cope with pre–
requisite interest payment and potentially dividend payment (possibly dividend growth
maintenance) should be considered.
Required debt rate and pro forma income statement
Risk determinants
Credit rating agencies take a wide range of factors – debt raising purpose, industry outlook,
corporate profile and financial measures into account when performing corporate ... Show more
content on Helpwriting.net ...
UST dividend payment ability can be hampered given the following risk factors: anti–trust dispute is
resolved in favor of competitors and UST is subject to further penalty, corporate restructuring or
new entrants are encouraged to enter the moist smokeless market; management's continued
lackluster non–core investment performance further harms the company's return over investment;
Price value further prey market share of premium products while premium R&D is not catching up
with the pace.
Valuation enhancement and alternative options
Valuation enhancement
Management considering share repurchase program should weigh its benefit of financial discipline,
efficient corporate strategy implementation and utilization of tax shield against the downside of cost
of financial distress. It's not the possibility of bankruptcy that causes concerns among equity holders
regarding extent of leverage but the direct costs (legal, liquidation, administrative etc.) and indirect
costs (deteriorated corporate image, management time and attention, agency costs of value–
destructing investment, distress asset sales etc.). Exhibit 4 lists the key assumption inputs of
approximating quantitative firm value/ equity value accretion. Levering UST to a larger extent by
adding $1,000m does increase firm value.

Valuation addition distribution
However, additional analysis should be done to differentiate value distribution of $328.9m in the
case of levering up $1,000m between cash–out

Credit Rating Case Study
The evidences from previous studies investigating the impact of credit rating changes are mixed.
Early studies conclude that rating change announcements do not have incremental information
contents. Weinstein (1977) studies the behavior of corporate bond prices during the period
surrounding rating change announcements using monthly data. He reports no evidence of significant
bond price reactions during the 6 months prior to rating change announcements. However, he finds
some price changes during the period from 18 to 7 months before the rating change announcement.
He believes the information which causes the price reactions also leads to the rating change and the
rating change announcement is 6 months lagged. In addition, he reports little ... Show more content
on Helpwriting.net ...
However, they find no evidence of positive abnormal returns for upgrade announcements.
Furthermore, they discover that significant stock price reactions are associated with announcements
of stocks being added to Standard & Poor's Credit Watch list when potential upgrades or
downgrades are indicated.
Hand et al. (1992) examine the daily excess returns of additions to Standard & Poor's Credit Watch
list and classify rating changes as expected and unexpected. They suggest that some information
with credit rating changes has already been available to investors from other sources because the
addition to credit watch list indicates a potential upgrade or downgrade. As suggesting by the market
anticipation theory, the result shows much stronger stock price reactions to unexpected rating
changes than to expected rating changes. Besides, they find significant abnormal stock returns with
downgrade announcements but less prominent impact with upgrade announcements, which is
consistent with the findings from previous studies. In addition, the negative excess returns are more
significant for bonds at speculative grade than for bonds at investment grade.
Although many studies find that equity market reacts negatively to credit rating downgrades, Goh
and Ederington (1993) argue that this reaction should not be expected for all

Deluxe Corporation: Recommendations for the Company's...
Case #35
Deluxe Corporation
Synopsis and Objectives
In July 2002, an investment banker advising Deluxe Corporation must prepare recommendations for
the company's board of directors regarding the firm's financial policy. Some special considerations
are the mix of debt and equity, maintenance of financial flexibility, and the preservation of an
investment–grade bond rating. Complicating the assessment are low growth and technological
obsolescence in the firm's core business. The purpose is to recommend an appropriate financial
policy for the firm and, in support of that recommendation, to show the impact on the firm's cost of
capital, financial flexibility (i.e., unused debt capacity), bond rating, and other considerations.
This ... Show more content on Helpwriting.net ...
4. Using Hudson Bancorp's estimates of the costs of debt and equity in case Exhibit 8, which rating
category has the lowest overall cost of funds? Do you agree with Hudson Bancorp's view that equity
investors are indifferent to the increases in financial risk across the investment–grade debt
categories? 5. Is Deluxe's current debt level appropriate? Why or why not? 6. What should Singh
recommend regarding: * the target bond rating * the level of flexibility or reserves * the mix of debt
and equity * any other issues you believe should be brought to the attention of the CEO and the
board
Epilogue
On August 5, 2002, Deluxe Corporation announced plans to raise its debt level to $700 million.
During a subsequent conference call with analysts, Deluxe Corporation's chief financial officer
(CFO), Douglas Treff, said:
We ... believe Deluxe is underleveraged. We believe our steady cash flows put us in a position to
increase our debt level up to $700 million and still maintain a strong investment–grade rating. The
use of debt will lower our overall cost of capital and as a result increase returns on capital invested.
We expect that the debt will be a combination of both long– and short–term borrowings.
The company also announced a plan to repurchase up to 20% of Deluxe Corporation's stock, or 12
million shares. "At current prices, we believe the repurchase of

