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Category Archives: Finance

Types of Financial Markets

Stock Markets
A market in which shares of stock are bought and sold is called stock market. The word ‘stock’, in American usage, means equity or ownership in a corporation. A share is the basic unit of a company’s capital, which it tries to raise from the stock market. When you own a stock, you are referred to as a share or stockholder. A stock shows that you own a small fraction of a corporation; hence if you buy stock in the Pepsi Corporation and they come out with a ‘cool’ new drink that becomes a hit, then you get to share the profits. A stock also gives you the right to make decisions that may influence the company. Therefore, the more stocks you own, the more decision-making power you have.

FOREX Market
Foreign Exchange is the simultaneous buying of one currency and selling of another. The foreign exchange market is the largest financial market in the world. The world’s currencies are on a floating exchange rate and are always traded in pairs. Here, settlement is made for international purchases and sales, i.e., for exports and imports, as also for payments international purchases and sales of assets. Operating virtually round the clock, the forex market trades enormous amounts of money, estimated at several trillion dollars daily.

The forex market is not centrally located. It is an over-the-counter market where business is conducted through telephones, computers, fax machines etc. Among its members are large corporations, commercial banks, money centers, pension funds and investment banking firms. As individuals or companies from one country trade across borders, the need for foreign currency arises. The resultant trading differential generates profits and keeps the forex market in animation.

Debt Market
Debt is the liability or obligation in the form of bonds, loan notes, or mortgages, owed to another person or persons and required to be paid by a specified date (maturity).

It is one in which mainly debt is transacted which could be in the form of debt instruments or cash. In the first place, there is the money market a huge market trading in debt instruments with an original maturity of one year or less. Typical instruments here include Treasury Bills, bank certificates of deposits etc. Secondly, there is the bond market in which long-term debt obligations are traded. As such, the bond market is the long-term complement to the money market.

I. The Money Market:
In this, the short-term surpluses of financial and other institutions and individuals are bid by borrowers, comprising institutions and individuals and also by the Government. In other words, a money market is one in which short-term funds are borrowed and lent. The borrowers are traders, speculators, brokers and producers of various commodities as well as government and institutional borrowers. The lenders include commercial banks, insurance companies and other institutional borrowers.

II. The Bond Market:
Bond market is the market for all types of bonds, whether on an exchange or over-the-counter. A bond is a debt instrument. An example of a bond can be a debenture. The following are the terms mostly used in the bond market.
Bond Term: The term of the bond is the number of years between the date it was initially issued and the date it matures.
Current Yield: A current yield is simply the yearly amount you receive in coupon income, divided by the market value of your bond. The current yield does not take into account the timing of coupon interest or the interest you might earn when you invest your coupon income.

Equilibrium in Financial Markets
Financial markets are said to be perfect when the following conditions are met:
1. A large number of savers and investors operate in markets.
2. The savers and investors are rational.
3. All operators in the market are well-informed and information is freely available.
4. There are no transaction costs.
5. The financial assets are infinitely divisible.
6. The participants in the market have homogeneous expectations.
7. There are no taxes.

On the whole it can be stated that equilibrium is established in the financial markets when the expected demand for funds for short-term and long-term investments matches with the planned supply of funds generated out of savings and credit creation.

Fund Manager

Managing investments is not an easy job. Fund managers need to know the pulse of the market and ensure that clients get good returns on their investments. Engaging in extensive market research is an integral part of the job. Some individuals or firms specialize in certain kind of investments like equities, bonds, etc. Large private investors also hire fund managers and refer to them as wealth managers. The basic objective of these professionals is to invest money for the clients and make them a profit.

Duties

Fund managers are mostly employed by asset management companies, financial institutions, and specialist stock investing firms. Eligible candidates who have an educational background in business schools and have certification from the American Academy of Financial Management will be preferred. Fund managers are in demand, especially during these times of economic turmoil. The job description can vary a bit for the different specialties. Here are a few.

Hedge Fund Manager
Hedge funds are unregulated and therefore have large sums of money invested in low risk and high risk return options. Keen market acumen, an ability to predict market trends, and doing lots of research is the main task of the hedge fund manager.

