레이블이 Debt Service Coverage Calculator인 게시물을 표시합니다. 모든 게시물 표시
레이블이 Debt Service Coverage Calculator인 게시물을 표시합니다. 모든 게시물 표시

2013년 11월 29일 금요일

About 'calculate debt service coverage ratio'|Debt Rattle, May 30 2008: The Inevitable







About 'calculate debt service coverage ratio'|Debt Rattle, May 30 2008: The Inevitable








Abstract               This               paper               will               attempt               to               explain               the               U.S.

Federal               Reserve               (commonly               called               the               Fed)               and               its               relationship               to               businesses               and               financial               institutions               in               the               United               States.

The               U.S.

Federal               Reserve               controls               the               money               supply               sets               interest               rates               on               the               money               they               supply.

Understanding               the               history               of               the               Fed               and               how               it               now               operates               sets               the               parameters               that               can               then               lead               to               an               understanding               of               how               businesses               use               the               available               money               supplies               to               finance               their               ends.

For               the               purposes               of               this               paper               businesses               are               classified               for               the               United               States               into               general               areas:               member               banks,               commercial               banks,               bank               associated               businesses               like               mortgage               lenders               and               other               corporations               and               non-connected               companies.

All               businesses               use               varying               degrees               of               calculated               financial               predictive               and               real               time               rates               structures               to               determine               the               current               and               future               costs               of               money               for               their               operations               and               so               are               affected               to               varying               degrees               by               the               actions               of               the               Federal               Reserve               system.

Depending               on               the               size               of               business               and               their               scope               the               opportunities               for               these               businesses               to               acquire               capital               is               relative               to               their               overall               position               in               the               business               community.
               The               Federal               Reserve
               The               Fed               is               the               Federal               Reserve               of               the               United               States.

The               Fed               is               an               independent               organization               outside               the               United               States               government.

The               Federal               Reserve               system               is               the               United               States'               fundamental               and               central               bank.

The               Federal               Reserve               of               the               United               States               was               originally               established               to               create               a               monetary               structure               to               maintain               stability               of               price               as               the               core               of               the               American               economy.

They               (the               Fed)               could               accomplish               this               by               controlling               the               money               supplies               to               try               to               negate               and               memorize               economic               fluctuations               to               create               an               economy               where               the               United               States               that               could               achieve               long-term               prosperity               (Palmer,               2000).

The               idea               behind               the               Federal               Reserve               Board               is               that               they               represent               fairly               our               country's               agricultural,               industrial,               financial               and               commercial               interests               from               the               divisional               and               geographical               areas               across               the               United               States.
               The               structure               of               the               Federal               Reserve               system               is               divided               into               five               parts.

There               is               a               board               of               governors,               a               Federal               open               market               committee,               12               regional               Federal               Reserve               banks               (privately               owned),               other               private               US               member               banks               and               advisory               councils.

Developing               and               implementing               monetary               policy               is               the               primary               responsibility               and               directive               followed               to               achieve               specific               policies               and               goals               to               balance               the               U.S.

economy               (Jeffery,               2008).

The               Board               of               Governors               of               the               Federal               Reserve               system               is               a               governmental               agency               located               in               Washington               DC.

The               Federal               Open               Market               Committee               is               structured               to               direct               monetary               policy               through               the               oversight               of               open               market               operations.

The               Open               Market               Committee               meets               a               minimum               of               eight               times               a               year               and               communicates               through               e-mail               and               phone               calls               as               needed.

For               example:               just               after               the               terrorist               attacks               of               9/11               the               committee               convened               to               discuss               potential               ramifications               of               the               terrorist               actions               on               the               financial               markets               and               created               solutions               to               continue               stabilizing               the               financial               structure               of               our               nation.

The               12               Federal               Reserve               Banks               are               located               in               specific               districts               across               the               United               States               and               work               as               fiscal               agents               of               the               US               treasury               and               have               their               own               board               of               directors.

One               of               their               primary               purposes               is               to               provide               a               governmental               checking               account               for               the               United               States               treasury               to               keep               the               money               flowing               in               and               out               of               our               monetary               system.

For               example:               an               individual               that               receives               a               monthly               Social               Security               check               keeps               getting               that               check               on               time               or               another               individual               that               is               making               monthly               payments               (deposits)               on               their               estimated               or               back               taxes               can               continue               to               deposit               the               funds               that               are               then               credited               properly.

These               12               Federal               Reserve               Banks               move               United               States               currency               (coins               and               paper               bills)               in               and               out               of               circulation,               hold               the               reserve               deposits               for               the               banks               and               other               members,               run               a               wire               transfer               service,               regulate               and               provide               supervision               of               banks,               maintain               economists               on               staff               to               contribute               to               the               regional               "Beige               Book"               analysis               structure               and               additionally               make               bank               loans               to               the               banks               and               other               members               (Pento,               2009).

