Thursday, May 31, 2012

Understanding the financial terms

In fact an employee working in a bank, an entrepreneur who is willing to extend bank finance and many others who are dealing with financial statements should be in a position to know in detail about the various banking terms which are in use. The following are some financial terms which are used during the course of analysis of financial statements pertaining to any borrower while lending bank finance:
01.            Cost of production: This refers to consumption of raw materials (including stores) and spares, power and fuel, direct labor, repairs and maintenance, other manufacturing expenses plus opening balance of stock in process minus closing balance of stock in process.
02.            Cost of sales: Cost of production as mentioned above plus opening stock of finished goods less closing stock of finished goods.
03.            Operating profit: Net sales less cost of sales minus interest and selling, general and administrative expenses.
04.            Net profit before tax: Operating profit plus other income minus other expenses.
05.            Net profit after tax: Net profit before tax  plus or minus deferred tax plus current tax.
06.            Retained profit: Net profit minus dividend paid/declared.
07.            Net sales: Gross sales minus excise duty and returns.
08.            Total current assets: Inventory, receivables (including bills discounted) and all other current assets which are cashable in next 12 months plus prepaid expenses.
09.            Total current liabilities: All liabilities which are payable in the next 12 months including term loan installments payable in next twelve months, if any.
10.            Net working capital: Total current assets less total current liabilities.
11.            Working capital gap: Total current assets less current liabilities other than bank borrowings.
12.            Total outside liabilities: Total liabilities as per balance sheet less net worth.
13.            Net worth: Capital Plus reserves plus surplus.
14.            Tangible net worth: Net worth less accumulated losses and intangible assets.
15.            Current ratio: Current assets/current liabilities.
16.            Current assets: Cash balance + bank balance + sundry debtors+ inventory + advance payment made to suppliers + advance paid for miscellaneous purposes
17.            Current liabilities: Bank overdraft + Sundry creditors + Provisions for income tax + provisions for any other expenses + advance payments received from the customers
18.            Quick ratio: Current assets less inventory/current liabilities less bank overdraft
19.            Debt equity ratio: Long term debt/tangible net worth
20.            Debt service coverage ratio: (Profit after tax + depreciation + interest on term loan)/(interest on term loan + installments on term loans)

How to conduct credit investigation?

Nowadays people are not hesitant to approach the banks and financial institutions for the purpose of availing some kinds of finance. Under such circumstances the banks and financial institutions are in a position to take utmost care in judging any individual for the purpose of getting eligibility for a loan.
The objective of loan interviewing and credit investigation is to determine as to whether  an applicant is eligible  for getting a loan and in such a case, the banks are in a position to gather as much information as possible  for the purpose of financial analysis and find out other subsequent steps to be taken for the purpose of extending commercial lending.
Normally the banker conducts an interview with the intending borrower at the time the borrower submits an application for availing a loan. The following questions can play great role towards selection of the borrower:
01.            How much money is necessary? – The borrower should be in a position to furnish the correct details to the banker. This information is readily available only with the borrowers who sincerely and honestly are willing to avail loans. When the borrower takes some time to tell the amount, the banker can very well understand that the borrower had not made any homework in finding out the exact financial requirement. Probably the borrower may be availing the finance for some other purposes.
02.            How the finance available from the bank can be utilized? – The borrower should be in a position furnish the complete details. For certain kinds of activities the requirement may be more and for other activities the financial requirement may not be much. The borrowers should not be of the opinion that they can avail any amount from the banker and such borrowers are found to be utilizing the amount for purposes other than the one for which they are availing finance from the banker.
03.            How long they do need the finance? – A honest borrower is in a position to furnish the exact duration for which he requires the finance. Such borrowers are willing to remit their dues in time and close the loan accounts within the stipulated time.
04.            How will the money be repaid? – This question prompts the borrower to find out the exact period by which he can repay the amount. In order to answer the question, the borrower should be in a position to furnish the details as to how he is going to generate the income.
In fact the credit manager should take time to pose as much questions as possible so that he is able to get the required information from the intending borrower. In fact, for banker who is lending money to the borrower, the initial interview process is considered to be the crucial one and the credit manager should satisfy himself as to whether he can consider the loan for the borrower. Once the credit is extended, the banker may find it very difficult to recover the amount, in case the borrower is found to creditworthy at a later stage.

Is public speaking a tough job?

