Tuesday, March 31, 2009

Factors of Production (Introduction)

Factors of Production

Factors of production are the resources that are used to produce goods and services

1. Natural resources:

The things created by acts of nature such as land, water, mineral, oil and gas deposits, renewable and nonrenewable resources.

2. Labor:

The human effort, physical and mental, used by workers in the production of goods and services.

3. Physical capital.

All the machines, buildings, equipment, roads and other objects made by human beings to produce goods and services.

4. Human capital:

The knowledge and skills acquired by a worker through education and experience.

5. Entrepreneurship:

The effort to coordinate the production and sale of goods and services. Entrepreneurs take risk and commit time and money to a business without any guarantee of profit.

IMF Completes First Review Under Stand-By Arrangement with Pakistan and Approves US$847.1 Million Disbursement

IMF Completes First Review Under Stand-By Arrangement with Pakistan and Approves US$847.1 Million Disbursement

The Executive Board of the International Monetary Fund (IMF) today completed the first review of Pakistan's economic performance under a program supported by a 23-month Stand-By Arrangement (SBA). The completion of the review enables the immediate disbursement of an amount equivalent to SDR 568.5 million (about US$ 847.1 million), bringing total disbursements under the program to an amount equivalent to SDR 2.64 billion (about US$3.93 billion).

Monday, March 30, 2009

BOND INDENTURE INTRODUCTION

BOND INDENTURE INTRODUCTION

The contract that specifies all the rights and obligations of the issuer and the owners of a fixed income security is called the bond indenture. The indenture defines the obligations of and restrictions on the borrowed and forms the basis for tall future transactions between the bondholder and the issuer. These contract provisions are known as covenants and include both negative covenant (prohibitions on the borrower) and affirmative covenants(actions that the borrower promises to perform) sections.

Negative covenants include restrictions on asset sales ( the company can't sell assets that have been pledged as collateral), negative pledge of collateral (the company can't claim that the same assets back several debt issues simultaneously), and restrictions on additional borrowings (the company can't borrow additional money unless certain financial conditions are met).

Affirmative covenants include the maintenance of certain financial ratios and the timely payment of principal and interest. For example, the borrower might promise to maintain the company's current ratio at a value of two or higher. If this value of the current ratio is not maintained, then the bonds could be considered to be in (technical) default.

Difference between equity security and fixed income security

Difference between equity security and fixed income security


Equity Securities

The most important equity security is common stock. Stock represents ownership interest in
a corporation. Equity securities may pay dividends from the company’s earnings, although
the company has no legal obligation to do so. Most companies do pay dividends, and most
companies try to increase these dividends on a regular basis.
Unlike fixed-income securities, equity securities represent an ownership interest in a corporation. These securities provide a residual claim—after payment of all obligations to fixed-income claims on the income and assets of a corporation


Fixed Income Securities

A fixed income security usually provides a known cash flow with no growth in the income stream. Bonds are the most important fixed income securities.A bond is a legal obligation to repay a loan’s principal and interest, but carries no obligation to pay more than this. Interest is the cost of borrowing money. Most preferred stocks pay a fixed annual dividend that does not change overtime consequently. For investment purposes, preferred stock is considered a fixed income security.

Saturday, March 28, 2009

Canadian official projects 8.5% contraction in Q1 GDP

Canadian official projects 8.5% contraction in Q1 GDP

Canada's GDP is headed toward a first-quarter contraction of 8.5%, said Kevin Page, the Canadian Parliament's independent budget officer. If Page's projections are correct, Canada will suffer this year its worst economic conditions since the end of World War II, a finance critic from the Liberal Party said. Page said he was handicapped by the government's refusal to give him some of the data he needed. Financial Post (Canada)/Reuters .

Break Even Analysis

Break Even Analysis

It is the point at which total variable and fixed costs are compared with sales revenue in order to determine the level of sales volume, sales value or production at which the business makes neither a profit nor a loss.
One of the most common tools used in evaluating the economic feasibility of a new enterprise or product is the break-even analysis. The break-even point is the point at which revenue is exactly equal to costs. At this point, no profit is made and no losses are incurred. The break-even point can be expressed in terms of unit sales or dollar sales. That is, the break-even units indicate the level of sales that are required to cover costs. Sales above that number result in profit and sales below that number result in a loss. The break-even sales indicates the dollars of gross sales required to break-even.

Break even point (for output) = fixed cost / contribution per unit

Contribution per unit= selling price (p.u) - variable cost (p.u)

Break even point (for sales) = fixed cost / contribution (pu) * Selling price (pu)

Fixed Costs

Fixed costs are those business costs that are not directly related to the level of production or output. i-e, even if the business has a zero output or high output, the level of fixed costs will remain broadly the same.

Examples are;

Admin expenses
Rent of office building
Marketing and research cost
etc.

Variable Costs

Variable costs are those costs which vary directly with the level of output.

Examples are;

Manufacturing expenses i-e labour cost, raw material cost etc

Assumptions are:

It assumes that fixed costs (FC) are constant.
It assumes average variable costs are constant per unit of output, at least in the range of likely quantities of sales.
It assumes that the quantity of goods produced is equal to the quantity of goods sold

Illustration

Abc limited has following monthly data. calculate break even point.

Average Selling price per unit $ 10
Average Variable cost per unit $ 6
Fixed cost (Estimated) $ 20,000

Break Even analysis

Monthly Sales (units) 5,000
Monthly Sales ($) 50,000


Therefore, no profits are made from the sale of this product until more than 5,000 units are sold or more than $ 50,000 in gross sales is generated.


