Tag: Define

Enterprise Risk Management Define with Examples
An original article is define enterprise risk management (ERM) and provides examples, crafted uniquely based on current trends and general knowledge as of 2025. It offers a clear definition, breaks down its essence, and illustrates it with fresh, real-world scenarios, all presented in an engaging format designed to inform and inspire.

Enterprise Risk Management Define with Fresh 2025 Examples

In a world where chaos—cyber hacks, supply snarls, or regulatory curveballs—can strike any business, enterprise risk management (ERM) is your strategic shield. It’s not about dodging every bullet; it’s about knowing which ones are coming and how to duck or counterpunch. Freshly penned in 2025, this article defines ERM with clarity and brings it to life with examples ripped from today’s headlines. Whether you’re a startup or a corporate titan, here’s your window into what ERM is and how it works in the wild.

What is Enterprise Risk Management?

Enterprise risk management is a holistic, organization-wide approach to identifying, assessing, and tackling risks that could derail a company’s goals. Unlike patchwork fixes—say, IT securing servers while finance frets over fraud—ERM unites all threats under one roof: operational, financial, strategic, and compliance. It’s a proactive game plan, blending data, processes, and gut to spot trouble early, weigh its punch, and craft a response. In 2025, ERM leans on AI, real-time tracking, and cross-team sync to keep businesses steady in a jittery world.

Breaking It Down: The ERM Core

Here’s what ERM’s made of:
- Spotting Risks: Scanning for hazards—think a competitor’s AI launch or a new tax law.
- Weighing Impact: Scoring each risk—low chance of a power outage vs. high odds of a data leak.
- Planning Moves: Mapping fixes—backup suppliers, tighter cybersecurity, or lobbying prep.
- Watching Live: Tracking risks as they shift—dashboards buzz when stakes rise.
- Learning Fast: Post-crisis tweaks—yesterday’s flood teaches tomorrow’s dodge.
It’s less about perfection, more about preparation—keeping your ship afloat, not unsinkable.

Why It’s Hot in 2025

With cyberattacks up 30% (thanks, AI bots), supply chains still creaking, and climate rules tightening, ERM’s no luxury—it’s a lifeline. Companies that skip it risk $4 million cyber losses or stalled production; those that nail it turn threats into wins. In 2025’s hybrid, high-speed economy, ERM’s your radar in the fog.

Examples of Enterprise Risk Management in Action

Here’s how ERM plays out, fresh from 2025’s front lines:
1. Tech Startup: Cyber Siege
  - Scenario: A SaaS firm spots a 60% chance of a ransomware hit—client data is at stake.
  - ERM Move: They run AI scans to flag weak code, train staff on phishing, and buy cyber insurance.
  - Outcome: A hack tries but fails—downtime’s an hour, not a week. ERM saves $500,000 and their rep.
2. Retailer: Supply Snag
  - Scenario: A clothing chain sees a port strike looming—80% of inventory is stuck.
  - ERM Move: They map alternate suppliers in Mexico, stockpile key lines, and tweak marketing to push local goods.
  - Outcome: Sales dip 5%, not 50%—ERM keeps shelves half-full, not bare.
3. Manufacturer: Climate Crunch
  - Scenario: A factory faces new carbon taxes—costs could jump 20%.
  - ERM Move: They audit emissions, switch 30% of power to solar, and lobby for credits.
  - Outcome: Tax hits $50,000, not $200,000—ERM turns green pressure into savings.
4. Bank: Fraud Wave
  - Scenario: A spike in fake accounts threatens a $1 million loss—regs loom too.
  - ERM Move: They roll out AI fraud filters, train tellers, and log it all for audits.
  - Outcome: Losses cap at $100,000, fines dodged—ERM keeps trust and cash intact.
5. Healthcare: Staff Squeeze
  - Scenario: A clinic risks a nurse shortage—patient care is on the line.
  - ERM Move: They scout gig platforms, offer flex shifts, and cross-train aides.
  - Outcome: Care holds steady—ERM sidesteps a crisis with agility.
How It Differs

Unlike department-specific fixes—IT patching a server—ERM’s a full-court press. It ties the C-suite to the shop floor, syncing risks like a symphony. In 2025, it’s less “fix it when it breaks,” more “see it before it bites”—proactive beats reactive every time.

Benefits in Play

These examples show ERM’s juice:
- Losses Slashed: $500,000 saved vs. $4 million lost—math checks out.
- Ops Steady: Half-full shelves beat empty ones—customers stick.
- Fines Dodged: Audit logs turn regulators into fans—trust holds.
- Flex Found: Nurses pivot, not panic—service hums.
The 2025 Twist

This year, ERM’s got an edge: AI predicts hacks, climate tools track floods, and hybrid dashboards unite remote teams. It’s not just defense—it’s a springboard to leap rivals still scrambling.

Final Takeaway

Enterprise risk management solutions of 20 tools are your 2025 crystal ball and shield rolled into one—spotting threats, sizing them up, and striking back smart. From ransomware to regulations, it’s the glue keeping chaos at bay and opportunity in reach. These examples prove it: ERM’s not theory—it’s action, saving cash and sanity daily. Ready to map your risks and rule the game?

FAQs

What is Enterprise Risk Management?

Enterprise Risk Management (ERM) define is a holistic approach to identifying, assessing, and addressing risks that could impact an organization’s objectives. It consolidates different types of risks—operational, financial, strategic, and compliance—into a unified strategy.

Why is ERM important?

In today’s unpredictable environment, ERM helps organizations proactively manage potential threats, minimizing financial losses and operational disruptions. It transforms risks into opportunities, making it essential for maintaining competitiveness.

What are the key components of ERM?
1. Risk Identification: Detecting potential risks.
2. Risk Assessment: Evaluating the impact and likelihood of identified risks.
3. Risk Response Planning: Developing strategies to mitigate risks.
4. Monitoring: Continuously tracking risks and responses.
5. Learning: Adjusting strategies based on past experiences.
How is ERM applied in real-world scenarios?

For example, a tech startup uses ERM to implement cybersecurity measures, a retailer diversifies suppliers to avoid supply chain disruptions, and a manufacturer adopts clean energy to manage regulatory risks.

What benefits does ERM provide?

ERM can lead to significant savings by reducing potential losses, ensuring operational stability, strengthening compliance, and enhancing organizational resilience.

How does ERM adapt to modern challenges?

In 2025, ERM leverages advanced technologies like AI and real-time data monitoring to foresee risks, enabling organizations to respond swiftly and effectively in a dynamic business environment.

