Factors that need to be considered before fueling fresh fund in to your business..

Whenever we plans to set up a new venture, need to populate several other essentials like source of raw materials, financing options, labour forces, markets capitalisation, organisation structure etc. All these aspects requires a detailed review before comencing the business. However, among all these, the first & foremost concern should be placed in comprehenive project analysis & accordingly adopting appropiate capital budgeting technique.

Project analysis asks for selection of most appropiate project among several alternatives. Here, an entrepenure effectively analyse the viability of a project in terms of cash flow pattern, inflationary impact there on, estimated project duration, trend of such flow, initial capital requirements etc. Let's have alook what are the factors influence in capital budgeting decisions.

As we all know capital is the back bone for every business, need to take proper care of such right from the day of investment. Hence, before taking any financing decision, we need to consider the available options, cost of such each source of finance, relative tennure of investment, the extent of obligations & repayment procedure along with expected return upon invested capital.

In my following article, we will have a detailed discussion upon both these analytical aspects.

Running your business at loss..??.. take a quick look in to the following quinine before you quit.

Loss is a quite tough word indeed. Although Profit & loss is a part of every life cycle whether it is living or non living.. but once loss lives, it looms larger than what profit looks. Accordingly, a provocative panic develops up among people that leeds them to further loose their feet & ultimately rests in taking wrong decisions. Henceforth, if an individual steps in to loss in either life, it is advisable not to loosing up to such loss, rather it would be apprehensive to find out the reasons behind such loss. As such I felt that I could put forward few optimistic thoughts on this behalf. As we all know, a loss incurs when respective expenses exceeds over income. However, if financial statement of a concern steps in to negative, following consideration should be taken in to account before taking any tough decision.

Firstly, calculate the net cash flow for that period in concern by adding back the non cash expenses & outstanding like depreciation, outstanding expenses etc. Accordingly,if the entire loosing amount is wipes out, no worry remains & one can really rely in running his/her venture along with the recession. However, if the substantial amount still shows in severity, we need to further place our concern in cost of operation. Now it is essential to fix up the extent of variable cost(including cost of processing) still prevails in total cost & accordingly, we need to add back again such amount to recover the loss. Consequently, if the above deviation can derive any profit or recover the loss, we may carry on our venture as long as the contribution is capable enough to cope up the fixed charges depending upon the sustainable liquidity strength.

Secondly, if the loss lives in devaluation of finished products or due to lack of working capital or raw materials i.e, due to recessionary aspect, it will be apprehensive to temporary slow down the operation or look for other financing options or apply for government grant. Also you can ask your creditors to allow some relaxations in payment schedule etc.

Finally, one need to exercise all the probable options to cope up the crisis. Filing bankruptcy is the least option remains & as such it also reflects adversely in credit report.

How to get rid of a bad investment decision..??

Investment in equities involves lots of risks & once an investor plays off such risks, can be rewarded with a lump some amount of return. Henceforth, it is essential to get rid of these risks to ensure a relishing return. Although we can’t mitigate the risk totally, can be taken to a minimum level on account of certain attributes such as..

PE ratio: Price Equity Ratio is determined taking EPS ( Earning per Share) in terms of current market price of that particular equity. This ratio signifies the extent of variance in valuation of an equity corresponding to it’s book value. As such, it is always apprehensive to invest in those equities having a lower PE ratio as these stocks are appeared much safer in times of market downturn.

ROI: Return on Investment is another vital consideration in order to be assure that the equity of the company, in which the investment to be made, having sufficient earnings over it’s total cost of capital. In this aspect, the gradual trend in ROI over the following years are also significant. An usual fluctuation of earnings for several years makes a suspicious sense upon it’s performance. Further, a common check in to consistency & growth in NP ratio can give more comprehensive picture.

Moving Averages: Moving average in price of equity for a certain period (generally 50 & 200 days) also depicts a rough idea upon its further movement. If a stock falls below it’s moving averaged price, it would be advisable to avoid that stock at least for a certain period. In this context, another relevant aspect could be comparing the movement of that particular equity in accordance with index performance.

Trading Volume: The amount of transaction took place in a day for that particular equity is another material consideration. Trading volume also hints up on the extent of happenings going on for that stock.

Information Relevancy: Any positive updates relative to the equity of that company blows further buzz among the investors.

STOCK MARKET as an invitabe investment option in 2009: few trading tricks & techniques..

