Concepts of Throughput Accounting and Theory of Constraints

Financial Management

Kaizen – Understanding the Japanese Business Philosophy of Continuous Improvement

Operations Management

Role of Leaders in Shaping Organizational Culture

Management Principles

Organizational Culture – Development and Importance

Management Principles

Five Important Organizational Cultural Models

Management Principles

The Concept of Time Value of Money

The concept of time value of money suggests that the money received at different point of time has different values. The financial manager must appreciate this fact and understand why they are different and how they are made comparable. Time value of money is a concept to understand the value of cash flows occurred at different point of time. If we are given the alternatives whether to accept $ 100 today or one year fro now, then we certainly accept $ 100 today. It is because there is a time value to money. Every sum of money received earlier has reinvestment opportunity. For example, if we deposited $ 100 in saving account at 5% annual rate of interest, it will increase to $ 105 at the end of one year. Money received at present is preferred even if we do not have reinvestment opportunity. The reason is that the money Continue reading

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Duality in linear programming

Corresponding to every linear programming problem, there is another linear programming problem. The given problem is called the primal and the other its dual. Although the idea of duality is essentially mathematical, it has important interpretations. This can help managers in answering questions about alternative courses of action and their effect on values of the objective function. When the primal problem is of the maximisation type the dual is of the minimisation type and vice versa. It is an interesting feature of the simplex method that we can use it to solve either the original problem – the primal – or the dual. Whichever problem we start out to solve, it will also give us the solution to the other problem. Consider the following general linear programming problem. Maximise Z = c1x1 + c2x2, Subject to a11x1 + a12x2 <or = b1 a21x1 + b22x2 <or = b2 x1,x2 > Continue reading

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Porter’s Five Forces and Corporate Strategy

Porter’s Five Forces Framework Porter’s Five Forces Framework introduced back in 1979 by Michael E. Porter from Harvard University in his first book “Competitive Strategy”. It becomes international best seller, and considered by many to be a definitive work on corporate strategy. The book itself had been published in nineteen languages and re-printed almost sixty times, changes the way business leaders thought and remains a guide of choice for strategic managers the world over. It has become an important tool for analyzing an industry structure and strategy process. The tool provides a simple perspective for assessing the position and competitiveness of a corporation or business organization within the industry. Porter points out five forces which the upturn and downturn, will affect the profitability and existence for a corporation or business organization. The development of Porter’s Five Forces Framework is based on the idea of attractiveness of an industry. As for Continue reading

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Product Oriented vs Market Oriented Marketing

Marketing can be characterized as the organization fulfilling client and market needs by creating value through communicating and working with client. Different businesses have different types of marketing strategies. Business can develop new products considering either a market orientated or a product orientated approach as it attracts customers by satisfying their needs and demands rather than trying to push buyers with sales. In today’s competitive world it is vital for a business to carry out a thorough market research before implementing any strategy. This article will revolve around two strategies – market and product orientation along with its importance and leading factors that must be overlooked before making any decision. A market orientated approach means that a business responds to what clients need. The choices are taken based around data about the clients’ needs and wants, instead of what the business believes is appropriate for the customer. An organization which Continue reading

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Currency Call Options and Put Options

Currency Call Options A currency call option is a contract that gives the buyer the right to buy a foreign currency at a specified price during the prescribed period. Firms buy call options because they anticipate that the spot rate of the underlying currency will appreciate. Currency option trading can take place for hedging or speculation. Hedging: Multinational companies with open positions in foreign currencies can utilize currency call options. For example, suppose that an American firm orders industrial equipment form a Indian company, and its payment is to be made in Indian Rupees upon delivery. An Indian rupee call option call option lacks in the rate at which the U.S company can purchase Rupees for Dollars. Such an exchange between the two currencies at the specified strike price can take place before the settlement date. Thus the call option specifies the maximum price which the U.S. company must pay Continue reading

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Audit Risk – Definition, Formula and Models

Audit risk is the risk that the auditor expresses an inappropriate audit opinion when the financial statements are materially misstated. In simple terms, audit risk is the risk that an auditor will issue an unqualified opinion when the financial statements contain material misstatement. ISA 200 states that auditor should plan and perform the audit to reduce audit risk to an acceptably low level that is consistent with the objective of an audit. (Auditing and Assurance Standard) AAS-6(Revised), “Risk Assessments and Internal Controls”, identifies the three components of audit risk i.e. inherent risk, control risk and detection risk. Audit Risk Model: AR = IR x CR x DR Where, AR= Audit risk (the risk that the auditor may unknowingly fail to appropriately modify his or her opinion on financial statements that are materially misstated) IR = Inherent risk (the risk that an assertion is susceptible to a material misstatement, assuming there Continue reading

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