Investments are both important and useful in the context of present day conditions. Some factors that have made investment decisions increasingly important are:
• Longer life expectancy or planning for retirement
• Increasing rate of taxation
• High interest rates high rate of inflation
• Larger incomes
• Availability of a complex number of investment outlets
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What is longer life expectancy?
Investment decisions have become significant as most people retire between the age of 55 and 60. Also, the trend shows longer life expectancy. The earnings from employment should, therefore be calculated in such a manner that apportion should be put away as savings. Savings by themselves do not increase wealth; these must be invested in such a way that the principal and income will be adequate for greater number of retirement years. This is especially applicable to the countries like India.
The importance of investment decision is further enhanced by the fact that there is an increasing number of women working in organizations. These women will be responsible for planning their own investments during their working life so that after retirement they are able to have a stable life.
Increasing Rates of Taxation:
Taxation is one o f crucial factors in any country which introduces an element of compulsion in a person’s savings. There are various forms f savings outlets in our country in the form of investments which help in bringing down the tax level by offering deductions in personal income.
Interest Rates:
Another advantage of investments is the level of interest rates. Interest rate is varying between one investment and another. These may vary between risky and safe investments. A high rate of the interest is not only the factor favoring the outlet of the investment. The investor has to include in his portfolio several kinds of investments. Stability of interest is as important as receiving a high rate of interest.
Inflation
Inflation has become a continuous problem in developing countries. In these years of rising prices, several problems are associated coupled with a falling standard of living.
Before funds are invested, erosion of the resources will have to be carefully considered in order to make the right choice of investments. The investor will try and search an outlet which will give him a high rate of return in the form of interest to cover any decrease due to inflation. He will also have to judge whether the interest or return will be continuous or there is a likelihood of irregularity.
Income:
Another reason why investment decisions have assumed importance is the general increase in employment opportunities in the countries like India.
The employment opportunities gave rise to both male and female working force. More incomes and more avenues of investment have led to the ability and willingness of working people to save and invest their funds.
Investment channels:
The growth and development of the country leading to greater economic activity has led to the introduction of a vast array of investment outlets. Apart from putting aside savings in savings banks where interest is low, investors are the choice of a variety of instruments.
Tuesday, June 10, 2008
Wednesday, June 4, 2008
Project Outsourcing
Project outsourcing is the new trend in business world.Projects refers to particular task which has to be completed with in the specified time. Actually in outsourcing business companies are transfering day to day management or activities to the third party. It continues to the many years as per the agreement. But project is short term task which has specific plan and objectives which have to be achieved with in agreed period. It involves the agreement between the company and service provider who will win the bid. The bid winner should complete the project with in the budget with in the time specified in project proposal. Service provider should use his own resourced including men, material, machine etc. Service provider will be entitled to receive the project money only after completing the project.But before making the payment company consider the quality of the work. Some companies are giving advance and pay the rest of money after completion of project. This project outsourcing is very popular in Information technology, construction world and market research, human resources, accounting, manufacturing and engineering works.
Project outsourcing mainly popular as offshoring project outsourcing are used interchangeably thouhg there are important technical differences. Project outsourcing involves contracting with a company, which may or may not involve some degree of offshoring. Offshoring is the transfer of an contract work to another country, regardless of whether the work is outsourced or stays within the same corporation.
Project outsourcing is predominantly popular in IT business. Because major Multi National Companies are situated in western countries only some of them are able to their branch offices in eastern countries. Compared to the western countries labour and overheads are cheap in eastern countries. So big corporations are outsourcing some of the short term projects to Indian companies through franchise business. These projects are different than the outsourcing business. Though outsourcing business is the agreement between the client organisation and the supplier organisation but sometimes service provider acts as the international branch of the organisation there is possibility of extending the agreement to several years.This outsourcing business only includes the outsourcing the day to day activities of organisations. But project outsourcing is the perticular task which has to be completed with in specified period. It has specific purpose. To bid for these projects the service provider should submit the project proposal. Only after the approval of project proposal companies are allowed to participate in bidding. Most of the companies consider the experience of service providers. In project outsourcing world mostly global companies are outsourcing the Market Research Survey product in order to find out their potential market in developing countries.
