Borrowing money – Condenetint Sat, 25 Sep 2021 00:30:00 +0000 en-US hourly 1 Borrowing money – Condenetint 32 32 Woman sparks debate over whether it is okay to withdraw money from a child’s savings Sat, 25 Sep 2021 00:30:00 +0000

A woman found herself in a complicated situation. She wasn’t sure whether it was okay to borrow money from her children’s savings, so she asked other parents how they would handle the situation and her question sparked an interesting debate.

Borrowing money from children has become common practice, and many parents do so without guilt. According to an article in Time magazine, hanging out with children for their savings can lead to mistrust. It’s almost similar to stealing their money management know-how from them.

Shockingly enough, nearly one in three parents admitted to “borrowing” money from their children’s savings. Another survey found that about half of parents occasionally loot their children’s bank accounts and are never guilty of doing so. Worse yet, half of them have never reimbursed their children.

Borrow from a child’s savings in a piggy bank | Photo: Amomama


One person wrote to Mumsnet asking if it was okay to borrow money from their child’s instant savings account and even promised a refund. A user named Ronnie Pickering then responded and reassured them that they disagreed with the practice, but “if you can guarantee that it is reimbursed, I guess the needs have to.” While another user said:

“The money was paid by the parent, so I don’t see any problem with that as long as the parent pays it back. However, I would be concerned as to why there was so much debt accumulated in the first place and the issue of spending beyond their means has been resolved. “

One argument for borrowing money from your children is that it can be viewed as your money. You are their legal guardian and you are also responsible for everything they own. So should you just take it, or is it better to ask your kid’s permission before you dip into their savings?

Person holds a wad of money |  Photo: Pixabay

Person holds a wad of money | Photo: Pixabay


A parent faced a similar dilemma when considering using some of their children’s savings to buy a new home. His wife disagreed and told him they would never reimburse their children. He posted an open question on The Guardian asking what other parents would do in a similar situation. A person named Jill le Neve Johnson replied:

“I couldn’t believe this question when I read it! Family allowances are paid to help cover the costs of raising children. I, like millions of others (and my mother with me), spend it on their children ”,

It is advisable to ask permission before borrowing money from your children, as this presents you as being honest. As long as your child is old enough to fully understand what is going on, you can ask him or her. But if your child is too young to know what you are talking about, it would be impossible to discuss it with him.

Person takes coins from a piggy bank |  Photo: Pexels

Person takes coins from a piggy bank | Photo: Pexels


If your child is in elementary school or above, you can explain your situation and ask them if they are ready to help you. Some parents think it is better to be frank than to take the money without their children’s consent. Sometimes parents have no choice but to make a candid request and see nothing wrong with it.

A parent shared their story on Today’s Parent, pointing out that they would never borrow money from their children without their permission. “I borrow money from my children. And until recently, I never saw anything wrong with it, ”she added:

“I never took them without permission, and I never borrowed what I can’t repay. But, over the past six years, I have also never hesitated to ask any of them for money if I run out.

Times are unpredictable. Households struggling with bills and debts generally have limited financial opportunities and are forced to use their savings. According to The Independent, a fifth of parents borrow money from their children’s savings to pay for living expenses.

couple counts the money they have withdrawn from the bank |  Photo: Pexels

couple counts the money they have withdrawn from the bank | Photo: Pexels

The study pointed out that parents plundered their children’s savings to support their households. The researchers interviewed about 5,000 parents and found that a fifth of them borrowed money from their children’s piggy banks and savings accounts to pay for living expenses.

Jody Coughlan, fund manager at, said parents need to make sure they can afford to give their kids pocket money without using it to cover household bills. People on Quora have already pointed out whether it is okay for parents to ask for money from their children’s wages.

Person putting the coin in a piggy bank |  Photo: Pexels

Person putting the coin in a piggy bank | Photo: Pexels

Several people in the online community have shared their mixed opinions on the matter. While some have argued that it is okay to borrow from children as long as parents can pay them back, others were totally against the concept. One person opposed the idea, saying saving money is a learning factor for children, and added:

“If you take money away from them, you take away a very important lesson in life, especially when your child is doing everything he can to make money. “

Other parents believe that since they are responsible for putting money into their child’s savings, they do not need to ask permission to collect it.

Parent distributes money to his child |  Photo: Pexels

Parent distributes money to his child | Photo: Pexels


If you take money from your children when they are young, they may be more likely to withdraw money from your wallet when they are older. They may assume that taking money from the family is normal. You may be setting a bad example for your children without realizing it.

