Investment Planning Definition

Investors need to identify the financial goals throughout life or for the next 10 to 15 years depending upon the time horizon selected by the investor, and prioritizing them. Investment Planning is important because it helps in deriving the maximum benefit from the investments. Success as an investor depends upon his investment in right instrument in right time and for the right period. This, in turn, depends on the requirements, needs and goals. For most investors, however, the three prime criteria of evaluating any investment option are liquidity, safety and level of return. Investment Planning also helps to decide upon the right investment strategy. Besides individual requirement, investment strategy would also depend upon age, personal circumstances and risk appetite. Investment Planning also helps in striking a balance between risk and returns. By prudent planning, it is possible to arrive at an optimal mix of risk and returns, which suits particular Continue reading

Questionnaires: Meaning and Types

A questionnaire is a form prepared and distributed to respondents secure responses to certain questions. It is a device for securing answers questions by using a form which the respondent fills by himself. It is a systematic compilation of questions that are submitted to a sample drawn the population from which information is desired. It is an important instrument in normative survey research, being used to gather information from widely scattered sources. The questionnaire procedure normally comes into use where one cannot readily see personally all of the people from whom he desires responses or where there is no particular reason to see them personally. Purposes of questionnaire in research are two fold: To collect information from the respondents who are scattered in a vast area and To achieve success in collecting reliable and dependable data. Types of Questionnaire There are diverse forms of questionnaire used in research. These are Continue reading

Typical Project Financing Models

Besides Build Operate Transfer (BOT) and Build Own Operate Transfer (BOOT) models, some typical project financing models are there. They are: Build Own Operate (BOO) Model: In BOO, the concessionaire constructs the facility and then operates it on behalf of the public agency. The initial operating period {over which the capital cost will be recovered} is defined. Legal title to the facility remains in the private sector, and there is no obligation for the public sector to purchase the facility or take title. The private sector partner owns the project outright and retains the operating revenue risk and all of the surplus operating revenue in perpetuity. As an alternative to transfer, a further operating contract {at a lower cost} may be negotiated. Design Build Finance Operate (DBFO) Model: Under this approach, the responsibilities fro designing, building, financing and operating are bundled together and transferred to private sector partners. They are Continue reading

The Concept of Time Value of Money

The concept of time value of money suggests that the money received at different point of time has different values. The financial manager must appreciate this fact and understand why they are different and how they are made comparable. Time value of money is a concept to understand the value of cash flows occurred at different point of time. If we are given the alternatives whether to accept $ 100 today or one year fro now, then we certainly accept $ 100 today. It is because there is a time value to money. Every sum of money received earlier has reinvestment opportunity. For example, if we deposited $ 100 in saving account at 5% annual rate of interest, it will increase to $ 105 at the end of one year. Money received at present is preferred even if we do not have reinvestment opportunity. The reason is that the money Continue reading

Duality in linear programming

Corresponding to every linear programming problem, there is another linear programming problem. The given problem is called the primal and the other its dual. Although the idea of duality is essentially mathematical, it has important interpretations. This can help managers in answering questions about alternative courses of action and their effect on values of the objective function. When the primal problem is of the maximisation type the dual is of the minimisation type and vice versa. It is an interesting feature of the simplex method that we can use it to solve either the original problem – the primal – or the dual. Whichever problem we start out to solve, it will also give us the solution to the other problem. Consider the following general linear programming problem. Maximise Z = c1x1 + c2x2, Subject to a11x1 + a12x2 <or = b1 a21x1 + b22x2 <or = b2 x1,x2 > Continue reading

Porter’s Five Forces and Corporate Strategy

Porter’s Five Forces Framework Porter’s Five Forces Framework introduced back in 1979 by Michael E. Porter from Harvard University in his first book “Competitive Strategy”. It becomes international best seller, and considered by many to be a definitive work on corporate strategy. The book itself had been published in nineteen languages and re-printed almost sixty times, changes the way business leaders thought and remains a guide of choice for strategic managers the world over. It has become an important tool for analyzing an industry structure and strategy process. The tool provides a simple perspective for assessing the position and competitiveness of a corporation or business organization within the industry. Porter points out five forces which the upturn and downturn, will affect the profitability and existence for a corporation or business organization. The development of Porter’s Five Forces Framework is based on the idea of attractiveness of an industry. As for Continue reading