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Career Opportunities With MBA Finance And Banking In The Ongoing Economic Scenario

admin — Thu, 13 May 2010 18:38:20 +0000

With current global economic crisis, Pink-slips are becoming a common phenomenon in almost every sector and unemployment is haunting every job-seeker. The scenario has driven many job aspirants to turn to study further and develop their existing skill to meet new challenges in the job industry. In such situation, MBA in finance and banking offers a potential career opportunity that fit any industry.

Scope of MBA Finance in the Current Job Industry:-
MBA programs in finance is developed round a well-constructed background of finance theory, a strong understanding of financial market and its implication on corporate valuation, and a strong skill set attributed to security analysis.

These days, every industry and almost all organizations are trying to combat with the recession blues. The demand of the time is to manage the financial system of the organization so as to balance the profits and expenses. A finance manager plays and extremely crucial as well as decisive role in reorganizing the financial system that can go well with the diminishing financial status of the organization. The economic crisis has hard-pressed many organizations to select a manager who can determine new strategies to improvise their nose-dived profit graph. Once you have accomplished a degree with MBA finance, you are fit to face the financial challenges of a business organization.

Scope of MBA Banking in the Current Job Industry:-
The MBA banking program centers round the financial and strategic management of banks. You will gain practical insight in international financial services that has a direct impact on the banking practice.

Contradictory to the ongoing circumstances of job cuts, the industry that is estimated to add new professionals is the banking industry. Many private sector banks are tying up with leading organizations to expand their field of operation. The globally competitive market of banking needs efficient and capable managers who can lead the organizations to stand out in the crowd. An MBA with banking will develop you to become a capable and knowledgeable banking executive who can deploy suitable strategies for the organization.

MBA schools in Bangalore look forward to inculcate an insightful wealth generating ideas in the students. The MBA in finance and banking programs are so well-structured that they can help you develop innovative strategies and solve the financial problems of an organization, end to end. After successful completion of the program you have a wide scope of job opportunities in financial institutions such as banks, insurance companies, non-financial organizations, securities and investment brokerage, financial scrutiny and investment positions, etc. Many business organizations in India are growing significantly resulting in providing increasing job opportunities for the MBA students. The MBA colleges in India offer programs to students to fulfill the basic motive of business organizations- earning profit.

The future of MBA in finance and banking is excellent. Both of them are attributed to the finance of business organizations that is the prime concerned of the era. However, you need to select the right MBA college and get into the best B-school in India to build an excellent career.

Visit bmaindia.com for further details.

Finance, Credit, Investments-modern Interpretation

admin — Sat, 08 May 2010 14:38:32 +0000

Scientific works in the theories of finances and credit, according to the specification of the research object, are characterized to be many-sided and many-leveled.

The definition of totality of the economical relations formed in the process of formation, distribution and usage of finances, as money sources is widely spread. For example, in “the general theory of finances” there are two definitions of finances:

1) “…Finances reflect economical relations, formation of the funds of money sources, in the process of distribution and redistribution of national receipts according to the distribution and usage”. This definition is given relatively to the conditions of Capitalism, when cash-commodity relations gain universal character;

2) “Finances represent the formation of centralized ad decentralized money sources, economical relations relatively with the distribution and usage, which serve for fulfillment of the state functions and obligations and also provision of the conditions of the widened further production”. This definition is brought without showing the environment of its action. We share partly such explanation of finances and think expedient to make some specification.

First, finances overcome the bounds of distribution and redistribution service of the national income, though it is a basic foundation of finances. Also, formation and usage of the depreciation fund which is the part of financial domain, belongs not to the distribution and redistribution of the national income (of newly formed value during a year), but to the distribution of already developed value.

This latest first appears to be a part of value of main industrial funds, later it is moved to the cost price of a ready product (that is to the value too) and after its realization, and it is set the depression fund. Its source is taken into account before hand as a depression kind in the consistence of the ready products cost price.

Second, main goal of finances is much wider then “fulfillment of the state functions and obligations and provision of conditions for the widened further production”. Finances exist on the state level and also on the manufactures and branches’ level too, and in such conditions, when the most part of the manufactures are not state.

V. M. Rodionova has a different position about this subject: “real formation of the financial resources begins on the stage of distribution, when the value is realized and concrete economical forms of the realized value are separated from the consistence of the profit”. V. M. Rodionova makes an accent of finances, as distributing relations, when D. S. Moliakov underlines industrial foundation of finances. Though both of them give quite substantiate discussion of finances, as a system of formation, distribution and usage of the funds of money sources, that comes out of the following definition of the finances: “financial cash relations, which forms in the process of distribution and redistribution of the partial value of the national wealth and total social product, is related with the subjects of the economy and formation and usage of the state cash incomes and savings in the widened further production, in the material stimulation of the workers for satisfaction of the society social and other requests”.

In the manuals of the political economy we meet with the following definitions of finances:

“Finances of the socialistic state represent economical (cash) relations, with the help of which, in the way of planned distribution of the incomes and savings the funds of money sources of the state and socialistic manufactures are formed for guaranteeing the growth of the production, rising the material and cultural level of the people and for satisfying other general society requests”.

“The system of creation and usage of necessary funds of cash resources for guarantying socialistic widened further production represent exactly the finances of the socialistic society. And the totality of economical relations arisen between state, manufactures and organizations, branches, regions and separate citizen according to the movement of cash funds make financial relations”.

As we’ve seen, definitions of finances made by financiers and political economists do not differ greatly.

