Business Education

What is Income Statement? Income Statement, Define Income statement

2011-10-20T13:46:00.000-07:00

Income statement

A business financial statement that lists revenues, expenses, and net income throughout a given period. Because of the various methods used to record transactions, the dollar values shown on an income statement often can be misleading. Also called earnings report, earnings statement, operating statement, profit and loss statement.

What is The Purpose of Accounting?

2010-10-05T02:42:00.000-07:00

Purpose of Accounting

Accounting does not exist for its own sake but for the services which it provides to society. It does not end with the recoding of business transactions and events. It also reports the result of these activities to all interested parties. Accounting, through reports enables management to organize business smoothly and efficiently in such a away that all wasteful elements are eliminated and better results are achieved. It may be said, therefore, that the primary purpose of accounting for a business enterprise is to provide. Management with the information needed for efficient operation of that enterprise.

What is Business?

2010-10-05T02:37:00.000-07:00

Business

Any activity in which a person engages with the hope of making a profit is a business or the activity of providing goods and services or both involving financial and commercial and industrial aspects to consumers in exchange for money.

What is Accounting?

2010-10-05T02:31:00.000-07:00

Accounting

Accountancy is the art of communicating financial information about a business entity to users such as shareholders and managers.It may be the occupation of maintaining and auditing records and preparing financial reports for a business.

Supply and Demand in the Bond Market, Quantity of Bond Demand and Supply, Movement along the Demand (or Supply) Curve, Shift in Demand (or Supply) Curve, and Factors that Shift the Demand curve and Supply Curve

2010-08-01T02:53:00.000-07:00

Supply and Demand in the Bond Market

Law of Demand

It stats that “The higher the price of bond lower the demanded of bond”. The demand curve illustrates the negative or inverse relation between price and quantity of demand bond and direct between interest and quantity of demand bond.

Law of Supply

It stats that “The higher the price of bond the higher the quantity of supply bond”. The supply curve illustrates the positive or direct relation between price and quantity of supply bond and inverse between interest and quantity of supply bond.

Change in Equilibrium interest rates

It is important to make the distinction between movements along a demand (or supply) curve and shifts in a demand (or supply) curve.

i. Movement along the Demand (or Supply) Curve

When quantity demand (or supply) changes as a result of change in the price of the bond (a change in interest), we have a movement along the demand or supply curve

ii. Shift in Demand (or Supply) Curve

A shift in the demand (or supply) curve, by contrast, occurs when the quantity demanded (or supply) changes at each given price (or interest rate) of the bond in response to a change in some other factor besides the bond’s price or interest rate. When one of these factors changes, causing a shift in the demand or supply curve, there will be a new equilibrium value for the interest rate.

Factors that Shift the Demand curve

Variable	Change in variable	Change in Quantity Demanded	P & i
Wealth	Increase	Increase	Both Increase
Expected interest rate	Increase	Decrease	Both Increase
Expected inflation	Increase	Decrease	Both Increase
Riskiness of bonds	Increase	Decrease	Both Increase
Liquidity	Increase	Increase	Both Increase

Factors that Shift the Supply Curve

Variable	Change in variable	Change in Quantity Demanded	P & i
Profitability of investments	Increase	Increase	Both Increase
Expected inflation	Increase	Increase	Both Increase
Government Deficit	Increase	Increase	Both Increase

Effect of Expected Inflation

We have already done most of the work to evaluate how a change in expected inflation affects the nominal interest rate, in that we have already analyzed how change in expected inflation shifts the supply and demand curves. Figure shows that effect on the equilibrium interest rate if an increase in expected inflation.

When the demand and supply curves moves from point 1 to point 2, the intersection of Bd2 and Bs2. The equilibrium bond price has fallen from P1 to P2 and because the bond price is negatively related to interest rate, this means that the interest rate has risen from i1 to i2.

Effect of Business Cycle

In a business cycle expansion, the amounts of goods and services being produced in the economy rise , so national income increases. When this occurs, businesses will be more willing to borrow, because they are likely to have many profitable investment opportunities for which they need financing. Hence at a given bond price and interest rate, the quantity of bonds that firms want to sell will increase. This means that in business cycle expansion, the supply curve for bonds shifts to the right from Bs1 to Bs2.

Expansion in the economy will also affect the demand for bonds. As the business cycle expands, wealth is likely to increase, and then the theory of asset demand tells us that the demand for bonds will rise as well. We see this in figure, where the demand curve has shifted to the right from Bd1 to Bd2.

