Wednesday’s reaction to the Fed announcement was muted, although it was enough to send the Dow up 26.41 points on Wednesday to its highest close in two years. On Thursday, as investors absorbed the impact of the announcement, financial markets in Europe and Asia rose, and the dollar weakened.

Equities have rallied strongly since early September, partly in anticipation of action by the Federal Reserve.The Dow Jones industrial average has gained more than 14 percent in the last two months while the Standard & Poor’s index is up 16 percent.

The pace of the Fed’s purchases was outlined as $75 billion a month for eight months. When combined with an earlier program announced in August, in which the Fed will be buying Treasury debt of about $250 billion to $300 billion by the end of June, the total purchases will be $850 billion to $900 billion.

The Federal Reserve policy makers, by buying government bonds, will increase demand for them and by raising their prices, push long-term interest rates down. Ultimately, the Fed wants to address the dual issues of extremely low inflation and high unemployment at a time when it has few other policy options available.

Emerging markets criticized the Federal Reserve for its decision to pump more money into the U.S. economy, a measure that they fear could escalate the worrisome flood of cash into fast-growing economies. Officials from countries like Brazil and Thailand threatened more measures to curb the flood of money that has pushed up currency values and fueled concerns that asset price bubbles might be in the making.

Many emerging-market countries and Japan have been intervening in the foreign exchange markets in an effort to slow the rise in the values of their currencies, which they fear could harm export industries by making exported goods and services more expensive for overseas consumers.

Sponsors: Consfin, dLoewi

What is a balance sheet used for? According to dLoewi.com, a balance sheet helps a small-business owner quickly get a handle on the financial strength and capabilities of the business. Is the business in a position to expand? Can the business easily handle the normal financial ebbs and flows of revenues and expenses? Or should the business take immediate steps to bolster cash reserves?

Balance sheets can identify and analyze trends, particularly in the area of receivables and payables. Is the receivables cycle lengthening? Can receivables be collected more aggressively? Is some debt uncollectable? Has the business been slowing down payables to forestall an inevitable cash shortage?

Balance sheets, along with income statements, are the most basic elements in providing financial reporting to potential lenders such as banks, investors, and vendors who are considering how much credit to grant the firm.

Assets

Assets are subdivided into current and long-term assets to reflect the ease of liquidating each asset. Cash, for obvious reasons, is considered the most liquid of all assets. Long-term assets, such as real estate or machinery, are less likely to sell overnight or have the capability of being quickly converted into a current asset such as cash. Total assets represents the total dollar value of both the short-term and long-term assets of your business.

Current assets

Current are any assets that can be easily converted into cash within one calendar year. Examples of current assets would be checking or money market accounts, accounts receivable, and notes receivable that are due within one year’s time.

Cash: Money available immediately, such as in checking accounts, is the most liquid of all short-term assets.

Accounts receivables: This is money owed to the business for purchases made by customers, suppliers, and other vendors.

Notes receivables: Notes receivables that are due within one year are current assets. Notes that cannot be collected on within one year should be considered long-term assets.

Fixed assets

Fixed assets include land, buildings, machinery, and vehicles that are used in connection with the business. Total fixed assets is the total dollar value of all fixed assets in your business, less any accumulated depreciation.

Land: Land is considered a fixed asset but, unlike other fixed assets, is not depreciated, because land is considered an asset that never wears out.

Buildings: Buildings are categorized as fixed assets and are depreciated over time.

Office equipment: This includes office equipment such as copiers, fax machines, printers, and computers used in your business.

Machinery: This figure represents machines and equipment used in your plant to produce your product. Examples of machinery might include lathes, conveyor belts, or a printing press.

Vehicles: This would include any vehicles used in your business

Liabilities and owners’ equity

This includes all debts and obligations owed by the business to outside creditors, vendors, or banks that are payable within one year, plus the owners’ equity. Often this side of the balance sheet is simply referred to as “liabilities.” Total liabilities and owners’ equity: comprises all debts and monies that are owed to outside creditors, vendors, or banks and the remaining monies that are owed to shareholders, including retained earnings reinvested in the business.

Current liabilities

Current liabilities include all liabilities due to creditors that must be paid within a one-year time frame.

Accounts payable: This includes all short-term obligations owed by your business to creditors, suppliers, and other vendors. Accounts payable can include supplies and materials acquired on credit.

Notes payable: This represents money owed on a short-term collection cycle of one year or less. It may include bank notes, mortgage obligations, or vehicle payments.

Accrued payroll and withholding: This includes any earned wages or withholdings that are owed to or for employees but have not yet been paid.

Long-term liabilities

These are any debts or obligations owed by the business that are due more than one year out from the current date.

Mortgage note payable: This is the balance of a mortgage that extends out beyond the current year. For example, you may have paid off three years of a 15-year mortgage note, of which the remaining 11 years, not counting the current year, are considered long-term.

