Term Paper Definition of Banking: It is thus clear that the underline principle of business of banking is that the resources mobilized through the acceptance of deposits must constitute the main stream of funds which are to be utilized for lending and investment purposes.
When one looks at these cases, one search as to who is to blame? No doubt the CFO of these companies dint perform their duties with the utmost due diligence or that SEC were not monitoring the regulations carefully but since the problem between these corporate failure is general and persistent, it can be determined that only a systematic problem have been the root of such failures i.
There are a lot of books which are applicable on the companies rather than a single set for example, GAAP, SEC filings; acquisition accounting and tax accounting are just a few. This results in confusion as different treatments are available for one problem which leads to inconsistency and management is able to dress the financial statements in their favor.
Therefore it is necessary to have an accounting system that provides a disciplined approach yet flexible in order to guide the companies through the principles without showing instability. Recent Corporate Failure However with further breakdowns of companies since these major upsets it is also learnt that gaps in accounting system is not to be blamed entirely as weakness in corporate culture has also caused failures.
With greed for power and wealth, failure to maintain effective internal controls, overpowering CFOs, uncontrolled expansion, and hurried acquisitions are just a few reasons of failures which a prospective investor should be alert of.
Editorial Review Body The above mentioned factors were merely a gist of why corporations failed. As facts have revealed that most of the corporate failures were once highly successful; later lead to inconsistencies due to this success.
Attitude changes once success is found among companies that constitute the reason why companies out grow. Pride dwells in companies which also bring the entities down like Microsoft were fortunate to have an antitrust suit stopped against them in time.
But the most natural aspect of all this is that companies loses their security upon having a taste of a lot of profit. This had been the case WorldCom where window dressing took place simply because the normal business was unable to produce great numbers to be reflected in the balance sheet.
Causes of Corporate Failure Australia has followed a similar path as well. In the early s, exchange rate, foreign bank entry, interest rate and exchange control deregulation caused fundamental increase in investment in Australia as the world financial market was open to get in Australia.
But going from the most stringent regulations to an unregulated market, caused a downfall on the economy as many entities failed, one after the other.
Regulation and the Regulatory Burden Even though an environment of uncertainty was created by such events, which has soured interest rates, the finance market is inspecting the corporate entities performance in terms of borrowing more than ever before. Lenders are afraid to invest in companies as they are constantly in search for any indication of failures.
This is why accurate means of forecasting failure is important resulting in a move towards systematic way. Predicting Corporate Failure The government of Australia introduced another methodology to further strengthen its market and economy by improving the framework of corporate governance.
Effective regulations of corporate governance prevent the chances of fraud or misrepresenting their true figure so that before the corporation collapses, strong indications would alert the investors and hence prevent such magnitude of failures.
By respecting the privileges of shareholders and making timely and unbiased disclosure to the financial statements will result in more transparency. This can be seen in an example where the CEO of Aristocrat, operator of poker, failed to meet these two criteria and showed incompetency which cause major financial issues for Aristocrat; also damaged its goodwill in the eyes of the current and prospective shareholders.
Therefore it is of utmost importance for the companies to realize that this framework is not merely the rule of law but serves more than just guidelines as failure to comply with the requirements will result in penalties. Strengthening Corporate Governance Regulations Recent turmoil in corporate failures had prompted a legislation response in USA thereby introducing what is known as Corporate Social Responsibility.
Due to the lack of governing and accounting practices the politicians were required to step in to pass Sarbanes-Oxley Act through the Congress in order to protect the reliability in the American business.
Recent Experience with Corporate Governance in the USA Sarbanes-Oxley appreciates the value of stockholder as they are the reasons why companies exist.
In this way the act strengthens the agency relationship of the directors towards the stockholders as stewards.
Recent Experience with Corporate Governance in the USA Failure to understand the significance of the corporate culture has led to many failures in America. Similarly the role of the directors is to safeguard the assets of the company and to look at the affairs of the company therefore they can never be full time employees.
That is why it is quite often that management sees the directors with a conflicting eye. However with the introduction of Sarbanes-Oxley, same queries which used to pose problems are now being accepted as another function of the directors.
This oversight function of the directors to check management for committing crimes is certainly the right way of securing corporations from failing.
Federal Reserve through short term loans to ease the liquidity position in the global market. Even though most of the investment is worthless at this point but the government hopes to make some, if not all, from this spending over a few years.
Central Banks move to Restore Confidence, Treasury secretary says the rescue plan, news of which rallied markets, is needed to restore the financial sector Conclusion Epitomizing, we can see that the increased government regulation has improved by a major fold on the American and Australian economy.
Stocks were down by major percentage as investors were no longer feeling safe in investing in financial sector, more recently since the collapse of Lehman Brothers Co.
Such events have changed the social economic relations between the government and the public at large as institutions were politically driven.
However the objective of this assistance was not to bail out companies from the crises but to tighten the rules on the instruments in such a way that government is able to secure its funds and prospects of such downturn do not arise anymore.
This can be seen in the Australian economy, reformed during the Howard Government by empowering the independent agencies to scrutinize the need for growing the regulations, in effect reducing the prospects of such downturn from occurring again.
Retrieved September 20,from the Internet Explorer Website:In the early s, exchange rate, foreign bank entry, interest rate and exchange control deregulation caused fundamental increase in investment in Australia as .
SCHEME OF WORK / 1 September / 13 comments. PRESENTATION NATIONAL HIGH SCHOOL, BENIN CITY. SCHEME OF WORK FOR PHE. JSS 1. 1ST TERM. Definition, nature, scope and objectives of physical education. Interest Rate Liberalization in China financial deregulation, interest rate liberalization, China however, there still remains a floor on bank lending rates and a ceiling on deposit rates.
The deposit rate ceiling, in particular, appears to bind, as deposit rates have remained clustered at their benchmark, and real deposit rates have. Mar 01, · The Federal Reserve can control the money supply through open market operations, changing the required reserve rate, the percentage of deposits that banks must maintain on reserve as cash deposits at the Federal Reserve banks, and by changing the discount rate, the rate of interest at which the Fed lends money to banks (Federal Reserve System).
By the end of , the prime interest rate imposed by commercial banks reached %. On September 14, , the interest rate for FHA and VA single-family insured or indemnified home loans.
its interest rate deregulation on deposits that has resulted in increased output and productivity (Gilbert and Wilson, ). papers dealing with d eregulatory initiatives during the mid s. Most of these savings bank customers held low average balances and.