Free Essay

Finance 190 Acc Paper

In: Business and Management

Submitted By dzhalilatakeev
Words 1178
Pages 5
Dzhalil Atakeev
Finance 190
Professor Shlyakhov
10/21/2013

Asian Currency Crisis The Asian Currency Crisis started in Thailand. The crisis just reflected structural and policy misinterpretation of the Asian region. Fundamental imbalances triggered the currency and financial crisis in 1997, due to crisis markets overreaction and herding caused the plunge of exchange rates, asset prices and economic conditions. Everything started from Thailand, before 1997 the economy grew was very high in Thailand, it was averaging 9% per year. The rate between USD and Baht was $25 per 1 baht. The 1997 was crucial for Thailand because massive speculators attacked Thai baht. The spark on Asian crisis was when prime minister of Thailand announced that he would not devalue the baht, and government just couldn’t defend baht, which was fixed to several currencies, one of the dominant components was USD. The decrease in economy of Thailand cause massive layoffs in finance, real estate, and construction that resulted many people to return their villages and countries. The Thailand baht was devaluating and by 1998 it reached lowest value of 58 baht over 1 USD. Without any support from foreign reserves Thai government had to float the baht, so that way baht was set on currency market. Since baht was pegged to other currencies crisis spread to another Asian countries. By 2001, Thailand's economy had recovered. The increasing tax revenues allowed the country to balance its budget and repay its debts to the IMF in 2003, four years ahead of schedule. The Thai baht continued to appreciate to 29 Baht to the Dollar in October 2010.
According to many economists the Asian crisis was created by policies that distorted incentives within lender-borrower relationship. The resulting large quantities of credit that became obtainable caused a highly leveraged economic climate, and pushed up asset prices to an unmanageable level. These asset prices eventually began to collapse, causing individuals and companies to non-payment on debt commitments. The depreciation or devaluation of the Thai baht, wave after wave of speculation hit other Asian currencies. One after another in a period of weeks the Malaysian ringgit, Indonesian rupiah and the Singapore dollar were all marked sharply lower. According to Charles Hill, with its foreign exchange reserves down to $28 billion, Malaysia let its currency, the ringgit, float on July 14th, 1997. Prior to the devaluation, the ringgit was trading at $1=2.525 ringgit. Six months later it had declined to $1=4.15 ringgit. Singapore followed on July 17th, and the Singapore dollar (S$) quickly dropped in value from $1=S$1.495 prior to the devaluation to $1=S$2.68 a few days later. Next up was Indonesia, whose currency, the Rupiah, was allowed to float on August 14th. For Indonesia, this was the beginning of a precipitous decline in the value of its currency, which was to fall from $1=2,4000 Rupiah in August 1997 to $1=10,000 on January 6th, 1998, a loss of 75%. The main drive of Asian Currency Crisis was currency devaluation. That’s how all the nearby countries fell in crisis just like Thailand. Many Asian economies had started their economy progress all over again. They lost many decades of economy progress due to crisis. Beyond this, though, the crisis has raised a series of important policy questions about the sustainability of the so called Asian Economic Model, the role of the IMF, and the virtues of floating and fixed exchange rates. The crisis also has significant implications for international businesses. For a decade, the Asian Pacific region has been encouraged by many as the future economic engine of the world economy. Businesses have invested billions of dollars in the region on the hypothesis that the rapid growth of the last decade would continue. The Asian financial crisis throws the risks related with doing business in developing countries into sharp focus. For most of the 1990s, multinational enterprises have viewed Asia as a future economic powerhouse, and invested accordingly. This view in the latter part of 1997 and early 1998, the IMF provided $36 billion to backing reform programs in the three worst-hit countries—Indonesia, Korea, and Thailand. The IMF gave this financial support as part of international support sets totaling almost $100 billion. In these three countries, unfortunately, the authorities' initial uncertainty in introducing changes and in taking other measures to restore confidence led to a worsening of the crisis by causing declines in currency and stock markets that were greater than a rational assessment of economic essentials might have justified. This overrunning in financial markets aggravated the panic and added to problems in both the corporate and financial sectors. In particular, the domestic currency value of foreign debt rose sharply. While uncertainties continued longer in Indonesia, reinforced commitments were made elsewhere to carry out adjustment reforms. as not without foundation.
The Asian crisis did undeniably have some painful effects on companies with major activities and investments in the region’s concerned economies. For example, when the Malaysian government void its $5 billion Bakun hydro-electric damn project this hurt ABB, the large European based engineering firm that was a prime contractor on the project. Boeing expressed concern that the Asian crisis may result in as many as 60 orders for large jet aircraft being postponed or cancelled
The western countries had more advantage because many investors start investing in Europe and USA comparing to Asia. It brought more developing to western countries. Furthermore, several firms are reportedly taking advantage of the changing circumstances in Asia to increase their rate of investment in the region. Plunging stock markets across the region have left many Asian companies trading at prices that are less than their break-up value, while the IMF’s rescue packages have required Korea, Indonesia, and Thailand to relax restrictions on inward foreign direct investment. As a result of these factors, it is reasonable to expect firms from outside of these countries to start buying the assets of troubled companies while they can be purchased for cents on the dollar. Indeed, there are signs that that is starting to happen. In December 1997, for example, Citicorp was reported to be examining the books of Thailand’s seventh largest bank, First Bangkok City Bank, with a view to making an acquisition. Citicorp was also reported to be looking for acquisitions in South Korea
Finally, it is worth emphasizing that despite its dramatic impact, the long run effects of the crisis may be good not bad. To the extent that the crisis gives Asian countries an incentive to reform their economic systems, and to initiate some much need restructuring, they may emerge from the experience not weaker, but stronger institutions and a greater ability to attain sustainable economic growth.

