Subprime Lenders And The Financial Crisis - 865 Words

Subprime loans are ethical tools which were wildly misused during the time leading up to the financial crisis in 2008-2009. Subprime lending targeted borrowers who would typically not qualify for standard loans for various reasons. These included low credit scores, low income, and history of late payments. The loans were offered at a rate higher than the market rate due to the increased risks of the borrowers. Many of the clients Countrywide supported were much less likely to be able to pay off their loans compared to traditional borrowers. In the years leading up to the financial crisis, the real estate industry was flourishing which encouraged even clients who could not afford fancy houses to use subprime loans to finance their homes.†¦show more content†¦Inflation of real estate appraisals also added to more reckless lending. Each of these factors contributed to the plethora of homeowners who could not afford their houses and pay their mortgages. If the idea of subprime l ending had remained pure, this financial tool could have helped many people change their lives for the better. However, businesses were careless and greedy enough to lend to increasingly risky clients, which ended up harming their businesses, their clients, and eventually the entire economy. During the early 2000s, when subprime lending reached its peak, Countrywide was extensively involved in risky transactions. To ensure that the company continued to grow and increase its profits, many ethical boundaries were tested. Incentives were offered to salespeople who were rewarded for taking risks. Subprime loans were given to clients who could not afford the loans and conversely those who qualified for traditional loans. Appraisers exaggerated housing values to reassure lending. Liar loans were one of the biggest areas of ethical concern when Countrywide was investigated in the late 2000s. These specific mortgages were given to clients who were not asked to provide proof of their indicated income. Borrowers would overstate their income in order to attain liar loans, possibly with the help of Countrywide personnel. These loans were handed out for the purpose of generating easy, short-term profits through increased fees and high interest

When Do Opportunity Costs Count - 1014 Words

In the study â€Å"When do opportunity costs count? The impact of vagueness, project completion stage, and management accounting experience†, Victoravich asks the research question â€Å"how two situational factors, vagueness of opportunity cost presentation and stage of project completion, affect individuals’ tendency to attend to opportunity costs†? (2010) Opportunity cost is a â€Å"fundamental component of classical economic theory†, and defined as â€Å"the value of the next-highest-valued alternative use of that resource â€Å"(Victoravich, 2010; Henderson, 2015). Opportunity costs are also known as trade-offs. The motivation behind this study stems from the fact that prior studies investigating the impact of implicit versus explicit opportunity costs ,†¦show more content†¦For the purposes of the study, Victoravich defines vagueness as a â€Å"common pitfall of real world situations because decision-makers do not have access to exact inf ormation about the costs and benefits of all available options† (2010). In the way in which Victoravich presents prior research findings and constructs, there seems to a clear gray area. Victoravich’s presentation showcases the importance and need of additional research in order to conducted to elaborate, clarify, and expanding on the previous findings and judgements. Victoravich’s study incorporates prior findings and seeks to the supplement the shortcomings of the prior research studies, such as: Shortcomings of Previous Research: †¢ Prior research has typically presented opportunity costs in a precise manner, which is inconsistent with how they would appear in a realistic setting. †¢ Prior research has not investigated whether opportunity cost vagueness reduces decision-makers’ tendency to attend to this relevant information. †¢ Prior research has yet to investigate the cognitive process by which attention to opportunity costs influences judgment and decision-making and whether it has a decisional consequence. In the study â€Å"When do opportunity costs count? The impact of vagueness, project completion stage, and management accounting experience†, the conceptual constructs examined in are 1) Management Accounting Experience, 2)

