Found 1015 Articles for Finance Management

What is Strategic Planning?Strategic planning ensures that a company’s portfolio is balanced in terms of profit, overall risk, and cash flows. Strategic planning is, therefore, the tool by which the progress of a company can be ensured.Strategic planning decides the strategy. Planning is done at the top level of a company while the strategy is applied at the ground level where managers apply the strategies as directed by the top-level managers.However, businesses often make strategic plans and see them fail while executed. The fault is not in the plan, but of the people who are going to execute it. In ... Read More

Although strategy and strategic plan are considered as the same, it is wrong to assume so. There are some distinct differences between strategy and strategic plans. Strategy and strategic plan are the parts of financial planning wherein companies try to chart their future course of action depending on the resources that the company has under its control. Let’s look at strategy and strategic planning individually to understand what they mean and what their basic differences are.What is Strategy?Strategy is the base of planning but it is not the planning itself. The strategy provides the platform for the company to build ... Read More

What is Discriminant Analysis?Discriminant analysis is a widely used tool in Machine Learning, Statistics, and Finance. It is a manner to classify the targets based on some assumptions, and then use them to predict the future of a process. As is obvious, since investors and analysts want to predict a company’s power in the future, the tool is of prime importance to them.The discriminant analysis relies upon continuous independent variables to form a pattern that shows relationships between two parameters or predictive equations that may satisfy the relationship for the data sets. These equations are then used to classify the ... Read More

Parametric Methods of Efficiency Vs Non-Parametric Methods of EfficiencyParametric and non-parametric methods of efficiency measurement have gained significant momentum in the current decade. However, the choice of the method for efficiency management has been a matter of lengthy debate. The parametric method has the advantage of being free from the random noise of inefficiency. However, separating true noise from the process may be a restrictive process.The non-parametric method has the advantage of justifying the axiomatic properties. It also does not have as many restrictive properties as that in the parametric method. However, non-parametric methods do not differentiate between true inefficiency ... Read More

What is Ratio Analysis?Ratio analysis is a good way of comparing the conditions of a business with its peers. It helps businesses understand their own strengths and weaknesses.Ratio analysis are basically tools to measure the various relationships between two or more financial items. It also helps businesses compare themselves with companies of scale. However, there are some drawbacks of ratio analysis that affect its efficiency.Limitations of Ratio AnalysisThere are some prominent drawbacks of ratio analysis which analysts and investors should be aware of. They are as follows −Base of ComparisonAlthough ratio analysis is a good way to measure the performances ... Read More

What is Inter-Firm Comparisons?Financial ratios can be compared with one another in order to get a gist of the performance and other attributes of a company in relation to the other major firms. Such a performance of a company that shows the financial ratios is known as Cross-Sectional Analysis or Inter-Firm Comparison.In an Inter-Firm Comparison chart, various attributes such as Market Share, Return on Equity (ROE), Net Worth (NW), Capital Employed (CE), Net Sales (NS), Profit Before Interest and Taxes (PBIT), etc., are put in one table. This table helps one to see the performance and efficiency of one company ... Read More

Businesses use past and present data in order to find a pattern and predict the future. This review of past and present forms of data is usually known as Trend Analysis which is one of the most popular tools in the hands of financial analysts and managers. Ratio analysis, on the other hand, are tools to measure the various relationships between two or more financial items.Financial ratios can be used to represent trend analysis. In fact, financial ratios are the backbone of trend analysis.Trend Analysis Vs Ratio AnalysisFollowing are the differences between Trend analysis and Ratio analysis −Based on the ... Read More

Options contract is the contract between parties in which, a buyer has the right to sell or buy a particular asset at future date on agreed price. These types of contract are used in securities, commodities etc.In this, buyer will look at ask price and if he wants to buy into option contract, he will offer the bid price (which is lower than bid price). After the contract is purchased from the seller, a position is opened and seller is paid to buy an asset on strike price. Buyer has to sell, buy or exercise the contract before an expiry ... Read More

Swap curve is the relationship between swap rates and varying maturities. This curve tells about the expected returns at different maturity dates. It is a two dimensional curve in which, Y-axis represents the swap rates and X-axis represents maturity dates.These curves are calibrated and constructed in segments depends on market prices of different fixed income. The short end (not more than 3 months) swap curve is calibrated to unsecured deposit rates. Middle end (in between 3 months to 2 years) is derived in combination of interest rate futures and forward rate agreement contracts.Long term (more than or equal to 10 ... Read More

DeflationIt is decline in goods/services price when rate of inflation falls below zero percentage. It is linked to unemployment and productivity levels of goods/services are low. Deflation acts as economy indicator for deteriorating conditions.Causes of deflation are as follows −Structural changes (capital markets)Productivity increasedWhen decrease in currency supplyEffects of deflation are −Reduces business revenueLow wagesLayoffsDisinflationIt is nothing but decrease in rate of inflation or price inflation is slowing. It is a point where inflation increases at slower rates. Money supply slows down because of tighter monetary policy is cause of disinflation. Disinflation is not always a negative. It can be ... Read More