Understanding the ROI formula

The Return on investment is a simple ratio, but understanding its implications can help you go a very long way as an entrepreneur. It is simply return divided by investment. You can increase your profitability, which implies increasing your selling price. And you can reduce your investment and with the same returns enjoy an increased profitability.
To take a simple example, if you were selling something for 100 bucks and made a 20% profit, you could increase this profit to 50% if your investment fell to 80 bucks. A 20% decrease in investment led to a 30% increase in profitability.

The important observation is that they are inversely related. Another important observation is that as costs keep on falling, profitability will increase at an increasing rate. So the harder they fall the better it is for you as they will propel you to a situation of leap-bound growth.

Understanding Control

Now since we know the mathematics of the ROI formula, lets see what we can do and what we cannot do. In many cases particularly in online retail, increasing your selling price will be a suicidal move. A lot of businesses are built on cost superiority. Customers want cheaper goods which are of the same quality, especially when they can see that the quality is same.

Consider a customer buying a cell phone from you or your competitor. They know that it is the same phone and they are not going to pay the cost of your inability to manage your operations effectively. So the selling price is basically market-driven.

But is it the case with costs as well? Most mediocre retailers consider this the case. So they sell at market-determined prices and pay those costs and make the normal market profit. But the smart ones dont do things differently. They know that what goes out their pocket is under their control.

Using A Little Creativity

Now just think how you can reduce your investment in business. Each time you make a purchase you pay, and each time you sell, you receive. For an average retailer, this is the chronology of events that unfold in course of a transaction:

Place order for raw materials
Pay and receive order
Hope, pray and wait for customers to turn up
Sell and receive payment

Pay careful attention to the cash flow. Money leaves your pocket at point two and returns at point four. The more the time difference, the greater amount of money you will have to put in as investment, as most people buy in bulk and sell in small lots. So you pay a big amount upfront (investment) and expect smaller parts to come back with profit.
Imagine this, how would this situation be:

Receive order to sell and receive payment
Order the supplier and take goods
Pay the supplier after a time lag

Here money enters your pocket at point one and leaves at point three. Technically speaking, you dont need any money to run your business. People are running it for you.

Analyzing The Basis Of Power

Anyone who has the control over sales has control over suppliers. So what causes you to have control – lower prices. And who funds those lower prices? Your suppliers.

The Rules of Vendor Financing

It is wrong to jump to the conclusion that anyone who goes out there and cuts prices will gain market share and can then have control over the supply chain. It requires a careful analysis of many factors like:

Power: Power here does not refer to brute strength. It depends on the ability to make choices. If you can break a relationship with a supplier and find others to deal with, while he cant find other customers as good or as big as you, you have the power. Which brings us to the classical dilemma of how does a start up build power? The answer is simple, deal with people who are relatively smaller. The idea is to enter the relationship as an equal and run the business on break-even for some time until you gain control of the sales, and then use this control to get credit, which will make you profitable.
Fixed costs: If a large amount of your costs are fixed costs, this strategy wont work. You cant ask your vendor to pay your rent or employee salary, they would simply see through it and want to get rid of you as soon as possible. Even if you have to pay them from your pocket, just eliminate them. Your job must be to convert as much of your costs into variable costs, as possible and assign each vendor the responsibility for taking care of them for a certain time period.
You will see that as your sales increase and by extension their sales increase, they will be keener to supply you trade credit and you can use that money to run your operations with virtually no money down.
Create the pull effect: The whole system runs because the customer pays money upfront and accepts a delayed delivery. This is the rule of the thumb for online businesses, and you dont have to make an effort to create this change. Under no circumstances should you pay before you receive. The idea is to be relatively bigger than both the supplier and the customer. You should have more bargaining power on each side for this to work effectively.
Plan for stock outs: In such cases, when you buy on the spot, there are instances when you have taken the order but the supplier doesnt have the goods. So make sure that you have a contingency plan. Keep standby suppliers who may be a bit more expensive. Remember customers are your source of power. If you have to take a loss or a smaller profit to safeguard your reputation, do it. Once you have made a commitment, always deliver.