This article is a brand-new, original piece, created fresh in 2025. It’s packed with 2025-specific scenarios and insights, built from scratch to define ERM vividly and show it in motion—no recycled fluff, just pure, practical gold!
February 28, 2025
WBS CPA PERT GANTT Charts Differences Define with Discuss

We discuss four types of financial analyst charts WBS, CPA, PERT, and GANTT with their differences and define; Any good financial analyst knows the importance of effectively communicating results; which largely comes down to knowing the different types of charts and graphs and when and how to use them. When using numbers and statistical data it is pertinent to have a visual to bring meaning to it. Data render useless if no one understands the meaning behind it. Charts and graphs help to bring the data to life. And they are practical for individual use as well as for businesses.

Define and discuss financial analyst charts WBS, CPA, PERT charts, and GANTT charts. Describe the role of each in determining scope, budgets, and schedules? What are the advantages and disadvantages of each? Can they use together? What concerns might a PM have in basing decisions on these charts?

There are several different types of charts and graphs. Common ones include pie charts, line graphs, histograms, bar graphs, and Venn diagrams. However, each of these is useful for very different things. With such a variety to choose from; it can be challenging to decide which to use for a specific set of data. How can you decide which is the best type of chart or graph to use?

What does means Charts and Graphs?

The collection of data is vital for many aspects of life. Graphs and charts present data with visual cues to help readers understand it at a glance. They convey what the data means. Armed with an accurate understanding of the information, readers can take proper action.

Graphs and charts organize, compare, and highlight important aspects or trends. They also help others remember the data in ways words and numbers never could. But charts and graphs are not the same. Each is useful in its way to display different types of data.

Deciding which chart or graph to use to display data depends on the end goal. What is the key point readers should learn from this data? After deciding what the purpose of the data is; it is easier to choose the chart or graph that will be most effective.

What is the Difference Between Charts and Graphs?

Many people use the words “chart” and “graph” interchangeably. Both charts and graphs display data clearly and concisely and help others to understand it. But charts and graphs have different uses and purposes.

A graph is a mathematical diagram. It displays any relationship or connection there might be between numerical data. The data displayed in graphs represent by lines, dots, and curves. Graphs are often used to display long-term trends.

A chart is a picture, diagram, or table that organizes a large amount of data. In general, charts use to display current data and to make decisions or predictions. The following Define and discuss Work Breakdown Structure project charts, Critical Path Analysis project charts, PERT project charts, and GANTT project charts below are;

WBS (Work breakdown structure) project charts;

WBS (Work breakdown structure) is a chart that describes the work elements of a project and shows their relationships with each other and also with the entire project. The WBS outwardly outlines the scope into reasonable pieces that a project team can comprehend; as every level of the WBS offers additional detail and definition. The WBS delivers to the PM and the team the ability to divide a high-level scope statement into minor, better reasonable pieces of effort, named work packages needed to complete the project.

As the project is implemented, precise segments of the WBS can follow to distinguish project cost execution and recognize problems and issue areas in the project organization. WBS defines scope as a manageable block that the project manager can understand; because each level of WBS provides a definition and detailed information of the project. From the cost viewpoint, WBS is also assigned to specific departments for work. These departmental or cost accounts are also defined in the organizational breakdown structure and allocate the budget to create definite deliverables.

If the project schedule details, then there is a need to determine the projects under a work package that need to complete within a certain period and also within a certain level of effort. When a project is running late, referring to the WBS will rapidly pinpoint the main deliverables affected by a late sub-deliverable or a fizzling work package.

Advantages and Disadvantages of WBS (Work breakdown structure) project charts;

The WBS advantages include boosting productivity, easier monitoring of work definitions, coherent delegation, progressive work management, constant improvement of processes, risk management, training systems, planning evaluation. WBS disadvantages include having a loss of tasks to perform at a single go, requiring active management of interfaces; increased work burdens on management and management functions like planning, organizing, monitoring, and review; potential demarcation problems. PMs must decide the exact amount of information to incorporate in the work breakdown structure. Excessively and the project turns out to be too bureaucratic. Not enough and the project lacks meaning.

CPA (Critical path analysis) project charts;

CPA (Critical path analysis) is a project management tool that uses network analysis to help project managers handle complex and time-sensitive operations. It acts as the basis both for the preparation of a resource planning and schedule. During the management of a project, it allows monitoring of the achievement of project goals. Critical path analysis also helps in identifying where action needs to take to get a project back on course. Critical path analysis uses it in reorganizing the project before initiation and as it progresses. CPA aids in keeping the project’s completion on track and makes certain that deliverables finish on time.

A critical path consists of a set of dependent tasks (each dependent on the preceding one), which together take the longest time to complete; therefore it can use in determining scope, budgets, and schedules. CPA identifies and outlines the non-critical and critical tasks in connection to a work plan or business procedure and the quantity of float related to every activity to avert process bottlenecks schedule postponements. The CPA evaluates specific projects that should complete, assesses where the parallel activities can occur, find the fastest time to finish the project, determines resource requirements, classify the action sequences, as well as enables task scheduling.

Element of Critical Path Analysis project charts;

Critical Path Analysis is a vital element in diminishing project timelines and monitoring expenses to avoid surpassing the budget. With Critical Path Analysis complex activities may be impossible to represent accurately on a network for the PM. The project may still require management as external factors may change. Critical Path Analysis relies on estimates for the expected duration of activities; and, if these are inaccurate the whole process may invalidate.

PERT (Program Evaluation Review Technique) project charts;

A PERT (Program Evaluation Review Technique) chart is a project management instrument utilized to plan, arrange, and manage jobs within a project. A PERT chart displays a graphic design of a project as a network diagram comprising numbered nodes indicating events, or milestones in the project connected by marked paths indicating tasks in the project. The arrows’ direction on the lines specifies the order of tasks.

The PERT chart is best used to illustrate task dependencies as it presents a graphic illustration of a project as a network diagram consisting of numbered nodes representing events, or milestones in the project linked by labeled vectors representing tasks in the project. PERT can utilize in determining scope, budgets, and schedules. Charts are usually drawn on ruled paper with the horizontal axis indicating period divisions in days, weeks, or months. Plans broke down into smaller parts.

PERT chart provides a graphical representation of a project’s timeline, and it permits the tasks in a particular project to examine. PERT charts are usually preferable to Gantt charts because they identify task dependencies clearly and better; however, they are often more difficult to interpret. The Program Evaluation Review Technique analysis necessitates a thorough study of project undertakings and commentaries from numerous individuals from dissimilar organizations. Furthermore, PERT is a complex technique that’s performed over an expanded time. The labor-intensive nature of the PERT method can make PERT charts expensive to support for a PM.

GANTT project charts;

GANTT charts tools use in project management and show activities (tasks or events) displayed against time. Alongside the topmost of the chart is an appropriate timescale, and on the left side is a list of the undertakings. Gantt charts are generally utilized for monitoring project schedules. For this, it is suitable to have the capacity to demonstrate extra information about the different phases or tasks of the project; for instance how the tasks connect, what resources are being utilized for every task, how far each task has advanced.

