9ed FIN421 PP_CH001

2 92 5050 70 4129 1536 48847 71932 57 21 679 1000

Info iconThis preview shows page 1. Sign up to view the full content.

View Full Document Right Arrow Icon
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: p. business 8,038 1,298 13,419 8,792 6,585 11.2% 1.8% 18.7% 12.2% 9.2% 5,050 7.0% 4,129 1,536 48,847 71,932 5.7% 2.1% 67.9% 100.0% Mutual fund shares Debt securities Other Total financial assets TOTAL Liabilities and Net Worth $ Billion Mortgages Consumer credit Bank and other loans Security credit Other Total liabilities % Total 10,215 2,404 384 316 556 13,875 14.2% 3.3% 0.5% 0.4% 0.8% 19.3% 58,058 71,932 80.7% 100.0% Net worth 1-22 Domestic Net Worth, 2011 Assets $ Billion Commercial real estate 14,248 Residential real estate 18,117 Equipment and software 4,413 Inventories 1,974 Consumer durables 4,665 TOTAL 43,417 Note: Column sums may differ from total because of rounding error. SOURCE: Flow of Funds Accounts of the United States, Board of Governors of the Federal Reserve System, June 2011. 1-23 Major Classes of Financial Assets or Securities Debt – Money market instruments Money Bank certificates of deposit (US Treas.bill,CD) – Capital market instruments Capital Bonds (Treasury bonds, Bonds “junk” bonds) “junk” Common stock (equity) (equity) Common Preferred stock (equity) (equity) Preferred Derivative securities (OPTIONS and FUT.) to Derivative hedge risks or transfer them to other parties. hedge 1-24 Financial Markets and the Economy Informational Role of Financials Markets – The Google effect Consumption Timing Allocation of Risk Separation of Ownership and Separation Management Management – Agency Issues (conflict of interest between Agency managemers and shareholders) solution: stock-options stock-options 1-25 Crisis in Corporate Governance Accounting Scandals – Examples – Enron and WorldCom Misleading research reports Auditors watchdogs or consultants – Example – Arthur Andersen and Enron Sarbanes-Oxley Act – Tighten the rules of corporate governance Tighten 1-26 Th...
View Full Document

Ask a homework question - tutors are online