Break-even analysis can be very helpful in the evaluation of a new venture. In most instances, success takes time.Many new enterprises and products actually operate at a loss (at a point below break-even) in the early stages of development. Knowing the price or volume necessary to break-even is critical to evaluating the time-frame in which losses are permissible. The break-even is also an excellent benchmark by which a company’s short-termgoals can be measured/tracked. Break-even analysis mandates that costs be analyzed. It also keeps a focus
connection between production and marketing.




Friday, March 27, 2009

SYSTEM SOFTWARE & APPLICATION SOFTWARE

SYSTEM SOFTWARE & APPLICATION SOFTWARE


The system software controls the computer. It communicates with computer’s hardware(key board, mouse, modem, sound card etc) and controls different aspects of operations.

It includes following sub categories:

o Operating system
o Device drivers
o Utilities

Operating system

An operating system is the program that manages all the other programs in a computer. It is a integrated collection of routines that service the sequencing and processing of programs by a computer.
So it is the the software responsible for controlling the allocation and usage of hardware resources such as memory, central processing unit (CPU) time, disk space, and peripheral devices.

Device driver

The device driver software is used to communicate between the devices and the computer. We have monitor, keyboard and mouse attached to almost all PC’s; if we look at the properties of these devices we will see that the operating system has installed special software to control these devices. This piece of software is called device driver software. When we attach a new device with the computer, we need software to communicate with this device. These kinds of software are known as device drivers e.g.CD Rom driver, Sound Card driver and Modem driver.

Utility Software

Utility software is a program that performs a very specific task, usually related to managing system resources. You would have noticed a utility of Disk Compression.Whenever you write a file and save it to the disk, Compression Utility compresses the file (reduce the file size) and write it to the disk and when you request this file from the disk, the compression utility uncompressed the file and shows its contents. Similarly there is another utility, Disk Defragmentation which is used to defragment the disk. The data is stored on the disks in chunks, so if we are using several files and are making changes to these files then the different portions of file are saved on different locations on the disk. These chunks are linked and the operating system knows how to read the contents of file from the disk combining all the chunks. Similarly when we delete a file then the place where that file was stored on the disk is emptied and is available now to store other files. As the time goes on, we have a lot of empty and used pieces on the disk. In such situation we say that the disk is fragmented now. If we remove this fragmentation the chunks of data on the disk will be stored close to each other and thus reading of data will be faster.For the purpose of removing fragmentation on the disk the Defragmentation utility is used.

Application software

A program or group of programs designed for end users. For example a program for Accounting, Payroll, Inventory Control System, and guided system for planes. GPS (global positioning system), another application software, is being used in vehicles, which through satellite determines the geographical position of the vehicle.

Most Popular Application Software Categories are:

Web browsers
Email clients
Word processors

The Global Information Technology Report 2008-2009

The Global Information Technology Report 2008-2009

The Report stresses the importance of ICT as a catalyst for growth in the current global turmoil

Denmark and Sweden once again lead the rankings of The Global Information Technology Report 2008-2009, released for the eighth consecutive year by the World Economic Forum. The United States follows suit, up one position from last year, thus confirming its pre-eminence in networked readiness in the current times of economic slowdown. Singapore (4), Switzerland (5) and the other Nordic countries together with the Netherlands and Canada complete the top 10.
The Report underlines that good education fundamentals and high levels of technological readiness and innovation are essential engines of growth needed to overcome the current economic crisis. Under the theme “Mobility in a Networked World”, this year’s Report places a particular focus on the relationship and interrelations between mobility and ICT.
With record coverage of 134 economies worldwide, the Report remains the world’s most comprehensive and authoritative international assessment of the impact of ICT on the development process and the competitiveness of nations.
The Report is produced by the World Economic Forum in cooperation with INSEAD, the leading international business school, and is sponsored by Cisco Systems.

For more details

The Global Information Technology Report 2008-2009

Thursday, March 26, 2009

Decision Making and Quantitative and Qualitative Factors in Decision Making:

Decision Making

Decision making is the cognitive (outcome of mental process) process of selecting a course of action from among multiple alternatives.

Quantitative and Qualitative Factors in Decision Making:

The Quantitative Factors are:

Investment appraisal
Break-even analysis
Sales forecasting
Critical path analysis
Decision trees etc.

The Qualitative Factors are

Stakeholder analysis
SWOT( Strengths , Weaknesses, Opportunities and Threats )
etc.

Decision-making process

A) Intelligence

It is Identifying the problems occurring in an organization. MIS is the major source for the
managers to be aware of problems.

B) Design

It is the inventing, developing, and analyzing possible courses of action.

C )Choice

It is selecting a course of action from those available i-e what kind of strategies there are.

D) Implementation

It is implementing the selected course of action & its proper communication to all.

E) Monitoring

It is checking the consequences of the decision made after its implementation (qualitative as well as quantitative).


Type of Decisions

1) Structured decisions

Where problem is recurring and repetitive, the common factors can be identified in order to identify a course of action. Due to which defined set of procedure can be devised for their solution. So it leads to clearly specified inputs and outputs & objectives.

2) Un-structured decisions

When problems are non routine, critical and novel in nature, they require individual judgment, evaluation and insight varying on case-to-case basis. There is no well defined procedure for treat these problems. For such situations, predefined policy cannot be devised. However, once the problem has been figured out, a policy may be devised to handle the problem in future.

