All About Financial Ratios

Talking about numbers reminds us of the mathematics classes in school days, when we would invariably get lost in a maze of numbers? Menstruations, formulae, graphs et al. Numbers still remain a put-off. And yet, we seem to share a love-hate relationship with them; otherwise, why do we use them so much and so often?
Through the following story, we will try and demystify some of the most important numbers used in the world of business. The story would come in several episodes. You would find an interesting tale behind each number, only if you care to listen. Our objective is to help you evaluate businesses for investment purposes by making numbers easy to comprehend. After all, owning equity is asking to own a company. And it is imperative that you understand the numbers of the company that you invest in, no?
A business can actually be assessed on the basis of several parameters i.e. profitability (whether it is making money), efficiency (if its making the best possible use of its resources), leverage (whether it has the right mix of debt and equity), solvency (whether it can pay off its debts), liquidity (whether it has cash to meet its day-to-day needs) and so on. All these point to the overall health of a company and hence, to the health of its shareholders.
In order to interpret the company on these parameters, we need to know what goes behind the numbers in the balance sheet and the profit & loss statement.
Let us talk about a company that seeks to manufacture soaps. To begin with, it will need a plant in place. Without the plant there would be no operations, right? To know what the company has, the best place to look for is its balance sheet.
Balance sheet:
A Balance sheet is like a snapshot that captures a mood at a particular instant. It is a financial snapshot of a company at a given point of time.
Gross fixed assets:
Coming to our example, to make soap, the company needs a plant. It also requires some land along with other infrastructure to set up an office. Other facilities like pipelines and waste disposal systems are also essential. These together constitute the gross fixed assets of the company.
Accumulated depreciation:
But nothing lasts forever, the assets wear and tear and need to be replaced at a future date. So, every year, an amount is set aside to meet these expenses. This amount is known as depreciation charges for the year. And the cumulative amount collected for the given period shows up in the balance sheet as accumulated depreciation.
Net fixed assets:
These are nothing but the gross fixed assets less the accumulated depreciation. All they connote is the book cost of the existing assets.
Capital work in progress:

When the company grows and expands its operations, there are often unfinished plants, buildings under construction and so on. These are clubbed under capital work-in-progress. Meanwhile, the plant is ready to commence operations. But can we straightaway get into the act of manufacturing soaps? Not really. Some other current requirements, those of raw materials, need to be met first. The suppliers of raw materials also need to be paid.
Current assets, current liabilities:
Liabilities like the creditors (suppliers of raw materials, fuel, etc. on credit) and provisions for tax that need to be paid immediately are called current liabilities. Similarly, there are some current assets. Unlike plants or buildings some assets like debtors and inventory of soaps that are in the company’s godown can be converted into cash more easily. What is crucial here is that the company’s current assets and liabilities balance comfortably; so that it does not face a cash crunch nor has surplus of cash. The difference between the current assets and current liabilities is called net current assets.
But all this can happen provided there are funds. So, the company raises funds?
Equity:
This is the amount contributed by the shareholders of the company at the initiation of the business. This is simply the number of shares multiplied by the face value.
Reserves and surplus:
As we saw in the profit and loss statement, from the total proceeds received, all the expenses have to be taken care of, tax has to be paid, and dividend has to be given to shareholders. The balance is called the retained profit. This is what the company would retain to re-invest in the business to propel further growth. This would get reflected in its balance sheet as reserves and surplus. Equity and reserves are together known as shareholders funds, funds at the command of shareholders to be invested in the business. They are also referred to as net worth.
Loans:
But the entire business can rarely be funded by shareholders’ funds alone. A company usually resorts to debt to bridge the gap between the requirement and the supply. These are called loan funds. Thus, we have the liabilities, funds owed to shareholders and debt holders, these constitute the company’s debts.
Investments:
After the operations start, money begins to flow in. Just like you put your surplus cash in stocks and other investment avenues, so does the company and the amount is shown as an asset (hopefully, the company makes sound investment decisions!).

