金融英语课件李丽 马跃ISBN 9787810788175 PPTchapter_16.pptVIP

Chapter 16 Business in the Financial System Chapter 16 Business in the Financial System The majority of funds drawn on by businesses to meet their working capital and investment needs come not from the financial markets but from inside the individual business. In most years, more than half of business capital requirements are supplied by earnings and non-cash depreciation expenses—internal cash flow. However, roughly a quarter to a half of business investment needs in recent years have been met by selling securities in the financial markets. The financial system is a backstop for the operations of businesses for those periods when internally generated cash fails to increase fast enough to support the growth of sales. 1. Factors Affecting Business Activity  in the Money and Capital Markets Many factors affect the extent to which businesses draw on the money and capital markets for external funds. They are: condition of the economy, credit availability and interest rates, level and expected growth of internally generated funds. A booming economy generates rapidly growing sales, encouraging business people to borrow in order to expand inventories and to issue stocks and bonds in order to purchase new plant and equipment. In contrast, a sagging economy normally is accompanied by declining sales and a reduction in inventory purchase and long-term investment. Rising interest rates that typically accompany a period of economic prosperity or inflation eventually choke off business borrowing and spending plans due to the increasing cost of carrying inventories, floating new securities, and renewing credit lines. Falling interest rates, on the other hand, can stimulate business borrowing and spending, leading to a restocking of inventories and to an expansion of long-term investment financed by bonds, stocks, and direct loans. The financial markets are largely a supplemental funds source for most businesses, draw