Posts Tagged: ‘government’

WORKING CAPITAL FINANCING –BOON TO BUSINESS

November 8, 2011 Posted by admin

INTRODUCTION:

It is widely accepted that every successful business must have a strong working capital position. It is in this context; an attempt was made to explain the concept and various determinative factors influencing net current assets below:

Gross working capital refers to working capital as the total of current assets. That is to say, Gross working capital = Total current assets.
Net working capital refers to working capital as excess of current assets over current liabilities. In other words net working capital refers to current assets financed by long term funds or capital employed of the business.

 Accordingly, Net working capital = Current assets – Current liabilities

The net working capital position of the firm is an imperative contemplation, as this will determine the firm’s profitability and risk. Here the profitability refers to profits after expenses and risk refers to the probability that a firm will become technically insolvent where it will be unable to meet obligations when they become due for payment.

A finance manager has to make an appropriate financing mix, which will limit the risk and increase the profitability. Financing mix refers to the proportion of current assets financed by current liabilities and long term funds.

There are two approaches which determine the financing mix (1) Aggressive approach (2) Conservative approach.

According to aggressive approach the long term funds are used to finance only the core or fixed portion of current assets (e.g., minimum level of finished goods inventory, raw material etc) and the other portion i.e. temporary and seasonal requirements are financed by short term funds. This is of high risk and high profit financing mix.

According to conservative approach the total current assets are financed from long term sources and short term sources are used only in emergency situation i.e. when there is an unexpected cash outflow. This is of low-risk and low-profit financing mix.

As we observed two methods of financing mix, one method is of high risk high profit and other is of risk low profit. A finance manager has to trade off between these two extremes.

Operating Cycle:

As there is a time lag between sales and realization of receivables there is a need for sufficient working capital to deal with the problem which arises due to lack of immediate realization of cash against goods sold. The operating cycle is the length of time required for conversion of non-cash assets into cash. This operating cycle refers to the time taken for the conversion of cash into raw material, raw materials into work-in-progress, work-in-progress into finished goods, finished into receivables into cash and this cycle repeats.

The operating cycle length differs from firm to firm. If a firm has lengthy production process or a firm has liberal credit policy the length of operating cycle will be more. On the other hand, if a firm does not extent credit or the firm is not a manufacturing concern i.e. where cash will be converted into inventory directly then the length of operating cycle will be reduced to a greater extent.

The length of operating cycle is calculated based on the following:

  1. Raw materials storage period    (RMSP)
  2. Work in process period              (WIPP)
  3. Finished goods storage period   (FGP)
  4. Debtors collection period            (DCP)
  5. Creditors Payment Period           (CPP)

Therefore Length of operating cycle = 1+2+ 3+4-5

FACTORS INFLUENCING WORKING CAPITAL NEEDS:

A firm should have neither low nor high working capital. Low working capital involves more risk and more returns, high working capital involves less risk and less returns. Risk here refers to technical insolvency while returns refer to increased profits/earnings. The amount of working capital is determined by a wide variety of factors:

  1. Nature of Business: The working capital requirement of a firm depends on the nature of the business. For example, a firm involved in sale of services rather than manufacturing or a firm is allowing only cash sales. In the first instance, no investment is required in either raw materials or WIP or finished goods, while in the second occasion there exists no receivable as there is immediate realization of cash. Hence the requirement of working capital will be lower.

 2    Seasonality of Operations:

If the product of the firm has a seasonal demand like refrigerators, the firms need high working capital in the periods of summer, as the demand for the refrigerators is more and the firm needs low working capital in the periods of winter, as the demand for the product is low.

3.      Production Cycle:

The term production cycle refers to the time involved in the manufacture of goods. It covers the time span between the procurement of the raw materials and the completion of the manufacturing process leading to the production of goods. As funds are necessarily tied up during the production cycle, the production cycle has a bearing on the quantum of working capital.

The longer the time span of production cycle, the larger will be the funds tied up and therefore the larger the working capital needed and vice versa.