As you can see, the interest rate rises during business cycle expansions and falls during recessions, which is what the supply and demand diagram indicates.

BUSINESS STRATEGIES OF FOREX TRADING

2010-07-31T14:35:00.000-07:00

Does anyone really know when and how Forex trends determine its direction? My response is "YES". How about you? Even most of Forex experts give analysis of the proposed direction of the market using Mechanical Strategy (TOP FOREX TRADING STRATEGIES).

In the past, lots of strategies has been tested and created in form of Robot (Robot is a programmed software for trading instruments automatically) but later discovered that most of the programmed Robot still need mechanical skill to complete or compliments it efforts. Mechanical, in the sense of having manual intervention in other to perform well.

Easy Money is the attraction that attracts many traders from foreign exchange. FOREX websites offer ‘risk-free’ trading, ‘high performance’, ‘low investment’. These claims have a grain of truth in them, but the reality of FOREX is a bit more complex.

The errors start Trader : There are 2 common mistakes that many beginner traders make: trading without a strategy and letting emotions rule their decisions. After opening a foreign currency account may be tempting to dive right in and start trading. Watching the movements of EUR / USD for example, you may feel you are letting pass an opportunity that if you do not enter the market immediately. Buy and watch the market move against you. You panic and sell, only to see the market recover. This kind of undisciplined approach to currency is guaranteed to lose money. FOREX traders must have a rational trading strategy and no commercial decisions in the heat of the moment.

Movements of the understanding of the market : To make sound decisions on trade, currency trader must be well educated in market movements. To be able to apply technical studies to charts and maps of entry and exit points. ? l should take advantage of the different types of orders to minimize their risk and maximize profits. The first step in becoming a successful FOREX trader is to understand the market and the forces behind him. That foreign exchange trading, and why? This allows you to identify successful trading strategies and use.

Accountability : There are 5 major groups of investors who participate in FOREX governments, banks, companies, investment funds and traders. Each group has its own objectives, but 1 that all groups except traders have in common is external control. Every organization has rules and guidelines for trading currencies and can be responsible for your trading decisions. Individual traders, on the other hand, are accountable only to themselves. Large organizations and educated traders approach the exchange of strategies, and if we hope to succeed as a currency trader must follow suit.

Money Management : Money management is an integral part of any business strategy. Besides knowing which currencies to trade and how to recognize yourself? Input and output signals, the successful trader has to manage their resources and integrate money management into their business plan. There are various strategies for managing money. Many are based on the calculation of core equity - opening balance minus the money used in open positions.

Basic fairness and limited risk : When entering a position try to limit risk to 1% to 3% of each trade. This means that if you are a Forex trading lot for $ 100,000 you should limit your risk to $ 1000 to $ 3000. You can do this with a stop loss order 100 pips (1 pip = $ 10) above or below their entry position. As your core equity rises or falls, adjust the dollar amount of your risk. Starting with a balance of $ 10,000 and 1 open position, your core equity is $ 9000. If you want to add a second open position, the core capital would be reduced to $ 8000 and you should limit your risk to $ 900. The risk in third position should be limited to $ 800.

Higher gain, higher risk : It should also increase your risk level as your core equity rises. After $ 5000 profit, your core equity is $ 15,000. You can increase your risk to $ 1,500 per transaction. Alternatively, you could risk more of the profits from the initial balance. Some traders risk up to 5% against their account of profits ($ 5,000 on a $ 100,000 lot) for greater profit potential. These are the kinds of strategic tactics that allow a beginner to get a foothold in the lucrative trade in foreign currency.

I strongly advise anyone interested in Forex trading should take his/her time in learning the Mechanical Strategy. Mechanical Strategy is all about reading and interpreting candles and lots more.

What is Finance, Personal Finance, and Corporate Finance?

2010-07-31T13:44:00.000-07:00

Finance

Finance is the science of funds management. The general areas of finance are business finance, personal finance, and public finance. Finance includes saving money and often includes lending money. The field of finance deals with the concepts of time, money, and risk and how they are interrelated. It also deals with how money is spent and budgeted. In short, An transaction that provides funds for a business

Personal Finance

Personal financial decisions may involve paying for education, financing durable goods such as real estate and cars, buying insurance, e.g. health and property insurance, investing and saving for retirement.

Personal financial decisions may also involve paying for a loan, or debt obligations.

