BUSINESS ENVIRONMENT FACTORS AFFECTING BANKING INDUSTRY
Business environment includes the internal as well as external factors that affect the operation of a business. Therefore, business environment is the sum total of the forces or the surroundings that have an influence on the business operations. The internal environmental factors are usually controllable because the management has control over it. Whereas the external environmental factors are difficult to control by the company. There are two types of external environment: Microenvironment and Macro environment.
It is important for every company to do environment analysis that is scanning the environment so that it may identify its threats and opportunities and improve its planning process.
1. Rebound in the housing market-
According to the recent reports, there have been some improvements in the national housing market this year. The average sale price for existing homes in June 2012 showed an increase of 7.9% when compared to the last year according to the National Association of REALTORS (NAR) reported that The median home sale price in York County for August was $142,000 down from $142,500 in 2011 according to a report by The REALTORS Association of York and Adams Counties (RAYAC) . There were around 349 properties sold in August 2012 compared to 322-sold last year. In August 2012, Adams County’s median home sale price was $162,000 with a total of 73 properties sold compared to 2011 when the median home sale price was $163,000 and 58 properties sold according to the report by RAYAC
The mortgage and banking industries have always been very competitive. (In York County alone, there are 275 banking and lending institutions.) The historically low intere...
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... RATIO = Debt/Equity
For the year 2012: 324/30308
For the year 2013: 370/37127
It is a leverage ratio, which indicates a relationship between the debt and equity. The ratio indicates the total liabilities of the firm and the total shareholders’ equity both the figures are present in the company’s balance sheet.
Lower the ratio, better it is. Higher the ratio, higher the risk. The ideal ratio is 1:1. In the year 2012, the HDFC bank’s ratio is 0.01. This means the company relies less on the outsiders and loans. This is a good indicator, which means the company was doing well in the last year. But in the year 2013, the ratio increased drastically. The ratio in the year 2013 was 9.9, which means that the bank borrowed a lot of money from the outsiders.
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Suppliers are mostly concerned with a company 's ability to pay on their liabilities. Therefore, the current ratio and the quick ratio are both looked at by suppliers. The current ratio takes a company’s current assets and divides that by the company’s current liabilities. This number is
The Current Ratio is calculated by taking the current debt and dividing it by the current liabilities. It is the measurement on how a company can meet its short term liabilities with liquid assets (Loth, Rihar, 2015a).A higher ratio indicates favorable activity. A company should be able to meet it responsibilities with its
Equity ratio and debt ratio are both very important because it shows how much of the assets used for production is really owned by the owner of a company. According to calculations in the appendix, RBC has the highest equity ratio and the lowest debt ratio. This is considered favourable compared to Sun life and BMO’s equity and debt ratio. When it comes to return on total assets BMO has the highest return. Meaning it is earning more per assets than RBC and Sun
Analysing the ratio of one with the other in the industry provides for better understanding about the performance of the company in market. An investor has to make a comparative analysis before making any investment decision.
Financial leverage ratio that is the most appropriate is the Debt to Equity Ratio. The Debt to Equity ratio measures the amount of debt a company uses to finance their assets relative to the amount of shareholder’s equity. The higher the debt to equity the more debt is used to finance the business. Boeing obtained a ratio of 1.5728 and the Industry has a 1.7587 or in other words Boeing uses 18.59% less debt to finance their company.
The debt-to-equity ratio indicates a company’s reliance on loaned money. The lower the number, the less reliant a company is on borrowing money for operations. AT&T has a relatively low debt-to-equity ratio compared to the market average and
Environmental – External environmental factors are forces or trends that can affect a business whether it is an opportunity, threat, or constraint. They can be divided into three interrelated subcategories of remote, industry, and operating environments. The remote environment includes factors beyond a company’s operating situation such as the economic, social, political, technological, and ecological factors. The industry environment includes factors that have more of a direct influence on a company’s business such as entry barriers, competitor rivalry, the availability of substitutes, and the bargaining power of buyers and suppliers.
Before beginning an analysis of a company it is necessary to have a complete set of financial statements, preferably for the pas few years so that historical trends can be obtained. Ratios are a way for anyone to get an idea of the financial performance of a company by using the information contained in the financial statements. Ratios are grouped into four basic categories, liquidity, activity, profitability, and financial leverage. This document will use a variety of these ratios to analyze the firm, Sample Company, as of December 31,2000.
Businesses play a significant role with the economies of all countries, whether developed or developing. It contributes to the welfare of the society through the satisfaction of needs, provides a source of livelihood to millions of people worldwide. Businesses do not operate in vacuums but operate within business environments. The events in the environment of a company have a direct effect on the success or failure of that company. According to Jain, Trehan and Trehan (2009), business environments can be categorized in two: (1) internal business environment; (2) external business environment. Institutions and organizations are usually in a position of controlling their internal business environment. By doing so, they gain the ability of affecting their institutional performance. On the contrary, it is difficult for a business to control the external environment; however, businesses can identify in advance the opportunities and threats presented by the external environment and take decisive actions to ensure its continued success (Jain, Trehan & Trehan, 2009; Goyal & Goyal, 2009).