All posts by akash1180

I am a college student who is energetic and I am learning new skills to develop myself to be a better human and being dedicated to every field known to me.
Business and Management

CAPITAL STRUCTURE

Capital structure signifies the composition of the amount of long-term financing and according to Gerstenberg, “Capital structure means the types of securities to be issued and the proportionate amounts that makeup capitalization”. Long term finds can be obtained from owners and borrowers. The owner’s fund consists of equity shares, preference shares, and retained earnings. Borrower’s fund (debt capital) includes debentures and other long term borrowings and the ratio between the owner’s fund (equity) and borrower’s fund is decided under the capital structure.

DETERMINANTS OF CAPITAL STRUCTURE

As stated earlier capital structure decision is highly individualistic and the capital structure of a company is planned initially when the company is floated. The initial capital structure must be designed very carefully since it will have long-term implications. However, the capital structure decision is a continuous one and has to be taken every time whenever a firm needs additional finances. Several factors affect the capital structure of a firm. Some of the important factors which must be kept in mind while determining the capital structure are discussed as follows:

1. Cash flow position

While choosing if capital structure the future cash flow position must be considered before issuing debt. Cash flow must not only cover fixed cash payment obligations but there must be sufficient buffer also, it must be kept in mind that a company has cash payments obligations for (i) Normal business operations; (ii) for investment in fixed assets; and (iii) for meeting the debt service commitments i.e. payment of interest and repayment of principal.

2. Interest Coverage Ratio

By the use of this ratio, it can ascertain whether the company can pay interest or not. The greater this ratio, the more will be the capacity of the company to use debt. The ratio can be calculated as under:

 Interest coverage ratio= Earnings before interest & Taxes/ Interest

3. Debt Service coverage ratio- DSCR:

 The debt service coverage ratio takes care of the weaknesses referred to in the interest coverage ratio-ICR. A higher DSCR indicated better ability to meet cash commitments and consequently, the company’s potential to increase debt components in its capital structure.

4.Cost of Debt

The capacity of a company to take depends on the cost of debt. In case the firm arranges borrowed funds at a low rate of interest then it will prefer more debt as compared to equity and vice versa.

5. Tax rate

High tax rate makes debt cheaper as the interest paid to debt security holder is subtracted from income before calculating tax whereas companies have to pay tax on dividend paid to shareholders. So high-end tax rate means prefer debt whereas at low rate tax the company can prefer equity in the capital structure.

6. Cost of equity capital

 The cost of a source of finance is the minimum rate of return expected by its Suppliers. Equity shareholders bear the maximum risk because no rate of dividend is fixed. To pay interest on debentures is a statutory liability of the company whether the company earns a profit or not. Thus, debt is cheaper as compared to ordinary share capital. The cost of debt becomes lesser because interest is a charge on the taxable income.

Advertisement
Business and Management

HENRI FAYOL: THE FATHER OF MANAGEMENT

Henri Fayol is the universalist and he father of general management and Fayol developed the Theory of Management and he has given his opinion that managerial excellence is technical ability and can be acquired and he developed theories and principles of management which are universally accepted and made him a universalist. He was a pioneer of the formal education in management, Fayol’s principles of management meet the requirements of modern management, as such, he is rightly accepted as the “Father of General Management”.

Fayol’s long practical experience in the field of management is reflected in his written work and He did not develop a logical theory of management, nor evolved a philosophy that answered all questions and satisfied all doubts about its practicability and based on his own experience in the field, Fayol set forth 14 Principles of management and they are:

1. Division of Work

The division of work is applied to all kinds of work- technical as well as management and division of work also means specialization and division of work promoted efficiency.

2. Authority and Responsibility

Authority and responsibility go together and Fayol stressed that right and power to give orders should be balanced by the responsibility for performing necessary functions and according to Fayol “The result of authority is responsibility. It is the natural result of authority and essentially another aspect of authority and whenever authority is used, responsibility is automatically born”.