However, having an open conversation with children about money can help you function as a parent. You can learn how to help your children build a healthy relationship with money and make them understand its importance in today’s competitive world.

Nobody counts a wad of money |  Photo: Unsplash

Nobody counts a wad of money | Photo: Unsplash

Have you ever borrowed money from your child’s piggy bank? Many parents have. They think it is a delicate situation while others see it as morally shameful, akin to stealing money from the needy. “It’s my money anyway,” some parents say, trying to justify their situation.

Think back to your childhood and how your parents helped you deal with money and finances. Were you frugal? Did you spend on things that were not necessary? And are you willing to borrow money from your children knowing that you have sowed it for their future? Start the conversation today! Thanks for reading!

]]> 0 McClaughry: A Crisis of Unsustainability Facing Seniors | Chroniclers Fri, 24 Sep 2021 12:00:00 +0000

Let’s put aside for a moment a long list of national issues – crime, drugs, racism, electoral laws, epidemics, vaccinations, the climate and the perilous international situation – to focus on a truly critical issue beyond the scope of the evening news.

To set the stage: the federal government’s current debt to the public – before the net contributions to that debt from a pending infrastructure bill of $ 1 trillion and up to a pending spending bill of $ 3 500 billion dollars to be added to the national accounts – is 28.43 billion dollars. That’s 102 percent of the nation’s total gross domestic product, a level not seen since the last year of World War II. A nation with this level of debt is usually associated with budget failures like Argentina and Greece.

The Treasury pays nearly $ 1 billion a day in interest on this debt – at a time when the federal government is borrowing (yield on 10-year notes) at 1.33%. In a year, this rate is much more likely to be higher than lower. The interest component of the federal budget will increase accordingly, and it must be paid to preserve the nation’s credit.

Now let’s focus on two extremely important programs for 65 million elderly Americans and their survivors and dependents: Social Security and Medicare.

Last month, administrators of the Social Security system, including Medicare, released their annual report on the status of these programs. The directors are four cabinet members appointed by President Biden. Here is what they tell us:

The two combined social security funds (retirement and disability) will be exhausted in 2034. That is to say that all the reserves will have been paid, and the funds will only be able to pay what comes from social charges. At the current payroll tax rate, this will represent 78 percent of the benefits promised for that year.

The Medicare program is threatened by the increase in life expectancy and the constant increase in health care costs for the elderly. At the current tax rate (1.45% of wage and salary income, plus an Obamacare surtax of 0.9% on very high-income seniors), the Health Insurance Trust Fund (HI) will not be able to pay only 91% of expected claims in 2026, which decreases with each subsequent year.

Each proposed remedy is extremely controversial. For pension funds, freeze increases in the cost of living. Increase social contributions to 10% for employees and employers and to 20% for the self-employed. Pay general income – actually borrowed money – to cover annual deficits. Eliminate early retirement at 62 and raise the retirement age to 70. Tell the elderly that they will have to live on less.

Solutions for Medicare are even more controversial. Increase the payroll tax rate from 1.45% to 5%. Offer senior citizens a financial incentive not to resort to expensive medical care here and to seek treatment in low-cost countries (“medical tourism”). Ration care UK style, reducing services for the very old and unhealthy, and lengthening wait times until the death of some patients. Reduce reimbursements to providers, at the risk of having fewer providers willing to accept Medicare patients at reduced prices, offering them cheaper services and reducing the number of small clinics and hospitals, especially in minority areas and rural underserved.

Not only are politicians from both parties allergic to any discussion of this issue, but a large number of them – the Sanders-Biden Democrats – are hard at work to quickly escalate the Medicare problem.

Their current plan, in Sanders’ pending $ 3.5 trillion budget bill, would expand benefits to include dental, vision and hearing, and lower the age of eligibility for insurance. illness at age 60. If implemented this year, it would bring two years to the day of reduced Medicare benefits. closer, 2026 to 2024. The Sanders Bill would also create new federally funded fees, such as free tuition, national child care, and universal preschool, the spending of which would compete for billions of dollars. budget with all other spending programs.

Covering fund deficits through “general revenue” is no longer, if it ever was, a viable solution. “General revenue” means more borrowed money and / or more taxpayer money. The burden of new taxes to prevent the depletion of both funds would threaten to cripple the U.S. economy, already facing challenges from COVID, the growing dollar depreciation and fierce international competition.

