Fundamental Finance Q&a

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Outline the advantages for a car hire firm of the introduction of credit cards into Australia. Firstly, for the car-rental companies, customers drive away merchandise. And credit card is an indicator of good financial standing with external parties, furthermore, it provides efficient and secure transaction. Secondly, using credit cards will benefit both companies and individuals. For the car-rental companies, extra incoming will be increased which come from the ‘holding fees’ for customers. When using a credit card to rent a car, the estimated amount of the rental will put on the card but the transaction will not put through. Though it may be a small number of incoming for each transaction, it brings considerable profits for the companies in the long-run. As for individuals, for instance, one is in need with a car for business ues, and after that the person will get a considerable income. As a result, it will gain the company income and increase the person’s purchasing power. Lastly, credit cards transaction will reduce the cost of holing cash, which saving the cost of cash printing and do good to the environment, in addition, it provides the global market a more efficient way of transaction.

Indicate two cases where the issue of a credit card by a bank could be considered an unethical practice. a. Give credit to minors
b. Give unreasonable high credit to customers who will not be able to handle the situation.

Is household debt of 150% of disposable income necessarily a financially dangerous situation? While the debt to disposable income is 150% and house process are much higher than normal based on price-to-income ration, the debt service is average and loan-to-value ratios are low at 55%65%. In addition, there are guarantees on 60% of mortgages, and residential delinquencies are only38 basis points. Thus the credit risk is moderate, due to mitigation factors. Nonetheless, growth will slow.

11.4 On what basis did the major...
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