The Importance of Liquidity for Commercial Banks

Banks are considered to be as safe deposit for customers associated with them for both short and long term basis. It has increased liability over banks to make sure that they are able to fulfill all the demands of the customers. Also several acts passed in many countries has reduced the dependency that commercial banks used to possess over Central Banks to make sure that their needs are sufficed in case some emergency arrives. Thus to maintain certain level of stake in the company, it is mandatory for commercial banks to retain appropriate liquidity ratios such that any ambiguous situation could be avoided. If any disturbance is encountered in these ratios, there is a problem of funding that comes into picture and hampers bank’s credibility among its stakeholders. Liquidity control is also necessary for proper structuring of the bank along with looking after all the complexities related to the size Continue reading

Exposures to Exchange Rate Fluctuations

International business is facilitated by markets that allow flow of funds between countries in different currencies. Multinational corporations are involved in international trade and receive and pay in various currencies. MNCs must constantly monitor exchange rates because their cash flows are highly dependent on them. The risk faced by these companies due to exchange rate movements after having already entered into financial obligations is called exchange rate risk. Such exposure to fluctuating exchange rates can lead to major losses for the firms. Exchange rate fluctuations cannot be forecast with accuracy. However, using various techniques, the amount of exposure can be measured and minimized. Exchange rate fluctuations can be broadly categorized into three types: Transaction exposure Economic exposure Translation exposure Transaction exposure arises when a firm’s contractual cash flows are affected by fluctuations in exchange rates of the currencies in which they are designated. Transaction exposures can have a great impact Continue reading

Purchasing Power Parity (PPP) Theory of Exchange Rate

Purchasing Power Parity Theory (PPP) holds that the exchange rate between two currencies is determined by the relative purchasing power as reflected in the price levels expressed in domestic currencies in the two countries concerned. Changes in the exchange rate are explained by relative changes in the purchasing power of the currencies caused by inflation in the respective countries. The concept of Purchasing power parity theory (PPP) is traced to David Ricardo, but the credit for stating the law in an orderly manner is given to the Swedish economist Gustav Cassel who proposed it in 1918 as a basis for resumption for normal trade relations at the end of First World War. The  Purchasing Power Parity Theory is stated in two versions : The stronger absolute version of Purchasing Power Parity, and The diluted relative version of Purchasing Power Parity. Absolute Version of Purchasing Power Parity The absolute version of Continue reading

How to Build a Successful Social Media Marketing Campaign?

The use of social media has increased exponentially, creating a fertile ground for platforms as a medium for advertising. However, advertising on social media can be very different from traditional advertising, due to the nature of the medium and the way on which marketing messages may be received. However, while there are differences compared to traditional marketing, there are also some similarities; with the stages of planning. The process of developing a social media marketing campaign may be broken down in to different stages; Determine the specific goals for the campaign. Identification of target market. Decision on the marketing message and specific content that will appeal to the target market. Framing of the message, and choice of medium. Communication of the message. Monitoring of the message impact. Adapting the message. These different stages may be seen as akin to the traditional marketing process, with a requirement to determine the specific Continue reading

International Project Appraisal

International project appraisal also known by a variety of names such as internal company analysis, profiling the organization, capability or resource audit position and strategic advantage analysis, is the process of evaluating a company’s posture relative to its business competition within and outside the country, overall performance and its capability in terms of strengths and weaknesses. Significance of International Project Appraisal The organization’s deficiency should also be compared with those of its successful competitors. Such perceptive self appraisal when matched with environmental analysis facilities management to grasp the opportunities and combat the threats inherent in the environment. International project appraisal has such a vital significance in international corporate planning. Without such am-exercise it will not be possible to formulate economic strategy for an organization on the objective basis. It helps the management in choosing the most suitable niche for the organization. Economic opportunities may bound in different parts of the Continue reading

Social and Commercial Profitability Analysis

Social or National Profitability Public projects like road, railway, bridge and other transport projects, irrigation, projects, power projects, etc for which socioeconomic considerations play a significant part, rather than mere commercial profitability. Such projects are analysis for their net socioeconomic benefits and the profitability analysis of such projects is known as social or national profitability analysis which is nothing but the socioeconomic cost benefit analysis done at the national level. Steps involved in determination of social or national profitability:- National/Social profitability analysis takes into account the real cost of direct costs and real benefit of direct benefits,. For instance, some of the inputs may be subsidized. Only the subsidized prices of input is what is relevant for assessing commercial profitability. However the national profitability analysis takes into account the real cost of inputs i.e. cost of input had they not been subsidized. Accordingly the required adjustment to direct cost of Continue reading

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