Every institution has laws or principles to be followed. When an organization or business has no rules, everything will be in disarray which could lead to chaos. Even the basic institution, which is the family, has certain principles that need to be implemented to achieve unity and harmony. Principles are very important, especially in the world of business to maintain a good management regarding funds or money and all the other factors related to finance. Below are some principles that are essential to understand the area of finance:
- Liquidity versus profitability – how fast an item can be transformed into cash to make profit or to pay debts is called liquidity. Profitability is how much profit it can earn.
- Risk-return trade-off – higher risks means bigger returns of investment. Lower risks mean the probability or greater return is small. It is an investment wherein the investor will need to identify how he or she will decide over it.
- Matching principle – this is also called the principle of suitability no credit check title loans near me, which means that there should be balance between the maturity of the assets to the maturity of the liabilities. Example of this is long term assets uses long term financing, and short term assets is financed with short term sources of financing.
- Leverage – it is a ratio of an institution’s debt to the value of its equity or ordinary shares. It is usually a borrowed capital; expecting that the profit will be greater than the payable interest.
- Bond prices versus interest rates – as the interest rates rise, bond price will fall; there is an inverse relationship between the price of existing income and the market interest rates.
- Valuation – the value of its future cash flows must be equal to the value of an asset.
- Time value or money – money has a time value and regardless of inflation, your money can be invested and over a period of time, it will earn a profit in return.
- Portfolio effect – the risk of the overall portfolio decreases when assets are added unto the portfolio.
Time, risks, and money; the relationship of these three factors is important in the field of finance. That is why every institution should implement it wisely. But before doing any implementations, other appropriate processes should be undertaken such as careful projections through financial planning. These principles serve as a guide to help every business become successful in its venture. Finance principles also serve as a foundation to ensure the positive financial standing of a company.
It is unfortunate that personal finance is not part of the curriculum in high school or college, the reason why there are so many people who are clueless on how to properly manage their money especially for young professionals. It will be the first time to explore the real world. Personal finance is a topic that can be learned quickly if you are willing to learn and read some important articles on this matter. In fact, you do not have to be a mathematician to manage your funds well.
To help young professionals start the right way, here are key financial tips to understand more about your money to live a prosperous and comfortable life.
- Self-control. For children who know the value of money, they are lucky enough that their parents taught them at an early age. If this has not been introduced in your childhood, do not worry, you will eventually learn this and keep finances well-managed. It is easy to buy what you like by using a credit card but it is better to buy the things you need and want until you have saved. Imagine this, by using a credit card, you pay an interest on a piece of chocolate or a pair of shoes. Habitual use of a credit card without thinking if you can pay in full at the end of each month, you will likely pay the interest until ten years. The key is self-control in spending to avoid high interest rates.
- Control your financial future. As a young professional, this is the best time to learn how to manage your own money or else other people or entities will manage for you. You may not like to hire a professional to do it for you and have the additional expense of paying a commission. Instead of getting professional advice, you can control your financial future of you have the essential elements of personal finance. You must be able to understand how your money works and how it can work for you.
- Your expenses must not exceed your income. The best way to keep a positive difference in your income is by budgeting. If possible, keep your expenses low every month, as a result you can save more. Do not waste your money by renting out a high-end apartment, save now and in the future you can afford a beautiful house or condominium.
- Allot an emergency fund from your income. No matter how much you owe in loans or credit card, save for an emergency fund on a monthly basis.
These financial tips will really help you manage your own finances. For young professionals, begin your journey right to have a prosperous life in the future.
Finance lease is also known as capital lease, and a type of lease wherein contract is arranged, and the lessee or user will pay the lessor or owner to use a certain asset. This type of lease is a commercial arrangement, and below are facts and steps that are usually involved:
- The lessee or known as the borrower or customer will be selecting a particular asset such as vehicle, software, equipment, etc.
- The lessor or known as the finance company will be the one to purchase the chose asset. During the lease, the lessee will use that asset.
- The lessee is obliged to pay for rentals or instalments for the use of that certain asset. The lessor will recover the money paid to purchase that asset as well as gain interest from the payment made by the lessee.
- The lessee may choose to own that asset by paying for the bargain purchase option price or last rental.
- During the entire duration of the lease, the lessor or finance company is known to be the legal owner of that asset, but the lessee will have benefits and risks of ownership for having control over that asset.
The lease is considered as a finance lease if any of the tests below are met:
- The ownership of that asset will be transferred to the lessee after the leased term.
- The leased term is more on the economic life of the asset even if the title will not be transferred.
- The lease has a bargain purchase option wherein the equipment can be bought less than its fair market value.
- Assets that are leased are specialized wherein the lessee is the only one who can use them without modifying it.
- The current value of the minimum payments for the lease will amount to at least significantly all of the leased asset’s fair value during the initiation of the lease.
These are the basic info that you should know about finance lease.
