Essays on Shareholding

QUESTION A

Definition of Credit Default Swaps A CDS is an instrument used to transfer the risk of default or credit exposure between two or more parties (Fabozzi and Kothari, 2008). It protects the lender from the possible loss of default by the borrower. The lender (protection buyer) pays premiums to the CDS seller. In return, the CDS seller guarantees to pay the lender the face value of the loan plus interests due in the intervening period if the borrower defaults.

Cash flows

Annual CDS premium = 4% × 1,000,000 = $40,000 Quarterly payments = 40,000/4 = $10,000 The borrower does not default ...

QUESTION A

A Credit Default Swap is a swap that protects the lender from the risk of loss resulting from the default by the borrower. The protection buyer of the CDS (the lender) makes periodic income payments (CDS premiums) to the protection seller who in return guarantees to pay the lender the principal in case the borrower defaults.

Cash flows when there is no default

Notional amount = $1 million Annual CDS premium = 4% × 1,000,000 = $40,000 Quarterly CDS premium = $10,000 If the borrower does not default, the protection seller will make a profit of $120,000 at the end of the third year ($10,000 ...

Corporate governance as a system of processes, practices, mechanisms and rules through which companies are controlled, directed and managed is mainly aimed at enhancing the accountability of managers and directors to the shareholders (Bruno & Ruggiero, 2011). In this sense, shareholders participation and active engagement in the affairs of companies has become an important aspect of corporate management. In Hong Kong, the legal framework for corporate governance is the Companies Ordinance Cap 622 Laws of Hong Kong. This new law contains provisions that are intended to improve transparency in internal controls of companies, strengthening oversight over company management and enhancing ...

Internal Analysis of McDonald’s Corp.

Introduction McDonald’s is the biggest chain of hamburger fasts food cafes around the world with over 50 million consumers. The corporation was started in 1940 by two brothers in San Bernardino, California (McDonald’s. com, 2016). Today, McDonald's is the leader in global food service retail with around 35,000 locations in more than 100 nations. However, most of its worldwide restaurants are owned and operated by independent local business people. Additionally, the alignment strength in McDonald’s is its franchisees and suppliers. This system has been the reason for the long-term success of the corporation. In the ...

The Health of the Family Business

Introduction JCDecaux Group is a multinational company based in Neuilly-sur-Seine, Paris in France. The company was established in 1964 by Jean-Francois Decaux to offer bus stop advertising systems, billboards, public bicycle rental services, and street furniture (Jcdecaux.com, 2016). Currently, the company is the best outdoor advertising company in the world with annual revenues of more than 2.8 billion Euros. Its commitment is to deliver quality outdoor advertising services to its clients as well as providing first class public services to its customers around the world. The JCDecaux Group core values are innovation, quality, design, sustainable development and trustworthiness in ...

INTRODUCTION

With the intent to evaluate the financial As an established manufacturer of a line of fully-integrated wireless communication products serving an international market, New Technology Incorporated (NTI) is looking to start a partnership with outside entities for a long-term software security venture. After a competitive technical product evaluation, it has been determined that MicroStrategy, Inc. (MicroStrategy), a Virginia based corporation, represents the best potential candidate for this venture. This analysis will review the income statement trends, balance sheet trends, cash flow trends, and three key financial ratio trends for the years of 2013 – 2015 to determine if this merger ...

Financialization is the process by which financial institutions increase in size and influence on the overall economy by strengthening the country’s financial sector. The process occurs in countries that are perceived to have shifted their economies from industrial capitalism. It has been occurring in the United States and other parts of the world since the 1970s. The process has affected both the macro economy and the micro-economy by changing the manner in which financial institutions are structured and operate in the entire economy. The United States has experienced high levels of financialization through the loss of manufacturing and ...