Owners’ equity

Sometimes this is referred to as stockholders’ equity. Owners’ equity is made up of the initial investment in the business as well as any retained earnings that are reinvested in the business.

Common stock: This is stock issued as part of the initial or later-stage investment in the business.

Retained earnings: These are earnings reinvested in the business after the deduction of any distributions to shareholders, such as dividend payments.

Value measurement

Although a balance sheet presents an enterprise’s financial position, it does not purport to report its real value. It can be explained by some following reasons.

The values of certain assets, such as human resources, secret processes, and competitive advantages are not included in a balance sheet despite the fact that they have value and will generate future cash flows.

The values of other assets are measured at historical cost, rather than market value, replacement cost, or specific value to the enterprise. For example, property and equipment are measured at original cost reduced by depreciation, but the underlying asset’s value can significantly exceed that adjusted cost and the assets may continue to be productive even though fully depreciated in the accounting records.

The values of most liabilities are measured at the present value of cash flows at the date the liability was incurred rather than at the current market rate. When market rates increase, the increase in value of a liability payable at a fixed interest rate that is below market is not recognized in the balance sheet. Conversely, when interest rates decrease, the loss in value of a liability payable at a fixed rate in excess of the market rate is not recognized.

Now, after shutting down most of its operations since last October, Prosper is re-launching the service by introducing a secondary market that allows financial institutions to tap into its markets. By offering loans to investors willing to bid on them, banks, credit unions, auto-finance companies and others could get access to funds they could use to make loans to more people.

Prosper investors benefit with potentially higher interest rates on loans that have already been vetted by a financial institution, are current and have at least three months of payments that have already been made. Investors can see all the details related to each individual loan.

Though the industry is small, having brokered just $90 million in loans last year, peer-to-peer lending has offered choices to small lenders whose options for car loans and help with credit card debt have increasingly dried up.

These online lending models are gaining popularity as they provide alternatives for both lenders and borrowers, while banks have been nervous about lending to consumers for fear of rising delinquencies and losses. Banks have also been hampered by their limited capital and the bearish stock market, making it difficult and more expensive for them to raise money to fund new loans.

Smartinmoney.blogspot

The latest sales promotion: Lennar Corp. is offering a fixed 3.625% rate over the life of a 30-year fixed rate mortgage. The deal is besting average rates that have fallen below 5% nationwide, but it comes as other builders are reporting mixed results from similar incentives.

Hovnanian Enterprises Inc.’s recent offer of a 3.99% rate sparked “underwhelming” interest from home buyers, says Dan Klinger, president of the builder’s mortgage operation. “It wasn’t like we needed crowd control,” says Mr. Klinger.  Link

Then last year, the fund collapsed, falling behind 95% of its peers. Its assets fell to a fourth of the fund’s peak. Now, it’s once again welcoming new investors.

The fund is among nearly 100 hitherto closed funds that have lowered the velvet rope since the start of last year and are now reopening to new investors. While historical data is spotty, analysts at investment researcher Morningstar Inc. estimate that this is the highest number of fund reopenings ever. The question for investors: Should they bite?  Link

Thousands of funds invest in the U.S. and quite a few international funds that invest everywhere else. But there aren’t that many truly global equity funds that spread their bets across the US and world markets. Lipper, Inc., lists just a few dozen funds in its mainstream “global multi-cap core” equity category.

Many are expensive. A lot come with up-front loads of 5% or more, and annual expenses of around 1.5%. This is a tough book to beat. Over time, these costs can slash your returns dramatically.  Link

These insurance products convert your cash into a stream of income that can be guaranteed to last the rest of your life. With many retirees staring at double-digit losses on their portfolios, that kind of reassurance is attractive.  Link

Some 12.5 million Americans were unemployed at the end of February, including 2.9 million who’ve been jobless for six months or more. From the market’s October 2007 peak through January, U.S. shareholders lost almost 85% of the capital gains they’d amassed in stock mutual funds since 1990. And while stocks rallied in March, we’re not out of the woods yet.  Link

On one side are stockbrokers and other securities salespeople who work for Wall Street firms, banks and insurance companies. On the other are financial planners or investment advisers who often work for themselves or smaller firms.

Brokers are largely regulated by the Financial Industry Regulatory Authority, which is funded by the brokerage business itself and inspects firms every one or two years. Under Finra’s rules, brokers must recommend only investments that are “suitable” for clients.  Link

Many retirees are considering immediate fixed annuities these days. Here is how they work: You hand over a pile of money to an insurer, which hands you a monthly check for life. The appeal in a bear market, of course, is that annuity payments could soften blows to your other investments. (The main drawbacks: Once you hand over your money to the insurer, you generally can’t get it back. And your fixed payments mightn’t keep up with inflation.)  Link