The Clinton Gazette

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Leslie Jones

5 Factors Influencing Mergers & Acquisitions

The corporate world is not a child’s play area. It revolves around strategies where time is of the essence. One such major strategy that many corporate leaders apply to increase their company’s overall face value is to adopt the tool of Mergers & Acquisitions. Through mergers and acquisitions, corporate leaders intend to expand the company, increase the market share, reduce costs, increase financial resources, earn goodwill, face competition, gain a competitive advantage, and achieve many other similar goals.

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Thus, the strategy of mergers & acquisitions is all about bypassing time and resources in order to achieve the ultimate organic growth that is required for the company. This article lists out 5 main factors that greatly influence the merger and acquisition decisions of a company.

Perfect Fit

It is all about the fit. There is no point in buying the entire toolset if you do not have the right spanner that can fix the required bolt. Similarly, mergers and acquisitions are all about achieving the right strategic fit. What will a banking company do by acquiring an e-commerce store that is into the sale of garments? However, when a banking company invests in an insurance company, benefits are numerous. Therefore, before considering mergers or acquisitions, the degree of alignment between the two industries must be analyzed in terms of usable resources, strategy, competitive situation, leadership and management styles, and the organizational culture.

Market Share

All companies that plan for mergers and acquisitions eye the combined market share. Corporate leaders are so protective in increasing their market share such that when such an opportunity presents itself, they will do anything to achieve it to gain a probable growth in terms of market share.

Accepting Change

Changes are difficult, especially when it comes to mergers and acquisitions. Mergers and acquisitions will be more difficult especially for that company which is going to be merged or acquired. There is a clash in many things, for example, the staff, the management, the resources, the policies, and others. However, different strategists deal with change differently. While some people avoid it, others confront it. Resistance is one of the most commonly encountered problems in almost all cases of mergers and acquisitions. Hence, tackling resistance to change is a major factor that will determine the success of the merger.

Lead, Not Manage

Resistances are bound to crop up after mergers and acquisitions. However, dealing with resistance in the proper manner is the key to a successful merger. One important way by which mergers can remain successful is for the leaders to lead the people and not try to manage them with a stick in their hand. Moreover, good training on new processes and policies will also help people mellow down faster to the change.

Evaluation, Feedback & Correction

The final step in every process including that in mergers and acquisition is to evaluate the results obtained from the results expected to see whether the objectives have been achieved or not. This is usually done by taking proper feedback and then planning for a course correction. Most corporate remain successful after a heavy merger and acquisition deal only because they take the effort to measure the results, evaluate their activities, and set proper expectations in terms of the expected performance.



Major Factors that Influence the Cryptocurrency Markets

The revolutionary digital currency that has created a lot of flutter in the financial markets has made people from all occupations to understand the popular form of virtual currency. The simple way to understand the curiosity of many, that there is no underlying asset that to can be related to when it comes to the liquidity aspect of the digital currency. The digital storage of asset without any physical presence in the virtual cloud storage is termed as cryptocurrency without any kind of monitoring or regulation form authorities. Read this review

What are the factors that influence the crypto world?

  • the confidence of the investors to foray into something that is not tangible has made the world of crypto very popular, encouraging many to keep the cryptocurrency storage as a back up when there is a huge fall in the traditional currencies
  • The limited supply of coins in the crypto world has increased the demand for this type of virtual currency to be high, thus increasing the pricing. As the mining of coin currency involves high-end technical programming and computer power back up, the supply of the coins are becoming a hotbod for people to inflate the prices to acquire them
  • the utility of the crypto currency is increasing, as they are used for payments, completing online transactions, trading online, hence they have a reasonably high scalability
  • the reserve currency bitcoins is the major factor that commands the pricing trends in the crypto world, has influenced the other digital coin currency to rally and gain the momentum required to strengthen the crypto exchanges
  • the driving force of the innovative coin currency has been a major competition to the traditional banking methods and peer currency groups as they are practically non erasable and cannot be tampered with, unlike the corrupt traditional currency that is siphoned off
  • the social media have also been actively increasing the demand for the digital currency, acceptance of crypto currency as units of exchange for different services online has made corporate to tie up with service providers to encourage coin currency payment modes for the products and services
  • the different pricing models across all the technical innovation support the use of the coin currency that has a future awaiting for, the use of the popular Bitcoin against the US dollar value is to strengthen, even after a free fall of the digital currency recently. the significance and ease of converting the coin currency to fiat currency in the exchange where the buyer or seller wants to makes the cryptocurrency even more in demand