Project outsourcing mainly popular as offshoring project outsourcing are used interchangeably thouhg there are important technical differences. Project outsourcing involves contracting with a company, which may or may not involve some degree of offshoring. Offshoring is the transfer of an contract work to another country, regardless of whether the work is outsourced or stays within the same corporation.
Project outsourcing is predominantly popular in IT business. Because major Multi National Companies are situated in western countries only some of them are able to their branch offices in eastern countries. Compared to the western countries labour and overheads are cheap in eastern countries. So big corporations are outsourcing some of the short term projects to Indian companies through franchise business. These projects are different than the outsourcing business. Though outsourcing business is the agreement between the client organisation and the supplier organisation but sometimes service provider acts as the international branch of the organisation there is possibility of extending the agreement to several years.This outsourcing business only includes the outsourcing the day to day activities of organisations. But project outsourcing is the perticular task which has to be completed with in specified period. It has specific purpose. To bid for these projects the service provider should submit the project proposal. Only after the approval of project proposal companies are allowed to participate in bidding. Most of the companies consider the experience of service providers. In project outsourcing world mostly global companies are outsourcing the Market Research Survey product in order to find out their potential market in developing countries.
Business liquidity
Having sufficient amount of liquidity in the business is very importance now days because the increased size of business transactions. Managements today spend a lot of time and efforts to maintain proper liquidity position in business.
Business liquidity has been interpreted in several ways. In one sense, it refers to the position of net working capital of the firm. In another, it means cash and cash equivalent balances of the firm. Net working capital approach has traditionally been quite dominant. It suggests that liquidity of the firm depends upon the position of its net working capital. During an accounting period, working capital or funds flow from one element of balance sheet to another and according to this approach. It is the amount of net working capital which is available to the firm as liquid resource. A statement that uses net working capital as a liquidity position is referred to as fund flow statement, and its analysis as fund flow analysis.
Cash and cash equivalent basis or simply cash basis, which is another way in which liquidity position of the firm is conceived. Marketable securities are considered as cash equivalent under this approach. The change in the amount of cash and its equivalents during the accounting period reflects liquidity position. This implies that many of the items which do not change NWC position but affect cash position of the firm are analyzed. For example collection of money from accounts receivables doesn’t change the net working capital of the firm, as it neutralizes the impact of an increase in one element of working capital by an equivalent decrease in another element that is accounts receivables. But it does not affect the cash position of the firm and is, therefore, included in the cash basis analysis. The statement prepared on cash basis or liquidity is called cash flow statement and its analysis is referred to as cash flow analysis.
Normally fund flow analysis is the detailed analysis of the net working capital position of the firm. It helps management to administer and control the amount of total working capital, its various elements and also it’s financing. In fact this analysis can greatly facilitate a critical review of the liquidity position.
Another analysis called cash flow analysis based on fund flow statement which doesn’t take into account the off-setting movements among the individual current assets and liabilities. An increase or decrease in the individual elements of current assets and liabilities affect cash in different ways.
Thus having sufficient business liquidity depends on the management decision.
Business liquidity has been interpreted in several ways. In one sense, it refers to the position of net working capital of the firm. In another, it means cash and cash equivalent balances of the firm. Net working capital approach has traditionally been quite dominant. It suggests that liquidity of the firm depends upon the position of its net working capital. During an accounting period, working capital or funds flow from one element of balance sheet to another and according to this approach. It is the amount of net working capital which is available to the firm as liquid resource. A statement that uses net working capital as a liquidity position is referred to as fund flow statement, and its analysis as fund flow analysis.