It is not quite easy to stand before the audience and talk on any specific subject and in fact it requires great amount of skill. People are afraid of many things and while a person finds it very difficult to stand before one or two persons and talk comfortably, it can be well imagined as to how he can perform well before an audience. On account of possession of good communication skills, politicians, executives, trainers and theatre artists are considered to be one among the stalwarts by others.
I had been the director of rural self employment training institute for a year and more and I was instrumental in imparting training to more than 800 trainees and the trainees were mostly from rural areas having minimum qualification.
The main purpose of the training was to impart various skills to the trainees namely; tailoring, photography, servicing of mobile and cell phones and repairing, servicing of air conditioners and many more. However, the skill development alone cannot help any individual in building a better career and apart from the technical skills, each individual requires soft skills namely; communication ability, inter personal relationship, public speaking skills etc.
By acquiring better communication ability, the individual is able to communicate with third parties in a better way and he can do better in marketing his products and services. Similarly, interpersonal relationship enables the individual in developing a cordial and smooth relationship and every entrepreneur is expected to have better relationship with his clients and users at all times.
Taking into consideration the abovementioned requirements by the trainees, it was felt necessary by us to enable the trainees master the public speaking and communication skills.
A two hour session was allotted each day exclusively for the purpose of improving the communication skills. Initially, the trainees were told to read some lines from the local newspaper for the information of other trainees and they were made to stand before the audience. Even though they were nervous during the initial stages; they were able to perform the activities in a better way subsequently. Afterwards, each trainee was allotted some specific topics and he was advised to talk on the subject for about five minutes standing before the audience. Since the trainees were given opportunities to stand before the audience for the second time, they started losing their stage fear and started talking confidently on the chosen subjects.
During the third stage, the trainees were advised to talk on random topics and during this time, even though they were finding it very difficult to talk on unknown subjects, they started talking comfortably through appropriate key words.
When the trainees were asked to talk for the fourth time, they were very much comfortable and they started talking to the audience as if they were full time speakers.
However, this exercise was undertaken in front of an unknown audience and during this time even though they were not comfortable during the initial stages, they started talking comfortably after five to ten minutes.
In fact speaking in front of the audience is not a difficult job. By means of regular practice the habit can be improved to a great extent and those who are willing to speak well before any audience should seize of the opportunities given to them without any reluctance so that they can develop themselves to be a good public speaker

Analysis of balance sheet

Balance sheet is considered to be the statement showing the business position of any company, firm or business organization as on a particular date. When it comes to business position, it represents the assets owned by the firm and liabilities owed by the firm to others.
A similar definition can be given for profit and loss account of any firm. Profit and loss account is a statement showing the income earned and expenditure incurred by the firm during a particular period.
Of course, the period can be monthly, quarterly, half yearly or yearly. In many countries, as per statutory rules in force,  each firm has to publish the balance sheet and profit and loss account at least once a quarter.
When it comes to the financial statements namely; balance sheet and profit and loss account of any firm, the following are the interested parties who are willing to know the details: the owners of the firm called as shareholders or stakeholders; the creditors who have been providing the materials required by the firm on credit terms; the bankers who had granted limits to the firm or who are willing to provide financial assistance to the firms; the debtors who are the users of the products and services provided by the firm; the auditors and the government.
Nowadays, the balance sheets are either provided in account form or statement form. For the purpose of analysis of any balance sheet, the liabilities can be bifurcated into long term liabilities consisting of capital, reserves and long term borrowings and short term liabilities consisting of sundry creditors, overdraft availed from the bankers, advance payments received from the customers and any other provisions. The liabilities are substituted by the word namely; sources and similarly the assets are substituted by the words namely; applications or uses.
The long term uses consist of land, building, machinery, intangible assets, noncurrent assets and short term uses consist of cash balance held by the firm, balance held in the bank, sundry debtors, stock of goods and advance paid to the suppliers.
The analysis of any balance sheet is done using ratio analysis and the ratios are classified into liquidity ratios, profitability ratios and solvency ratios.
Current ratio and quick ratio or acid test ratio are classified into liquidity ratios. Debt equity ratio and debt service coverage ratio are called as solvency ratios.
Gross profit ratio, net profit ratio etc. are called as profitability ratios

Wednesday, May 30, 2012

Never forget your past

After eating, he gave 5$ to the waiter as a tip.
The waiter had a strange look on his face after the tip.
Gates realized & asked.What happened?
Waiter: I'm just amazed Bcoz on the same table ur son gave Tip Of... 500$...
& u his Father, richest man in the world Only Gave 5$...? 