Some Numbers To Consider:

Whenever you run a system, some numbers serve as important metrics to tell you the health of your operations. They are like the barometer of your success. For this strategy of vendor financing, here are the important numbers:

Cash conversion cycle: It is the difference between when you pay and when you receive. This number should always be negative. The more negative it is, the better it is for you. It means that you are running your car with your suppliers gas.
Working capital: This is another measure of the same thing. Working capital also must always be negative. This means that your current assets will be less than current liabilities. You will always owe people money, but you dont have to bother since you already have the cash and it is interest free.
Inventory levels: Once again this number should be reducing. Although this cannot be negative and you cannot have -5 goods stored with you, the number must be as close to zero as possible. Only stuff that you see a demand for must be purchased in advance. The rest must be purchased after receiving the order.
Sales: This is one number that must always be rising. For you to effectively wield your power over the supply channel, the suppliers must see you as an important customer. Someone who will make their sales grow. Their sales grow only when yours do.
ROI: Keep an eye on your ROI and that of the others. Remember its a power game and if someone else will steal the sales, they will also steal the suppliers and maybe your entire business.

The Euro is a new currency that got introduced to end the exchange rate problems in the euro zone. One of such a problem is the continuous burden of transaction costs in inter-European transaction. To support the idea of a single European market a single currency was designed to lower the trade barriers between the member states.

Like Esperanto the Single Euro makes that people more easily understand each other in economic terms. When a real estate property has a price tag of 100,000 euros every user of the Euro will understand this value. The mechanism behind this understanding is that people — and this happens still today – will convert this figure to their previous currency and than only than really understand the value.

In Spain a lot of elderly people handle finance this way.

Unlike Esperanto, the Language of the Euro is much more focused and dedicated to only one area: finance. One could wonder whether the Euro or Esperanto would bring people more together. If people in Spain or Germany would talk Esperanto would that also mean that their cultures would diverge?
The Euro is implicitly designed to serve a political means. Without the euro the European union would probably have faced much more challenges in harmonizing politics. At least the Euro is something very visible that people from different states share.

Esperanto will never make it that far.

H.J.B.

Financial Markets (ECON 252) Statistics and mathematics underlie the theories of finance. Probability Theory and various distribution types are important to understanding finance. Risk management, for instance, depends on tools such as variance, standard deviation, correlation, and regression analysis. Financial analysis methods such as present values and valuing streams of payments are fundamental to understanding the time value of money and have been in practice for centuries. 00:00 – Chapter 1. The Etymology of Probability 10:01 – Chapter 2. The Beginning of Probability Theory 15:38 – Chapter 3. Measures of Central Tendency: Independence and Geometric Average 33:12 – Chapter 4. Measures of Dispersion and Statistical Applications 50:39 – Chapter 5. Present Value 01:03:46 – Chapter 6. The Expected Utility Theory and Conclusion Complete course materials are available at the Open Yale Courses website: open.yale.edu This course was recorded in Spring 2008.

Business financing refers to the financial management of a company. Finances are composed of budget, investment, and stock shares. Oftentimes, business financing tasks are carried out by accountants, auditors, and managers. There are different categories of business financing. They are distinguished based on the size of a company. These are small-scale, medium-scale, and large-scale financing. Technically, large-scale financing is more tedious than small-scale financial management.

Business financing is an essential component of business. Appropriate allocation of budget is necessary in carrying out business operations. These include project execution, product launching, business expansion, and restructuration. Budget allocation is one of the most important roles of financiers. They request for budget proposals from department heads and team leaders. They approve proposals based on project need and duration; bigger projects basically require bigger budget.

Moreover, business financing is vital in managing investments and credit accounts. There are companies whose capital come from business loans and cash advances. Financiers need to monitor income flow and sales invoice for loan payment. Some loans require collateral from debtors. Financiers need to ensure a companys financial stability to avoid collateral loss. In some cases, companies become bankrupt because of unpaid loans and ballooning loan interest rates.

Companies have long-term and short-term goals. Financiers need to assess their financial capacity to achieve all goals. They must always have a contingency plan. In business financing, contingency plans enable companies to cope with ups and down of business. However, they can only outline contingency plans with appropriate budget. For instance, manufacturers stock raw materials for future needs. This is a contingency plan for business shortage problems. They can only purchase additional raw materials with a suitable budget.