Diageo Plc
1. How has Diageo managed its capital structure? Do you agree it is conservative?
Diageo was born as the result of merging Grand Metropolitan plc and Guinness plc. Since the
beginning the newly formed company maintained conservative financial policies inherited from the
two parent companies; and in general from the British financial management style. There are many
indications that confirm that Diageo has managed its capital structure using a conservative approach.
Firstly, it is worth mentioning that the company has maintained levels of debt way below its
capacity to repay, maintaining the EBIT/interest ratio above optimum levels
Secondly, we can see that the credit rating of the company is A+, practically an average of what the
parent ... Show more content on Helpwriting.net ...
2. How would you apply the Equilibrium Theory to Diageo in order to determine the firm's capital
structure policy? Would this analysis result in Diageo being a firm with high or low leverage
capacity?
Applying the equilibrium theory to Diageo we can segregate the scale into "benefits of debt" and the
"costs of debt". The analysis of each component of the theory is as follows:
Benefits of debt:
Tax savings – Based on the calculations provided in the case it can be estimated that Diageo has the
capability to borrow more debt to some extent without losing it credit rating. This additional debt (if
required) will bring additional tax savings in the future (given that Diageo will be able to maintain
positive earnings). It is also important to note that the marginal tax rate of 27% will substantially
contribute towards the savings.
Management discipline – Diageo's management has maintained a strict proportion in terms of debt
and equity thereby not borrowing capital aggressively to alleviate the value of company on pretense.
They have paid out dividends in a regular manner in the range of 35–38% of the operating profit.
Costs of debt:
Bankruptcy cost – The financial statements of Diageo indicate that they have been able to generate
steady cash flows and that revenue volatility has been low. A careful analysis of the case also

Home Depot Credit Rating
Evaluation of credit rating Memorandum: Credit Rating assignment: Home Depot, Inc. After
analysing the financial statements of Home Depot, we have allocated a "C" rating of credit risk. The
proposal is to start with the "C" rating and then to either upgrade to a "B" rating or to be down
graded to a "D" rating. The reason for such a decision is discussed below. Home Depot has a current
ratio of 1.19 to 1 which means that it's current assets covers it's current liabilities by 1.19 times. This
is the lowest that it had been for the last 10 years against an average of 1.61. A current ratio of 2 or
higher would usually be a qualifier for good credit risk. The low current ratio of Home Depot will
increase the credit risk. Working ... Show more content on Helpwriting.net ...
Gross Profit Rate: The average year on year increase in gross profit rate over the past 10 years was
19.85% (Annexure 2, Table). This indicator peaked in 1999 at 32.54% and gradually reduced over
the past 6 years and ended at 11.83% for the 2005 financial year which is the lowest over the last 9
years. This is of major concern as it seams that the company can't stop the deterioration in the gross
profit rate. Net income as a percentage of sales: The average year on year increase in net income as
a percentage of sales over the past 10 years was 5.91% (Annexure 2, Table). This is the one
indicator that Home Depot has managed to keep stable for the past 10 years. It had shown steady
growth over the years and the 7.20% achieved in 2005 is the highest in the 10 year window period.
ii Conclusion After calculating and analyzing the ratios and their trends the following conclusion
regarding the profitability of Home Depot can be made: Growth in Net Sales reduced with 1.3%
between 2004 and 2005 while cost of sales increased with 1.4% over the same period resulting in a
reduction in the gross profit rate. In order to conclude on the net earnings, a trend was calculated
with regards to the return on invested capital (assets). The trend, as computed from the table and
graph in annexure 2, shows

