Corporate Finance- Making Simple

The main objective of financial management is to arrange sufficient finances for meeting short-term and long term needs. These funds have to be procured at minimum costs so that profitability of the business can be maximized.

Here are some simple steps that can be followed to manage the finances of a corporate

Estimating Financial Requirement

This is the foremost task to determine the short term and long term needs of finance on the basis of its strategic importance. Such an estimate must be screwed to perfection since shortage of funds would have an adverse effect and excess funds may lead in extravagant spending, speculative activities and rising interest figures.

Selecting sources of finance

There may be as many sources of finances such as shares, debentures, financial institutions, banks and public deposits. If funds are required on a long term basis then shares and debentures may help the cause. Financial institutions and banks can be used to finance on a short term need.
If the management does not want to tie its assets then public deposits may used as a source to finance.

Selecting a Pattern of Investment

After the finances are available it becomes very necessary to allocate it properly. Finances must be first allocated to procure fixed assets(Plant and Machinery) and then the remaining must be allocated to meet the working capital requirements(Day to day working requirements like wages, bills etc). Proper techniques like cost-benefit analysis and opportunity costs analysis must be followed before a capital investment.

Proper Cash Management

Cash may be required to purchase raw materials, pay creditors, wages, utility bills etc. Inadequate cash may hamper the production cycle or may limit the scope of some attaining seasonal and contingent advantages. Excess cash may cause funds to remain idle and increasing the cost of capital by rising Interest charges. Hence proper cash management becomes a must by maintaining balance between cash inflows and cash outflows.

Implementing Financial Controls

Various control Devices and techniques must be used in ordinary course of business to monitor the usage of finances. These devices are return on investment, budgetary control, break even analysis, cost control, ratio analysis and cost and internal audit.
Return on investment is taken as the best measure in many corporate

Proper use of Surplus

To gain maximum growth judicious use of surpluses becomes a must. Surplus can be used in diversification, expansion and to declare dividends that would satisfy shareholders and eventually helps in raising market prices of shares.
Ploughing back of profits may be used to finance expansion and diversification but may go against the interest of shareholders. So an optimum balance has to be carved out between the two options.

This simple process is used by businesses to grow into corporate.

Stock market investment – Bull or Bear

Stock and shares, commodities , bonds have always remained on the top list when one heads towards the financial community. How market would play is an all time question whether it comes to an economic crunch or it comes to a boom.

Predictions have proved to be useful techniques helping an investor to take decisions regarding investment and divestment as well. Technical analyst give their predictions based on comparative study with past data, trends, cycles, price movements and ratios of a particular scrip , company, industry or market as a whole

Fundamental analyst forecasts on the basis of intrinsic values of the stock, sales, profit, taxes, growth of the company etc.

However, there are as many factors that has the bearing over share prices and the market as well. Such factors include national and international economic health in terms of GDP, inflation, prevailing tax rates , Foreign direct investments , foreign institutional investment, foreign exchange, climatic conditions, political situations, company’s performance in terms of profit and loss, reserves, capital structure, projects and many more.

Besides all such factors I would like to rate “Sentiments” as the driving factor which indicates the market to be “Bear” or “Bull”

Here are some guidelines which would help my friends who want to have some investment in the stock market. I am sure it is going to help you a lot as it helped me reaping good returns .These guidelines have come from market experts and ten long years of my investing experiences and analysis.

Be sure- Investing, speculating or gambling

The very first rule of the market is to understand your own intentions whether you will behave as an investor to reap steady returns gradually, with nominal risk on long term investment, or speculator to reap fast returns with high risk on short term investment or as a gambler to earn abnormal profits with infinite risk irrespective of the time horizon.

Study the market

Having clear intentions of your stand , market study becomes the most important aspect of investing. Collect information about the economic conditions of the country and projections of its future movements. When economic conditions such as GDP , saving ratios, foreign exchange reserves of the country are stable and increasing it’s the right time to invest and vice a versa. Steady growth in economy helps out investors and fluctuations favors the speculators

Do not put all eggs in one basket

It is the golden rule of the market and investment. Be sure of what you are investing in. Making investment blindly in every scrip would bring your portfolio to a no profit no loss situation and even huge losses. Be very choosy about scrip by looking to its past paerformances, dividend rates, expectations of further growth, recent projects and its synergy with other industry performances.

Wait for the right time

Right time to sale and right time to purchase is the factor which will benefit you the most.

Invest at a time where the share prices are to maximum low (bottom line) and divest when it stop rising up. But the point is how to determine the optimum time? This can be determined by reading cycles of that individual stock in various economic conditions.

Boom triggers investment and depression aggravates divestment.

However , recession and depression in the economy can also be an ideal time to start investment or even speculation because of the fact that shares can be availed at all time low prices and then tends to shoot up. The only fear factor is chances of delisting which is very low in case of Big player and even for blue chips.

Tips

Here I am talking about advices one should take from equity research companies, brokers and investment houses. They at times really get hold of some very useful and internal information about a particular scrip or company which will be fruitful for investing.

I don’t know how to succeed but I know overconfidence is the key to failure. It is better to be equipped before war rather than asking for a sword in middle of the battlefield.

Financial Planning – This Christmas

Financial planning and Christmas together is very difficult to enjoy. World go mad about Christmas especially European countries and Christian communities paying a very little attention towards maintaining their personal finance ending up in serious troubles of overspending like heavy cash outflows, negative budgets, low savings in their bank accounts and the most serious is the alarming debt amounts.

Christmas brings the season of “credit boom” with itself and creditors literally behave like poachers to engulf the needy and the unconscious. This fact has to be understood by people who do not want to end up in debt traps and restrain themselves from overspending and borrowing and land up in a finance proof section of the society.

Enjoyment and pleasure beyond your reach will only bring you worries, distress and debts for future. To synchronize enjoyment and prosperity, financial planning becomes a must.

See your wallet

It is very important to figure out available funds that can be managed to spend so that it would not harm your current status and future development. Look out for those amusements and entertainments that fits your wallet.

Budgeting

When it comes to expenses and expenditures, budgeting is indispensable. It is an art as well as a technique to allocate funds and resources for different avenues and requisites.

Budget has to be prepared strategically so that important needs and wants are fulfilled

And at the same time satisfaction can be derived out of such expenses.

Prioritize your wishes/wants

Wants and demands are unlimited and endless but resources are very scarce to meet them. Fulfillment of one leads the beginning of the other want. This is where one has to take reformative actions and prioritize their need accordingly.

Such needs and wishes can be prioritized on various parameters like estimated satisfaction, family , kids etc on level of their importance.

Spend smart

This is the time to look out for offers that are dumped on the market. Now watch out Needs in your priority list that can be matched or satisfied with the market offerings at cheap or discounted prices so that you can save some more penny.

Such market offers may come in the form of discounts, free gifts, gift vouchers and even scratch coupons.

Avoid overspending

Overspending in cakes, excess decoration, partying, sending greetings cards, gifts etc will upset the budget you initially prepared. A good idea is probably organizing get together functions instead of individual parties that would entertain you at the same time.

So plan your finances this Christmas to up live the subtle essence of this “Holy Day”