What are financial markets and why it is important for savers and borrowers? A financial market is a system that includes individuals and institutions, and procedures that together borrowers and savers and it is no matter where is the location between the savers and borrowers. The main role of the financial market is to facilitate the funds from the individuals and businesses that have the majority fund to individuals, businesses, and governments to fulfill their needs of income. The financial institution is a process used by an organization that provides various types of financial services to their customers. The government authorities have controlled and supervised the institution according to the rules and regulations. The financial institution is giving different types of economic ideas for an organization to carry out their business. A financial institution is an establishment that gives financial services. Financial institutions based on banks, credit unions, asset management Continue reading
Financial Concepts
Labor Cost – Definition, Types and Importance
Like materials, labor is also one of the prime inputs of production system. All manufacturing concerns require the labor for carrying out their production activities. The labor consists of workers who are essential to convert materials into finished products. The workers operate machine and perform other tasks to help convert materials into final outputs. The labor can be either direct or indirect. The labor who is directly engaged in the conversion process is called direct labor and who is not is called indirect labor. The labor, however, should be properly utilized and satisfactorily paid in order to minimize labor turnover and labor cost. Unlike materials, labor is complex to deal with. Dissatisfied and discontented labor always results in high labor costs and low quality outputs. Therefore there should be proper planning, accounting and controlling of labor. Concept and Meaning of Labor Cost The payment made to the labor in exchange Continue reading
Understanding Inflation-Linked Bonds (ILBs)
The recent Monetary Policy released by Reserve Bank of India (RBI) laid its thrust on controlling the spiraling inflation, especially the food price inflation. One of the reasons behind the Cash Reserve Ratio (CRR) hike was to “curtail the rising inflationary expectations (higher expected price trends)” In the past RBI has been concerned about the fact that a common man does not have any protection against rising prices, vis No Inflation Hedge. The common man has to rely on traditional but inefficient methods to hedge the real inflation risks, such as Gold and real assets such as commodities or real estate or even excessive stocking of goods In developed markets like US, the government has issues “Treasury Inflation Protected Securities” known as TIPS. Globally more than USD 1 trillion worth inflation linked bonds must be outstanding. Inflation-linked bonds (ILB) securities give an opportunity to market participants and investors to hedge Continue reading
Importance of Accurate Financial Statements
The role of financial accounting is not to show the value of a company, but rather it provides enough information for others outside the company to determine the value of the company for themselves. Financial Statements are annual statements summarizing a company’s activity over the last year. They consist of the profit and loss account, balance sheet, statement of total recognized gains and losses and, if required, the cash flow statement together with supporting notes. Proper financial statements are crucial for a company’s success. Bad financial management can quickly lead to a company’s downfall. Income statements, also known as P&L’s or profit and losses are a basic account of the company’s profits, expenses and sales. These reports will give insight into the finances of a company in the immediate and distant future. Balance sheets are the assets, liabilities and the equity of a company. This sheet is simply the statement Continue reading
Receivable Management – Meaning, Significance and Purpose
Introduction to Receivable Management Receivables, also termed as trade credit or debtors are component of current assets. When a firm sells its product in credit, account receivables are created. Account receivable are the money receivable in some future date for the credit sale of goods and services at present. These days, most business transactions are in credit. Most companies, when they face competition, use credit sales as an important tool for sales promotion. As a sales promotion tool, credit sale enhances firm’s sales revenue and ultimately pushes up the profitability. But after the credit sale has been made, the actual collection of cash may be delayed for months. As these late payments stretch out over time, they may cause substantial drop in a company’s profit margin. Since the extension of credit involves both cost and benefits, the firm’s manager must be able to measure them to determine the ultimate effect of credits sales. In Continue reading
Guidelines for Preparing a Proper Strategy for Debt Recovery
Devising a strategy helps in achieving a set goal or objective. Recovery agents should therefore devise a strategy for debt recovery. The following guidelines would help in preparing proper strategy for debt recovery. The collection process should be compliant to the bank-specific recovery norms and also regulatory guidelines. The collection timing should be synchronized to the cash inflow pattern of the debtors: For example, recovery from salaried employees should be timed when salary is received by or credited to the debtor’s account, normally at the moth-end. In case of SME borrowers the effort should coincide with cash flow on account of sales. In case a collection from agriculturist should be made, then it should be soon after the crops are sold. This will call for knowledge of bank products on the part of agents. It should be the endeavour of the agent that collection Continue reading