Bibliography
Giancarlo Corsetti, Paolo Pesenti, Nouriel Roubini,What caused the Asian currency and financial crisis? Japan and the World Economy, Volume 11, Issue 3, October 1999, Pages 305–373
Kaufman, GG., Krueger, TH., Hunter, WC. (1999) The Asian Financial Crisis: Origins, Implications and Solutions. Springer
Ries, Philippe. (2000) The Asian Storm: Asia's Economic Crisis Examined…...

Similar Documents

Premium Essay

International Finance Paper

...International Finance Paper Leonel A. Santana FIN/419 October 11, 2012 Florentino Lopez International Finance Paper To comprehend how worldwide banking has made it easier for Wal- Mart to attain its growth plan, one has to understand the contents of the worldwide banking process. According to financial experts worldwide investment banking includes acquisitions, mergers, underwriting, distributing equity, debt, financial restructurings, derivative securities, and divestitures. As far as Wal-Mart is concerned acquisitions and mergers have allowed them to establish and expand its being there in nations not fond of global nations; namely India and China. (Wal-Mart, 2010). With the world’s population at 6.8 billion and with China and India’s combined population approximated at 2.5 billion; both countries make up almost 40percent of the world’s population. Trying to tap into the biggest markets in Asia offers vast potential for expansion and profits for Wal- Mart. On the other hand India and China prove to be difficult markets an American company to go into because the government lacks related transparency, and discriminates American firms. To rise above the difficulties of foreign investments and increase its presence in China and India, Wal-Mart is relying on merging and using joint ventures. Wal- Mart’s venture consists of a 35 percent interest in China’s BCL (Bounteous Company Limited), and a joint......

Words: 305 - Pages: 2

Premium Essay

Finance Paper

...agencies. Now that we know what the Fed is, let’s turn to its most important function: regulating the U.S. money supply. But first we have to understand what the money supply is. Just about everyone expects to be paid in money. If you show up with money—at least in its appropriate form, hardly anyone will turn you away. In other words, money is a widely accepted means of payment. But money is more than cash. Cash, or currency, is paper bills and coins, which serve as a quick and efficient way of making small transactions. But currency is not so useful for larger transactions, especially between businesses. Often it is easier to pay by check or debit card (which can be thought of as an electronic check) or by credit card (and then pay your bill later by check). For larger purchases, you might transfer money from a savings account to a checking account and then pay by check or debit. All these means of payment are money but they are not currency. The most important assets that serve as means of payment in the U.S. today are: 1. Currency—paper bills and coins 2. Total reserves held by banks at the Fed 3. Checkable deposits—your checking or debit account 4. Savings deposits, money market mutual funds, and small-time deposits Figure 14.1 shows the magnitude and proportions of the major means of payment in the United States (there are also some smaller items, such as traveler’s checks, that we have omitted): Figure 14.1   Major Means of Payment in the......