In every discussed position there are:

1) expression of essence and phenomenon in the definition of finances;

2) the definition of finances, as the system of the creation and usage of funds of cash sources on the level of phenomenon.

3) Distribution of finances as social product and the value of national income, definition of the distributions planned character, main goals of the economy and economical relations, for servicing of which it is used.

If refuse the preposition “socialistic” in the definition of finances, we may say, that it still keeps actuality. We meet with such traditional definitions of finances, without an adjective “socialistic”, in the modern economical literature. We may give such an elucidation: “finances represent cash resources of production and usage, also cash relations appeared in the process of distributing values of formed economical product and national wealth for formation and further production of the cash incomes and savings of the economical subjects and state, rewarding of the workers and satisfaction of the social requests”. in this elucidation of finances like D. S. Moliakov and V. M. Rodionov’s definitions, following the traditional inheritance, we meet with the widening of the financial foundation. They concern “distribution and redistribution of the value of created economical product, also the partial distribution of the value of national wealth”. This latest is very actual, relatively to the process of privatization and the transition to privacy and is periodically used in practice in different countries, for example, Great Britain and France.

“Finances – are cash sources, financial resources, their creation and movement, distribution and redistribution, usage, also economical relations, which are conditioned by intercalculations between the economical subjects, movement of cash sources, money circulation and usage”.

“Finances are the system of economical relations, which are connected with firm creation, distribution and usage of financial resources”.We meet with absolutely innovational definitions of finances in Z. Body and R. Merton’s basis manuals. “Finance – it is the science about how the people lead spending `the deficit cash resources and incomes in the definite period of time. The financial decisions are characterized by the expenses and incomes which are 1) separated in time, and 2) as a rule, it is impossible to take them into account beforehand neither by those who get decisions nor any other person”. “Financial theory consists of numbers of the conceptions… which learns systematically the subjects of distribution of the cash resources relatively to the time factor; it also considers quantitative models, with the help of which the estimation, putting into practice and realization of the alternative variants of every financial decisions take place”.

These basic conceptions and quantitative models are used at every level of getting financial decisions, but in the latest definition of finances, we meet with the following doctrine of the financial foundation: main function of the finances is in the satisfaction of the people’s requests; the subjects of economical activities of any kind (firms, also state organs of every level) are directed towards fulfilling this basic function.

For the goals of our monograph, it is important to compare well-known definitions about finances, credit and investment, to decide how and how much it is possible to integrate the finances, investments and credit into the one total part.

Some researcher thing that credit is the consisting part of finances, if it is discussed from the position of essence and category. The other, more numerous group proves, that an economical category of credit exists parallel to the economical category of finances, by which it underlines impossibility of the credit’s existence in the consistence of finances.

N. K. Kuchukova underlined the independence of the category of credit and notes that it is only its “characteristic feature the turned movement of the value, which is not related with transmission of the loan opportunities together with the owners’ rights”.

N. D. Barkovski replies that functioning of money created an economical basis for apportioning finances and credit as an independent category and gave rise to the credit and financial relations. He noticed the Gnoseological roots of science in money and credit, as the science about finances has business with the research of such economical relations, which lean upon cash flow and credit.

Let’s discuss the most spread definitions of credit. in the modern publications credit appeared to be “luckier”, then finances. For example, we meet with the following definition of credit in the finance-economical dictionary: “credit is the loan in the form of cash and commodity with the conditions of returning, usually, by paying percent. Credit represents a form of movement of the loan capital and expresses economical relations between the creditor and borrower”.

This is the traditional definition of credit. In the earlier dictionary of the economy we read: “credit is the system of economical relations, which is formed while the transmission of cash and material means into the temporal usage, as a rule under the conditions of returning and paying percent”.

In the manual of the political economy published under reduction of V. A. Medvedev the following definition is given: “credit, as an economical category, expresses the created relations between the society, labour collective and workers during formation and usage of the loan funds, under the terms of paying present and returning, during transmission of sources for the temporal usage and accumulation”.Credit is discussed in the following way in the earlier education-methodological manuals of political economy: “credit is the system of money relations, which is created in the process of using and mobilization of temporarily free cash means of the state budget, unions, manufactures, organizations and population. Credit has an objective character. It is used for providing widened further production of the state and other needs. Credit differs from finances by the returning character, while financing of manufactures and organizations by the state is fulfilled without this condition”.

We meet with the following definition if “the course of economy”: “credit is an economical category, which represents relations, while the separate industrial organizations or persons transmit money means to each-other for temporal usage under the conditions of returning. Creation of credit is conditioned by a historical process of fulfilling the economical and money relations, the form of which is the money relation”.

Following scientists give slightly different definitions of credit:

“Credit – is a loan in the form of money or commodity, which is given to the borrower by a creditor under the conditions of returning and paying the percentage rate by the borrower”.

Credit is giving the temporally free money sources or commodity as a debt for the defined terms by the price of fixed percentage. Thus, a credit is the loan in the form of money or commodity. In the process of this loan’s movement, a definite relations are formed between a creditor (the loan is given by a juridical of physical person, who gives certain cash as a debt) and the debtor.

Combining every definition named above, we come to an idea, that credit is giving money capital of commodity as a debt, for certain terms and material provision under the price of firm percentage rate. It expresses definite economical relations between the participants of the process of capital formation. Necessity of the credit relations is conditioned, from one side, by gathering solid quantity of temporarily free money sources, and from the second side, existence of requests of them.