What is my solution? This is an unprecedented titanic problem, and the only advice I can give is: don’t make it worse. Restoring the sustainability of failing social security and medicare will require extraordinarily courageous leadership that is not on the horizon.

Perhaps the roar of seniors receiving reduced pension benefits and restricted health care services will put those funds back on the path to fiscal sustainability. I hope to live to see it.

John McClaughry is Vice President of the Ethan Allen Institute ( The opinions expressed by columnists do not necessarily reflect the opinions of Bennington Banner.

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Ballot Calls on Voters to Approve Debt for Fire Truck and New Seniors Center; Bromfield House preference polls | The Harvard Press | News | Press articles Thu, 23 Sep 2021 04:11:46 +0000

Some council members got a preview Tuesday night of the issues that will appear on the ballot in this fall’s municipal election.

There are four, city administrator Tim Bragan told the board. Two called on voters to allow the city to borrow money as excluded debt to pay for the purchase of a building on Lancaster County Road and a new tower truck for the fire department. The purchase price for the building, which is intended to replace Hildreth House as a Harvard senior center, is $ 1.4 million, but the additional amount needed to renovate and equip the building as a center for the elderly is $ 1.4 million. elderly has not yet been determined.

The cost to the city of a new tower truck is $ 900,000, thanks to a large federal grant. Both proposals have not yet been approved by the Capital Planning and Investment Committee.

The amount of each loan must first be approved by a two-thirds vote at the municipal assembly. Then, in municipal elections, a majority must vote to add principal and interest on amounts borrowed from property tax as excluded debt.

The two remaining questions on the ballot are non-binding resolutions regarding Bromfield House. The first asks if the city should sell only the 39 Massachusetts Avenue structure, but keep the land for future use. The second asks if the city should sell both the structure and the land to a buyer for use as a private residence. The questions were placed on the ballot by the select committee, which seeks to know the preferences of the voters. The municipal elections provide a larger sample of voter sentiment than Town Meeting, the board said.

The municipal election will take place on November 2, two weeks after the municipal assembly. Polling stations will open at 3 p.m. and close at 8 p.m.

Bromfield House. (Photo by Lisa Aciukewicz)

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Is it better to pay off a loan sooner or later Wed, 22 Sep 2021 13:00:00 +0000

LOS ANGELES, September 22, 2021 (GLOBE NEWSWIRE) – Getting rid of debt can be a good idea if someone has the cash flow to do it. However, in some cases, paying off a loan on time can be a better financial decision.

There are a few pros and cons to each strategy that borrowers should weigh before making a decision. Here are some things to consider when deciding whether borrowers should prepay a loan.

Benefits of early repayment of a loan

Positive effect on credit and future borrowing opportunities

Prepaying the loan early reduces the chances that a borrower could miss or be late on a payment. This helps prevent potential damage to the credit score.

Additionally, prepaying a loan can improve a borrower’s debt-to-income ratio, which is a measure of their monthly debt repayments relative to their monthly income. A lower debt-to-income ratio can help borrowers get approved for mortgages and other large loans.

Peace of mind

Paying off a loan can reassure borrowers. They no longer have to worry about earning enough to cover those payments or not paying and dealing with consequences like fees and recoveries.

Disadvantages of early repayment of a loan

Less money for other expenses or financial goals

Borrowers have to increase their monthly payments to pay off their loans sooner than expected. This can put financial pressure on some borrowers who may not have a large amount of money after spending.

Borrowers could also lose higher yields elsewhere. If a borrower could get a return on their investment that was greater than the interest rate on their debt, that investment might be a better option.

Penalties for early repayment

Some lenders impose prepayment penalties on loans. This means that borrowers might owe additional fees if they repay the loan early. This is disclosed in the fine print, so borrowers should check all loan terms before signing. Note that Advance America does not charge prepayment penalties.

Benefits of paying off a loan on time

Better cash flow / less financial stress

Making the minimum payments on a loan each month can free up more of the borrower’s money for their monthly expenses. Borrowers on a tighter budget might consider sticking to the loan repayment schedule.

More money to build an emergency fund

Borrowers who pay off their loan on time may have more funds available each month to add to their emergency fund. By building an emergency fund more quickly, they will be less likely to go into debt if they have to pay an unforeseen expense, like a car repair or a medical bill. It can also give the emergency fund more time to earn interest.