Words: 9471 - Pages: 38

Premium Essay

Finance Paper

... | |The key metrics such as Average Occupancy Rate and Average Income per Bed in use per day were below the industry leaders. | |Intense competition from industry major players such as Fortis healthcare and Max India in the Gurgaon region. Such players have large scale and expertise to | |penetrate faster than smaller players like GHRC. | |The consolidated Debt-Equity ratio is at 2.82 as on June 30th 2011. | |On a consolidated basis, the company will have to raise additional finances to fund OFHPL’s Rs 227 crore 700 bed hospital project at Faridabad. The current issue | |objects do not cover this project. | |Valuation: | |At the issue price 175-180, the consolidated EPS for FY’11 (on post issue and warrant conversion equity) works out to Rs 9.8-10 and P/E 17.9 –18.5 times. Similar | |sized player Fortis Malar Hospitals’ consolidated EPS for FY’11 is Rs 2.9 and it trades at P/E of 9 times.  ...

Words: 2421 - Pages: 10

Premium Essay

Global Finance Environment Paper

...Global Finance Environment Paper FIN/403 May 4, 2008 Globalization refers to the merging of national markets into one huge global marketplace. In today’s market, selling internationally is much easier due to falling barriers in cross-border trade. Now businesses don’t have to be industry giants to operate and succeed in global markets. Although it can be beneficial to offer a standard product that can be used worldwide, significant differences still exist between national markets such as cultural differences, consumer taste differences, product preferences and legal regulations. It is important to define and understand these differences when merging into national markets. Globalization is inevitable and it’s happening at an astonishing speed in nearly every market possible. The technology era that we are in has enabled businesses to join forces like never before and we are seeing significant changes in the global marketplace. There are main drivers in globalization and this paper will define three of them, as well as describe the risks associated with financial investing, and explain the importance of cultural sensitivity and ethics in global finance. Drivers of Globalization Market drivers Domestic markets are saturated and growth opportunities are often times limited. Expanding globally opens up many new opportunities allowing for real growth within a business. The following lists in detail the specific market drivers that play a key role...

Words: 1180 - Pages: 5

Premium Essay

Finance Paper

...Financial Statements Paper Phillip Carter ACC/290 November 19, 2012 Michael Olsen Financial Statements Paper There are four basic financial statements involved in the basic accounting process. These reports summaries the financial activity of a company over a specific time period. The first of fore is the balance sheet. The balance sheet reports assets and claims to assets at a particular point in time. Claims to assets are divided into two categories; claims of creditors and of owners. This relationship is where the name balance sheet comes from (Wiley Plus, 2012). Assets must balance with claims to assets. For example the balance sheet lists assets such as cash, accounts receivable, equipment and buildings as well as, land. Additionally, the balance sheet outlines liabilities such as accounts payable and notes payable. Moreover, the balance sheet brings to bear the owners’ equity. Consequently, liabilities and owners’ equity should balance with a company’s assets. The balance sheet is a report on the company’s resources. This information can be useful to internal customers in management rolls to determine how much cash is on hand. Additionally this information is useful to external stakeholders such as creditors and investors who can use the data to determine if the company will be able to repay their debt (Wiley Plus, 2012). The second financial statement we will discuss is the Income Statement. This statement lists the company’s revenues against its expenses....