In my previous article, I have spared many words on stock market options as an optimist. Let’s find out few investment tricks & techniques that can facilitate more oxygen in to our optimism.
Firstly & most importantly, self assessment of an individual investor is essential. Before stepping in to investment decisions, one need to rest assure on his or her personal projection over the market scenario for the coming months. Once an investor is ready to enter in to, need to ensure upon his/her risk taking capability & hence concerning up on such extent of risk & expected return, his/her further investment decision should be designed. Now, at present, as nothing much left to navigate the market sentiment, I would rather suggest to make a systematic investment plan(SIP) i.e., investment in small bulks at a regular interval spreading over a specific period, than opting for a one time bulk investment. Further, before applying for an equity, it is essential to evaluate properly on the prospect & potentiality in terms of time factor. Here, effective evaluation can be done in two ways, fundamental & technical analysis. Fundamental analysis includes study of financial position for the present as well as previous fiscals, ratio analysis, identification of the objective of the company through memorandums & articles, also need to ensure upon the extent of stack holdings among management, efficiency of the management, if any legal proceedings or suit pending against that company & any other ambiguity in conformation with the guiding rules & regulations etc. On the other hand, technical evaluation of past performance of a share sometimes facilitates a fair picture of the furure. In this context, few measures like moving averages varying the number of days, also formation of several types of chart pattern signifies the extent of soaring of a particular script. However, although technical analysis is a very tactical part in trading activities, most of us are not quite acquainted with these aspects. Hence, few factors can be sorted out from both the analytical aspects to justify our investment decisions like PV ratio, present status in terms of 50 days & 200 days moving averages, positive updates, return on onvestment(ROI), market capitalization & trading volume up on that particular script etc.

STOCK MARKET as an investment option in 2009: opportunites, & few optimistic opts..

In spite of sloppy socio-economic situation everywhere around, we need to set forth a strategic approach in order to cah in the future favorable. Hence it will be apprehensive to work out a further analysis of the market scenario in later half of the current fiscal. As many of us believes in opening up of a probably investment opportunity in coming months, lets find out few justifications..

Firstly, in accordance with the events like merger, acquisition & all many more new establishments will be emerged up along with much prudent potentiality & undertakings & in course of reconstructing their capital base, have to come up with public offerings in capital market. Henceforth,these initial offerings can be a rewarding opportunity for us.

Secondly, apart from stock specific strategies.. if we shift a bit to the sector specific, the following sort outs can be significant. Among the several sectors severely suffered, there are few priority sectors like housing & constructions, power & even financial service sector like banking, insurance etc are prima-facie, more precisely, these sectors are bound to bounce back banking on continuous population growth & consequent gradual saturation of residential plots, huge demand of capital for business promotions & reconstructions along with economic turn around, more expansion of power etc are the core factors to be concerned upon.

Thirdly, as we all know fluctuations in interest rate, repo & reverse repo rate etc are also acts against stock market movements are likely to be revised further in near term. Currently these rates are quite relaxed to favor flow of fund in to the system. However, once the economy will be sufficient enough to sets in, these rates will be revised further & accordingly it will attract more attention towards the equity market.

Fourthly, all the global stock indexes are very much economy sensitive. As such a minimum sense of economic instability amounts in to a major insecurity across these markets. Hence they used to crash before the economy cramps in & recover once the economy is restored back. Accordingly, we can conclude that eyeing upon the economic stability & standings for the upcoming few months, more comprehensive decision can be taken up.

STOCK MARKET as an investment option in 2009: few precautions..

As I have mentioned earlier, many equity analyst of major fund houses projects that 2009 could be a year of opportunity. Accordingly as per our common intelligence it is not much tough to presume that there must be a turn around in trading market sooner or later. Hence if we invest as per recent tem we can expect a higher return in future but there are three major considerations in this aspect.:

Firstly, most of the optimists projects that opportunity can be open up in the latter half of the year as all of them are yet to conclude whether the worst part is over. Hence none can rest assure that the global stock market can’t go down further. In this context, the ideal level of entering is still to be estimated. Hence, people are more reluctant to return back in fear of further loss.

Secondly, if we presume that nothing much left out of worried factor & there will be a hint of gradual growth from the later half still it is tough to predict what will be the exact turn around time for market to back in tract.