Fundemental Analysis

Fundamental analysis of a business involves analyzing its financial statements and health, its management and competitive advantages, and its competitors and markets. The term is used to distinguish such analysis from other types of investment analysis, such as quantitative analysis and technical analysis.
The biggest part of fundamental analysis involves delving into the financial statements. Also known as quantitative analysis, this involves looking at revenue, expenses, assets, liabilities and all the other financial aspects of a company. Fundamental analysts look at this information to gain insight on a company's future performance.
Fundamental analysis is a technique that attempts to determine a security’s value by focusing on underlying factors that affect a company's actual business and its future prospects. On a broader scope, you can perform fundamental analysis on industries or the economy as a whole. The term simply refers to the analysis of the economic well-being of a financial entity as opposed to only its price movements.
Fundamental analysis is performed on historical and present data, but with the goal of making financial forecasts. There are several possible objectives:
· To conduct a company stock valuation and predict its probable price evolution,
· To make a projection on its business performance,
· To evaluate its management and make internal business decisions,
· To calculate its credit risk.
Fundamental analysis serves to answer questions, such as:
Is the company’s revenue growing?
Is it actually making a profit?
Is it in a strong-enough position to beat out its competitors in the future?
Is it able to repay its debts?
Is management trying to "cook the books"?
Quantitative and Qualitative
The big problem with defining fundamentals is that it can include anything related to the economic well-being of a company. Obvious items include things like revenue and profit, but fundamentals also include everything from a company’s market share to the quality of its management. The various fundamental factors can be grouped into two categories: quantitative and qualitative. The financial meaning of these terms isn’t all that different from their regular definitions.

• Quantitative – capable of being measured or expressed in numerical terms.
• Qualitative – related to or based on the quality or character of something, often as opposed to its size or quantity.

In our context, quantitative fundamentals are numeric, measurable characteristics about a business. It’s easy to see how the biggest source of quantitative data is the financial statements. You can measure revenue, profit, assets and more with great precision. Turning to qualitative fundamentals, these are the less tangible factors surrounding a business - things such as the quality of a company’s board members and key executives, its brand-name recognition, patents or proprietary technology.
Financial reports are required by law and are published both quaterly and annually.

Management discussion and analysis (MD&A) gives investors a better understanding of what the company does and usually points out some key areas where it performed well.
Auditied financial reports have much more credibility than unaudited ones.
The balance sheet lists the assets, liabilities and shareholders' equity.
For all balance sheets: Assets = Liabilities+ Shareholders equity. The two sides must always be equal to each other (or balance each other).
The income statement includes figures such as revenue, expenses, earnings and earnings per share.

For a company, the top line is revenue while the bottom line is net income.
The income statement takes into account some non-cash items, such as depreciation.
The Cash flow statement strips away all non-cash items and tells you how much actual money the company generated.
The cash flow statement is divided into three parts: cash from operations, financing and investing. Always read the notes to the financial statements. They provide more in-depth information on a wide range of figures reported in the three financial statements.
Whenever you’re thinking of investing in a company it is vital that you understand what it does, its market and the industry in which it operates. You should never blindly invest in a company.
One of the most important areas for any investor to look at when researching a company is the financial statements. It is essential to understand the purpose of each part of these statements and how to interpret them.

Man - The Maker Of His Destiny

Question (by student)

I have got very few marks in my exams. I am afraid to face my parents. They will scold me. How can I show my face to them? I am depressed and feel like ending my life.

Answer (by Swami Vivekananda)
You have prepared well for your examinations. Your parents know very well that you are intelligent, sincere and honest. Even if you are not intelligent, you have tried to the best of your ability. How can you thin that they will scold you? There may other reasons to get less mark. And even if your scold you, what does it matter. It is their duty to give you good education so that they will be free from worry about your future. They want to see you well-settled in life. They love you and therefore they have the right to scold you. Don’t be so sensitive. Bear it. Try to convince them that you have tried to the best of your ability, and also assure them that next time you will try to do better. Do not be afraid, but be bold to open out your mind to your parents. If you find it extremely difficult for you to cope with subjects in school or college request those to allow you go for a change. All cannot get first rank and achieve merit. Out of thousands there will be a few who are toppers. What about the remaining? Do you mean that others are worthless and useless? Who know they may shine in some field or other. Search your own talents. Find out your own interests and try to master them. You may not be good in studies; but who knows you may become a good artist, singer, poet, champion, cricketer, politician, or a businessman. It is not necessary that all should become doctors, engineers or software professionals. There are many options. Convince your parents about goal in life. They will certainly listen to your request. If it is with in their reach they will surely try to help you. Many great scientists and philosophers were dropouts from school; but they became great. Don’t entertain negative thoughts. Never think of committing suicide even in your dreams. These exams are nothing. You will have to face many more exams in real life. If you are mentally weak, how will you face problems in real life? Do your duty perfectly and be content with whatever you achieve. Next time take up a challenge to perform better, work a little harder, be confident and prove through your actions that you are no less than others. That is the way to come up in life, not by ending life. God has not given this life to waste it in that way.

Business Etiquettes

Etiquette is the way a person presents himself to others, being comfortable and making other people around comfortable. It is very important to practice good manners and etiquettes in order to succeed in your business, be liked by people and maintain good relationships with clients, customers and employees. Complying with popular etiquettes that are prevalent in the region where one is working plays an important role in determining the success level of a person’s commercial endeavor. Etiquette is a very important factor in determining the success or failure of a business or a person. It is easier to make money than to earn respect and accolade from people who know and interact with you like colleagues and employees. Life will definitely be easier if you follow the following Tips on Business etiquettes.