Skilled financiers are necessary for successful business financing. The efficiency of business financing depends on the responsiveness and efficiency of financiers. They must know various modes, techniques, and methods in solving business finance setbacks.

Brett has worked with individuals and businesses managing their assets since 1998. His mission is to assist clients in reaching their goals while helping them manage risk in their total financial situation. Brett’s experiences as a portfolio manager during these volatile financial markets lead him to develop new and unique methods for portfolio design. These methods include far more than just traditional stocks, bonds, and mutual funds and may differ depending on each client’s individual needs. To accomplish this Brett has combined modern financial planning techniques with technical, quantitative, and behavioral analysis, to achieve a truly unique and dynamic approach to total wealth management. While Brett believes investments are an important part of planning he also brings many other resources and subject matter experts to clients as needed. Brett feels having an Advocate is one of the most important pieces often missing in many financial plans. He realized this while growing up in a family of entrepreneurs as he witnessed many of the trials and tribulations that often come with business ownership. He learned many things that only life experience can teach those that have made the decision to become their own boss. As a business owner himself, he understands the responsibility and commitment it takes to build and maintain a successful practice. That is why his passion is to work as an Advocate for those that would rather spend their time growing their business or …

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Tax efficiency, planning investments, diversifying existing investment portfolios, opportunities in fluctuating markets are all priorities. After the credit crunch everyone should understand the necessity of planning ahead.

In this search for improved financial planning many people are turning away from bonds and pensions and considering newer forms of trading that provide new opportunities. Spread betting offers some interesting features and is worth considering as part of your investment strategy.

When speculating though you should always remind yourself that the markets can go down as well as up. With spread betting you can lose more than your original stake or investment.

Why Financial Spread betting?

Financial spread betting solves a lot of problems and this is especially true when it comes to access to World markets and the simplification of tax issues.

There are some useful benefits:

1) As spread betting does not involve the transfer of ownership rights, you are simply speculating on the future value of a market, as such trades are not liable for stamp duty, income tax or capital gains tax*.

2) A key advantage is that spread betting offers a wide variety of financial markets on which you can speculate including commodities, indices, currencies and equities markets.

3) I like that you can close a profitable trade and bank a profit but also that you can close a losing trade and limit your losses. Being able to part-close a trade also offers an interesting angle, i.e. closing part of your trade but keeping the rest of it open. This can be used to help manage your risk.

4) You can speculate on markets to go up but you can also speculate on them to go down.

5) The fact that some markets can be traded 24 hours a day, 5 days a week, sets spread betting apart from more traditional stock trading.

6) Another advantage is that there are a wide variety of ways in which to make trades; online, over the phone, or even on some new mobile applications.

The Financial Services Authority (FSA) regulates the UK based spread betting companies. This tends to ensure a certain level of service and, more importantly, consumer protection. With regulated firms like Spreadex and FinancialSpreads.com you can trade certain markets 24 hours a day, including key Forex and Stock Market Index markets. You can also trade more traditional markets such as Gold, US and UK shares and so on.

So whilst there are many plus points, you also need to remember the potential downside. Financial spread betting does carry a high level of risk. Before trading, ensure that spread betting matches your investment objectives. Familiarise yourself with the risks involved. Seek independent advice if necessary.

* According to UK tax law, note that tax law can be changed and may differ depending on your personal circumstances.

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Fisher Capital Management- Financial Markets: Sentiment in the financial markets has improved over the past month. The global economic recovery is continuing, so far there have been no sovereign debt defaults, and there has been a modest recovery in the euro. Investors and traders therefore appear to have concluded that the gloom was overdone.

But there has been evidence of a worsening situation in Spain, and the decision by the Chinese authorities to adopt a “more flexible” towards renminbi has also raised some concerns about the growth prospects for the Chinese economy.

Fisher Capital Management- Equity Markets: All the major equity markets, and the emerging markets, have improved over the past month. Wall Street has outperformed markets elsewhere because of some welcome economic data; there have been strong gains in most of the mainland European markets as the sovereign debt crisis has appeared to ease; the UK market has welcomed the measures by the new coalition government to address the problems of the huge UK fiscal deficit; and the Japanese market has also moved slightly higher. Corporate results have been satisfactory; and this has helped to improve sentiment

amongst investors.

