Cash flow refers to the cash that comes into and flows out of a business. Cash flow can be increased in a number of ways, including selling more goods or services, increasing the selling price, reducing costs or selling an asset. If a business experiences a surplus of cash flow, it has to make a determination on the best way to use that surplus for the benefit of the business. In a company like CONCOR, which is the market leader of its segment and enjoys number of core competencies over others it becomes extremely important to formulate an efficient way to manage surplus cash that is generated in day to day business and the cash kept in form of reserves that is generated by the business over the period of time.
In number of PSEs quantum of
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After the further review of guidelines in 1995 it was decided that instead of the condition of Rs.100 Cr. as paid up capital there will be a condition of Rs.100 Cr. as ‘net worth’ of the bank, i.e. the paid up capital plus free reserves of the bank should not be less than Rs.100 Cr.
3. Instruments which have been rated by an established Credit Rating Agency and have been accorded the highest credit rating signifying highest safety e.g. certificates of deposits, deposits schemes or similar instruments issued by scheduled commercial banks/term lending institutions including their subsidiaries, as well as commercial paper of corporate.
4. Inter-corporate loans are permissible to be lent only to Central PSEs, which have obtained highest credit rating awarded by one of the established Credit Rating Agencies for borrowings for the corresponding period.
5. Any debt instrument, which has obtained highest credit rating from an established Credit Rating Agency. Treasury bills and Government of India securities up to three years maturity period are also allowed for investment purpose.
6. As the above guidelines leaves no scope to fully utilize the surpluses for a duration of less than 15 days, in 2003 it was decided that the public sector enterprises are allowed to invest their surplus funds in the call money deposits after taking individual approvals from the Reserve Bank of
The high yield bond is a bond that features higher returns but with a lower credit rating than typical investment-grade bonds. These bonds can also be referred to as ‘junk bonds’ that are rated as below investment grade by organizations such as Moody’s and Standard and Poor’s. [Appendix #1] Generally, companies that issue high yield bonds may receive their rating due to a few characteristics, such as being less established than typical household brands, showing weak financial performance or they may have suffered a financial setback at some point in their corporate history. Although, high yield bonds may seem to have a relatively negative reputation among investors they possess many attractive advantages which include: diversifying portfolios, greater yields, lower volatility thus makings for a good long-term investment and the fact that bondholders have priority of recovering their money over equity security holders in the case of bankruptcy. These bonds are accessible to investors either as individual issues or through the means of high-yield mutual fund investments. On the other hand, there are certainly risks involved when investing in high yield bonds, such as credit risk where there is the possibility that the issuer defaults on the principal or interest payments over the course of the term and investment in these bonds ultimately depends on how informed the investor is and the amount of risk the investor is willing to tolerate. Similar to other types of securities there is always the threat of economic downturn and risks occurring when investing in international markets, such as political and exchange rate risks. In contrast, high yield bonds are able to mitigate interest rate risks better, and are less vulnerable to drast...
This selection may include mutual funds, individual securities, annuities or bonds. Both the choice of investment instruments as the investment risk borne by the employee and not the employer.
Capital budgeting is one of the primary activities of a company. Most of the company uses capital budgeting for decision making process of selecting and evaluating long-term investment. The company have to make a right decision with respect to investment in fixed asset such as purchasing of new equipment and delivery vehicles, constructing additions to buildings and many more. The decision must be right because of the project involve huge amount of cash outflow and it is committed for many years.
In our business world, ‘Capital is the lifeblood of every business venture’ (Smith, 2012). Capital can build up company, purchases non – current assets for instance machinery or plant and paid off daily expenses for examples wages, lighting, power etc. Every company needs to have someone to manage the finance by thinking different types finance which are internal short term, internal long term, external short term and external long term financial resources. These are the main four ways which can raise the capital but those sources may relate to different repayment rate and length and the amount will be received. When the owner and manager thinking to apply internal or external financial resources they need to consider Purpose, Amount, Repayment, Interest and Security which is name as PARIS. Purpose is identifying what type of finance are suitable to required, amount is how much should be borrow, repayment is how much and when should the business pay the finance back. Interest is how much is the finance cost and security is the business need put down the business assets or personal household as a deposit before receive any finance. These are the main concepts owner and manager need to remember before apply any type of finance. (Cox and Fardon, 2009) Director and manager need to think effectively for rising capital in an effective way which includes lower repayment and the control of the company. (Gillespie, 2001)
Bonds have many characteristics such as the way they pay their interest, the market they are issued in, the currency they are payable in, protective features and their legal status. Bond issuers may be governments...
Exchange traded: These are standardized instruments and are backed by clearing house. So there is no default risk. E.g. Futures.
Reserve Requirements, it is the amount of funds that the financial institutions have to hold in their vault. No one has the right to change the Reserve requirement, yet the Board of
Therefore, the amount of profit obtained is somewhat arbitrary. However, cash flow is an objective measure of cash and it is not subjected to a personal criterion. Net cash flow is the difference between cash inflows and cash outflows; that is, the cash received into the business and cash paid out of the business (Fernández, 2006). Whereas, net profit is the figure obtained after expenses or cost of resources used by the business is deducted from revenues generated from the business operations activities. Nonetheless, the figure for revenue and cash are not entirely cash, some of the items may be sold on credit and some of the expenses are not paid up
Issue Commercial Papers – It is identified in (Short Term Finance:Commercial Paper, 2008) that a commercial paper is simply unsecured short-term debt instrument issued by an organization for meeting short-term liabilities. An advantage of issuing commercial papers is that only companies with high credit ratings can do so, therefore, a company like MRM can enjoy the prestige with such an issuance. Also it is cheaper than a bank loan as it has low interest rates. However a disadvantage could be that there are no flexibilities with regard to repayments and that it lacks liquidity as it cannot be cashed before the maturity date.
However it is also a source of finance. Research shows that over 60% of business investment comes from reinvested, retained profit. · Squeezing Working Capital By cutting stocks, chasing up debtors or delaying payments to creditors, cash can be generated from a firm’s working capital. However, when cash is taken from working capital for a purpose such as
The management of cash is essential to the survival of any organization. Managing an organization’s financial operation requires knowledge of the economy and ways to maximize revenue. For any organization to operate on a daily basis adequate cash flow is required. Without cash management the organization will be unable to function because there is no cash readily available in case of inconsistencies in the market. Cash is also needed to keep the cycle of the company’s operations going.
chooses a stable and profitable bond, it will provide a steady source of income through interest
Cash flow statements provide essential information to company owners, shareholders and investors and provide an overview of the status of cash flow at a given point in time. Cash flow management is an ongoing process that ties the forecasting of cash flow to strategic goals and objectives of an organization. The measurement of cash flow can be used for calculating other parameters that give information on a company 's value, liquidity or solvency, and situation. Without positive cash flow, a company cannot meet its financial obligations.
Balance sheet is a financial statement which is widely used by accountants for businesses. Balance sheet is also known as the statement of financial position because it helps us to present company’s financial position at the end of a specified period. (fresh books, 2016)
8. Limited instruments: It is in fact a defect of the Indian money market. In our money market, the supply of various instruments such as the treasury bills, commercial bills, certificate of deposits, commercial papers, etc. is very limited. In order to meet the varied requirements of borrowers and lenders, it is necessary to develop numerous instruments.