Corporate Finance

Any financial or monetary activity that deals with a company and its money. Managerial or corporate finance is the task of providing the funds for a corporation's activities. It generally involves balancing risk and profitability, while attempting to maximize an entity's wealth and the value of its stock

Long term funds are provided by ownership equity and long-term credit, often in the form of bonds. The balance between these elements forms the company's capital structure. Short-term funding or working capital is mostly provided by banks extending a line of credit.

Another business decision concerning finance is investment, or fund management. One of the core functions of responsible corporate finance is to make wise use of the financial resources available to the company.

Clayton Alderfer ERG Theory

2010-07-31T02:50:00.004-07:00

ERG Theory (Clayton Alderfer)

Description

Clayton Alderfer extended and simplified Maslow's Hierarchy into a shorter set of three needs: Existence, Relatedness and Growth (hence 'ERG'). Unlike Maslow, he did not see these as being a hierarchy, but being more of a continuum.

Existence

At the lowest level is the need to stay alive and safe, now and in the foreseeable future. When we have satisfied existence needs, we feel safe and physically comfortable. This includes Maslow's Physiological and Safety needs.

Relatedness

At the next level, once we are safe and secure, we consider our social needs. We are now interested in relationships with other people and what they think of us. When we are related, we feel a sense of identity and position within our immediate society. This encompasses Maslow's Love/belonging and Esteem needs.

Growth

At the highest level, we seek to grow, be creative for ourselves and for our environment. When we are successfully growing, we feel a sense of wholeness, achievement and fulfillment. This covers Maslow's Self-actualization and Transcendence.

Abraham Maslow’s “Need Hierarchy Theory

2010-07-31T02:24:00.000-07:00

Abraham Maslow’s “Need Hierarchy Theory

One of the most widely mentioned theories of motivation is the hierarchy of needs theory put forth by psychologist Abraham Maslow. Maslow saw human needs in the form of a hierarchy, ascending from the lowest to the highest, and he concluded that when one set of needs is satisfied, this kind of need ceases to be a motivator.

As per his theory this needs are :

(i) Physiological needs

These are important needs for sustaining the human life. Food, water, warmth, shelter, sleep, medicine and education are the basic physiological needs which fall in the primary list of need satisfaction. Maslow was of an opinion that until these needs were satisfied to a degree to maintain life, no other motivating factors can work.

(ii) Security or Safety needs

These are the needs to be free of physical danger and of the fear of losing a job, property, food or shelter. It also includes protection against any emotional harm.

(iii) Social needs

Since people are social beings, they need to belong and be accepted by others. People try to satisfy their need for affection, acceptance and friendship.

(iv) Esteem needs

According to Maslow, once people begin to satisfy their need to belong, they tend to want to be held in esteem both by themselves and by others. This kind of need produces such satisfaction as power, prestige status and self-confidence. It includes both internal esteem factors like self-respect, autonomy and achievements and external esteem factors such as states, recognition and attention.

(v) Need for self-actualization

Maslow regards this as the highest need in his hierarchy. It is the drive to become what one is capable of becoming; it includes growth, achieving one’s potential and self-fulfillment. It is to maximize one’s potential and to accomplish something.

As each of these needs are substantially satisfied, the next need becomes dominant. From the standpoint of motivation, the theory would say that although no need is ever fully gratified, a substantially satisfied need no longer motivates. So if you want to motivate someone, you need to understand what level of the hierarchy that person is on and focus on satisfying those needs or needs above that level.

Maslow’s need theory has received wide recognition, particularly among practicing managers. This can be attributed to the theory’s intuitive logic and ease of understanding. However, research does not validate this theory. Maslow provided no empirical evidence and other several studies that sought to validate the theory found no support for it.

Sample Memo to Cheif Executive

2010-07-29T08:05:00.000-07:00

To: Chief Executive of the Company

From: Afnan Adil, Deputy General Manager, AA Garments

Date: Jun 16, 2010

Subject: Acceptance Purchase Proposal of Elastic Tape

I received a proposal from Rustam Gondal a manager production for the purchase of Elastic Tape at low cost. Reason for low cost the company has manufactured elastic tape made of some new material. His company at present rate of production for local and international markets has saved Rs. 15 millions a year.