Though, at the same time we must distinguish two resembling concepts: loan and credit. Loan is characterized by:

· Here, the discussion may touch upon transmission of money and also things form one side (loaner) to another (borrower): a)under the owning of the borrower and, at the same time, b) under the conditions of returning same amount or same quantity and quality of the things;

· The loaning of money may bear no interest;

· Any person may take part in it.

With the difference with loan, credit, which is somehow a private occasion of the loan, represents:

· One side (loaner) gives to the second one (borrower) only money, and _ for temporal usage;

· It may not bear no interest (if the assignment doesn’t foresee something);

· In it creditor is not any person, but a credit organization (at the first place, banks).

So, a credit is the bank credit. To our mind, it is not correct to use “credit” and “loan” as the synonyms.

Banking crediting is the union of relations between bank (as a creditor) and its borrower. These relations touch upon:

a) Giving a certain amount of money to the borrower for definite purpose (though, we meet with the so-called free credits, aims and objects of crediting are not appointed in the assignment);

b) Its opportune returning;

c) Getting percentage rate from the borrower for using the sources under his/her disposal.

The essential foundation of the credit essence and its important element is existence of trust between the two sides (in Latin “credo”, from which comes the word “credit”, means “trust”).

From the position of circulation of money forms (in the abstraction, historical process of formation economical relations and social budget and banking systems expressed by them) comparing different definitions of finances and credit, the paradox conclusion appears: credit is the private occasion of finances. And truly, from the position of movement of the money forms, finances represent the process of formation and usage of the funds of cash means. Very often such movements are fulfilled without returning, but sometimes, it is possible to give loans from the budget for the investment projects of other needs. Also, when a manufacture or corporations use their cash funds and we mean the finances of industrial subject, such usage may be realized as inside the manufacture or corporation (there is no subject about returning or not returning of the usage), so gratis under conditions of returning. This latest is called commercial form because of transmitting the sources to others, but even in this occasion, it is the element of financial system of the manufacture and corporation.

From the point of cash means movement, main character of credit is the process of formation and usage of the funds of cash means under the conditions of returning and, as a rule, taking the value-percentage. If gating the credit value doesn’t take place (even in the exceptional occasions), according to the movement form, credit becomes a private occasion of finances, as from the net financial funds (consequently from the state budget) the loans which bear no interests may be used. If gating credit value takes place, by the appearance form, credit is discussed to be financial modification.

From the historical point of view, finances (especially in the sort of the state budget) and credit (beginning with usury, later commercial and banking) were developing differently for considering credit to be the part of finances. Though, from the genetic-historical point of view, previous loaners, before giving loan, needed gathering the permanent capital not returning, that is the net financial foundation. The banks analogously needed concentration of the important own capital for influxing the consumers’ means and for getting higher percentage rate under the conditions of returning. Herewith, exactly on the financial basis, in the sort of financial fund (which later partially becomes loan fund) part of the bank capital appears to be the reservation (insurance) part of the fund, which by nature is financial and not loan. So notwithstanding the essential distinctions between finances and credit form the genetic-historical point of view, credit appears to be formed from finances and represent their modification.

From the essential position of expressing economical relations of finances and credit, we meet with cardinal distinctions between these two categories. Which mostly expressed by the distinction of the movement forms notwithstanding they are returnable or not. Finances express relations in the aspects of distribution and redistribution of social product and part of the national wealth. Credit expresses distribution of the appropriate value only in the section of percentage given for loan, while according to the loan itself, a only a temporal distribution of money sources takes place.

Herewith, there is a lot of common between the finances and credit as from the essential point of view, so according to the form of movement. At the same time, there is a significant distinction between finances and credit as in the essence, so in the form too. According to this, there must be a kind of generally economical category, which will consider finances and credit as a total unity, and in the bounds of this category itself, the separation of the specific essence of the finances and credit would take place.

Funding of the cash means is common to the researched economical categories. It takes place in any separate system of finances and credit, which have been touched upon during the analyses of defining finances and credit. Word combination “funding of the cash sources (fund formation)” reflects and defines exactly essence and form of economical category of more general character, those of finances and credit categories. Though in the in economical texts and practice, it is very uncomfortable to use a termini, which consists of three words. Also, “unloading” with an information hardens greatly its influxing into the circulation even in the conditions of its strict substantiation and thoroughness.

In the discussing context we consider:

1) wide and narrow understanding of economical category of the finances;

2) discussing finances in narrow understanding under general traditional meaning;

3) discussing finances, as funding of the cash means, in wide understanding, which concerns finances – in narrow meaning and credit – in complete meaning.

Termini “funding” and its equivalent “fund formation” are used by us as the purposeful structuring of cash means, which is based on two poles – accumulation of money sources (gathering) and its usage for definite purpose in the way of financing and crediting.

We have established a new termini – “finance-investment sphere” (FIS). Analyses about interrelation of finances and credit made by us give us an opportunity of proving, that in the given termini, the word “financial” is used with the meaning of funding cash sources, its purposeful structuring. In this process we consider at the same time financial, credit and investments’ economical categories.

Let’s sum up middle results of discussing new concept – “finance-investment sphere” and discuss its investment consisting parts.

The concept “investments” was brought into the native economical science from the West. In the Soviet economical science they for a long time used in the place “investments” the termini “capital placement”, which expressed the usage of the industrial factors in the sphere of real industrial activities during realization of capital projects. From one glance, this termini in its concept is identical to the “investments”, consequently it is possible to use them as synonyms. Though the termini “investments” and “investing” have the advantage towards the termini “capital placement” from linguistic and philological points of view, because they are expressed with one word. This is not only economical and comfortable in the process of working with the termini “investment” itself, but also it gives an opportunity of termini formation. More concretely: “investment process”, “investment domain”, “finance-investment sphere” – all these termini are much more acceptable.