4.Production Policy:

The quantum of working capital is also determined by production policy. In case of the firms having seasonal demand of the products like refrigerators, air coolers etc. and the production policy of the firm determines the amount of working capital requirement. If the firm has production policy to carry production at a steady level to meet the peak demand, this will result in a large accumulation of finished goods (inventories) during the off-seasons and the abrupt sale during the peak season. The progressive accumulation of finished goods will naturally require an increasing amount of working capital. If the firm has production policy to produce only when there is a demand then the firm needs low working capital during the slack season and high working capital during season.

 5. Credit Policy:

The level of the working capital is also determined by the credit policy, as the firm’s credit policy determines the amount of receivables. If the firm has a liberal credit policy, then the firm needs high working capital and the firm needs low working capital if the company’s credit policy does not allow it to extend credit to the buyers.

6. Market Conditions:

The working capital requirements are also determined by the market conditions. In case of the high degree of competition prevailing in the market the firm has to maintain larger inventories as customers are not inclined to wait for the product. This needs higher working capital requirements. If there is good demand for the product and the competition is weak, a firm can manage with smaller inventory of finished goods, as customers can wait for the product if it is not available in the market.

Thus, a firm can manage with low inventory and will need low working capital requirements.

 7.Conditions of Supply:

The availability of raw materials and spares also determine the level of working capital. If there is ready availability of raw materials and spares, a firm can maintain minimum inventory and need less working capital. If the supply of raw materials is unpredictable, then the firm has to acquire stocks as and when they are available for ensuring continuous production.

Thus, the firm needs to maintain larger inventory average and needs larger requirementofworkingcapital.

CONCLUSION:

From the above discussion, it is made clear that the objective of financial management is to maximize the shareholders wealth. Hence, it is needed to generate sufficient profits. The profits generated depend mainly on sales volume. When the goods are being sold on credit as is the normal practice of business firms today to cope with increased competition the sale of goods cannot be converted into cash instantly because of time lag between sales and realization of cash. Further this is possible only through evolving effective working capital policy and better administration on current assets financing.

 

 

 

Dr.R.SRINIVASAN is a Post graduate in commerce and Management. He received his doctoral degree from Alagappa University in 1997. He is now Working as an ASSOCIATE PROFESSORin Post graduate and Research Department of Corporate Secretaryship at Bharathidasan Government College for Women (Autonomous), Pondicherry University, Puducherry.He currently teaches Accounting ,financial management and Research Methodology Subjects. Before Joining BGCW, he was teaching in SNR College, Coimbatore, Sindhi college, Chennai& T.S.Narayanasamy College, Chennai for eight years. He was with the industry for a short term at Salzar Electronics Pvt. Ltd, Coimbatore. He has about 20 years of teaching experience and having research experience of 15 years. His interests are in Accounting and finance, Capital Market, Quantitative Methods. He underwent the Faculty Development Programme at Indian Institute of Management Ahmedabad during 2000-01. He has presented 20 papers in national and international conferences and has published twenty papers in the areas of Finance and Human resource Management in National Journals. Co-authored a book titled, ‘Investors Protection, published by Raj Publications, New Delhi He has delivered lectures in contemporary finance topics at Pondicherry University. He is involved in consultancy projects for Godrej Saralee, Chennai in the areas of Statistical Applications. He has supervised a number of research projects in the area of corporate finance and Human Resource Management. He is the Board of examiner in corporate Secretaryship and Management for the past two decades.
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Article Source:http://www.articlesbase.com/investing-articles/working-capital-financing-boon-to-business-1359680.html

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What It Entails To Close Business Officially

November 3, 2011 Posted by admin

Even though one does not start a business with the intention of closing in mind, it is helpful to have a strategy on how to officially close it, if and when need arise. There are many issues that may push an entrepreneur to close down a business, some are social, others are legal, while others are finance related. Whatever the reason for the closedown, there are steps that one must carefully consider before declaring the business officially closed.

Much of what needs to be done may depend on the type of business ownership. This is because, when there are more stakeholders, decision making may be biased and may bring up a lot of protocol. One of the most important things to do is to vote for the close of the business. If the enterprise involves more than one overseer or director, minutes of the meeting in which it was decided that the business would be closed should be taken and filed as well as presented to the major stakeholders.