1. Make sure to treat each person you interact with such as a secretary or a janitor, no matter what his or her position in the corporation, with respect and make it a rule to be pleasant to everybody no matter what the situation is.
2. Let people know that you appreciate what they do which will boost morale and improve work quality.
3. Keep records of people who matter to you and acknowledge if they receive a promotion and wish them on their birthdays.
4. When organizing meetings make sure that all the participants know about the schedule, the objective of the meeting, matter that is to be discussed and the expected duration of the meeting.
5. Distribution of minutes and summaries of meetings and thanking each participant after meetings is a basic courtesy.
6. Always return calls, if you are unable to answer have a polite message on the answering machine that will be returned at the earliest. Never be rude or impatient with anyone on the phone.
7. Never make anyone wait, be it an employee or employer, or a business acquaintance. Never be late for a meeting or for work.
8. Dress is also a very important aspect in maintaining good business etiquette. Businessmen have to appear impeccably groomed
9. Women have to dress appropriately and take care that they do not give a wrong impression to their colleagues. Proper care taken can avert a lot of embarrassment.
10. Make sure your employees practice good etiquettes to customers and to each other to be able to work in a friction free atmosphere. Smiling courteous service will definitely help improve business and make a customer become regular.

Things to avoid:
1. Business Etiquette Mistake #1: A Poor Introduction: A handshake is the first impression another person gets of you in the business world. Fumbling here might mean that you're judged to be an undesirable candidate for a job, partner for a business venture, or employer for a promotion. Remember, in the business world, every time you see a career acquaintance both inside and outside of the office, you'll be shaking hands, meaning that your whole business life will be filled with mini introductions. A firm handshake is first and foremost important. If you have a weak handshake, you may come off as a weak businessperson. In addition, stand up to shake someone's hand if you have been sitting and make eye contact. When you are meeting someone for the first time, it is also proper etiquette to repeat his or her name, which will help you remember the name for later as well. Forgetting someone's name is a sure way to make a bad impression!
2. Business Etiquette Mistake #2: Drinking Too Much: At business functions like dinners, holiday parties, and social hours, it is common for the company to pay for an open bar. Even if there is not an open bar, a cash bar or wine may be available. Whatever the case, avoid having more than one or two drinks. These events are meant to be a time for networking; if you want to get drunk, go out to the bar with your friends on the weekend. By drinking too much, you'll come off as unprofessional and you may be labeled as uncommitted to the company. It may also lead you to saying things that you shouldn't say, and it can even be dangerous if you choose to drive home afterwards. Avoiding the consumption of alcohol altogether is the best bet, but if the situation presents itself, exercise a little self control and minimize the number of drinks you have.
3. Business Etiquette Mistake #3: No Table Manners: People are often intimidated by business dinners at fancy restaurants, but if you keep just a few basic rules in mind, you'll eloquently survive any meal. Start with learning what silverware to use. In general, start from the outside and work in, saving the fork and spoon at the top of your plate for dessert. The ladies at your table should be served first, but even if they aren't, wait until everyone at the table has their food before you begin eating. Of course, keep you napkin on your lap, and thank a server who refills your glass.
4. Business Etiquette Mistake #4: Forgetting Your Manners During Emails: As communication technology changes, there are more and more business etiquette rules to keep in mind. One of the biggest mistakes the people make in regards to business etiquette is writing emails that are too casual or inappropriate. Today, email is the communication method of choice, whereas once paper memos were sent. When you're writing any email, use care to keep it professional and polite. In fact, you should think of an email as you would a typical letter. Always address it to the person receiving the email, use proper grammar and spelling, and close with your full name and contact information. In addition, avoid using your office email to send other in the office funny, cute, sentimental, personal or chain emails. If you want to send these kinds of emails, get a free Yahoo!, Google, or MSN email account and use that. Your company email should only be used for professional purposes, like sending memos or asking questions about work-related projects.
5. Business Etiquette Mistake #5: Being Too Casual With Superiors: Lastly, one of the worst - if not the worst - business mistakes you can make is treating your superiors as friends. While some bosses and employees become very close, this is not the rule, and you should always treat your relationship as one that is strictly for business. Do not call someone by his or her first name until prompted to do so, and do not assume that you can take liberties without asking permission, even if it was not a problem in the past. The key is professionalism. Recognize how you're like to be treated were you the boss, and show your superiors that same respect. And who knows? If you avoid this top five business etiquette mistakes, you might actually be that boss someday!