Changing native economical termini with foreign ones is purposeful, if it really matters (by keeping parallel usage of the native termini for the inheritance). Though we must not change native economical termini into foreign ones all together, when by ordinal traditional language easy to explain private and narrow concrete processes and elements get their own termini. The “movement” of these termini is approved in the narrow professional bounds, but their “spitting out” into the economical science may turn economical language into the tangled slang.

Let’s discuss termini – “investment” and “capital placement’s” usage in the economical literature.

Investments are placement of funds into the main and circulation capital for the purpose of getting profit. “Investments in material assets – are the placements of funds into the mobile and real estate (land, buildings, furniture and so on). Investments in financial assets are the placements of funds into the securities bank accounts and other financial instruments”.

We don’t meet with the termini “investments” in the earlier economical dictionary, but we meet the combined termini “investment policy” – the union of the industrial decisions, which guarantee main directions of the capital investments, the activities of their concentration in the determinant suburbs, on which the reaching of planned rates of development of the society production is depended, balancing and effectiveness, getting more and more production and profit of the national income for every lost Ruble”. For today, in the most actual definitions, the capital investments are bounded only by financial means, when not only financial, but also the investment of natural, material-technical and informational resources takes place. Labour resources take an actual place in the investment process. They themselves fulfill this or that investment process.

A positive side of the discussed definitions is that they connect investment policy and capital placements (investments):

- economical development according to the key directions to the concentration;

- providing high rates of economical growth;

- raising an economical effectiveness, which is expressed:

a) by growing the throw off of the production and national income for every lost Ruble;

b) by fulfilling the branch structure of the investments;

c) by improving their technological structure;

d) by optimization of their further production structure.

Compared with such definition of the investments (capital placement) the definition of investments in the dictionary attaching the “Economics” seems to be unimproved: “investments – the expenses of gathering production and industrial means and increasing material reserve”. In this definition current expenses (production expenses) are mixed with the investment (capital) expense. Also, not the investment expenses but (though the investments are followed by the appropriate expenses) exactly advancing. It differs from the expenses by that the means (means) are put by returning the advanced values, also, under the conditions of growth, to which the concept-advanced capital is corresponding. the advancing may be realized in the money, natural-material and informational forms.

Except the termini “investments”, there are two more termini related with the investment. They are shown below.

“Human capital investment” – any activity provided for rising the workers labour productivity (in the way of growing their qualification and developing their abilities); at the expenses of improving the workers’ education, health and raising the mobility of the working forces”. It is very useful to use the mentioned termini, though it needs one correction: the human capital investments do not concern only workers, but also the servants, representatives of every kind of labour.

“Investment commodity, capital goods – a capital.”

In the official manuals of political economy of the reformation time the capital investments are discussed as “expenses for creating new main funds and widening, reconstruction and renewing the active ones”. In this definition the investments (capital placements) during separation of the forms (types) of further production of the main funds are bounded only by main funds (without increases of the circulation funds and insurance reserves): a) creating new ones; b) widening; c) reconstruction; d) renewing. Also, the concept of the industrial gathering appears, at the expenses of widening of basic, circulation funds and also insurance reserves takes place”.

You’ll meet below the definitions of investments from “the course of economy”: the investments are called “placements of fund into the basic capital (basic means of production), reserves, also other economical objects and processes, which request long-termed influxing of material and cash means. “According to the division of capital into physical and money forms, the investments too must be divided into material and cash investments”.

They apportion investment commodity, to which belong industrial and nonindustrial building objects, vehicles purposed for changing or widened technical park and the furniture, increasing reserves and others.

“They call the total investments of production an investment product, which is directed towards keeping and increasing the basic capital (basic means) and reserve. Total investments consist of two parts. One of them is called the depreciation; it represents important investment resources for compensation of renewal till the level of before industrial usage, wearing out and repairing of the basic means. Second consisting part of the total investments is represented by net investments – capital investments for the purpose of increasing basic means”. Depreciation is not a compensation resource of wearing the basic funds out, but it is the purposeful financial source of such resources.

Human capital investment is “a specific kind of investments, mostly in education and health protection”.

“Real investments are the investments in the economical branches and also, they are kinds of economical activities, which provide influxing the increases of real capital, that is increasing material values of the industrial means”. We can agree with such definition with one specification that material and nonmaterial values too belong to the real capital (wealth), consequently science-researching experimental-construction results, various information, education of he workers and others. Such service as organization of the excitable games, also the service of redistribution social wealth from one private person to another (except charity).

“Financial investments represent placement of funds into the shares, obligations, promissory notes, other securities and instruments. Such investments, of course, do not give increases of the real material capital, but they help getting profit, consequently at the expenses of changing the course of the securities in the time of speculation, or distinguishing the course in different places of sell and purchasing”. We share wholly such definition, hence it follows that financial investments (if it is not followed by real investments as a result) do not increase real material wealth and real nonmaterial wealth. According to this context, the expression below is very important: “we must distinguish financial investments, which represent placement of the funds in the ways of selling and purchasing the securities for the purpose of getting profit and financial investments, which become cash and real, moved to real physical capital.”

