A healthy and strong economy with a high rate of growth is the economy which has organized, well-functioning and active financial markets. Please indicate why the existence of organized and active financial markets contribute to the creation of healthy and strong economy as well as the growth of the economy – (increase of Gross Domestic Product -GDP) Book Name : Financial Management, Theory and Practice E.F Brigham and M. C. Ehrhardt, International Middle East and Africa Edition Pages 3, 15 to 19
Book Name : Essentials of Managerial Finance, Fourteenth Edition, Scott Besley and Eugene F. Brigham http://www.scribd.com/doc/45859389/Essentials-of-Managerial-Finance One of the main attributes of successful companies is having funding to execute their plans. Companies can invest portion of their earning or may need to increase their funds by selling stock or borrowing in financial markets. Getting sufficient capital for expansion defiantly is based on how successful is the organization (corporation) and healthy financial market in that document we will focus on financial market point of view. Healthy finical market and economy are tied together and can’t be separated. Many economic conditions can affect the cost of money therefore they will defiantly affect organizations growth and they will increase the cost of required fund to establish new corporation or corporation’s growth, those conditions are: Federal Reserve policy and interest rate:
If the government is stimulating the economy they increase money supply to increase the growth and lower interest rate will accordingly encourage investment and consumption. But it should remain under control, because larger money supply will lead to an increase in inflation rate that would increase interest rates. Budget deficits and surpluses:
If the government on deficit thy will need to have to the following options borrowing which will lead to increased money demand , increase money supply by printing money...
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