This will show that it was decided without controversy that the venture would head down that road. If your business is registered with the Small Business Development agency, you have to inform them that you are officially closed. The next thing is to cancel or to go back to your books of accounts and see which creditors need to be paid, the pending bills as well as all other dues that need to be taken care of. These will include taxes and all outstanding debts.

Once this is done, surrender all operational documents like trading licenses, operational permits and all other certificates acquired from the government or elsewhere. Once you are done with the above step, notify your creditors, employees, clients as well as other stakeholders that you are now officially closed.

Peter Gitundu Creates Interesting And Thought Provoking Content on Small Business. For More Information, Read More Of His Articles Here CLOSE BUSINESS OFFICIALLY If You Enjoyed This Article, Make Sure You Read My Most Recent Posts Here SMALL BUSINESS

Article Source:http://www.articlesbase.com/investing-articles/what-it-entails-to-close-business-officially-1337697.html

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How To Buy Government Foreclosed Homes

September 28, 2010 Posted by admin

Learn the secrets to finding, buying and financing government owned foreclosures. This is a modern day gold rush for anyone wanting to buy a home a deep discount prices. With a little bit of research you can buy homes for half of their fair market value.
How To Buy Government Foreclosed Homes

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Categories: cigars

Buying Cigars from Cuba

July 3, 2010 Posted by admin

Every cigar aficionado knows that the very best cigars come from Cuba.  Unfortunately, buying the best can often be a risky proposition.  But many cigar enthusiasts are willing to take the risk to get a taste of the very best.  If you’re wondering just how one would get their hands on a box of Cubans, read on.  Because of the relationship between the United States and Cuba, know that there are a lot of people looking to take advantage of cigar aficionados.  Purchasing Cuban cigars should be done with great caution in order to avoid getting duped.  

First, know that importing cigars from Cuba is considered illegal.  The United States placed economic sanctions on the Cuban government in 1963.  Ever since then, Cuban cigars have become the holy grail of cigar enthusiasts.  There is, however, one loophole: visitors to Cuba who return from a sanctioned and licensed visit are allowed to bring back cigars.  However, visitors are not able to bring back more than $100 worth of cigars, and they must be intended for personal use, and not for resale.  

Any other ways of obtaining Cuban cigars is considered illegal.  It is in fact illegal to buy, sell or trade Cuban cigars in the United States.  Fines for illegal trading, buying or selling of Cuban cigars may face up to $55,000 in civil fines.  This type of fine, however, is quite rare.  The more likely scenario is that you’ll have your cigars confiscated.  

When purchasing a box of Cuban cigars, be prepared to fork over quite a bit of your cash.  Prices can range from about $150 to $500 or more.  If you’re offered a box below these prices, chances are it may not be the real thing.  Most Internet businesses that sell purportedly genuine Cuban cigars tend to be imitations.  Always avoid shops or retailers that offer “discounted” Cuban cigars.  

How to get your hands on the real thing?  The easiest way to get a box of authentic Cuban cigars is to head north to Canada.  Buy them in Canada and repackage them so that they are not in their original Cuba packaging.  Remove the rings and place the cigars in a different box.  Customs agents tend to not inspect cigars carefully, and it is generally not considered a serious offense to bring Cuban cigars into the United States.  In fact, many clerks at tobacco shops will even offer to repackage Cuban cigars for you.

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Key West Florida

May 28, 2010 Posted by admin

Key West FL is the southernmost city in the Continental United States. Key West is a city and an island by the same name near the southernmost tip of the Florida Keys and encompasses the namesake island, the part of Stock Island north of US 1, Sigsbee Park and Sunset Key.

Many passenger cruise ships utilize Key West as a seaport. Key West International Airport also serves the area. Naval Air Station Key West offers a training site for Naval Aviation.

Key West is officially known for having the nation’s first and oldest continuous gay and lesbian chamber of commerce. Thus the city’s motto “One Human Family”

Kay West was inhabited by ancient peoples known as the Calusa People in Pre-Columbian times. Juan Ponce De Leon was the first European to visit the area and the island was known as Cayo Hueso. It was established as a fishing and salvage village with a small fort to protect the Spanish colony.

