A global economic and financial boom in the 20th and 21st century Essay

A global economic and financial boom in the 20th and twenty-first century - Essay ExampleThere was a global economic and financial boom in the 20th and 21st century.This resulted in tremendous growth of opportunities for businessmen, investors, governments, financial intermediaries and other financial institutions to invest their money. In other words, they needed to create a portfolio of assets that lead to mettlesome returns with assets that do not yield genuinely high returns, but argon safe. The major objective behind this investing strategy was to maximize the wealthiness and at the same time make sure that the coronation would not lead to credit happen or put on the line of default. Before making any investment, investors are required to price the assets clearly. This requires knowledge of financial statement depth psychology and security analysis. Those investors who lack the financial guile and knowledge suffered in the long-run. Investment analysis is a detailed fiel d of study. It combines theory of financial evaluation with the practical implications. The task is tough, but it is by no means impossible. Analysts combine various financial techniques such as NPV, security valuations, IRR and other tools of investment appraisal to evaluate the investment opportunities they have. The investment decision is usually based on the return on investment and safety of investment. However, there is a negative correlation between the two. High yielding assets are usually not very safe. Safe assets usually do not have very high yields. Investors face a dilemma, either to go for riskier assets and ingest high rate of return or to go for safe assets at the cost of high rates of return. The final decision is based on the risk appetite of the investors. However, in the modern world, very few investors choose to invest in one grade of asset. Investors usually create portfolios to make sure that their investment is safe and at the same time it earn them suffici ent rate of return (Investopedia.com, 2011). The other considerations for making investment decisions allow in liquidity of the security, obligations, credit rating, knightly performance trends and risk mitigation. All of these measures are assessed carefully in order to make rational investment decisions. There are three types of financial statements that are usually utilise for making the financial decisions. These include balance rag, profit and loss (income statement) and cash flow statement. These statements give accurate picture of the financial opinion of the satisfying along with its financial performance and the liquidity of the theatre. Balance sheet consists of three main sections. The firm section gives the picture of the short-term and long-term assets of the firm. These assets enable the firm to earn money in the future. The south part of the balance sheet describes the liabilities of a firm. These represent the long-term and short-term obligations of the compa ny. This money is owed by the firm to its creditors and failure to meet these obligations can result in bankruptcy of the firm. The third part of the balance sheet represents the owners equity. This part represents the claim on the assets by the owners. The second statement apply by the financial analysts is the income statement. Income statement usually describes the profitability of the firm. It is calculated by deducting revenues from expenditures. The third statement used by the financial analysts is the cash flow statement. This statement represents the liquidity position of the organization. This statement shows the actual impetus of the cash in the organization. Since most of the organizations are using the accrual based accounting system, the profit get in becomes irrelevant without using the cash flow statement. Hence, income statement and cash flow sta