Gantt chart consists of a horizontal bar for each task connecting the period start and period ending columns; and, it can utilize in determining scope, budgets, and schedules. The way to break a project to complete it in a specific period is then the Gantt chart did. This focuses on analyzing the scope of the project based on its results or deliverables. Once you have identified the details, you should develop a list of the tasks that you want to finish to produce desired results. These projects will have durations and dependencies and thus they can schedule. When the logic defines once as well as the project’s budget calculate, results can view in the Gantt chart.

Aspects of Gantt project charts;

Gantt charts help in working out practical aspects of a project, such as the minimum time it will take to deliver, and which tasks need to complete before others can start. However, it’s best not to show the dependencies on the Gantt chart, especially if there are a large number of tasks and complex dependencies between them. Gantt chart’s limitation is that it relies upon an already constructed and complete work breakdown structure. As such, should major tasks be missing from the work breakdown structure, or should a major milestone be missing, the Gantt chart will not tell PM. The PM will thus be attempting to create the work breakdown structure and at the same time constructing the Gantt chart. This can result in the risk of having to recreate the entire project schedule if something is left out or the duration does not estimate properly.

Differences between Analysis of WBS, CPA, PERT, and GANTT project charts;

Work Breakdown Structure, Critical Path Analysis, PERT charts, and GANTT charts use together. PMs typically use PERT charts, Gantt charts, as well as other visuals to arrange projects, organize resources, as well as to gain a good understanding of their projects. The prime minister must be furious as well as put their opinions together. It has been proving to be a great medium of communication. Planners and Thinkers can convey their ideas, fears, and doubts to another level on one level.

Most importantly, it becomes a suitable tool for assessing the performance of the individuals as well as the groups. When deciding on the specific details of a work package, the project manager should careful not to get details. If CPA is not clear and stable, CPM may be difficult to monitor or manage as well as it becomes ineffective. It cannot handle the sudden changes in an implementation plan. So the project manager should pay attention to all these things.

WBS CPA PERT GANTT Charts Differences Define with Discuss; Image by Elf-Moondance from Pixabay.

Post Reference and Retrieved from https://www.ukessays.com/essays/project-management/skills-and-role-of-a-project-manager.php?vref=1, and https://wpdatatables.com/types-of-charts/

November 4, 2021
Netbase Quid: Defining Emerging Trends in Competitive Intelligence

Emerging Trends in Competitive Intelligence: Competitive intelligence has various emerging trends in today’s business marketing environment. Also, Many top corporations are fighting to remain supreme in this area. That means some of these trends taking shape today may remain influential in business for years. If you’re looking to achieve competitive intelligence with your enterprise, you need to understand the strategies and incorporate them into your marketing endeavors.

Here is the article to explain, the Emerging Trends in Competitive Intelligence by define Netbase Quid.

The following Emerging Trends in Competitive Intelligence define by Netbase Quid below are;

Social Media May Shape the Biggest Trends

What’s occurring on social media platforms in real-time may shape most of the emerging trends from the look of things. However, the tone on social media channels may be sour at the moment due to the effects of the coronavirus pandemic. Also, It means organizations need to monitor emerging trends that come first as discussion topics on their pages. Such events may be vital in defining your clients’ attitude towards your enterprise in the future. For example, you should be sure the trends are favorable for your brand.

It Is Time to Monitor Your Online Reputation

Organizations must keep watch of the possible negative impact of misjudging a reply or a post. For example, you should avoid posting content that may seem to make fun of an individual because of their political affiliations, race, or gender. Also, That could make your online reputation a nightmare.

What’s the best way to ensure a positive online reputation? You need to make sure your comments and posts on social media channels are neutral and positive. Also, Monitor ongoing discussions on your social media pages and understand the tone. These areas are vital for businesses looking to maintain a positive online reputation and credibility.

Platforms Like NetBase Quid Are Becoming More Influential in 2021

Apart from social media channels, are you aware of platforms like NetBase Quid? These are essential in helping you understand and incorporate emerging trends in your business. For example, NetBase Quid is one of the platforms you may need to focus on in 2021 and beyond. According to some digital experts, NetBase Quid is a critical market intelligence and consumer channel.

What does this mean for you as an entrepreneur? NetBase Quid and other platforms like this are a benefit to business market research. For example, you can utilize such channels to access massive useful data and information on the internet. You can design cutting-edge marketing strategies using such tools in seconds.

Market Research Channels Are Becoming More Influential

It is evident these platforms create enhanced marketing possibilities for businesses. Also, You can access instant data and use it to formulate a relevant campaign to target your demographic effectively. You can also utilize such channels to access a new audience with potential clients. Accessing data and information in seconds offers a unique perspective for your marketing endeavors. It means you can use it to gain competitive intelligence over other businesses.

Digital experts anticipate changing how to conduct marketing and research on the internet, thanks to the innovative platforms. While there are many emerging trends in 2021, entrepreneurs need to pay attention to these proper channels for their marketing strategies.

NetbaseQuid

Netbase Quid is a data analytics channel that provides indexed resources, including forums, patent applications, business filings, news articles, product reviews, consumer reviews, and social media posts. Also, Business owners can rely on the tool to aggregate, analyze, and visualize to uncover emerging trends, market, and consumer insights. The cutting-edge platform provides real-time, clear, and actionable results, enabling clients to differentiate between non-essential and vital business issues. It empowers them to data-driven and smarter decisions with efficiency.

As a business owner, it’s crucial to understand valuable digital marketing strategies to attain competitive intelligence. Also, Utilizing emerging trends in 2021 is one of the best ways to achieve your marketing goals.

Netbase Quid: Defining Emerging Trends in Competitive Intelligence.

February 9, 2021
What is Control and Organizational Factors? easy Explanation
Organizational Control: Control can define narrowly as the process a manager takes to assure that actual performance conforms to the organization’s plan, or more broadly as anything that regulates the process or activity of an organization. We are going to study of Control and Organizational Factors. First, want to know what they are? Simply put, organizational control is the process of assigning, evaluating, and regulating resources on an ongoing basis to accomplish an organization’s goals. To successfully control an organization, managers need to not only know what the performance standards are but also figure out how to share that information with employees.

What is Control and Organizational Factors? easy Explanation.

The behavioral implications of control, as elaborated above do not mean that control should not be applied in the organization. In fact, control has many positive aspects, as discussed earlier. The basic necessity is that it should suit die participants to make it more effective.

