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2 years ago

How do banks create money?

Business

1 answer:

Dafna11 [192]2 years ago

5 0

Answer:

Commercial banks, required reserve, loans, deposits, create.

Explanation:

The main function of commercial banks is to accept deposits and then to lend the same money (minus required reserves) back out. Banks make a profit by charging a higher interest rate on loans than the interest rate they pay on deposits. Through the loan process, banks are actually able to create money.

The major function of commercial banks is

1. Accepting deposits from people and business organzations.

2. Giving loans to Customers to be paid at a specific period of time at an agreed interest rate.

Required reserve is the minimum amount of money which in required for a commercial Bank to hold/save out of every deposit. If the required reserve is 10% of every deposit, a customer customer deposited $100. The required will be $10 which the bank will hold. The remaining $90 is the balance which banks can loan out to Customers.

Commercial Banks make profit by charging a higher interest rate on loan and lower interest rate on deposits. For example: 7.5% interest rate on loan and 2.5% interest rate on deposits. The 5% difference is the bank Profit.

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1. What is the revised net operating income if unit sales increase by 16%? 2. What is the revised net operating income if the se

weeeeeb [17]

Answer:

1) NOI = $90,240

2) NOI = 29,250

3) NOI = 133,260

4) NOI = 110,190

Explanation:

The question is incomplete.

Sales (38,000 units) $342,000 ($9.00 per unit)

Variable expenses $228,000 ($6.00 per unit)

Contribution margin $114,000 ($3.00 per unit)

Fixed expenses $42,000

Net operating income $72,000

1. What is the revised net operating income if unit sales increase by 16%

If unit sales increase, we can calculate this with a 16% increase in the contribution margin.

$NOI=CM*(1+0.16)-FE=114,000*1.16-42,000=132,240-42,000\\\\NOI=90,240$

2. What is the revised net operating income if the selling price decreases by $1.50 per unit and the number of units sold increases by 25%?

A reduction of $1.50 in price means a reduction of the same amount in the contribution margin per unit (CMu), as the variable expenses stay the same .

Also, the contribution margin increases by 25%, for the increase in units sold (q).

$NOI=CM_u*q-FE=(3.00-1.50)*(38,000*1.25)-42,000\\\\NOI=1.5*47,500-42,000=71,250-42,000\\\\NOI=29,250$

3. What is the revised net operating income if the selling price increases by $1.50 per unit, fixed expenses increase by $6,000, and the number of units sold decreases by 6%?

The selliing price will be added to the contribution margin per unit.

The units sold are increased 6%.

$NOI=CMu*q-FE=(3.00+1.50)*38,000*1.06-(42,000+6,000)\\\\NOI=4.5*40,280-48,000=181,260-48,000\\\\NOI=133,260$

4. What is the revised net operating income if the selling price per unit increases by 20%, variable expenses increase by 30 cents per unit, and the number of units sold decreases by 11%?

The contribution margin per unit, with a increase in price and an increase in variable cost, becomes:

$CM_u=P-VE_u=9.00*(1.20)-(6.00+0.30)=10.80-6.30=4.50$

The units sold is now:

$q'=(1-0.11)q=0.89q=0.89*38,000=33,820$

Then, the net operating income becomes:

$NOI=CM_u*q-FE=4.5*33,820-42,000=152,190-42,000\\\\NOI=110,190$

5 0

2 years ago

The following information is taken from the records of Erie Corp.(in thousands) for the year ended on December 31: 2019 2018 Sal

den301095 [7]

Answer:

Favourable Changes:

Sales

Gross Profit

Operating Income

Interest Expense

Net Income

Unfavourable Changes:

Cost Of Sales

Selling Expenses

General Expenses

Other Revenue

Income Taxes

Explanation:

Observe Movement from 2018 results to 2019 results

Erie Corp

Vertical Analysis of Income Statement

2019 2018

Sales 1,397 1,122

Less Cost Of Sales 935 814

Gross Profit 462 308

Less Operating Expenses

Selling Expenses 154 121

General Expenses 88 77

Operating Income 220 110

Less Non- Operating Expenses

Other Revenue 4 7

Interest Expense 2 9

Income Taxes 134 66

Net Income 88 42

8 0

2 years ago

Define ATS and describe its use.. Why would large companies use an ATS ?

elena55 [62]

Answer:

An applicant tracking system (ATS) is a human resources software that acts as a database for job applicants.

7 0

1 year ago

On January 1, Year 1, Friedman Company purchased a truck that cost $35,000. The truck had an expected useful life of 200,000 mil

Svetradugi [14.3K]

Answer:

$4620

Explanation:

Activity method based on hours worked = (hours worked that year / total hours of the machine) x (Cost of asset - Salvage value)

33,000 / 2000,000) x ($35,000 - $7000) = $4620

3 0

2 years ago

Carol has worked for Centrum Springs, Inc., for many years and has now been given the opportunity to advance in the company. Her

levacccp [35]

Answer:

controlling, organizing, planning, and leading

Explanation:

From the question we are informed that Carol's manager is retiring and she will take over. And she will take over management position. Carol needs to have a general understanding of what it takes to be a manager. Therefore in this case, She will need to have knowledge about ✓controlling

✓organizing

✓planning

✓ leading

And all of these are managerial function which are managerial job role as regards to task-based perspective.

Organizing can be regarded as function of management which requires development of organizational structure as well as allocation of human resources so that objective of organization can be met

Planning which requires the manager to create plans so that goals and objectives can be achieved. It involves

delegation of responsibilities, allocation of employee resources

7 0

2 years ago