Techniques of Financial Statement Analysis

Business

It is an interrelated system of financial resources movement that is activated by the management decisions.

Management                                                          

It is the art of asking significance questions. The process management is a series of economic choices that activates movement of financial resources connected with business.

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Franchising

Franchising

 A marketing system revolving around a two-party agreement, whereby the franchisee conducts business according to the terms specified by the franchisor 

 Franchisee

   An entrepreneur whose power is limited by a contractual agreement with a franchisor

Franchisor

The party in the franchise contract that specifies the methods to be followed and the terms to be met by the other party 

The 20 Fastest-Growing Franchises in 2003

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Measuring Investments (Part-2)

The Working Capital Effect

Ø  Intuitively, money invested in inventory or in accounts receivable cannot be used elsewhere. It, thus, represents a drain on cash flows. To the degree that some of these investments can be financed using suppliers credit (accounts payable) the cash flow drain is reduced. . Investments in working capital are thus cash outflows

1.      Any increase in working capital reduces cash flows in that year

2.      Any decrease in working capital increases cash flows in that year

3.      To provide closure, working capital investments need to be salvaged at the end of the project life

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How can I do business on the web?

How can I do business on the web?

Essentially, doing business on the Web can be broken down into five main requirements.

• On-Line Store

The obvious requirement is an on-line store, or commerce-enabled Web site where goods or services can be described and selected.

• Payment Processing

While it is possible to run an on-line store without accepting on-line payments, this is cumbersome and rarely successful. Accepting on-line payments is therefore essential - and at the moment this means credit cards.

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E-Commerce

What do you mean by E-commerce? E-commerce simply means buying and selling of goods and services across the Internet

Advantages and Disadvantages of E-Commerce 

The major advantage to a customer using this mode of shopping

are:

1.   One can buy/sell items from anywhere using one’s computer provided an internet connection is available.

 2.   The shopping can be done 24 hours a day, 365 days in a year

- an internet based shop never closes!

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Measuring Investments

Measuring Investment – (Returns Measurement)

First Principles

Ø  Invest in projects that yield a return greater than the minimum acceptable hurdle rate.

Ø  The hurdle rate should be higher for riskier projects and reflect the financing mix used - owners’ funds (equity) or borrowed money (debt)

Ø  Returns on projects should be measured based on cash flows generated and the timing of these cash flows; they should also consider both positive and negative side effects of these projects.

Ø  Choose a financing mix that minimizes the hurdle rate and matches the assets being financed.

Ø  If there are not enough investments that earn the hurdle rate, return the cash to stockholders.

Ø  The form of returns - dividends and stock buybacks - will depend upon the stockholders’ characteristics.

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Success Quotes

What counts is not the number of hours you put in, but how much you put in the hours.
— Unknown wise person

After my spectacular failures, I could not be satisfied with an ordinary success.
— Mason Cooley

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Personal Finance Tips

Savings

There are different reasons to save, and different approaches depending on what you are trying to achieve. One overall savings goal is to put money away for a rainy day; anything from health related problems, for repairs to a house or car, or an interruption to employment. Most experts say to put three months salary away to cushion life's little emergencies.

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GOLDEN RULES OF MONEY MANAGEMENT

> Put a broad limit to regular expenses so that they do not go out of control.
> Look at various payment options such as zero-interest EMI while buying a valuable item.
> Do not hesitate to ask for discounts and complementary services.

Most Common Money Mistakes

Passing Up Tax Breaks

Small investors often look only at the return an instrument is giving them, and overlook how taxes take a bite out of those returns. Morningstar figures that over the 74-year period ending in 2010, investors who did not manage investments in a tax-sensitive manner gave up between one and two percentage points of their annual returns to taxes.

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