3) Semi-structured Decisions

The term is used to refer to the grey area of decisions which lie between the two extremes. Some (but not all) structured phases and often solved using standardized solution procedures and human judgment.
Similarly problems are also categorized as structured, Semi structured & unstructured.
Nature of problem determines the approach to decision making to be followed to solve it

DECISION TIME FRAMES


To study the relationship between a firm’s output decision and its costs, we distinguish between two decision’s time frames:

(1) The Short Run

It is the time frame in which the Qty of at least one factor of production is fixed. For most firms, capital, land and entrepreneurship are fixed factors of production and labor is the variable factor of production. We call the fixed factors of production, the firm’s plant. In the short run, a firm’s plant is fixed.

(2)The Long Run

It is the time frame in which the quantities of all factors of production can be varied. I.e. the long run is a period in which the firm can change its plant. To increase output in the long run, a firm is able to choose whether to change its plant as well as the quantity labor it lines.

FLOAT,DISBURSEMENT FLOAT AND COLLECTION FLOAT

FLOAT,DISBURSEMENT FLOAT AND COLLECTION FLOAT

FLOAT

The difference between bank cash and book cash, representing the net effect of
cheques in the process of clearing is called float.

DISBURSEMENT FLOAT

Cheques written by a firm generate disbursement float, causing a decrease in the
firm’s book balance but no change in its available balance.

ABC LTD has $150,000 on deposit with its bank.
• On June 15, it buys some raw material and pays with a cheque for $150,000. reducing
the book balance by $150,000 immediately.
• ABC’s bank is unaware of this activity until the cheque is presented, say June 29 and
the firm’s available balance is greater than it’s book balance by $150,000.
• Before June 15, the ABC’s float is zero:
Float = Firm’s available balance –Firm’s book balance
= $150,000 – 150,000 = 0
• Form June 15 to June 29, the position is:
Disbursement Float = Firm’s available balance –Firm’s book balance
= $150,000 – 0 = 150,000

COLLECTION FLOAT

Cheques collected by the firm create collection float, which increases book balances
but does not immediately change available balance.

NET FLOAT

In general, the firm’s payment activities generate disbursement float and its collection
activities generate collection float.

• The net effect, the sum of both floats is the net float, equal to the overall difference
between the firm’s available balance and its book balance.

• If net float is positive, then the firm’s disbursement float exceeds its collection float
and its available balance exceeds its book balance, and vice versa.

• Suppose you have $50,000 on deposit.
• One day, you write a cheque for $10,000 and deposit $20,000.
• What are your disbursement, collection and net floats?
• After writing the cheque, you show a balance of $40,000 on your books, but bank
shows $50,000 while the cheque is clearing. So you have a disbursement float of
$10,000
• Depositing $20,000 increases the book balance to $60,000, but the available balance
remains the same until the cheque clears. So collection float is -$20,000.
• Net float = $10000 + (-20,000) = -$10,000

Wednesday, March 25, 2009

Fixed Asset depreciation

Fixed Asset depreciation

Depreciation is a systematic allocation of the cost of a depreciable asset to expense over its useful life. It is a process of charging the cost of fixed asset to profit & loss account.

Fixed Assets are those assets which are:
• Of long life
• To be used in the business to generate revenue
• Not bought with the main purpose of resale.
Fixed assets are also called “Depreciable Assets”

Accumulated Depreciation is the depreciation that has been charged on a particular asset from the time of purchase of the asset to the present time. This is the amount that has been charged to profit and loss account from the year of purchase to the present year.
Depreciation accumulated over the years is called accumulated depreciation.

Useful Life
• Useful Life or Economic Life is the time period for machine is expected to operate efficiently.
• It is the life for which a machine is estimated to provide more benefit than the cost to run it.

Methods of calculating Depreciation


There are several methods for calculating depreciation. However two are important.

• Straight line method
• Reducing balance method or written down method.

Straight line method

It is based on the principle that each accounting period of the asset's life should bear an equal amount of depreciation.
As a result, the depreciation charge for the asset can be calculated using the following formula:

Annual straight-line depreciation charge = (Cost of the asset - Residual value of the asset )/ N

Where N =Useful economic life of the asset (years)

Residual value is the cost of the asset after the expiry of its useful life.

Illustration

A business purchases a new machine for £110,000 on 1 January 2008. It is estimated that the machine will have a residual value of £10,000 and a useful economic life of five years. The business has an accounting year end of 31 December.

Using the straight line depreciation method, the calculation of the annual depreciation charge is as follows:

Annual straight-line depreciation charge = (Cost of the asset - Residual value of the asset )/ N

Annual straight-line depreciation charge = (110,000 - 10,000 )/ 5= £20,000

In the accounts of the business a depreciation charge of £20,000 will be expensed in the profit and loss account for each of the five years of the asset's useful economic life.
In the annual balance sheet, the machine would be shown at its original cost less the total accumulated depreciation for the asset to date.

Reducing balance method or written down method.

The reducing balance method of depreciation provides a high annual depreciation charge in the early years of an asset's life but the annual depreciation charge reduces progressively as the asset ages.

To achieve this pattern of depreciation, a fixed annual depreciation percentage is applied to the written-down value of the asset. Thus, depreciation is calculated as a percentage of the reducing balance.

Illustration

A business purchases a new machine for £110,000 on 1 January 2008. It is estimated that the machine will have a residual value of £10,000 and a useful economic life of five years. The business has an accounting year end of 31 December.The business decides to calculate annual depreciation at the rate of 40% of the written-down value.

Using the reducing balance method, the calculation of the annual depreciation charge is as follows:

For 31 dec 2008

Original machine cost £110,000

Depreciation in 2008 (40% cost) £44,000

Written down value at 31 December 2008 £66,000

For 31 dec 2009

Depreciation in 2009 (40% of WDV of £66,000 31 december 2008) £26,400

Written down value at 31 December 2009 £39,600

and so on...........