Words: 614 - Pages: 3

Premium Essay

Finance Paper

...Bachelor of Commerce: Finance & Economics Specialist (Effective 2012/13) 1. Program Overview & Required Courses Overview and Summary •This is a four-year honours program which leads to the Bachelor of Commerce •This Specialist requires 10.0 RSM + 10.0 non-RSM, with 13.5 specified FCEs •10 RSM = 4.0 required + 2.0 specified electives + 4.0 unspecified electives •10 non-RSM = 1.0 MAT + 6.5 ECO + 2.5 unspecified FAS electives •RSM100Y Introduction to Management •ECO100Y Introduction to Economics •MAT133Y Calculus and Linear Algebra * First-Year Requirements Upper-Year ECO Requirements (i) Upper-Year ECO Requirements (ii) •ECO204Y/ECO206Y Microeconomic Theory and Applications •ECO208Y/ECO209Y Macroeconomic Theory •ECO220Y/ECO227Y Quantitative Methods in Economics ** •2.5 from any 300+ ECO Upper-Year RSM Requirements (i) •RSM219H Introduction to Financial Accounting •RSM222H Management Accounting I •RSM230H Financial Markets •RSM330H Investments •RSM332H Capital Market Theory •RSM333H Introduction to Corporate Finance •0.5 from: •RSM250H Principles of Marketing •RSM260H Organizational Behaviour •RSM270H Operations Management •RSM392H Strategic Management •1.0 from: •RSM430H Fixed Income Securities •RSM432H Risk Management for Financial Managers •RSM433H Advanced Corporate Finance •RSM434H Financial Trading Strategies •RSM435H Futures and Options Markets •RSM437H International Finance •0.5 from: •RSM295Y/296Y/395Y Special Topics: Summer Abroad •RSM437H......

Words: 1126 - Pages: 5

Free Essay

Islamic Finance Research Paper

...Islamic Finance is a financial system that doesn’t work like other conventional banking systems. It follows the Islamic law, Shariah, which doesn’t allow certain aspects of a normal banking system such as usury and speculation. There are some main principles to be followed in Islamic banking. First of all, it prohibits interest, or Riba. Riba is forbidden in Islam, and therefore Islamic banking system adopts the principle of profit and loss sharing. It also prohibits uncertainty, gambling, and prohibits certain products and industries such as alcohol and tobacco. Islamic Finance needs to be in accordance with the Shariah. All products and contracts follow Islamic principles that conventional financial systems do not, such as interest and risk sharing, and uncertainty. Conventional financial systems have never worked this way and it worked for them for many years until they were hit by the financial crisis. The crisis had a minimal impact on the Islamic financial systems because they did not comply with all the factors that created the crisis in the first place. There were 3 main factors in the creation of the financial crises. First, subprime loans, which was lending to certain people who did not have a good credit history and were bound to default. The banks than charged them with higher rates that increased their risk of defaulting. Secondly, there was securitization, which was creating securities from un-liquid assets. This process is used by banks to create securities......

Words: 2899 - Pages: 12

Premium Essay

Finance Terms and Roles Paper

...Finance Terms and Roles Paper Finance is simply the management of money. It is also described as the study of how people and businesses evaluate investments and raise capital to fund them (Mayo, 2012). When one think of finance, the first thing that comes to mind is cash flow (the amount of cash a company spend and receives.) The financial aspect of business includes receipt of cash, sales, management of finances, amongst other financial transactions. Loans and investments into a business is one of the first portions business owners seek knowledge in. Most first time business owns seek out loans and investments for startup money. Finance is an important aspect of business and in everyday situations. An efficient market is when all of the market’s participants can see the values of a public company at any given moment. The importance of an efficient market is there are not any over or undervalued stocks because all stock is traded based on information that is available to everyone. In this market businesses are able to raise money. A primary market is a financial market in which new securities (tradable assets) are bought and sold the initial time (Mayo, 2012). On the other hand, a secondary market is a market where previously issued securities are bought and sold (Mayo, 2012). Companies do not receive any additional money in a secondary market. A loss is a loss and a profit is a profit. Risk is the chance investors take when investing money into a business. Investors......

