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Deficit Financing

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  Deficit Financing Definition: Deficit financing refers to the method used by the government to meet budget deficits (when expenditure is greater than revenue) by: Borrowing from the central bank Printing new currency Borrowing from domestic or foreign sources Formula: Government Expenditure – Government Revenue = Budget Deficit Government covers this deficit through deficit financing . Why Do Governments Use Deficit Financing? To promote economic development For public welfare programs To finance development projects (roads, hospitals, schools) To cover emergencies such as floods, wars, pandemics Effects of Deficit Financing Positive Effects: Boosts economic activity Increases employment Helps in infrastructure development Negative Effects: Leads to high inflation Increases public debt Causes depreciation of currency Reduces investor confidence ...
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Inflation

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  Inflation Definition: Inflation is a continuous and sustained increase in the general price level of goods and services in an economy over a period of time. In simple words: 👉 When prices of almost everything increase, and the value of money falls, it is called inflation. Effects of Inflation: Decrease in purchasing power Increase in cost of living Uncertainty in business decisions Fixed-income groups (salaried people) suffer the most 2. Causes of Inflation Inflation can be caused by several factors. Major causes include: A. Demand-Pull Inflation Occurs when aggregate demand is greater than aggregate supply . Example: High government spending Increased consumer spending Easy credit and loans Increase in exports Result: 👉 Too much money chasing too few goods.     B. Cost-Push Inflation Occurs when the cost of production increases , forcing producers to raise prices....
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Economic Problems of Pakistan & Their Solutions

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  1. Low Economic Growth Problem: Pakistan’s GDP growth remains unstable and low due to political uncertainty, weak industrial performance, high inflation, and low investment. Solutions: Ensure political stability and continuity of economic policies. Promote industrialization, especially export-oriented industries. Improve ease of doing business to attract foreign and local investment. Encourage public–private partnerships for mega projects. 2. High Inflation Problem: Prices of essential goods increase rapidly, reducing the purchasing power of the public. Causes include supply chain issues, currency depreciation, and dependence on imported fuel and food. Solutions: Strengthen price monitoring and control mechanisms. Increase agricultural productivity to reduce food shortages. Promote renewable energy to reduce fuel imports. Stabilize exchange rate through improved foreign reserves. 3. Unemployment Problem: Million...
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Global Financial Crises and Their Impact on Corporate Strategy

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  Global Financial Crises and Their Impact on Corporate Strategy ❖ Introduction Definition of financial crisis : A situation where financial assets lose a large part of their nominal value rapidly. Types: Banking crisis, currency crisis, debt crisis. ❖ Key Historical Financial Crises The Great Depression (1929) The Great Depression was the worst economic crisis in modern history , beginning in 1929 and lasting through the 1930s . It led to massive unemployment, bank failures, and a global economic collapse.   Major Causes of the Great Depression Stock Market Crash of 1929: In October 1929, the U.S. stock market collapsed after years of speculative trading. Millions of investors lost their savings, leading to a sharp decline in consumer and business confidence. Overproduction and Underconsumption: Industries and farms produced more goods than people could afford to buy. This cause...
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Corporate Governance & Ethics in Finance

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  Corporate Governance & Ethics in Finance 1. Definition: Corporate Governance refers to the system by which companies are directed and controlled. It involves the relationships among a company’s management, its board, its shareholders, and other stakeholders. Corporate governance provides the structure through which the objectives of the company are set, the means of attaining those objectives, and monitoring performance. Ethics in Finance refers to the moral principles and standards that guide behavior in the financial world. This includes integrity, honesty, transparency, fairness, and accountability in financial decision-making and transactions.   2. Importance and Advantages of Corporate Governance and Ethics in Finance: Accountability: Ensures management is accountable to stakeholders. Transparency: Builds trust through accurate and open disclosure of financial information. Risk Management: Identifies, evaluates, and mitigat...
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Overview of Strategic Finance & Its Role in Corporate Strategy

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  Overview of Strategic Finance & Its Role in Corporate Strategy What is Strategic Finance? Strategic Finance refers to the long-term financial planning and decision-making processes that help organizations align their financial resources with overall business objectives. It involves analyzing financial performance, forecasting future growth, managing risks, and optimizing capital allocation to maximize shareholder value. Role of Strategic Finance in Corporate Strategy Aligning Finance with Business Goals: Ensures that financial decisions support overall corporate objectives. Capital Allocation & Investment Planning: Helps businesses decide where to invest for maximum returns. Risk Management: Identifies and mitigates financial risks that may affect profitability. Corporate Valuation: Enhances company value through strategic acquisitions, mergers, and efficient capital management. Performance Monitoring: Uses financial metri...
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Financial Markets & Investment Strategies

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  1. Introduction to Financial Markets Definition: Financial markets are systems that allow people to buy and sell financial instruments such as stocks, bonds, and derivatives. They are essential for mobilizing savings, facilitating investment, and promoting economic growth. Importance for Business Students: Helps understand how businesses raise capital. Improves decision-making in investment and financial planning. Essential for careers in finance, banking, and entrepreneurship.   2. Stock Markets, Bond Markets & Alternative Investments A. Stock Markets A stock market enables investors to buy ownership in companies through shares. Formulae: Market Cap = Share Price × No. of Shares Dividend Yield = (Annual Dividend ÷ Share Price) × 100 P/E Ratio = Price per Share ÷ EPS Benefits for Business Students: Understanding equity financing. Learning how market valuation affects business reputation. Solved Question 1: A ...
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