Explain Why Total Financial Assets In The Economy Must Equal Total Financial Liabilities?
1. Explain why total financial assets in the economy must equal total financial liabilities?
Financial assets are converted in cash which include lands, building, and machinery. Financial liabilities includes loan from the bank and trade payables what company owes.
Total financial assets are identical to total financial liabilities in the economy because the balance sheet is based on accounting equation. Total assets equal total liabilities plus equity in accounting equation. It means while a company’s assets increase, the company’s liabilities and equity will increase. For example, if you take loan $200,000 from the bank to buy a house, your balance sheet will have a liability in the amount of $200,000 and your funds is going to record the activity as a loan. On the asset side of your …show more content…
is more likely to go public and register with the SEC because Trader’s asset value is higher worth than Horst Corporation. Going public take time and needs a lot of money. Initial Public offering is expensive which might be risky investment. IPO is used to secure capital and investment by companies. Horst Corp. will not take a risk with less asset values so they are not more likely to go public.
5. What does it mean to “underwrite” a new security issue? What compensation does an investment banker get from underwriting a security issue?
When investment banker buys the entire issue and resell the security to investors at higher price so it called a new security issue. There are differences between banker’s purchase price and total resale price and it is called underwriting spread and banker’s compensation. Investment banker provide services which include prepare the prospectus, legal documents and provide general financial advice.
6. Identify whether the following transactions are primary market or secondary market transactions:
a. Singh Holland bought 300 shares of IBM through his brokerage account
b. Haruka Jones bought $5,000 of General Motors bonds from another
Financial assets are converted in cash which include lands, building, and machinery. Financial liabilities includes loan from the bank and trade payables what company owes.
Total financial assets are identical to total financial liabilities in the economy because the balance sheet is based on accounting equation. Total assets equal total liabilities plus equity in accounting equation. It means while a company’s assets increase, the company’s liabilities and equity will increase. For example, if you take loan $200,000 from the bank to buy a house, your balance sheet will have a liability in the amount of $200,000 and your funds is going to record the activity as a loan. On the asset side of your …show more content…
is more likely to go public and register with the SEC because Trader’s asset value is higher worth than Horst Corporation. Going public take time and needs a lot of money. Initial Public offering is expensive which might be risky investment. IPO is used to secure capital and investment by companies. Horst Corp. will not take a risk with less asset values so they are not more likely to go public.
5. What does it mean to “underwrite” a new security issue? What compensation does an investment banker get from underwriting a security issue?
When investment banker buys the entire issue and resell the security to investors at higher price so it called a new security issue. There are differences between banker’s purchase price and total resale price and it is called underwriting spread and banker’s compensation. Investment banker provide services which include prepare the prospectus, legal documents and provide general financial advice.
6. Identify whether the following transactions are primary market or secondary market transactions:
a. Singh Holland bought 300 shares of IBM through his brokerage account
b. Haruka Jones bought $5,000 of General Motors bonds from another