WHAT ABOUT WORKING CAPITAL
Introduction:
Working capital is the life blood and nerve centre of a business. Just as circulation of blood is essential in the human body for maintaining life, working capital is very essential to maintain the smooth running of a business. No business can run successfully with out an adequate amount of working capital.
Working capital refers to that part of firm’s capital which is required for financing short term or current assets such as cash, marketable securities, debtors, and inventories. In other words working capital is the amount of funds necessary to cover the cost of operating the enterprise.
Meaning:
Working capital means the funds (i.e.; capital) available and used for day to day operations (i.e.; working) of an enterprise. It consists broadly of that portion of assets of a business which are used in or related to its current operations. It refers to funds which are used during an accounting period to generate a current income of a type which is consistent with major purpose of a firm existence.
Objectives of working capital:
Every business needs some amount of working capital. It is needed for following purposes-
• For the purchase of raw materials, components and spares.
• To pay wages and salaries.
• To incur day to day expenses and overhead costs such as fuel, power, and office expenses etc.
• To provide credit facilities to customers etc.
Factors that determine working capital:
The working capital requirement of a concern depend upon a large number of factors such as
? Size of business
? Nature of character of business.
? Seasonal variations working capital cycle
? Operating efficiency
? Profit level.
? Other factors
:
Sources of working capital
The working capital requirements should be met both from short term as well as long term sources of funds.
? Financing of working capital through short term sources of funds has the benefits of lower cost and establishing close relationship with banks.
? Financing of working capital through long term sources provides the benefits of reduces risk and increases liquidity
Types of working capital:
Working capital an be divided into two categories-
Permanent working capital:
It refers to that minimum amount of investment in all current assets which is required at all times to carry out minimum level of business activities.
Temporary working capital:
The amount of such working capital keeps on fluctuating from time to time on the basis of business activities.
Advantages of working capital:
• It helps the business concern in maintaining the goodwill.
• It can arrange loans from banks and others on easy and favorable terms.
• It enables a concern to face business crisis in emergencies such as depression.
• It creates an environment of security, confidence, and over all efficiency in a business.
• It helps in maintaining solvency of the business.
Disadvantages of working capital:
• Rate of return on investments also fall with the shortage of working capital.
• Excess working capital may result into over all inefficiency in organization.
• Excess working capital means idle funds which earn no profits.
• Inadequate working capital can not pay its short term liabilities in time.
follow the link
http://www.indiastudychannel.com/resources/Index.aspx?UserId=Aparna1970
Sunday, June 21, 2009
Sunday, June 14, 2009
WHAT IS FOREIGN DIRECT INVESTMENT
FOREIGN DIRECT INVESTMENT
Foreign direct investment is a major sources of fund channelised in the form of direct contribution to the equity capital of the company and is akin to domestic equity invested by the corporate shareholders. Prior to 1991 FDI was allowed only on a case to case basis with a ceiling of 40% on the total equity capital.
Under the new industrial policy foreign equity has been de-linked from technology transfer. Moreover FDI is being sought actively in a wide range of high priority /export oriented/critical infrastructure industries.
The major driving force for FDI is to tap foreign market where excess return can be earned as this provide incremental opportunities to MNC/International firm to earn higher return through lower cost and more sales and thus higher growth by expansion.
Govt. policy is to facilitate FDI and investment from non resident Indian including overseas corporate bodies that are predominantly own by them to complement and supplement domestic investment.
FDI is freely allowed in all sectors including the service sector except where the existing and notified sectoral policy does not permit beyond a ceiling.
The FDI for virtually all items/activities can be brought in through the automatic route, under power delegated to the RBI and for the remaining items/activities through Govt.approval accorded on the basis of the recommendation of the Foreign Investment Promotion Board(FIPB).