In reducing balance method, a formula is used for calculation the depreciation rate i.e.


Rate = 1 –n√ RV / C

Where:
“RV” = Residual Value
“C” = Cost
“n” = Life of Asset


Calculate the rate if:
Cost = 100,000
Residual Value (RV) = 20,000
Life = 3 years

Rate = 1 –3√ 20,000 / 100,000
Rate = 42%

WTO forecasts 9% fall in global trade

WTO forecasts 9% fall in global trade

Collapsing global demand will send the volume of world goods trade plunging by 9 per cent this year, the largest drop since the second world war, the World Trade Organisation predicted on Monday.

This compares with anaemic growth of 2 per cent in 2008, reflecting the sharp downturn in the global economy late in the year, and 6 per cent in 2007.

Pascal Lamy, WTO director-general, urged leaders of the Group of 20 countries who will meet in London next week not to raise trade barriers, saying this would hinder recovery efforts.

Courtsy Financial Times

Monday, March 23, 2009

what is Depression

Depression

Depression is a mood disorder. You feel sad and have no joy in life. You may feel that you have nothing to live for. There are many types of depression, from simple depressed mood to Major Depression - a life-threatening illness.

Symptoms could include:

Irritability
Mood Swings
Nervousness
Loss of Appetite
Night Sweats
Lethargy
Depressed Mood
Memory Impairment
Difficulty Sleeping
Social Withdrawal
Feeling Hopeless
Feeling Empty
Feeling of Anger
Loss of Capacity For Enjoyment
Fear
Suicidal Thoughts
Social Isolation
Poor Self Esteem
Poor Hygiene
Problems at Work
Self Depreciation
Threatening Suicide
Finding of Suicidal Intent


Common Causes

Depression often runs in families. This may due to your genes (inherited), learned behavior, or both. Even if your genes make you more likely to develop depression, a stressful or unhappy life event usually triggers the onset of a depressive episode.

Depression may be brought on by:

Alcohol or drug abuse
Childhood events like abuse or neglect
Death of a friend or relative
Disappointment at home, work, or school
Medical conditions such as hypothyroidism ,cancer, or hepatitis
Nutritional deficiencies
Overly negative thoughts about one's self and life, self blame, and ineffective social problem solving skills
Prolonged pain or having a major illness
Sleeping problems
Social isolation (common in the elderly)

Self care steps are

Get enough sleep.
Follow a healthy, nutritious diet.
Exercise regularly.
Avoid alcohol, marijuana, and other recreational drugs.
Get involved in activities that make you happy, even if you don't feel like it.
Spend time with family and friends.
Try talking to clergy or spiritual advisers who may help give meaning to painful experiences.
Consider prayer, meditation

Conclusion

In today's life , no one can avoid stress as a part of life. However depression can be avoided and stress be minimized by taking life and life events positively. So enjoy life and work hard.

Saturday, March 21, 2009

What is free cash flow

What is free cash flow

Free cash flow (FCF) is a cash flow available for distribution among all the security holders of a company. They include equity holders, debt holders, preferred stock holders, convertible security holders, and so on.

Free cash flow = (Net Income +Depreciation/Amortization-Changes In Working Capital) cash flow' operations- Capital Expenditure

Explanation

Free cash flow (FCF) represents the cash that a company is able to generate after laying out the money required to maintain or expand its asset base. It is important because it allows a company to pursue opportunities that enhance shareholder value. Without cash, it's tough to develop new products, make acquisitions, pay dividends and reduce debt.
So it is the cash flow actually available for distribution to all investors (stockholders and debt holders) after the company has made all the investments in fixed assets, new products, and working capital necessary to sustain ongoing operations.

Illustration

ABC ltd has following financial data extracted from income statements, balance sheets , cash flow and notes to accounts.

Net income $ 25,000
Depreciation $ 2,000
Working capital changes +$10,000
Capital expenditure $12,000
Then
Free cash flow = (Net Income +Depreciation/Amortization-Changes In Working Capital) cash flow' operations- Capital Expenditure
Free cash flow = (25,000 + 2,000-10,000) 17,000-12,000
Free cash flow =$5,000






Thursday, March 19, 2009

Market Efficiency

Market Efficiency

If prices properly reflect available information , then markets are said to be efficient.

Semi strong form efficient

Markets are said to be semi strong form efficient if the prices are unbiased based on all publicaly information

Strong Form efficient

Markets are said to be strong form efficient if the prices are unbiased based on all information (public and private).

Who cares about market efficiency?

1) Investors

If investors find that prices are predictable, then smart investors can earn extra return at the expense of naive investors.

2) Companies

If markets are efficient aggregators of information, then companies can learn from the stock price reactions.

3) Government and public

They are concerned about market efficiency because of the effect on economic growth and allocation of resources.

Tuesday, March 17, 2009

Effect of structural economic changes on industries

Effect of structural economic changes on industries


The following factors can have a significant effect on the cash flows and risk prospects of different industries

1) Demographics

The study of demographics includes much more than population growth and age distributions. It also includes the geographical distribution of people, the changing ethnic mix in a society and changes in income distribution.

2) Life style.

Consumer behavior is affected by trends and fads.

3) Technology

Trends in technology can affect numerous industry factors including the product or service and how it is produced and delivered.

4) Politics and regulations

The industry analyst needs to project and assess political changes relevant to the industry under study.

LEARNING ORGANIZATION

LEARNING ORGANIZATION

A learning organization is one in which people at all levels, individually and collectively, are continually increasing their capacity to produce results they really care about.