3. Discipline

According to Fayol, “Discipline is in essence obedience, application, energy, behavior and outward marks of respect observed following the standing agreements between the firm and its employees”. Agreements must be obeyed in totality, without any dissent and discipline is essential for the smooth running of the business.

4. Unity of Command

A subordinate should take orders from only one boss and Fayol claimed that if the unity of command is violated “Authority is undermined, discipline is endangered, order disturbed and stability threatened” if there are two or more superiors for an employee then confusion and conflict of interest arise and everyone has to make sure that this doesn’t happen.

5. Unity of direction

 Fayol advocates, “One head and One plan” for a group of activities having the same objectives, and this will create dedication of purpose and loyalty. Unity of direction for achieving unity of action in the pursuit of common objectives by a group of persons.

6.Subordination of Individual Interests to general Interests

This is a home truth and, in a family, the interests of its members should be subordinated to the interests of the family as a whole.

7. Remuneration to employees

Remuneration should to fair and adequate and it should be supported by both types of incentives- Financial as well as non-financial.

8.Centralization and Decentralisation

There should be one central point in the organization that exercises control over all the parts but the degree of centralization of authority should vary according to the needs of the situation.

9. Scalar Chain

The Scalar chain is a chain of supervisors from the highest to the lowest rank and this principle suggest that there should be a clear line of authority from top to bottom linking all managers at all level.

10. Principle of order

This principle applies to the arrangement of material and people and there should be a place for everything and everything should be in a place.

11. Principle of Equity

Kindness and justice should be exercised by management in dealing with their subordinates and this will infuse loyalty and devotion among the employees.

12. Stability of Tenure of Personnel

An employee with all the requisite abilities needs some time to gain specialization and stability is linked with a long tenure of personnel in the organization and efficiency is promoted by a stable workforce.

13. Principle of Initiative

The initiative is the power of thinking out a plan and ensuring its successful implementation. Initiative on the part of its employees can become a great source of strength, but it must not be against the established practice.

14.Esprit-de-corps

 It means the spirit of loyalty and revolution which unites the members of a group or society and Fayol said that there is strength in unity and the two enemies of sprit-de-corps are:

i. Divide and rule

ii. Abuse of written communication

Business and Management

Principles of Management

A principle refers to a fundamental truth, it establishes a cause and effect relationship between two or more sets of events. Principles can predict the results of certain causes in the given circumstances. According to George R. Terry “ Principle is a fundamental statement of truth providing a guide to thought or action”.  Thus on a basic principle, we may say that this is to be done and this is not to be done. A managerial principle is a broad and general guideline for decision-making and behavior, for example, while deciding about the promotion of an employee on my consider seniority, whereas the other may consider the principles of merit. Principles of management are different from that of principles of pure sciences. Management principles are not as rigid as principles of pure sciences they deal with human behavior and thus are to be applied creatively given the demand of the situation.

Management principles have not been developed overnight but a complete procedure to develop these principles is undertaken and these principles are developed by the management experts, first, the problems were born, then efforts were made to solve them and these efforts resulted in a lot of research work and finally the solutions were found out and these solutions are in the form of principles of management. The principles of management are derived in the following ways:

1. Based on deep observation/ study of the problem

  Researchers observe the problem in different situations and from different angles. They have to study deeply the problem, its cause, magnitude, consequences, and solutions.

2. Based on experimental studies

A decision or statement which is observed is tested in different organizations with different employees and if they get a favorable result, then the statement is given the name of a principle and a principle is derived. After understanding the meaning of principles and principles of management, it is very necessary to learn the nature and the need for the principles of management.

Based on the above guidelines the principles of the management were developed. Several principles of management have been developed to assist managers in performing their functions well, a large number of principles have been contributed by the management authors belonging to the traditional school of management thought and today there is a very lengthy list of management principles and these principles can be used by changing them according to the requirement and situation. The principles of management are not like the principles of physical sciences. The Principles of management cannot be rigid or absolute as they are not rules or laws and “No Principle operates automatically”. According to Henry Fayol “Principles of management are flexible and nor absolute, but must be utilized in the light of changing and special conditions”. Management principles are universal and these can be applied in different organizations like government, business, military, etc.. Principles of management are the fundamental statements of the truth of universal validity and these principles help the managers in solving managerial problems systematically and scientifically and methodologically.