Therefore FDI is a attractive source of capital from international market through Equity investment, by issuing GDRs, ADRs FCCBs etc, it is also allowed to small scale sector up to 24%, Investment through preference share ,Investment by Non resident Indian and overseas corporate bodies, through foreign technology agreement etc. are also treated the Foreign direct Investment.
http://www.indiastudychannel.com/resources/Index.aspx?UserId=Aparna1970
Aparna
Foreign direct investment is a major sources of fund channelised in the form of direct contribution to the equity capital of the company and is akin to domestic equity invested by the corporate shareholders. Prior to 1991 FDI was allowed only on a case to case basis with a ceiling of 40% on the total equity capital.
Under the new industrial policy foreign equity has been de-linked from technology transfer. Moreover FDI is being sought actively in a wide range of high priority /export oriented/critical infrastructure industries.
The major driving force for FDI is to tap foreign market where excess return can be earned as this provide incremental opportunities to MNC/International firm to earn higher return through lower cost and more sales and thus higher growth by expansion.
Govt. policy is to facilitate FDI and investment from non resident Indian including overseas corporate bodies that are predominantly own by them to complement and supplement domestic investment.
FDI is freely allowed in all sectors including the service sector except where the existing and notified sectoral policy does not permit beyond a ceiling.
The FDI for virtually all items/activities can be brought in through the automatic route, under power delegated to the RBI and for the remaining items/activities through Govt.approval accorded on the basis of the recommendation of the Foreign Investment Promotion Board(FIPB).
Therefore FDI is a attractive source of capital from international market through Equity investment, by issuing GDRs, ADRs FCCBs etc, it is also allowed to small scale sector up to 24%, Investment through preference share ,Investment by Non resident Indian and overseas corporate bodies, through foreign technology agreement etc. are also treated the Foreign direct Investment.
http://www.indiastudychannel.com/resources/Index.aspx?UserId=Aparna1970
Aparna
Saturday, June 13, 2009
Mutual Fund as an Investment
MUTUAL FUNDS :
Regulations and operations. A Mutual fund is a special type of investment institution that acts as an investment conduit With the emergence of the capital market at the center stage of the Indian financial system ,from its marginal role a decade earlier, the Indian capital market also witnessed, during the same period, a significant institutional development in the form of a diversified structure of mutual funds. It pools the savings, particularly of the relatively small investors and invests them in a well diversified portfolio of sound investment .Mutual funds issue securities [ known as units]to the investors[ known as unit holders] in accordance with the quantum of money invested by them .The profits [or losses] are shared by investors in proportion to their investments .A mutual fund is set up in the form of a trust ,the trust is established by a sponsor[s] who is like promoter of a company .The assert management company[AMC ] manages the funds by making investments in various types of securities. As an investment intermediary, they offer a variety of services/ advantages to the relatively small investors who on their own ,cannot successfully construct and manage an investment portfolio mainly due to the small size of their funds, lack of expertise and experience and so on.
Different types of Mutual fund scheme
Mutual fund can be classified under three head i.e.
1.Open-end vs closed-end funds
2.Load fund and no load funds
3.Tax exempt or non tax exempt funds.
1.Open-end scheme means a scheme which offer units for sales without specifying any duration of redemption. Thus the investors can buy or sell units on daily basis for any numbers at prices that are linked to the NAV of the units. So the investor can invest or disinvest any amount any time after a short initial lock in period.
An close ended scheme is one in which the subscription period remains open only for a specific period, called the redemption period after which the entire corpus is disinvest and the proceeds distributed to the unit holders .
2.A mutual fund can recover the initial marketing expenses in any of the following ways:
a. By deducting front end or entry load
b. By deducting deferred load
c. By deducting back end or exit load
If the load is charged at the time of its entry in to the fund it is called as front end or entry load. Back end is charged at the time of its exit. The load amount charged to the scheme over a specific period is called as deferred load. SEBI has fixed the maximum amount of load that could be charged by the fund manager. Some of the fund existing in India charged front end while others charged back end. There are some no load fund also. It only means that the fund will not charged any sales expenses. However they still charged management fees and other recurring expenses. The investors in a no load fund enters or exits at the net NAV of the fund.
3. Tax exempt vs non tax exempt fund
If a fund is invest in a non tax fund .In India dividend income from mutual fund are tax free but any capital gain arising out of sales is taxable.