Disadvantages of not repaying a loan early

No more money lost on interest

The more borrowers have an outstanding loan, the more interest they can pay. Paying off a loan on time can make the loan more expensive than prepaying it because the borrower pays more interest overall.

Possibility of missed or late payments

Keeping a loan longer increases the risk that a borrower will miss a payment or pay late. Not only will this incur a fee, but it could also hurt their credit score.

Should borrowers repay their loans early or on time?

Borrowers with good discretionary income might consider paying off a loan sooner if they can afford it easily, especially if it has a high interest rate. They just have to watch out for prepayment penalties. Yet these borrowers may also consider repaying the loan on time while using their extra cash to build an emergency fund or pay for other expenses.

On the other hand, the right option for borrowers on a tight budget may be to pay off the loan on time. Paying more interest over the life of the debt is worth having enough money to cover essential expenses.

Borrowers must make the decision to repay a loan early or on time depending on their particular circumstances. Either option might be ideal depending on the borrower’s circumstances and the terms of the loan.

Opinion: The information provided in this article is for informational purposes only. Consult your financial advisor about your financial situation.


This content was posted through the press release distribution service at

]]> 0 Republican Lawmaker Calls For Clarity On New Jersey Unemployment Insurance Borrowing | national news Tue, 21 Sep 2021 21:38:00 +0000

(The Center Square) – A Republican lawmaker wants Gov. Phil Murphy to clarify how much New Jersey borrowed to finance its unemployment insurance fund.

According to State Senator Sam Thompson, R-Old Bridge, the state borrows about $ 10 million per day from the federal government. The loan has an interest rate of 2.3%.

According to the Direct Treasury, the state borrowed $ 299.1 million from the federal government for the unemployment fund, including $ 132.7 million this month.

“New Jersey is going into debt at an alarming rate, and Murphy’s only plan is to pass the cost on to employers, many of whom are barely surviving in the COVID economy,” said Thompson, a member of the Senate Budget and Committee. credits. in a press release. “This is a dangerous tax system that could bankrupt countless small and medium-sized businesses and the loss of hundreds of thousands of jobs. It is reckless and unjustifiable.

New Jersey businesses could pay about $ 885 million in additional unemployment insurance (AC) over three years, including an increase of $ 252 million starting in October. Republican lawmakers want Murphy to use federal US bailout money (ARP) to avoid the increase.

A spokesperson for Thompson told The Center Square that more than 40 states have used ARP dollars to stabilize their unemployment insurance funds.

“This outrageous borrowing was only made necessary because of Murphy’s refusal to use some of the billions of dollars New Jersey received in federal pandemic relief funds to maintain the solvency of the unemployment fund. Thompson added. “Almost every other state with high unemployment has used federal funds to avoid borrowing money to pay unemployment claims. New Jersey is once again racking up debts that it will force taxpayers to pay off through tax increases. “

Between $ 2 billion and $ 2.5 billion of the $ 6.2 billion in ARP funds New Jersey received has been “talked about,” Murphy said previously. However, Republicans, citing figures from the Office of Legislative Services (OLS), say a small chunk of the money has been spent.

On Tuesday, the New Jersey Department of Labor and Workforce Development said the agency paid nearly $ 35 billion in unemployment insurance benefits to 1.6 million claimants between March 2020 and the week ending September 4. Payments.

Murphy’s spokespersons did not immediately respond to a request for comment from The Center Square. The governor has already refused to commit to use federal money to avoid a New Jersey small business tax increase to replenish the state’s unemployment insurance fund.

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pipeline to Chicago could make mayor of Joliet the new suburban water czar | State and regional news Tue, 21 Sep 2021 11:30:00 +0000

And last summer, O’Dekirk, 51 – a former police officer who has cultivated a reputation for strength and law and order – rejected calls for his resignation from many leaders of the region’s black community.

Questions have surfaced about O’Dekirk’s sensitivity to minority issues after he clashed with a Black Lives Matter protester following the murder of George Floyd by police in Minneapolis in May 2020. He went on to defend the action. by claiming that he had acted in self-defense.

In an email to the BGA, O’Dekirk suggested that the controversies had been exaggerated and stressed “considerable interest” in his ambitious water bodies.

He said the person was not a protester but rather “was participating in a riot”. The Will County State Attorney’s Office declined to press charges against O’Dekirk in August, but he, the town and some of its police officers face an ongoing federal lawsuit from the man at who he attacked and the brother of the man.

