Though E-banking offers vast opportunities, yet even less than one in three banks have an E-banking strategy in place. According to a study, less than 15 percent of banks with transactional websites will realize profits directly attributable to those sites. Hence, banks must recognize the seriousness of the challenge ahead and develop a strategy that will enable them to leverage the opportunities presented by the Internet. No single E-banking strategy is right for every banking company. But whether they adopt an offensive or a defensive posture, they must constantly re-evaluate their strategy. In the fast-paced e-economy, banks have to keep up with the constantly evolving business models and technology innovations of the Internet space. Early e-business adopter like Wells Fargo not only entered the E-banking industry first but also showed flexibility to change as the market developed. Not many banks have been as e-business-savvy. But the pressure is now building Continue reading
Business Finance
Business Finance is that business activity which is concerned with the acquisition and conservation of capital funds in meeting financial needs and overall objectives of business enterprises.
Shareholder Value Approach
Nowadays shareholder value approach reflects to a modern management philosophy, which implies that an organization measures its success by enriching its shareholders. Shareholders or stockholders are individuals or institutions that owns in a legally form shares of a corporation. They are considered to be a subset of stakeholders, which are all individuals or communities, who have a direct or indirect interest in the business entity (e.g. suppliers, customers, government, competitors etc.). The philosophy of the shareholder value approach attempts to increase the organization’s value by enhancing firm’s earnings, by increasing the market value of corporation’s shares and by increasing also the frequency or amount of dividend paid. The idea is that shareholder’s money should be used to earn a higher return than it could by investing in other assets with same amount of money and risk. Furthermore according to many business analysts shareholder value approach provides managers with clear mission Continue reading
Sources of Long Term Finance
Based upon the time, the financial resources may be classified into long term and short term sources of finance. Long term sources of finance are those that are needed over a longer period of time – generally over a year. A business requires funds to purchase fixed assets like land and building, plant and machinery, furniture etc. These assets may be regarded as the foundation of abusiness. The capital required for these assets is called fixed capital. A part of the working capital is also of a permanent nature. Funds required for this part of the working capital and for fixed capital is called long term finance. The sources from which a finance manager can raise long-term funds are discussed below: 1. Issue of Shares The amount of capital decided to be raised from members of the public is divided into units of equal value. These units are known as Continue reading
The Concept of Dematerialisation of Securities
Origin of Dematerialisation in India The concept of demat was introduced in Indian capital market in 1996 with the setting up of NSDL. A depository holds securities in dematerialized form. It maintains ownership records of securities in a book entry form and also effects transfer of ownership through book entry. SEBI has introduced some degree of compulsion in trading and settlement of securities in demat form while the investors have a right to hold securities in either physical or demat form, SEBI has mandated compulsory trading and settlement of securities in select securities in dematerialized form. This was initially introduced for institutional investors and was later extended to all investors. Starting with 12 script on15th Jan 1998, all investors are required to mandatory trade in dematerialized form in respect of 2335 securities as at end-June 2001. By Nov, 2001. 3811 companies were under demit mode and the rest of the Continue reading
Working Capital Management – Definition, Significance, Objectives, and Importance
Working Capital is the part of the firm’s capital which is required for financing short term or current assets such as stock, receivables, marketable securities and cash. Money invested in these current assets keep revolving with relative rapidity and is being constantly converted into cash. These cash flows rotate again in exchange of other such assets. Working Capital is also called as “short term capital”. “Liquid Capital”, “Circulating or revolving capital”, The Working Capital management refers to management of the working capital or to be more precise the management of current assets and current liabilities. Working capital management is a very important to ensure that the company has enough funds to carry on with its day-to-day operations smoothly. A business should not have a very long Cash Conversion Cycle. A cash Conversion Cycle measures the time period for which a firm will be deprived of funds if it increases its Continue reading
Reasons for Liquidity Fluctuations in Indian Banking System
Liquidity risk is inherent in bank’s core business because banking organizations employ a significant amount of leverage in their business activities and need to meet contractual obligations in order to maintain the confidence of customers and fund providers. The first step in measuring and managing liquidity risk is the identification of the most important sources of risk. In the Indian context of banking, unexpected liquidity fluctuations are driven mainly by the following items: Behavior of non-maturity deposits: A large fraction of deposits, in an Indian bank, consists of low-cost current and savings deposits which do not have any contractual maturity. Moreover, the depositor has the option to introduce or withdraw funds at any point of time. This makes the analysis of future cash inflows and outflows quite difficult. However, it is extremely crucial because the main reason for the closure of banks has been the inability to pay depositors on Continue reading