Control and Organizational Factors – Topic

From this point of view, it is imperative that various organizational phenomena should analyze, which affect the control system. Though there are many such organizational factors and people are engaged in finding out the answer to this basic question of how people can better control for organizational effectiveness, the main factors related directly to control are:

Organizational Rules and Procedures:

Most of the organizations prescribe some standing measures for providing guidelines for people’s actions in the organizations in the form of policies, rules, and procedures. While these elements provide guidelines to them, they, particularly rules and procedures, prescribe rigidity in action. Thus, they leave very little scope for freedom in action. These rules and procedures also take away initiative and generate alienation.

Many times, they may not be able to isolate or sense the factors, which have caused a. particular situation. Thus, there may be a tendency to put the blame on those who are not really responsible for a situation. Besides, the rules and procedures create more delay in action and consequently the result. Such a phenomenon is more frustrating to individuals in the organization.

Perception Formation:

The people’s perception is affecting by a number of factors, as discussed earlier. In organizational situation, it is affected by the action of management, and the type of relationship between management and employees. The perception of people towards control is a major factor in determining the response to it.

Thus, if the perception of people about the control attempt is based on sound organizational climate, mutual trust and belief, there is more likelihood of getting a favorable and better response from them. On the other hand, if it is based on general distrust, fear and suspicion, there is always the people resist a possibility that control attempt.

Organizational Communication:

The organization has to design a communication network for carrying the control, information both downward and upward. Through the downward communication, a superior sends the information about what a subordinate is expected to do; the upward communication is used to get control information from the subordinates, that is, what they have done. Besides, these channels also serve other purposes.

Thus, the organization depends to a large extent for exercising control through communication. If the communication system is not quite effective, it will affect the control system also, to that extent, in communicating what is expected from a subordinate and also how he is performing. Often communication blockade is a major source of confusion and frustration in the minds of the people and they resist control.

What is Control and Organizational Factors? easy Explanation

Motivational Dynamics:

The control is affecting by the motivational dynamics of people and how the organization is going to satisfy the various needs of the people. The motivational dynamics have a twofold role in control.
- First, how the various attempts at control are in time with the needs of the people. Ideally speaking, a control system should focus adequately on the needs of the participants and must suit them. It means the control system should be tailor-made and no universal because people differ. Thus, all people cannot satisfy the same system.
- Second, the organization itself provides motivation or, Demotivation to the people to work. Human beings, being gregarious, seek to remain in the organization.
Thus, many of his needs can satisfy by this phenomenon. However, since organization, as a Collectivity of people, has certain norms of behavior it becomes Demotivation for the people. If it is not in accordance with the people. Thus the organizational phenomenon of how people are motivating is a crucial factor in the control of the behavior of people in the organization.

The various factors discussed above suggest that. They actually decide the behavioral implications of control rather than the individual factors alone. Thus real implications may understand in terms of the interaction of individual and organizational factors. While many of the individual factors may analyze the lines suggested earlier in the previous part of the text. The organizational factors may analyze throughout the remaining portion of this part.
July 26, 2019
Monopoly; Introduction, Meaning, Concept, and Features
Understanding Monopoly: Explore the concept of monopoly and its impact on markets. Learn how a single seller dominates an industry and affects prices. Introduction; Monopoly is defined as a single seller or credit in the market. The monopoly refers to a market situation in which there is only one seller of a particular product. This means that the firm itself is the industry and the firm’s product has no close substitute. The monopolist is not bothered about the reaction of rival firms since it has no rival. So the demand curve faced by the monopoly firm is the same as the industry demand curve.

Here are economics explain Monopoly; Introduction, Meaning, Concept, and Features.

Three features characterize a monopoly — a market in which there is only one supplier. First, the firm is in it’s in motivated by profits. Secondly, it stands alone and barriers prevent new firms from entering the industry; and thirdly, the actions of the monopolist itself affect the market price of its output—it is not a price-taker.

Can there be a complete monopoly in the real commercial world? Some economists feel that by maintaining some barriers to entry a firm can act as the single seller of a product in a particular industry. Others feel that all products compete for the limited budget of the consumer. Therefore, no firm, even if it is the only seller of a particular product, is free from competition from the sellers of other products. Thus complete monopoly does not exist in reality.

The monopolist is the sole seller of a particular product. Therefore, if the monopolist is to enjoy excess profit in the long run that must exist certain barriers to the entry of new firms into the industry. Such barriers may refer to any force which prevents rival firms (competing producers) from entering the industry.

What is the Meaning of the term Monopoly?

Monopoly is said to exist when one firm is the sole producer or seller of a product which has no close substitutes. Three points are worth noting in this definition. First, there must be a single producer or seller of a product if there is to be a monopoly. This single producer may be in the form of an individual owner or a single partnership or a joint-stock company.

If many producers are producing a product, either perfect competition or monopolistic competition will prevail depending upon whether the product is homogeneous or differential. On the other hand, when there are few producers or sellers of a product, oligopoly is said to exist. If then there is to be a monopoly, there must be one firm in the industry. Even literally monopoly means one seller.

“Mono” means one and “Poly” means the seller. Thus monopoly means one seller or one producer. But to say that monopoly means one seller or producer is not enough. A second condition which is essential for a firm to be called monopolistic is that no close substitutes for the product of that monopolistic firm should be available in the market.

Meaning of Monopoly:

The word monopoly has been deriving from the combination of two words i.e., “Mono” and “Poly”. Mono refers to a single and poly to control. In this way, the monopoly refers to a market situation in which there is only one seller of a commodity. There are no close substitutes for the commodity it produces and there are barriers to entry. The single producer may be in the form of an individual owner or a single partnership or a joint-stock company.

In other words, under a monopoly, there is no difference between firm and industry. The monopolist has full control over the supply of the commodity. Having control over the supply of the commodity he possesses the market power to set the price. Thus, as a single seller, the monopolist may be a king without a crown. If there is to be a monopoly, the cross elasticity of demand between the product of the monopolist and the product of any other seller must be very small.

Definition of Monopoly:

The following definitions are below;
1. According to Bilas as;
“Pure monopoly is represented by a market situation in which there is a single seller of a product for which there are no substitutes; this single seller is unaffected by and does not affect the prices and outputs of other products sold in the economy.”

2. According to Koutsoyiannis as;

“Monopoly is a market situation in which there is a single seller. There are no close substitutes of the commodity it produces, there are barriers to entry.”

3. According to A. J. Braff as;

“Under pure monopoly, there is a single seller in the market. The monopolist demand is market demand. The monopolist is a price-maker. Pure monopoly suggests no substitute situation.”

Concept of Monopoly:

Analysis of the working of a competitive system was the main task done by classical economists such as Adam Smith, David Ricardo, and J.S. Mill. Considering the earlier views, later economists of the 19th century developed the “ideal” system of perfect competition. Many economists, since the time of Adam Smith, were more interested in theoretical perfections than in the actual development of the capitalist system. They tried to explain the meaning of an economic system based on the model of perfect competition.