The               "Beige               Book"               and               reports               are               based               upon               subjective               data               collected               by               each               Federal               Reserve               Bank               and               compiled               together.

The               private               member               banks               (not               the               12)               hold               specific               required               amounts               of               nontransferable               stock               for               their               local               Federal               Reserve               Bank               depending               on               the               region               where               they               are               located               (Correa               &               Suarez,               2009).
               The               Federal               Reserve               structure               also               has               numerous               other               duties               that               can               be               divided               into               four               general               categories.

They               set               the               configuration               of               monetary               policy               to               be               generally               followed.

Their               job               is               to               balance               the               complete               financial               system               and               keep               it               stable.

Their               duties               are               to               oversee               and               regulate               various               banking               institutions               and               their               actions.

Another               duty               they               have               is               to               protect               our               citizens'               credit               rights.

They               are               the               structure               that               provides               services               to               the               United               States               government,               various               financial               institutions,               both               inside               the               United               States               and               outside               our               borders               and               also               the               public.

The               Federal               Reserve               sets               interest               rates.

This               setting               of               interest               rates               influences               the               use               of               money               throughout               the               entire               economic               structure               of               the               United               States               and               world.

The               Federal               Reserve               has               for               many               years               promoted               a               policy               and               actions               that               have               achieved               measures               of               prosperity               for               the               American               economy               area.

It               plays               a               critical               and               pivotal               role               in               how               our               economy               in               the               United               States               functions               (Fleckenstein,               2010).
               Interest               rates               are               affected               by               the               Federal               Reserve               altering               rates.

In               the               lowering               or               raising               of               the               Federal               Funds               rate               this               action               correlates               directly               to               movements               in               short-term               interest               rates.

For               example:               the               treasury               bill               rates               (T-Bill)               for               a               time               period               of               less               than               five               years               would               be               affected               significantly.

And               where               the               Federal               Reserve               goes               with               rates               (to               raise               or               lower               them),               the               commercial               banks               correlate               their               actions               in               tandem.

The               Federal               Reserve               uses               two               primary               areas               to               regulate               economic               growth:               the               discount               rate               is               the               set               rate               and               the               Fed               funds               rate               is               the               targeted               goal               (Posen,               2002).
               Because               it               is               the               Federal               Reserve's               job               to               regulate               economic               functions               over               long               periods               of               time               consequences               that               can               be               inappropriate               may               be               the               result               from               the               Federal               Reserve               curbing,               allowing               or               even               encouraging               huge               expansion               rates               of               the               United               States               economic               structure.

Some               analysts               have               theorized               that               the               Federal               Reserve               intentionally               may               create               these               recessions               as               opposed               to               expansions               of               the               economy.

And               logically,               this               may               make               sense.

Many               experts               understand               the               idea               of               controlling               balancing               economic               growth               and               despite               the               bad               connotation               of               the               term               the               Fed               historically               has               at               times               "put               on               the               brakes"               (created               a               short               recession)               to               balance               our               economic               system.
               The               reality               is               that               the               Federal               Reserve               is               comprised               of               individuals               that               are               highly               trained               in               the               area               of               economics               and               finance.

That               does               not               mean               that               they               all               agree               or               that               they               are               right               every               time               in               their               assumptions,               policies               and               implementations.

It               is               a               directed               consensus               of               technical               agreement               to               balance               a               monetary               system.
               Historically               the               Federal               Reserve               has               made               any               number               of               larger               mistakes               by               acting               in               the               opposite               manner               to               what               was               needed               for               longer               than               needed.

One               of               the               best               examples               was               during               the               1920s               when               banks               generally               were               not               given               money               reserves               they               needed               this               promoted               a               recession               (Jeffery,               2008).

Economic               policies               that               produce               recessions               are               based               on               the               idea               of               the               Fed               lowering               inflation.

But               the               unfortunate               reality               is               it               then               creates               a               reduction               in               the               production               base               which               then               lowers               output               and               reduces               jobs.

This               just               proves               the               Federal               Reserve               makes               errors               in               directive               judgment               sometimes.

As               the               Fed               sets               policy               based               on               past               observation,               judgment               and               future               prediction               this               will               continue.
               The               level               of               available               money               supply               is               another               major               responsibility               of               the               Federal               Reserve               (Wang,               2008).

The               Federal               Reserve               buys               and               sells               U.S.

Treasury               securities               and               targets               the               money               supply               to               control               inflation.

When               the               inflation               rates               are               low,               and               unemployment               is               moderate               most               times               this               simplistically               should               yield               economic               growth.

When               inflation               rates               are               high               and               unemployment               also               rises               the               tendency               is               for               economic               growth               to               slow               down.