Broadly mutual fund are distinguish on the following basis:
1 Open ended and close ended scheme
2.According to investment objectives i,e Growth fund, Income fund, Balanced fund and tax savings fund.
3.According to investment type i,e, money market fund(equity fund ,gift fund and debt fund),
INVESTORS RIGHTS AND OBLIGATIONS IN MUTUAL FUND SCHEME.
One of the important aspect of the mutual fund regulations and operations is the investors protection and discloser norms. It serves the very purpose of the mutual fund guidelines.
Steps to be taken by mutual fund for improving disclosers and compliance standard
1.All mutual fund should disclosed full portfolio of their scheme in the annual report with in one month of the close of each financial year.
2.The Asset Management company must prepared of compliance manual and design internal audit system including audit system before the launch of any scheme.The trustees are also required to constitute an audit committee of the trustees which will review the internal audit system and the recommendation of the internal and statutory audit report ensure that the rectifications are suggested by internal and external auditors abr acted upon.
3.The AMC shall constitute an in house valuation committee consisting of senior executives including personnel from accounts, fund management and compliance deptt.
The committee would on a regular basis review the system and practices of valuation of securities.
4.Trustee shall review all transactions of the mutual fund with the associates on a regular basis.
INVESTORS RIGHT
The offer documents of a scheme lays down the investors right. The important rights of the unit holders are as below:
1.Unit holders have a proportionate right in beneficial ownership of the scheme assets as well as any dividend or income declared under the scheme .
2.They have the right to information regarding any adverse happening.
3.They are entitled to received dividend warrant with in 42 days of the date of dividend declaration.
4.AMC can be terminate by 75%of the unit holders of the scheme present and voting at a special meeting.
5.The holders have the right to inspect major documents of the fund i.e. material contract, the investment management agreement, the custodian services agreement, registrar and transfer agencies agreement, memorandum and articles of association of the AMC , recent audited financial statements and the offer documents of the scheme.
6.With the consent of 75% of the unit holders they have the right to approve any changes in the close ended scheme.
7.Every unit holder have the right to received a copy of the annual statement and periodic statement regarding his transactions.
LIMITATION TO THE INVESTORS
1.Unit holders can not sue the trust but they can initiate proceedings against the trustees, if they feel that they are being cheated.
2.Except in certain circumstances AMC can not assure a specified level of return to the investors. AMC can not be sued to make good any shortfall in such scheme.
OBLIGATIONS OF THE INVESTORS
1.An investor should carefully study the risk factors and other information provided in the offer documents .Failure to study will not entitled him for any rights thereafter.
2.It is the responsibility of the investor to monitor his scheme by studying the reports and other financial statement of the fund.
So before investing everybody should take necessary action to familiar with the scheme.
http://www.indiastudychannel.com/resources/Index.aspx?UserId=Aparna1970
aparna
Regulations and operations. A Mutual fund is a special type of investment institution that acts as an investment conduit With the emergence of the capital market at the center stage of the Indian financial system ,from its marginal role a decade earlier, the Indian capital market also witnessed, during the same period, a significant institutional development in the form of a diversified structure of mutual funds. It pools the savings, particularly of the relatively small investors and invests them in a well diversified portfolio of sound investment .Mutual funds issue securities [ known as units]to the investors[ known as unit holders] in accordance with the quantum of money invested by them .The profits [or losses] are shared by investors in proportion to their investments .A mutual fund is set up in the form of a trust ,the trust is established by a sponsor[s] who is like promoter of a company .The assert management company[AMC ] manages the funds by making investments in various types of securities. As an investment intermediary, they offer a variety of services/ advantages to the relatively small investors who on their own ,cannot successfully construct and manage an investment portfolio mainly due to the small size of their funds, lack of expertise and experience and so on.
Different types of Mutual fund scheme
Mutual fund can be classified under three head i.e.
1.Open-end vs closed-end funds
2.Load fund and no load funds
3.Tax exempt or non tax exempt funds.