As the progress of digital currency has been steadily increasing, they are susceptible to the markets as well as the investors’ decision to influence the movement of the coin currency in different market positions. The promotion of tokens as a form of acceptance in the crypto world has gained the pricing momentum and is directly influencing the volatility of the crypto exchanges worldwide, thus deliberation in investing heavily on the lesser known tokens are increasing the price of other crypto coins.



Working Capital Requirements For A Small Business

When you decide to begin a new business which is the extension of your existing small business, you need to keep some factors in your mind. This type of business should be formulated with the basic financial tools and their minor components. One important factor is Working Capital. When you plan to grow your business how much additional capital you require will be a question you may have. This is simple and easy when you just follow few steps.

  1. You have to understand the working capital cycle of your business. This means how fast your assets can be changed to cash and how soon the liabilities can be paid off.
  2. Know the amount of accounts receivables, inventory, and account payable.
  3. You need to know the historical rates of working capital to forecast the future needs of your business.
  4. Analysis of balance sheet and income statement.
  5. Make a table and find out the annual turnover ratios pertaining to inventory, accounts receivables and accounts payable.
  6. Calculation of your new working capital needs.
  7. Then calculate the projected working capital needs.
  8. Calculate the increase from the historical working capital.
  9. Finally, calculate the additional working capital needs.

These are the steps which are followed and calculated for finding the required working capital for a business extension. These are done with the important ratios and also with the components like inventory, accounts payable and account receivable.

Ultimately it all decides how we will be able to handle the immediate cash requirements for the overall business development.

How to aid in working capital sources?

Therefore to accomplish this task of finding the working capital needs of any business a proper business strategy should be formulated which is called as working capital management. This is a part of managerial accounting concepts which is dealt by the senior management professionals of a company. They find out the capability of the balance between the current assets and current liabilities and their liquidity status.

This Working capital management is by following some methods such an inventory analysis, ratio analysis, and operating expenses calculation. All these help in the proper and easy calculation of the working capital requirements of a business.

A good working capital balance aims at smooth functioning of a company from all angles and easy sustainability of the business for a long term.



The Rule Book To Your Working Capital

Working capital needs to be carefully handled, as it involves both a company’s present assets and its current liabilities. Therefore, it is important to abide by certain rules in order to ensure that there is a good control over the working capital.

Here are certain rules and stepwise procedures to manage “working capital” on a broad scale.

  1. Evaluate all the needs of your working capital based on every cash inflow and every outflow. Identification, sorting, and segregating are the key.

  2. Account for different cash cycles that are appropriate for in your line of business such as managing different customer payments, processing all supplier payments, tallying all the invoice payments, and verification of the outstanding invoice payments.

  3. Verify the financial situations of all the stakeholders involved including the company’s suppliers and customers.

  4. Calculate all invoice payment cycle period, know about the payment terms & conditions, and check if any discounts are available for advance payments.

  5. Manage the company’s inventory, production, and distribution using effective business strategies, for example, apply the concept of Just-in-Time if the approach is suitable for your business or else consider opting for an Economic Order Quantity approach if that is more profitable.

  6. Monitor all the receivables from start to end including every tiny bit of detail, especially while dealing with invoices, where details such as payment terms, due date, and amount are vital and hence must be carefully noted.

  7. Manage all movements of cash from a central point of control, as it will help you manage your funds more effectively and quickly.

  8. Manage all the stocks and inventory to ensure that they perform positively. In cases of non-performing stocks and slow-selling products, be sure to discard them at the very beginning rather than blocking your funds and incurring a loss.

