Friday, May 26, 2017

Financial Statement Analysis Notes: Financial Reporting By Banks, Insurance Companies and NBFCs

Unit – 4: Financial Reporting By Banks, Insurance Companies and NBFCs

MEANING OF A BANKING COMPANY
A banking company is defined as a company which transacts the business of banking in India. Section 5 (b) of The Banking Regulation Act, 1949 defines the term banking as “accepting for the purpose of lending or investment of deposits of money from the public, repayable on demand or otherwise and withdraw able by cheque, draft, order or otherwise.
Section – 7 of this Act makes it essential for every company carrying on the business of banking in India to use as part of its name at least one of the words – bank, banker, banking or banking company. Section 49A of the Act prohibits any institution other than banking companies to accept deposit money from public withdraw able by cheque. The essence of banking business is the function of accepting deposits from public with the facility of withdrawal of money by cheque. In other words, the combination of the functions of acceptance of public deposits and withdrawal of the money by cheque by any institution cannot be performed without the approval of Reserve Bank.

Features of Banking: The following are the basic characteristics to capture the essential features of Banking:
a)      Dealing in Money: The banks accept deposits from the public and advance the same as loans to the needy people. The deposits may be of different types – current, fixed, savings, etc. accounts. The deposits are accepted on various terms and conditions.
b)      Deposits must be withdraw able: The deposits (other than fixed deposits) made by the public can be withdraw able by cheques, draft or otherwise, i.e., the bank issue and pay cheques. The deposits are usually withdraw able on demand. 
c)       Dealing with credit: The banks are the institutions that can create credit i.e., creation of additional money for lending. Thus, “creation of credit” is the unique feature of banking.

Financial Statement Analysis Notes: Financial Reporting and CSR

Unit – 3: Financial Reporting and CSR

Meaning of Financial Reporting, its components and objectives
Basically, financial reporting is the process of preparing, presenting and circulating the financial information in various forms to the users which helps in making vigilant planning and decision making by users. The core objective of financial reporting is to present financial information of the business entity which will help in decision making about the resources provided to the reporting entity and in assessing whether the management and the governing board of that entity have made efficient and effective use of the resources provided. Financial reporting is of two types – Internal reporting and external reporting. The financial report made to the management is generally known as internal reporting and the financial report made to the shareholders and creditors is generally known as external reporting. The internal reporting is a part of management information system and they uses MIS reporting for the purpose of analysis and as an aid in decision making process.
 The components of financial reporting are:
a)      The financial statements – Balance Sheet, Profit & loss account, Cash flow statement & Statement of changes in stock holder’s equity
b)      The notes to financial statements
c)       Quarterly & Annual reports (in case of listed companies)
d)      Prospectus (In case of companies going for IPOs)
e)      Management Discussion & Analysis (In case of public companies)

Financial Statement Analysis Notes: Ratio Analysis

Unit – 2: Ratio Analysis
Meaning of Ratio Analysis
A ratio is one figure expressed in terms of another figure. It is mathematical yardstick of measuring relationship of two figures or items or group of items, which are related, is each other and mutually inter-dependent. It is simply the quotient of two numbers. It can be expressed in fraction or in decimal point or in pure number. Accounting ratio is an expression relating to two figures or two accounts or two set accounting heads or group of items stated in financial statement.
Ratio analysis is the method or process of expressing relationship between items or group of items in the financial statement are computed, determined and presented. It is an attempt to draw quantitative measures or guides concerning the financial health and profitability of an enterprise. It can be used in trend and static analysis. It is the process of comparison of one figure or item or group of items with another, which make a ratio, and the appraisal of the ratios to make proper analysis of the strengths and weakness of the operations of an enterprise.
According to Myers, “Ratio analysis of financial statements is a study of relationship among various financial factors in a business as disclosed by a single set of statements and a study of trend of these factors as shown in a series of statements."
Objectives of Ratio analysis
1. To know the area of the business which need more attention.
2. To know about the potential areas which can be improved with the effort in the desired direction.