In his state of the city address, he praised the police for cracking down on what he described as a violent “mob” that broke free from the peaceful protesters.

“We will never stand idly by and let lawlessness rule the day or rule the night,” O’Dekirk said in the speech.

One of the black leaders who called for O’Dekirk’s resignation after the incident was Joliet City Councilor Bettye Gavin. She represents the east side of the city, neighborhoods she says are in desperate need of water supply lines that don’t regularly collapse in cold weather.

“I didn’t think it was appropriate for the mayor of a town to rush over and grab someone like that,” Gavin said, adding that the incident had made it difficult for her to support the water body in the city. ‘O’Dekirk. “When you get these problems on top of each other, one can blow up the other.

“We’ve been pretty neglected in terms of infrastructure on the east side,” she said. “We have to face these demons now.”

Gavin said O’Dekirk had a lot of work to do to gain the support of his constituents. She advocates for Joliet to provide assistance to residents who cannot afford rising water bills.

O’Dekirk also faced fallout from a 2019 police department memo regarding the mayor’s efforts to silence rumors of a federal investigation into corruption in the water deal.

The note, written by former Joliet Police Chief Al Roechner and reported in the Joliet Herald-News, documents O’Dekirk’s efforts to discredit a police sergeant who was speaking to people about the alleged investigation.

The sergeant told associates O’Dekirk and a friend “have land and are going to make money from a water deal, and the federal authorities are coming,” the mayor told Roechner, according to the memo. the ex-chef. “I’m sick of this (expletive).”

O’Dekirk also accused the sergeant – a former campaign employee of the mayor – of being publicly intoxicated when he made the comments, a charge which the chief said was not substantiated by proofs.

O’Dekirk was a Joliet cop for 10 years before joining city council in 2011. He became mayor four years later, mainly with the help of building unions and construction companies.

While working part-time as mayor, O’Dekirk is also the town’s liquor commissioner and runs a Joliet law firm specializing in family law and criminal law.

O’Dekirk’s tumultuous tenure has been a concern among officials in neighboring communities considering the water partnership.

Anderson, Minooka’s director of public works, said neighboring towns had been concerned from the start about the “volatile” politics prevailing in Joliet in general and around O’Dekirk in particular. So they banded together, he said, to force O’Dekirk to abandon his “proportional” representation plan, in which the vote in the regional water commission would be weighted in favor of Joliet and the other large cities.

“The way he looks now, no one will be on a higher horse than anyone else,” said Anderson. “Large and small communities, they will each have a voice. “

Mudron, the municipal councilor of Joliet, accepted. “The regional group will be running the show, not the city of Joliet,” he said.

“This is necessary because there always seems to be a commotion here, always advertising which is not good, and most of it seems to be caused by the mayor’s office,” he said.

Hugh O’Hara, executive director of the Will County Governmental League, said the precise impact of the O’Dekirk controversies is difficult to measure.

“I don’t think that’s a weird question,” he said. “This project is much bigger than any community or any mayor,” O’Hara said. “By all accounts, Joliet got a really good deal from the city of Chicago.”

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Buy now Pay later is even better Mon, 20 Sep 2021 12:40:45 +0000

UK financial technology company Monzo has launched a new product that plans to tackle the growing Buy Now, Pay Later (BNPL) market by introducing zero interest loans on qualifying purchases.

Monzo Flex, the name of the new BNPL feature introduced by the company, will allow users to get finance on purchases of up to £ 3,000, either by paying three equally large installments with 0% or 6% interest. at 12 installments at an annual percentage of 19%. rate (APR).

The minimum ticket size for a purchase to be eligible for Monzo Flex would be £ 30 and it can be applied retroactively to purchases made up to two weeks ago.

“Flex combines Monzo’s technology and banking expertise with its core values, ensuring that customers always have visibility and control over their financial lives and only borrow money they can afford to pay back.” said Kunal Malani, head of Monzo loans.

Getting approved for a flex loan is easy. Users only need to complete the application process in the Monzo app. Thanks to artificial intelligence and algorithms, Monzo will be able to make a decision about the application almost instantly.

Once the loan is approved, a credit limit will be set and the user can apply it in whole or in part after the purchase is made. The first installment of the loan will be deducted at the end of the transaction while the remaining payments will be collected as agreed.

It is important to note that the 19% APR offered by Monzo Flex at the moment is variable, which means it can fluctuate with UK interest rates.