Thirdly, in course of economic turbulence events like amalgamations, mergers, absorptions & winding up among many major companies is quite obvious as most of these companies rests in balance sheet manipulations at least to an extent. Although the entire scenario can be a bit prominent to predict once their first quarter result is declared. Henceforth, which sector will lead the race or more precisely what are the stocks under which sector will be a good bet is troublesome to project at present point of time.

STOCK MARKET as an investment option in 2009: Lets have a glance on the global stock market scenario at present..

In course of the current economic downturn all the major stock markets across the globe are trading at their bottom level. Let’s have few snap shots of how the stock indices in most of the countries have been rattled off significantly on recessionary roll out. To start with, the penetration had populated with the Standard & Poor 500 stock index’s downfall of 10% accordingly in december07 after a huge hit in october07 & subsequently further slides of 26% in january08 fueled a world wide worry among traders. On the other side, deflation in US housing market & it’s consequence among multinational financial players like global banks, investment houses & in insurance sector led to a lump sum loss(50-60%) in major indexes like Nasdaq & Dow. Accordingly stock indexes of other countries had to hardship the heat & suffered severely as Sensex in India has felled down from it’s all time high around 21k to 8k, likewise Nikki in japan has lost it’s ground approximately 42%, the Russian stock market has lost 65.5% of its value & subsequently followed up by Hang Seng & all. As most of the fund houses & banks are running short of money so as many retail individuals, there is nothing much left to pull back the momentum.. As such, for an orthodox optimist, no more words left to opine up on except taking the entire scenario as an opportunity. In the following article, let's depict a detail light up on to what extent we can take the ongoing turmoil as a turning point.

Can Obama ressolve the recession??

The significance of US presidential campaign in 2008 had appeared a bit more apprehensive in terms of few absolute thought outs from the US president. Obama's economic stimulus plan on resolving the recession & restoring the economic strength & stability has earned an amount of applause from global audiences. Accordingly, he had put forth the urgency of passing the roughly $838 billion to force fluid in to the economy & to follow up the following resolutions:

• Creation of over 3 million job while focusing in priorities like health care, energy, and education that will jumpstart economic growth.

• Investing in the science, research, and technology that will encourage in widening up new medical breakthroughs, new discoveries, and entire new industries.

Further, Obama has also clarified the fact that as the major portion of employment facilitates by the private sector, he has extended most of his measurement pills to promote the private players & assured in federal government assistance.

However, as we all know, any monitory reform policy requires more concern & placement of such rests in several consideration. Consequently in pursuance of all his prospective proposals, Obama was challenged by republicans on further justification of spending & questioned on his foreseeable economic reforms.

how to OVERCOME the recession..?

On my previous articles I have depicted on the deep & dire decor of recession, how heavily the economy is hopping in to the hardship. Hence it is quite obvious that there will be a desperate attempt among us to come out of this severe situation. but HOW?.. lets find out few solutions.

It is regardless to mention that many of us are already cramping into the financial crunch. Amongst them few might had to sacrifice their home or filed bankruptcy or badly indebted whatever the case may be, the system still holds enough hope for them to earn an amount of oxygen. Accordingly, there are certain debt settlement agencies constantly engaged in negotiating with creditors to reduce the debt burden on behalf of the borrowers. Another viable option could be debt consolidation that accumulates all the debts & discharged off to the respective creditors on behalf of the borrower & arrange a fresh loan at cheaper rate for long term & or comparatively higher rate for short span of time. Alternatively, before taking any frantic decision on debt, it is essential to look through legal provisos to defend your rights & safeguard your interest.

Although, financial crisis is a crucial consideration in the current circumstances, proper financial planning can be a productive tool to play out the penetration & particularly for a fruitful future.
Revision of plans..
Everyone lays out a list of their essentials & accordingly they works out a financial plan to fund those needs. In many occasions people finds themselves in financial trouble as they fails to follow up the future facts. However, it is obvious to have a prudent plan to protect the future. Hence periodic revision of financial set outs is essential taking in consideration of socio-economic conditions, political outlooks etc. & most importantly the repayment capacity & risk taking capability of an individual. In the present scenario every such plan should be revised to rule out the needless norms.
Risk tolerance capability..
As I have hinted earlier financial plan should be followed up in accordance with the risk adherence ability of the planner.In the recent past, easy availability of funds has erased out this critical concern among common people & consequently resorts in recession.
Periodic review of portfolio..
In any circumstances.. periodic review of one's investment options & effective diversification is always desirable. An effective portfolio should be mixed up in such a proportion that can optimize the profit taking the investment risk at minimum. In order to pursue a wel-balanced portfolio a proper combination of fixed assets along with liquid assets like stocks & bonds is to be maintained taking in to consideration of several other factors. As such in the present circumstances long term investment in fixed assets appears more justified than opting for short term stock options.