Businesses should effectively and efficiently manage funds to accomplish the success of the company. Once the capital has been raised, the money should be properly allocated by making a capital budgeting plan. Finance operations are connected as to how funds are managed. And below are the details of its importance that you will want to know:
- Finance operations can provide financial guidance and advice – it may involve feasibility study, identifying of KPIs, finance metrics, etc. they are very helpful if a company needs the right answers and guide to successfully achieve the goals.
- It can support the procurement process – procurement may involve the process of bidding which is called as tendering. There are procurement steps that should be followed, and this includes the following:
It can provide pay support – if the finance operations are properly handled and planned out by the right people, it can surely pay for the expenses involved in the operation of the business. It can be salaries and other costs related in maintaining the financial stability of the company.
It can provide support for disbursing – disbursements of cash are part of the normal operational cycle of the company but still, it requires thorough planning and analysis if doing so is viable for the business.
- Need Identification.
- Identification of supplier.
- Communication with supplier.
- Liaison of supplier.
- Management of logistics.
- Notification of tender.
Finance operations are crucial in every business, and without it, the company could end up being bankrupt. Finance is all about managing funds, proper allocation of liabilities and assets over a period of time under risky conditions. It expects a rate of return, and this is what every business is aiming at. You never consider doing a business if you don’t earn from it. Investing takes a lot of thinking and appropriate processes to ensure that money will not be put to waste.
A business must have a good finance organizational structure to prosper and profit. To design an organizational structure will help top management in identifying appropriate staff to handle responsibilities and what are additional talents needed in the company. Planning the right structure ensures that there is an adequate resources for the business to achieve the annual and long-term goals. In addition, the responsibilities in each operating unit must be clearly defined and each staff must have a job description that works in consonance with the company’s goal. The benefits of a good financial organizational structure are the following:
Growth and Development
The company that grows gradually is the one that has an effective and efficient use of its resources. A good structure employs the best human resource for each position and gives a clear picture of weaknesses and strengths a company have. As it grows, the structure has also evolved, as a result it will become a fine finance organization structure.
Completion of Tasks
A well-planned and designed structure will facilitate a timely completion of projects. The responsibility centers can identify which areas can complete the tasks accurately and timely and which areas deliver delayed completion.
Fit the Company’s Needs
Businesses are unique in their own sense, depending on its products, human resource, needs and finance organizational structure. The structure must produce a report that maximizes productivity and creativity, deadlines should be met and it must be vital to the success of the company.
In a company, communication among members of the organization is important in bringing its success or failure. The finance organizational structure must be designed that each staff can coordinate with their co-workers and have an open communication line. For example, the department of financial planning must coordinate and report to the Financial and Marketing Officers because these important top managers depend their decision making capabilities on the information provided by the department.
Finally, formulating a good finance organizational structure brings many benefits in a business.
Banking is an organized finance industry. It operates like a financial intermediate among capital deficits, surpluses, and customers. International regulatory authorities manage international operations and banking by setting various limitations on the finance activities of banks.
Banks create revenues by interest charges on the lent money. They are paying lower interest over deposits and lend out cash at bigger interest rates. This enables them to benefit from the various interest rates. Banks usually charge transaction fees that come in the form of stable revenues. They also provide a model for smooth financial operations. A more dynamic and revenue-creating tool is the administration of financial tips to customers.
This financial system is a form of economic cycle that is affected by the strengths and needs of customers that require loans. It is a method of channeling resources and interconnecting financial institutions. It enables the direct funding of household savings towards the industrial sector and allowing them to work together on the risks.
The financial industries are made up of stock brokerages, banks, insurances, credit cards, consumer finance companies, and investment. International operations within the finance industry must be set in legal international operations as managed by the top authorities of the world. The reforms and changes in banking regulations enable practices and progressive policies.
There are a number of finance institutions in Canada that have the largest deposits and revenues. They contain the largest market capitalization. These banks are focusing on investment banking support and within specific marketing clients. The groups of banks in Canada have been considered as the biggest Canadian companies that work on international operations in various countries.
Among the main focuses of these groups of banks is international finance. These banks are investing within the Caribbean area. The residents get financial support offered by the First-Caribbean international banks. Such institutions have joint ventures that merge the Caribbean operations. These banks not only cater to financial needs of residents but also extend their support to non-residents.
Financial key performance indicators play an important role in every business of all sizes. It can help measure and define progress in the company’s business goals. They are quantifiable measurements and it reflects the critical factors for the success of the business, and they also differ from one business to another. This tool can help a company or business focus in achieving their goals. There are many key performance indicators but it will depend upon a business and their objectives. Below are a few examples of finance key performance indicators that you will want to know:
- Accounts receivable collection period – it is similar to the days sales in accounts receivable or days sales outstanding.
- Cost income ratio – it is the ratio between operating income and expenses. It shows the measure of how costs change when compared to income. It is a bank’s main key performance indicator in efficiency. If the ratio is lower, the bank is more efficient.
- Direct costs – it is the price attributed to the production of certain services or goods. It is the labor, materials and expenses incurred in producing a product.
- Fixed costs – these are expenses that do not depend on the level of goods or services that is produced by a business or company. They are time-related such as rents or salaries paid out every month, and it is also known as overhead costs.