Cayo Hueso literally means “bone key” as it is said that the island is littered with the bones from an Indian battlefield or burial ground. It is thought that the name changed to Key West is an Anglicization of the word “Hueso” that could mean west in English. Many businesses on the island use the name.

Great Britain took control of Florida in the late 1700′s and relocated the Spaniards and Indians to Havana. Florida passed back to the Spanish 20 years later but they did not formally resettle. The island was used by fishermen from Cuba and joined by fishermen from the United States.

The island was deeded to Juan Pablo Salis in 1815 but when Florida was transferred to the United States Salas was eager to sell the island. First he sold it for a sloop valued at $575 and then to a US businessman named Simonton for about $2,000. The sloop trader sold it to a man named Geddes who could not secure rights to the property because Simonton had help from influential friends in Washington and gained clear title. Simonton bought the island because he had learned of the opportunities presented by the strategic location. Simonton’s friend John Whitehead, once stranded on the islands by a shipwreck had seen the deep harbor.

Lying 90 in a strategic location on the deep shipping lane Straits of Florida the harbor was considered the “Gibraltar of the West”. Matthew Perry said into the harbor in 1822 and physically planted the US flag to claim it as US property. He reported on the piracy problems and renamed it “Thompson’s Island” and named the harbor “Port Rodgers”. Neither name stuck. In 1823 Commodore David Porter took charge and tried to rule the island as a military dictator under martial law.

Simonton soon subdivided the island into plots and sold 3 undivided quarters of each plot to private individuals. Simonton spent the winter in Key West and then the summer in Washington to lobby for development of the island and for the establishment of a naval base. Among other first founders are Pardon Green who moved there permanently and became a prominent businessman. John Whitehead lived there for 8 years and partnered with Greene in the firm of “P.C. Greene and Company”. He left the island for good in 1832 returning only once during the Civil War. John Fleeming, active in the mercantile business in Alabama was a friend of Simonton. He spent only a few months in Key West before leaving to marry in Massachusetts. He returned to Key West intending to develop the slat manufacturing of the island but died soon after. The names of these founding fathers of modern Key West used as names for the main arteries of the island.

Many residents of Key West emigrated from the Bahamas. They were known as Counch. They arrived in ever increasing numbers after 1830. Sons and daughters of Loyalists fled to the nearest British soil during the American Revelation. Many of residents of Key West refer to themselves as Conchs and the term is now generally applied to all residents of Key West. The term “Fresh Water Counch” refers to a resident not “native born” but who has lived there for more than seven years. The name is derived from the tradition of placing a conch shell on a pole at the home of a new born baby.

“Bahama Village” is an area of Old town next to the Truman Annex largely inhabited by Bahaman immigrants.

Fishing, salt production and ocean salvage were major industries in the early 19th century. The salvage operations made Key West the largest and richest city in Florida and residents had a high concentration of fine furniture and fancy chandeliers which the locals used in their homes after taking them from shipwrecks on the Florida reefs.

During the Civil War Fort Zachary Taylor was established in Key West after Florida seceded and joined the confederate States of America. It was an important outpost and now contains the largest collection of Civil War cannons ever discovered in a single location.

In 1912 Key West was connected to the Florida mainland via the Overseas Railway extension. The railway created a landfill at Trumbon Point for rail yards. In 1935 the Labor Day Hurricane destroyed much of the railroad and hilled hundreds. About 400 World War I veterans living in camps there working on federal road projects and mosquito control projects in the Middle Keys were also killed. It was too expensive to restore the railroad. In 1938 The Federal Government rebuilt the rail lines as an automobile highway. Completed in 1938 it became an extension of the US Highway 1. The portion of US 1 running though the Keys is called the Overseas Highway.

Numerous artists and writers have come to the Keys but the two most associated with the island are Ernest Hemmingway and Tennessee Williams. Hemmingway reportedly wrote 2 novels “A Farewell to Arms” and “To Have and Have Not” while living in the Keys. The Ernest Hemingway House and Sloppy Joes Bar have become important tourist’s attractions. The Hemingway House is currently inhabited by six or seven toed polydactyl cats descended form Hemingway’s original pert named “Snowball”. The cats live on the grounds and are cared for by the Hemingway House even though the USDA complains about the number of them housed there. The Key West City Commission exempted the house from a law prohibiting more than four domestic animals per household.