Financial Performance of Evergreen Marine Corporation †Free Samples

Question: Discuss about the Financial Performance of Evergreen Marine Corporation. Answer: Introduction: This report has been presented to examine the financial performance of Evergreen Marine Corporation and Wan Hai shipping. Analysis of financial performance is crucial for every investor as it helps them to choose the best security from the market. Financial performance of a company could be affected through various internal and external factors. It is required for an investor to look over entire internal and external actor before making a long term investment into the company. For internal analysis, company could analyze the final statement of the company and the annual report of the company. For external factors company could analyze the industry report or compare the performance of the company in any other firm which is also performing under the same industry. Evergreen Marine Corporation: Evergreen Marine Corporation is a Taiwanese company. It operates its function in transporting and shipping the containers. This company has been found in 1968. This company performs its functions globally. Headquarter of the company is situated in Luzhu District, Taiwan. Currently 3398 people have been employed by the company and the revenue of the company is $ 4.556 billion (Home, 2017). Wan Hai shipping: Wan Hai shipping is a Taiwanese company. It operates its function in transporting and shipping the products from one place to another. This company has been found in 1965. This company performs its functions globally. Headquarter of the company is situated in Taiwan. Currently 4588 people have been employed by the company and the revenue of the company is TWD 57351 million (Home, 2017). Calculation of ratios: Ratios analysis is one of the studies to analyze the performance of the company in terms of various bases such as profitability, solvency, efficiency, liquidity etc. Ratio analysis gives a brief idea to the investor about the performance and position of the company, further, through ratio analysis last year data can also be compared from current year data as well as the ratio analysis data could be compared to industry data to analyze the performance and the profitability of the company (Morningstar, 2017). Ratio analysis study has been performed over both the companies. The calculations of ratio analysis are in appendix. In which, current and quick ratios depict about the liquid position of the company. Net profit and margin and return on equity depict about the profitability position of the company. Average receivable collection period, return on equity, total asset turnover, times interest earned ratio, return on total assets etc depict about the efficiency position of the company (Morningstar, 2017). Further, the debt ratio and earnings yield depict about solvency position of the company. Analyze financial performance: Financial performance of a company could be analyze through analyzing over the final financial statements of the company, in this report, final financial statement which are income statement, cash flow statement, balance sheet etc have been analyzed of Evergreen Marine Corporation and Wan Hai shipping (White, Sondh Fried, 2005). Evergreen Marine Corporation: Final financial data of evergreen Marine Corporation limited has been analyzed to evaluate the performance of the company in context of various financial data. The evaluation over financial analysis of the company is as below: Short term solvency: Short term solvency position of a company depict about the ability of a firm to meet its entire short term financial obligation. Solvency position seeks to analyze the ability of a company to avoid the stress related to financial condition for short term (cal et al, 2007). Study over the solvency position of evergreen marine depict that the solvency position of the company has been bit better from 2015 in 2016. 2016, data depict that the current assets and current liabilities, both has been enhanced in 2016 but the liability ratio is quite higher and thus the current and quick ratio has been lowered. This is a good sign as currently the revenue of the company has been reduced so company didnt required any high amount as well as now company can use the minimum resources at their maximum. Financial stability: Financial stability is a position of a company in which the financial system of the company such as profitability of the company, return of the investors, net profit of the company and various other points of the company is examined and it is analyzed that how stable the position and performance of the company is. Study over the financial stability of evergreen marine depict that the position and performance of the company is not at all stable. Various changes have been taken place into the performance of the company from 2015 in 2016. The revenue of the company, net profit of the company etc has been analyzed and it has been found that the financially company is not stable (Bramme, Brooks Pavelin, 2006). Company is required to control over various internal factors and make such strategies that the external factors could not affect the performance and position of the company. Efficiency of asset management: Asset management efficiency is evaluated after analyzing the effectiveness and efficiency of a company to manage its assets. Efficiency of assets management depict about the assets position with context of various financial data. This evaluation helps the investor to identify the operations and effectiveness of the company. Study over the efficiency of asset management of evergreen marine depict that the position and performance of the companys assets has been lowered due to various external factors but still the impact is quite little. Total assets of the company have been lowered from 2015 in 2016. The revenue of the company, net profit of the company etc has been analyzed and it has been found that the impact of those have been imposed over the asset position of the company. Company is required to control over various internal factors through adopting various new strategies. Profitability: Profitability position of a company depict about the total profit earned by the company in various situation and in the context of various data. Study over the profitability position of evergreen marine depict that the position and profitability of the companys net profit has been lowered due to various external factors. Currently the net profit of the company is TWD -6608 million which was TWD -4408 million in last year. This depict that the profitability position of the company has been lowered with a huge amount. The nest profit has been lowered due to less revenue and high operating expenses. Market place performance: Lastly, the market place performance of the company has been analyzed. For performing this study, various factors of the company have been analyzed. In this report, it has been analyzed that the market place performance of evergreen Marine Corporation depict that the company is performing average in terms of position and performance. Through this report, it has been analyzed that the