Business and Management

LEVELS OF MANAGEMENT

The level of management is an important classification needed for an organization to work smoothly and operationally to complete the needed work and all the employees working in an organization/institution can be divided into two categories:

                             1. Managerial Members

                             2. Non-Managerial Members

1. Managerial Members

 In this category, all such persons are included who manage somebody, they are called managers because they manage some of the other people. Thus they have all the subordinates. The Chief Executive officer or CEO ranks higher in this hierarchy and departmental managers are subordinate to the CEO. Supervisors work under the departmental managers and so they are subordinate to them. In the same manner, workers are subordinate to supervisors. Except for workers, all others are called managers irrespective of their designation. He is the manager only who builds managerial levels. “The best executive is the one who has sense enough to pick good men to do what he wants done, and self-restraint to keep from meddling with them while they do it.” 

Employees working in an organization build a chain of hierarchy and that is known as “ Chain of Authority”. This chain links all ranks in a vertical form. In this manner, this chain from top to bottom builds many managerial posts, which are termed as managerial levels. The term level of management refers to a line of demarcation between various management positions in an organization. As we move from top to bottom the degree of authorities goes on decreasing. In the top management, the members who occupy the seat are entrusted with the responsibility of planning and executing broad policy decisions. Manages of all major activities areas can be referred to as top management. The top management generally performs the following functions:

  1. Laying down guidelines for the various departmental heads.
  2. Organizing the business into various sections and departments for the accomplishment of predetermined goals.
  3. Setting out general objectives and policies.
  4. Making appointments to top positions such as appointments of managing director, secretary, departmental heads, etc.
  5. Reviewing the work of executives and ensuring their performance at different levels.
  6. Budgets prepared by different managers are given final shape i.e., approval is given to the budget.
  7. To understand the interlocking of departments in major policies.
  8. To ensure that there is coordination between the different parts of the organization.
  9. To build the company spirit where all are working to provide a product or service wanted by others.
This image has an empty alt attribute; its file name is manageriallevelsmiddlelinemanagers.topline.managers.firstlinemanagers.none28093managerialemployees..jpg

2. Non-Managerial Members

In this category, those employees are included who work directly on the job. The place at which such employees work is known as a platform area. Since they are at the lowest level of the chain in an organization, they do not have any subordinates, that is why they cannot be called as managers. For this very this they are not counted among the level of management and that is why they form the Non-Managerial level. They are the main base or the building block for the organization as the company depends upon their work to run the company smoothly and efficiently and greater the workforce the greater the productivity.

Business and Management

MANAGEMENT

Management has become an important “Economic organ” of the present industrial society. Every person in the world from the family head to the prime minister of the country or from the worker to the Managing director of a Joint-stock company is busy in managing different types of affairs that he has to perform in discharging his/her entrusted duties. Management is the coordination of human and physical resources towards the attainment of objectives. By managing different activities, we can best utilize our available scarce resources. As the mind of a person controls his activities, similarly management controls the business organization, men, machines, and materials in getting the work accomplished.

This image has an empty alt attribute; its file name is resource-management-software.jpeg

TRADITIONAL AND MODERN CONCEPT OF MANAGEMENT

Management is related to the dynamic process of establishing objectives of the organization, harnessing and coordinating its human as well as other resources, and ultimately to the attainment of goals. It is a process of creating a creating conducive environment for humanitarian efforts, to reach the organization’s goals effectively and efficiently. According to  C.S George who describes management as “Management is a distinct process consisting of planning, organizing, actuating and controlling, performed to determine and accomplish the objectives by the use of people and resources” Traditional concept of management restricted management to getting things done.