Words: 516 - Pages: 3

Premium Essay

Principles of Managerial Finance Syllabus - Acc

...PRINCIPLES OF FINANCE 1303 FALL SEMESTER 2014 16-WEEK SEMESTER 1. Instructor Information: Professor: Jake Costin Office: Rio Grande Campus Phone: 512.461.4151 E-mail: jcostin@austincc.edu Office Hrs: 8:40 to 9:40 (after class or by appointment) 2. Course Description: BUSG 1303 PRINCIPLES OF FINANCE (3-3-0). Personal and business financial dynamics including monetary and credit theory, cash inventory, capital management, and consumer and government finance with emphasis on the time value of money. Skills: R ( ) Course Type: W 3. Required Textbooks/Materials: “Principles of Managerial Finance” Brief 6th Edition by Lawrence J. Gitman 4. Instructional Methodology: Instruction will be based on lectures and the required reading from the required text. All tests will be given in the classroom during class times. 5. Course Rationale: The course will provide an overview of managerial finance with focus on important concepts such as: the time value of money, risk and return, interest rates, and stock and bond valuations. Additionally, consideration will be given to both long and short term investment and financial decisions. 6. Course Objectives: Understand the following: a. Financial Statement Analysis b. Cash Flow and Financial Planning c. Time Value of Money d. Risk and Return e. Interest Rates, Stock and Bond Valuations f. Capital Budgeting g. Cost of......

Words: 1066 - Pages: 5

Premium Essay

Finance Paper

... College of Business and Finance The MBA Program Financial Management (FINC 501) 1st Semester (2012/2013) Final Exam Instructor: Dr. Wajeeh Elali Date: December 13, 2012 Time: 6:00pm -8:00pm |Student Name: | |Student ID: | ***Suggested Solutions*** INSTRUCTIONS: □ This is a CLOSED BOOK examination. □ You are allowed TRANSLATION dictionaries ONLY. □ You are permitted noiseless, non-programmable CALCULATORS. □ You may use the opposite side of the paper for any rough work. □ This examination is worth 50% of your final mark. □ This examination consists of 18 questions plus three mini cases on a total of 10 pages, including cover page. Please ensure that you have a complete examination paper before starting. □ For each multiple choice question, choose ONLY ONE answer. Good Luck! Honor Code In recognition and spirit of the Honor Code, I certify that I have not and will not receive or give aid on the examination and that I will report, to the best of my ability, all honor Code violations observed by me. Signed_________________________________________________ THIS EXAMINATION PAPER MUST BE RETURNED Part I Concept Questions (15 marks) 1. What additional concerns might a corporate Chief Financial Officer (CFO) face when a company expands into international......

Words: 2430 - Pages: 10

Premium Essay

Finance Paper

...where to invest. Efficiency ratios compare performance over different periods. For example a decreasing Operating expense ratio is positive, as it generally means more efficiency. The turnover ratio is a good indication of production and procurement efficiency. A low turn could mean low sales, too much stock from wrong forecasts or slow mover stock, showing an inefficient company. Even though the current return on equity is higher, it is perhaps an indication that the company is on decline. Combining the reads from all these ratios is essential to taking a sound financial decision. References Eugene F. Brigham & Joel F. Houston (2013). Fundamentals of Financial Management Jonathan Berk and Peter DeMarzo (2010). Corporate Finance . 2nd ed. Pearson...

Words: 1865 - Pages: 8

Premium Essay

International Finance Paper

...International Finance Paper FIN/419 International Finance Paper Pepsico is one of the truly global organizations in the world with presence in many countries and offering products which are not only unique but carry a great brand value . Since Pepsi Co works in a global environment therefore its strategy is also global and focuses on achieving the strategic objectives of the firm with great greater emphasis on creating a unique set of strategies which are as applicable as they are in one country . Pepsico universally acknowledged as one of the world’s most successful companies of consumer products. Enormous awards have gone in the worlds. In 2009, Pepsico is ranked 175 in the Fortune’s. 18 brands out of its series boast an annual sales volume of over 1 billion USD, including Pepsi-Cola, Mountain Dew, Gatorade, Lay’s, Diet Pepsi, Tropicana, Doritos, Lipton Teas, Quaker Cereals, Cheetos, 7-UP, Ruffles, Aquafina, Mirinda, Tostitos, Sierra Mist, Walkers, Fritos. In addition, PepsiCo entered new markets including Japan and Eastern Europe. However, the company also had its share of crucial missteps – principal of which was entering into the fast food industry. With the purchase of Pizza Hut, Kentucky Fried Chicken and Taco Bell, PepsiCo was well on its way to building a proverbial three-legged stool. The CEO at the time, Wayne Callaway, believed that this new structure would bring the company success and referred to the three legs of the stool as being snack foods, soft......