It               is               a               balancing               act               based               on               the               implementation               of               monetary               policies               of               the               Federal               Reserve               since               the               Federal               Reserve               controls               the               money               supply               and               its               movement               structure.
               The               potential               for               effective               flow               of               money               once               it               leaves               the               Federal               Reserve               and               is               distributed               out               into               the               member               banks               and               other               systems               depends               on               many               factors.

If               the               interest               rates               are               too               low               an               opportunistic               business               (at               any               level)               may               not               lend               out               a               given               amount               of               money               for               potential               future               profit               of               principal               plus               interest.

This               if               done               by               enough               of               them               creates               a               slowdown               in               the               flow               of               money               in               our               monetary               system.

Here               is               a               very               simplistic               example               of               how               money               moves               through               the               financial               system.

If               the               total               amount               of               dollars               needed               for               the               entire               system               to               function               effectively               is               $800,000,000,000               yearly               but               the               entire               system               has               only               $600,000,000,000               yearly               available               then               there               is               the               distinct               shortage               of               capital.

This               shortage               of               capital               creates               a               demand               for               capital.

With               this               shortage,               the               need               is               greater               than               the               supply               and               makes               the               dollar               as               capital               worth               more,               and               competitors               would               want               to               loan               out               money               and               raise               interest               rates               on               loans.

If               on               the               other               hand               the               opposite               for               these               numbers               was               true               then               there               would               be               an               oversupply               of               cash               capital               available.

With               the               oversupply               of               capital               available               competitors               would               generally               relax               terms               (to               a               degree)               and               parameters               needed               to               qualify               (to               a               degree)               on               potential               loans               and               most               likely               even               lower               interest               rates               on               these               loans               in               order               to               facilitate               moving               the               money               like               a               commodity.

It               does               comes               down               to               a               simple               law               of               supply               and               demand               pushing               individual               and               group               actions               and               that               is               based               on               the               cost               of               money               and               available               money               supply               levels               (Fleckenstein,               2010).
               The               flow               of               money               from               a               lender               to               someone               borrowing               it               is               the               basic               financial               and               economic               structure               used               in               the               United               States               banking               system.

These               groups               are               in               business               to               achieve               a               purpose.

At               the               top               the               Federal               Reserve               has               been               given               the               responsibility               to               regulate               the               money               supply               and               at               the               bottom               end               corporations               need               a               share               of               the               money               supply               to               operate               their               businesses               to               further               benefit               themselves               and               the               economy.

The               entire               structure               provides               economic               benefits               as               money               changes               hands               and               is               used               for               a               value               purpose.

As               a               business               become               smarter               and               larger;               they               can               look               for               alternate               sources               of               financial               capital               for               operational               needs.

The               proximity               of               reliance               on               the               Federal               Reserve               to               keep               the               flow               of               money               operating               through               the               same               system               of               banks,               lenders               and               finally               the               alternate               other               businesses               becomes               less               important               as               a               company               grows               in               size               structure               and               scope               making               alternatives               possible               for               capitalization               needs.
               The               financial               crisis               that               started               in               mid-2007               create               a               domino               effect               that               eventually               encircle               the               globe               (Wang,               2008).

Mid-2007               through               2008               was               a               period               of               global               trade               collapse.

Financial               markets               have               been               slow               to               recover               since               then.

The               Federal               Reserve               is               constantly               concerned               about               the               big               economic               balancing               act               they               must               perform.

Individual               companies               no               matter               what               their               size               are               not               the               Federal               Reserve's               real               concern.

The               Fed               has               most               recently               been               flooding               huge               volumes               of               money               into               the               national               monetary               market               structure               and               keeping               interest               rates               extremely               low.

It               is               designed               to               provoke               a               recovery               of               the               United               States               economic               structure.

And               while               interest               rates               are               low               the               available               cash               can               be               difficult               to               qualify               for               depending               on               the               size               and               background               of               the               business               looking               for               the               money.

The               Federal               Reserve               has               been               using               quantitative               easing,               and               hopefully               sometime               soon               they               will               stop               buying               treasury               notes               and               mortgage-backed               securities               and               allow               the               system               to               reset               itself               naturally.

However,               no               matter               what               actions               the               Federal               Reserve               takes,               all               businesses               must               put               themselves               first               as               a               consideration               of               survival.

By               taking               into               account               the               available               pertinent               data               and               existing               economic               structures               nationwide               as               well               as               globally               as               they               applied               sound               financial               practices               to               continue               to               analyze,               plan               and               handle               their               capital               and               assets               as               a               directed               function               of               operating               their               own               businesses.
               Businesses               and               the               Federal               Reserve               System
               The               Federal               Reserve               and               businesses               are               connected               in               many               ways               but               primarily               by               the               businesses               using               methods               of               determining               value               as               related               to               current               and               future               cost               of               money               for               their               businesses.