The salary, according to statistics, ranges around four billion US dollars. A person working as a hedge fund manager also needs to track global interest rates and the changing economic policies of different countries. You need to at least have a degree from a business school with a major in finance to be eligible for the job.

Mutual Fund Manager
They are mostly hired by asset management companies to take care of investments made on behalf of the clients in mutual funds. As mutual funds are professionally-managed collective funds, managers will have to carefully invest these funds in stocks, securities, commodities, etc. They will also have to keep track of the international market and prevailing political conditions that might affect the financial markets.

Investment Fund Manager
Organizations and individuals hire investment fund managers for financial advice and to wisely invest their money to make a profit. Investment fund managers will have to research the stock market to find opportunities to profit, by investing in company shares. They will also identify real estate, which can be bought and sold later to make a profit. These managers will also have to liaison with clients and managers from different companies to investigate investment opportunities.

Equity Fund Manager
This job profile requires individuals to manage the funds within one or multiple equity funds. They will also have to interact with investors and liaison with clients for financial planning. They will also have to implement strategies that will help manage the organization’s investment portfolio. Monitoring the markets and preparing reports regarding the performance of equity funds on a quarterly basis or as stipulated by the firm, is one of their tasks. They will also have to oversee international equity funds and keep an eye on foreign policies and international political environment.

Facts About Gross Payment

The definition of gross payment says that, it is the total amount of salary or wages paid to any employee by the employer before any kind of deductions made. It is nothing but the total amount offered by the employer for the services being given by the employee in a full year. Your gross pay reflects how much amount is being paid to you by your employer in every pay period.

While trying to understand this concept, you need to be aware of two terms – hourly gross pay and salaried gross pay. For calculating the hourly gross pay, you need to multiply the fixed hourly pay rate with the number of hours served by the employee in the pay period under discussion. The technique of calculating gross pay for salaried employees of corporations is slightly different. Every employee working in a firm has a fixed total remuneration. If this amount is divided by the total number of pay periods, you will get the salary gross payment.

When some items are deducted from the gross pay, the amount which is left is the net pay or in-hand salary of the employee. The deductions are compulsory and are made from every payment made to the employees. The taxes to be paid to the government authorities are the most important deductions from the salary. These taxes can include the national taxes, taxes to be paid to the respective states in which the employee works and also the local taxes.

The second major deduction would be that of the health insurance costs as the health insurance cover is provided by the employer. This too will be deducted on a monthly basis. Social security deductions are also considered while calculating the net income of a person for a year from the gross income. Given below is the formula that will help you calculate the net pay.

Net Payment = Gross payment – (social security + tax deductions + state and local taxes).

Taking Financial Decisions Based on Gross and Net Pay

Whenever an employer advertises about job vacancies and mentions the salary which he is offering, it is the gross salary most of the time. So, that is why you get a paycheck of an amount which is little less than the promised amount at the end of the month.

Whenever you consider decisions of opting for a loan or buying anything big, it has to be on the basis of the net income and not the gross salary. This is because in case of a loan availed, you will have to pay the monthly installments from the net salary. Taking an investment call on the basis of the gross income could be a wrong decision that can stress your finances greatly.

Steps to Set Financial Goals

  • Create a Plan

The best way to set your financial goals is to first set the plan you will need to achieve the goals. This includes understanding how much of an income you are getting per month which includes your regular job, other small incomes, where you are spending and how much etc. Once you are conscious of all these details, you will be more aware of how to go about your plan to achieve your financial goals. You can also set a time limit has to how long you will need to achieve these goals when needed.

  • Managing your Finances

Once you have set your plan, you must learn how to manage the finances for it. That means curbing on unnecessary spending, ensuring that you stay within budget every month and take measures to save with every opportunity. One way of managing your account is to divide your income into three parts where each part can be used for different purposes like spending, saving and investing. If you have a credit card, you can switch to a more advantageous debit card as this will not only allow you to reduce you’re spending, it will also limit it to a fixed amount.

  • Setting limits for Spending

If you are an impulsive spender, be it clothes, food or even luxury items the best way to prevent this from affecting your finances is to set limits for spending. This is best done through the prepaid card as there is a certain limit to where you can use the card. The atm cardis an ideal way to spend your limitations by just removing the right amount of finance you will be using for the month, rather than withdrawing funds multiple times. The debit card is also one way to curb impulsive spending as you can use only a certain limit in the account.

