Objectives
Students will be able to:
• Compare and contrast short-, intermediate-, and long-term financing.
• Discuss the connection between personal saving and financing for business.
• Analyze the yield curve and explain what it tells us about the cost of short-, intermediate-, and longterm
financing.
• Examine what the yield curve reveals about the future direction of the economy.
Standards
NES: 10, 12, 14, 15
ELA: 1, 2, 3
Time Frame/Notes to Teacher
One day, double period
Materials
• Textbook chapter on: Financing a Business.
• To be assigned for homework: The World is Flat by Thomas L. Friedman;
Chapters:
— “America and Free Trade”
— “The Great Sorting Out,” Sections: Section 1 (Untitled) and “Where Do Companies Stop and
Start?”
— “The Dell Theory of Conflict Prevention, Old-Time Versus Just-in-Time”
Teaching Strategies
I. Obtaining Financing
Review homework (Worksheet 14A, “Obtaining Financing.”) As part of the whole-class discussion,
have students explain their answers to the following:
— What did you learn about business financing from this exercise?
— Describe the kinds of short-term and long-term financing.
II. Financing ChartDistribute Worksheet 14B, “Financing Chart.” Have students complete the exercise on the
worksheet. Then have them explain their answers to the following:
— In your own words, explain the chart.
— What does this chart tell us about how businesses like our VE business obtain money for
financing?
— Based on what we learn from the chart, should we be concerned that Americans have one of the
lowest savings rates in their history?
III. Yield Curve: The Cost of Financing Over Time
Distribute Worksheet 14C, “Yield Curve: The Cost of Financing Over Time.” Have students
complete the exercise on the worksheet. Then have them explain their answers to the following:
— What do we learn about the costs of borrowing over different periods of time from this chart?
— How can you explain why it costs more to borrow for longer periods of time than shorter periods?
— Under what conditions would interest rates be higher for shorter than longer periods of time?
IV. Yield Curve: Signs for the Economy
Distribute Worksheet 14D, “Yield Curve: Signs for the Economy.” Have students complete the
exercise on the worksheet. Then, as part of the whole-class discussion, have the class explain their
answers to the following:
— What do we learn about the yield curve from this worksheet?
— How does this worksheet explain how the shape of the yield curve indicates the future direction
of the economy?
— Based on the shape of the yield curve today, in what direction do you think the economy is
going?
— How might what we learn about the yield curve on this worksheet help us in running our VE
business?
Summary/Assessment
Describe how your personal spending and saving contribute to the circular flow of economic activity.
Homework
• Read materials in preparation for Lesson 15.
• Assign questions for homework.
• Distribute for completion as homework: Worksheets 15A, 15B, and 15C. These worksheets
correspond to specific chapters in The World is Flat.
_____________________________________________________
Worksheet 14A
Financing the Enterprise
Generally speaking, a company wants to obtain money at the lowest cost and least amount of risk.However, lenders and investors want to receive the highest possible return on their investment, also at the
lowest risk. Thus, there is a tension between those who want to obtain cash for their business and those
who may be willing to provide cash that businesses require.
What options are available to a company that needs to raise cash to finance operations?
Exercise: Assume that you are the Chief Financial Officer (CFO) for your VE firm, and you have been assigned the task of obtaining a total of $300,000 that will be used to purchase inventory, pay all outstanding debts to various creditors and to finance the purchase of new office furniture and computers.($200,000 of the total will be used for the furniture, equipment and computers.) Using the information in the table about the financing options, as well as information in your textbook and/or the Internet, write a memo to the Chief Executive Officer (CEO) of your VE firm in which you suggest the type of financing that would be best. Make the case for the type of financing you recommend and explain why one choice is better than another. Feel free to recommend more than one type of financing (mix funding types).
____________________________________________
Worksheet 14B
Financing Chart
Exercise. Study the chart below and create a title for it. Write the title in the space provided.
________________________________________________
Worksheet 14D
Yield Curve: Signs for the Economy
We can learn a lot about how well the economy is doing by studying the shape of the yield curve. This
page shows the four possible shapes of the yield curve and what experts say each yield curve shape tells us about where the economy is going. Study this worksheet then complete the exercise on the following page.
_________________________________________________
ReplyDeletePretty article! I found some useful information in your blog, it was awesome to read, thanks for sharing this great content to my vision, keep sharing.
Regards,
cash on card