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Locking into low fixed–rate long-term borrowing [ edit ] For a finance director watching the trend in interest rates, there is an attraction in trying to catch the lowest point in the cycle to fund with fixed rate debt, or swap variable rate bank borrowings for fixed rate convertible borrowing.
More importantly, a fall in fixed investment by business can hurt long-term economic growth of the supply side, i.e., the growth of potential output. Thus, the situation in which a tight monetary policy may lead to crowding out is that companies would like to expand productive capacity, but, because of high interest rates, cannot borrow funds ...
Government borrowing to finance public goods, such as urban infrastructure, has been associated with modern economic growth. [7]: 6 Written records point to public borrowing as long as two thousand years ago when Greek city-states such as Syracuse borrowed from their citizens.
Alternatives to implementing austerity measures may utilise increased government borrowing in the short-term (such as for use in infrastructure development and public work projects) to attempt to achieve long-term economic growth. Alternately, instead of government borrowing, governments can raise taxes to fund public sector activity.
Note that some finance and economic theories assume that market participants can borrow at the risk-free rate; in practice, very few (if any) borrowers have access to finance at the risk free rate. The risk-free rate of return is the key input into cost of capital calculations such as those performed using the capital asset pricing model. The ...
The Federal Reserve is set to cut U.S. short-term borrowing costs on Wednesday, a watershed moment that should start to ease some of the financial pressures everyday consumers have felt over the ...
Another popular iteration of the ratio is the long-term-debt-to-equity ratio which uses only long-term debt in the numerator instead of total debt or total liabilities. Total debt includes both long-term debt and short-term debt which is made up of actual short-term debt that has actual short-term maturities and also the portion of long-term ...
An economic theory that defines wealth by the amount of precious metals owned. [48] business cycle. Also called the economic cycle or trade cycle. The downward and upward movement of gross domestic product (GDP) around its long-term growth trend. [49] The length of a business cycle is the period of time containing a single boom and contraction ...