For               the               purposes               of               this               paper;               United               States               businesses               will               be               classified               into               three               general               categories.

These               categories               are:               banks,               directly               related               businesses               to               banks               (like               mortgage               and               security               companies)               and               other               non-affiliated               business               corporations.

In               addition               these               business               can               be               subdivided               by               their               scope               into               sections               of               local,               regional,               national,               multinational               and               global.

Depending               on               where               a               business               falls               in               these               categories               and               sections               the               Federal               Reserve's               actions               affects               their               ability               to               function               and               create               profit               levels.

The               reason               for               the               sectoring               into               categories               and               divisions               is               to               be               able               to               clarify               how               money               is               moved               around,               to               show               the               present               and               future               cost               of               money,               to               detail               how               profits               are               made               and               in               the               end               to               show               why               financial               analysis               coupled               with               a               thorough,               realistic               understanding               of               financial               matters               will               benefit               a               business.
               The               economy               in               the               United               States               is               based               on               general               principles               of               this               financial               money               movement.

That               any               money               which               is               borrowed               (relative               to               any               U.S.

financial               market)               is               materially               affected               by               the               assigned               interest               rate               that               must               be               paid               back               along               with               the               principle.

The               time               duration               of               a               loan               is               set               and               correlates               to               that               action               and               effects               the               future               value               created.
               There               are               primary               and               secondary               capital               markets.

And               subdividing               these               are               the               equity               and               debt               segments.

For               example:               primary               capital               markets               in               the               debt               area               are               bank               loans               and               initial               debt               security               offerings.

Secondary               capital               markets               in               the               equity               area               related               to               the               buying               and               selling               of               stocks               on               the               securities               markets.

And               it               all               relates               to               how               a               corporation               or               any               group               creates               value               (Romer,               1999).
               Here               is               another               simplistic               example               with               simple               interest               (not               compound):               the               first               person               (the               Fed)               lends               the               second               person               $800,000               and               the               interest               rate               is               2%.

Then               the               second               person               (a               commercial               bank)               needs               to               make               money               on               their               transaction               also               so               they               lend               the               $800,000               to               a               third               person               (mortgage               broker               company)               for               an               interest               rate               of               3.5%               then               the               third               person               lends               the               money               $800,000               to               the               fourth               person               (a               corporation)               at               an               interest               rate               of               4.5%               and               that               fourth               person               goes               out               and               purchases               a               small               building               with               the               loan               money               and               now               has               a               physical               location               for               operation               of               their               business.

This               business               that               now               owns               the               building               makes               regular               mortgage               payments               that               include               the               principal               and               interest               for               the               benefit               of               the               lender.

This               simplified               pattern               shows               the               flowing               interconnection               of               financial               profit               down               throughout               the               structure.
               If               it               all               worked               this               easily               and               effectively               there               would               be               no               trouble               with               the               financial               structure               of               the               Federal               Reserve,               our               banks               and               our               businesses.

However               so               many               factors               can               create               complications               or               alternates               depending               on               the               originator,               the               borrower               and               the               situation               from               both               macro               and               micro               circumstances.

The               complications               may               come               from               the               time               duration,               interest               rate               or               structure,               insolvencies               causing               defaults,               general               inflation               can               erode               the               future               profit,               sale               of               a               discounted               note               to               others,               originator               changes               like               mergers               can               effect               it               and               other               circumstances               can               change               the               actual               and               future               value               of               the               example               loan.

In               addition               to               all               of               these               potential               complications               the               structure               for               generally               acquiring               corporate               financing               is               changing.
               Traditionally               the               Federal               Reserve               Banks               set               credit               policy               structure.

Individuals               located               at               these               Federal               Reserve               Banks               examine               the               documents               and               financial               statements               of               the               business               that               want               to               borrow               money.

They               then               made               a               judgment               call               about               loaning               money.

Sometimes               their               subjective               judgment               was               validated               and               sometimes               not.

In               an               effort               to               reduce               losses               and               mitigate               the               loss               variables               new               techniques               were               implemented               widely               in               2000               (Schwartz,               2008).

These               newer               systems               for               the               Federal               Reserve               Banks               are               highly               automated               for               lending               decisions.

The               credit               scoring               models               for               mortgage               originations               and               credit               cards               are               being               based               on               automated               information               from               databases               retrieved               that               may               or               may               not               be               accurate.

And               in               many               cases               a               beginning               business               either               does               not               exist               or               has               no               record               in               these               databases,               this               creates               a               circumstance               of               the               actual               new               business               who               wants               the               loan               being               rejected               automatically               and               having               to               take               the               time               and               money               to               appeal               the               automated               decision.