Monzo Flex – A £ 38 billion opportunity

The introduction of Flex allows Monzo to tap into the growing BNPL market. This segment of the lending industry is expected to grow from $ 5.8 billion (£ 4.24 billion) in 2020 to $ 35.3 billion (£ 25.8 billion) by the end of 2028, according to data from

That said, Monzo will likely face stiff competition from well-established digital payments and fintech companies in the country, including PayPal, Klarna, Clearpay, and Laybuy.

According to the company’s 2020 annual report, Monzo increased its user base by 23% to 5 million customers at the end of last year. By comparison, Klarna reported a total of 752,000 monthly active users (MAUs) on its iOS app alone.

However, the company saw a drop in its gross lending figures last year as the pandemic affected its operations, although the company’s revenue fell from £ 67million to £ 79million. Of that £ 23.95million, it was interest income for Monzo.

Going forward, it would be plausible that the company’s results would be positively affected by the launch of Monzo Flex, as this product offering would further diversify the company’s lending business.

What could happen next for Monzo?

There has been a lot of talk about a potential initial public offering (IPO) for Monzo lately amid the rise of fintech companies and ‘challenger banks’ in the UK.

However, the company’s chief executive, TS Anil, clarified that such a step could be considered by 2023 and not before.

Going forward, Monzo could exploit other opportunities in the rapidly evolving fintech industry, including offering cryptocurrency trading services and a crypto wallet.

On this particular front, the company doesn’t seem to like the Bitcoin (BTC) boom too much, as its general counsel, Stephanie Pagni, viewed cryptocurrency as a fad despite the fact that many of its competitors have already introduced related services. to crypto.

About Alejandro Arrieche PRO INVESTOR

Alejandro is an independent financial analyst with 7 years of industry experience. He writes technical content on economics, finance, investments and real estate and has also helped financial companies develop their digital marketing strategy. His favorite subjects are value investing, macro analysis and technical analysis. Other publications Alejandro has written for include The Modest Wallet and

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Here’s why Tata Motors (NSE: TATAMTRDVR) has a heavy debt burden Mon, 20 Sep 2021 01:18:50 +0000

David Iben put it well when he said: “Volatility is not a risk we care about. What matters to us is to avoid the permanent loss of capital. ‘ So it can be obvious that you need to consider debt, when you think about how risky a given stock is, because too much debt can sink a business. Above all, Tata Motors Limited (NSE: TATAMTRDVR) carries a debt. But the real question is whether this debt makes the business risky.

Why Does Debt Bring Risk?

Debt is a tool to help businesses grow, but if a business is unable to repay its lenders, then it exists at their mercy. If things really go wrong, lenders can take over the business. However, a more common (but still costly) situation is where a company has to dilute its shareholders at a cheap share price just to get its debt under control. Of course, debt can be an important tool in businesses, especially capital intensive businesses. When we look at debt levels, we first consider both liquidity and debt levels.

See our latest review for Tata Motors

What is the debt of Tata Motors?

The image below, which you can click for more details, shows that in March 2021 Tata Motors had a debt of 1.46 t, up from 1.06 t in a year. However, he has 659.2 billion yen in cash offsetting this, which leads to net debt of around 798.3 billion yen.

NSEI: TATAMTRDVR History of debt to equity September 20, 2021

A look at the responsibilities of Tata Motors

According to the latest published balance sheet, Tata Motors had a liability of 1.58 t yen due within 12 months and a liability of 1.29 t yen due beyond 12 months. On the other hand, he had 659.2 billion yen in cash and 193.4 billion yen in receivables due within one year. Its liabilities therefore total 2.01 more than the combination of its cash and short-term receivables.

This deficit casts a shadow over the society of 1.10, like a towering colossus of mere mortals. So we would be watching its record closely, without a doubt. Ultimately, Tata Motors would likely need a major recapitalization if its creditors demanded repayment.

We use two main ratios to inform us about the levels of debt compared to earnings. The first is net debt divided by earnings before interest, taxes, depreciation, and amortization (EBITDA), while the second is the number of times its profit before interest and taxes (EBIT) covers its interest expense (or its coverage of interest, for short). Thus, we consider debt versus earnings with and without amortization charges.

While we’re not worried about Tata Motors’ 3.3 net debt to EBITDA ratio, we do think its ultra-low 1.8 times interest coverage is a sign of high leverage. It seems clear that the cost of borrowing money is having a negative impact on shareholder returns lately. A buyout factor for Tata Motors is that it turned last year’s EBIT loss into a gain of 129 billion yen, in the past twelve months. When analyzing debt levels, the balance sheet is the obvious starting point. But it is future profits, more than anything, that will determine Tata Motors’ ability to maintain a healthy balance sheet going forward. So, if you want to see what the professionals think, you might find this free analyst earnings forecast report interesting.