Stress Is Poison

There are great sources of stress for us in every field of life, such as work place, schools, social gathering and in our own home. But, knowing how to deal with stress may save you from a lot of stress and mental agony.
1) Don't be offended when someone hurts your feelings or criticize personally. While it may feel like they are trying to hurt you, they may actually be speaking with good intentions and ignore any generalizations or personality attacks that also come along.
2) Most people won't even rest when they are stressed out and tired. They just keep on going. But over time they'll get overwhelmed, burned out and perhaps crush and burn. Take a rest.
3) Very few things happen to us by surprise. Most things that end up stressing us could have been avoided if we'd carefully planned our time well in advance. On paper maintaining a daily/weekly planner sounds unattractive and ordinary, but is the best thing you could do to avoid becoming overwhelmed with workloads.
4) Never take important decisions while under stress.
5) Planning ahead is the secret of sound financial management without which one can invite a lot of stress. Allocate your income across the categories you need to fund each month.
6) Eating a balanced diet will reduce stress levels overall and give you the mental boost to deal with anything life throws you.
7) Exercise allows you to focus on something else other than worries, for the duration of the workout. Exercises such as yoga also help in causing one to calm the mind, focus internally and become centered.
8) Learning to create or be part of interactive groups/communities helps in weaning away an individual from stress and its effects.
9) Meditating can be as simple as breathing exercises. Visualization in combination with breathing makes an excellent relaxation exercise. Regular meditation, at least 15 minutes twice a day not only helps feel extremely happy most of the time, it helps your creative juices flow with ease. You feel incredibly spiritually nourished.
10) Cut back on (or quit) coffee, pop, tea, cigarettes and alcoholic beverages. All of these products are drugs. They increase panic, anxiety and therefore stress.
11) Instead of blasting the TV with incredibly negative news sometimes just put on calming relaxing music and let it play in the background.
12) Taking just 15 minutes a day to do nothing, is much better for your long term mental health, than how much you can get done in 15 minutes on a day to day basis. If you feel too guilty to take a "nothing break" than indulge in a hobby such as gardening for some well deserved "you time."
13) Physical stress will also cause certain areas of our bodies to tense up. An outstanding, professional massage therapist will easily identify what areas of your body feel tense and tight. They will then be able to work their magic fingers to help relieve tension in those areas.
14) Taking a time out can be invaluable; whether that is by taking a nap or a long bath, or reading an enjoyable novel, or just giving oneself a long night of sleep for once. Of course, taking a real vacation is one of the best ways to get rid of our grouchiness.
You will not be punished for your anger you will be punished by your anger. Whether you deal with stress by aromatherapy, massages, sex or even working on time management skills, it's very important for long term health and wellness that you are not only physically fit, but mentally fit as well.

Lead India - Take Initiative And Build A Team

Marketing Tips To Attract Kids

• In order to attract kids you first have to understand how kids think. Make sure that your staff attending your kid customers knows they should address kids as what they are. Kids think with urgency and when they have something in mind, they want it at the same moment; they are not willing to wait. So now you need to think like a kid. Remember your childhood and think of the things that make you smile and laugh and things which will be useful to you for fun making. When marketing to kids, be a kid.
• Make your products visible to kids so that they can have a feel of that. When you go to shopping mall you generally see that the last shelf contains all the items related to kids like toys, chocolates etc. Have a contest, with the prizes.
• Be kid-friendly. Tell them to come back over and over again...they will listen. Word of mouth advertising continues to be one of the most powerful tools in any business. Allow kids to carry your message.
• The thoughts of kids are very imaginative and creative. They like things which are different and attractive. They have very wild imagination. Like you would have observed in a movie called Taare zammen par that when the Kid is being given a test paper to solve Math’s question there we see that he goes into his own wild imagination to solve one problem. So u can keep in your display set the toys which attract the children and are really creative.
• To attract the kids you can even demonstrate how the toy works and by seeing that kids feel really happy and they do enjoy and once the product is into their mind then the kids will make sure that they have that product is in their hands.
• Kids love to learn about other cultures and new things. They often picture themselves in other places, countries and dream about traveling through planes, cars, boats, etc. So you can also project such things.
• Make sure that the item you are selling is kids friendly so that it can be operated by kids easily. Items that may have a wind-up, pull-back, press-n-go, etc. mechanism are great. If you choose an item that requires the motor skills of a 25-year-old to operate, you will end up with a very frustrated young customer.
• Kids love to learn and to share information. If you have the chance to buy a toy with a bilingual insert card, do it! Kids love to learn about other languages and cultures.
• Dinosaurs: Yes, these are not extinct in kids’ minds. They are one of the most popular things which kids would like to have with them.