Interest on Bonds Article Critique
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Discuss how the article applies or relates to the financial management of a company and answer the following questions in 600 words. Use one outside source as reference.
1. What is the author's focus?
2. What points is the author making?/
3. How does the authors points apply to financial management?
3. What is the author's conclusion, findings or recommendation?
Go to the following link to see the article "Italy Pushes Bond Issues to Ease Credit Squeeze": http://online.wsj.com/article/SB10001424127887323854904578259633211368620.html
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Solution Summary
This presents a summary of an article wherein the government of Italy is willing to provide long term debt funding for firms which are now experiencing financial troubles. It analyzes the potential effects of borrowing in a setting where the underlying cause of difficulty within the European Union has been too much debt and not enough offsetting productivity and expense management.
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The focus of the author appears to relate to the fact that Italy has no equity financing available through banks and private lenders, therefore the next best thing is to have firms borrow the money via bond offerings which the country will allow and support through easing restrictions on borrowing, and offering a tax incentive which allows the firm to deduct the interest on the bonds as a business expense (this is currently available in the United States).
Points the author seems to be making is that this is a good alternative for many firms which provides an alternative source of financing which should help firms to finance long term investment opportunities --- if successful, this would lead to employment opportunities which reduces unemployment within Italy, and leads to a rise in consumer spending if more people are ...
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