Tag: Difference

The term “difference” can have various definitions depending on the context in which it used. Here are some common definitions across different fields:

  1. General Definition:
    • The quality or condition of being unlike or dissimilar. This refers to a distinguishing characteristic or the way in which two or more things are not the same.
      • Example: “The main distinction between the two proposals is their cost.”
  2. Mathematics:
    • The result of subtracting one number from another. In this context, it is the amount by which one quantity is greater or smaller than another.
      • Example: “The distinction between 8 and 3 is 5.”
  3. Logic and Philosophy:
    • A property by which two concepts or objects are distinguished. It refers to a characteristic that sets two entities apart.
      • Example: “The distinction between humans and other animals is the capacity for abstract thought.”
  4. Sociology and Anthropology:
    • The various ways in which people or groups are distinct from one another, often considering aspects such as culture, ethnicity, gender, etc.
      • Example: “Understanding cultural distinctions is crucial in global business.”
  5. Set Theory (Mathematics):
    • Given two sets AA and BB, the difference (or set distinction) A−BA – B is the set of elements that are in AA but not in BB.
      • Example: “If A={1,2,3}A = \{1, 2, 3\} and B={2,3,4}B = \{2, 3, 4\}, then A−B={1}A – B = \{1\}.”
  6. Statistics:
    • The difference between two values, such as the mean difference between two groups in an experiment.
      • Example: “The distinction in average scores between the control and experimental groups was significant.”

Each definition highlights a specific aspect of how the term “difference” can applied in various fields of study or everyday language.

 

  • Difference between Private Company and Public Company

    Difference between Private Company and Public Company

    Private Company and Public Company Difference; A private company isn’t like a public company. The private company runs in the same way as a public company runs. A public company refers to a company that lists on a recognized stock exchange and its securities trade publicly. Also, A private company is one that not lists on a stock exchange and its securities hold privately by its members.

    Difference or distinction between Private Company and Public Company in PPT presentation.

    The Differences of Company content below are the following and presentation;

    Which means:

    A public company alludes to a company that records on a perceived stock trade and its protections are exchanged publicly. Also, a private company is one that not records a stock trade and its protections are held privately by its individuals.

    Name of company end word:

    As well as, a public company needs to exclude “private” in its name. However, for a private company, it is required to compose the words “private restricted” toward the finish of its name.

    Number of Members for Company:

    There should be at any rate seven individuals to begin a public company. Yet, despite what might expect, the private company can be begun with at least two individuals. There is no roof on the greatest number of individuals in a public company. Also, a private company can have a limit of 50 individuals, including its at various times representatives.

    Number of directors in Company:

    A public company ought to have at any rate three chiefs; Also, a private company can have at least 2 chiefs.

    Majority:

    It is obligatory to assemble a legal general conference of individuals, on account of a public company. The presence of two individuals is a sufficient majority for the regular gathering on account of a private company. Then again, there should be in any event five individuals, by and by present at the yearly regular gathering for comprising the essential majority if there should be an occurrence of a public company.

    Capital for Company:

    As well as, a public company should have a settled up capital of rupees five lakh. Alternately, a private company should have a settled up capital of rupees one lakh.

    Beginning of Company Business:

    To begin a business, the public company needs a testament to the beginning of business after it is fused. As well as, a private company can begin its business soon after accepting an endorsement of the fuse.

    Articles of Association:

    As well as, a public company can receive the model Articles of Association given in the Companies Act. Also, a private company should get ready and document its own Articles of Association.

    The adaptability of offers in the financial exchange:

    Also, the adaptability of portions of a private company totally limited. Unexpectedly, the investors of a public company can openly move their offers.

    Limitations on the Appointment of Directors:

    Ahead of a public company will record with the recorder’s agreement to go about thusly. He/she will sign the reminder and go into an agreement for capability shares. He/she can’t cast a ballot or participate in the conversation on an agreement where he/she intrigue. 66% of the overseers of a public company should resign by a pivot. These limitations don’t have any significant bearing on a private company.

    Difference or distinction between Private Company and Public Company Image
    Difference or distinction between Private Company and Public Company; Image from Own.
  • Difference between Cash Discount and Trade Discount

    Difference between Cash Discount and Trade Discount

    Cash Discount and Trade Discount Difference; Market or business allows giving two types of discount first cash and trade. Maybe we want to know first what is a discount? A deduction from the usual cost of price or something else; typically given for prompt or advance payment or to a special category of buyers. A cash discount allows stimulating instant payment of the goods purchased; while a trade discount is one that allows the wholesaler to the retailer, calculated the list price of the product. The main difference between the cash discount and trade discount is that the ledger accounts open for a cash discount, but not for a trade discount; That’s mean the ledger of merchant account book is we allow cash discount add in book columns, but trade discount does not allow to add or entry on account book columns.