List Of Descriptive Statistics Of Rate, The Index (...
Table 4 summarises descriptive statistics of RATE, the un–weighted (weighted) risk disclosure
index (RDI) as well as SSB for all bank fiscal years, as well as for each of the eight firm years
investigated, separately from 2006 to 2013. Table 4 shows a number of remarkable outcomes. First,
it reports that there is a high amount of variation in ratings between banks. For instance, RATE
ranges from a minimum of 1 (Default) to a maximum of 19 (AA– which mean very high credit
quality) with the median RATE 14.12 (Good credit quality) that indicate most banks in MENA have
good rating, but there has been a continuous decreases in ratings during 2008 and years after which
reflects the impact of continues crises beginning with GFC in 2007 and credit crunch in 2010. For
instance, the average banks ratings is 14.4, 14.29, 14.09, 13.77, 13.69 and 13.84 in 2008, 2009,
2010, 2011 and 2012, but RATE begin to increases in 2013 which indicates recovery in MENA
banks from GFC crisis effects. Finally, there is evidence that the level of listed bank RATE before
GFC is higher than during and after GFC. Insert Table 4 about here Table 4 shows a high variation
degree in risk disclosures between MENA banks. For example, un–weighted RDI ranges from a
minimum of 1 (1.04%) to a maximum of 84 (87.50%) with the mean banks disclosing 56.24
(58.58%). Risk disclosure level (percentage) indicate a significant level of discretion in the bank
management 's decision regarding risk disclosure level which are

Goodrich-Rabobank Interest Rate Swap Essays
Goodrich–Rabobank Interest Rate Swap
1. How large should the discount (X) be to make this an attractive deal for Rabobank?
2. How large must the annual fee (F) be to make this an attractive deal for Morgan Guaranty?
3. How small must the combination of F and X be to make this an attractive deal for B.F. Goodrich?
4. Is this an attractive deal for the savings banks?
5. Is this a deal where everyone wins? If not, who loses?
Introduction:
Players: Morgan Bank, Rabobank, and B.F. Goodrich, Salomon Brothers,
Thrift Institutions and Saving Banks
Goodrich:
In early 1983, Goodrich needed $50 million to fund its ongoing financial needs. However, Goodrich
was reluctant to borrow (short term debt) from its ... Show more content on Helpwriting.net ...
Also, Rabobank had never borrowed in the Eurobond market prior to the deal with Goodrich, and
Morgan. Since Rabobank conducted only small amount of dollar based business, and most of the
dollar denominated assets were loans whose rates floated with LIBOR. Historically,
Rabobank was able to fund these loans through the following:
· Interbank deposits at LIBOR.
· Prime Eurodollar CD?s.
This was the first time that Rabobank would venture into the Eurobond market. Note: Because of
Rabobank?s AAA rating it would be able to borrow in the Eurodollar market at very competitive
rates.
Morgan Guaranty Bank:

Morgan acted as an intermediary guarantor between the Goodrich, and
Rabobank to implement the swap. Morgan was merely agreeing to act as a conduit assuming no
default payments. In fact, if Goodrich defaulted it could not collect the floating rate stream from
Morgan. The swap was a two way or no way transaction. This was true for the bilateral agreement
between Rabobank, and Morgan also.
Morgan had an AAA credit rating, and an international reputation, this guarantee effectively lowered
whatever credit risk might have otherwise been present in the swap agreement to acceptable levels
for
Rabobank.
In commissions, Morgan received an initial one time fee of
$125,000.00, and an undisclosed annual fee for each of the next 8 years. The going rate for