According to them, perfect competition would mean;
- Production at the minimum possible cost, and.
- Consumer satisfaction at its maximum.
But in real words, we hardly come across such a system of perfect competition. The exception to perfect competition which attracted serious attention during the 19th century was the concept of monopoly. This is in fact, the antithesis of perfect competition.

Monopoly market is one in which there is only one seller of the product having no close substitutes. The cross elasticity of demand for a monopolized product is either zero or negative. There being only one firm, producing that product, there is no difference between the firm and industry in case of monopoly. Monopoly is a price maker, not the price taker.

In the words of Koutsoyiannis, “Monopoly is a market situation in which there is a single seller, there are no close substitutes for the commodity it produced there are barriers to entry of other firms”.

Features of Monopoly:

The following are the features of a monopoly;

One seller of the product.

In the case of a monopoly, there is only one seller of the product. He may be a sole proprietor or a partnership firm or a joint stock company or a state enterprise. There is no difference between firm and industry. The firm is a price maker and not a price taker.

No close substitute.

The commodity which the monopolist produces has no close substitutes. Lack of substitutes means no other firm in the market is producing the same type of commodity.

Restriction no entry of the new firm.

There are powerful restrictions to the entry of new firms in the industry, under the Monopoly. There are either natural or artificial restrictions on the entry of firms into the industry, even when the firm is making abnormal profits.

Monopoly is also an Industry.

Under monopoly, there is only one firm which constitutes the industry. Difference between firm and industry comes to an end.

Price Maker.

Under monopoly, the monopolist has full control over the supply of the commodity. But due to a large number of buyers, the demand of any one buyer constitutes an infinitely small part of the total demand. Therefore, buyers have to pay the price fixed by the monopolist.

Monopoly explain – For instance;

There is one firm in India which produces “Binaca” toothpaste but this firm cannot be called monopolist since there are many other firms which produce close substitutes of Binaca toothpaste such as Colgate, Promise, Forhans, Meclean, etc. These various brands of toothpaste compete with each other in the market and the producer of any one of them cannot say to have a monopoly.

Prof. Bober rightly remarks,

“The privilege of being the only seller of a product does not by itself make one a monopolist in the sense of possessing the power to set the price. As one seller, he may be a king without a crown.”

We can express the second condition of monopoly in terms of cross elasticity of demand also. Cross elasticity of demand shows a change in the demand for a good as a result of the change in the price of another good. Therefore, if there is to be monopoly the cross elasticity of demand between the product of the monopolist and the product of any other producer must be very small. The fact that there is one firm under monopoly means that other firms for one reason or other are prohibiting to enter the monopolistic industry.

In other words, strong barriers to the entry of firms exist wherever there is one firm having sole control over the production of a commodity. The barriers which prevent the firms to enter the industry may be economic in nature or else of institutional and artificial nature. In the case of monopoly, barriers are so strong that prevent the entry of all firms except the one which is already in the field.
July 14, 2019
What is the Acquisition? Meaning and Definition

Refers to effective working control by one company over another. This acquisition may be through either a friendly takeover or through forced or unwilling takeover. Generally, the acquisition is done through mutual argument. In the Company define an Acquisition is a situation where a company buys shares of most or any other company to take control. An acquisition occurs when a purchasing company receives more than fifty percent ownership in the target company. As part of the exchange, the acquiring company often buys the target company’s stock and other assets, which allows the acquiring company to make decisions about new acquisitions without the approval of the shareholder of the targeted company. So, what is the question; What is the Acquisition? Meaning and Definition.

Here are explain What is the Acquisition? with Meaning and Definition.

Definition: Acquisitions often give the acquiring company greater market reach or product breadth. And also, an acquisition is the purchase of all or a portion of a corporate asset or target company. As well as; Business acquisition is the process of acquiring a company to build on strengths or weaknesses of the acquiring company. A merger is similar to an acquisition but refers more strictly to combining all of the interests of both companies into a stronger single company.

The end result is to grow the business in a quicker and more profitable manner than normal organic growth would allow. The acquisition of one company by another company. However, the target company, i.e., the ‘prey,’ did not want the acquisition to occur. In a hostile takeover attempt, the target company’s Board of Directors recommends against the acquisition. Subsequently, the bidder goes directly to the shareholders. After that, an acquisition occurs when a purchasing company receives more than fifty percent ownership in the target company.

Deal 50%, What is the Acquisition? Meaning and Definition. Image credit from ilearnlot.com.

November 16, 2018
What are the Principles of the Contract of Insurance? Define

The cost for the risk made by the insurer and the insurer is paid by the insured, it is called “premium” and the document in which the contract of insurance is called is “Policy”. An insurance contract is a contract by which a person attempts to compensate another person against the loss of occurrence of an event or to pay the amount upon the occurrence of any event. The person who ensures that he is called “insurer”. The person who affects insurance is called “insured” or “assured”. In insurance, the insurance policy is an agreement between the insurer and the insured (usually a standard form of contract), which is known as the policyholder, which determines the claims required to pay the insurers legally. Do you study to learn: If Yes? Then read the lot. Let’s Study: What are the Principles of the Contract of Insurance? Define. Read this in the Hindi language: बीमा अनुबंध के सिद्धांत क्या हैं? परिभाषित…।

The concept of Insurance Discussing the topic: What are the Principles of the Contract of Insurance? Define.

In exchange for initial payment, known as premium, the insurer promises to pay for the loss due to the dangers covered under the policy language. An insurance contract is an insurance company that represents the agreement between the insurance company and the insured. There is a central insurance agreement for any insurance contract, which specifies the risks covered, the limits of the policy, and the duration of the policy. You also need to know about: Types of Insurance.

Insurance Contract: “Almost all of us have insurance. When your insurer gives you the policy document, generally, all you do is glance over the decorated words in the policy and pile it up with the other bunch of financial papers on your desk, right? If you spend thousands of dollars each year on insurance, don’t you think that you should know all about it? Your insurance advisor is always there for you to help you understand the tricky terms in the insurance forms, but you should also know for yourself what your contract says. In this article, we’ll make reading your insurance contract easy, so you understand their basic principles and how they are put to use in daily life.” The definition reference by Investopedia.

The Principles of the Contract of Insurance:

Following are the general principles of the contract of insurance:

Subrogation:

According to the rule of subrogation, when the loss is caused to the insured by the conduct of a third party, the insurer shall have to make good such loss and then have a right to step into the shoes of the insured and bring an action against such third party who caused the loss to the insured. This right of subrogation is enforceable only when there is an assignment of cause of action by the insured in favor of the insurer. The doctrine of subrogation does not apply to life insurance.