Tennessee Williams is said to have written the first draft of “A Streetcar Named Desire” while staying at the La Concha Hotel. He bought a permanent house and listed Key West as his permanent residence. Williams’ home in the “unfashionable” New Town neighborhood is quite the contrast to the elegant Hemingway house. It is a very modest bungalow. The house is privately owned and is not open to the public. The Tenn4essee Williams Theatre is located on the campus of Florida Keys Community College on Stock Island.

Key West is much closer to Havana than to Miami. In 1890 it had a population of nearly 18,800 which made it the richest and biggest city in Florida. The population was nearly half Cuban descent and the city had a succession of Cuban mayors. Cubans were reportedly active in nearly 200 factories in town producing cigars.

The Battleship Maine was blown up after sailing from Key West to Havana which ignited the Spanish American War.

Pan American Airlines was founded in Key West to fly visitors to Havana.

John Kennedy used the phrase “90 miles to Cuba” in his speeches against Fidel Castro.

There were regular ferry and airplane services between Key West and Havana until the revelation in 1959. Refugees flooded into Key West during the Mariel Boatlift and continue to come across the dangerous stretch of waters.

In 1982 Key West and the rest of the Keys tried to declare independence and become the “Conch Republic” in a protest over US Border Patrol blockades. The blockade was set up in response to the Mariel Boatlift. This blockade created a 17 mile traffic jam when the Border Patrol stopped every car to search for illegal immigrants. The Florida Keys were virtually paralyzed as tourism nearly ground to a halt. Couch Republic flags and T shirts are still popular souvenirs for visitors. The Counch Republic Independence Celebration is celebrated each April 23.

Key West was always an important military post. At the beginning of World War II the Navy built the first water line extending the length of the Keys to serve the Naval Air Station. The main facility on Boca Chica is where the navy trains pilots. There are 3400 civilians and 16oo active duty military personnel along with family members. The area next to the old For Taylor became a submarine pen and was used for the Fleet Sonar School.

Key West Florida or visit our Self Storage Search Engine

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Categories: cigars

Is the government going to ban all mail order tobacco?

April 22, 2010 Posted by admin

I heard from a friend that the Senate was about to pass legislation that would make it illegal to send or receive any type of tobacco (clove cigarettes, cigars, hookah tobacco, discount cigarettes, everything) through the mail or FedEx/UPS?

Has anyone heard of this?

I can’t believe that I wouldn’t have heard something in the news about this by now, he says it’s almost law already.

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Tags: going, government, mail, order, Tobacco
Categories: cigars

Is the government going to ban all mail order tobaccos?

April 19, 2010 Posted by admin

I heard from a friend that the Senate was about to pass legislation that would make it illegal to send or receive any type of tobacco (clove cigarettes, cigars, hookah tobacco, discount cigarettes, everything) through the mail or FedEx/UPS?

Has anyone heard of this?

I can’t believe that I wouldn’t have heard something in the news about this by now, he says it’s almost law already.

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Tags: going, government, mail, order, tobaccos
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The U.S. Government provides inside information in the commodity markets

January 2, 2010 Posted by admin

By Floyd Upperman, Commodities Trading Expert

The U.S. Government provides inside information in the commodity markets

The U.S. government publishes a weekly report called “Commitments of traders” or “COT” which provides a very unique view of the futures and options market from the inside looking out. 

The Commodity Futures Trading Commission (“CFTC”) is the U.S. government agency responsible with policing and regulating trading on U.S. futures and options markets. The agency keeps track of all trading activity that takes place in these markets. The CFTC’s power and authority to oversee all trading activity gives it unique access to inside information in regards to the identities of market participants and their positions.  This information in the hands of futures and options traders can be extremely powerful.  Many people believe this information is heavily guarded and kept out of reach to individual traders, and in most countries that is indeed the case, but not in the U.S. 