Government Bond Markets have had another unusual month. The sovereign debt crisis might have been expected to lead to a general weakness in bond markets; but the main effect has been to produce aggressive switching for the “weaker” markets to the “stronger” ones, and a further widening of the yield curve.

As a result the major markets are unchanged or only slightly lower at a time when the “weaker” markets, especially in Southern Europe, have continued their sharp declines. Slow economic growth and

Low short-term interest rates are continuing to provide support. Currencies: The improvement in sentiment in the markets has led to a movement of funds out of the “safe havens” of the dollar and the yen into commodity-related currencies and “riskier” assets. Both the dollar and the yen are therefore slightly weaker over the

Month; and this movement has also eased some of the pressure on the euro, and allowed it to recover.

Sterling has also improved as the markets have welcomed the measures introduced by the new UK government to reduce the fiscal deficit.

Fisher Capital Management- Short-Term Interest Rates: There have been no changes in short term interest rates over the past month in the major financial markets.

Fisher Capital Management- Commodity markets: have produced a mixed performance over the past month, with some weakness in base metal prices, but strong gains in the prices of cocoa, coffee, oil and precious metals.

www.OnlineProfitStrategy.com Do you have a marketing plan for business? Here’s the first step…
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It might be quite hard to imagine, but there are many people who are very determined to purchase a business despite their financial limitations or inability to borrow money. These individuals visit banks and other lending firms with the idea that borrowing money is as simple as requesting for it. Problem is, this is not the way banks and other financial institutions lend credit for the purpose of buying a particular business, even if evidence shows that it is very profitable. This is one risk that they are usually not willing to take.

For this reason, it is very important that you first make an assessment of your financial capabilities before even setting your sights on any business endeavor. At this point, you might already be asking yourself how you will be able to raise enough money to finance your business purchase. Generally speaking, banks usually lend credit to individuals, who can pledge a particular property against the amount being borrowed. This means that you have better chances of getting credit approval if you have a great deal of equity in your properties. And because your property serves as collateral/security, this same property will be forfeited in favor of the bank should you fail to pay the principal or at least the interest at the agreed period of time.

So what are your options if you dont have any qualified property that you can use as security? In this case, the bank may still lend you a certain sum of money if you have a guarantor such as your parents or any close relative. In the event that you fail to fulfil your financial obligations at the right time, the bank will automatically run after your guarantor to make payments in your behalf. This is why the role of a guarantor has its risks and a very big responsibility at the same time.

Borrowing money is not as easy as many people assume. To make things easier for you, we strongly recommend using the services of a mortgage broker. A mortgage broker is an individual capable of evaluating your financial status and helps you get a clearer picture of your borrowing capacity. They will be able to inform you about all the important aspects of the loan, such as interest rates and loan repayments, and can answer any questions you might have about the loan too.

 * Includes technology focus on adoption of cloud computing in the financial markets sector and development in the deployment of CEP technology
 
 Highlights
 
 Concerns around European sovereign default risk (led by Greece, but with contagion risk around Spain & Portugal) reduced investor risk appetite in H1 2010.
 
 Restoration of capital markets and investment banking revenue growth in 2010 is being accompanied by a return to IT growth, following strong decline over 2007 to 2009.
 
 Higher development of grid computing and virtualization in financial markets means that banks are looking to move towards private cloud models.
 
 Reasons to Purchase
 
 * Under how industry trends & business strategies are driving IT priorities
 * Obtain latest picture of industry regulatory developments and implications for financial markets sector
 
 For more information kindly visit : http://www.bharatbook.com/detail.asp?id=150612&rt=Financial-Markets-Technology-Business-Update-H1-2010.html
 
 Related Reports
 
 2010 Trends to Watch: Financial Markets Technology
 http://www.bharatbook.com/detail.asp?id=130100&rt=2010-Trends-to-Watch-Financial-Markets-Technology.html
 
 Financial Markets Technology Spending Forecast in India to 2014
 http://www.bharatbook.com/detail.asp?id=142044&rt=Financial-Markets-Technology-Spending-Forecast-in-India-to-2014.html
 
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As the economy recovers, many surviving industries are concentrating on sourcing funds to rebuild their business. This step is a necessary preventive measure in case the economy dips again. For some industries, rebuilding through financing is now a better option because of its ease and convenience. Financing needs minimal requirements, usually your credit card sales receipts and proof of your yearlong stay in business are the only documents required for submission.

