Interest Rates | by Wall Street Survivor
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What are interest rates?
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Interest rates, however, are important to understand because of their profound effects on your stock portfolio and your ability to buy a house. This impact is so significant that the chairman of the Fed Reserve is probably the second most powerful person in the country after the President.
Interest rates generally refer to the general level of interest that a borrower has to pay a lender to borrow a certain amount of money for a certain amount of time. These rates refer to all sorts of loans, ranging from ones companies take to buy new machines, to ones you or I would take to buy a new house. Although these loans can be used by very different borrowers for very different purposes, their overall levels generally rise and fall together. Think of a rising tide lifting all boats in the water, regardless of whether it’s a tanker or a rowboat. Intuitively, high interest rates dissuade people from borrowing because it becomes more expensive to do so.
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Current assets and current liabilities
What are current assets and current liabilities? Let’s define current assets and current liabilities, and then take a look at the current assets and current liabilities on the balance sheets of two of the biggest companies in the world. Current assets and current liabilities are both groupings of accounts on the balance sheet. A balance sheet is a picture at a point in time (usually the end of the year, or the end of the quarter) of what a company owns (on the left) and what a company owes (on the right). Besides assets (what a company owns) and liabilities (what a company owes to creditors), you will also find a group of accounts on the righthand side called equity, which represents the book value of the shareholder capital. Asset accounts are grouped in either current assets or noncurrent assets, and liabilities accounts into current liabilities or noncurrent liabilities. The difference between current and noncurrent in both cases is within one year (current) versus longer than one year (noncurrent). Current assets are cash and other assets that are expected to be converted to cash within a year. Some examples of accounts in Current Assets: Cash, Accounts Receivable (amounts to be received from customers), Inventory (products available for sale), Prepaid Expenses (amounts paid but not expensed yet). Current Liabilities are amounts due to be paid to creditors within twelve months. Some examples of accounts in Current Liabilities: Accounts Payable (amounts to be paid to suppliers), Accrued Liabilities (an expense incurred but not yet paid), Short Term Debt. So the difference between current and noncurrent assets is whether this asset will be converted to cash within one year. The difference between current and noncurrent liabilities is whether the amounts are due within one year, or further out.
0:00 Current assets and current liabilities on the balance sheet
0:53 Current vs noncurrent
1:03 Current assets definition and examples
1:26 Current liabilities definition and examples
2:00 Current assets vs current liabilities example: Amazon
4:01 Negative working capital
4:36 Current assets vs current liabilities example: Apple
Philip de Vroe (The Finance Storyteller) aims to make strategy, finance and leadership enjoyable and easier to understand. Learn the business and accounting vocabulary to join the conversation with your CEO at your company. Understand how financial statements work in order to make better investing decisions. Philip delivers financetraining in various formats: YouTube videos, classroom sessions, webinars, and business simulations. Connect with me through Linked In!
What is a Balance Sheet?
A balance sheet is a statement of the assets, liabilities, and equity of a business or other organization at a particular point in time.
A balance sheet can also be described as a snapshot of a company’s financial condition.
A balance sheet is broken up into 3 sections. Assets, liabilities and equity.
The difference between the assets and the liabilities is the equity of the company also known as net assets, net worth or capital.
So, you’re starting a business. You go to the bank and get a loan.
On your balance sheet this loan shows as a liability as it has to be repaid to the bank. It also shows as an asset for the same amount as you have the cash to spend. Thus the balance sheet is balanced.
You need to buy a computer for your new business.
The cash in your assets decreases but your new computer asset helps balance this.
As you sell to your customers your profits are recorded as retained earnings in the equity section.
The cash from these profits is recorded in the assets section and the sheet remains balanced.
Every month you make a loan payment to the bank.
Your liabilities reduce by the amount of the payment and your cash is reduced by the same amount.
If at any point you need to find out your businesses worth go back to the formula from before. Assets minus liabilities equals equity.
Unfunded Liabilities Explained in One Minute: From Definition to Tricky Unfunded Liability Examples
You might have at least occasionally come across analysts who expressed concern with respect to the sustainability of our financial system and referred to unfunded liabilities as one of the most important threats.
This video explains what these (in)famous unfunded liabilities are all about, from the definition (or meaning, if you will) of the term to examples which make it easy to understand how things work with unfunded liabilities.
The pension system of a country can represent an example of an unfunded liability that is let’s say tricky… to say the least.
At the end of the day, unsustainable unfunded liabilities can be considered a byproduct of the political system of a country, with for example politicians being eager to make generous pensionrelated promises without thinking all that much about the future.
Once you understand the definition of unfunded liabilities, it shouldn’t be complicated to connect the dots by going through examples of presentday tricky unfunded liability examples.
This video is simply here to define and explain a concept, which conclusions you draw and where you take things from here is entirely up to you 🙂
Liabilities (Finance, Accounting) – What is the DEFINITION – Financial Dictionary
Welcome to Subjectmoney.com’s video dictionary. In this video we are covering the definition of Liabilities. We built this video dictionary for people to use to study when listening makes more sense than reading. The best way to use our video dictionary is to create a playlist in your Youtube account and add only the terms that you need to learn. Then you can play your playlist using a computer or your mobile device while cooking, resting, driving, walking etc…
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