According to the modern view, management covers a wide range of business-related activities. According to modern thinkers, “Management is a process of an activity a discipline and an effort to coordinate, control and direct individuals and group efforts towards attaining the cherished goal of the business”. Another aspect of management is presented by Harold Koontz and O’ Donnell, “Management is the art of getting things done through and with the help of a formally organized group”. To be more specific, to manage is to forecast and to plan, to organize, to command, and to control.

This image has an empty alt attribute; its file name is leadership-vs-management-difference-article.jpg

CONCEPT OF MANAGEMENT

Management is a set of functions directed at the efficient utilization of the resources in the pursuit of organizational goals. To be more specific, to manage is to forecast and to plan, to organize, to command, to coordinate, and to control. To foresee means examining the future and drawing up the plan of action. To organize means building up the dual structure, material, and human of the undertaking. To command means maintaining activity among the personal. To coordinate means binding together, unifying, and harnessing all activities and efforts. To control means seeing that everything occurs in conformity with the established rules and expressed command. By efficient utilization of resources using resources wisely and in a cost-efficient manner. By effectiveness, we mean making the right decisions and successfully implementing them. Efficiency and Effectiveness are interrelated, for instance, it is easier to be effective if one ignores efficiency. The effect of good management is nothing short of remarkable. Take an under-performing-even chaotic-organization and install a skilled manager and him/she soon can have the enterprise humming like a well-tuned machine. Studies have shown that 90 percent of the business fail generally due to poor management.

This image has an empty alt attribute; its file name is 12b3e-1u4ebes6muu2fy7im8igmug.jpeg
Education, Guest Post

NET BANKING A BOON?

Traditional banks offer many services to their customers, including accepting customer money deposits, providing various banking services to customers, and making loans to individuals and companies. Compared with the traditional channels offering banking services through physical services, Net banking use the internet to deliver traditional banking services to their customers, such as opening accounts, transferring funds, and electronic bill payment.

Net banking can be offered in two main ways, first, an existing bank with physical offices can also establish an online site and offer net banking services to its customers in addition to the regular channel, Net banking is provided without extra cost to customers. Customers are attracted by the convenience of Net banking through the internet and in turn, banks can operate more efficiently when customers perform transactions by themselves rather than going to the bank branch and dealing with a branch representative.

This image has an empty alt attribute; its file name is what-is-net-banking.jpg

Net banking services are delivered to customers through the internet and web using Hypertext Markup Language (HTML). One of the main and important concerns of Net banking is security, without great confidence in security customers are unwilling to use a public network such as the internet to view their financial information and conduct financial transactions. Some of the security threads include invasion of an individual’s privacy and theft of confidential information. Banks with E-banking service offer several methods to ensure a high level of security :

  1. Identification and authentication
  2. Encryption
  3. Firewalls

The range of e-banking services is likely to increase in the future. Some banks plan to introduce electronic money and electronic cheques. Electronic money can be stored in computers or smart cards and consumers can use electronic money to purchase goods of small value over the internet. Electronic cheques will look similar to paper cheques, but they can be sent from the buyer to sellers over the internet, electronically endorsed by the seller, and forwarded tot eh seller’s bank for electronic collection from the buyer’s bank. Further bank seeks to offer its customers more products and services like insurance, mortgage, financial planning, and brokerage. This will not only deliver more values to the customers but also help banks to grow business and revenues.

ADVANTAGES/BENEFITS OF NET BANKING

1. Advantages from the customers’ point of view:

  1. Net banking provides 24 hours, 365 days a year of services to the customers of the bank.
  2. Customers can make some of the permitted transactions from office, home, or while traveling via mobile phones.
  3. It inculcates a sense of financial discipline by recording every transaction.
  4. There is greater customer satisfaction by offering unlimited access to the bank.
  5. There is greater security to the customers as they can avoid traveling with cash.
This image has an empty alt attribute; its file name is e-banking.jpg

2. Advantages from the bank’s point of view:

  1. Net banking provides a competitive advantage to the bank.
  2. Net banking provides an unlimited network to the bank and is not limited to the number of branches.
  3. Load on branches can be considerably reduced by establishing centralized data and by taking over some of the accounting functions.