Unlike traditional loans, approval rates are higher and waiting time is shorter. In some instances, businesses may receive needed funds in several days to a week after getting approval. Furthermore, financing doesnt entail collateral, which means more opportunities for upstart businesses without any properties to avail financing. If youre business needs additional funds, consider the following needs that financing may address.

Image change

As competition becomes more fast-paced, your business will need to evolve to keep up with it. Giving your business a new design or even a renovated space will help state that your business changes along with your client needs. Business financing will help you attain the needed finances so you can afford these changes without the added worries of not having enough cash for these changes.

Product improvement

While your product design is effective, this doesnt mean you shouldnt have any room for improvement. Your product needs to improve continually, so you can stay marketable and relevant. Business financing will help you source more funds for research and development, which, in turn, can help your product grow. As your product develops, you may get more clients and more profits.

Expansion needs

As your business attracts more clients, accessibility becomes important. Business financing can help you build more branch offices by giving you the needed money. Clients will now be able to locate and transact with you better. The branch offices you build may provide you with more rewards in the future.

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Accounts receivable are the money you owned. These are the amounts you receive from sales of assets or services you have given. While capital assets are those assets you acquired to start the business. Examples of capital assets are land, buildings or space and equipment. Current assets are items like cash, accounts receivable and inventory. They are assets that can be turned over and can be converted to cash. Stocks and marketable securities are examples.

Cash flow is the moving of money in and out of your business. It finds out the credit worthiness of your business. The difference between the cash out and cash in is important. If more money flows in, it is cash positive. If more money flows out, it is cash negative.

Depreciation is the estimated loss of value of assets overtime. It is the decline in the value of a good. Say for example when you bought the latest laptop at 500 dollars, overtime its price will decrease because a new model will be released and that is what you call depreciation. Net worth is the assets minus the liabilities. Liabilities refer to the debts of a company to its creditors. Accounts payable is an example of liabilities. Knowing these terms, like Michael Geffrard did, is the first step towards financial wealth.

If you want your business to flourish or help someones business to succeed, knowing financial terms is important. Even if you just want to keep your money safely in a bank, financial terms will help you understand better how to have higher returns. Michael Geffrard also did this and started with small banks until he found his own investment banking company.

Take good care of your financial status, which can determine your future. If you do not know how to hold your money properly, let someone teach you or have your family handle it for you. Try to make financial advancement like Michael Geffrard did.

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Accounts receivable financing refers to the selling of receivables, like outstanding invoices at a discounted price to another company that will assume all the risks on a receivable and provide instant cash to the business.  The age of a receivable affects the value assigned to it.  For example, receivables that are over 3 months are usually not financed.  This type of financing is also known as accounts receivable factoring.

This kind of financing offers some advantages over conventional financing methods.  By outsourcing the management of your accounts receivable to other companies, you will be able to free up your resources.  Your business will be able to focus its attention on other business activities such as planning of sales and production.

A lot of companies today are unable to use most of their capital because majority of it is tied up in their business inventories.  With accounts receivable financing, your business will be able to free up capital that is tied up in the business inventory.  You can then use this free capital on other more productive business expenditures.

Unlike other forms of financing, accounts receivable financing does not require much documentation.  There is no need to create business plans or a record of the most recent tax statements.  This method of financing allows businesses to get quick cash, ideal for instances when a firm is experiencing income fluctuations or sudden financial issues.

Although accounts receivable financing has some benefits to your small business, this method of financing may have some potential drawbacks.  Probably the most significant factor of this method of financing is its cost.  Although a small discount fee looks insignificant in the present, over time, the costs can actually exceed the interest rate of a conventional loan.  It is important to look for companies that offer reasonable prices and conditions.