The               cutoff               numbers               that               are               used               in               scoring               potentials               are               limiting               human               judgment               of               highly               trained               financial               managers.

For               example:               if               a               credit               score               is               650               and               a               business               has               asked               for               a               very               small               loan               of               $50,000               this               credit               score               would               allow               for               automatic               approval               without               any               human               oversight.

It               makes               sense               that               the               performance               of               these               loans               is               good.

However,               it               creates               a               condition               where               as               a               business               that               knows               it               will               need               loans               will               tailor               make               itself               for               the               parameters               that               are               automatically               judged.

In               addition,               it               means               that               a               business               that               has               a               credit               score               slightly               below               automatic               approval               needs               to               additionally               undergo               extensive               review               for               appeal               by               the               lender.
               What               does               all               this               have               to               do               with               the               Fed               and               that               financial               movement               of               money?

Simply               that               if               a               business               can               and               often               does               manipulate               their               own               financial               accounting               records,               they               can               structure               these               accounting               records               to               reflect               what               they               prefer               outsiders               to               see.

This               can               affect               any               number               of               areas               of               credit               including               qualifying               for               a               bank               loan               to               purchase               a               building               to               expand               their               operations               and               so               on.

Earnings               quality               is               the               main               importance               of               full               disclosure.

If               a               company               uses               conservative               reporting               and               minimizes               risk               to               earnings               further               examination               and               analysis               will               show               this               company               to               be               fair               in               their               reporting               and               the               tendency               would               be               to               imply               that               any               loan               requested               by               the               company               (if               they               qualify)               will               not               be               defaulted               on               (Romer,               1999).
               A               financial               analysis               traditionally               has               certain               steps               and               procedures               to               evaluate               information               for               making               decisions.

It               is               standard               to               use               a               sequential               six               step               process               for               financial               analysis.

These               steps               are:               identification               of               the               reason               behind               doing               a               financial               analysis,               understanding               the               structure               of               the               company               being               examined,               applying               standard               and               proper               financial               analysis               techniques,               examination               of               the               accounting               structure               details,               a               general               comprehensive               analysis               leading               to               some               decisions               and/or               a               recommendation.

Part               of               all               of               this               (a               financial               analysis)               is               an               understanding               of               the               company               and               its               placement               in               relation               to               the               structure               of               the               other               business               segments.
               For               example:               it               is               unrealistic               to               have               a               small               local               company               owner               make               predictions               and               act               on               those               predictions               that               if               they               acquired               enough               capital               (a               single               huge               bank               loan)               they               could               exponentially               grow               the               company               to               another               level.

Their               belief               that               they               could               then               position               themselves               as               a               top               leader               against               their               competitors               is               dubious.

The               belief               that               they               could               corner               a               global               market               in               an               single               common               item               against               an               industry               of               competitors               supplying               the               same               item               at               a               lower               cost               is               a               fallacy               that               can               be               exposed               from               careful               analysis               and               recommendation               for               future               operations.

To               be               realistic               is               one               of               the               functions               of               a               financial               analysis.

The               numbers               must               be               accurate.

It               is               the               job               of               a               financial               analysis,               to               insure               that               "the               blue               sky               projections"               are               not               used               but               the               reliance               on               realistic               actions               for               continuation               and               reasonable               growth               is               followed               instead.

Businesses               must               consider               their               current               and               future               value               of               assets               and               liabilities               including               their               inventories               and               pension               funds               to               be               handled.
               In               addition,               using               quantitative               financial               analysis               allows               for               an               examination               of               the               key               elements               in               context,               which               is               helpful               for               planning               the               future.

The               technical               structure               is               about               ratios,               time               series,               cash               flows               and               comparative               models.

Again,               this               kind               of               analysis               must               be               done               using               accurate               information               that               actually               represents               the               business.

The               identification               of               any               flexibility               in               accounting               policies               and               disclosures               must               be               included.

Earnings               management               potential               must               be               evaluated.

A               major               issue               in               any               analysis               is               the               identification               of               red               flag               items.

A               comprehensive               analysis               can               be               undertaken               to               identify               and               bring               together               key               points               for               making               decisions.

A               rating               scale               along               with               a               summary               should               be               undertaken               at               this               point.

The               rationale               behind               the               decisions               and               summary               should               be               sound.

All               this               should               be               done               in               relation               to               the               general               financial               structures               and               controls               available               including               any               from               capital               markets,               credit               decisions,               equity               investment               decisions,               SEC               regulations               and               accounting               regulators               (Palmer,               2000).
               The               value               created               is               a               function               of               profit               derived               from               a               business               operation.

It               is               the               owner(s)               or               the               designated               management's               responsibility               to               control               identifiable               risks               and               achieve               profitability               by               utilizing               all               the               resources               as               effectively               as               possible.

