Monetary Policy Essay Example | Topics and Well Written Essays - 2000 words

Monetary Policy - Essay Example A stock has no maturity date; the investor owns a portion of the business. Financial institutions move money from those with excess to those with shortage through financial instruments. Supply, investors, and demand, entrepreneurs, dictate the terms and conditions of the trades facilitated by the financial institution. Commercial banks, savings banks, formerly savings and loans, thrift institutions, securities traders and investment bankers, finance companies, mutual funds, insurance companies and pension funds all serve as financial institutions, but with differing regulations (Saunders and Cornett, 2007). The History and Current Role of the Federal Reserve System Mayer (2001) defines a central bank as a bank of issue, meaning it creates currency to represent wealth. Many American patriots like Tom Payne and Tom Jefferson thought only state chartered private banks should issue bank notes because governments that can pay bills by printing money generally did so. Money is a commodity, just like bread, eggs and butter. If the supply of money increases without value to back it up, inflation occurs and all prices rise (56). A central bank is a lender of last resort. When all banks clear their transactions through a central bank, the central bank smoothes volatility problems through loans. All banks remain solvent by leaving reserves at the central bank, and then the bank lends money to create more reserves. (57) The central bank regulates financial institutions. (79) In 1791, Alexander Hamilton convinced President George Washington to implement a central bank over the protests of Jefferson and Madison. By 1811, Madison became President and did not renew the charter. The end of the... Mayer (2001) defines a central bank as a bank of issue, meaning it creates currency to represent wealth. Many American patriots like Tom Payne and Tom Jefferson thought the only state chartered private banks should issue bank notes because governments that can pay bills by printing money generally did so. Money is a commodity, just like bread, eggs, and butter. A central bank is a lender of last resort. When all banks clear their transactions through a central bank, the central bank smoothes volatility problems through loans. All banks remain solvent by leaving reserves at the central bank, and then the bank lends money to create more reserves. The central bank regulates financial institutions. (79) In 1791, Alexander Hamilton convinced President George Washington to implement a central bank over the protests of Jefferson and Madison. By 1811, Madison became President and did not renew the charter. The end of the Civil War brought in a new central bank which, too, lasted about 20 yea rs. World War I, 1913, brought the Federal Reserve Act to form a compromised central bank with 12 regional banks. This compromise did not regulate disputes among the banks or with Washington, D.C. (Wells, 2004). As long as the gold standard was in place, the 12 banks could not print more money than was reserved. Friedman states (1994, p.250) â€Å"The 1974 removal of the prohibition against private ownership of gold in the United States was, somewhat paradoxically, a tribute to the end of gold’s monetary role†.

The Financial Enviroment of Healthcare Organizations Essay

The Financial Enviroment of Healthcare Organizations - Essay Example Sharing financial information with the employees of a business should be done by corporations even if they are not required do so such as private firms. A lot of different aspects of the financial performance of the firm should be released. The four major financial statements of a company are the income statement, balance sheet, statement of retained earnings, and the statement of cash flow (Garrison & Noreen, 2002). These statements are prepared upon completion of the accounting cycle. An employee of the firm can perform an evaluation of the financial performance of the company using ratio analysis if he is given the financial statements of the firm. The five categories of ratio analysis are liquidity, asset turnover, profitability, market, and financial leverage. Analyzing the cost structure and expenses of a firm is important for an employee. Companies whose cost structures are too high are at risk of downsizing or closing its facilities (Capella, 2008). The income statement shows the expense accounts of an organization. Profits are obtained by subtracting total expenses from the revenues of a firm. Costs are classified as fixed or variable costs. Fixed costs do not change over time, while variable costs change as a company increases or decreases production output (Thomason, 2014). An important accounting metric that stakeholder groups such as employees need to understand and be informed about is the breakeven point. The breakeven point is the amount of sales that a company needs to generate to cover all its fixed and variable costs. Profit at the breakeven point is cero. The formula to calculate the breakeven point in units sold is fixed expenses divided by unit contribution margin. Unit contribution margin is calculated dividing sales price minus variable cost per unit. The employees must know whether its company is breaking even because the solvency of the firm is dependent on it. Controlling the inventory of a business is