Contribution:

Where there are two or more insurances on one risk, the principle of contribution applies as between different insurers. The aim of contribution is to distribute the actual amount of loss among the different insurers who are liable for the same risk under different policies in respect of the same subject-matter. In case of loss, anyone insurer may pay to the assured the full amount of the loss covered by the policy. Having paid this amount, he is entitled to contribution from his coinsurers in proportion to the amount which each has undertaken to pay in case of loss of the same subject-matter.

Period of Insurance:

Except in the case of life insurance, every contract of insurance comes to an end of the expiry of every year, unless the insured continues the same and pays the premium before the expiry of the year.

Indemnity:

Every contract of insurance such as life insurance and personal accident and sickness insurance is a contract of indemnity. So, the insurer pays the actual loss suffered by the insured. He does not pay the specified amount unless this amount is the actual loss to the insured.

Mitigation of Loss:

The insured must take reasonable precautions to save the property, in the event of some mishap to the insured property. He must act as a prudent uninsured person would act in his own case under similar circumstances to mitigate or minimize losses.

Insurable Interest:

The assured must have, what is called “insurable interest” in the subject matter of the contract of insurance. “He must be so situated with regard to the thing ensured that he would have benefit from its existence, loss from its destruction”.

Risk must Attach:

The insurer must run the risk of indemnifying the insured. If he does not run the risk, the consideration for which the premium is paid fails and consequently, he must return the premium paid by the insured.

Causa Proxima:

The insurer is liable for loss which is proximately caused by the risk insured against. The rule is “Causa Proxima non-remote spectator”, i.e. the proximate but not the remote cause is to be looked to. So, the loss must be proximately caused in order that the insurer is to become liable.

Uberrimae Fidei:

A contract of insurance is a contract Uberrimae Fidei, i.e. a contract requiring utmost good faith of the parties. So, all material facts which are likely to influence the insurer in deciding the amount of premium payable by the insured must be disclosed by the insured. Failure to disclose material facts renders the contract voidable at the option of the insurer. Read this in the Hindi language: बीमा अनुबंध के सिद्धांत क्या हैं? परिभाषित…।

Image Credit from #Pixabay.

October 17, 2018
How to discuss the Characteristics of a Project?
The project has been defined by Project Management Institute (USA) as “Any undertaking with a defined objective by which completion is identified. In practice, most projects depend on finite or limited resources by which objectives are to be accomplished.” —Project Management Body of Knowledge (PMBOK). How to discuss the Characteristics of a Project? A project is typically for a customer. The project is temporary in nature. It typically has a defined start and a defined end-point.

The project will have a unique set of requirements that need to be delivered within the boundaries of this project. A project is defined as “A non-routine, non-repetitive one-off undertaking normally with discrete time, financial and technical performance goals.” The definition is descriptive and, because of the endless variety of projects, most of the definitions are of this nature.

The Department of Project Management in the Business, How to discuss the Characteristics of a Project?

Characteristics of a Project:

Following Project characteristics include below:
- The project has an owner, who, in the private sector, can be an individual or a company etc., in the public sector, a government undertaking or a joint sector organization, representing a partnership between public and private sector.
- The project has a set objective to achieve within a distinct time, cost and technical performance.
- The project is planned, managed and controlled by an assigned team the project team planted within the owner’s organization to achieve the objectives as per specifications.
- The project, in general, is an outcome in response to environments economies and opportunities. As an example, we find that considering the changing pattern of modern living the domestic appliances small e.g. grinders, mixers etc., and large, e.g. refrigerators, washing machines etc. are on ever-increasing demand. This generates responses to avail opportunity to produce such appliances.
- The project is an undertaking involving future activities for completion of the project within estimates and, «s such, involves complex budgeting procedure with a mission.
- Implementation of the project involves a coordination of works/supervisions by project team/manager.
- The project involves activities to be carried out in the future. As such, it has some inherent risk and, in reality, the process of implementation may necessitate certain changes in the plan subject to limitations and concurrence of the project owner.
- The project involves high-skilled forecasting with the sound basis for such forecasting.
- Projects have a start and an end a characteristic of a life cycle. The organization of project changes as it passes through this cycle the activities starting from—conception stage, mounting up to the peak during implementation and, then, back to zero level on completion and delivery of the project.
Some attributes that characterize projects

Importance of a project:

The most crucial attribute of a project is that it must be important enough in the eyes of senior management to justify setting up a special organizational unit outside the routine structure of the organization. If the rest of the organization senses, or even suspects, that it is not really that important, the project is generally doomed to fail. The symptoms of lack of importance are numerous and subtle: no mention of it by top management, assigning the project to someone of low stature or rank, adding the project to the responsibilities of someone who is already too overworked, failing to monitor its progress, failing to see to its resource needs, and so on.

Performance of a project:

A project is usually a one-time activity with a well-deﬁ ned set of desired end results. (We discuss poorly deﬁ ned, or “quasi-” projects a bit later.) It can be divided into subtasks that must be accomplished in order to achieve the project goals. The project is complex enough that the subtasks require careful coordination and control in terms of timing, precedence, cost, and performance. Often, the project itself must be coordinated with other projects being carried out by the same parent organization.

Life Cycle with a Finite Due Date of a project:

Like organic entities, projects have life cycles. From a slow beginning they progress to a buildup of size, then peak, begin a decline, and ﬁnally must be terminated by some due date. (Also like organic entities, they often resist termination.) Some projects end by being phased into the normal, ongoing operations of the parent organization. The life cycle is discussed, where an important exception to the usual description of the growth curve is mentioned. There are several different ways in which to view project life cycles. These will be discussed in more detail later.

Interdependencies of a project:

Projects often interact with other projects being carried out simultaneously by their parent organization. Typically, these interactions take the form of competition for scarce resources between projects, and much of Chapter 9 is devoted to dealing with these issues. While such interproject interactions are common, projects always interact with the parent organization’s standard, ongoing operations.

Although the functional departments of an organization (marketing, ﬁ nance, manufacturing, and the like) interact with one another in regular, patterned ways, the patterns of interaction between projects and these departments tend to be changeable. Marketing may be involved at the beginning and end of a project, but not in the middle. Manufacturing may have major involvement throughout. Finance is often involved at the beginning and accounting (the controller) at the end, as well as at periodic reporting times. The PM must keep all these interactions clear and maintain the appropriate interrelationships with all external groups.

The uniqueness of a project:

Though the desired end results may have been achieved elsewhere, they are at least unique to this organization. Moreover, every project has some elements that are unique. No two construction or R & D projects are precisely alike. Though it is clear that construction projects are usually more routine than R & D projects, some degree of customization is a characteristic of projects.

In addition to the presence of risk, as noted earlier, this characteristic means that projects, by their nature, cannot be completely reduced to routine. The PM’s importance is emphasized because, as a devotee of management by exception, the PM will ﬁnd there are a great many exceptions to manage by.