Diageo Essay
Diageo Case
1. How has Diageo historically managed its capital structure?
Diageo sought to maintain the low–debt (conservative) financial policies of the Guinness and Grand
Met with goals to keep * its interest coverage ratio (EBITDA / Interest Payments) between 5 and 8
and * its EBITDA / Total Debt around 30–35%
Although not quite as conservative as other UK firms (with Equity/Assets ratios of 42%), it was
successful in achieving these goals and retaining a credit rating of A+ (a rough average of Guinness'
AA and Grand Met's A ratings) by re–levering the firm via * issuance of debt to repurchase and
retire shares in fiscal years 1998 and then again in 1999 * and ensuring that cost of capital was
managed down at ... Show more content on Helpwriting.net ...
The selling of Pillsbury would ensure Diageo 33% ownership of the General Mills/Pillsbury
business without active managerial involvement and the Burger King spin off allowed floating of
shares without tax penalties. In general, divesting of Diageo's non–core business allowed for
infusion of capital that allowed new internal investments and external acquisitions in businesses that
can be more easily integrated to Diageo's core competencies and can generate growth in stable, top–
line revenues that are more reflective of the industry cost of capital.
However, it should be noted that Diageo's Food and Fast Food segments had relatively stable cash
flows similar to its Alcohol segments; the food segments even exhibited higher average ROA over
time than industry samples (~19.8 to 21.0% vs. 15.4%). However, volatility is lower for the industry
sample than Diageo's food segments although that may be reflective of the much smaller sample
size for calculating Diageo's ROA.
4. Based on the results of the model, what recommendation would you make for Diegeo's future
capital structure? How might you adjust the recommendation from the model to adjust for any
missing risk factors?
In generating countless Monte Carlo scenario outputs for tax shield gains vs. cost of financial
distress, the model simulates

What Was the Main Cause of the Financial Crisis in 2007-2009?
The intention of this essay is to provide an in depth and critical analysis of the financial crisis that
took place between 2007–2009, in particular focusing on some key issues raised by the Foote,
Gerardi and Willen paper 'Why did so many people make so many Ex Post bad decisions?' Whilst
there were many contributing factors, it is clear that a specific few played a particularly dominant
role, primarily the 'Bubble Theory', irresponsible regulation, toxic CDO's and $62 trillion of CDS's.
'That's what bubbles are: they're examples of mass delusions' (Norcera, 2011). Bubble theory's are
by no means a new school of thought, in fact they date back to the Dutch Tulip bubble in the 1630's
and it is these types of bubble that are believed, by ... Show more content on Helpwriting.net ...
Even the largest of investment banks such as Goldman Sachs and Morgan Stanley were so confident
in their products that they too maintained large holdings of 'super senior' tranches on their balance
sheets, thus wiping billions of dollars of their balance sheets too. However whilst it is true that the
bankers over zealous nature and thirst to maximise profits lead to the breaching of standards and
forfeit of reliable credit checks, they were still allowed to do it. This leads to the plausible
involvement of the credit rating agencies and the Governments lack of regulation and in some cases
irresponsible regulation.
A major concern surrounds the actions of US credit rating agencies, namely Standard & Poor and
Fitch. Whilst they may not have anticipated the financial crisis, they, to a large extend suffered from
institutional failure. The mathematical models that had been developed and used by the credit rating
agencies were inadequate to deal with and provide accurate data concerning the riskiness of sub
prime mortgages. The mathematical modelling teams continued to use traditional out–dated 30 year
mortgages to asses the likelihood of default. Mortgages issued after 2004 were based on a different
credit rating tool, know as FICO. A FICO score takes into account 5 factors to help determine a
borrowers credit risk, length of credit history and the various types of credit used, the current