performance of the company is not that much attractive. Wan Hai shipping: Final financial data of evergreen Wan Hai Shipping limited has been analyzed to evaluate the performance of the company in context of various financial data. The evaluation over financial analysis of the company is as below: Short term solvency: Short term solvency position of a company depict about the ability of a firm to meet its entire short term financial obligation. Solvency position seeks to analyze the ability of a company to avoid the stress related to financial condition for short term. Study over the solvency position of Wan Hai Shipping limited depict that the solvency position of the company has been bit bad from 2015 in 2016. In 2016, data depict that the current assets has been lowered and current liabilities have been enhanced in 2016 and thus current and quick ratio has been enhanced. This is a bad sign as currently the revenue of the company has been reduced so company didnt required any high amount as well as now company can use the minimum resources at their maximum. So it is required by the company to reduce the level of current assets as well as current liabilities to manage the funds of the company (Brigham Houston, 2012). Financial stability: Financial stability is a position of a company in which the financial system of the company such as profitability of the company, return of the investors, net profit of the company and various other points of the company is examined and it is analyzed that how stable the position and performance of the company is (Fletcher Growing, 1979). Study over the financial stability of Wan Hai Shipping depict that the position and performance of this company is also not stable. Various changes and various internal and external factors have been taken place and impacted the performance of the company from 2015 in 2016. The revenue of the company, net profit of the company etc has been analyzed and it has been found that the financially company is not stable. Company is required to control over various internal factors and make such strategies that the external factors could not affect the performance and position of the company (Bartram, Brown Fehle, 2009). Efficiency of asset management: Asset management efficiency is evaluated after analyzing the effectiveness and efficiency of a company to manage its assets. Efficiency of assets management depict about the assets position with context of various financial data. This evaluation helps the investor to identify the operations and effectiveness of the company. Study over the efficiency of asset management of Wan Hai Shipping depict that the position and performance of the companys assets has been lowered due to various external factors but still the impact is quite little. Total assets of the company have been lowered from 2015 in 2016 (Van Horne Wachowicz, 2008). The revenue of the company, net profit of the company etc has been analyzed and it has been found that the impact of those have been imposed over the asset position of the company. Company is required to control over various internal factors through adopting various new strategies. Profitability: Profitability position of a company depict about the total profit earned by the company in various situation and in the context of various data. Study over the profitability position of Wan Hai Shipping depict that the position and profitability of the companys net profit has been lowered due to various external factors. Currently the net profit of the company is TWD 1142 million which was TWD 3943 million in last year. This depict that the profitability position of the company has been lowered with a huge amount. The nest profit has been lowered due to less revenue and high operating expenses (Shapiro, 2008). Market place performance: Lastly, the market place performance of the company has been analyzed. For performing this study, various factors of the company have been analyzed. In this report, it has been analyzed that the market place performance of Wan Hai Shipping limited depict that the company is performing average in terms of position and performance. Through this report, it has been analyzed that the performance of the company is not that much attractive (Thomas, Lyons, Chen Pugh, 2008). Cross Sectional analysis: Cross sectional analysis method of analysis which compares a companys ratios with other company who is performing under the same industry. Usually, this analysis is done according to the industry benchmark. In this study, ratios of Evergreen Marine Corporation and Wan Hai shipping have been analyzed in the year of 2016. This calculations has been given in appendix, this study depict that the performance of the Wan Hai Shipping limited is quite better than the performance of Evergreen Marine Corporation in terms of profitability whereas in terms of liquidity, Wan Hai is required to reduce the level of liquidity. Further, the solvency and efficiency position of the company depict that both the companies are performing average. Investment recommendation and Conclusion: Through the above calculations, it has been found that the both the companies are facing many issues due to various external issues, still, the performance of WAN Hai Shipping is better than the Evergreen Marine corporation and thus it is required by the investors that either they should not invest into both the companies or if it is required than Wan Hai limited is a better option. References: Bartram, S. M., Brown, G. W., Fehle, F. R. 2009. International evidence on financial derivatives usage. Financial management, 38(1), 185-206. Brammer, S., Brooks, C., Pavelin, S. 2006. Corporate social performance and stock returns: UK evidence from disaggregate measures. Financial management, 35(3), 97-116. Brigham, E. F., Houston, J. F. 2012. Fundamentals of financial management. Cengage Learning. Evergreen Marine. 2017. Home. Retrieved from https://www.evergreen-marine.com/ available on 16th Sept 2017 Fletcher, J Growing, D 1979, Effective writing for accountants, The Institute of Chartered Accountants in England and Wales, London. Thomas, C, Lyons, K, Chen, P Pugh, J 2008, Financial Resource Management, Study Guide, Department of Maritime and Logistics Management, Australian Maritime College, Launceston, p.3.11. Morning star. 2017. Evergreen Marine. Retrieved from https://financials.morningstar.com/income-statement/is.html?t=EGMAregion=gbrculture=en-US available on 16th Sept 2017 Morning star. 2017. Wan Hai Limited. Retrieved from https://financials.morningstar.com/cash-flow/cf.html?t=2615region=twnculture=en-US available on 16th Sept 2017 cal, M. E., Oral, E. L., Erdis, E., Vural, G. 2007. Industry financial ratiosapplication of factor analysis in Turkish construction industry. Building and Environment, 42(1), 385-392. Shapiro, A. C. 2008. Multinational financial management. John Wiley Sons. Van Horne, J. C., Wachowicz, J. M.2008. Fundamentals of financial management. Pearson Education. Wan Hai Shipping, 2017. Home. Retrieved from https://www.wanhai.com/views/Main.xhtml available on 16th Sept 2017 White, G. L., Sondh, A. C., Fried, D. 2005. Analysis of Financial Statement. Analysis.