Analyzing Economic Trends And Capital Raising Options For Ethical Trading Group

Overview of the Global Financial Crisis

The global financial crisis is necessarily triggered by the crumpling of the sub-prime market of mortgage in particularly the USA. The housing market bubble burst took place during the late 2006. There were widespread defaults of loans that indicated towards the fact that banks essentially took ownership of roughly worthless houses, giving way to loss. Consequently, the banking market crumpled (Vogel 2014).

Banks also became reluctant to provide loans to the overall public and particularly to one another due to fear of not getting back. This situation referred to credit crunch also affected the financial service industry. Therefore, the crisis of 2008 necessarily ballooned into global financial crisis in which billions of mortgage associated investments became bank, different well known investment banks went bankrupt and share markets also crashed worldwide (Zeff 2016). However, the impact of the recent global financial crisis is considerably small on a worldwide scale owing to the following factors:

 -stimulus package of the Rudd Government,

-slashing of the cash rate by the RBA

-Overall Strength of the Australian economy

-Resilience of the overall Chinese economy

Keynesian economists were of the view that particularly during the period of the financial crisis, the government of the nations have the need to enhance the total amount of their spending in order to foster rate of growth of the economy and that is what the Australian government did. The Central Bank of the Nation slashed the rate of interest in order to enhance the overall consumer spending (Zeff 2016).

Description of the economic and political climate associated to financial service industry

Economic Growth Outlook

Reports reveal that economic fundamentals of Australia are strong and the outlook also remains very positive together with strong rate of growth, moderate level of unemployment along with contained levels of inflation. Forecast real rate of growth of GDP during 2012 and 2013 as well as during 2013 and 2014 is lowered by around ¼ of 1percentage since the time of budget. The unemployment rate is at approximately 6.25% during the middle of the year 2014.  Essentially, significant modifications to the entire terms if trade particularly in the context of the Chinese growth and low anticipated wage growth particularly weighed down heavy on the nation’s nominal GDP as well as fiscal position (Grant 2016).

ertheless, the rate of unemployment is also recorded at around 6% by the middle of the year 2014 and the rate of unemployment is a bit higher level than what is expected. The rate of unemployment is also anticipated to stabilise at a specific level during the period 2014 and 2015. This rate remained the lowest among the developed world as there were mainly nations that were still experiencing the ill effects of the worldwide financial crisis (Negishi 2014).

Again, the rate of inflation is expected to remain within the target band of the RBA. The forecast for inflation is 2.5% all through the quarter of June during the year 2014, slightly stronger than what was presented in the budget, representing the impact of higher amount of prices of import from mainly the lower dollar (AUD) (Robinson 2017).

Impact of the Global Financial Crisis on the Financial Service Industry

Keynesians are of the view that waiting for a nation to get towards the level of full employment might take very long time. The Keynesian economists are of the view that “In the long run, we are all dead”. Essentially, the higher rate of unemployment was necessarily the outcome of the market failure and a lack of the overall aggregate demand. In this case, the government can intervene and rectify the identified market failure by utilizing different expansionary fiscal strategies for the purpose of stimulating demand.

Therefore, the higher rate of inflation and lower wages as witnessed in this case might lead to reduced affordability of the consumers to purchase goods (Gibbons and Roberts 2013). Therefore, demand reduces and at the same time unemployment rises. In case if rate of inflation exceeds the nominal wages, then the real wages will also decrease and in that case, the overall consumer spending will also decline. This New Keynesian Phillips Curve suggests that there exists a trade off between the rate of unemployment and the rate of inflation. Essentially, higher level of demand leads to reduced unemployment but leads to increased rate of inflation (Davis and Sanchez-Martinez 2015). Diagram is hereby presented below:

mportant features of the common economic theories

The classical economics by Adam Smith indicates towards the fact that people mainly act in the self-interest and generate social outcomes also referred to as laissez faire economics (Lins et al. 2017). This indicates towards small government that implies lesser government interventions.