- Return on Equity – it is the amount of returned income as a percentage of the shareholder’s equity. It reveals how much profit the company can generate using the money invested by the shareholders.
- EBIT – earnings before interest and taxes is the measure of a company’s profit excluding income tax and interest expenses.
A lot of key performance indicators may not be applicable to your business that is why it is important for you to only choose the ones that are critical to your company’s success.
The majority of successful individuals is dedicated to budgeting, planned and managed their finances well. They are disciplined to get additional information about personal finance and continue that grow the knowledge all throughout their lives.
Education related to finance is something not learned in schools while growing up but it is one of the most basic components to achieve financial success. If personal finance is new, here are some steps to gain control over it:
- Plan a weekly money date. According to a study, millionaires spend an average of 8.4 hours every month to manage and plan their finances. There are many people who aspire to be millionaires yet they do not allot the necessary time and energy to make it happen. Instead, plan a weekly money date and set an hour solely for your finances. During this time, update your budget, review new expenses, regularly pay bills and review your bank accounts to handle other important financial needs.
- Allot at least twenty minutes or more each week to know more about personal finance. Learning personal finance cannot be done all at once, take each step every week to digest important aspects. As you do this every week, it will become a habit and gradually, finance will be part of your daily life.
- Talk to people you admire most. As you integrate knowledge on personal finance in everyday life like spending, credit, saving, debt, retirement strategies and investing, apply what you have learned to someone you admire most. You can talk this matter with your family and friends but often they have the wrong impression about finance. With this, talk to entrepreneurs and mentors who are very successful. Ask them about their highs and lows and how they become where they are right now. Remember, money issues are sensitive so start a small conversation until you can explore more ideas and important aspects.
Whether you are starting out to make a living or a millionaire, the key to successful personal finance is through commitment and dedication.
If you have a major course in finance, then you must be working on obtaining a financial analyst certification. A lot of the employers are looking for certification from their applicants. Certification will always improve your professional credibility as a financial analyst. Getting certification also increases people’s respect and recognition towards you and compels employers to give you a higher position and salary.
Job growth in the field of finance has grown throughout the years and showed a 37% increase in financial advisors and analysts. Thirteen percent of the growth is expected to go to financial managers by the year 2016. There are a lot of ways in which you can get the best position and salary. You must know where you may be needed. Insurance companies, investment banks, and businesses prepare mutual funds and pensions needed for financial analysts.
Sectors like energy, technology, and securities also require analysts to will deal with investments in these areas and to offer effective advice. Any field would require somebody who would assess finances, predict market behavior, identify trends, and know how to adjust to such trends. It is common practice for big companies, both private and public, to hire a financial analyst.
Any training you will complete will immensely improve your salary in the field. Getting a certification will ensure your potential in acquiring a rewarding salary. During the years 2008–2009, the average salary for financial analysts was $66,500. Ten percent of the analysts made at least $130,000 between the years 2008 and 2009. Also during those years, the lowest earning analysts, who made up 10% thereof, made $40,000. In spite of the present downturn in the investment banking market, the finance industry still has professionals that can provide the highest salaries for their commercial endeavors.
Knowing how to efficiently and effectively utilize software and Excel spreadsheets will reinforce your ability to acquire a good-paying job as a financial analyst. Also by doing so, you can aid in growing small businesses through your financial advice.
Financial budget is very important whether it’s for business or personal plan. It is a financial plan that is made to see the projections of income and expenses in details in a given period of time. It is very helpful to set goals and evaluate one’s current financial standing. Anyone can do a financial budget and below are simple tips that can be followed.
- Identify, evaluate and track your spending – you can do this by listing down how you are spending your money now, and then make evaluations for you to set goals to help you achieve your financial objectives. The guidelines that you have set should be attained by keeping track of your spending.
- Use budget tools or software – it can help you create an effective budget plan that you can use.
- Watch out if you keep on coming back to make withdrawals using your ATM – keep records and make sure you know where that money is spent on.
- Only spend within your financial capabilities – never go beyond what you can pay for, this can get you into serious trouble.
- Buy what you need – if you see yourself spending on too many luxuries, serious changes will have to be made, especially if you go beyond your limits. It is not bad to buy some of those “wants” but you should know that this can be addictive. What you need is more important and you should discipline yourself in buying those unnecessary things.
- Use the tithing strategy – you can use the 90% of your income to spend on the necessaries and 10% of it can go to your savings.
- Don’t include in your budget the money that you’re not sure to have – bonuses, tax refunds, etc. is not always guaranteed to be received, so better not include them in your budget yet.
- Increase and promotion – some people tend to go out and shop right away with their extra money. It is better for anyone to keep it and make plans on how it can be spent.
Managing money is not easy but a good financial budget plan can be a helpful guide to anyone, especially if he or she has spending issues. Common factors that are included in the financial budget are income, contractual payments such as car loans and mortgage; monthly living expenses such utilities, unexpected expenses such as medical and veterinary services; savings and investments.