  • Cutting Down on Costs and Save

The best to set your goals is to cut down costs when possible. Instead of using cash for retail purchases, you can use the credit or debit card to gain points which can be redeemed for purchases later. You can also use the atm card to withdraw a limited amount of cash and spend only within that amount. It also eliminated the need to withdraw multiple times and increase the charge for every additional withdrawal.

Debtor Finance Services

Debtor finance services are those services that show as a point of convergence man between the transactions and the little business firms. Thusly it could be said that they are an astounding help to the individuals who are suspecting begin with little business either outside or at home itself. It is said that these affiliations are there since as long as the year 1700 and has seen and survived different scenes of emergency and subsidence. Despite the way that different sorts of business houses can use the services of such firm at any rate it is fitting and recommended for the most part for the affiliations that are financially powerless.

Nuts and bolts and need of these services

Affiliations who are more rotated around the headway in their benefit typically enlist some of these services. Of course they have imperativeness and need in some preferable places liberally all the more over these ones. There are sure associations that need suitably enhanced flow in cash so it gets to be less unpredictable for them to get rebates from the unique suppliers. There are different unique works that these affiliations that are in addition known Trade finance affiliations do.

These services are essentially for social event duties from the clients and spots because of which the affiliation is remaining up to a difficulty all dynamic deck. There as frequently as could be expected under the circumstances a period can arrive when you have expected a parcel from a client however that specific client has neglect to pay you on time. At this specific time, these master services acknowledge proprietorship taking out the part from the client at fitting time in a manner so that the relationship of the client with the affiliation likewise stays sound.

Working of these services

These Trade finance affiliations have an adjusted general course of working however different special firms can wear down various ways and systems. A rate of the standard working techniques that help the different business houses may be explained to aggregate things up. They not basically handle transactions and aggregate responsibilities for the affiliation; they besides perform diverse other changed exercises. They do set up the stock now and then the season is at top. They in addition help the business firm in upgrading their things and services for better deals in the business as showed by the client incline. Notwithstanding all these services they additionally help the social affair to make and offer more things and services of the affiliation.

Getting the best services for the business

As reviewed these services are a remarkable exertion in giving unprecedented profits to numerous people little business firms who are not ready to handle everything, particularly transactions, on their own. They are best utilized every now and then of subsidence and distresses when there is less any longing of the business firm to benefit. Subsequently, Debtor finance services are an exceptional decision nowadays for individuals who are plunging into little scale business and wish to make unprecedented measure of benefit in lesser time. These could be also profitable in instances of specific enormous houses in addition however the little house specialists are the most who take help the most.

What’s Assets ?

It is a mandatory procedure for companies to keep a record of their financial dealings. A reflection of these is seen in the form of a balance sheet. A balance sheet has two sides, one which records all the liabilities of the company, and the other, which records the assets of the company. Liabilities are basically what the company ‘owes’ and assets are what the company ‘owns’. In the assets section, there is a division into tangible assets and intangible assets. Let us delve deeper into these concepts below.

Intangible Assets
Just like the general meaning of the term, even in the finance and accounting of a company, anything that cannot be seen or touched is considered intangible. Hence, assets that a company owns, but cannot be seen, touched or measured using physical scales and measurements is called an intangible asset. Examples of intangible assets are goodwill, copyrights, trademarks, royalties, patents, franchises, etc. Since these cannot be seen, but still contribute to the total monetary ‘value’ of the company, they are termed as intangible assets, but assets nonetheless.

Tangible Assets
As opposed to the above, anything that can be seen, felt or touched in the physical form is tangible. Hence, all the assets that a company owns, which can be physically seen, felt, touched, and measured using physical scales, are said to be tangible assets. Given below are some features of tangible assets followed by some examples.

Characteristics

Enlisted below are some of the main features of tangible assets.

