The pecuniary statements investigated showed that induce Stearns was indeed heading towards bankruptcy. Upon investigation we make love that take for Sterns failed on a number of reasons, some of these reasons universe:- * Between 2005 and 2007, Bear Stearns decided to take onto its books two outwit funds, Bear Stearns High-Grade Structured Credit Fund and the Bear Stearns High Grade Structured Credit Enhanced stick on Fund. Both companies operating within the mortgage industry. However, the subprime mortgage market had recently begun to see substantial increases in delinquencies from homeowners, which caused sharp decreases in the market values of these types of bonds. Unfortunately, the Bear Stearns portfolio managers failed to expect these sorts of price movements and, therefore, had requisiteing(p) credit entry insurance to protect against these losses. Because they had leveraged their positions substantially, the funds began to experience enormous losses.  * liquid and converting assets into cash was a major issue both miser competent and wide term assets. * Collection period was alike long to create any impact on their qualification to correct back their loans and debts. * Liquidity Ratios: A class of financial metrics that is used to determine a companys ability to pay by its short-terms debts obligations.
* Current Ratio: Measures whether or not a fast has enough resources to pay its debts over the next 12 months. In Bear Stearns case, for the both years investigated they were operating at a Current Ratio of .44 which would be considered as an bad circumstance. Their ! on-line(prenominal) liabilities were more than half the value of the current assets. This would look at been deemed as a liquidity problem since the current assets during the means of life of the two years would not have been able to efficiently cover their current liabilities. Current Assets ÷Current Liabilities 2006:2005: $125.1$102.9 $283.7 = .44$233. = .44 *...If you want to posit a full essay, order it on our website:
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