Part 1. 2
Introduction. 2
Main Context 2
Conclusion. 3
Part 2. 3
Question 1. 3
Question 2. 4
References. 8
The United States in the year 2007 was suffered from the crises which started due to the fluctuations in the mortgage lending markets. The Federal Home Loan Mortgage Corporation stated that they would be not going to buy high-risk mortgages (Savona, Oldani & Kirton, 2016). The New Century Financial Corporation, a well-known mortgage lender was bankrupted. The fall of the large financial institutions in the year 2008 of United States became the major reason for the occurrence of the financial crisis. The economies of many countries were being affected by this crisis.
The economies of the European Union were being affected by the financial crisis. The European Union took a step to strengthen its policy by coordinating the member states. A legislation pack named "Six-pack" was being adopted by the European Parliament on the basis of the economic governance (Berlatsky, 2010). The “Stability growth and Pact stronger was introduced by the package and focused on monitoring the deficits in the budget set by the member states. "The two-pack", a new package was introduced which consists of two objectives. The objectives were developing budgetary coordination and improving economic and financial reconnaissance by enhancing inspection of the member states (Barnett, 2015).
The financial sectors were not able to respond to the debt crisis which led to the financial crisis. The European Union for avoiding such incidents in the future established new authorities for supervising the financial institutions. The institutions include the European Banking Authority (EBA), the European Insurance and Occupational Pension Authority (EIOPA), the European Systematic Risk Board for the Macro-prudential Supervision (SRBMS) and the European Securities and Markets Authority (ESMA) (Hofmann, Rowe & Türk, 2013). The financial institutions were responsible for regulating the financial market in an appropriate manner.
The council made efforts for managing the financial markets by adopting key pillars such asthe Single Supervisory Mechanism for banks and Capital Requirements Directive to set a standard requirement for the financial institutions. The economic stability is very much important for the development of a country. In the year 2010,the European Union set a common goal for boosting the growth of the economy (Lannoo, 2011). “Europe 2020 strategy” was implemented for delivering smart, sustainable and inclusive growth. European Union also took initiative for growth and jobs.
European Union was more competitive in comparison to itsneighborss. Furthermore,the council also enter into n aagreement for increasing the employment for young people through the Youth Empowerment Programme of European Union (Olsson, 2014). The European Union had promised to provide jobs and ensurethe growth of the economy. The new structure for the government was used for coordinating the economic and fiscal policy. However, the European Union had made adequate efforts for dealing with the debt crisis.
The supervisory and banking structures at the European Union level depicted that they have responded adequately to the debt crisis. The goal of the Union was to ensure that the debt crisis would not occur inthe future. For the European Union, the growth of the supervisory structured and banking unions would remain the key agenda (Sum, 2016).
Year |
Project X (Rs.) |
Project Y (Rs.) |
0 |
-70000 |
-70000 |
1 |
10,000 |
50,000 |
2 |
20,000 |
40,000 |
3 |
30,000 |
20,000 |
4 |
45,000 |
10,000 |
5 |
60,000 |
10,000 |
Net present value |
46,150 |
36,578 |
Profitability index |
1.659288052 |
1.522543436 |
The internall rate of return |
27% |
38% |
The identifiable assets of Wing Ltd are $345000.
The liabilities of Wing Ltd are $120000.
The net identifiable assets = Identifiable assets-liabilities
= $345000-$120000
= $225000
Goodwill = $270000-$225000
= $45000
Date |
Particular |
Debit ($) |
Credit ($) |
1 July 2011 |
Share capital |
270000 |
|
|
Wing Ltd |
|
270000 |
Date |
Particular |
Debit ($) |
Credit ($) |
1 July 2011 |
Nick Ltd |
270000 |
|
|
Share capital |
|
270000 |
Nick Ltd ($) |
Wing Ltd ($) |
Total |
Dr |
Cr |
Consolidated |
|
Shareholders’ equity |
||||||
Share capital |
4,50,000 |
1,80,000 |
6,30,000 |
180000 |
450000 |
|
General reserve |
45,000 |
25,000 |
70,000 |
25000 |
45000 |
|
Retained earnings |
1,40,000 |
20,000 |
1,60,000 |
20000 |
140000 |
|
Total shareholders’ equity |
6,35,000 |
2,25,000 |
8,60,000 |
635000 |
||
Assets |
||||||
Current assets |
||||||
Goodwill |
45000 |
45000 |
||||
Cash at Bank |
50,000 |
30,000 |
80,000 |
80000 |
||
Accounts Receivable |
20,000 |
10,000 |
30,000 |
30000 |
||
Inventory |
100000 |
25000 |
1,25,000 |
125000 |
||
Non-current assets |
||||||
Investment in Wing Ltd |
2,70,000 |
2,70,000 |
2,70,000 |
|||
Land |
2,50,000 |
2,00,000 |
4,50,000 |
450000 |
||
Plant & Equipment |
100000 |
80000 |
1,80,000 |
180000 |
||
Total assets |
790000 |
345000 |
1135000 |
910000 |
||
Liabilities |
||||||
Current liabilities |
||||||
Accounts Payable |
40,000 |
10,000 |
50,000 |
50000 |
||
Interest Payable |
15000 |
8000 |
23,000 |
23000 |
||
Non-current liabilities |
||||||
Bank loan |
1,00,000 |
1,02,000 |
2,02,000 |
202000 |
||
Total liabilities |
1,55,000 |
1,20,000 |
2,75,000 |
275000 |
Note:
Goodwill= $45000
Net asset value of Wing Ltd= $225000
Nick Ltd ($) |
Wing Ltd ($) |
Total |
Dr |
Cr |
Consolidated |
|
Shareholders’ equity |
||||||
Share capital |
4,50,000 |
1,80,000 |
6,30,000 |
180000 |
450000 |
|
General reserve |
45,000 |
25,000 |
70,000 |
25000 |
45000 |
|
Retained earnings |
1,40,000 |
20,000 |
1,60,000 |
20000 |
140000 |
|
Total shareholders’ equity |
6,35,000 |
2,25,000 |
8,60,000 |
635000 |
||
Assets |
||||||
Current assets |
||||||
Goodwill |
45000 |
45000 |
||||
Cash at Bank |
50,000 |
30,000 |
80,000 |
80000 |
||
Accounts Receivable |
20,000 |
10,000 |
30,000 |
30000 |
||
Inventory |
100000 |
25000 |
1,25,000 |
125000 |
||
Non-current assets |
||||||
Investment in Wing Ltd |
2,70,000 |
2,70,000 |
2,70,000 |
|||
Land |
2,50,000 |
2,00,000 |
4,50,000 |
450000 |
||
Plant & Equipment |
100000 |
80000 |
1,80,000 |
180000 |
||
Total assets |
790000 |
345000 |
1135000 |
910000 |
||
Liabilities |
||||||
Current liabilities |
||||||
Accounts Payable |
40,000 |
10,000 |
50,000 |
50000 |
||
Interest Payable |
15000 |
8000 |
23,000 |
23000 |
||
Non-current liabilities |
||||||
Bank loan |
1,00,000 |
1,02,000 |
2,02,000 |
202000 |
||
Total liabilities |
1,55,000 |
1,20,000 |
2,75,000 |
275000 |
||
Net assets |
6,35,000 |
2,25,000 |
8,60,000 |
635000 |