In the “economical course” quoted before long and short-termed investments are separated. Recognizing the existence of the bounds between them, the authors ascribe short-termed investments to “one month or more” investments. If we get such conditioned criteria, that we can call the investments which overcome the terms of some months, long-termed ones, which is very doubtful and we don’t agree with it. A long-termed character of the fund placement is a significant feature of the investments (short-term doesn’t combine with the concept of investments). Principally, it would be better to point out quick compensative, middle termed compensative and long-termed compensative investments:

- less then 6 months – quick compensative;

- from 6 months up to the year and a half – middle termed compensative;

- more then the year and a half – long termed compensative.

We stopped at the definition of the investments in the capital work “economical course” for the special purpose, as, in it the author tried to discuss the concept of investments systemically and quite completely, herewith the book is published just now.

We’ll return to the discussion the definition economical category of “investments” in different publications in the following chapter. The definitions given here are quite enough for having a notion of the level of lighting up the given category in the economical literature.

What conclusions may be made according the definition of the mentioned economical category in the published works, except the made notions and specifications?

There is quite deeply, concretely and thoroughly defined the concept of “investments”, different definitions in the economical literature; but mostly in every works about the investments discussed by us until now, there is not opened the essence of investments as an economical category. In every monograph, even if it has a title investment, as an economical category, there is given only the definition, concept of investments. But, as the Academician Vasil Chantladze explains, “a concept is a discussion, which proves something about the distinguishing feature of the researched object. A concept out of much essential characteristic features represents only one, and essential in it is only – definition”.

But the categories are much wider; it is “a key, the most fundamental concept of every science”. Economical categories theoretically represent real, objectively existed productive relations. A category is the defining of occasions of existed characters, connections, relations of the objective world. Generally, any educational process is fulfilled by the categories, which give opportunities for dividing the processes and occasions semantically, for expressing the definitions of a subject and realize their specific peculiarities and economical relations of a material world.

Our goal is exactly to substantiate investments – as an economical category and also, as a financial category in the narrow understanding.

Here we apply for another manual thesis made by the academician Vasil Chantladze: “every financial relation is an economical one and every financial category is and economical one, but not every economical relation and economical category is financial relation and financial category”.

In the process of defining the investments, it is important to take in mind the sides of resources, expenses and incomes, because investment, from one side, is the result of the manufacture’s activity, and, from another one, – a part of income, which, in this case, is not used for usage.

Another occasion: it is advisable to discuss investments in two aspects: as a category of reserve and flow, which will reflect exactly the connection between “placement of funds” and “investments”.

As we’ve mentioned above, not long ago, in the well-known Soviet literature the concepts of “the placement of funds” and “investments” were accepted to be the synonyms and concerned to be investment of sources for further production of the main funds and formation of the turnover funds. We meet with such understanding of the concept of “investment” (here, they separate three types of the investment expenses: investments in the basic capital of investments, investments in the house building and investments in the reserves) in the modern economical publications and it is mostly used on the macro level during a statistical analyze of economical processes. In this concrete occasion investment is the category of reserve.

According to the aspect of flow the investments may be discussed in the process of analyzing industrial activity, when it is necessary to learn the variety of the economical relations related with the investments’ further production and formation, sources, objects and subjects, that is on the micro level.

Main distinguishing criteria of different methods of approach towards the concept of “investment” the aspect of prolonging of measuring this showing. Is it possible or not to measure the investment showing separate from the term factor (the norm of gathering, the volume of capital property, the reserves of production and so on). If it is possible, then it is the category of reserve, and if it is not, then it is measured in the section of time and belongs to the category of flow.

Thus, investment, as an economical category, is quite consuming concept. It concerns the elements defining the regularities of function and regulation of the investment domain, privately:

First, resources and values put into the industrial activity. Here, investments may be realized in the following ways:

1. mobile and real estates (buildings, constructions, furniture and other material values);

2. cash sources, purposeful bank accounts, credits, shares and other long-termed securities;

3. owners rights according to the author’s rights, licenses, Now-How, experience and other intellectual values;

4. the rights for using land and other natural resources, also other owners rights.

Notwithstanding any forms, investments are results of capital gathering. Leading investments – regularity of gathering defines its volume and dynamics and, generally, whole investment activity.

Second, the incomes ruling volume and dynamics of the resource investment. Herewith, we must underline the circumstance, that the process of getting profit, the regularity of its creation, isn’t a constant of the concept “investment”. The factors of production (also the conditions of exploitation of capital values) and selling (market conjuncture), also the process of capital gathering is the leading and important condition only for the investment formation. Though, we underline again, that the process of getting and distributing the income is a significant component of the investment activity.

The transformation of investments makes the basis for the investment activity, which concern the following circles: resources – investment (expense) – capital property – income. The practice of realization such circles of the investments transformation is exactly the investment activity (investing). The investment activity, except the investments itself, concern motivation and stimulation of the capital gathering, relations of capital gathering and ruling, also, totality of the defined level of profitability on the capital and the goals of capital growth.

According to the mentioned above, in the definitions of the investment as economical category sometimes the needed exactness and clearness is not felt, some categories of the wealth are represented tightly enough. For example, real prosperity is bounded only by material estimation. This leads us to the unvalued investment resources in the era of transformation industrial society into the investment one; also to the recognition of yet uninvolved valuable scientific researches in the production, securities turned into speculation objects, and unreal property in the consistence of one and the same parts; to there equalization. On the basis of the made analyses, we can cite a wide definition of the investments together with the leading categories.

Investment resources – are values, invested into this or that project in this or that kind for the purpose of getting profit beginning with material ones, finished with cash.

Kinds of the prosperity are equal to the kinds of the investment resources and is divided into real and cash, consequently into financial resources.