Thursday, May 25, 2017

Financial Statement Analysis Notes: Financial Statements and its Analysis

Unit – 1: Financial Statement Analysis

Meaning of Financial Statements
Financial statements are the summarized statements of accounting data produced at the end of accounting process by an enterprise through which accounting information are communicated to the internal and external users. A set of financial statements includes (Types):
a)      Balance sheet
b)      Profit and loss account
c)       Schedules and notes to accounts.
The American Institute of Certified Public Accountants states the nature of financial statements as “Financial Statements are prepared for the purpose of presenting a periodical review of report on progress by the management and deal with the status of investment in the business and the results achieved during the period under review. They reflect a combination of recorded facts, accounting principles and personal judgments.”
In the words of Myer,” The financial statements provide a summary of accounts of a business enterprise, the balance sheet reflecting the assets, liabilities and capital as on a certain date and income statement showing the result of operations during a certain period”.

Nature of Financial Statements:
a)      Recording facts of a business transactions;
b)      Accounting Conventions;
c)       Accounting Concepts;
d)      Personal judgments used in the application of conventions and postulates.

Research Methodology Notes - Introduction to Research Project

Unit – 1: Introduction to Research Project
Concept of Research and Research Methodology  – Meaning, Characteristics and objectives
Research is an art of scientific investigation. Research covers the search for and retrieval of information for a specific purpose. Research has many categories, from medical research to literary research. Basically research is a search for truth with the help of some study, observation, comparison and experiments. It is search for knowledge with the help of objective and systematic method of finding solution to a problem.
Research in common man’s language refers to “search for knowledge”. Research is simply the process of finding solution to a problem after a complete study and analysis of situational factors. Research is purposeful investigation. It provides a structure for decision making. It provides an analytical framework for the subject matter of investigation. It establishes the relationship between different variables, especially the relationship of the dependent variable with the valuable independent variables. In short, the search for knowledge through objective and systematic method of finding solution to a problem is research.

Definition of Research: According to P.M. Cook, “Research is an honest, exhaustive, intelligent searching for facts and their meanings for implications with reference to given problem. It is the process of arriving at dependable solutions to problems through the planned and systematic collection, analysis and interpretation of data. The best search is that which is reliable, verifiable and exhaustive so that it provides information in which we have confidence.”

Research Methodology Notes - Data Collection

Unit – 2: Data Collection
Statistical data are of two types
(a) Primary data
(b) Secondary data.
(a) Primary Data: Primary data are information collected by a researcher specifically for a research assignment. In other words, primary data are information that a company must gather because no one has compiled and published the information in a forum accessible to the public. Companies generally take the time and allocate the resources required to gather primary data only when a question, issue or problem presents itself that is sufficiently important or unique that it warrants the expenditure necessary to gather the primary data. Primary data are original in nature and directly related to the issue or problem and current data. Primary data are the data which the researcher collects through various methods like interviews, surveys, questionnaires etc. The primary data have own advantages and disadvantages.
Advantages of primary data: Advantages of primary data are as follows:
a)      The primary data are original and relevant to the topic of the research study so the degree of accuracy is very high.
b)      Primary data is that it can be collected from a number of ways like interviews, telephone surveys, focus groups etc. It can be also collected across the national borders through emails and posts. It can include a large population and wide geographical coverage.
c)       Moreover, primary data is current and it can better give a realistic view to the researcher about the topic under consideration.
d)      Reliability of primary data is very high because these are collected by the concerned and reliable party.
Disadvantages of primary data: Following are the disadvantages of primary data:

Research Methodology Notes - Sampling and Questionnaire

Unit – 3: Sampling and Questionnaire

Meaning, Features and Types of Sampling
According to Goode and Hatt, “A sample as the name applies, is a smaller representative of a large whole”.  According to Pauline V Young, “A statistical sample is a miniature of cross selection of the entire group or aggregate from which the sample is taken”.  According to Bogrdus, “Sampling is the selection of certain percentage of a group of items according to a predetermined plan”.
Feature of Sampling Techniques:  The sampling techniques have following good features and these bring into relief its value and significance:
(a)    Scientific Base:  It is a scientific because the conclusion derived from the study of certain units can be verified from other units.  By taking random sample, we can determine the amount of deviation from the norm.
(b)   Economy:  The sampling technique is much less expensive,  much less time consuming than the census technique.
(c)    Reliability:  If the choice of sample unit is made with due care and the matter under survey is not heterogeneous, the conclusion of the sample survey can have almost the same reliability as those of census survey.
(d)   Detailed study: Since the number of sample units is fairly small, these can be studied intensively and elaborately. They can be examined from multiple of views.
(e)   Greater Suitability in most Situations:  Most of the surveys are made by the techniques of sample survey, because whenever the matter is of homogeneous nature, the examination of few units suffices.  This case in majority of situations.

Methods of Sampling: The methods of selecting a sample are as follows:

Research Methodology Notes - Research Report

Unit – 4: Research Report

Meaning of Interpretation
The task of drawing inferences from the collected facts after an analysis and or experimental study is called interpretation. Interpretation is the device through which the factors that seems to explain what has been observed by researcher in the course of the study can be better understood. Interpretation provides a theoretical conception which can serve as a guide for further researches. It has two major aspects viz,
(i) The efforts to establish continuity in research through linking the results of a given study with those of another,
(ii) The establishment of some explanatory concepts.

Technique of interpretation
The task of interpretation requires a great skill of researcher. The art of interpretation can be achieved through practice and experience. The interpretation techniques involve the following steps:
(a) The relation that the researcher has found must be reasonably explained.  The researcher must interpret the lines of relationship in terms of the underlying process. He must also try to find out the thread of uniformity that lies under the surface layer of his concept of formulated.
(b) While interpreting the final results of research study, the extraneous information that he has collected during the study, must be considered.  This helps in understanding of the problem under consideration.
(c) Before giving final interpretation, the researcher should consult someone who is expert in the concerned study and will not hesitate in pointing out the omission and errors in logical argumentation. Such consultations will result in correct interpretation and thus will enhance the utility of research results.

Wednesday, May 24, 2017

Principles of Business Management - Motivation, Leadership and Management Control

Unit – 4: Motivation, Leadership and Management Control
Introduction: Motivation
The word motivation is derived from ‘motive', which means an active form of a desire, craving or need that must be satisfied. Motivation is the key to organisational effectiveness. The manager in general has to get the work done through others. These 'others' are human resources who need to be motivated to attain organisational objectives.
According to George R. Terry, "Motivation is the desire within an individual that stimulates him or her to action."
According to Berelson and Steiner “A motive is an inner state that energizes activates, or moves and directs or channels behavior goals".
According to Lills "It is the stimulation of any emotion or desire operating upon one's will and promoting or driving it to action".
According to Encyclopedia of Management  "Motivation refers to the degree of readiness of an organism to pursue some designated goals and implies the determination of the nature and locus of force inducing a degree of readiness."
Nature/Characteristics of Motivation
Motivation is a psychological phenomenon which generates within an individual. A person feels the lack of certain needs, to satisfy which he feels working more. The need satisfying ego motivates a person to do better than he normally does. From definitions given earlier the following inferences can be derived:
  1. Motivation is an inner psychological force, which activates and compels the person to behave in a particular manner.

Principles of Business Management - Organissation

Unit – 3: Organisation
Introduction of Organisation and organising
The term 'Organisation' can be used in different senses. It can be used as a group of person working together to as a structure of relationships or as a process of management.  When it is used to refer to a group of person working together, it means a concern, an undertaking or as enterprise.
When it is used to refer to a structure of relationships, it means the structural relationships among the positions and jobs and person (i.e., the framework of responsibility and authority) through which the enterprise functions, and it is called organisation structure.
On the other hand, Organising or Organizing in management refers to the relationship between people, work and resources used to achieve the common objectives (goals).
Definitions
In the words of
Allen – “An organisation is the process of identifying and grouping the work to be performed, defining and delegating responsibility and authority and establishing relationships for the purpose of enabling people to work most effectively together in accomplishing objectives.”
Mooney and Reily – “Organisation is the form of every human association for the attainment of a common purpose.”