    Discount is one of the easiest ways to increase sales and so boost profit, consumed by various traders, businessmen or businesswomen, and shopkeepers all around the world are to offer or proposal a discount. It is simply a reduction in the selling price of the goods; which not only attracts customers but also persuades them to make more selling. The Discount classifies as a cash and trade discount, depending on the option and selling of the product.

    Difference between Cash Discount and Trade Discount Image
    Difference between Cash Discount and Trade Discount; Image from ilearnlot.com.
  • Difference between the Debentures and Shares Market

    Difference between the Debentures and Shares Market

    Debentures and Shares Market Difference: In the securities exchange for financial specialist have two kinds of corporate share – first shares and second debentures; interest in shares and debentures has taken a predominant situation in the public eye, as individuals of various ages, religion, sex, and race put away their well-deserved cash, with a point of improving returns. While the Shares market alludes to the offer capital of the organization. It depicts the privilege of the holder to the predefined measure of the offer capital of the organization. Then again, the debentures market suggests a drawn-out instrument demonstrating the obligation of the organization towards the outside gathering. It yields a positive pace of interest, given by the organization, could conceivably be made sure about against resources, for example, stock. Thus, on the off chance that you will put resources into any of the two protections, you should initially understand their importance.

    This is the article that explains the difference between the Debentures and Shares market? Meaning, Definition, and Types.

    Even though there are likewise a few similitudes among shares and debentures yet, for the present, to understand the no holds barred contrasts between the two shares and debentures, we ought to think about the favorable circumstances and drawbacks as far as different key highlights. Also, there are various kinds of shares and debentures accessible which give exceptional highlights to meet the speculator’s advantage and to limit the innate dangers. The compare and contrast essay topics below are;

    What are shares?

    Shares compare to a piece of an organization that is sold on the securities exchanges to get financing in return for reprisals of benefits among their proprietors. As well as, the return for the financial specialist comes from a stock value change, which relies upon the exhibition of the firm, just as the installment of profits, which is concurred through the quarterly, semi-yearly, or yearly gathering of investors, just if benefits are created.

    The kinds of shares can be isolated considering the parts of the privilege to invest in the choices of the organization, the estimation of its profits, and the dangers accepted by the investor in the event of a liquidation.

    Definition of Shares:

    The littlest division of the organization’s capital knows as shares. The shares are offered available to purchase in the open market, for example, in financial exchange to raise capital market (Indian capital market) for the organization. The rate at which the shares offer knows as the offer cost. It speaks to the segment of responsibility for investors in the organization. Also, the investors are qualified for the profit (assuming any) proclaimed by the organization on the shares. The shares are mobile for example adaptable and comprise of an unmistakable number.

    The shares are extensively separated into two significant classifications:

    1. Equity Shares: The shares which carry voting rights on which the pace of profit isn’t fixed. They are irredeemable in nature. In case of ending up of the organization value, shares reimburse after the installment of the apparent multitude of liabilities.
    2. Preference Shares: The shares which do not carry voting rights, The shares which don’t convey casting ballot rights, however, the pace of profit is fixed. They are redeemable in nature. In the case of ending up in the organization, inclination shares reimburse before value shares.
    Types of shares:

    The following types below are;

    1. Common shares: These are where they reserve the privilege to cast a ballot at the investors’ gathering, with a lower incentive in profits.
    2. Preferred shares: These are where a superior profit is conceded in contrast with standard shares, in return for postponing the option to cast a ballot at the investors’ gathering.
    3. Preference shares: These are shares with casting ballot rights and particular profits, with the additional advantage of recovering the investment in case of bankruptcy at the moment of liquidating liabilities by the company.

    Every one of these sorts of shares gives by the firm as per its necessities and with an alternate ostensible value; which may change as per the demand for these protections in the securities exchanges.

    What are debentures?

    It establishes an obligation that the organization concedes to a speculator in the protection markets to get prompt financing for the advancement of its exercises in return for a fixed installment.

    The key highlights that make a debenture are the accompanying:

    1. Principal: It is the all-out estimation of debenture purchased by financial specialists and returned right now of development lapses.
    2. Coupon: It is the premium picked up because of the financing cost characterized by the agreement and the head.
    3. Development: It is the lapse date of the debenture.
    Definition of Debentures:

    Long-term debt or obligation instrument gave by the organization under its regular seal; to the debenture holder indicating the obligation of the organization. As well as, the capital raised by the organization is the obtained capital; that is the reason the debenture holders are the loan bosses of the organization.

    The debentures can be redeemable or irredeemable in nature. They are uninhibitedly adaptable. The profit for debentures is as revenue at a fixed rate. Debentures make sure about by a charge on resources, albeit unstable debentures can likewise give. They don’t convey casting ballot rights.

