• 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

    Using the businesses retained profit to expand the business has no disadvantages of its use as it is being used to develop the business and take it to a different level of success. The only down side could be if the businesses used all of its retained profits to develop

  2. A2 Business CourseWork

    However this reduction in costs can have a side effect such as the little money going to suppliers, most notably milk suppliers which was a huge news headline a couple of years ago. Through these three areas Tesco has aimed to provide better products for all its customers and at

  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. Sources of finance for a new business.

    A variable interest rate is where the rate of interest charged over the life of the loan could go up or down according to the current interest rates set by the Bank of England - known as the bank base rate.

  1. The maintenance of accurate records supplies the company with the financial data that assists ...

    For companies that exceed certain size criterion (where the annual turnover and balance sheet total for the year (unless a charitable company) are not more than �5.6m and �2.8m respectively) As stated earlier the companies' annual reports will be audited by an independent auditor; if a company fails to comply

  2. Advantages and Disadvantages of Credit Cards

    So, you are actually spending a huge amount of money. If you know disadvantage of using credit card, you can save this amount of money too. Credit card impacts our life significantly. A lot of individuals cannot pay off their credit card bill.

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

    This has been replaced by the Consumer Rights Act which gives you rights if something goes wrong with a service you pay for. The Consumer Rights Act introduces a 30 day period to get a refund on your product, after one failed attempt by the retailer to repair or replace

  2. Roles of Banks and Building societies.

    Chorley & District Building Society, The City of Derry Building Society Coventry Building Society Cumberland Building Society Darlington Building Society Derbyshire Building Society (A trading division of Nationwide Building Society) Dudley Building Society Dunfermline Building Society (A trading division of Nationwide Building Society)

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