Principles of Business Management - Concept of Planning and MBO

Unit - II: Concept of Planning, MBO and Decision Making
Introduction of Planning
Planning is the primary function of management.  Planning concentrates on setting and achieving objectives through optimum use of available resources.  Planning is necessary for any organisation for its survival growth and prosperity under competitive and dynamic environment.  Planning is a continuous process to keep organisation as a successful going concern,
In the words of:
Koontz and O’Donnel – “Planning is deciding in advance, what to do, how to do it, when to do it, and who is to do it.  It bridges the gap from where we are to where we want to go.”
Allen – “Management planning involves the development of forecasts, objectives, policies programmes, procedures, schedules and budgets.”
Haynes and Massie - Planning is a decision making process of a special kind.  It is an intellectual process in which creative thinking and imagination is essential.”
Alfred and Beatty - “Planning is the thinking process, the organized foresight, the vision based on fact and experience that is required for intelligent action.
Nature and Characteristics of Planning or Essentials of a good plan
  1. Primacy of planning or primary function: .Planning is a primary function. That is, it is a primary requisite to the managerial functions of organising, staffing directing, motivating, coordinating, communicating and controlling. A manager must do planning before he can undertake the other managerial functions.

Principles of Business Management - Concept of Management

Unit – 1: Concept of Management
Management - Introduction
Management is the coordination of all resources through the process of planning, organising, directing, staffing and controlling in order to attain stated objectives effectively and efficiently.  Effectively means doing the right task, completing activities and achieving goals and efficiently means to attain objectives with least amount of resources at a minimum cost. This process starts at the top and continues in more or less degree at every level of the organisation.
According to Harold Koontz, “Management is an art of getting things done through others and with formally organised groups."
According to F.W. Taylor, “Management is an art of knowing what do you want to do and then seeing that is is done in the best and cheapest way.”
According to Henry Fayol, “To manage is to forecast, to plan, to organize, to command to co-ordinate and control.
George R. Terry, “Management is a distinct process consisting of planning, organising, actuating and controlling performance t determine and accomplish the objectives by the use of people and resources,”
Thus management may be defined as a process including various activities like planning, organising , directing, controlling  co-ordination etc in order to make optimum use of men machinery, materials and money by way of preparing plans, policies and purposes, for achieving organisational goals under healthy internal environment.
Nature or characteristics of Management:

Tuesday, May 23, 2017

IGNOU Solved Question Papers - ECO 05 (December' 2011)

Bachelor’s Degree Programme
Term – End Examination: December 2011
ELECTIVE COURSE: COMMERCE ECO-5: MERCANTILE LAW
Time: 2 hours
Maximum Marks: 50
Note: Attempt any five questions. All questions carry equal marks.
1. Explain the essentials of a valid contract. 10
Ans: Section 2 (h) defines ‘Contract’ as an agreement enforceable by law.  If we analyse the definition it has two components viz.
(i) An agreement and
(ii) Its enforceability by law.
Section 2 (e) defines ‘agreement’ as “every promise and set of promises forming consideration for each other”. For a contract to be enforceable by law there must be an agreement which should be enforceable by law. To be enforceable, the agreement must be coupled with obligation. Obligation is a legal duty to do or abstain from doing what one promised to do or abstain from doing.  All contracts are agreements but for agreement to be a contract it has to be legally enforceable.
Section10 of the Act provide “All agreements are contracts if they are made by the free consent of the parties competent to contract for lawful object & are not hereby expressly declared void.”  All contracts are agreements but for an agreement following essential element are required:

IGNOU Solved Question Papers - ECO 05 (June' 2011)

