Essay on Credit Risk And Financial Risk

Essay on Credit Risk And Financial Risk

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Credit risk is an aspect where the bank borrower may fail to fulfill its obligations in regards to the underline terms. In most banks loans are the most and largest sources of risks. Therefore banks have to draw some measures to reduce the coverage of credit risks. Banks ought to have great awareness in need to control, identify, measure and monitor credit risk and also make sure that they have enough capital in relations to these risks and they sufficiently cater for the risk incurred.
The banking management should put in place practices that help in controlling credit risk. The risk plans of the bank must provide continuity. The strategy should be assessed often and amended and be viable during the various economic cycles and long- run of the business. The risk ought to be effectively spread all through the banking business (Ojo, 2012). The risk plan must recognize the objective of credit earnings, growth and quality. The bank should also identify the target markets in relations to available features a bank may need to accomplish in their credit portfolio.

QUESTION 7:
Jackson Company repurchasing stock is mainly based on the distribution of its cash to the shareholders which in return gets a fraction for the stupendous equity. When performing cash repurchasing it alters the firm’s assets composition, its mix of finance, revision of ownership fractions of every shareholder and distribution of cash by shareholders using different tax transaction. This also signifies the information concerning the value of the company to investors. Jackson Company stock repurchasing shows results that potentially poses implications for many issues when financing the corporate. This ranges from evaluating differences in a company’s cash taxability...


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...n company dividends payout serves to decrease the disagreement between the shareholders and the managers over conflict of interest. The dividends payout for Jackson firm poises as a device to inform the investors about the future prospects of the company. The investors can use the information in the determination of the company’s share price. The Jackson company decide to give a high dividends of $400 in the year 2013 bearing in mind that dividends enhances the value of the firm. The bank should not agree with the payout since this affect the cash flow. In return it will have adverse effect on the repayment of the loan that the company took from the bank. This can also leads to liquidation that can greatly affect the bank and other investors. The appropriate dividends payout for Jackson Company could be $200 that will not adversely affect the cash flow the company.

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