Cash and cash equivalent basis or simply cash basis, which is another way in which liquidity position of the firm is conceived. Marketable securities are considered as cash equivalent under this approach. The change in the amount of cash and its equivalents during the accounting period reflects liquidity position. This implies that many of the items which do not change NWC position but affect cash position of the firm are analyzed. For example collection of money from accounts receivables doesn’t change the net working capital of the firm, as it neutralizes the impact of an increase in one element of working capital by an equivalent decrease in another element that is accounts receivables. But it does not affect the cash position of the firm and is, therefore, included in the cash basis analysis. The statement prepared on cash basis or liquidity is called cash flow statement and its analysis is referred to as cash flow analysis.
Normally fund flow analysis is the detailed analysis of the net working capital position of the firm. It helps management to administer and control the amount of total working capital, its various elements and also it’s financing. In fact this analysis can greatly facilitate a critical review of the liquidity position.
Another analysis called cash flow analysis based on fund flow statement which doesn’t take into account the off-setting movements among the individual current assets and liabilities. An increase or decrease in the individual elements of current assets and liabilities affect cash in different ways.
Thus having sufficient business liquidity depends on the management decision.
How to grow customer to your business
Growth of an entrepreneur depends on the satisfaction and growth of his customers. This is especially so in intermediate products or services. For instance, small scale chemical industrialist developed a unique solvent to act as drying agent in paint industry. He demonstrated to his paint manufacturing customer that by using his new solvent the paint quality would improve. The paint manufacturer used it and achieved better turnover. Similarly a textile processing entrepreneur built up his customer base by giving useful suggestions to them on colour and shade combinations for fabrics. In order to provide value for money and grow customers, an entrepreneur has to convince his customers with three things.
How much: the entrepreneur should be able to convince his customers with the quantity of incremental returns on his investments that is possible by buying the entrepreneurs product or service. In case of customer’s products, it is the incremental benefits or satisfaction which the consumer derives that matters. How quickly the entrepreneurs should be able to tell the customer the speed with which he would be able to supply the product or providable service. In competitive environment speed is an important factor. This means that if the entrepreneur wants to help his customer grow, he should do it fast.
How definite: the customer is given a definite idea about the entrepreneur’s capabilities to help him grow. How will buy and continue to buy only if the promise stands the test of time.
One important observation we have to make on the above discussion is that we have not been talking about profits, but customer satisfaction. Although an entrepreneur has to make higher levels of profit it should not be the bottom line to work towards. He has to think beyond, towards the customer without whom he cannot achieve growth and sustain it .this means providing growth values on a consistent basis. Also entrepreneurs should approach their customers and prove their growth values to build up business, to make a better impact. In other words, entrepreneurs should think of long term growth of the organization and factors influencing it.
Maintaining leadership
In a competitive environment, maintaining leadership is not easy. New substitutes and products made using new technologies would keep entering the market eroding competitiveness of existing firms. Under such circumstances, constant product improvement becomes essential to maintain product differentiation. Even in fields where competition is limited, it is worth attempting technological improvements either for cost reduction or product improvement. This means that the experience curve of such firms keep shifting continuously. Thus to face the competition effectively there should be strong sense of product differentiation through technological development.
How much: the entrepreneur should be able to convince his customers with the quantity of incremental returns on his investments that is possible by buying the entrepreneurs product or service. In case of customer’s products, it is the incremental benefits or satisfaction which the consumer derives that matters. How quickly the entrepreneurs should be able to tell the customer the speed with which he would be able to supply the product or providable service. In competitive environment speed is an important factor. This means that if the entrepreneur wants to help his customer grow, he should do it fast.
How definite: the customer is given a definite idea about the entrepreneur’s capabilities to help him grow. How will buy and continue to buy only if the promise stands the test of time.