  • Any asset that has a physical form which can be seen and touched is a tangible asset.
  • Tangible assets generally form the major chunk of the assets section in a balance sheet.
  • They are also called reproducible assets, hard assets or real assets of the company.
  • One of the main features of tangible assets is that they are subject to depreciation from the minute they are purchased. For instance, if a vehicle is purchased for $4000 today, it will immediately become second-hand, and even if sold the very next day, will have a lower sale value.
  • Tangible assets, because of their definite physical form, can be used to easily fix the ‘price’ of a company.
  • However, the same feature acts as a negative, because it does not help to put a finger on the ‘value’ of a company. The total value will include intangible assets as well.
  • Another important use of tangible assets is that they can be used as collateral or security for the purpose of obtaining a loan. In this sense, the secured loans that a company holds, are generally ‘secured’ against the tangible assets that are on the assets side of the balance sheet.

Examples

Given below is a list of the most commonly used and occurring tangible assets in the accounting field.

  • Land
  • Machinery
  • Equipment
  • Cash or Bank Deposits
  • Real Estate
  • Items included in the company’s inventory
  • Vehicles
  • Building
  • Accounts Receivable

Types of Finance Companies

Investment Banks
Investment banks would be rated as the most important in the world of finance. These banks act as middlemen in the execution of big transactions which involve exchange of securities/shares. So, whether it is helping common investors buy stocks, or helping giant or medium-sized corporations to issue fresh equity, investment banks always play a key role. Investment banks like JPMorgan Chase and Wells Fargo are well-known for their wealth management division which caters to retail as well as institutional investors.

Private Equity Firms
The private equity firms work in a professional way, and are known to execute several billion dollars of transactions in a year. These firms approach cash rich investors to invest their money in their firms and finally, they use this money to buy stakes in privately managed companies. Private equity firms have highly qualified analysts who study the fundamentals and growth prospects of the firms before investing the company’s money in them.

Hedge Funds
Hedge funds are those funds in which rich global investors invest their money for the purpose of wealth maximization. These hedge funds are managed by professional hedge fund managers who have vast experience in hedging, and have many clients with them. In the United States of America, there are many rules and regulations for hedge funds which make it compulsory for them to have minimum income and hence only the top finance brains in the world are seen actively involved in hedge funds.

Way to Get a Finance Job

Build a Strong Resume

A candidate’s resume is responsible for creating the first impression on the interviewer. Hence, a strong resume with no typos, proper formatting, and accurate information must be built. Candidates who are unable to build a good resume must not hesitate from taking the help of professional resume builders. With a perfect resume, the candidate’s chances of being shortlisted for the interview are highly increased.

Take up Internships

Candidates lacking full-time experience in finance face difficulty in obtaining jobs. Generally, only entry-level positions are open to such candidates. As most of the entry-level positions do not require experience, the number of candidates with no knowledge of the work involved will be substantially high. To stand apart from the group, candidates can gain some work-related knowledge by taking up internships in finance companies. Internship will help the candidate understand how the industry works, what are the various departments involved, and how the work flows through these departments to finally meet customer demands. When interviewers come to know that a particular candidate is well aware of the functioning of the industry, his chances of getting selected are more as compared to others.

Work for Different Internship Programs

Diversifying areas of internship helps the candidate in gaining perspective of different functions in the finance industry. For example, equity trading, bonds, portfolio management, commodity trading etc., are all individual areas of the finance industry, and each of them has a different kind of work involved. Working in different areas during internship can give a clear picture to the candidate and make the choice of a field easy in the huge finance industry. This will also be a plus point for being selected in the interview, as it will reflect the candidate’s knowledge in various areas and his dedication towards the industry.

Build Your Network

Many finance companies offer internship programs to identify prospective employees for the upcoming year. A good performance during the internship can open the doors of a company for a well-performing candidate. Building healthy relations with full-time employees working in the company can be a good way of getting into the business. Apart from this, going for informational meetings with people working in the industry helps the candidate to learn about their companies and other relevant information. While doing so, candidates must maintain a formal approach and try not to be too aggressive. Calling up contacts several times or sending them e-mails five times a week, can force them to avoid meetings, which will not be good for the candidate.

Read Financial News

Going through financial news may not seem interesting at the beginning to candidates taking their first step towards the industry. This is because they lack understanding and knowledge about the whole subject. However, with consistent reading, candidates will be able to remain updated about the happenings in the finance industry, which can be showcased at the right time during the interview. Interviewers are generally impressed with such candidates who keep track of what’s going on in the industry, even when they are not directly associated with it.