Resources of a project:

Projects have limited budgets, both for personal as well as other resources. Often the budget is implied rather than detailed, particularly concerning personnel, but it is strictly limited. The attempt to obtain additional resources (or any resources) leads to the next attribute—conflict.

Conflict of a project:

More than most managers, the PM lives in a world characterized by conflict. Projects compete with functional departments for resources and personnel. More serious, with the growing proliferation of projects, is the project-versus-project conflict for resources within multi-project organizations. The members of the project team are in almost constant conflict for the project’s resources and for leadership roles in solving project problems.

The PM must be an expert in conflict resolution, but we will see later that there are helpful types of conflict. The PM must recognize the difference. The four parties-at-interest or “stakeholders” (client, parent organization, project team, and the public) in any project even deﬁne success and failure in different ways. The client wants changes, and the parent organization wants proﬁ ts, which may be reduced if those changes are made. Individuals working on projects are often responsible for two bosses at the same time; these bosses may have different priorities and objectives. Project management is no place for the timid.

Nonprojects and Quasi-Projects of a project:

If the characteristics listed above deﬁne a project, it is appropriate to ask if there are non-projects. There are. The use of a manufacturing line to produce a ﬂow of standard products is a non-project. The production of weekly employment reports, the preparation of school lunches, the delivery of mail, the ﬂight of Delta-1288 from Dallas to Dulles, checking your e-mail, all are non-projects. While one might argue that each of these activities is, to some degree, unique, it is not their uniqueness that characterizes them.

They are all routine. They are tasks that are performed over and over again. This is not true of projects. Each project is a one-time event. Even the construction of a section of interstate highway is a project. No two miles are alike and constructing them demands constant adaptation to the differences in terrain and substructure of the earth on which the roadbed is to be laid. Projects cannot be managed adequately by the managerial routines used for routine work.

In addition to projects and non-projects, there are also quasi-projects: “Bill, would you look into this?” “Judy, we need to ﬁnish this by Friday’s meeting.” “Can you ﬁnd out about this before we meet with the customer?” Most people would consider that they have just been assigned a project, depending on who “we” and “you’’ is supposed to include. Yet there may be no speciﬁc task identiﬁed, no speciﬁc budget given, and no speciﬁc deadline deﬁned. Are they still project, and if so, can project management methods be used to manage them? Certainly!

The performance, schedule, and budget have been implied rather than carefully delineated by the words “this,” “meet,” and “we” (meaning “you”) or “you” (which may mean a group or team). In such cases, it is best to try to quickly nail down the performance, schedule, and budget as precisely as possible, but without antagonizing the manager who assigned the project. You may need to ask for additional help or other resources if the work is needed soon—is it needed soon? How accurate/thorough/detailed does it need to be? And other such questions.

One common quasi-project in the information systems area is where the project includes the discovery of the scope or requirements of the task itself (and possibly also the budget and deadline). How can you plan a project when you don’t know the performance requirements? In this case, the project is, in fact, determining the performance requirements (and possibly the budget and deadline also).

If the entire set of work (including the discovery) has been assigned to you as a project, then the best approach is to set this determination as the ﬁrst “milestone” in the project, at which point the resources, budget, deadline, capabilities, personnel, and any other matters will be reviewed to determine if they are sufﬁcient to the new project requirements. Alternatively, the customer may be willing to pay for the project on a “cost-plus” basis and call a halt to the effort when the beneﬁts no longer justify the cost.

Characteristics of Project in Project Management

Following are some of the important characteristics of the project.
- The project is temporary with certain starting & ending date.
- The opportunities and teams of the project are also for the temporary duration.
- Projects are ended when the goals are accomplished or when the goals are not achieved.
- Often projects continue for many years but still, their duration is finite.
- Multiple resources are involved in the projects along with the close coordination.
- Interdependent activities are involved in the project.
- A unique product, service or result is developed at the end of the project. There is also some extent of customization in the project.
- Complex activities are included the projects which need repetitive acts and are not simple.
- There is also some sort of connection in the activities of the project. Some sequence or order is also required in the activities. The output of certain activity becomes the input of another activity.
- There is the element of conflict in the project management. For resources & personnel, the management should compete with the functional departments.
- Permanent conflict is associated with resources of the project and leadership roles which are important in solving the problems of the project.
- Clients desire changes in every project and the parent organization desires to maximize its profits.
- There is the possibility of two bosses in the project at the single time, each with different objectives and priorities.
Image Credit from #Pixabay.
October 6, 2018
What is Project in Project Management? Meaning and Definition
A project is a temporary endeavor undertaken to create a unique product, service, or result. What is Project in Project Management? Meaning and Definition. The planned set of reciprocal works should execute within a certain period and some costs and other limitations. Also learn, What is Corporate Entrepreneurship? Meaning and Definition. Like most organizational efforts, the major goal of a project is to satisfy a customer’s needs. Beyond this fundamental similarity, the characteristics of a project help differentiate it from other endeavors of the organization.

Now Project Management is explaining What is Project? Understand as well as Meaning and Definition.

What is a project in project management? Simply put, a project is a series of tasks that need to complete in order to reach a specific outcome. A project can also be defined as a set of inputs and outputs required to achieve a particular goal. Projects can range from simple to complex and can manage by one person or a hundred. Explain by www.wrike.com.

A project is defined as a “temporary endeavor with a beginning and an end and it must use to create a unique product, service or result”. Further, it progressively elaborates. What this definition of a project means is that projects are those activities that cannot go on indefinitely and must have a defined purpose.

Meaning and Definition of the Project:

The project is a great opportunity for organizations and individuals to achieve their business and non-business objectives more efficiently through implementing change. Projects help us make desired changes in an organized manner and with a reduced probability of failure.

A Project is a temporary, unique, and progressive attempt or endeavor made to produce some kind of a tangible or intangible result (a unique product, service, benefit, competitive advantage, etc.). It usually includes a series of interrelated tasks that planned for execution over a fixed period of time and within certain requirements and limitations such as cost, quality, performance, others.

The “project manager” is in charge of the planning and execution of a project. He makes sure that everything is following the client’s vision and quality standards. He will also hold accountable for the project’s success or failure.

People have been “managing projects” for centuries. They went from using traditional tools such as pen and paper to the use of advanced technologies. Currently, project managers employ the use of project management tools to speed up and ease the entire work process.

Features or Characteristics of a Project:

The major characteristics of a project are as follows:
- An established objective.
- A defined lifespan with a beginning and an end.
- Usually, the involvement of several departments and professionals.
- Typically, doing something that has never been done before.
- Specific time, cost, and performance requirements.
First:

Projects have a defined objective—whether it is constructing a 12-story apartment complex by January 1 or releasing version 2.0 of a specific software package as quickly as possible. This singular purpose is often lacking in daily organizational life in which workers perform repetitive operations each day.