One important observation we have to make on the above discussion is that we have not been talking about profits, but customer satisfaction. Although an entrepreneur has to make higher levels of profit it should not be the bottom line to work towards. He has to think beyond, towards the customer without whom he cannot achieve growth and sustain it .this means providing growth values on a consistent basis. Also entrepreneurs should approach their customers and prove their growth values to build up business, to make a better impact. In other words, entrepreneurs should think of long term growth of the organization and factors influencing it.
Maintaining leadership
In a competitive environment, maintaining leadership is not easy. New substitutes and products made using new technologies would keep entering the market eroding competitiveness of existing firms. Under such circumstances, constant product improvement becomes essential to maintain product differentiation. Even in fields where competition is limited, it is worth attempting technological improvements either for cost reduction or product improvement. This means that the experience curve of such firms keep shifting continuously. Thus to face the competition effectively there should be strong sense of product differentiation through technological development.
Security analysis
Investment decision is a part of our economic life. Everybody takes such decisions in different contexts and at different times. Some are able to reap more profits through them; while others simply lose their money. Attempts should therefore be made to understand and know the way sound investment decision can be taken in order to improve the chances of making profits through them. Thus, investment decision making is an important area worth probing further.
Unfortunately, for long, investment decision making was regarded only art. As art is personal and subjective, it was difficult to provide a general framework with in which one could operate. Only, recently it has been developed which helps us to understand and know the way investment decision can be attempted. Recognizing is art contents, this body of literature works on the thinking that a systematic, general framework can be suggested for those involved in investment decisions that can then modify that according to their requirements. It has, therefore, been recognized that investment decision making is both an art as well as science. This is indeed an on-going process in which decision maker attempts to update him regarding the risk return characteristic of securities. These characteristic keep-on changing and investor go on attempting to understand their impact on his decisions. The conceivable investment opportunities were discussed and explained in many ways. The investment decision maker takes them into account in order to decide which securities should be bought or held or sold by him. A very simple investment decision rule is here applicable: buy a security that has highest return per unit of risk or lowest risk per unit of return. And, sell the security which doesn’t satisfy the above requirements.
The above investment decision rule to buy/sell securities is highly simple but it is very difficult to apply in straight forward fashion in actual practice. This is because there are large number of factors which affects both risk and return in the real world situation. Thus, security which had highest return per unit of risk at one point of considered to be a good buy might turn into a less attractive proposition and could be considered later on as a possible candidate for disinvestment. Such a situation might arise due to change in the management of the concerned company or changes in the government policy at economy level making it less attractive. The opposite might also be possible.
Investment decision making being continuous in nature should be attempted systematically.
Unfortunately, for long, investment decision making was regarded only art. As art is personal and subjective, it was difficult to provide a general framework with in which one could operate. Only, recently it has been developed which helps us to understand and know the way investment decision can be attempted. Recognizing is art contents, this body of literature works on the thinking that a systematic, general framework can be suggested for those involved in investment decisions that can then modify that according to their requirements. It has, therefore, been recognized that investment decision making is both an art as well as science. This is indeed an on-going process in which decision maker attempts to update him regarding the risk return characteristic of securities. These characteristic keep-on changing and investor go on attempting to understand their impact on his decisions. The conceivable investment opportunities were discussed and explained in many ways. The investment decision maker takes them into account in order to decide which securities should be bought or held or sold by him. A very simple investment decision rule is here applicable: buy a security that has highest return per unit of risk or lowest risk per unit of return. And, sell the security which doesn’t satisfy the above requirements.
The above investment decision rule to buy/sell securities is highly simple but it is very difficult to apply in straight forward fashion in actual practice. This is because there are large number of factors which affects both risk and return in the real world situation. Thus, security which had highest return per unit of risk at one point of considered to be a good buy might turn into a less attractive proposition and could be considered later on as a possible candidate for disinvestment. Such a situation might arise due to change in the management of the concerned company or changes in the government policy at economy level making it less attractive. The opposite might also be possible.
Investment decision making being continuous in nature should be attempted systematically.
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