recession: facts & figures

On my previous article I have discussed on various facts of recession. Lets have look on the statistical figures to estimate the quantum of current economic circum. Although few years back few economist dared to predict a possible recession addressing US housing bust and consequent effect on the rest of the world, no one had paid much attention. Today everyone is taken muse concerning the deep dire of the financial disaster & worried upon whether the worst is yet to come.

The fear of recession in US had appeared in early of 2008 & finally floated the floor in April. In January08, IMF predicted that global growth will fall down 4.9% to 4% & two months later they revised the figure announcing the forecast may fall down further. Consequently, as the US economy holds 21% of the world economy, it was obvious that if recession comes it would have world wide impact.

As I have stated in my previous article, correction in US housing market & sub prime lendings ware the major contributors of US recession, the following figures will be relevant to justify my words. In march08 it was estimated that 8.8 millions home owners or approximately 10.8% of the total homeowners had been vacated their place as their home turned worthless than their mortgages. Accordingly, mortgage backed securities of multinational banks gradually lost their values. Hence global banks, investment corporations & brokeing houses have had to book a loss of an estimated $512 billion inspite of earnest effort of the US federal reserve to inject fuel in to the economy. The crisis was led by Bear Sterns, one of the world's largest investment bank was taken over by JP Morgan with some financial assistance from US federal bank & subsiquently Lehman Brothers, the fourth largest investment bank in US had filed for bankruptcy & accordingly followed up by Citi Group & Merrill Lynch on writing off huge amount of losses around $55.1 billion & $52.2 respectively. Further Merrill Lynch was absorbed by Bank of America. Freddie Mac & Fennie Mae ware the two major mortgage cmpanies of US are subsiquently natinalised to prevent them from going under. Henceforth, as the banks & other financial institutions are the backbone of all other industries the rust of recession rattled out over the rest.

before searching for the SOLUTIONS.. it is essential to know what are the REASONS behind the RECESSION.

RECESSION referrs to the period of reduced economic activity. An economy is said to be in recesseion on the basis of few presumptions like under preforment for several quaters, slowdown in GDP, unemployment factoretc. Although recession is accoutable on these mere predictors but the reasons for a country in recession confinds in several preceding decades. Hence, recession is not a sudden saturation rather a cumulative phenomenon of past. Lets take look on what are the probable factors that amounts to recession in present terms:
Common Contributors:

• Gradual increase in the price of oil & foods in global market results in decrease in consumption. Hence transportation cost kept increasing over the years significantly & standard of living went lower & adversely affects in GDP.

Country Specific:

• In US for past several years availability of essy inflow of foreign funds led to a major economic boom in housing sector at cheaper rates. Accordingly all the loan agencies followed up & relaxed their lending terms in order to attract more & potential borrowers disregarding principal prudence of disbursment. Further, as the property value kept incrising, refinance & second mortgage became popular. However since 2006, the scenario had changed dramatically. Overbuilding of houses led to a surplus over the demand & results in downturn in home prices in many parts of US. Henceforth, refinace became more difficult. For such, many homeowners who had been facilitated, turned in to default due to drastic turnaround of the entire scenario.
• On the other hand, as long as sub prime lendings & refinance was an lucrative investment option, most of the major fund houses & American & European banks kept purchasing such loans from loan agencies as mortgage backed securities to diversify their portfolio. Afterward, once the housing market got over optimized & deflation starts all the home owners, borrowers, lenders & mostly major multinational banks felt the heat & hurdle of surveillance. An huge amount of loss became obvious among those giant financial players. Henceforth many investment corporations & companies & fund houses had found no other option than to file bankruptcy & rests are staggering in liquidity crunch . Accordingly as many other international financial backbones were severely suffered, an wave of panic started soaring up across the globe.
  

For an obvious obliviation of all of the above, US economy got stuck taking rest of the world in stagnant.

On the above article I have tried to present a simplified synopsis of the entire scenario. Lets have a look on my next article on how heavily the ongoing recession costs to the world at large.