The               desired               outcome               for               a               business               from               efforts               directed               towards               operations               and               discretionary               accounting               methods               yields               best               value               benefits.

Earnings               quality               (that               is               the               quality               of               the               asset               generating               and               thus               derived               from)               is               important               (Jeffery,               2008).

In               addition               the               relationship               of               risk               to               benefit               must               be               part               of               the               bigger               viewpoint,               objectively               used               when               reviewing               financial               analysis               data.

The               discretionary               aspects               of               using               reasonable               variable               earnings               manipulation               must               be               thoroughly               understood               before               being               implemented               as               part               of               any               agency               theory               employed.

In               the               end,               the               accounting               choices               are               discretionary               for               any               business.

Under               GAAP               a               company               may               create               reserves,               do               off               balance               sheet               financing,               leave               out               some               obligations               and               liabilities               and               potentially               even               overstate               potential               performance               using               variations               in               revenue               recognition               (Wang,               2008).

So               a               business               can               actually               manipulate               their               own               reported               income               by               structuring               the               reporting               structure               of               when               they               recognize               their               own               critical               data               from               their               bookkeeping               practices.

For               example:               some               income               may               be               classified               onto               the               books               for               next               year's               cycle.

Depreciation               and               employee               benefits               also               have               discretionary               aspects               for               earnings               manipulation.
               Now               let               us               look               at               the               relationship               between               the               Federal               Reserve,               the               flow               of               moneys,               the               volume               of               money               being               available               and               businesses               that               use               capital               to               operate.

Any               business               from               a               tiny               individual               proprietorship               (for               example:               a               young               man               mowing               yards               to               make               money)               up               to               and               including               global               corporations               is               affected               by               the               flow               of               money.

While               it               is               not               as               common               for               the               young               man               (or               woman)               mowing               yards               to               do               a               financial               analysis               of               their               business               it               becomes               a               more               common               process               to               use               to               assist               a               company               in               making               the               correct               decisions               to               provide               for               the               business               as               it               grows               larger.

A               manager,               owner               of               the               business               or               delegated               individual               can               analyze               the               flow               of               money               for               current               and               future               possibilities.
               No               matter               what               size               a               business               is,               all               businesses               use               some               form               of               financial               analysis               on               their               records               and               apply               it               to               make               the               best               possible               decision               for               operations.

In               addition,               the               size               of               a               business               does               not               matter               when               it               comes               to               understanding               and               applying               principles               relating               to               the               proper               use               of               calculating               the               time               value               of               money               for               their               organization.

Of               course               these               two               processes               and               procedures               need               to               relate               directly               to               the               inflation               rate               from               the               Federal               Reserve               printing               paper               money               that               in               access               in               circulation               can               devalue               a               business'               money               being               used               as               operating               capital               or               in               the               case               of               physical               assets               like               buildings,               land               and               vehicles               also               decrease               in               potential               net               worth.
               The               reality               is               that               no               matter               if               a               business               operating               in               the               United               States               is               very               small               like               a               proprietorship               that               sells               hotdogs               from               a               vending               cart               located               on               a               downtown               street               corner               all               the               way               up               in               size               to               the               biggest               of               the               huge               conglomerates               that               operate               globally               they               all               depend               on               cash               flow               from               structured               operations               to               keep               their               businesses               running               (Mouhammed,               2008).

Is               Generally               these               two               examples               companies               can               both               can               get               cash               from               two               primary               sources:               investment               and               financing               (Schwartz,               2008).

Any               business               makes               use               of               their               money               by               purchasing               items               and               services               needed               for               operations.

This               could               be               the               hotdogs               that               are               resold               by               the               hotdog               vendor               or               it               could               be               the               accident               insurance               that               is               paid               for               potential               replacement               for               the               hotdog               vending               cart.

Financing               cash               could               be               acquired               when               the               hotdog               vendor               asks               for               a               loan               from               a               bank               for               a               new               hotdog               vending               cart               or               a               second               cart               for               expansion.

Of               course               evaluation               of               the               analysis               of               accounting               performance               for               both               these               example               companies               becomes               the               bottom               line               that               often               is               the               decider               for               financing               (Meltzer,               2003).

However               generally               as               a               company               or               corporation               grows               in               size               the               potential               avenues               widen               for               the               acquisition               of               capital.

The               hotdog               vendor's               proprietorship               has               a               more               limited               ability               to               qualify               for               varying               sizes               of               loans.

The               bank               or               a               finance               company               after               examining               the               vendors               financial               records               may               be               willing               to               extend               credit               for               a               hotdog               cart               ($12,000),               company               vehicle               ($27,000),               or               even               potentially               the               purchase               of               real               estate               ($150,000)               to               centralize               the               hotdog               vendor's               business               location.

