Lecture 2 - Newspaper extracts

Lecture 2- - Extracts from recent newspaper articles illustrating leverage 1 Carolyn Cummins'A low-risk approach follows lessons learnt Sydney

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Extracts from recent newspaper articles illustrating leverage: 1. Carolyn Cummins 'A low-risk approach follows lessons learnt", Sydney Morning Herald Business Day, 1 March 2010, p. 10 The level of debt is always at the forefront of anyone's mind. From the household budget to buying an investment property (being an office or a house) and as an investor. ... [The gearing ratio is] also the main ratio that has been causing so much pain across the whole economy The people in the US who, in 2006 onwards, were offered loans at incredibly low [historically] interest rates, and took them up with a relish. We now know them as subprime loans. They were the ones that consumers took up at 1 to 2 per cent for the first couple of years, only to have the reset values at 18 per cent. . .. It was the high gearing that brought the [Australian] property sector asunder. . .. It was the same when the trusts and indeed the rest of the market, even down to the humble milk bar, geared up to buy more and more assets. . .. "Gear up" was the catchphrase. And the banks were happy to oblige even though margins on loans were at least 200 basis points [2 per cent] higher than non-commercial borrowings. But
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This note was uploaded on 08/18/2011 for the course ACCT 1001 taught by Professor Luder during the Three '08 term at University of Sydney.

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Lecture 2- - Extracts from recent newspaper articles illustrating leverage 1 Carolyn Cummins'A low-risk approach follows lessons learnt Sydney

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