Learn Financial Terms and Jargon

During interviews, it is highly possible that the interviewer will ask the candidate meanings of various financial terms which are used every now and then in the workplace. Being equipped with the correct answers will leave a mark on the interviewer and increase the chances of being selected, even if the candidate does not have experience.

Prepare for the CFA Exam

The Chartered Financial Analyst (CFA) is a reputed designation in the finance industry. A candidate needs to appear for three exams and gain four years of relevant experience to achieve this designation. Every level of exam needs the candidate to fulfill 250 study-hours. Therefore, any candidate appearing for the CFA exam is rated a bit higher than others, as finance professionals know what it takes to become a Chartered Financial Analyst.

Improve Communication Skills

A candidate who is able to present his thoughts in front of the interviewer clearly, is better than the ones who fail to express themselves properly. Improving communication and presentation skills will help the candidate to perform better in the interview. It is better to practice commonly asked questions so that any blunder during the interview can be avoided. An interview lasts about 20-25 minutes. It is during this short time period, when good candidates are selected and not-so-good ones are rejected. So, it is better to be prepared beforehand for the face-to-face session.

Credit Card Benefits

Protection against price:

It is not uncommon for individuals to suffer from buyer’s remorse after purchasing items of great expense. The reasons for this remorse can vary, but one of the main reasons is better pricing. With the price protection feature, you can get a refund on the difference up to a certain amount. Additionally, you will need to make this application within a certain timeframe of the purchase.

Guarantee of returns

In some instances you may not be happy with your purchase. However, the retailer may not accept the item back. In this case, if you have paid with cash or a debit card, you may be out of luck. However, certain credit cards do offer a guarantee on such returns. You will need to file an application in order to get the refund you require, regardless of the store policy. However, you must ensure that you submit this claim within a certain timeframe of the purchase date.

Extended product warranty

Electronics and appliances are an expensive affair. Paying with your credit card for these items can help you collect reward points. In addition to this, you can also use this card to avoid paying extra finances for any extended warranty. Some credit cards offer an extension on the manufacturer’s warranty. However, there are certain terms and conditions that are associated with this factor, so you must read the contract before you sign up for it.

Purchase Protection

Your purchases, especially gadgets and electronic equipment has a high chance of getting stolen. If you purchased an item with a credit card that has a purchase protection clause, then consider yourself lucky. Through this clause, you may be offered a purchase protection plan from damages or theft, especially if the entire purchase is made on your credit card.

How Asset Finance Works

Asset finance is one of the useful funding arms extended to individuals and businesses when they are in need of funds for renewing or promoting business. What is asset finance and how does it work? Balance sheet assets such as inventory accounts receivable and short-term investments are used to get loans or borrow a sum of money, and security is provided by the borrower on the assets to the lender. The loan acts in conjunction with the laws of traditional loans and institutions, and the company or the borrower simply pledges some assets in exchange for money.

Any kind of loan secured by pledging assets is known as asset-based lending, and the conditions usually imply that the asset is to be retained by the lender if the borrower fails to return the loan within the agreed period and terms. You could say that a mortgage is also a kind of asset-based loan. However, the term asset based lending is only applied to big and small businesses and individuals who take a loan by pledging assets to a bank or financial institution.

Individuals can also avail themselves of this type of funding to raise short-term finance, and the small business sector tends to benefit the most from this kind of funding. Sometimes luxury cars, wine collections, or vintage articles are pledged in order for the individual to get access to asset based funding. Most of these loans go through without much scanning such as credit checks and usually the loans are disbursed by the asset finance company within a day or two. Asset based truck finance is a great funding model highly beneficial for a fleet, or individual owner as it would help to bring in good returns and a borrower has no chance of defaulting on the loan because truck businesses have great track records as money making instruments.

When all doors are closed for the borrower, asset financing companies stand as the savior as they don’t ask many questions and don’t scan your past records. You are likely to receive the loan within a very short period of time – sometimes just 24 hours, and you can carry on with your business without anything blocking your road to progress. The asset finance companies are non-conventional hence they don’t need to ask permission from other people to grant asset based funding to entrepreneurs. If you belong to the SME sector and need finance you will not find a better avenue than asset finance because it is easy to obtain, hassle free and you agree to repay the loan on your own terms and revenue cycle.