• Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

Balance sheets and banks assets. Likely effects of the recession on business.

Extracts from this document...


Global Business Context-Spring assignment The purpose of a balance sheet is to ascertain the financial position of a business at a certain moment in time .The balance sheet is comprised of assets that the business hold , and claims (in this case liabilities) that are held against the business. An asset is basically a resource that is held by the business, these can either be tangible assets (assets that have a physical substance and can be seen or touched) or intangible assets (assets that have no physical substance but can still benefit the business like patents). Liabilities represent the claims held against the business by either individuals or organisations. These can refer to the supply of materials on credit or the lending of money to a business .These claims will eventually need to be paid back. The relationship between the two is simple. If a business needs to acquire assets, it needs to raise the necessary funds in order to so. These funds may be provided by the owner (capital) or by an source outside of the business (liabilities).Therefore Assets= Liabilites+Capital. This is the money 'put-up' by the bank's owners that is used to cover any potential losses on assets incurred by borrowers defaulting on their loans, or losses made on any investments that might subsequently collapse. ...read more.


The toll on US titans is worse: Bear Stearns gone; Lehman Brothers, gone; Merrill Lynch swallowed by Bank of America; Citigroup bailed out. Even the survivors, Goldman Sachs and Morgan Stanley, were forced to take government money." With the public and the economy still reeling from the last credit crisis, unemployment levels are still high and people are finding it increasingly hard to find jobs. This is causing a fall in demand across for the country for goods and services which in turn is meaning supply needs to fall resulting in more job cuts and in some areas the main employer (often for non-skilled labour) closing down. This vicious circle means the public have to tighten their belts and many are defaulting on mortgage payments. More and more households are falling into negative equity and are being forced to take up a higher standard variable rate on their mortgage. This isn't a great scenario to be faced with especially when more and more are becoming unemployed, in this case people are going to struggle to pay off debts, loans, credit cards, and overdrafts which in turn will mean bank assets are going to take a very big hit which could spark a second credit crisis. ...read more.


The problem with this is that these companies were being bled dry not once but twice and in some cases even three or four times not leaving much of a company to be saved. However this is all one persons opinion in this book and we will need to look at several other resources to argue that there is a chance we could experience another credit crisis. Another factor that some experts say could lead to another credit crisis is the fact that the economy is slowing at an alarming rate, far faster than expected. Financial authorities fear that this could cause an even bigger downturn as this is going to create a lot more bankruptcy. This means banks are going to have to yet again raise more capital this year in a marketplace that is scarce of potential investors ultimately culminating in a lack of credit as banks will continue to experience greater losses. To combat this best thing that can be done is to encourage banks to start lending again and that the government may need to enforce capital raising in the early months of 2010 in order to increase credit availability. ...read more.

The above preview is unformatted text

This student written piece of work is one of many that can be found in our AS and A Level Accounting & Financial Management section.

Found what you're looking for?

  • Start learning 29% faster today
  • 150,000+ documents available
  • Just £6.99 a month

Not the one? Search for your essay title...
  • Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

See related essaysSee related essays

Related AS and A Level Accounting & Financial Management essays

  1. Sources Of Finance

    So could benefit more from purchasing the asset its self as it would be worth the cost as it would be use continuously and is an important part of the functioning of the business, rather than hiring it as it would mean paying one fixed fee in stead of a

  2. A2 Business CourseWork

    For instance a few years ago organic products were introduced following an explosion of people wanting to buy them. Tesco had to meet this demand and provide organic products that were widely available to the general public at a reasonable price.

  1. Financial Ratio Analysis.

    2.2.3 Revenue Recognition Accrual accounting is based on the matching of cost with the revenue they generate. It is crucially important under this convention that we can establish the point at which revenue may be recognised so that the correct treatment can be applied to the related costs.

  2. Sources of Finance

    (Source of reference: http://forums.forbes.com/forbes/board/message?board.id=entreforum&message.id=399) 3.2 Cons of Equity Financing The disadvantages of equity finance are: Costly and Time Consuming: Raising equity finance is costly and time-consuming. Business may suffer as times are devoted to the deal. Potential investors will seek background information on owner and his business and they will closely scrutinize past results and forecasts and will delve the management team.

  1. Assess Effects of Corporate Personality

    The company did not perform well so Mr. Salomon had to sell his debentures and shortly later the company went into liquidation. The liquidator accused Mr. Salomon of fraud and he argued that Mr. Salomon should be liable for the debts to the unsecured creditors as he was the principle and the company his agent.

  2. Advantages and Disadvantages of Credit Cards

    This is similar to taking an extremely expensive loan. When you withdraw cash from an ATM machine using your credit card, you begin paying your interest immediately. Unlike when you purchase an item with your credit card, you pay the interest after the date the payment was due. Also you have to pay fee of up to 2 to 4 percent of the amount advanced.

  1. Describe the key features of UK and EU nancial service legislation and regulation likely ...

    of state support, and the administration of other regulatory rules including the national minimum wage. They have have 3 strategic objectives. Maximise revenues, Transform tax and payments for customers and design and deliver a professional, efficient and engaged organisations.

  2. Roles of Banks and Building societies.

    Hope & Co. Defoe Fournier & Cie. Close Brothers Morgan Grenfell & Co. Greenhill & Co. Robert Fleming & Co. Kuhn, Loeb & Co. Hambros Bank Hill Samuel Brown Brothers Harriman & Co. Samuel Montagu & Co.

  • Over 160,000 pieces
    of student written work
  • Annotated by
    experienced teachers
  • Ideas and feedback to
    improve your own work