Finally, a business needs free cash flow to repay its debts; accounting profits are not enough. It is therefore worth checking to what extent earnings before interest and taxes (EBIT) are backed by free cash flow. In the most recent year, Tata Motors recorded free cash flow of 68% of its EBIT, which is close to normal given that free cash flow excludes interest and taxes. This hard cash allows him to reduce his debt whenever he wants.

Our point of view

At first glance, Tata Motors’ interest hedging left us hesitant about the stock, and its total liability level was no more appealing than the only empty restaurant on the busiest night of the year. But at least it’s pretty decent to convert EBIT into free cash flow; it’s encouraging. Looking at the big picture, it seems clear to us that Tata Motors’ use of debt creates risks for the company. If all goes well it may pay off, but the downside to this debt is a greater risk of permanent losses. There is no doubt that we learn the most about debt from the balance sheet. But at the end of the day, every business can contain risks that exist off the balance sheet. For example, we have identified 1 warning sign for Tata Motors that you need to be aware of.

At the end of the day, it’s often best to focus on businesses with no net debt. You can access our special list of these companies (all with a history of profit growth). It’s free.

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This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts using only unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell shares and does not take into account your goals or your financial situation. Our aim is to bring you long-term, targeted analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price sensitive companies or qualitative documents. Simply Wall St has no position in the mentioned stocks.
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]]> 0 A $ 1 Trillion Platinum Coin Could Be a Way Around the Debt Ceiling Sun, 19 Sep 2021 10:15:29 +0000
  • The GOP is standing firm on its resolution not to help Democrats raise the debt ceiling before a crucial October deadline.
  • The Treasury Department technically has the ability to issue platinum coins of any denomination.
  • In theory, Treasury Sec. Janet Yellen could order up a $ 1 trillion platinum coin, mint it, and deposit it at the Federal Reserve.

A new fight over the debt ceiling is brewing on Capitol Hill.

Senate Minority Leader Mitch McConnell has firmly dug in on refusing GOP help to renew the US’s ability to pay off its bills, known as the debt ceiling. Instead, the Kentucky Republican said it’s up to Democrats to raise it in order to finance their social spending plans on healthcare, education, and childcare. He insists he’s not “bluffing.”

But the conundrum could have a coin-sized solution. A loophole in the law that prescribes the types of coins that can legally be minted in the US theoretically allows the Treasury Department to mint a $ 1 trillion platinum coin, deposit it at the

Federal Reserve
, and then continue paying its bills as normal.

The deal with the debt ceiling

The debt ceiling places a fixed limit on the total amount of money the Treasury Department can borrow in order to fund government activities, and Congress has to vote to either raise or suspend that limit from time to time as the federal debt grows ever larger.

The Biden administration and Democrats are pressuring Republicans to back down, ruling out raising the debt limit on their own and reminding the GOP they played a role racking up $ 8 trillion in new debt under the Trump administration. There’s no clear path out for lawmakers as they confront a barrage of deadlines this month, including another spending brawl that could end in a government shutdown.

Former President Barack Obama said in a 2017 interview with Crooked Media that senior officials had considered minting a coin to stave off a potentially catastrophic default.

“We were having these conversations with Jack Lew and others about what options in fact were available, because it had never happened before,” Obama said, referring to the treasury secretary at the time. “There were all kinds of wacky ideas about how potentially you could have this massive coin.”

The huge conundrum with a coin-sized solution

The debt ceiling sets up a frustrating conundrum: Congress can pass budgets that direct the government to spend a fixed amount of money across its departments and programs, and sets tax rates at particular levels to fund some of it. The gap between Congressionally mandated spending and Congressionally mandated revenues then needs to be paid for by borrowing money.

But, the debt limit requires yet another act of Congress to authorize the Treasury Department to actually borrow the money needed to pay for the spending lawmakers already authorized.

This causes a problem once the department hits that debt limit, as it did at the end of July. While the Treasury Secretary has a bit of leeway to use “extraordinary measures” to keep paying the bills for a few months using cash on hand and shuffling money around, that only works for so long. It may exhaust those abilities sometime in mid-October.