    Types of debentures:

    The debentures are of the following 6 types:

    1. Secured Debentures.
    2. Unsecured Debentures.
    3. Convertible Debentures.
    4. Non-convertible Debentures.
    5. Registered Debentures, and.
    6. Bearer Debentures.
    Types of bonds:

    The types of bonds (debentures) that exist as per the guarantor are;

    1. Public debt: It is a debt or obligation gives by a sovereign government to back the public spending plan. Also, the cost and loan fee paid relies upon the financing costs of the national bank of that nation, its credit quality, and the essentials of its economy.
    2. Private debt: This is debt or obligation given by private area organizations to back the advancement of new speculation ventures. The quality and the loan cost paid for the organization’s obligation relies upon the credit danger of the nation where the organization works and the organization’s monetary ability to produce income and deal with its liabilities.

    An extra part of debentures is the way that organizations can change over this resource of fixed pay as factor pay, utilizing the figure subjected debentures; where the organization trade obligation with shares of the firm in the event of liquidation or rearrangement of the firm.

    Difference between the Debentures and Shares Market Image
    Difference between the Debentures and Shares Market; Image from Pixabay.

    Difference between the Debentures and Shares Market by Comparison Chart or Table:

    The compare and contrast essay topics; The following difference below is by Comparison Chart or Table;

    BASIS FOR COMPARISON SHARES MARKET DEBENTURES MARKET
    Means They own funds from the company, call share. They borrow funds from the company, call debenture.
    Who they are? Representing the capital of the business. Represent the debt of the business.
    Holder The holder of shares calls a shareholder. The holder of debentures calls a debenture holder.
    Status as Holders in Company They are Owners They are Creditors
    Form of Return They get the dividend. In there they get the interest.
    Payment of return A dividend can pay only out of profits. Interest can pay even if there is no profit.
    Allowable deduction When an appropriation of profit and so it does not allows as a deduction. In there they are a business expense and so it allows a deduction from profit.
    Security for payment No security pay option Yes, therein have a pay security option
    Voting Rights The holders have the right of voting. In there the holders do not have any voting rights.
    Conversion This is not to convert into debentures. It converts into shares.
    Repayment in the event of winding up It repays after the payment of all the liabilities. They get priority over shares, and so they repay before shares issue.
    Quantum Dividend in there an appropriation of profit. They get Interested in a charge against profit.
    Trust Deed They have not a trust deed execute in the case of shares. When they issue to the public, a trust deed must execute.

    The main 12 key points difference between Shares and Debentures Market:

    The compare and contrast essay topics; Coming up next are the significant 12 contrast or difference between the Shares and Debentures market:

    • The holder of shares knows as an investor while the holder of debentures knows as a debenture holder.
    • Offer is the capital of the organization, yet Debenture is the obligation of the organization.
    • The shares speak to responsibility for investors in the organization. Then again, debentures speak to the obligation of the organization.
    • The pay procured on shares is the profit, yet the pay acquired on debentures is interest.
    • The installment of profits can make uniquely out of the current benefits of the business and not something else. Not at all like the premium on debentures which must pay by the organization to debenture holders, regardless of the organization has acquired benefit or not.
    • A profit isn’t an operational expense and so isn’t permitted as a derivation. In actuality, interest on debentures is a cost and so permitted as a derivation.
    • In case of wrapping up, debentures get the need for reimbursement over shares.
    • Shares can’t be changed over rather than debentures are convertible.
    • There is no security charge made for the installment of shares. Alternately, a security charge makes for the installment of debentures.
    • A trust deed isn’t executed on account of shares while a trust deed is executed when the debentures are given to general society.
    • In contrast to debenture holders, investors have to cast a ballot right.
    • Also, Shares gave at a rebate subject to some legitimate consistency. While Debentures can give at a markdown with no lawful consistency.

    The main 10 key points difference between Preference Shares and Debentures:

    The compare and contrast essay topics; Coming up next are the significant 10 contrast or difference between the Preference Shares and Debentures:

    1. Preference shares are value-based capital through debentures are obligation reserves.
    2. Forgiving preference shares, the organizations need to weaken their some extent of proprietorship while to give debentures any security is required.
    3. Also, Preference shares are the wellspring of long-haul monetary prerequisites; while debentures are the wellsprings of short to medium-term money.
    4. Preference investors are the halfway proprietors of the organization; while, debenture holders are loan bosses of the organization.
    5. Profits for preference shares deliver regarding profit, then again, if there should be an occurrence of debentures it pays as interest.
    6. Preference shares unstable or not sponsor up by any guarantee though debentures gave by making a charge on the organization’s resources, thus made sure about.
    7. Also, Debenture holders procure a fixed loan fee until their capital sum puts resources into the organization (till the development period); then again, Preference investors acquire a fixed pace of profit till the organization’s presence.
    8. Preference investors have an occasion to make capital increase because of the cost development of offer, over the long haul, debenture holders, then again, don’t have such a chance.
    9. Also, Preference shares can’t change over to debentures through debenture can change over to value shares.
    10. Preference shares are might reclaim (non-redeemable) till liquidation or ending up of the organization; while debenture must recover after a specified time-frame.

