Activity based costing (ABC) is a costing model that recognizes activities in a company and assigns the cost of each activity resource to all products and services according to the actual use by each: it assigns more indirect costs overhead into direct costs. In this method a company can exactly estimate the cost of its individual products and services for the purposes of recognizing and reducing those which are unbeneficial and lowering the prices of those which are overpriced. In a business organization, the Activity based costing method assigns an organization’s resource costs through activities to the products and services given to its consumers. It is commonly used as a device for understanding product and consumer cost and profitability. As such, Activity based costing has predominantly been utilized to support strategic decisions such as pricing, outsourcing and recognition and measurement of procedure enhancement initiatives. Activity based costing is basically a Continue reading
Finance Research
The Fundamental and Enhancing Qualitative Characteristics of Financial Information
The purpose of financial statements is to give financial statements information about the change in financial position, financial performance and financial position of the organization. These can provide data use in decision making such as investment, credit and economic decision making which are useful for various users. There are seven main groups of users which are public, investors, lenders, employees, customers, supplies, government and other agencies and the needs of information is different for each group, for instance, employee will interest on the profitability, retirement benefits and employment opportunities and so on. The qualitative characteristics can be categorized as fundamental (relevance and faithful representation) or enhancing (comparability, verifiability, timeliness and understandability) based on how they influence the usefulness of financial information. However, it can limited by two pervasive constraints which is cost and materiality in providing useful financial information. Fundamental Qualitative Characteristics of Financial Information Relevance: Relevant financial reporting information Continue reading
Literature Review – Credit Derivatives
Review of Literature on Credit Derivatives Giesecke, K. (2009) says that a credit derivative is a financial instrument whose cash flows are linked to the financial losses due to default in a pool of reference credit securities such as loans, mortgages, bonds issued by corporations or governments, or even other credit derivatives. Credit derivatives facilitate the trading of credit risk, and therefore the allocation of risk among market participants. They resemble bilateral insurance contracts, with one party buying protection against default losses, and the other party selling that protection. He discusses the mechanics of standard contracts, describes their applications, and highlights the mathematical challenges associated with their analysis. Dufey & Rehm(2000) say that credit derivatives are contracts between two financial market participants.The essence of this contract is to transfer credit risk from one party to another.Like all financial innovation, a credit derivative is a new financial product which is developed Continue reading
Cost of Capital – Meaning, Significance and Components
Investment in capital projects needs funds. These funds are provided by the investors like equity shareholders, preference shareholders, debenture holders, etc in expectation of a minimum return from the firm. The minimum return expected by the investors depends upon the risk perception of the investor as well as on the risk-return characteristics of the firm. This minimum return expected by the investors, which in turn, is the cost of procuring funds for the firm, is termed as the cost of capital of the firm. Thus, the cost of capital of a firm is the minimum rate of return that it must earn on its investments in order to satisfy the expectation of the various categories of investors who have invested in the firm. A firm procures funds from various sources by issuing different securities to finance its projects. Each of these sources of finance entails cost to the firm. Since Continue reading
Literature Review about E-Banking In India
Introduction E-banking in today’s scenario is a very dynamic concept. It is a kind of self service technology (Dixit & Datta,2010). Competition is the pushing force for the introduction of e-banking. (Ziqi Liao and Michael Tow Cheung, 2003) .E-banking is delivery of new and traditional banking products and services straight to customers using electronic, interactive communication channels using computers. At a fundamental point, E-banking means setting up of a web page by a bank to provide information about its products and services their features, advantages, disadvantages, prices , duration and other details. On the other hand, at an advanced level, it refers to providing facilities such as accessing accounts, transferring funds, and buying financial products or services online, Making payments et which is known as “transactional” E- banking (Sathye, 1999). E-banking includes the systems that enable financial institutions, customers, individuals or businesses whether small or big or medium scale to Continue reading