  9. Consider renting, outsourcing, or a different business course of action rather than channelizing a major share of funds in methods that cost the company more.

  10. Protect your company from the varying price fluctuations of the different raw materials available in the market, in order to maintain your profits. Additionally, check within your country and across borders rather than relying on local suppliers.

Thus, it is very important to keep up the performance of your working capital by striking a perfect balance between the needs, amounts receivable, amounts payable, and inventory & asset control. Sticking to the professional know-how’s and expert advice will ensure that you do not go overboard with your working capital but rather lets you stay in control of your working capital. Therefore, minimize the needs of working capital, maximize the income reporting, and optimize all cash flows.



Understanding mutual fund payouts

 

Almost everybody is aware of what happens with stocks payouts which are invariably reinvested or used to supplement an income. But not many are clear about the payout in mutual funds which are also called distributions. Read on to understand mutual funds payouts in detail.

Not all mutual funds have payouts

The first thing that you must understand is that not all mutual funds pay distribution because several funds are invested in companies that do not pay any dividends, hence there is nothing to distribute. Thus, when you invest in funds you have the option to choose funds that pay dividends and those that don’t distribute any dividend income.

Those mutual funds that do distribute the income do so only after deducting their operating expenses. That is why funds that distribute dividends often invest in companies that have high payouts so that after deducting their costs they still have enough to distribute among the investors.

Reinvest or encash your dividends

Investors who receive these dividends have the choice of deciding whether they want it in the form of a cheque to supplement their income or they want to reinvest. Normally retirees like to use the amount to increase their regular income while the vast majority like to reinvest. Almost all dividend-based funds have their payouts on a quarterly basis.

How can I know how much payout I will get

Your fund manager will inform you about all the related details. You can also find the information on the company website. The distribution is not constant always because it is based on the stocks that the funds are invested in and how they perform. It also depends on the payout policies of the stocks which can undergo changes. The best way to determine how much payouts you might get is to look at the fund’s distribution history.

Does reinvestment affect taxation

You have to pay tax on both the dividend income and reinvestment amount. The only difference is that the taxation rate on the dividend income is much higher than the one levied on reinvestment amount. This tax credit can be beneficial for you. of course, the bottom line is that you pay tax on only what is distributed to your account and nothing else.

Should I opt for dividends?

This brings us to the very basic question of whether dividends are beneficial to everyone. Unless you want to supplement your regular income you might not benefit with dividend funds.

 



How to choose a Business Valuation Expert

As is the case with most business owners, business valuation is done only as a last-minute resort and hence many of them are not aware of what to look for in a business appraiser. It is crucial that you get your business evaluated periodically to stay on top of the game. In case you have missed out on gathering information on how to choose an efficient and well-versed business valuation expert read on to gain some tips on the subject.

Tips on choosing a business valuation expert

  • Look out for a certified appraiser: It is paramount that you do not cut costs on this account because you need the guidance of an experienced and well-versed appraiser to aid your business. Certified professionals undergo training in the field and are thorough not only in documentation and presentation but also with identifying the potential pitfalls in an organization. These individuals are well aware of the legal, financial, tax and insurance calculations and requirements.
  • How much experience do they have: A seasoned appraiser will understand the vagaries of the present market situation in your industry and will be able to determine if a lull in the market is a temporary phase or something more significant. They are well aware of what to look for in businesses like yours and this will help them make valuable comparisons with other organizations in the same industry. It is important that your appraiser has sufficient experience in your industry to provide accurate information.

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  • Do they have authentic references about their work: A well established and experienced evaluator will be able to provide you with references of previous work. By following up on these leads you will get a fair idea of the working style and efficiency of the expert. Don’t be conned by client testimonials because in a majority of cases they are falsified with no proof to substantiate their claims; verifiable references are a must in all cases.
  • Don’t ignore bad experiences: Browse through the company’s Facebook page, Instagram and Twitter accounts; you will be able to get information from the Better Business Bureau also. Sometimes minor issues like the location of the office, their opening hours etc. are cited as drawbacks of a company. Unless there are specific concerns with the appraisal process you need not worry about negative feedback but you must be aware of them.