    Summary:

    You may definitely find your answer above right?

    1. What does mean Debentures?
    2. Explain the Debentures’ meaning and definition.
    3. What are the kinds or types of Debentures?
    4. What does mean Shares?
    5. Explain the Shares’ meaning and definition.
    6. What are the kinds or types of Shares?
    7. What is the Difference between the Debentures and Shares?
    8. The Difference between the Debentures market and the Shares market.
    9. Difference between the Debentures and Preference Shares.
  • What are the Financial Problems of Merger and Consolidation?

    What are the Financial Problems of Merger and Consolidation?

    Financial Problems of Merger and Consolidation: Entrepreneurial Marketing in a merger is when two or more corporations come together but only one of the corporation or policy or contract stays exists afterward. For example, if company X and Company Y merge to and only company X or Y exists afterward. While In consolidation, when two or more corporations come together to form a completely new corporation or policy or contract.

    Here the expiration of Financial Problems of Merger and Consolidation.

    After merging and consolidation, companies face several financial problems. The liquidity of the companies has to establish afresh. The merging and consolidating companies pursue their financial reports or policies when they are working independently. Some adjustments are required to make in financial planning and policies so that consolidated efforts may enable to improve short term and long term finances of the companies.

    Merger and Consolidation both are different from each other but some Financial Problems of Merger and Consolidation, the companies are following discussed below;

    Cash management:

    The Liquidity Problem is the usual problem faced by acquiring companies. Before merger and consolidation, the companies had their method of payments, cash behavior pattern, and arrangements with financial institutions. The cash pattern will have to adjust according to the present needs of the business.

    Credit policy:

    The credit policies of the companies are unified so that the same terms and conditions may be applied to the customers. If the market areas of the companies are different, then the same old policies may be followed. The problem will arise only when operating areas of the companies are the same and the same credit policy will have to pursue.

    Financial planning:

    The companies may be following different financial plans before merger and consolidation. After merger and consolidation, unified financial planning follows. The divergent financial control will unify to suit the needs of acquiring concerns. The methods of budgeting and financial controls may also be different.

    Dividend policy:

    The companies may be following different policies for paying dividends. The stockholders will be expecting higher rates of the dividend after merger and consolidation on the belief that financial position; and, earning capacity have increased after combining the resources of the companies. This is a ticklish problem and management will have to devise an acceptable pay-out policy. In the earlier stages of merger and consolidation, it may be difficult to maintain even the old rates of dividends.

    Depreciation policy:

    The companies follow different depreciation policies. The method of depreciation, the rate of depreciation, and the amount to take to revenue accounts will be different. After merging and consolidation, the first thing to decide will be different. After merger and consolidation, the first thing to decide will be about the depreciable and non-depreciable assets. The second will be about the rate of depreciation. Different assets will be in different stages of use and appropriate amounts of depreciation should decide.

    Here is the Mobile App for maintaining your Financial Problems.

    What they are? It calls Khata Book, you may download it on Google Play Store or iOS store. Khata Book (Ledger Account Book) – Replace your traditional debit account book (Udhar Bahi Khata) by a new digital ledger cash book. It is 100% Free, Safe, and Secure for all types of businesses to maintain their customer’s accounts. It is Tally for mobile. Shop owners can use the app to record credit (Jama) and debit (Udhaar) transactions for their trusted customers.

    Financial Problems of Merger and Consolidation Image
    What are the Financial Problems of Merger and Consolidation? Image from Pixabay.

    Differences between Statutory Merger and Consolidation:

    The following differences below are;

    1. In a statutory merger, one of the two parties retains its entity and another party merges into the other by losing its entity. While statutory consolidation, when two parties come together, both of their legal entities cease to exist, and a new identity creates.
    2. In a merger, a union whereby one or more existing corporations and absorbed by another corporation that survives and continues the combined business. While consolidation, a union of two or more existing corporations to form a new corporation called the consolidated corporation
    3. In a merger, the assets and liabilities of the merging company (one that loses its identity after the merger) become the property of the acquiring company (one that retains its identity intact even after the merger). While consolidation, the assets, and liabilities of both of the companies become the assets and liabilities of the larger company that forms after consolidation.
    4. In a merger, all constituent corporations, except the surviving corporation, dissolve. While consolidation, all constituent corporations dissolve and absorb by the new consolidated enterprise.
    5. In both mergers and consolidation, the federal and state government can stop the process of merger or consolidation by using anti-trust laws; if they find that by merger or consolidation; a company (new or old) gets an unfair advantage over others or can affect the market by becoming a monopoly.
  • Difference between Equity instruments and Debt instruments

    Difference between Equity instruments and Debt instruments

    Equity instruments vs Debt instruments; Equity instruments allow a company to raise money without incurring debt. While Debt instruments are assets that require a fixed payment to the holder. Both equity and debt investments can deliver good returns, they have differences with which you should be aware. Debt investments, such as bonds and mortgages, specify fixed payments, including interest, to the investor.