If we accept this proposal, we could also reduced the cost of our undergarments but this elastic loses its strength when washed by warm water at above 80 degree centigrade, it is given good result as compared with made of standard material elastic tape, so it may be little danger for our product quality compare with our competitors, in this case we can use this elastic tape in that undergarments which are supplied in cold area where normally temperature is between 40—50 degree centigrade. On the other hand losses may be faced, if the under garments are supplied in warm areas which are made of new material elastic tape. If we supply undergarment made of new material elastic tape in warm area the result may be decreased of life of our products, which may be decreased our market shares of warm area.

By using strategic planning in distribution or supply of undergarments according to the environment of area, we can get millions of profit. We should accept this proposal.

Return on Capital Employed

2010-05-31T12:56:00.000-07:00

Return on capital employed

Return on Capital Employed (ROCE) is used in finance as a measure of the returns that a company is realizing from its capital employed. ROCE should always be higher than the rate at which the company borrows

The formula

ROCE = EBIT
Capital Employed

ROCE compares earnings with capital invested in the company. It is similar to Return on Assets (ROA), but takes into account sources of financing.

Earnings before interest and taxes

In accounting and finance, earnings before interest and taxes (EBIT) or operating income is a measure of a firm's profitability that excludes interest and income tax expenses.^[1]

EBIT = Operating Revenue – Operating Expenses (OPEX) + Non-operating Income

Operating Income = Operating Revenue – Operating Expenses^[1]

Operating income is the difference between operating revenues and operating expenses, but it is also sometimes used as a synonym for EBIT and operating profit.^[2] This is true if the firm has no non-operating income.

Capital Employed

In the denominator we have net assets or capital employed instead of total assets (which is the case of Return on Assets). Capital Employed has many definitions. In general it is the capital investment necessary for a business to function. It is commonly represented as total assets less current liabilities or fixed assets plus working capital.

Capital employed = total assets

Capital employed = fixed assets + current assets - current liabilities

Application

ROCE is used to prove the value the business gains from its assets and liabilities, a business which owns lots of land but has little profit will have a smaller ROCE to a business which owns little land but makes the same profit.

It basically can be used to show how much a business is gaining for its assets, or how much it is losing for its liabilities.

Advantages of ROCE

· The main drawback of ROCE is that it measures return against the book value of assets in the business. As these are depreciated the ROCE will increase even though cash flow has remained the same.

· It does not signal for investment like NPV.

· Simplicity

· Link with other accounting measure

Disadvantages of ROCE

· It does not consider project life/timing of cash flows

· It will vary with specific accounting policies

· It does not signal for investment

Paperless Environment in Organization

2010-05-06T14:15:00.000-07:00

Paperless Environment in Organization

In modern day business, many companies are weighing up the option of developing a paperless environment. Electronic management can have a huge impact on the everyday processes and procedures within the company by increasing productivity and streamlining the workflows within.

REDUCING COSTS

The first objective benefit many vendors focus on as a primary reason for making a move to paperless is cost reduction. Their value points are a reduction in the real estate needed to store document, decreased printing costs, and reduced time for filing paper.

IMPROVING EFFICIENCY

Efficiency improvement is one of the largest benefits your firm will experience from a move to a paperless environment. It is much faster to access documents that are stored electronically. Also, since document management applications completely control the organization logic used in storing documents, there is less time spent training and overseeing firm members in the storage process.

SHARED NETWORK

A system which is centralized also assists in communication within the company. If all files are being saved to a shared network, they are available to everyone instantly as opposed to the slow process of passing round hard copies. Everybody knows where to look to find the file they are looking for and the overall dynamics of the company can be vastly improved.

WEB BASED SYSTEM

By incorporating a web based system into the company, you will be able to allow third parties to view files with ease, without the risk of losing them en route. This could be especially important for legal documents that need to be transferred at speed or for vital information that is required by suppliers. Naturally, you can set limits on the system so that only certain people are able to view specific documents in order to maintain integrity and security. A substantial amount of time can be saved by not having to send copies of documents to various groups but giving instant access instead.

SAVE TIME

A further benefit of the paperless environment is the speed that you can look something up. Just think about how long it can take to go over to the filing cabinet, sift through hundreds of documents and still not find what you are looking for. With an electronically based system, all it would take is a quick search on the computer, perhaps by keyword of what you are trying to find and it will appear on your screen. As long as the system is managed properly and all documents are named effectively, they will be very easy to locate.

Entrepreneurial Background and Characteristics

2010-04-08T23:38:00.000-07:00

Entrepreneurial Background and Characteristics

The education level of the entrepreneur has received significant research attention. Although some may feel that entrepreneurs are less educated than the general population, research findings indicate that this is clearly not the case .Only few background characteristics have differentiated the entrepreneur from the general population.