Armed with the above knowledge you can choose an evaluation expert whose report will be beneficial for your company.



Why Mutual Funds?

Markets are always a best to create an investment for long term. Parking your funds in banks will not give you as much capital appreciation as in market instruments like equities, mutual funds, bonds and others.

Equities are the stock forms that you invest in certain companies, while funds are a pool of investors in the company. Bonds are nothing but the fund gaining some specified percent of interest for some years and there is sometimes a mix of these available. Mutual funds are said to be the best option for making your investments, among all these categories. Wondering why? Read on to know:

Simple:

Mutual funds are the simple investment vehicle in today’s scenario. Unlike stocks where you need to have a check regularly and understand the base of all, mutual funds are simple in knowledge. They are basically a pool of investors who invest in a company shares and once the company grows your dividends also grow, giving pay-out. If opted for growth you get great capital appreciation in the longer term.

Now with SIP, this is even easier and lot hassle-free. You pay monthly the affordable amount and for a specified year of time, your capital grows along. At the end what you get is good returns along with capital money.

Diversified investments:

Unlike any other investment where you need to park your money all in one kind of investment, in mutual funds you have various types and various returning schemes that suits many. You have equity funds, balanced funds, debt funds, multi-cap funds, small cap funds, diverse funds, bond funds and many others. Rather than clubbing all your money together, you can split them and put in different baskets and allow them to grow. This helps you in the long term to balance any downside that occurs in one scheme.

Fund managers and professional assistance:

When we don’t have time to look into our investments they go haywire. But, in mutual funds, each fund has one or 2 fund managers who track down the performance of the fund and act accordingly as per the law of fund says. While hiring a personal fund manager is too expensive you can get the benefits here directly without any extra penny.

Ease of liquidity:

With mutual funds, you can turn your NAV’s anytime into cash and use it for emergencies, except for the closed funds. Mutual funds offer you very easy redemption policies, that the money you invested will be liquidated within a maximum of 48Hours or 2 working days in most of the cases.

 



Housing Microfinance

Housing is a basic part of our daily life, without which we become nomads and not humans. Food, shelter, and clothing are as essential as air, water, and food. Without shelter humans are exposed to a lot of threats and dangers and also the lifestyle remains like the olden early man.

We living in urban cities often don’t get the picture right about the underdeveloped people who struggle to get the basic needs. We think about decorating our homes, while they pray to have one! We think about having dinner at a particular restaurant, but they think about whether they would get dinner or not! Such is the plight of underdeveloped, developing nations, where humans do exist, but in a more pathetic form, who suffer from no money to help themselves and no job on the offer to earn.

In developing nations, underdeveloped nations, housing is one of the biggest issue faced by many people. How is the government there managing to give shelter to the less privileged? How can we help our fellow beings who have the extremely low income to help them sleep with a roof on top?

Here comes the Microfinance for housing!! Where the land prices are really not affordable due to poor income situation, and they don’t have access to loans and mortgages; microfinance helps the needy to build a basic shelter by giving the capital to build home, and after the first loan is done, they do provide to further expand the area.

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Microfinance is just like your bank loan services but offered by a different organization who are capable of giving smaller amounts. It’s nothing but a financial service offered by banks, or also called non-profit organizations, or co-operative banks, that helps the less privileged to lead a better life by providing capital at lower rates of interest and for a lesser span of time; and the most important without any warranty or guarantee needed.

Housing microfinance is a loan offered to have a house for the low-income people or even renovate an existing home, get some repairs done and so on.

Difference between loans and microfinance for housing:

The regular housing loans are high in interest and are offered only for newly built houses and with any collateral provided.

In microfinance housing loan, there is a loan given to renovate a constructed home, you get money in increments as and when you are capable of constructing, which reduces the burden on the people. It aims at giving smaller amounts and letting them utilize and then come back.