    What is the difference between Equity instruments vs Debt instruments? with Comparison;

    The equity and debt investments argument has been ongoing in the investment world for years. Equity investments, such as stock, are securities that come with a “claim” on the earnings and/or assets of the corporation. Common stock, as traded on the New York or other stock exchanges, is the most popular equity investment.

    As an investor, we should know the ins and outs of the different financial assets and then choose that which suits our goals. So, Capital is the basic requirement of every business organization, to fulfill the long term and short term financial needs. To raise capital, an enterprise either used owned sources or borrowed ones. Owned capital can be in the form of equity, whereas borrowed capital refers to the company’s owed funds or say debt. The equity and debt investments come with different high returns and risk levels.

    Meaning and definition of Equity instruments:

    Equity instruments (stock or share) allows the investor to buy an ownership stake in the company. Equity refers to the Net Worth of the company. It is the source of permanent capital. It is the owner’s funds which are divided into some shares. Fortunes can make or lost with equity investments. Any stock market can be volatile, with rapid changes in share values.

    Often, these wide price swings do not base on the solidity of the organization backing them up but on political, social, or governmental issues in the home country of the corporation. Equity investments are a classic example of taking on a higher risk of loss in return for potentially higher rewards. Equity instruments are papers that demonstrate an ownership interest in a business.

    More things;

    Unlike debt instruments, equity instruments cede ownership, and some control, of a business to investors who provide private capital to a business. Stocks are equity instruments. Two main types of stocks exist. The first type prefers stock. The second type is common stock. Businesses issue stock in shares and, typically, the greater the amount of shares a single investor possesses, the greater the ownership interest in the company.

    Equity holders incur greater risk than debt holders because equity holders do not enjoy priority in a bankruptcy proceeding. However, equity holders earn greater returns if the business succeeds. Where credit instruments provide set payments over a set period, equity instruments typically provide a variable return based on the business’ success. Therefore, if the business does extraordinarily well, equity investors may see a much healthier return than creditors.

    Meaning and definition of Debt Instruments:

    A debt instrument is an electronic obligation or any paper that permits an issuing party to raise funds by assuring it to pay back a lender by the terms and conditions of a contract. Debt investments tend to be less risky than equity investments but usually offer a lower but more consistent return.

    Money raised by the company in the form of borrowed capital is known as Debt. It represents that the company owes money to another person or entity. They are less volatile than common stocks, with fewer highs and lows than the stock market.

    The bond and mortgage market historically experiences fewer price changes, for better or worse, than stocks. Also, should a corporation be liquidated, bondholders are paid first. Mortgage investments, like other debt instruments, come with stated interest rates and are backed up by real estate collateral.

    Debt instruments are the instruments that are used by the companies to provide finance (short term or long term) for their growth, investments, and future planning and come with an agreement to repay the same within the stipulated period.

    More thing;

    Long-term instruments include debentures, bonds, long-term loans from the financial institutions, GDRs from foreign investors. Short-term instruments include working capital loans, short-term loans from financial instruments.

    Debt instruments are typically agreements where a financial institution agrees to loan borrower money in exchange for set payments of principal and interest over a set period. Debt instruments typically involve loans, mortgages, leases, notes, and bonds.

    Anything that obliges a borrower to make payments based on a contractual arrangement is a debt instrument. Debt instruments can be secured or unsecured. Secured debt involves placing an underlying asset as security for the loan where, through the legal process, the lender can take possession of the underlying asset if the borrower stops making payments.

    Unsecured debt base only on the borrower’s promise to pay. If business files for bankruptcy, creditors take priority over investors. Within the creditors, secured creditors take priority over unsecured creditors.

    Comparison of Equity instruments and Debt instruments:

    The following 6 comparisons of equity vs debt instruments below are;

    1] Meaning:

    Equity instruments allow a company to raise money without incurring debt, and they have used the holders to give money in exchange for a portion of the company. It funds raised by the company by issuing shares knows as Equity.

    While Debt instruments are assets that require a fixed payment to the holder, they are mortgages and government bonds. It funds owed by the company towards another party knows as Debt.

    2] Nature:

    Equity instruments are the nature of return Variable and irregular, In contrast to the return on equity calls a dividend which is an appropriation of profit.

    While Debt instruments are the nature of return Fixed and regular, and Return on debt knows as interest which is a charge against profit.

    Equity investments offer an ownership position in the company. Owning a stock makes the investor an owner of the organization. The percentage of ownership depends on the number of shares owned as compared with the total number of shares issued by the corporation. Also, the number of fund shares is its own funds.

    While Debt instruments, whatever they may call, are corporate borrowing. Instead of procuring a straight commercial bank loan, the organization “borrows” from a variety of investors. This is why debt instruments, such as bonds, come with a stated interest rate, as a loan would. Also, the number of fund shares is the borrow funds.