Actually reaching a point where the US government is no longer able to meet its obligations would likely be a financial and economic calamity. A default on existing US debt would send financial markets into chaos, and government payments ranging from Social Security checks to military paychecks could abruptly halt. The White House is also warning about potential cuts for programs at the state and local level like Medicaid.

This isn’t the first time Congress and the president have had a showdown over the debt limit.

In the Obama era, several economists and commenters noted a potential workaround to the debt limit. The law that governs the types of coins that the Treasury Department is legally allowed to mint includes descriptions of typical coins like dimes, nickels, and quarters, as well as special commemorative and collectors’ coins, like a palladium $ 25 coin.

The law includes this clause: “The Secretary may mint and issue platinum bullion coins and proof platinum coins in accordance with such specifications, designs, varieties, quantities, denominations, and inscriptions as the Secretary, in the Secretary’s discretion, may prescribe from time to time. “

That clause leaves it up to the Treasury Secretary to decide on the denomination for a platinum coin, meaning in theory, Yellen could carve out the amount required and Congress could get on with more pressing business.

Of course, Treasury officials have long ruled out using the trillion-dollar platinum coin as a solution to the debt ceiling, arguing that Congress should do its job and raise the ceiling itself.

]]> 0 Will the State Bank raise the interest rate this time? Sat, 18 Sep 2021 17:20:03 +0000

The state bank will be embarrassed to keep the interest rate at 7% to target economic growth or raise it to control inflation when it announces its monetary policy on Monday. Experts are also divided on which course the central bank will take – induce economic growth or control inflation.

According to a survey conducted by Topline Securities among 68 experts, 65% of respondents say the interest rate will be kept at 7%. The remaining 35% of respondents say the key rate will be increased, with a majority saying it will be raised to 7.25%.

Topline Securities CEO Mohammed Sohail said the central bank may choose to raise the key rate to 7.25%.

“In addition to the high current account deficit in August, inflationary pressures are also increasing. The latest inflation figures show an increase of 14.3% compared to last year. It’s time to tighten (monetary policy), ”he said.

However, other experts believe the policy rate will be maintained as the government strives for growth and threats to the economy persist.

“The factors that caused the interest rate cut last year still exist,” said senior research analyst Raza Jafri. “The threat of the coronavirus is still there and winter is also upon us. ”

Cold and less humid conditions make the coronavirus more threatening, he said.

Jafri added that the country has not yet recovered from the pandemic and he expects the central bank not to raise interest rates in this monetary policy.

According to another senior research analyst, Adnan Sami Sheikh, interest rates should be kept as inflation is expected to fall below 8% over the next three months. He added that if the central bank raises interest rates, the economy will be under pressure and the government will then have to lower interest rates to induce economic growth.

In the Topline Securities survey report, 54% of respondents say the interest rate will be increased by the end of the year. The State Bank will announce the last monetary policy of this year in November.

In the survey, 57% of respondents see the dollar rate in the range of Rs165 and Rs170. But 39% of those polled see the dollar rate range increase to between Rs 170 and Rs 175.

Monetary policy is announced every two months. The next monetary policy will be announced on November 26 of the current fiscal year.

It should be noted that in March 2020, the interest rate was at a peak of 13.25%. But the coronavirus pandemic and the deteriorating economy forced the State Bank to cut the interest rate to 12.5% ​​in March 2020, and then to 3.5% to 9% in April. Later, in June of last year, the interest rate was further reduced to 7%. The State Bank has not raised interest rates over the past five monetary policies.

What role does the key rate play in the Pakistani economy?

Controlling inflation and ensuring economic stability are two of the main functions of the State Bank. To achieve these objectives, the central bank uses, among other tools, its key rate. This is the rate at which commercial banks borrow money from the central bank’s discount window.

The rate, revised every two months, affects all market interest rates. In other words, a higher policy rate means that commercial banks will charge more, which will make borrowing more expensive for individuals, businesses and government.

Higher interest rates make loans expensive. Businesses, which depend on bank financing, shut down new projects, the government is cutting spending on development projects, and consumers are shutting down car finance, home loans, and even cutting back on credit card use. In short, a higher interest rate reduces economic activity and slows job creation.

On the other hand, a lower interest rate encourages individuals and businesses to borrow more, which in turn increases consumption nationwide. As aggregate demand is high, it pushes up the prices of goods, hence inflation increases.

The role of the central bank is to keep the interest rate at a level that controls inflation while not reducing economic activity.

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