Financial economics is a field of economics that deals with the deployment and allocation of resources, in an uncertain environment, across time as well as spatially and blends the study of finance with the methodology of economicsSearch
The independent trustee and conflicts of interest
Company pension schemes are not immune from conflicts of interest despite many having robust procedures in place to deal with them if they should arise. Indeed, all those involved in the running of a pension scheme, which typically might include an independent trustee, scheme auditor, independent financial adviser, or lawyer, need to be fully aware of the possibility.
Conflicts of interest, which can range from the subtle to the blatantly obvious, can sometimes arise when staff of an employer, for example, are appointed as trustees of the company’s pension scheme. There’s nothing inherently wrong with the practice because such trustees are likely to bring with them a great deal of useful knowledge and expertise. However, the trustees of the scheme are there to protect its members, not the interests of the employer.
Letter of Credit
Mostly issued by financial institutions, a letter of credit (LC) is a standard document which is primarily used in the trade finances to provide irrevocable payment undertakings. In simple terms, it is a letter from a bank that guarantees that the payment from a buyer to the seller will be for the correct amount and on time. If for any reason, the buyer defaults on the payment, the bank that issued the letter of credit will have to pay the full or remaining amount to the seller.
The are various factors that affect international trade such as the distance between the two parties, differences in the laws of the countries of involved parties and most importantly the possible hurdles of knowing each other personally. Hence, to ensure that the payment will be received, letter of credit is mostly used in international transactions.
Liquidity Ratios
Liquidity Ratios, a class of financial metrics, is the ability of a company to repay its short-term (usually limited to a year) debt obligations. In simpler terms, it measures the ability of a company to pay its bills. It the result of dividing the total cash by the short term borrowings the company has. Generally, the higher the resultant value, the greater the margin of safety the company has to cover its short-term debts. Liquidity ratios is a major indicator of a company’s financial health and can be measured using several ratios that include, quick ratio and the current cash flow ratio.
Current Ratio
The most basic liquidity ratio of all, the current ratio expresses or signifies the company’s ability to pay off short-term creditors out of its total current assets.