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4500.10 - Topic 1 Finance and Global Competition Purpose To...

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Topic 1: Finance and Global Competition Purpose: To integrate major concepts of macro finance and business strategy on a global scale How should we think about corporations? Consider the corporation as an intermediary between investors and the basic activities of the firm. The securities issued by the corporation represent income from a package of activities. To the investors, any particular corporation represents a small part of a diversified portfolio. Corporation is part of a webwork of interactions among various economic sectors.
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Highlights of Macro-Finance Theory Efficient money and capital markets are essential to assure adequate capital formation and economic growth. Capital is created when resources used to make tools for future use Since antiquity, cultures have devised means to share the ownership of major capital assets (such as ships) in order to diversify the risk of loss Highlights of Macro-Finance Theory Money is something accepted as a means of exchange, allowing values of different things to be expressed in terms of money (money is a unit of accounting) thus, money can be used to store value. • Eurocurrency Examples: Eurodollars, Euro-Yen Regulatory Issues Role in international markets
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Highlights of Macro-Finance Theory Primary securities: economic unit adds financial liabilities Indirect securities: issued by financial intermediaries, which in turn hold primary securities examples: bank deposits and insurance policies Highlights of Macro-Finance Theory Derivative securities: value derived through contractual relationship with primary securities
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