Discuss the Causes of the Sub-Prime Crisis and the Parties...
Discuss the causes of the sub–prime crisis and the parties responsible for such a crisis.
Sherman Oh E S
Principles of banking & finance (PBF)
Mr Marvin Ang
26th January 2013
According to www.investopedia.com, the world "subprime" defines to "A classification of
borrowers with a tarnished or limited credit history" and that is what led to the titanic crisis of 2008–
2009. This essay will explore the events, which eventually led to many mortgage delinquencies and
foreclosure of these sub prime borrower's homes, causing the insurance company AIG and many
other banks to foreclose thus forcing bail out money from the American government to prevent the
next great depression.
In the past, traditional mortgage loans that could be acquired ... Show more content on
Helpwriting.net ...
A rating agency was required find out the creditworthiness of an investment. This can apply to any
company, bank, government or an investment. There were namely 3 famous rating agencies
involved in the crisis namely, Standard & Poor's (S&P), Moody's, and Fitch Group. To
give an example of a rating would be like the big internet search company "Google" would be given
a rating like AA+ i.e. a high grade. Many of these CDOs however were given good ratings such as
AAA+ the highest rating possible given by any rating agency. These CDOs did not deserve the
rating as the CDOs were made of mortgages of lenders who were unable to pay their mortgage. The
reason for such a high rating was simple. In the past, rating agencies were paid by the buyer to rate
the assets they were going to invest in. In 1970s however, the systems changed and now it was the
seller that was paying the agency for the ratings, on a per–rating basis. This gave incentives for
rating agencies to rate more and be more generous in their rating. A conflict of interest rose and
rating agencies were now earning large amount of profit for these CDOs. They were more then
happy to rate them. Moody's earned nearly US$1 billion a year from rating in 2005 and 2006. With
an average of $300k per rating why wouldn't they want to rate more? Aside from that, they had to
give a good rating due to

Improving The Efficiency Of The Market
To improve the efficiency of the market, CRAs act as reliable information providers to collect and
process information pertinent for the assessment of credit quality, and disseminate the results to
financial market participants such as investors and portfolio managers. The rating information
provided by CRAs will reduce information asymmetries in the market, and this will lead to a higher
level of investor confidence, increased activities in the market and lower transaction costs.
To begin with, information asymmetry refers to a situation in which the issuer of a debt instrument
who is the borrower has more knowledge about its own creditworthiness than the investors who are
creditors. This information asymmetry discourages investors ... Show more content on
Helpwriting.net ...
A downgrade will only occur in the event of major changes in the issuer's financial status, which
means that a rating will not be reviewed frequently. The credit rating assists in providing the issuer
with a broader range of financing opportunities in a manner that is more efficient than in traditional
loan banking. In this way, the transaction costs are lower and the pools of investors are larger. A
rating also has influence on the interest rate of securities since highly–rated issuers have to pay less
interest to compensate the risk of investors.
Undoubtedly, both private and institutional investors are likely to depend on credit ratings as a
standard to assist them in making more knowledgeable investment decisions. It is the same for
portfolio managers who can use rating as guidance when they have to deal with a wide range of
financial products originating from different countries. Furthermore, credit ratings can be beneficial
for other problems, especially the issue of collective action among dispersed debt investors, and the
issue of principal–agent between investors and their agents. It may not be possible for a single bond
investor to observe the performance of a corporation during a difficult period of time. If a company
carries on its business without any measures being taken, the values that investors are entitled to
recover could be reduced. A downgrade of credit rating by CRAs can serve as a warning for
investors to

Managing Accounts Receivable, An Essential Part Of...
Financial managers have typically been involved in the high–level decision making regarding the
financial health of a company. However, the function of the financial manager has changed over
time to include more detailed aspects of the company's cash flow, including accounts receivable.
Accounts receivable is vital to a company's cash flow operations, if you cannot collect the money
from your customers, you cannot pay for materials, expenses, or employees. If your customers are
not paying on time, or not paying whatsoever, a business will inevitably lack the cash flow it
requires to pay its own expenses. Consequently, it is essential for companies to have comprehensive
policies on the managing of their accounts receivable because it has proven to be an essential part of
business activities. The management of accounts receivable has a direct influence on shareholder
value, on the capability of a company to meet its short–term obligations, such as, paying expenses
and creditors. This paper will address how to effectively manage accounts receivable, by use of a
credit policy and why it so critical.
Credit policy refers to procedures that outline how the company will determine which customers are
extended credit and how much, the credit terms, the thresholds to establish on unpaid balances and
how to manage delinquent accounts. A company should have a comprehensive, practical, and
reliable credit policy established, prior to offering credit to its customers.
The amount

