There were many causes that contributed to the financial crisis of 2007–2008. Which of the choices most accurately describes the role of securitization in contributing to the crisis? Globalization has increased the connectedness of the major economies of the world. Correspondingly, there has been a decrease in the economic security of the U. S., where the U. S. has been adversely affected by the many European nations that have suffered recessions. In providing aid to firms that were at risk of becoming insolvent, the U. S. government securitized these firms. In the future, firms are more now likely to engage in risky investments since the government securitizes these behaviors. Banks bundled mortgages together and then sold them on the market as a financial asset. However, the risk level of these securitized assets was often much higher than the purchaser thought. Banks failed to securitize their loans by requiring sufficient down payments from home buyers. This resulted in small declines in housing prices causing many homes to go into foreclosure.

Fanning company is considering the addition of a new product to its cosmetics line. the company has three distinctly different options: a skin cream, a bath oil, or a hair coloring gel. relevant information and budgeted annual income statements for each of the products follow. skin cream bath oil color gel budgeted sales in units (a) 110,000 190,000 70,000 expected sales price (b) $8 $4 $11 variable costs per unit (c) $2 $2 $7 income statements sales revenue (a × b) $880,000 $760,000 $770,000 variable costs (a × c) (220,000) (380,000) (490,000) contribution margin 660,000 380,000 280,000 fixed costs (432,000) (240,000) (76,000) net income $228,000 $140,000 $204,000 required: (a) determine the margin of safety as a percentage for each product. (b) prepare revised income statements for each product, assuming a 20 percent increase in the budgeted sales volume. (c) for each product, determine the percentage change in net income that results from the 20 percent increase in sales. (d) assuming that management is pessimistic and risk averse, which product should the company add to its cosmetics line? (e) assuming that management is optimistic and risk aggressive, which product should the company add to its cosmetics line?