Leaning Organization is important because of following factors:

The organizations that will truly excel in the future will be the organizations that discover how to tap people’s commitment and capacity to learn at all levels in an organization.

It provides competitive advantage.

All organizations exit in more complexes, dynamic and globally competitive environment.

Peter Senge – “The Fifth Discipline”

Learning organizations are where people continually expand their capacity to learn.
Five disciplines are key to achieving an effective learning organization.

Personal Mastery:-enhancing ability to be objective.
Mental Models:-continually scrutinizing our assumptions and picture of the world.
Shared Vision:-creating a new picture for the future.
Team Learning:-creating the capacity to “think together”.
Systems Thinking:-knowledge and tools that allow people to see inter-relationships.

Daniel Tobin’s Five Principles of the Learning Organization

Everyone is a learner.
People learn from each other.
Learning enables change.
Learning is continuous.
Learning is an investment, not an expense

A learning organization tries to do six things

Collect intelligence about the environment.
Learn from the best practices of other organizations.
Learn from its own experiences and past history.
Experiment with new approaches.
Encourage systematic problem solving.Transfer knowledge throughout the organization

Levels of Learning

Managers/leaders need to encourage learning at four levels:

Individual
Group
Organizational
Inter-organizational

The Basis of the Learning Organization Strategy need to be

Transfer Knowledge, not just information.
Knowledge leads to better, safer decisions.
Better-informed.
Knowledgeable and Wiser decisions.

Conclusion

Organizations must learn faster & adapt to the rapid changes in the environment otherwise they will be history. This is the knowledge era and entry is granted only to those who learn, innovate and implement



Sunday, March 15, 2009

MOTIVATION

MOTIVATION


Motivation is the inner drive that directs a person’s behavior toward goals. Motivation can be defined as a process which energizes, directs and sustains human behavior. It refers to person’s desire to do the best possible job or to exert the maximum effort to perform assigned tasks. An important feature of motivation is that it is behavior directed towards goal.


Motivational Theories


Motivation theories seek to explain why employees are motivated by and satisfied with one type of work than another. It is essential that mangers have a basic understanding of work motivation because highly motivated employees are more likely to produce a superior quality product or service than employee who lack motivation.


A) Maslow’s Need Hierarchy


Abraham Maslow organized five major types of human needs into a hierarchy .The need hierarchy illustrates Maslow’s conception of people satisfying their needs in a specified order, from bottom to top.

The needs, in ascending order, are:

1. Physiological (food, water, and shelter.)

2. Safety or security (protection against threat and deprivation)

3. Social (friendship, affection, belonging, and love)

4. Ego (independence, achievement, freedom, status, recognition, and self-esteem)

5. Self-actualization (realizing one’s full potential; becoming everything one is capable of being.)

According to Maslow, people are motivated to satisfy the lower needs before they try to satisfy the higher need. Also, once a need is satisfied it is no longer a powerful motivator. Maslow’s hierarchy, however, is a simplistic and not altogether accurate theory of human motivation. For example, not everyone progresses through the five needs in hierarchical order. But Maslow makes three important contributions. First, he identifies important need categories, which can help managers create effective positive rein forcers. Second,it is helpful to think of two general levels of needs, in which lower-level needs must be satisfied before higher-level needs become important. Third, Maslow sensitized managers to the importance of personal growth and self-actualization.


B) Existence Relatedness Growth (ERG) Theory


Alderfer focuses on three needs: existence, relatedness, and growth.

Existence needs are similar to Maslow’s physiological needs, and to the physical components of Maslow’s security needs.

Relatedness needs are those that require interpersonal interaction to satisfy the needs for things like prestige and esteem from others.

Growth needs are similar to Maslow’s needs for self-esteem and self-actualization.

C) McGregor’s Theory-X and Theory-Y


McGregor’s Theory-X represented the traditional management view that employees are lazy, was uninterested in work, and needed to be prodded to perform.

In contrast his theory Y viewed employees as creative, complex, and mature individuals interested in meaningful work.

McGregor believed that under the right circumstances, employees would willingly contribute their ingenuity and their talents for the benefits of the organization. He suggested that the mangers motivate employees by giving them the opportunity to develop their talents more fully and by giving them the freedom to choose the methods they would use to achieve organizational goals. In McGregor’s view the mangers role was not to manipulate employees but to align their needs with needs of the organization so that employees would regulate their own actions and performance. These insights lead researches to investigate the origins and processes of motivation more closely.

D) Expectancy Theory

Expectancy theory states that a person’s motivation to exert a certain level of effort is a function of three things: expectancy (E), instrumentality (I), and valance (V). Motivation = E x I x V.

“E” is the person’s expectancy that his or her effort will lead to performance,

“I” represents the perceived relationship between successful performance and obtaining the reward, and

“V” refers to the perceived value the person attaches to the reward.

E) Reinforcement Theory

In 1911, psychologist Edward Thorndike formulated the law effect: Behavior that is followed by positive consequences probably will be repeated. This powerful law of behavior laid the foundation for country investigations into the effects of the positive consequences, called rein forcers that motivate behavior.Organizational behavior modification attempts to people’s actions.Four key consequences of behavior either encourage or discourage people’s behavior

1. Positive Reinforcement- applying a valued consequence that increases the likelihood that the person will repeat the behavior that led to it. Examples of positive reinforcers include compliments, letters of commendation, favorable performance evaluations, and pay raises. Equally important, jobs can be positively reinforcing. Performing well on interesting, challenging, or enriched jobs is much more reinforcing, and therefore motivating,then performing well on jobs that are routine and monotonous.