BACHELOR'S DEGREE PROGRAMME
Term-End Examination: June, 2011
ELECTIVE COURSE: COMMERCE
ECO-5: MERCANTILE LAW
Time: 2 hours
Maximum Marks: 50
Note: Answer any five questions. All questions carry equal marks.
1. (a) "All contracts are agreements but all agreements are not contracts." Comment. 5, 5
Ans: Section 2 (h) defines ‘Contract’ as an agreement enforceable by law.  If we analyse the definition it has two components viz.
(i) An agreement and
(ii) Its enforceability by law.
Section 2 (e) defines ‘agreement’ as “every promise and set of promises forming consideration for each other”. For a contract to be enforceable by law there must be an agreement which should be enforceable by law. To be enforceable, the agreement must be coupled with obligation. Obligation is a legal duty to do or abstain from doing what one promised to do or abstain from doing.  All contracts are agreements but for agreement to be a contract it has to be legally enforceable.

IGNOU Solved Question Papers - ECO 02 (June' 2014)

Term-End Examination June, 2014
ECO-2 ACCOUNTANCY-I
Note: Attempt any four questions, including question no. 1 which is compulsory.
1. Attempt any two questions from the following: 7+7
(a) What are the advantages of accounting?
Ans: Accounting: Accounting is the analysis and interpretation of book-keeping records. It includes not only maintains of accounting records but also the preparation of financial and economic information which involves the measurement of transaction and other events pertaining to a business.
The main advantages of accounting are mentioned below:
  1. Accounting information is used by the management in taking various menageries at decision.
  2. It shows the operating efficiency i.e. net profit of business for a particular year.
  3. It shows the financial position of business on a particular data.
  4. Accounting data are accepted by the tax authorities as authentic and reliable. Hence they can be used as the basis for discharging tax liabilities.
  5. Accounting supplies financial data which are accepted by the insurance company as reliable figure for settlement of insurance claim.
  6. It is also helpful for financial institution who lends money to the business.
  7. It is also useful for owners of the business. It shows whether their investment is fruitful or not.

IGNOU Solved Question Papers - ECO 02 (December' 2013)

Term-End Examination December, 2013
ECO-2: ACCOUNTANCY-I
Note: Attempt any four questions, including question no. 1 which is compulsory.
1. Answer any two of the following: 7+7
(a) What is materiality concept of accounting? Explain its accounting implications with examples.
(b) Explain the functions of accounting.
Ans: Accounting: Accounting is the analysis and interpretation of book-keeping records. It includes not only maintains of accounting records but also the preparation of financial and economic information Which involves the measurement of transaction and other events pertaining to a business.
According to the American institute of certified public accounts” The arts of recordings, classifying and summarizing in a significant manner and in terms of money transaction and events which in parts, at least of a financial charter and interpreting the result there of”.
Functions of Accounting
i) Record Keeping Function: The primary function of accounting relates to recording, classification and summary of financial transactions-journalisation, posting, and preparation of final statements. These facilitate to know operating results and financial positions. The purpose of this function is to report regularly to the interested parties by means of financial statements.

IGNOU Solved Question Papers - ECO 02 (June' 2013)



Term-End Examination June, 2013
ECO-2: ACCOUNTANCY-I
Note: Attempt any four questions, including question no. 1 which is compulsory.
1. Answer any two of the following: 7+7
(a) What is consistency concept? Explain its accounting implications with examples.
(b) Explain the objectives of accounting.
Ans: Objective of Accounting: Objective of accounting may differ from business to business depending upon their specific requirements. However, the following are the general objectives of accounting:
  1. To keeping systematic record: It is very difficult to remember all the business transactions that take place. Accounting serves this purpose of record keeping by promptly recording all the business transactions in the books of account.
  2. To ascertain the results of the operation: Accounting helps in ascertaining result i.e., profit earned or loss suffered in business during a particular period. For this purpose, a business entity prepares either a Trading and Profit and Loss account or an Income and Expenditure account which shows the profit or loss of the business by matching the items of revenue and expenditure of the some period.
  3. To ascertain the financial position of the business: In addition to profit, a businessman must know his financial position i.e., availability of cash, position of assets and liabilities etc.

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