 



Inflation And Its Causes

In the economic parlance, inflation is the rise in the prices of goods and services. People often wonder about the reasons that make the prices fluctuate. Many older people keep comparing the prices with what they paid years ago. They compare the price of a burger or a bag of flour and always complain about the rising prices.

It amazes everyone and this is a complicated topic for financial experts also. When there is a constant increase in demand due to growing population and the supply is also keeping up due to innovative methods of production and improved quality of production in every area from farming to manufacturing, then why should the prices of commodities increase constantly over the years?

Causes of inflation

If you want to understand the reasons behind inflation, then we need to explore how the economy works.

  1. The first reason is, of course, increased demand that cannot be fulfilled by the existing supply. It takes a little time for the supply to reach the level of demand.
  2. A sudden event can change the number of goods supplied in the market. For example, a natural calamity might damage the crops in an area and the prices of grains and other essentials may go up. But this should be a periodical change and the price may come back to the previous levels once the supply is stabilized.
  3. Sometimes the effect of one event may be carried forward and the built-in inflation may continue.

Inflation is difficult to get rid of

This is a vicious cycle. Once the inflation goes up then there are times when people stop buying certain things, this, in turn, may create an over-supply for some time. Then the people involved in their production suffer losses and may lose jobs or stop producing them. This may reduce the available money in a particular part of society.

On the other hand, when the demand goes up slowly even then the prices remain high and the working class people fight for higher wages as they are not able to afford the higher prices of essential goods. Big companies try to pass on the burden of production and high wages of employees to their customers through increased prices.

Sometimes the government policies may also affect the inflation at times of an emergency or war like situations the prices of goods may increase due to scarcity and more currency may be printed, which may compound the problem as seen in many countries. Thus we can see that there are myriad reasons and some are mentioned here. It affects the economy and a community and country at all levels.

 



Arbitrage – The Perfect Opportunist

Arbitrage is the buying and selling of an asset simultaneously to gain profits from the difference in prices of similar assets or securities in different trading platforms.

A simple instance in our daily life can be used to illustrate this scenario. The bullion market can be quoted as a good example. Gold has different prices at different locations. So a trader can buy gold at one location where say 10 gms will cost him Rs 25,000 and sell it at a different location where the price is Rs 25,300. Therefore he stands to gain Rs 3000 risk-free profit. The trader stands to gain only if the profit is more than the costs involved to carry out this transaction (both purchase and sale)

Why is it referred to as an Opportunistic activity?

Arbitrage works due to the imperfections/inefficiencies that exist in the market. It takes advantage of the inefficient pricing of similar financial instruments in similar or different markets. Arbitrage opportunities are often short-lived and will end once the faulty pricing or situation is corrected. Hence it can be referred to as an opportunistic activity.

Types of Opportunities

  • Currency Arbitrage – This is a strategy applied in forex trading. This involves taking advantage of variations in currency quotes given by different brokers or banks.
  • Uncovered Arbitrage – This arbitrage looks out for changes or fluctuations in the currencies and tries to take advantage of the appreciations in the currency value.
  • Time Arbitrage – This arbitrage happens when there is a drop in the stock price of certain securities. When there is selling spree due to a temporary fall in stock price, there are investors who believe in their long-term value, purchase these securities to benefit from it in the long run.

The different types of arbitrage are many depending upon instruments involved or specific situations or reasons that cause imperfections in the market. We also have political arbitrage, fixed income arbitrage and so on.

Likelihood of Arbitrage

This strategy definitely yields a risk-free profit but it is very rare to find such instances. In today’s financial market where everything is highly automated and the instances of errors or inefficiencies are limited, the chances or arbitrage are minimal. Even if exits, it will be rectified almost instantly. A day trader looking to maximize his profits will be able to identify these opportunities immediately but it will also be wiped off in few minutes or seconds.

Win-Win Strategy

This strategy is essential to ensure efficient functioning of the financial markets. Any faults or discrepancies in pricing will be noticed and rectified. Thus arbitrage brings about a win-win situation where the trader benefits from the price difference and also leads to market efficiency.

 

 

 

 

 




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