2. Negative Reinforcement- removing or withholding an undesirable consequence. For example, a manager takes an employee (or a school takes a student) off probation because of improved performance. Frequent threatening memos admonished people to achieve every one of their many performance goals

3. Punishment- administering an aversive consequence. Examples include criticizing or shouting at an employee, assigning an unappealing task, and sending a worker home without pay. Negative reinforcement can involve the threat of punishment, but not delivering it when employees perform satisfactorily. Punishment is the actual delivery of the aversive consequence.

4. Extinction –withdrawing or failing or failing to provide a reinforcing consequence. When this occurs motivation is reduced and the behavior is extinguished, or eliminated. Examples include not giving a compliment for a job well done, forgetting to say thanks for a favor, or setting impossible performance goals so that the person never experiences success. The first two consequences, positive and negative reinforcement, are positive for the person receiving them:The person either gains something or avoids something negative. Therefore, the person who experiences these consequences will be motivated to behave in the ways that led to the reinforcement. The last two consequences, punishment and extinction, are negative outcomes for the person receiving them: Motivation to repeat the behavior that led to the undesirable results will be reduced.Thus, effective managers give positive reinforcement to their high-performing people and negative reinforcement to low performance. They also punish or extinguish poor performance and other unwanted behavior.


F) Herzberg’s Two-Factor Approach


Herzberg Two-Factor theory divides Maslow’s Hierarchy into a lower-level and a higher-level set of needs,and suggests that the best way to provide motivation for an employee is to offer to satisfy the person’s higher-order needs, ego and self-actualization. Herzberg said that lower-order needs, or hygiene factors, are different from higher-order needs, or motivators. He maintains that adding more hygiene factors to the job is a very bad way to motivate because lower-order needs are quickly satisfied.


G) McClelland (Needs for Affiliation, Power, and Achievement) Theory


McClelland agrees with Herzberg that higher-level needs are most important at work. He believes the needs for affiliation, power, and achievement are most important. He and his associates use the Thematic Apperception Test to identify a person’s needs for achievement, power, and affiliation. People with a high need for achievement strive for success, are highly motivated to accomplish a challenging task or goal,prefer tasks that have a reasonable chance for success, and avoid tasks that are either too easy or too difficult. People with a high need for power enjoy roles requiring persuasion. People with a strong need for affiliations are highly motivated to maintain strong, warm relationships.

H) Adam’s Equity Theory


Adams’s equity theory assumes that people have a need for fairness at work, and therefore, value and seek it. People are motivated to maintain a balance between what they perceive as their inputs or contributions and their rewards as compared to others. This theory seems to work when people feel they are underpaid,but inequity due to overpayment does not seem to have the positive effects on either quantity or quality that Adams’s equity theory would predict.





Saturday, March 14, 2009

Analysis of cash flow statements

Analysis of cash flow statements


Cash Flow Statement shows the movement of cash resources during the year. It gives information about sources of income and account heads on which this amount is spent.
It is an integral part of financial statements.

Cash flow statement shows, how cash was generated and how it was used during the period.

Cash flow statement is divided into three components

• Cash Flow from Operating Activities
• Cash Flow from Investing Activities
• Cash Flow from Financing Activities


CASH FLOW FROM OPERATING ACTIVITIES


Cash flow from operating activities is generally derived from the principal revenue producing activities of the business. Cash Flow from Operating Activities is the indicator of success or failure of a business’s operations. If the cash flow from operations is continuously negative, this means that the business revenue is not enough torecover the costs that are incurred to earn it. Therefore, in the long run Cash flow from operations must bepositive.

Examples of cash flows from operating activities are:

• Cash receipt from sale of goods and rendering of services.
• Cash receipts from fees, commission and other revenues.
• Cash payments to suppliers for goods and services.
• Cash payments to and on behalf of the employees.
• Cash payments or refunds of income taxes.


CASH FLOW FROM INVESTING ACTIVITIES

Cash flow from investing activities includes cash receipts and payments that arise from Fixed and Long Term assets of the organization. Cash Flows from Investing Activities shows the investment trend of the business. If it is negative (Outflow) this means that the company is investing in long term assets and is expanding. On the other hand if it ispositive (Inflow) over the years, this means that the company is selling its long term investments.

Examples of cash flows from investing activities are:

• Cash payments to acquire property plant and equipment. These also include payments made for selfconstructed assets.
• Cash receipts from sale of property plant and equipment.
• Cash payments and receipts from acquisition and disposal of other than long term assets e.g.
Shares, debentures, TFC, long term loans given etc.

If assets are held for trading purposes or in normal course of business e.g. car / property dealers and loans given by banks, then cash flow from these are included in Operating Cash Flow.


CASH FLOW FROM FINANCING ACTIVITIES

Cash flow from financing activities includes cash receipts and payments that arise from Owners of the business and other long term liabilities of the organization.
Cash Flows from Financing Activities shows the behavior of investors (both equity capital and debt capital). A positive figure (inflow) shows that funds are being invested in the company and vice versa.

Examples of cash flows from financing activities are:

• Cash received from owners i.e. share issue in case of company and capital invested by sole
proprietor or partners.
• Cash payments to owners i.e. dividend, drawings etc.
• Cash receipts and payments for other long term loans and borrowings.

Thursday, March 12, 2009

Long Term Financing Facility (LTFF)

Long Term Financing Facility (LTFF)
for Plant & Machinery:- Second Hand Machinery

Please refer to the captioned Scheme circulated vide MFD Circular No. 07 dated December 31, 2007 and other instructions issued from time to time in the matter.