    4] Types:

    Equity instruments are the types of investment in Shares and Stocks. While Debt instruments are the types of investment in Term loans, Debentures, Bonds, etc.

    5] Goals and Risk:

    Depending on your investment goals, these differences may strongly influence your preferences. All investments come with risk. However, debt instruments offer less risk than equity investments.

    Your investing targets may favor equity investments if you’re seeking striking growth or profit potential. Conversely, you might focus on debt instruments when you prefer consistent income and less risk. Tailor your investment actions to match your objectives and risk tolerance.

    Equity instruments are the types of investment in the long term, so that high risk. While Debt instruments are the types of investment in the comparatively short term, so that low and less risk.

    FAQs

    1. What are equity instruments?

    Equity instruments are securities that provide ownership stakes in a company. They distribute the company’s net worth among shareholders and can include stocks or shares. Investors earn returns based on the company’s performance and may benefit from dividends or capital appreciation.

    2. What are debt instruments?

    Debt instruments are financial assets that represent a loan made by an investor to a borrower. This can be in the form of bonds, mortgages, or other contractual agreements, where the borrower acknowledges a debt and promises to pay interest and repay the principal at specified intervals.

    3. How do equity instruments generate returns?

    Equity instruments typically generate returns through dividends (profit distributions) and capital gains when the stock price increases. Returns can be variable and depend on the company’s financial performance.

    4. How do debt instruments generate returns?

    Debt instruments generate returns primarily through fixed interest payments made to the investor at regular intervals until the instrument matures. They tend to offer more consistent but typically lower returns compared to equity investments.

    5. What are the main differences between equity and debt instruments?

    The primary differences include:

    • Ownership vs. Obligation: Equity instruments provide ownership stakes, while debt instruments represent obligations to repay borrowed funds.
    • Return Nature: Equity returns are variable and depend on company performance; debt returns are fixed and regular.
    • Risk Levels: Equity investments are generally riskier, offering higher potential returns, whereas debt instruments are considered safer but with lower returns.

    6. Which is riskier: equity or debt?

    Equity instruments are generally considered riskier than debt instruments. While equity has the potential for higher returns, investors may also face greater losses if the company does poorly. Conversely, debt investments usually carry lower risks, as they provide fixed payments and priority in the case of bankruptcy.

    7. Can an investor hold both equity and debt instruments?

    Yes, an investor can hold both types of investments as part of a diversified portfolio. This strategy can help balance risk and return by combining the growth potential of equities with the stability of debt securities.

    8. How does one choose between equity and debt investments?

    When choosing between equity and debt investments, consider your financial goals, risk tolerance, and investment horizon. Equity may be more suitable for those seeking capital growth, while debt may appeal to those looking for steady income with lower risk.

    9. What are some common equity instruments?

    Common equity instruments include common stocks, preferred stocks, and real estate investment trusts (REITs).

    10. What are some common debt instruments?

    Common debt instruments include bonds, debentures, loans, and mortgages.

    11. What happens in bankruptcy for equity and debt holders?

    In a bankruptcy proceeding, debt holders are prioritized over equity holders. This means that debt investors will be paid back before equity investors receive any returns, if at all. Equity holders may lose their investment, whereas debt holders may recover a portion of their lent capital depending on the company’s liquidated assets.

  • Difference between Delegation and Decentralization

    Difference between Delegation and Decentralization

    Delegation and Decentralization: They are closely related concepts. Decentralization is an extension of delegation. It is wider in scope and consequence than delegation. Szilagyi writes, “Centralization and decentralization should not be viewed as two separate concepts, but opposite ends of a single continuum of delegation.” The primary difference between Delegation and Decentralization: Delegation is the process of assigning authority to others. This process of delegating power from higher to lower levels within organizations results in decentralization. Thus delegation can under­stand as a means of affecting decentralization.

    What is the Difference between Delegation and Decentralization in Organization Function?

    In an organization, it is not possible for one to solely perform all the tasks and take all the decisions. Due to this, their authority came into existence. Generally, there is some confusion regarding the meanings of both because of the fact the process in respect of both is almost the same.

    Some people consider them synonyms but that is wrong. Their difference can understand with the help of an example. Suppose, a general manager allows the manager of the department of production to appoint employees with a pay range of less than dollar 500 in his department, it will call delegation.

    On the contrary, if this authority of appointing the employees is given to the managers of all the departments, it will call decentralization. If the departmental manager assigns this authority to a sub-manager of his department, it will be the extension of decentralization. In this reference, it is said that if we delegate the authority, we multiply it by two, if we decentralize it, we multiply it by many.

