Impact Of The Economic Disruptions Caused By The Global Financial Crisis Essay

• Resilience: How robust is the company? Does it have the potential to withstand inflation, higher interest rates, a rise in fuel prices etc.?

The success of a business depends on its ability to remain profitable over the long term, while being able to pay all its financial obligations and earning above average returns for its shareholders. This is made possible if the business is able to maximize on available opportunities and very efficiently and effectively use the resources it has to create maximum value for all involved stakeholders. One way the performance of a company can be measured on critical areas such as profitability, its ability to stay solvent, the amount of debt exposure and the effectiveness in resource utilization, is performing financial analysis where a set of ratios provides a snapshot of company performance and future

This research paper is prepared for purposes of assessing financial condition as well as overall operating performance of two same sector entities.

The 2008 financial meltdown resulted in the most treacherous investment landscape observed since the great depression. The most notorious issue was the subprime mortgage crisis, which had a ripple effect felt through every market in the world. The banks, whose leverage rate should never have been higher than two times capitalization, surged as high as thirty to forty times market cap. With this level of exposure, any unforeseen market fluctuations could mean disaster. Lehman Brothers, the oldest investment bank on Wall Street, went bankrupt and thousands lost their jobs. Outside of finance, thousands of companies in the United States and abroad had to fire significant portions of their workforce, thus furthering the economic decline and plunging the US into an economic recession. In the late 1990s, Congress repealed the legislation separating commercial and investment banks, which resulted in investment banks overreaching their bounds. The Emergency Economic Stabilization Act of 2008 was enacted due to the effects of the subprime mortgage crisis, which allowed the US Treasury to spend billions of dollars to bail out the investment banks by purchasing distressed assets. However, the bailout plan has created a debate over whether it was a good idea for the government to bailout the investment banks. Also, if the government fared better or worse in the years following the bailout.

The Global Financial Crisis, also known as The Great Recession, broke out in the United States of America in the middle of 2007 and continued on until 2008. There were many factors that contributed to the cause of The Global Financial Crisis and many effects that emerged, because the impact it had on the financial system. The Global Financial Crisis started because of house market crash in 2007. There were many factors that contributed to the housing market crash in 2007. These factors included: subprime mortgages, the housing bubble, and government policies and regulations. The factors were a result of poor financial investments and high risk gambling, which slumped down interest rates and price of many assets. Government policies and regulations were made in order to attempt to solve the crises that emerged; instead the government policies made backfired and escalated the problem even further.

It is difficult to quantify exactly how much revenue a bank generates from proprietary trading, one brokerage analyst estimated that 5%-10% of trading done by large banks is a result of trading not done on behalf of the client.32 These investments are the reason Lehman Brothers Holdings Inc., a global financial services firm, failed. The firm participated in investment banking, equity, fixed-income sales, research, trading, investment management, private equity, and private banking. At one time, Lehman Brothers Holdings Inc., was a primary dealer in the United States Treasury securities’ market. In 1998, 25% of Lehman’s revenue was generated from proprietary trades.33 The company, at this time, held $28 billion in securities and other

The United States has seen this situation before and survived; but not without change. Any solution to the current financial crisis will need to include the three players; individuals, banks, and the government. All three will also need to be held accountable. Many individuals have stepped beyond their personal means, financial institutions have acted with blatant neglect, and so far the government has in essence stood by and supervised the entire show. Capitalism is the American ideal, but unchecked and immoral capitalism leads to collapse through greed. No solution will be easy and America will suffer regardless of what is done, though some action must be taken.

The financial crisis of 2007/2008 had a negative impact on the UK economy, resulting in low growth and high level of unemployment while inflation constantly remained above the 2% target. In those extraordinary circumstances focus of monetary policy had to be on growth rather than reaching inflation target, resulting in gradual reduction of the Bank rate from 5.75% in middle of 2007 to its lowest level of 0.5% in the beginning of 2009 (BoE, 2014). Although, a low interest rate led to significant depreciation of sterling, a tightening policy at that time would be a major mistake, that could lead to deflation and depression, rather than recovery and inflation around target (Fisher, 2014). Despite any effort pursued by monetary policy there was not only sign of the economic recovery. Moreover, the conditions deteriorated, with negative GDP figure, high level of unemployment and inflation rate remained above the target the economy was in recession. The conventional measures used by the MPC to stimulate economic growth proved to be inefficient, and the risk to fall into triple-dip recession remained. In order to provide additional stimulus into economy, the Bank had to make a decision on implementing unconventional measures. In January 2009, the Bank set up an Asset Purchase Facility to buy high-quality assets with the aim to improve liquidity and credit condition. The MPC purchased £200 billion of financial assets during period between March and November 2009. Although GDP figure

The company will determine its financial health using its financial performance and financial position. This is shown by the profitability statement for the year under review, and its financial statement. The performance and financial position are measured using the accounting ratios. The raw data from the income statements for the four years 1009, 2010 and 2011 indicate progressive improvement over time. The table below illustrates the observation.

The 2008 financial crisis leaded the USA to one of the most important recession after the Great Recession of 1980. It started in 2006 with the subprime crisis, and the proliferation of mortgage backed securities following by the estate crisis. The crisis was global ; it affected the whole economy; the financial institutions as well as the households and investors, and caused a stock market crash in September 2008. The government proposed several plans and packages to overcome the situation.

In 2016 it was estimated that the US wealth gap had reached a width previously seen in the 1920s. Since the 1970s America’s middle class has been shrinking, whilst the lower and upper classes have been growing, the former at a much faster rate to than the latter. It’s negative effects are best stated up John Taylor in the Hover Digest: “On the Fraser index, the United States ranked 2 in the year 2000 and it ranks 14 today. On the Heritage index it ranked 5 in 2008 and it ranks 12 today. On the World Bank's Doing Business indicator it ranked 3 in 2008 and it ranks 7 today.” (Hover Digest 9). Much of this shrinkage has been attributed to various periods of economic turmoil in the past several decades; the 1979 energy crisis, the Savings and

Research has explored resilience at multiple levels including individual, system, firm, industry, and country. We show the key factors affecting firm resilience in Table 2. In this paper, we concentrate on testing the impact of learning (Vogus & Sutcliffe, 2007) and increased organizational preparedness (Czinkota et al., 2010; Fowler, Kling, & Larson, 2007) in response to extreme events (Henry & Ramirez-Marquez, 2012).

In 2008, the world experienced a tremendous financial crisis which is rooted from the U.S housing market. Moreover, it is considered by many economists as one of the worst recessions since the Great Depression in 1930s. After bringing a huge effect on the U.S economy, the financial crisis expanded to Europe and the rest of the world. It ruined economies, crumble financial corporations and impoverished individual lives. For example, the financial crisis has resulted in the collapse of massive financial institutions such as Fannie Mae, Freddie Mac, Lehman Brothers and AIG. These collapses not only influenced own countries but also international scale. Hence, the intervention of governments by changing and expanding the monetary

“We are having the single worst recovery the U.S. has had since the Great Depression. I don't care how you measure it. The East Coast knows it. The West Coast knows it. North, South, old, young, everyone knows it's the worst recovery since the Great Depression” (Arthur Laffer)

The company’s performance on these dimensions shall be measured through financial ratios analysis. As there are many variations of ratios available to measure more or less the same aspect of performance, I have short-listed, in the following table, the key ratios that will be utilized in the analysis: