Archive for January, 2015

Again a striking result is that 23.9% of the US and 42.6% of the German firms distinctly denoted this as a non-important goal.
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These results raise an interesting question: why do so many US and German managers ignore the recommendations of the theoretical finance literature? Looking at the breakdown by size in Table 2 one is tempted to argue that the results depend on the level of sophistication of management. The relevance of the cash flow as well as the firm value objective of risk management using derivatives increases and the relevance of the accounting earnings objective decreases with size. For two thirds of the largest US companies and for almost half of the largest German companies derivatives hedging is primarily directed to a cash flow objective. There are no US and only three German firms in the largest size group that think of cash flow as an unimportant hedging objective. Larger companies in both countries are more often concerned with firm value when designing hedging strategies.
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The most important role for derivatives is for risk management, and an important issue in risk management is defining its goals. The theoretical financial literature strongly recommends focusing on cash flows or on the value of the company. A focus on accounting numbers is generally discarded. However, the results in Table 2 reveal that managers are also concerned with accounting numbers and use earnings and/or balance sheet accounts (especially equity) as objectives in risk management. quick cash payday loans online
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Areas of Use

Figure 2 reveals that US and German companies use derivatives primarily to manage foreign exchange (FX) and interest rate (IR) risk. Almost all German users, 95.9% employ derivatives in FX management and 88.8% employ derivatives in IR management. The comparable figures for the US firms are once again smaller, 78.6% and 75.9%, respectively. Considerable attention is placed also on commodity price (CP) risks by US and German companies with around 40% of firms in each country reporting usage
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One might then expect a higher percentage of derivative users in the German motors industry, which is well known to be an industry following global strategies. Again two of the non-using companies are subsidiaries of foreign groups. Of the six responding motor companies with German headquarters all use derivatives. This similarity in the pattern of derivative use across industries supports the view that derivative usage is driven (at least partially) by underlying economic factors rather than random choice. Feel free to come by whenever your find yourself in need of some money, easy pay day loans to get as much as you need for solving your temporary financial troubles without embarrassing yourself in front of your friends and relatives. Visit us right now at to see how we can help you out
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Figure 1 indicates that the result of German companies being more prone to use derivatives is also consistent across industries groups, with only one exception (the mining industry). Again, exception can be explained by the fact that many firms in the German mining industry are subsidiaries of foreign groups. For the chemical industry we observe a near tie on a high level of derivatives usage in both countries.
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Figure 1 splits the responding companies by industry groups with the total number of firms in each group shown on the right-hand side of the figure. Industry classification is based on the official classification index of the European Community NACE and comparable US SIC code groups.3 To deal with industrially diversified
firms, companies active in more than one industry group were assigned to up to three industry-groups based on their three most-important industry activities that each constitutes 10% of total sales. Thus the sum of industry classifications exceeds the number of responding firms (US industry classifications: 240; German industry classifications: 166). The absolute numbers of respondents are very close in five of the eleven industry groups. Major differences in subgroup composition show up only in the service industry and with utilities where the numbers of US companies are considerably larger. The trouble with online loans is that you can get an insane APR even for the small amount of money you are willing to borrow. If you want the best instant loan online that will not cost too much, you can apply at fully and get one just as easily as you would get a carton of milk at the local grocery store.
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This comparative study is based on the questionnaire of 1995 Wharton Survey of US non-financial firms that was used with only minor modifications in the 1997 German study. The US questionnaire was sent out to a broad-based sample of 2000 US companies including all Fortune 500 firms in the fall of 1995. Three hundred and fifty firms responded to the questionnaire. The German questionnaire was sent to 368 firms comprising large private firms and quoted companies with an annual turnover of DM 200 million or more with the exception of regional breweries, regional public utilities, and local public transportation companies. The German questionnaire was sent in the spring of 1997 and 126 firms responded.
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