Real investment resources concern all kinds:

- natural resources;

- labour resources;

- material resources, the usage of which is possible in the economical development (buildings, constructions, vehicles and furniture, transport and communication means and so on;

- investment resources (in the widest understanding, that is from scientific-research and experimental-construction works, till the education potential of the society and till all kinds of gathering useful information, written about every possible, that is typing and electronic bearer).

Cash, consequently financial resources concern every cash means for usage in this way in definite conditions or directed in the sort of investments.

Cash means (resources) turn into the financial resources in the case of structuring of funds of purposeful destination foreseen for investments of this or that kind.

After defining investment resources we can make wide definition of the investments as economical category.

Investments – are the placements of real, financial and intellectual resources into the projects, the fulfillment of which leads us to getting the increases from real wealth, in the material and informational forms. It is followed by a cash (financial) prosperity or its increases (at the expenses of the distribution of the cash means).

As an economical category, investments express economical relations, which are created in the ways of using and formation of the investment resources between the participants of the investment process for the purpose of improving and widening of the enterprise.

Finance Series : Exploring Investor Rationality

admin — Wed, 05 May 2010 14:38:27 +0000

The Efficient Market Hypothesis has been under fire since Eugene Fame of the University Of Chicago Graduate School Of Business first suggested it back in the early 1960s. The central idea behind the Efficient Market Hypothesis is the theory that investors are completely rational in interpreting and acting on market news and information (which, ostensibly, is fully revealed public knowledge).

It has since come to be known as the Theory of Rational Expectations. This rational investor behavior is factored into the value of all news and information the moment it becomes available. And it happens to the extent that “beating the market” becomes an impossible task.

The idea of investor rationality has been under fire by the few “gurus” who have consistently beaten the market since its inception. Nobel Laureate and father of Behavioral Finance, Daniel Kahneman, pointed out that the failure of the rational model is not inherent in the logic of the theory, but rather in the human psyche. He posited that nobody has the ability to simultaneously process all incoming stimuli and attain a complete understanding and mastery of that stimuli.

From the many arguments for and against the theory of rational expectations, I observed that many of the arguments stemmed from a difference in the understanding of what rationality means in the first place (indeed, that is further proof that “rational” people can look at ideas and apply their own bias and still be regarded as “rational”). If the world is made up of blistering imbeciles making irrational decisions, like those who argued against the theory suggest, wouldn’t the world more closely resemble an assembly of monkeys? Yet, if the world is made up of rational humans the way the theory postulates, wouldn’t the world be more robotic than human?

For too long, academia has debated the theory by taking sides with either the monkeys or the robots without a clear understanding of what constitutes rationality in the first place. Is the investor who rushes blindly into the stock market during market bubbles irrational? Are investors rational beings if they buy undervalued and sell overvalued stocks? Essentially, all reasonable human beings are rational! Rationality is the consistency of action based upon a set of logical variables. The issue here is that the difference in one’s level of knowledge and life experiences is the determining factor that allows for the installation of a distinct set of logical parameters and values in every human being! This means that two human beings looking at and interpreting the same information can come to two separate conclusions and resulting actions! The result of which is a two-sided market. An investor who has lost a significant amount of money in the stock market may prefer to stay out of an overextended stock regardless of how fantastic the news. On the other hand, investors who have never been through that same life experience would simply continue to buy on the news. Both investors, in this case, are rational in regard to their own level of knowledge and experience. This explanation of rationality effectively consolidates all the differing views on the Theory of Rational Expectation. Because investors are rational, two-sided markets are created, making the overall market more and more efficient. Because investors are rational, they rush after price bubbles on the expectation of profits only to be defeated by the Law of Regression to the Mean.

Being greedy is a rational response to one’s needs and wants and being fearful is a rational response to one’s past sufferings. The driving factors of Greed and Fear are also rational expressions! Contrarians who take positions against the market are rationally expressing their expectations that markets eventually turn against the prevailing trend. Trend followers who take positions along with market trends are rationally expressing their belief in that trend continuing into the foreseeable future. Both create a two-sided market for each other, driving the overall market towards more and more efficiency.

However, this explanation of rationality completely nullifies the part in the theory that states that “rational investors should act in a similar fashion in response to the same news”. Because there is no way of measuring or predicting whether or not there will be more decisions of rational buying or rational selling in response to new information, nobody can predict market movement with any moral certainty. Although not attributed to random behavior, the unpredictable nature of the market has more cause and effects than the theory itself can explain.

In summation, any argument to explain market behavior through the notion of rationality has limited application in reality. As investors in the stock markets, our understanding that the markets cannot be predicted and the set-up of realistic stop loss points in preparation for worst-case outcomes and hedging portfolios using stock options (http://www.optiontradingpedia.com), are the most rational actions that can be taken. As behavioral finance suggests, everyone makes the best of a bad situation and the situation in the stock market has never been ideal for anyone.

Online Finance Education-More than Just A Finance Certificate

admin — Thu, 01 Apr 2010 14:38:23 +0000

It is no doubt that knowledge and skills is what today’s world need the most. The economic recession has just exposed how ill equipped most of us are in managing their finances. This ill equipment ranges from personal finances to business finances. It no wonder that many people especially in America have been caught pants down with lives that were just but borrowed. How else would you call the huge credit card bills that are taking down gigantic economies such as the USA and Europe?

Finance education has to be redefined from the traditional finance for picking mistakes in accounting to a contemporary finance education that allows you to be have skills to better manage personal finances or business finances.