1.Open-end scheme means a scheme which offer units for sales without specifying any duration of redemption. Thus the investors can buy or sell units on daily basis for any numbers at prices that are linked to the NAV of the units. So the investor can invest or disinvest any amount any time after a short initial lock in period.
An close ended scheme is one in which the subscription period remains open only for a specific period, called the redemption period after which the entire corpus is disinvest and the proceeds distributed to the unit holders .
2.A mutual fund can recover the initial marketing expenses in any of the following ways:
a. By deducting front end or entry load
b. By deducting deferred load
c. By deducting back end or exit load
If the load is charged at the time of its entry in to the fund it is called as front end or entry load. Back end is charged at the time of its exit. The load amount charged to the scheme over a specific period is called as deferred load. SEBI has fixed the maximum amount of load that could be charged by the fund manager. Some of the fund existing in India charged front end while others charged back end. There are some no load fund also. It only means that the fund will not charged any sales expenses. However they still charged management fees and other recurring expenses. The investors in a no load fund enters or exits at the net NAV of the fund.
3. Tax exempt vs non tax exempt fund
If a fund is invest in a non tax fund .In India dividend income from mutual fund are tax free but any capital gain arising out of sales is taxable.
Broadly mutual fund are distinguish on the following basis:
1 Open ended and close ended scheme
2.According to investment objectives i,e Growth fund, Income fund, Balanced fund and tax savings fund.
3.According to investment type i,e, money market fund(equity fund ,gift fund and debt fund),
INVESTORS RIGHTS AND OBLIGATIONS IN MUTUAL FUND SCHEME.
One of the important aspect of the mutual fund regulations and operations is the investors protection and discloser norms. It serves the very purpose of the mutual fund guidelines.
Steps to be taken by mutual fund for improving disclosers and compliance standard
1.All mutual fund should disclosed full portfolio of their scheme in the annual report with in one month of the close of each financial year.
2.The Asset Management company must prepared of compliance manual and design internal audit system including audit system before the launch of any scheme.The trustees are also required to constitute an audit committee of the trustees which will review the internal audit system and the recommendation of the internal and statutory audit report ensure that the rectifications are suggested by internal and external auditors abr acted upon.
3.The AMC shall constitute an in house valuation committee consisting of senior executives including personnel from accounts, fund management and compliance deptt.
The committee would on a regular basis review the system and practices of valuation of securities.
4.Trustee shall review all transactions of the mutual fund with the associates on a regular basis.
INVESTORS RIGHT
The offer documents of a scheme lays down the investors right. The important rights of the unit holders are as below:
1.Unit holders have a proportionate right in beneficial ownership of the scheme assets as well as any dividend or income declared under the scheme .
2.They have the right to information regarding any adverse happening.
3.They are entitled to received dividend warrant with in 42 days of the date of dividend declaration.
4.AMC can be terminate by 75%of the unit holders of the scheme present and voting at a special meeting.
5.The holders have the right to inspect major documents of the fund i.e. material contract, the investment management agreement, the custodian services agreement, registrar and transfer agencies agreement, memorandum and articles of association of the AMC , recent audited financial statements and the offer documents of the scheme.
6.With the consent of 75% of the unit holders they have the right to approve any changes in the close ended scheme.
7.Every unit holder have the right to received a copy of the annual statement and periodic statement regarding his transactions.
LIMITATION TO THE INVESTORS
1.Unit holders can not sue the trust but they can initiate proceedings against the trustees, if they feel that they are being cheated.
2.Except in certain circumstances AMC can not assure a specified level of return to the investors. AMC can not be sued to make good any shortfall in such scheme.
OBLIGATIONS OF THE INVESTORS
1.An investor should carefully study the risk factors and other information provided in the offer documents .Failure to study will not entitled him for any rights thereafter.
2.It is the responsibility of the investor to monitor his scheme by studying the reports and other financial statement of the fund.
So before investing everybody should take necessary action to familiar with the scheme.
http://www.indiastudychannel.com/resources/Index.aspx?UserId=Aparna1970
aparna
Subscribe to:
Posts (Atom)