2. It is advised that henceforth second hand plant & machinery to be used in the eligible sectors / sub-sectors of LTFF Scheme shall also be eligible for financing under the Scheme subject to following terms & conditions:-


i. Only imported second hand machinery not more than three years old will qualify for financing under the Scheme.

ii. Second hand machinery purchased from local suppliers will not qualify under the Scheme.

iii. Further, fixed term loans extended by banks/DFIs against second hand imported machinery prior to the issuance of this circular will not be eligible for refinance.

iv. The useful life of such machinery should be more than the period of loan itself.

v. The borrowers concerned should submit a report from PBA’s approved surveyors (acceptable to bank/DFI concerned) with regard to confirmation that machinery is in order and its useful life is more than the period of loan itself.

vi. Banks / DFIs can avail refinance for a maximum period of three years, to the extent of value of such machinery determined by the approved surveyor; or original cost less accumulated depreciation @ 10% p.a., which-ever is lower.

vii. LCs established from the date of this circular to December 31, 2009 shall be eligible for refinancing from SBP.


3. All other instructions issued on the subject shall remain unchanged.

Wednesday, March 11, 2009

Top Five Pregnancy Symptoms

Top Five Pregnancy Symptoms

If you have any of these pregnancy symptoms, be sure to take an at home test. If it is positive, it is important that a mother-to-be receive prenatal care early in pregnancy.

Missed Menstrual Period

A missed cycle can be a sign of pregnancy . It is usually the first indicator that conception has occurred, although some women claim to know they are pregnant before they miss a period.

Fatigue

Extreme fatigue can be another indicator of pregnancy, especially if other symptoms are present

Tender Breasts

Tender swollen breasts are another early symptom. While tender breasts are a symptom of an impending cycle, enlarged breasts are not. Sore and swollen breasts with a tingling sensation can be an early indicator of pregnancy.

Nausea and Morning Sickness

Nausea can be a sign that a woman is pregnant. Many women say that they've had nausea up to two weeks before an expected monthly cycle and before any other symptom. Eating crackers before getting out of the bed in the morning can help and eating several smaller meals instead of larger ones can help with nausea.

Frequent Urination

An increased urge to urinate can be an indicator and usually occurs between 6 to 8 weeks out.

Tuesday, March 10, 2009

Performance Based Mark-up Rates under Export Finance Scheme (EFS)

Performance Based Mark-up Rates under Export Finance Scheme (EFS)


As you are aware, SBP is already charging lower mark-up rate from exporters against export refinance facility under EFS in order to enable them to become competitive in the international market. In this regard, it has been decided to further incentivize financing under EFS (Part-II) by way of lowering mark-up rates for high performers. The following mark-up rates will be charged from exporters based on their export performance against borrowing from SBP under EFS Part-II:-

The detail is here

2. The exporters who have achieved excess performance as mentioned above will claim benefit of mark-up rate differential from SBP through their bank provided they have no export proceeds overdue bills. The benefit in mark-up rate will be reimbursed to exporters through their banks on submission of claim form (form attached) to respective offices of SBP-BSC, after verification of export performance as per EF-1 statement(s) by FEOD at the end of each financial year.

3 Other instructions on the subject shall remain unchanged.

Monday, March 9, 2009

Mid‐Year Review of Economic Situation of pakistan

Mid‐Year Review of Economic Situation of pakistan
(July‐December 2008)



Pakistan economy is facing mounting pressures from ever‐rising inflation, food prices, the
acute power shortages, a bewildering stock market, a perceptible slowdown in the
manufacturing and services sectors, a sharp increase in interest rates, and widening current
account deficit. The Economic Stabilization Program of the government aimed at reversal of
the situation to promote a stable macroeconomic environment. Signs of early recovery are
becoming visible while fiscal and current account deficits has depicted improvement,
exchange after depreciating by almost 16‐18 percent in the period July‐November 2008 has
remained stable at Rs.79 to a dollar, inflation has started responding to the demand
management, and foreign exchange reserves are starting building‐up. A brief review of the
economic situation during the first half of the current fiscal year 2008‐09 is given below link

Mid‐Year Review of Economic Situation of pakistan

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The Implications of the Global Financial Crisisfor Low-Income Countries

The Implications of the Global Financial Crisisfor Low-Income Countries

The IMF report says that the global financial crisis is expected to have a major impact on low-income countries (LICs). The crisis is projected to increase the financing needs of LICs by at least $25 billion in 2009.

REPORT

Saturday, March 7, 2009

Coca-Cola to invest another $2 billion in China

Coca-Cola to invest another $2 billion in China

HONG KONG (Reuters) - Coca-Cola Co, the world's largest soft drinks maker, said on Friday it will invest $2 billion in new plant and distribution infrastructure in the next three years in China.
The company would also speed up development to ensure products suit local taste, it said in a statement.
The $2 billion investment comes in addition to the $2.4 billion already committed to Huiyuan Juice Group, a company spokesman said.
Asset prices have come down amid the global financial crisis, which triggered concerns that the Coca-Cola's takeover bid for Huiyuan may not go through. Huiyuan's share price, which edged up 0.66 percent on Friday, was traded a quarter below Coca-Cola's offer of HK$12.2 per share.
But Huiyuan Juice, the country's top juice maker, said earlier this week it was not aware of any changes in Coca-Cola's bid for the company and said the U.S. company would be obliged to make the offer if pre-conditions were met.
If the bid is successful, it would be the largest acquisition of a Chinese firm by a foreign rival. The deal is pending Chinese government approval.
"Our commitment and confidence in China never wavers," Muhtar Kent, president and CEO of Coca-Cola, said in the statement.
The company's largest innovation and technology center in Asia was opened in Shanghai on Friday. The $90 million center was part of a three-year investment plan in China, it added.