    Meaning of Delegation and Decentralization:

    Delegation means the passing of authority by one person who is in a superior position to someone else who is subordinate to him. It is the downward assignment of authority, whereby the manager allocates work among subordinates. On the other hand, Decentralization refers to the dispersal of powers by the top-level management to the other level management. It is the systematic transfer of powers and responsibility, throughout the corporate ladder. It elucidates how the power to take decisions is distributed in the organizational hierarchy.

    Table of Difference:

    The following difference below are;

    Delegation and Decentralization - Table of Difference
    Delegation and Decentralization – Table of Difference.

  • Corporate Banking: Meaning Characteristics Importance Advantages

    Corporate Banking: Meaning Characteristics Importance Advantages

    What is Corporate Banking? Corporate banking is a significant division of commercial banks. This is a relatively new concept that has been adopted by many banks. This article explains Corporate Banking with its topic of Meaning, Definition, Characteristics, Bank list, Difference, Importance, and Advantages. Corporate banking is a subset of business banking that involves a range of banking services that offer only to corporates. The services include the provision of credit, cash management facilities, etc. Many business owners may go as far as using a different bank for their corporate account to ensure funds are not being muddled up. Furthermore, most companies require that you open a corporate account for the value proposition of your business to become valid.

    Here are explain Corporate Banking: Meaning, Definition, Characteristics, Bank list, Difference, Importance, and Advantages.

    Corporate banking also refers to business banking that identifies with the items and services that include loaning or credits between the bank and the bank’s client. The corporate banking segment of banks typically serves a diverse clientele, ranging from small-to-mid-sized local businesses with a few million in revenues to large conglomerates with billions in sales and offices across the country.

    Definition of Corporate Banking:

    By ICICI Bank, “They offer corporates a wide range of products and services, the technologies to leverage them anytime, anywhere and the expertise to customize them to client-specific requirements. From cash management to corporate finance, from forex to acquisition financing; they provide you with end-to-end services for all your banking needs.”

    According to my accounting course as;

    “Corporate banking is the tailor-made financial services that financial institutions offer to corporations in the context of corporate financing and raise capital.”

    What is the definition of corporate banking? Typically, corporate banking is a specialized division of a commercial bank that offers various banking solutions; such as credit management, asset management, cash management, and underwriting to large corporations as well as to small and medium-sized enterprises (SMEs). Corporate banks might be offering similar services to retail banks; however, the major distinction is the clientele and the amount of money and profit involved.

    Characteristics of Corporate Banking:

    The following characteristics of corporate banking below are;

    1. Clientele or Customer: A bank’s business banking unit usually serves small to middle-sized businesses and large conglomerates.
    2. Authority: A company’s corporate banking accounts can only be opened after obtaining consensus from the board of directors of the company. It means that they must authorize by an official vote or a corporate resolution. As well as, the company’s treasurer usually opens corporate accounts.
    3. Liability: Since companies are recognized as separate legal entities under the law, all contents of corporate accounts are the property of the company and not of the individual board members. It means that there is a certain degree of independence in corporate accounts. It also indicates that the personal creditors of the board of directors are not entitled to the contents of the corporate account of a company.
    4. Credit rating: The conduct or functioning of the corporate account forms part of the credit history of the company. It affects the valuation and share prices of the company, the interest rates applicable to loans extended to the company, etc.
    5. Bankers: Corporate banking requires a degree of expertise in the industry. Thus, corporate bankers are extremely well paid. JP Morgan Chase, Bank of America Merrill Lynch, and Goldman Sachs are some of the largest commercial banks in the world.

    Bank list for Commercial and Corporate Banking in India:

    The following bank list by NSDL below are;

    Bank Name (A-Z): Allahabad Bank, Andhra Bank, Axis Bank, Bank of Bahrain and Kuwait, Bank of Baroda – Corporate Banking, Bank of Baroda – Retail Banking, Bank of India, Bank of Maharashtra, Canara Bank, Central Bank of India, City Union Bank, Corporation Bank, Deutsche Bank, Development Credit Bank, Dhanlaxmi Bank, Federal Bank, ICICI Bank, IDBI Bank, Indian Bank, Indian Overseas Bank, IndusInd Bank, ING Vysya Bank, Jammu & Kashmir Bank, Karnataka Bank Ltd, Karur Vysya Bank, Kotak Bank, Laxmi Vilas Bank, Oriental Bank of Commerce, Punjab National Bank – Corporate Banking, Punjab National Bank – Retail Banking, Punjab & Sind Bank, Shamrao Vitthal Co-operative Bank, South Indian Bank, State Bank of Bikaner & Jaipur, State Bank of Hyderabad, State Bank of India, State Bank of Mysore, State Bank of Patiala, State Bank of Travancore, Syndicate Bank, Tamilnad Mercantile Bank Ltd., UCO Bank, Union Bank of India, United Bank of India, Vijaya Bank, and Yes Bank Ltd…

    The Difference Between Retail Banking And Corporate Banking:

    Retail Banking and Corporate Banking make up the two very essential components of the field of finance. While retail banking mainly deals with individual customers, corporate banking focuses more on the corporate world. Apart from these, there are quite a few other differences between the two that will highlight in this article. The following difference between Retail and Corporate Banking provided and referenced by medium.com below are;

    Very popularly known as consumer banking or personal banking, retail banking consider the more visible face of banking to the general public. The most vibrant character of this branch is the presence of numerous bank branches all over the major cities. Usually, there is no, one specific bank which only focuses on catering to the needs of the general public, usually, banks have branches that specialize in this field. Whereas on the other hand, corporate banking stands very popularly known as, business banking. It is meant to highlight that aspect of banking, which solely deals with corporate customers. This type of banking is popularly known to be the key profit center, for most banks in the USA as well as other nations.