The classical view of unemployment refers to the individual supply of labour. in essence, the supply ,curve is necessarily upward rising as higher the amount of wage, the more is the attraction to work. Thus, more number of people wants to function and work. Again, business concerns also make demand for more number of labours. Essentially, the demand for labour is represented by the downward falling curve as the higher the amount of wage it becomes more costly to engage and hires the workers (Peress 2016). Therefore, business concerns also hire lesser number of workers as the amount of wages enhances.

The Great Depression:

The Great Depression can be considered to be the worst economic downturn in the modern history. The Keynesian economics explains the dramatic nature of the economic recession as well as the hardships that were associated during the same. This led to economic re-thinking. In essence, the market that was left to own device necessarily failed. Goldman and Peress (2016) mentions that John Maynard Keynes was of the view that the government have the need to utilize fiscal as well as monetary policies for the purpose of actively warding off economic recessions.

The Keynesian economists are of the opinion that higher rate on of inflation was necessarily the upshot of the failure of the market as well as a deficiency of the entire aggregate demand of an economy. In this case, the government can intervene for the purpose of rectifying the identified market failure by way of using appropriate expansionary fiscal strategies aimed at stimulating the demand (Christensen et al. 2016).

Description of the Economic and Political Climate Associated with the Financial Service Industry

Phillips Curve:

Bennett et al. (2017) asserts that the Phillips Curve   reflects an inverse association between particularly rate of inflation and the rate of unemployment. In this case, the main implication is that government can control the overall rate of unemployment and rate of inflation by particularly monetary as well as fiscal strategies. As such, the governing bodies can trade off enhanced inflation in a bid to lessen the rate of unemployment or else trade off lower the overall rate of inflation for additional unemployment (Anton 2016).

The theory of stagflation indicates that high rate of inflation as well as high rate of inflation occurs at the same point of time. During the year 1973, the oil price shock also contributed to the novel phenomenon. In itself, higher prices of oils led to rise in prices, leading to inflation. Higher prices of oil also created costs of production to rise lowering levels of profits of corporation (Lo 2017). This in turn led to the slowdown of economies and enhanced rate of unemployment. Keynesian theory was necessarily challenge by this notion.

Monetarism:

Again, notion of monetarism refers to the fact inflation is created by excessive money supply and monetarists argued that tight control of the money supply can bring about stability to the process of inflation and the entire economy (Koonce et al. 2017).

Supply Side Economics:

During the period of the 1980s, monetarism was necessarily dishonoured, the governing bodies started to follow a strategy of economic rationalism or else market mechanisms. Particularly, in Australia the Hawke government started the procedure of deregulation and diverse microeconomic reforms . .

Microeconomic principles and their relation to debt and equity markets and organizational practices

Microeconomic principles of demand and supply can be related to financial markets. In itself, in different financial markets, the ones that supply the financial capital by means of savings anticipate to receive a rate of return. However, the ones who demand for the financial capital by accepting funds have expectations to make payments of rate of return. Essentially, this rate of return can arrive at variety of forms, relying upon the investment category. A simple instance of the rate of return is necessarily the rate of interest.

For instance, at the time when money is supplied into savings account of a bank, it is important to accept interest on the deposits. Again, the interest paid is essentially a percent of the deposit that is the rate of interest. The figure below illustrates the demand as well as supply factors in the financial market. Essentially, the horizontal axis essentially of the financial market reflects the quantity that is mainly loaned or else borrowed in this specific market. Again, the vertical axis reflects the return rate in this case measured with rate of interest (Negishi 2014). The figure below reflects the total quantity of financial capital that necessarily consumers place demand at different rates of interest and the quantity of particularly corporations are willing to supply.

Two mathematical principles

Average reflects a specific number that expresses the central or else a typical value in a specific data set. In addition to this, the percentage is also used for the calculations used in the study In mathematical principles, percentage reflects a specific number else wise a ratio reflected as a fraction out of total 100 (Robinson 2017).

Economic Growth Outlook

Two statistical methods

Statistical hypothesis testing necessarily also known as confirmatory data analysis is used in this study. There is a hypothesis that is necessarily testable based on observing an entire procedure that is particularly modelled through a set of diverse random variables (Rodriguez and Kaczmarek 2016).