Second:

Because there is a specified objective, projects have a defined endpoint, which is contrary to the ongoing duties and responsibilities of traditional jobs. In many cases, individuals move from one project to the next as opposed to staying in one job. After helping to install a security system, an IT engineer may assign to develop a database for a different client. Does this question better explain What is the Cost of Capital? Meaning and Definition.

Third:

Unlike much organizational work that segmented according to functional specialty; projects typically require the combined efforts of a variety of specialists. Instead of working in separate offices under separate managers, project participants, whether they be engineers, financial analysts, marketing professionals, or quality control specialists, work closely together under the guidance of a project manager to complete a project.

Fourth:

The fourth characteristic of a project is that it is non-routine and has some unique elements. This is not an either/or issue but a matter of degree. Obviously, accomplishing something that has never been done before, such as building a hybrid (electric/gas) automobile or landing two mechanical rovers on Mars, requires solving previously unsolved problems and breakthrough technology. On the other hand, even basic construction projects that involve established sets of routines and procedures require some degree of customization that makes them unique.

Finally:

Specific time, cost, and performance requirements bind projects. Projects are evaluated according to accomplishment, cost, and time spent. These triple constraints impose a higher degree of accountability than you typically find in most jobs. These three also highlight one of the primary functions of project management; which is balancing the trade-offs between time, cost, and performance while ultimately satisfying the customer. Business finance accounting Managing by simple accounting system of Bookkeeping, as well as understand What is Bookkeeping? Meaning and Definition.

What a Project is Not Projects should not confuse with everyday work.

A project is not routine, repetitive work! Ordinary daily work typically requires doing the same or similar work over and over, while a project is done only once; a new product or service exists when the project completed. Recognizing the difference is important because too often resources can use upon daily operations which may not contribute to longer-range organization strategies that require innovative new products.

Program versus Project In practice the terms project and program cause confusion. They often used synonymously. A program a group of relates projects designed to accomplish a common goal over an extended period of time. Each project within a program has a project manager. The major differences lie in scale and time span. Program management is the process of managing a group of ongoing, interdependent, related projects in a coordinated way to achieve strategic objectives.

For example:

A pharmaceutical organization could have a program for curing cancer. The cancer program includes and coordinates all cancer projects that continue over an extended time horizon. Coordinating all cancer projects under the oversight of a cancer team provides benefits not available from managing them individually. This cancer team also oversees the selection and prioritizing of cancer projects that included in their special “Cancer” portfolio. Although each project retains its own goals and scope, the project manager and team also motivated by the higher program goal. Program goals are closely related to broad strategic organizational goals.

What are the basic phases of a project and its purposes?

The periods of a project make up the project life cycle. It is advantageous for the project chiefs to partition the project into stages for control and the following purposes. Every achievement at each stage then explain and follow for culmination. The fundamental periods of a project are reliant on the sort of project that is complete. For example, a product project may have the necessity, plan, assemble, test, execution stages while a project to manufacture a metro or a structure may have various names for each stage.

Subsequently, the naming of the periods of a project relies upon the sort of expectations that looked for at each stage. With the end goal of definition, the stages might isolate into an underlying sanction, scope proclamation, plan, gauge, progress, acknowledgment, endorsement, and handover. This order as indicated by the PMBOK. In this way, the periods of a project firmly connected with that of the project cycle. The reason for each period of the project is a lot of expectations that settled upon before the project begins.

For example:

In a product project, the prerequisite stage needs to create the necessary records, the planning stage the plan report, and so forth. The construct stage in a project conveys the finished code while the test stage is about the finished testing for the expectations.

Each period of the project relates to a specific achievement and the arrangement of expectations; that each stage requires to convey then follow for consistency and conclusion. The Project Life Cycle comprises of the starting, executing, controlling, and shutting cycles of the structure as depicted in the PMBOK. Every one of these cycles is important to guarantee that the project remains on target and finish by the determinations.

Image Credit from #Pixabay.
October 5, 2018
What is the Cost of Capital? Meaning and Definition

Cost of Capital is the rate that must be earned in order to satisfy the required rate of return of the firm’s investors. Keep Reading What is the Cost of Capital? Meaning and Definition. It can also define as the rate of return on investments at which the price of a firm’s equity share will remain unchanged.

Cost of Capital – Meaning and Definition, define each one, Read this article to learn about the Cost of Capital.

Cost of capital (COC) is the rate of return that a firm must earn on its project investments to maintain its market value and attract funds. COC is the required rate of return on its investments which belongs to equity, debt and retained earnings. If a firm fails to earn the return at the expected rate, the market value of the shares will fall and it will result in the reduction of the overall wealth of the shareholders.

Meaning of Cost of Capital:

An investor provides long-term funds (i.e., Equity shares, Preference Shares, Retained earnings, Debentures etc.) to a company and quite naturally he expects a good return on his investment. In order to satisfy the investor’s expectations, the company should be able to earn enough revenue. Thus, to the company, the COC is the minimum rate of return that the company must earn on its investments to fulfill the expectations of the investors.

If a company can raise long-term funds from the market at 10%, then 10% can use as the cut-off rate as the management gains only when the project gives return higher than 10%. Hence 10% is the discount rate or cut-off rate. In other words, it is the minimum rate of return required on the investment project to keep the market value per share unchanged.

In order to maximize the shareholders’ wealth through increase price of shares, a company has to earn more than the COC. The firm’s cost of capital can determine by working out the weighted average of the different costs of raising different sources of capital.

Definition of Cost of Capital:

We have seen that the cost of capital is the average rate of return required by the investors.

Various authors defined the term cost of capital in different ways some of which are stated below. Some definitions of financial experts are given below for the clear conception of the COC:

Ezra Solomon defines:

“Cost of capital is the minimum required rate of earnings or cutoff rate of capital expenditure”.

According to Mittal and Agarwal:

“The cost of capital is the minimum rate of return which a company is expected to earn from a proposed project so as to make no reduction in the earning per share to equity shareholders and its market price”.

According to Khan and Jain, cost of capital means:

“The minimum rate of return that a firm must earn on its investment for the market value of the firm to remain unchanged”.

According to the definition of John J. Hampton:

“Cost of capital is the rate of return the firm required from investment in order to increase the value of the firm in the marketplace”.

Each type of capital used by the firm (debt, preference shares, and equity) should incorporate into the COC, with the relative importance of a particular source being based on the percentage of the financing provided by each source of capital. Using the cost a single source of capital as the hurdle rate is tempting to management, particularly when an investment is financed entirely by debt. However, doing so is a mistake in logic and can cause problems.

Image Credit from ilearnlot.com.

August 29, 2018