Central banks introduction


Central banks introduction

A bank's bank and a public authority that regulates the nations depository institutions and controls the quantity of money.

functions are:

1) Set monetary policy
2) determine how the economy behaves
3) Respond to economic and financial market conditions within their jurisdiction.
4) Control money supply
5) Regulate the banking system
6) issue currency

Friday, March 6, 2009

BoE cuts rates to 0.5 percent, to pump money into economy

BoE cuts rates to 0.5 percent, to pump money into economy


LONDON (Reuters) - The Bank of England cut interest rates by 50 basis points to a record low of 0.5 percent on Thursday, and said it would pump 75 billion pounds of new money into buying assets, mostly gilts, to combat the recession.
UK government bonds soared on the news the BoE would be starting so-called quantitative easing -- effectively printing money -- on such an aggressive scale over the next three months. The asset buying program equates to around 5 percent of GDP.
Doubts remain over whether it will work but the BoE may have had no choice -- the economy shrank at its fastest pace in nearly 3 decades at the end of 2008, house prices are sinking at record rates and hundreds of thousands of jobs have disappeared.
"The world economy has turned down very rapidly since last Autumn, the amount of money is not growing at all, and the economy is in a recession, so we need to increase the supply of money," BoE Governor Mervyn King said on Sky Television.
The government set the BoE an overall limit of 150 billion pounds for new money it can create, though 50 billion of this is money which had been previously earmarked for the Asset Purchase Facility but will now be unfunded.
Quantitative easing has previously only been tried in Japan in the early part of the decade with limited success. But it has now become a watchword for central banks everywhere as interest rates near zero in the most serious world downturn for decades.
The European Central Bank also cut interest rates by 50 basis points to a record low of 1.5 percent on Thursday. U.S. interest rates are between 0 and 0.25 percent and Japan's are at 0.1 percent.
Economists said the BoE would stop at 0.5 percent, after cutting by a total of 4.5 percentage points in six months, due to worries that very low rates could start having a counter-productive effect by hitting bank profits.
"We expect this to be the final reduction in policy rates, with Bank Rate maintained at this level for a considerable period," said Ross Walker, UK economist at RBS. "Overall, the scale and timing of the QE operations appears significant."
"The lasting benefits for credit availability and demand are much more uncertain but, given the severity of the macroeconomic and financial backdrop, it is worth a try."

Wednesday, March 4, 2009

Banking jobs

Banking jobs

Banking industry of Pakistan is expanding very fast offering numerous opportunities for the talented professionals of Pakistan. The banks are rightly looking for relevant talent and therefore advertising on regular basis. Direct link with bank advertising the position are created for your convenience. Best of luck.

Visit at jobs

Downturn to be considerably deeper than IMF forecast: OECD


Downturn to be considerably deeper than IMF forecast: OECD

PARIS (Reuters) - The global economic downturn will be considerably deeper than even the International Monetary Fund forecast a month ago, the Organization for Economic Co-operation and Development's chief economist Klaus Schmidt-Hebbel told Reuters.
Further substantial cuts in interest rates by the European Central Bank and Bank of England are totally justified, he said in an interview. These were to be expected in response to the worst spell the economy has suffered since 1946, when military spending plunged after World War Two.
"The recession will deepen...there's no doubt," he said. "I think this quarter will be the worst quarter of all."
On January 28, the IMF cut its forecast for global growth to 0.5 percent in 2009 from an earlier prediction of 2.2 percent. It also forecast a 2.0 percent slide in economic output from the world's most advanced economies as a whole, an equally large downgrading of forecasts it had made in November 2008.
Even those drastic revisions failed to reflect the extent of the downturn at this stage, said Schmidt-Hebbel.
He is preparing new forecasts for publication at the end of March by the Paris-based OECD, which will be cutting its own predictions from those it made last November.
"The shape of it will be a significantly deeper recession than what was forecast by the IMF in January, at all levels," said Schmidt-Hebbel. "(It will be) significantly deeper and more protracted -- meaning longer than what is embodied in the IMF forecasts of late January."


Tuesday, March 3, 2009

AIG enters record books with $61.7 billion loss

AIG enters record books with $61.7 billion loss

NEW YORK (Reuters) - American International Group Inc posted a $61.7 billion fourth-quarter loss -- the biggest quarterly loss in corporate history -- after reaching a revised rescue deal with the U.S. government that wards off for now the prospect of crippling credit rating downgrades.
The massive quarterly loss, equal to $22.95 a share, was AIG's fifth in a row, bringing the total loss over that period to more than $100 billion.
The U.S. Treasury and Federal Reserve said AIG had posed a systemic risk requiring government action to prevent its problems from damaging the entire financial system.
AIG, the recipient of $150 billion in taxpayer aid last year, will get access to an additional $30 billion under the government's revised plan announced on Monday.
It also got more lenient terms on existing financing and will be able to significantly pay down an outstanding credit facility in a swap that will give the government a preferred-share stake in two life insurance businesses.
AIG also announced plans to spin off part of its property-casualty business, to be renamed AIU Holdings.
The revamped rescue package is the third since last fall when the government stepped in to bail out AIG, once the world's biggest insurer by market value.
The Treasury and the Fed said that AIG, which has counterparties around the globe, was so important to the U.S. economy and financial system that it had to be helped, and they held out the possibility more aid might be needed.
"This will take time and possibly further government support if markets do not stabilize and improve," they said in a statement.