Childhood family Environment

The impact of word order and social status has have confliction preserve result. Having a father who is self employees provide the strong inspiration in the example of independence and flexibility and self employment this feeling of independence is often further enforce by and entrepreneurial another, parents of entrepreneur need to be supported and encourage independence achievement and responsibility.

Education

Education appears important in the up bringing of an entrepreneur the level of education obtain in playing the major roll in coping with problems. The ability to deal with people and communicate clearly in written and spoken work is also important.

Personal Values

Its very important to entrepreneurs is ethics and the ethical behavior of the entrepreneur. Entrepreneurs do differ from managers on some aspects of ethics.

Work History

The past work experience of an individual. Work history plays a role in the growth and eventual success of the new venture.

Current Economic Scenario of Pakistan

2010-04-01T00:12:00.000-07:00

Current Economic Scenario of Pakistan

According to the paper, Pakistan’s economy is facing numerous challenges, including twin deficits - current account deficit and fiscal deficit - as well as stagnant exports, tax revenues and almost a halted privatization process. Inflation is another big challenge for the upcoming economic managers and improving the supply side coupled with better management can reduce woes on this front. Pakistan is an agricultural country as 75% of its population relies on agriculture. Remaining 25% are workers, industrialists, government officials etc. Currently government is trying to improve the system of tax collection. As far as local industry’s production is concern, it is struggling due to several reasons. The main reason behind it is current energy crisis in Pakistan. Due to this crisis local products are very expensive. This created a big gap for countries like China who are capable of taking full advantage of this gap. Due to the increase in prices inflation rate is increasing. This results in the form of currency devaluation. One would say that, currency devaluation would result in increase the export and exporter would earn more revenue. There is another threat to its economy that is ‘terrorism’. It is preventing foreign investors from investing in Pakistan which is slowing down the economy’s growth. This threat is also affecting one more area which is ‘tourism’. Pakistan has a lot of potential in tourism department but, it is lagging behind due to this threat. This threat is not limited to Pakistan. It has struck its neighboring country Afghanistan. Afghanistan has no infrastructure. There is a lot of development going on in there. This is a very good opportunity for Pakistan’s economy.

1. Trade Gape

The amount by which the value of a country's visible imports exceeds that of visible exports; an unfavorable balance of trade

2. Budget

A budget is generally a list of all planned expenses and revenues. It is a plan for saving and spending.

Quality budget

i. Revenue surplus

ii. It should be balanced

iii. It should create environment for growth and development

iv. The budget should conciliate for macroeconomics fundamental.

v. As for as budget should be possible.

3. Low Tax

In Pakistan agriculture has been given a lot of benefits including tax remittance. So 75% of the population does not pay tax. From remaining 25% majority has monthly income less than applicable to tax payment. So government has very little collection of revenue in order to cater the problems of its population. Direct tax of our country is 10% but it should be 15%-16%.

4. Low Productivity

There are 45 million people are workforce out of 45 million people only 15% is in agriculture but it should be 23% percent this low rate of use work force is called low productivity.

5. Low Participation Rate

35% people are not playing role in economy and women participation rate is minimum. The reason of minimum participation of women is

· Higher population of children

· Custom and tradition does not allow to work

· The dependency of single person

What is the difference between growth and development?

2010-03-17T12:42:00.001-07:00

Growth

Economic growth is a narrower concept than economic development. It is defined as the increase in the value of goods and services produced by every sector of the economy. It is usually expressed in terms of the gross domestic product or GDP of the country.

· Growth mean increase in physical structure with reference to age of an object

· An increase in size, number, value, or strength

· In growth, we talk about statistical facts which does not takes into consideration social factors

Development

The economic development of a country is defined as the development of the economic wealth of the country. Economic development is aimed at the overall well-being of the citizens of a country, as they are the ultimate beneficiaries of the development of the economy of their country.
Economic development is a sustainable boost in the standards of living of the people of a country. It implies an increase in the per capita income of every citizen. It also leads to the creation of more opportunities in the sectors of education, healthcare, employment and the conservation of the environment.

· Development means increasing of other factors such as mental, social, and secondary sexual character in an object at which we say person has some maturity.

· Development is the description of the various processes that are taking place, such as progress, improvement, structural changes, and successive stages.

· In development, we talk about that development is in terms of social factors.