The               reality               is               a               hotdog               vendor               and               a               huge               global               corporation               can               have               identical               credit               scores               but               qualify               only               into               certain               ranges               of               maximum               debt               in               total               because               of               their               profits               resulting               from               cash               flow,               liquidity,               sales               activity               and               debt               structure               (Pento,               2009).

The               debt               ratio               of               total               liabilities               to               total               assets,               along               with               long-term               trends               and               projected               potential               growth               rates               for               either               of               these               example               companies               also               control               the               maximum               point               of               financial               debt               offered               because               of               the               need               for               paying               back               their               loans.
               It               is               true               that               there               are               more               potential               opportunities               for               financing               are               larger               for               bigger               companies.

For               example:               let's               look               at               a               business               that               specializes               in               ladies               plus               size               clothing               that               currently               has               12               stores               located               in               various               states               in               the               eastern               United               States.

They               have               more               leverage               and               financing               alternatives.

The               size               of               this               company               in               relation               to               sales               numbers,               assets               owned,               liabilities               incurred               and               overhead               as               structured               gives               them               an               automatic               level               of               respect               from               potential               investors               or               lenders               because               of               the               volume               of               positive               cash               flow               created.

When               approaching               a               commercial               bank               this               ladies               clothing               chain               would               be               considered               a               better               risk               by               the               bank               than               the               hotdog               vendor's               company               even               if               financially               sales               and               net               profit               were               trending               down               over               time               for               their               industry               because               of               a               ongoing               recession.

This               medium-sized               ladies               clothing               chain               has               verifiable               accounting               dollar               value               of               the               owned               and               already               paid               for               assets               available               as               collateral               and               can               provide               extensive               details               on               all               current               and               potential               projected               liabilities.

The               proportionate               assets               to               liabilities               ratio               along               with               the               multiple               location               dispersion               for               coverage               "to               attract,               pull               in               and               sell               to               customers"               gives               more               reason               for               bank               confidence               behind               any               loan               monies.

It               all               becomes               a               factor               of               the               financial               analysis               and               evaluation               of               the               structural               data               and               because               there               is               a               larger               amount               of               data               in               more               detail               covering               the               assets,               liabilities,               expenses,               income,               and               so               on.
               When               the               cost               of               capital               is               too               high               from               a               United               States               bank               or               lender               a               big               business               can               look               elsewhere.

With               a               relative               increase               in               size               for               a               business               the               potential               for               financing               keeps               increasing.

This               can               include               options               for               the               bigger               company               with               the               larger               scope               for               finding               funding               including               :               IPOs,               relational               partnerships,               stock               issuance               systems               and               creative               variations               in               investment               techniques               (Wang,               2008).
               There               are               exceptions               and               a               business               can               grow               up               to               or               be               designed               for               a               larger               scope               of               activities               and               coverage               areas               and               actively               target               financing               alternatives               (Pento,               2009).

For               example:               Google               quickly               grew               in               relative               size               because               of               the               nature               of               the               search               engine               and               database               business               structure               from               their               original               design.

When               word               of               a               Google               IPO               offering               was               released               it               was               so               valued               that               they               set               a               record               for               opening               IPO               price.

Their               system               of               financing               over               time               that               started               with               initial               loans               from               private               investors               and               then               finally               led               them               to               use               IPOs               has               buffered               them               to               some               degree               from               the               United               States               Federal               Reserve               ongoing               monetary               actions.

However               by               continuing               to               keep               some               of               their               Google               facilities               based               in               the               United               States               they               will               currently               be               directly               affected               in               their               day               to               day               and               future               operational               costs               by               the               continuing               inflation               rate.
               While               it               is               true               the               United               States               Federal               Reserve               effects               the               monetary               system               of               the               United               States               it               also               effects               the               global               monetary               system               network               (Parks,               2000).

This               is               because               the               United               States               dollar               has               for               over               30               years               been               the               preferred               currency               for               many               nations               reserves.

But               because               it               is               a               percentage               share               of               the               complete               structure               its               impact               on               interest               rates               and               money               supply               in               the               United               States               is               large               and               then               lessons               as               the               scope               of               affected               relationships               decrease               (Wang,               2008).
               Currently               it               is               believed               by               experts               that               the               world's               two               biggest               economies;               China               and               the               United               Sates               will               continue               to               be               linked               by               supply               and               demand               structures               (Schwartz,               2008).

For               both               countries,               the               capital               management               of               their               money               will               continue               to               be               subjective               primarily               because               of               self-interest               for               their               own               country's               survival               needs.