The revolution brought about by the information technology (IT) is an opportunity through which finance education has been revolutionized. The emergence of online finance education propelled by the linkages between students and tutors via the internet has made it easier to share facts on finance education. In addition, people are now able to ask questions that build their daily skills through asking or providing answers that have practical solutions. This can be achieved though blogging.

Online finance education also has the benefit of providing templates from which the practical application of finance theories can be based. For example, a budget planner can be customized to calculate allowable expenses to what proportions.

The traditional training in finance can also be delivered using the online finance education. There are now available e-business degrees that cover training in accounting, business management, actuarial sciences, human resource management, insurance, and international business management among others.

The demand for online training opportunity has fuelled the growth of online colleges or universities. The challenge in enrolling in online colleges is that you have almost no chance of ascertaining the authenticity and quality of service. At most, you can only view information about the college from the websites. The websites are however easy to manipulate to present incorrect information in a seemingly correct form.

As you search for the information on where to find online college or education to improve your financial knowledge, check for an institution that will provide more than just a certificate. You should be able to learn tips on how to get out of credit card debts, how to make the most from your mortgage investments and much more contemporary financial needs.

Forex Trading – the Scientific Theory of Market Movement

admin — Fri, 26 Feb 2010 14:38:36 +0000

Human nature is constant and never changes and there have been several theories developed that are designed to take advantage of this; by utilizing a scientific theory of market movement – lets look at how they work.

The three most popular theories are based upon the theories of:

W D Gann, N Elliot and his Elliot wave theory and Fibonacci.

All claim to have found the scientific theory of market movement but there is a problem from the start:

The problem is a scientific theory needs to be TOTALLY objective.

If a theory is scientific by definition it must be rule based, objective and work all the time.

Do the above theories do this?

Not at all.

We will ignore the fact that Elliot died poor, Gann had to sell courses to make money and Fibonacci well, his theory is nothing to do with finance and has been hijacked by the far out investment community. Just look at the facts of the theories and how objective they actually are:

Elliot wave and Gann – Are totally subjective, they don’t tell you what to do, you have to do it all on your own! – That not scientific if you have to think.

Fibonacci tells you exactly what retracements to buy and sometimes they work sometimes they don’t. However you can take any percentage you like and like Fibonacci retracements it will work some of the time – does that sound like science to you? Well it doesn’t to me!

So why Doesn’t Science Work?

Quite simply because you are dealing with humans and they don’t think scientifically.

Humans are creatures of emotion and were all different.

We do NOT all conform to a scientific theory. Of course if we did and there was a scientific theory of human nature we would all know the price in advance and there would be no market!

Markets move because their uncertain – So leave the scientific theories to the far out investment crowd, concentrate on making money and to make money you need to trade the odds.

A Better way to Trade

Forget scientific movements and trade the odds – it’s the only way to trade but if you do it correctly, you will make a huge amount of money over time.

Just like the professional card player you will hold and bet big, when the odds favour you and fold and take a loss when they don’t.

There is nothing wrong with taking losses, so long as you achieve you aim of making money long term.

Today, we marvel at how science can conquer illness, transports us faster than ever and generally makes our lives easier – but in forex it can never be applied as a theory and will never work.

So in conclusion, do the best you can accept the above trade the odds and you can make big profits.

How the Arbitrage Theory in Finance, is Applied in Internet Marketing With Little Or No Success

admin — Thu, 25 Feb 2010 14:38:31 +0000

If you have ever done any elementary course in finance, then you would probably know what arbitrage theory is.

Arbitrage as it is known in finance is when there is a price discrepancy for the same stock listed in two different stock exchange markets. Thereby giving an arbitrageur the chance to make risk-less profits by continuously buying the stock where it is cheaper, and selling it where it is expensive.

Now, if you have ever done elementary finance, you would also know that because of immense competition, this type of situation is very rare to fine in our almost efficient markets of today. In fact in finance, it is always assumed that there are no arbitrage opportunities. Even when these opportunities do present themselves, the effects are minimal because the markets quickly adjust and automatically fix the problem. It may even take less than 5 minutes for an arbitrage situation to be automatically fixed, and wipe out any price discrepancy in the listed stocks.

People have been trying to apply the internet marketing version of the arbitrage theory but slightly different though. They claim that they can use Google AdWords to buy cheap traffic, and then send visitors to a landing page with expensive AdSense adverts hoping that the visitor would click on the AdSense ads. The difference they make form what they spend on buying Google traffic and what they get from Google as a results of clicks on their AdSense ads is considered as their profits.

This sounds kind of wired to me and quite impossible to achieve. Even if you make money from the start, it is quite less likely that you can continuously be making money using this method. I am challenging anyone who says he used this method and continuously made profits for over a period 2 week.

If you are just starting out with internet marketing, don’t get caught up with the hype that surrounds this whole arbitrage theory thing and loose sight of some real internet opportunities that you can, and should be targeting, so as to make money on the internet.

Arbitrage is simply not possible in finance, and it is not possible in internet marketing.

Total Value of Opportunity

admin — Sun, 18 Oct 2009 17:35:53 +0000

The business world in the beginning of this century, is dominated by metrics relating to both operational performance in the areas of human resources, marketing, production, logistics, etc.., As in metrics based on traditional financial indicators (return on Investment and many others). This approach, although very important and necessary, ignores essential aspects of strategic type, that will definitely add value to the organization and of which we can not necessarily figure in the present, an associated cash flow benefits.

A first illustrative example would be the development of human capital, in which we can calculate the costs of training and education, but when measuring the specific benefits, we are in the realm of the probable. Another similar example comes from the side of management of intangible assets such as brand value or the image projected by the corporation. The same applies to those involving strategic positioning resulting from the completion of a project or not. Finally, I cite the huge profits generated by the knowledge management area, strategically important for modern business, but difficult to measure in terms of cash flow quantification.