Correlation refers to a mutual association or else connection between two or more things. The statistical technique of instituting a specific association that can reflect whether there exist any association and the strength of association between diverse pairs of variables are associated (MacQueen et al. 2016).

Statistical ratios and analysis tools relevant to the study

The ratios can be considered as simple mathematical or else statistical tools that reflect significant associations that are hidden in a huge amount of data. This also permits meaningful comparisons in the study (Koonce et al. 2017). Some ratios can be expressed as specific fractions or else decimals or percentages.

Two sources of pertinent financial services information are

-ASIC- Australian Securities and Investments

-Financial Service Industry Reference Committee (IRC) (Koonce et al. 2017)

Principles of statistical standards and sampling techniques 

Principles of Statistics: As per principles of statistics, the primary objective of descriptive statistical mechanisms is to summarize a specific set of observations. Again, according to principles of statistics, the main objective of inferential statistical mechanisms is to arrive at inferences that include both predictions and decisions regarding a specific population founded on provided information in a sample (Bennett et al. 2017). Sampling techniques are of various types namely cluster sampling, convenience sampling, judgement sampling, quota sampling, pure random sampling and systematic sampling.  

The analysed documentation from a variety of sources involves several steps. The current study essentially initially includes analysing the primary sources, model document evaluation utilizing effective procedures. The first step includes meeting the documents, observing diverse parts, trying to gather appropriate sense from the available documents and using the same as the historical substantiation. After analysis of the documents the entire procedure of workings that can be followed will be internalized (Bennett et al. 2017).

Legislation, statutory requirements and industry codes of practice Relevant legislation and policies for financial services industry in Australia include the following

The current study has helped me to understand the preparation as well as presentation of corporate financial assertion that can be governed by the regulations and accounting standard. In this respect, this study has aided me to gain deep insight regarding requisite information that can prove to be important to diverse users as the foundation on which different accounts are prepared. The purpose of standard setting in financial reporting thereby has assisted me to understand the significance of maintaining uniformity as well as consistency in the process of financial reporting. Thus, the current module has helped me to gather vivid idea regarding meaning of accounting standards, significance of accounting standards and the need for the standards.

In addition to this, this current study has assisted me to develop thorough understanding regarding economic theories, different macroeconomic factors and their impact on the operations of industry. The thorough understanding regarding the economic theories has thus helped me to develop distinct comprehension regarding significance of economic framework along with its consequences, implications of real life economic problem and the ways the identified problems might be solved. In addition to this, the present section also has helped me to understand the financial modelling techniques and the financial decision making along with use of statistical and mathematical tools for arriving at business decisions.  

References

Anton, S.G., 2016. The Impact of Leverage on Firm Growth. Empirical Evidence from Romanian Listed Firms. Review of Economic and Business Studies, 9(2), pp.147-158.

Bennett, B., Bettis, J.C., Gopalan, R. and Milbourn, T., 2017. Compensation goals and firm performance. Journal of Financial Economics, 124(2), pp.307-330.

Christensen, H.B., Liu, L.Y. and Maffett, M.G., 2016. Proactive Financial Reporting Enforcement and Firm Value.

Davis, E.P. and Sanchez-Martinez, M., 2015. Economic theories of poverty. Joseph Rowntree Foundation.

Gibbons, R. and Roberts, J., 2013. Economic theories of incentives in organizations. The handbook of organizational economics, pp.56-99.

Goldman, J. and Peress, J., 2016. Firm R&D and Financial Analysis: How Do They Interact?.

Grant, R.M., 2016. Contemporary Strategy Analysis Text Only. John Wiley & Sons.

JAMES, M.W., 2017. FINANCIAL REPORTING, FINANCIAL STATEMENT ANALYSIS AND VALUATION. CENGAGE LEARNING.

Koonce, L., Leitter, Z. and White, B.J., 2017. Linked Financial Statement Presentation.

Lins, K.V., Servaes, H. and Tamayo, A., 2017. Social capital, trust, and firm performance: The value of corporate social responsibility during the financial crisis. The Journal of Finance.

Lo, H.C., 2017. Do Firm Size Influence Financial Analyst Research Reports and Subsequent Stock Performance. Accounting and Finance Research, 6(4), p.181.

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