Gates Smiled & Replied With Meaningful words:
"He is Son of the world's richest man, but I am the son of a wood cutter..."
( Never Forget Your Past. It's Your Best Teacher. )

Tuesday, May 29, 2012

Children – the torch bearers of future years

It is the responsibility of the parents to educate their children in a proper manner. When the child is not in a position to learn good habits during her earlier years, she may not be doing well in her future years. In fact habits play a great role in shaping the character of any individual.
Of course, parents are the best teachers for their children. The following tips will prove a long way in educating the children well:
01.            Many children are fond of sleeping for a long time in their beds. Of course sleep is essential; however, sleeping for more than required number of hours will yield negative results and such children are found to be lazy and they are reluctant to undertake any new adventures because of their lazy attitude. Parents should tell their children to get up early in the morning. In this connection, the parents should play as role models and while the parents are doing their morning exercises, they can guide their children to perform certain kinds of physical activities suitable to them.
02.            Children should be educated to take care of their health through some sort of physical exercises. Of course, nowadays, a large number of outdoor and indoor activities are available which are found to be greatly helpful in activating the body cells namely; tennis, badminton, walking, jogging and playing any other games. In some countries people are taught other kinds of activities namely; yoga, karate and many other forms of physical exercises and the ultimate aim is to keep the body fit and free from diseases.
03.            Children should be taught to wear appropriate footwear. The footwear depends upon the seasons and a footwear which is suitable for winter season may not be suitable for summer seasons. Some children are fond of moving without any footwear and it is found to be more dangerous and children who are having the habits of walking or jogging without wearing any footwear are found to be attacked by many kinds of skin and other diseases.
04.            Towards shaping the children, the teachers who are employed in primary schools should be more responsible on account of the facts, that the children who meet the first person beyond their parents and close relatives  are their primary school teachers.
It has to be borne in mind that the children are the torch bearers in the future years and every elder is having the responsibility to guide the children in the right direction.

Solar power - the best alternative

''எங்க வீட்டுல மட்டும் மின்வெட்டு
பிரச்னை கிடையாதுங்க'' !

''எங்க வீட்டுல மட்டும் மின்வெட்டு பிரச்னை கிடையாதுங்க'' என்று ஜாலியாகச் சிரிக்கிறார் சுரேஷ். சென்னை கீழ்ப் பாக்கத்தில் வசிக்கும் இவர், தனியார் நிறுவனம் ஒன்றின் நிர்வாக இயக்கு நர். தன்னுடைய வீட்டில் சோலார் தகடுகளைப் பொருத்தி, அதன் மூலம் கிடைக்கும் மின்சாரத்தைப் பயன்படுத்திவருகிறார்.

''மழை நீர் சேகரிப்புத் திட்டம் உள்பட ஏகப்பட்ட திட்டங்களை நம்ம அரசு அறிமுகப்படுத்துவதற்கு முன்னாடியே என் வீட்டுல அறிமுகப்படுத்திட்டேன். காரணம், நல்ல விஷயங்கள்ல நாம மத்தவங்களுக்கு முன் மாதிரியா இருக்கணும்கிற எண்ணம்தான். வீட்டுல சோலார் தகடுகளைப் பொருத்தின இந்த மூணு மாசமா ஒரு செகண்ட் கூட எங்க வீட்ல கரன்ட் கட் கிடையாது. மின் விசிறி, லைட்டுகள்னு எங்க வீட்டுக்கான மின்சாரத் தேவை சுமார் ஒரு கிலோ வாட். அதுக்காக, 10 சோலார் தகடுகளைப் பொருத்தி இருக்கேன். சூரியஒளியில் இருந்து கிடைக்கும் மின்சாரம், நேரடியா மெயின் போர்டில் சேரும்படி இணைப்புக் கொடுத்து இருக்கேன். அப்படி கிடைக்கிற மின்சாரத்தை 10 இன்வெர்ட்டர் பேட்டரிகளில் சேமிச்சுவெச்சுப் பயன்படுத்துறேன்.

சோலார் தகடுகளில் இருந்து கிடைக்கிற மின்சாரத்தைக் காலையில் இருந்து சாயங்காலம் வரை மட்டுமே பயன் படுத்த முடியும். இரவு வேளைகளில் பேட்டரியில் சேமிக்கப் பட்டு உள்ள மின்சாரத்தைப் பயன்படுத்துவோம். இங்கே நான் பொருத்தி இருக்கிற சோலார் தகடு, இன்வெர்ட்டர் பேட்டரிகளுக்குக் கிட்டத்தட்ட இரண்டரை லட்ச ரூபாய் செலவாச்சு. இது பெரிய தொகைதான். ஆனால், இதில் 80 ஆயிரம் ரூபாயை அரசாங்கம் மானியமாக் கொடுத் தாங்க. 20 ஆயிரம் ரூபாய் செலவில்கூட சோலார் தகடுகள் மூலம் மின்சாரம் தயாரிக்கலாம். இப்ப பெரும்பாலான வீடுகள்ல டிஷ் ஆண்டனா இருக்கிற மாதிரி வருங்காலத்துல எல்லா வீட்டு மாடிகளிலும் சோலார் தகடுகள் இருக்கும். என்கிட்ட ஏகப்பட்ட பேர் இதைப் பற்றி விசாரிக்கிறாங்க. இதை ஃபாலோ பண்ணினா பவர்கட்டுக்கு கட் சொல் லலாம்!'' சிரிக்கிறார் சுரேஷ்.