The CFTC is mandated to keep the marketplace fair for all participants, big and small, and to prevent price manipulation from taking place. To achieve this, the CFTC releases certain information to the public on a weekly basis. This information is contained in the Commitments of traders (“COT”) report. The COT contains a summary of all positions held by the largest market participants. Making this data public helps to provide market transparency and gives the public a certain ability to police the markets as well. In addition to that however, it also gives traders access to a powerful tool. It helps to level the playing field between large and small speculators, though that may not be the intended effect. Having access to weekly changes in positions held by large commercial producers, processors, and users of the world’s commodities provides the little traders with a wealth of information that can never be obtained through any price indicators!

The weekly COT data provides individual traders with inside information regarding changes in hedging activities by commercial producers as well as speculative activity by the world’s largest money managers and swap dealers. The CFTC releases all of this information to the public weekly via the Commitments of Traders (“COT”) report. 

It still amazes me how few people actually know about this report. And of those who know about it, few really understand the information and know how to put it to use. I’ve spent the last fifteen years studying this data and building entire trading strategies around this information. Recently (2009) the CFTC has begun to improve the report and is now even breaking down positions further in an effort to provide greater clarity into the individual market participants.

I am thrilled that that the U.S. government provides this wonderful service (no other government in the free world provides such a service) and yet I am also still puzzled how few people know the report exists. If you are trading futures, an examination of this report is like turning on the lights in a dark room! The positions are all revealed. The report provides a detailed breakdown of all positions and discloses which market participants (by category) are holding the positions. Amazing!

In 2006 the CFTC began a pilot to provide greater clarity of the commercial category, which had begun to change due to new trading practices (pension funds and swap dealer activity). To address these changes the CFTC began releasing a supplemental report called “CIT” or commodity index trader report in twelve agricultural markets. The CIT report discloses the positions of commercial producers and commercial consumers on a weekly basis. These large commercial institutions utilize the futures market to hedge their cash exposure in the underlying physical markets. For example, an energy consumer (e.g. airliner) may use the futures markets as a form of insurance; to lock in the price they pay for their energy consumption in the future. This is called “hedging” and it reduces a business’s risk to future market fluctuations.

An airline which consumes jet fuel can use the futures market to lock in the price they pay for their fuel over the next five years. This hedges their exposure to the risk of sharply higher prices in the next five years. If an unforeseen event were to occur which causes fuel prices to sky-rocket, the company would not have to worry as they would have their price secured for a predetermined period (in this example five years). These commercial consumers and producers are widely considered to be the most knowledgeable group of traders in the futures markets.

The Trading Groups in the COT Report

 The commercial entities typically know more about the true supply and demand than any other trading group. There are two other categories of traders in the markets and their positions are also disclosed in the COT report. These are Large trader (managed money) positions and small speculators. The large traders are usually funds, such as a hedge fund, which typically use price indicators such as trend following techniques combined with fundamental information. What is interesting here is that most of the fundamental information that gets reported to the government (such as crop reports) all comes from the commercial traders. Thus, that’s why the commercials are widely considered to be the most “knowledgeable” group in the markets.

The COT report is the kind of information you’d be happy to receive once in a lifetime, yet few people are aware that the U.S. government actually publishes this information on a weekly basis. 

This information has provided the public with a ‘heads up’ to massive movement in and out of various futures markets, including the U.S. stock market. Consider the Nasdaq stock index at the height of the internet bubble at the turn of the last century. When the Nasdaq was trading around 5000 (its all-time high at the time) the COT report showed the commercial traders were actually selling off all of their long positions in the futures market and in a little over a weeks’ time had accumulated a record size short position in Nasdaq futures!

This article is an excerpt from the free e-book Slipstream Wealth. Read the full chapter in the free e-book Slipstream Wealth downloadable at http://www.slipstreamwealth.com

Floyd Upperman is recognized as the leading expert and analyst of Commitments of Traders (COT) data. He is the author of the highly recognized commodity trading book “Commitments of Traders” and is one of the world’s foremost authority on this long neglected subject. Read his full article at http://www.slipstreamwealth.com

Article Source:http://www.articlesbase.com/investing-articles/the-us-government-provides-inside-information-in-the-commodity-markets-1642387.html

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