Bad Credit Rating
Credit Repair Tips – How to Fix Your Bad Credit Rating
By Lisa Brewster | Submitted On May 27, 2011
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Do you have a bad credit rating and are not sure how it happened? You are not alone. Possibly
millions of Australians have a bad credit rating, and many of us are unaware we have black marks
against our name until we apply for credit and are flatly refused.
What is a bad credit rating?
A bad credit rating is generally ... Show more content on Helpwriting.net ...
Then the credit repairer negotiates with the creditor who initiated the listing on our behalf to remove
the default.
This can also often involve lengthy requests and submissions of documentation until an agreement is
reached by the creditor and the repairer to remove the offending black mark.
Not every credit file is suitable for credit repair. The credit repair company can review our situation
and determine whether our case is worthy of pursuing.
It is advised to research the company and ensure they are a reputable credit repairer before we
outlay any money. The best way of knowing we are dealing with a professional repairer and not a
professional con artist, is to check these things:
Can we verify their street address?
Are they an Australian company in Australia?
Do they publish their costs?
Are we required to pay the full costs up front?
Do they provide testimonials from past clients?
A reputable credit repair company (the good ones) will be well worth our investment because they
will be up front about what they can do for us. If and when they do remove our black marks – we
will have back the financial freedom we

Credit Rating
When you deal with any lender, it is of great advantage to have a good or very good credit rating.
Suppose you know that your mortgage will have to be renewed in two years. You may need to either
repair your credit and/or improve your credit scores.
First, buy the personal credit reports from both Equifax and TransUnion, which cost $25–$30 each.
Note that these use different credit score systems, so you cannot compare them directly.
Second, scan the reports for any outright errors or incorrect records. If someone once initiated
collection proceedings against you, that may still be listed as an open/unpaid debt, even though it
may have been long–settled with the former creditor. Correct these erroneous entries by contacting
the credit reporting agency.
Third, you may be able to find a friendly mortgage broker who is willing to discuss your ... Show
Consider joining and using financial services from a credit union. Because these organizations are
dedicated to their clients, who are also the owners of the credit union they are using, you may get
many unexpected benefits which are not general available when you go to the "traditional" banks
and trust companies.
As just one example, consider the profile of the credit union Meridian in Ontario, Canada: with over
70 years of banking history, Meridian is Ontario's largest credit union, with more than a quarter of a
million Members, including over 19,000 business Members. Meridian has $9.9 billion in assets
under management and delivers a full range of financial services online, by phone, by mobile and
through a network of 64 branches and 7 business centres. Meridian Members also have access to
THE EXCHANGE® Network, with more than 2,400 no–fee ABMs across Canada and 340,000
ABMs in the United States (for more information, visit

Current Uk Economic Conditions
Information and definition
UK
The United Kingdom of Great Britain and Northern Ireland is also known as UK, United Kingdom
or Britain. United Kingdom is a member of European Union, G 8, G–20, World Trade Organization,
Common Wealth of Nations, United Nations Security Council, NATO, Organization for Economic
Cooperation and Development (OECD). United Kingdom is a well developed country. It has a rich
economy brought up by economies of its individual countries England, Scotland, Wales and
Northern Ireland. Landon which is the capital of UK and England is the most important financial
center for international business and commerce. UK is one of the most important globalised
countries of the world.
GDP
GDP, or Gross domestic product is a ... Show more content on Helpwriting.net ...
Leading up to the crisis, thanks to a buoyant housing market and cheap and easy credit, consumer
spending had been rising in the years. "The fall in output was largely due to a drop in mining and
quarrying, after maintenance delays at the UK 's largest North Sea oil field," the ONS said. The
decrease in aggregate demand was caused by the credit crunch and job fears, which meant
consumers cut spending, deciding to pay off debt and save instead; in addition, a fall in demand and
the global economic crisis hit businesses and make aggregate supply decrease. Businesses also
found that borrowing from banks – which most rely on – was harder or more expensive. Moody 's
now expects that economic growth will be "sluggish" into the second half of the decade. This means
it will take longer for the government to reduce its budget deficit – the amount it has to borrow
every year because it is spending more than it receives in tax revenue. This situation was caused by
a series of reasons. The lack of growth makes cutting the deficit more difficult because when an
economy is not growing, less tax is coming in from companies and individuals, while the
government has to spend more on welfare payments, such as unemployment benefit. And as the UK
's debt problem will take longer to get under control, there will be a deterioration of the country 's
"shock–absorption capacity". In other words, it will make it harder for UK to cope with any external
problems, such as a worsening of the crisis

