Review of Literature on Credit Derivatives Giesecke, K. (2009) says that a credit derivative is a financial instrument whose cash flows are linked to the financial losses due to default in a pool of reference credit securities such as loans, mortgages, bonds issued by corporations or governments, or even other credit derivatives. Credit derivatives facilitate the trading of credit risk, and therefore the allocation of risk among market participants. They resemble bilateral insurance contracts, with one party buying protection against default losses, and the other party selling that protection. He discusses the mechanics of standard contracts, describes their applications, and highlights the mathematical challenges associated with their analysis. Dufey & Rehm(2000) say that credit derivatives are contracts between two financial market participants.The essence of this contract is to transfer credit risk from one party to another.Like all financial innovation, a credit derivative is a new financial product which is developed Continue reading
Finance Research
4 Important Profitability Ratios Every Business Must Calculate
While profitability ratios evaluate a business overall financial performance through appraising its capability to produce revenues in surplus of service costs as well as other expenses. There are at least four profitability ratios, which they are gross profit margin, as well net profit margin, besides return on assets, in addition to return on equity. These ratios are used to assess performance and, with other data, forecast prospect profitability. Along with that is the future viability in addition to the soundness, which will repay loans as well as credit, additionally pay interest along with dividends. Since profits are divided amongst shares, the profit per share indicates possible dividend. 1. Gross Profit Margin It demonstrates how well the business is efficiently producing or else providing products as well as services. It shows how well products are priced given the proper otherwise variable costs it takes to create or even give them. The Continue reading
Advantages and Disadvantages of Activity Based Costing (ABC)
Activity based costing (ABC) is a costing model that recognizes activities in a company and assigns the cost of each activity resource to all products and services according to the actual use by each: it assigns more indirect costs overhead into direct costs. In this method a company can exactly estimate the cost of its individual products and services for the purposes of recognizing and reducing those which are unbeneficial and lowering the prices of those which are overpriced. In a business organization, the Activity based costing method assigns an organization’s resource costs through activities to the products and services given to its consumers. It is commonly used as a device for understanding product and consumer cost and profitability. As such, Activity based costing has predominantly been utilized to support strategic decisions such as pricing, outsourcing and recognition and measurement of procedure enhancement initiatives. Activity based costing is basically a Continue reading
The Objective of Shareholder Wealth Maximization
In old times, the traditional approach of companies was to maximize the owner’s profit. Modern approach puts more emphasis on Shareholder Wealth Maximization rather than owner profit maximization. This includes increasing the earnings per share (EPS) of every shareholder so that their net worth is maximized. Wealth increase is equal to what gross present worth in needed for raising profits in the future. This value needs to be discounted as per the time frame to found out the annualized rate of return for the shareholder. In Shareholder Wealth Maximization, it places priority before any other objective for the organization. Any action which has positive effective on Shareholder Wealth Maximization needs to be given priority. In any capitalistic society, the goal of business should be Shareholder Wealth Maximization as mostly the ownership of goods and services is by individuals, since, they own all the means so that they can make money. Continue reading
Literature Review about E-Banking In India
Introduction E-banking in today’s scenario is a very dynamic concept. It is a kind of self service technology (Dixit & Datta,2010). Competition is the pushing force for the introduction of e-banking. (Ziqi Liao and Michael Tow Cheung, 2003) .E-banking is delivery of new and traditional banking products and services straight to customers using electronic, interactive communication channels using computers. At a fundamental point, E-banking means setting up of a web page by a bank to provide information about its products and services their features, advantages, disadvantages, prices , duration and other details. On the other hand, at an advanced level, it refers to providing facilities such as accessing accounts, transferring funds, and buying financial products or services online, Making payments et which is known as “transactional” E- banking (Sathye, 1999). E-banking includes the systems that enable financial institutions, customers, individuals or businesses whether small or big or medium scale to Continue reading