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Finance Management Articles
Page 13 of 96
What is the difference between bid and offer?
Terms Bid and offer (offer also called as ASK) is a two-way price which indicates best price at which securities can be bought and sold at point of time. Bid price is the minimum price whereas offer price or Ask price is minimum price where securities can be bought and sold. Difference between bid price and ask price gives the price called spread. Spread and liquidity are inversely proportional that means if spread is smaller then liquidity will be greater for a given securityFor example, Market maker quoting a price of $13.50/$13.75 for XYZ company stock. Mr. x Ask for ...
Read MoreWhat is contract function and contract formation?
The main function of a contract is to record transactions between entities that exist between parties legally. Contracts can be as simple as handshake between people or as complex deal between companies (which takes months of negotiations and preparation of pages of legal terms with help of team of lawyers). Components of contract are Offer (promiser made an offer to promisee), Acceptance (Promisee accepts the offer made by promisor), Capacity (ability of promisee and promisor to fulfill offer and acceptance), Consideration (Obligation are created and made accepted), creating legal Document (agreement enforced by court of law), Certainty (No ambiguity) and ...
Read MoreWhat is unilateral contracts and bilateral contracts?
If an agreement has legal enforceability then those are called as Contracts. Contracts are categorized into executed and executory contract. In executed contract, parties involved in contract have performed their obligation and nothing is left. Whereas executory contract, obligations of parties are yet to complete. Unilateral contract and bilateral contracts comes under executory contractAs the name suggest in unilateral contracts obligation of party is due whereas in bilateral contracts obligations are both parties are due.Unilateral contractIt is one side contract. One party already performed his part at the time of contract and only one party or remaining party in the ...
Read MoreWhat is the difference between E-commerce and traditional commerce?
Traditional commerce is part of a business that has all activities that facilitate exchange. Trade and auxiliaries of trade are kinds of traditional commerce whereas e-commerce refers to the exchange of goods & services, funds/information between customer and business by means of an electronic networkThe major differences between Electronic commerce (E-commerce) and traditional commerce are as follows −E-commerceTraditional commerceIt is cost-effective.It is less cost-effective than E-commerce.No role of middlemen.Middlemen have a role to play in traditional commerce.Less overhead cost.High overhead cost than E-commerceTakes less time.Takes more time.Better connectivity.No better connectivity.Size of business is easily expandable.Size of business is not easily ...
Read MoreWhat is the difference between an offer and an invitation to offer?
Offer and invitation to offer are two different terms having separate meanings. An offer is a proposal and invitation of offer is to invite some body to make a proposal. Offer leads to enter into contract while invitation of offer leads to offer.Now let us understand the meaning of both separatelyOfferIt is the expression of person to show their willingness to another to do something or not to do something. Offer must be certain, complete and define in their respects. Offer is legally bind and acceptance of offer results in valid contract.Types of offersGeneral offerCross offerCounter offerStanding offerSpecific offerInvitation to ...
Read MoreWhat is the difference between contract and agreement?
Before going for differences, first let us understand the difference between contract and agreement and their typesAgreementAgreement is commitment made or proposal made by a person or a promisor to offer something to another person or a promisee and that promisee accepts that proposal with same considerations. Then it is called as agreement.Types − some of types of agreements areVoid agreementIllegal agreementImplied agreementExpress agreement etc.ContractIf an agreement is legally enforceable for doing or for not doing then it is called as contract. Contract must contains offer, acceptance, unconditional considerations and adequate. These are also called as elements of contract.Types − ...
Read MoreWhat are the terms used in Merger & Acquisition?
The terms used in Merger & Acquisition are explained below −Acquirer − It is someone who purchases a company.Acquisition − A company (1) taking control over another company (2) by purchasing more than 50% shares in company (2).Amalgamation: − Combining two companies into a single company.Asset deal − Acquirer buys only assets of selected companies.Backward integration − Acquires purchases of Ancillaries Company of its own product.Bootstrap effect − Bad reason to merge.Cash considerations − Part of purchase price is given in the form of cash.Compensation manipulation − Bad reason to mergeConglomerate − Merge of unrelated units.Debt issuance fees − Charges ...
Read MoreHow to compare passbook and cash book?
The major differences between a passbook and a cash book are as follows −PassbookPassbook is the book which is issued by the concerned bank, which contains the details of account holder(s) and information related to the transactions (deposits and withdrawals) of the holder(s).These are prepared by banks. In this book, all the deposits of the holder are shown on the credit side and the withdrawals of the holder are shown on the debit side.Preparing these books is compulsory.Cheque issued to the creditor is recorded when the amount is paid by the bank. Cheque deposited for collection is recorded on the ...
Read MoreHow are errors classified in trial balance?
Errors in trial balance are classified into two types namely, errors disclosed and errors not disclosed. Errors disclosed and errors not disclosed are again subdivided into several types.Following diagram shows the classification of errors in trial balance −Classification of errors based on natureThe classification of errors in trial balance which is based on nature is explained below:Error of omissionError of complete omissionError of partial omissionError of commissionError of recording in book of original entryWrongly totaling of subsidiary bookError in balancing ledger accountsError of posting − This is further classified as follows −Posting to the wrong side, but on the correct ...
Read MoreWhat are the steps involved in preparing the trial balance?
Trail balance is worksheet which consists of all ledger balances and columned them as debit and credit. Later these debit and credit columns are equaled. Trail balance ensures entries are mathematically proven. It is prepared at end of reporting period and repeated for every period.To understand trail balance once should understand following conceptsDouble entry systemJournalLedgerThe steps which are followed to prepare the trial balance are as follows −Step 1 − Prepare a columnar table which consists of four columns namely account number in column 1, account name in column 2, debit in column 3 and credit in column 4.Step 2 ...
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