Words: 1314 - Pages: 6

Premium Essay

Finance Paper

...Stryker BUAD 341-0, MWF 1:00PM Isral Hadero 04/28/2014 Table of Contents Introduction 1 Theme 1 History of the Firm 1 Product Line of the Company 3 Industry History and Analysis 4 Major Competitors 4 NAICS Numbers 5 Relative Industry Sales, Returns and Maturity 5 Stock Performance 6 Financial Analysis 7 Ratio Analysis 9 Pro forma 11 Assumption 12 Growth Rate of Sales 12 Asset Acquisition 13 Financing Needs 13 Conclusion 14 Appendices 15 Income Statement 15 Balance Sheet 16 Sources and uses 17 Percentage of Sources and Uses 19 Firm Ratios 21 Industry Ratios 22 Graphs of Ratios 23 Bibliography 26 Introduction This paper contains the financial analysis of Stryker corporation and its major competitors during the past 5 years. Also a 3 year forecast is created to show were the company is heading and changes needed to be made to be more efficient. Theme Time are hard for the medical industry with the global economic crisis and with the announcement of the Affordable Care Act’s medical device excise tax. Stryker corporation has done better than the industry on average sustaining a strong financial while presenting new products in the market. Growth is becoming slow for mature firms but Stryker is making all the right moves to dominate the market. To increase growth the company has shifted its focus on acquisitions. With the acquisition of Trauson, a Chinese leading manufacturer of surgical products...

Words: 4190 - Pages: 17

Premium Essay

Finance Paper

...results in the reputable work in the company. Debt equity The debt equity ratio gives the financial leverage of the company that is attained through dividing all the total liabilities of the company with the stockholders’ equity. In the case of Toyota Motor Corporations, there was a decrease in debt equity in 2013 despite having increased in 2012. This generally indicated the proportion of equity and all the debts that Toyota Motor Corporations were currently using in financing their assets in operation. Through this method, one could tell the ratio of debt to equity that the company was undergoing at that moment (Adler, Goldoftas & Levine, 1999). It will be clear that if the ratio has increased, the company has been using debt to finance its operations whereby in Toyota Motor Corporations there was a decrease of the ratio in 2013 giving good hoe to investors. In the third quarter of the financial year 2014, Toyota Motor Corporation recorded a debt equity ratio of 111.4%, even though there was reduction of debt usage that led to the reduction of debt equity to the company with high leveraging of its resources. Price earnings ratio When a company is having a higher price earnings ratio, it’s a clear indication that the investors are expecting the high growth returns on their investments and this is what is currently being experienced at Toyota Motor Corporations. Devastation and highly accumulation of the workers’ funds has led to a declining trend of the price......

Words: 3050 - Pages: 13

Premium Essay

Finance Paper

...ratio analysis is a useful tool for managers and investors that would like to evaluate the company’s financial health. By using this analysis companies are able to identify opportunities for growth and areas of weakness to determine where corporations can put in place corrective measures in order to rectify their areas of weakness.  Financial statements are used in order to predict trends of cash flow within the business as well as predict the potential of a business and if they are capable of financial growth. Ratio analysis allows companies to analyze the future revenue of a company’s profit or a company’s loss.   This paper will examine the benefits and limitations of ratio analysis, explain what factors impact the meaningfulness of such measures and what new practices or theories may be emerging regarding the application of ratio and financial statement. The paper concludes that ratio and financial statements is an essential tool used in analyzing a company’s profit. Close your eyes and think about all of the products you have consumed today. You purchased lunch from McDonald’s, used Google to help you find directions, drove your Toyota to work and grabbed your Nike sneakers as you headed to the gym. What do all of these brands have in common? They are well known market leaders and multinational organizations. Consumers are unaware of how many multinational brands they come into contact with daily, however, these organizations......

Words: 1302 - Pages: 6