6.3 - Major World Events Flashcards
(37 cards)
Factors that affects all economies:
- Recession
- Price of commodities
Commodity definition
A resource that is bought and sold on commodity markets e.g. oil
A fall in oil prices is good for who and bad for who?
- Good for countries such as the UK, who imports most of its oil and gas
- Bad for exporters such as Saudi Arabia
How do governments find money to pay for a war?
- Raise taxes
- Borrow more
What is the effect of increasing taxes?
- Reduces the take-home pay of employees earning more than the annual tax-free allowance
- Increases rate of inflation
How can governments borrow money to finance a war?
Issuing government bonds
What are government bonds known as in the UK?
Gilt-edged security
How do the government ensure that investors buy enough bonds?
By offering higher interest rates
What does war result in investors doing?
Investing in safer products
How do providers respond to war?
By developing new financial products designed to appeal to a nervous public e.g. products with built-in guarantees
What terms do many insurers have in their policies to do with war?
They will not pay out compensation for damaged to property resulted from war.
How is the insurance industry being affected by the weather?
More frequent and larger claims for extreme weather events
Why are UK insurance premiums for house insurance likely to increase?
As a direct result of serious floods
What are some insurance companies doing in response to serious floods?
No longer insuring certain properties or pushing premiums up so that they are unaffordable
How are houses near the coast effected by weather?
Coastal erosion means that the property value decreases as the houses become closer to cliffs.
What have big businesses been plagued by in relation to accounting?
False, or ‘creative’ account in which an individual has falsified or hidden records, so that senior management does not know how bad the business’s finances are until it is too late
When ill-advised mergers happen and the problem-hit company’s shares fall, what can this mean?
- Sudden loss in wealth for shareholders
- Stock market uncertainty - other companies may be affected
- Calls for better controls on companies and what they do
What is a result of problems coming from ill-advised mergers?
- A tightening of financial regulation under the FCA, the PRA, and the bank of England
- Banks have increased amount of capital they hold to cushion them against future financial problems
What is the responsibility of the company’s compliance department?
To ensure that a company acts fairly and ethically, and abides by all relevant laws.
Who is the compliance department under the direction of?
Directors and auditors
What is the duty of directors?
To care to the shareholders in the company but they have recently taken on duty to care for the interest of all stakeholders
What happens if directors do a bad job of caring to stakeholders?
The shareholders can sue them for ‘breach of fiduciary duty’
What is the duty of auditors?
To check the accuracy of published accounts, for the protection of shareholders and other stakeholders
What has happened in cases where auditors have failed to identify problems with accounts that they should have found?
They have been sued and had to pay compensation to people who have lost money as a result