In               addition               to               these               two               giant               economies               the               employment               cost               structure               of               some               other               countries               has               created               business               opportunities               that               some               companies               have               taken               advantage               of               to               increase               profits.
               Because               of               the               nature               of               global               economies,               including               specific               countries               with               low               employment               cost               rates,               some               businesses               have               chosen               at               different               economic               time               periods               to               leave               the               United               States               and               set               up               operations               in               other               countries               (Fleckenstein,               2010).

This               has               created               a               reduction               in               their               overhead               and               their               cost               of               doing               business.

But               overall               it               is               a               combination               and               total               of               factors               that               control               the               creation               of               value               for               any               business.

And               sometimes               the               move               by               a               business               to               a               foreign               country               has               not               gone               as               projected.

And               in               the               case               of               the               "help               desk"               industry               in               general               the               trend               has               been               for               many               of               these               operations               to               be               brought               back               into               the               United               States               despite               the               higher               costs.

For               other               companies               it               has               been               worthwhile.

For               example:               a               global               corporation               like               Coca-Cola               with               hundreds               of               main               offices               located               in               200               countries               including               Saudi               Arabia,               England,               the               United               States               and               Mexico               can               secure               a               loan               from               a               local               bank               in               China               for               local               use               if               they               so               desire               (and               the               local               bank               agrees               to               it).

The               numbers               economically               relating               to               the               applicable               financials               need               to               be               "right"               for               this               to               occur.

This               circumstance               would               be               especially               applicable               if               Coca-Cola               was               setting               up               a               partnership               with               a               local               company               to               open               up               a               bottling               plant               in               China               (Posen,               2002).
               Conclusion
               The               United               States               Federal               Reserve               will               continue               to               operate               and               plan               to               create               the               long-term               stability               and               growth               in               the               United               States'               monetary               system.

Through               applying               an               understanding               of               the               effects               of               the               Federal               Reserve's               actions               on               the               money               structure               of               the               United               States               any               business               can               be               prepared               to               take               measures               to               protect               their               current               and               future               operations               as               needed.

Depending               on               the               functional               size               of               the               business               and               their               operational               scope               it               can               be               said               that               generally               for               the               foreseeable               future               the               realistic               trend               for               most               all               United               States               based               businesses               will               be               towards               looking               for,               acquiring               and               using               various               forms               of               capital               when               feasibility               available               for               continued               business               functioning,               growth               and               long-term               survival.
               References
               Correa,               R.

&               Suarez,               G.

(2009).

Firm               Volatility               and               Banks:               Evidence               from               U.S.

Banking.

Retrieved               from               http://www.FederalReserveBoard.com/researchand               statistics/
               Fleckenstein,               B.

(2010).

Why               the               Fed               won't               stop               printing               money.

Retrieved               from               http://articles.moneycentral.msn.com/Investing/currency/why-the-Fed-wont-stop               printing-money.

Htm
               Jeffery,               E.

(2008).

How               Does               The               Federal               Reserve               Affect               Interest               Rates?

Retrieved               from               http://ezinearticles.com/?How-Does-The-Federal-Reserve-Affect-Interest-Rates?&id=404238
               Meltzer,               A.

(2003).

A               History               of               the               Federal               Reserve.

Retrieved               from               Http://www.UC.edu/bib/his/class/research/history/historyofthefrederalreserve.htm
               Mouhammed,               A.

(2008).

The               Federal               Reserve               and               the               American               business               cycles.

Retrieved               http://www.allbusiness.com/economy-economic-indicators/economic-indicators-interest/11766378-1.html
               Palmer,               G.

(2000).

Credit               Scoring               for               Small               Business               Lending..

Retrieved               from               http://www.frbsf.org/publications/community/investments/cra99-3/page1.html
               Parks,               K.

(2000).

The               truth               may               hurt,               but               financial               projections               should               be               brutally               honest.

Retrieved               from               http://www.bankrate.com/brm/news/biz/Cashflow_banking/20000406.asp
               Pento,               M.

(2009).

Fed               Gaining               Complete               Control               Over               Money               Supply.

Retried               from               http://www.huffingtonpost.com/michael-pento/Fed-gaining-complete-cont_b_173172.html
               Posen,               A.

(2002).

Six               practical               Views               of               Central               Bank               Transparency.

Retrieved               from               http://docs.google.com/cache:YlLBnZhoL-0J:www.iie.com/publications/papers/posen0502.pdf+Faust+and+Svensson
               Romer,               C.

(1999).

Changes               in               Business               Cycles:               Evidence               and               Explanations.

Retrieved               from               Http://www.

JEP.edu/ch13/Romer/1999EandE.htm
               Schwartz,               A.

(2008).

Money               Supply.

Retrieved               from               http://www.econlib.org/library/Enc/MoneySupply.html
               Wang,               J.

(2008).

Durable               Goods               and               the               Collapse               of               Global               Trade.

Retrieved               from               http://www.dallasFed.org/research/eclett/2010/el1002.html






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