Traditional financial indicators are lagging behind when it comes to measuring the dynamics of the world and all the factors that contribute today and create value, both in companies and projects. This was due, in part, by generally accepted accounting principles (GAAP), such as materiality and conservatism, which fail to measure the abstract aspects of an initiative.

For all the above is that there is the concept of “Total Value of Opportunity” which attempts to evaluate and monetize all the intangible factors, strategic, knowledge, risk, and ultimately financial, that can impact positively or negatively the component values a proposal.

Make a detailed description of the methodology for assessing special projects, is beyond the scope of this brief. However we can describe different aspects which may arouse the reader’s curiosity to know more. In any case, the methodology must begin with recognition and comprehensive analysis of the opportunity presented itself in front of a given situation. The opportunities may arise on different levels and among the most visible are:

1) Application of new technologies / implementation of new knowledge.
2) Changes in the structures: economic, social, political and market.
3) Changes in perceptions.
4) Innovation in business processes.
5) Use of unfamiliar situations.

The exploitation of opportunities, must cause any impact on the overall indicators and / or functional indicators and / or the financial indicators. These indicators or metrics are framed within different view of the enterprise as it exposes the Balanced Scorecard (CMI) from which we can build a map with the cause-effect relationships of the organization or project aimed towards a greater return on investment (ROI) or equity (ROE).

Then we can develop a medium-complexity algorithm based on the metrics above, captures all the elements that add value to the proposal. Then complete the monetary allocation algorithm to obtain the total net present value of the initiative under study.

A variation to the proposed methodology is to replace or complement the CMI approach to the use of real options, which provide great flexibility in the assessment of special projects, including social, it manages to amalgamate financial rigor techniques Discounted Cash Flow (DCF) with the contributions and achievements of strategic planning.

Real options represent a much more convenient technique for assessing the CDF, in those projects requiring the need to manage opportunities (options) such as defer, expand, subdivide, or abandon the project of pre-defined contingencies occur. Additionally, it is the ideal tool for assessment in situations that present high degree of uncertainty.

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Assessment of Special Projects

admin — Fri, 16 Oct 2009 17:08:46 +0000

We understand those special projects that can not be adequately assessed by traditional techniques such as Net Present Value.

Let’s see what it is:

In past months, I participated in an interesting advice to our office where we had the task of developing a methodology that was easily applied to economic evaluation of social projects. As a financier, I felt that my participation would be relatively simple thing it was to apply the knowledge on capital budgeting techniques such as Net Present Value, Internal Rate of Return (traditional or modified), recovery time, etc.., Etc. .

Maybe a little to my surprise, these techniques were put aside by the customer for their application should favor those initiatives associated with production projects, leaving aside the development-related initiatives in the country both infrastructure and development projects purely endogenous social character. What then?

Investigating a bit more about the subject, we find that there is indeed enough research literature showing that the Net Present Value method tends to underestimate a good part of the projects that do not show future flows of payments and receipts perfectly defined. For a large number of projects, in addition to the uncertainties on the flow may occur more than one option for implementation, for example, the decision to postpone the project until there is a set of conditions that do not necessarily have to be of monetary origin.

For the solution of the difficulty, there are two relatively easy to apply methodology that seeks to overcome the shortcomings of the VPN mentioned. They are the Total Value of Opportunity (Total Value of Opportunity, TVO) and the application of real options. Such tools allow the assessment of projects in which the strategic positioning, development of high technology, the social content or survival of the company, are the variables of food-pricing model.

In the next essay we will explore the first one, leaving for later delivery item of real options.

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Distinction between Financial Management and Corporate Finance

admin — Wed, 14 Oct 2009 17:03:02 +0000

It is not feasible to draw a perfect line between Financial Administration and Corporate Finance. The Finance Manager will be forced to perform in both areas. However, we argued that the Financial Management is more focused on tasks of day to day control of company operations.

For their part, finance a little more focus to the realization of tasks of a transcendental (ie strategic) for the company, tasks are not performed on a daily basis. Here I propose the agenda for a financial management course:

Purpose and scope of the Financial Administration
Reports of results: the financial statements.
Analysis of reasons.
Utility Planning: Types of costs and analysis. Breakeven.
Planning and Financial Control: budgets
Managing current assets: cash, accounts. Receivable, accounts payable, inventory management.
Treasury: Management of capital in turn.
Treasury: sources and forms of short-term financing. Money markets and instruments.
Treasury: sources and forms of long-term financing. Capital markets and instruments.
Domestic investment techniques: the capital budget.
Financial management of SMEs.
Financial management of cooperatives.

We now propose an agenda for a Corporate Finance courses:

Legal Structure of a Corporation: The SACA
Agency Theory and Theory of the Firm (The Financial G.).
Capital Structure (Selection of M & M).
Cost of Capital and financial leverage (WACC).
Long-Term Financing (Technical Issue of shares and debt).
Venture capital funding (Venture Capital)
Debt Re-structuring. (Guidance for the re-structuring).
Financial Hardship (Financial Reengineering).
Mergers and Acquisitions (with other corporations).
Dividend Policy.
The Model Financial Corporation (Planning F).
Ethics and social responsibility of the Corporation.

Note that, the mind set of the executive to perform administrative tasks or the mind set to practice finances is a little different, to say the least. The student can complete their courses with an administrator or mentality with a willingness to finance. That’s already a personal decision.