What Is Credit Rating?
Kyle, F
I think other classmates replied well. As Zach mentioned, Table 5–1 clearly shows the bond with a
lower rating pays the higher yield. The bond rating is determined by credit risk underlying an bond
issue or an issuing company. Rating agency may select some financial ratios that are believed to
affect the default risk of a subject company. Those ratios are liquidity ratios, asset management
ratios, profitability ratios, and debt–related ratios that are believed to affect the credit risk of a bond
issue or an issuing company. Then, those ratios are blended using appropriate statistical methods to
create a scoring index model which determines credit rating of an issuing company and/or its
security issue.
As discussed in M03L01, ... Show more content on Helpwriting.net ...
The bond issue with a protection provided by an insurance company would have less default risk
than the bond without such insurance.
Thanks.
JYS
Zach,
Good question. Bond duration is one of complicated topics related to fixed income security. That is
why duration concept was just slightly touched in my lecture notes. That is why mathematical
concepts of the duration was placed in the appendix.
Since you raised questions related to bond durations, let me briefly reply them.
As discussed in the lecture notes, duration is nothing but a metric to quantify bond price risk (price
sensitivity to a change in interest rate). Let me give you a naïve example, but it really helps
understand the duration concept. Supposed that there are two securities: A and B. A gives you $1
next year and $999 in 100 years whereas B gives you $999 next year and $1 in 100 years. Both A
and B have the "SAME" maturity of 100 years.
Which security seems to be riskier? Apparently, you would say security A because relatively large
cash flow is paid further in the future. It is clear that nominal maturity does not represent bond risk.
Rather, a kind of effective maturity that considers the present value of the cash flows (i.e., the speed
of cash flows) could represent better the risk underlying a bond issue. The metric developed based
on this idea is called Macaulay duration. That is why the

Dodd Frank Reform And Consumer Protection Act
Dodd–Frank
The full name of the bill is the Dodd–Frank Wall Street Reform and Consumer Protection Act, but it
is mostly known as Dodd–Frank. The Dodd–Frank Act is a United States federal law, which is
divided into sixteen titles that places major regulations on the financial industry with the purpose of
restraining another major financial market collapse. The stated aim of the legislation is: "To promote
the financial stability of the United States by improving accountability and transparency in the
financial system, to end "too big to fail", to protect the American taxpayer by ending bailouts, to
protect consumers from abusive financial services practices, and for other purposes" (Thomas,
2010).
Due to the Great Recession of the late ... Show more content on Helpwriting.net ...
The Office of Financial Research is designed to support the Financial Stability Oversight Council in
range of researching and collecting data. The Director has supreme power and may require any
financial institution (bank or non–bank) to provide any needed information for reseaching and
analyzing. The Office can also standardize the way financial data is reported, with the constituent
agencies having three years to implement new guidelines.
Investor Protection Measures and Reform "The Act reviews the powers and structure of the
Securities and Exchange Commission (SEC), credit rating organizations, and the relationships
between customers and broker–dealers or investment advisers" (David S. Huntington, Paul, Weiss,
Rifkind, Wharton & Garrison LLP, 2010). It provides corporate governance and executive
compensation reforms, such as proxy access, chairman and CEO disclosures, broker discretionary
voting (Corporate Governance); say–on–pay, say–on–golden parachutes, broker discretionary,
compensation committees, executive compensation claw backs (Executive compensation). In order
to be active and operational, these provisions require further action by the SEC, the stock exchanges
or other regulators except the say–on–pay, say–on–golden parachute and broker discretionary voting
requirements. Most of

Notes On Credit Rating Agencies

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Notes On Credit Rating Agencies