    In terms of products and services, both branches differ widely. While on one hand, retail banking offers several services like checking and savings accounts, certificates of deposit and Guaranteed Investment Certificates, Mortgages on residential as well as investment properties, automobile financing, credit cards, lines of credit, foreign currency, and remittance services. Apart from these services, there are a few more targeted services, that stand generally offered through another division; or, an affiliate of the bank, stock brokerage, Insurance, Wealth Management, Private Banking, and so on.

    Continually;

    On the other hand, the corporate banking segment of the banking sector usually says to deal with clients on a varied scale. Here the clients usually range from small to mid-sized local business firms, to huge conglomerates with billions in sales. It is the commercial banks, which usually offer a range of corporate banking products and services like loans and other credit products, which is by far the biggest area of business for corporate banks. Other services include treasury and cash management services, equipment lending, treasury and cash management, commercial real estate, trade finance, employer services, and so on.

    While these two branches may have their differences, they are equally important for the economy, both on a domestic as well as a global level. Retail Banking usually is responsible for bringing in, large customer deposits, that enable banks to make loans to their retail and business customers. Whereas on the other hand, it is the commercial banks, which help in making the loans to enable businesses to grow as well as hire more people, thus in a way contributing to the economy of any particular country. Despite their differences, both of these fields stand highly preferred as career options, by several finance aspirants. To get their dream career and jobs, a lot of candidates go a step ahead and seek to get industry-relevant education, by opting for several certification programs, offered by Imarticus Learning.

    Need and Importance of Corporate Banking:

    The following need and importance of corporate banking below are;

    Safe Accounting:

    As a start-up, it is vital to account for every naira to effectively help you track your business activities and analyze what expenses to cut down on, what areas need more investing; what revenue stream yields the highest income, and so on. It is also important to keep all invoices and receipts, to account for every business transaction carried out using the corporate account.

    Professionalism:

    How your business funds manage, directly impacts the corporate image of your company. If you are writing a check to a supplier or receiving money from a customer, checks or deposits need to address to your business name. What is the IT Professionalism in Information Technology Essay? Additionally, it will be a hassle managing the inflow or outflow of cash; if your business and personal finances do not keep separate.

    Managing Expansion:

    With a business account, you may choose to allocate money to pay employees as your staff increases in size. You can also use your corporate account to partner with other businesses, or use it for mass payments. Whatever the case is, it is convenient to transact transparently to monitor growth in your venture.

    Loan Accessibility:

    As a start-up, potential investors must perceive that your venture is running smoothly and effectively. Whether it is a bank loan or a private equity investment you are aiming for; opening a corporate account will increase your chances of accessing loans. This is because your investors can better track how the business has been running to date; before making any long-term commitments.

    Tax Audit:

    When your start-up becomes operational; there is a need to open a corporate account to keep your accounting transparent for external auditing. It will determine whether or not you should be paying taxes to the government. It will also help auditors to determine the precise amount of taxes your business should be paying; based on the net profit being generated by your company.

    Bills of Exchange:

    Companies often use bills of exchange for accounts receivables and account payables purposes. For instance, if company A agrees to pay company B at a later date, they could sign a bill of exchange for the same. Company A can then take this bill of exchange to the bank to get the bill discounted.

    Corporate Banking Meaning Characteristics Importance and Advantages Image
    Corporate Banking: Meaning, Characteristics, Importance, and Advantages, Image from Pixabay.

    Advantages of Corporate Banking:

    The following advantages of corporate banking below are;

    It is a segment of financial services necessary for corporations, like funding, capital structure, allocation of finances, and more. It is largely related to financial planning and how finances must be implemented at various stages of the business. The basic function of a bank is giving credit to its customers. It doesn’t just end there. It is the process that covers various stages from granting credit to its recovery.

    Credit management also includes setting up the terms and conditions; the policy of agreement, analysis of risk factors, and other related functions. In simple words, this segment takes care of the money owned by corporations or individuals. This segment of corporate banking directs and decides where to invest the money. Management of the cash flow of the corporates is one of the key functions of corporate banks.

    This segment ensures efficient collection, distribution, and investment of cash in an organization. It ensures efficient implementation of resources and various other financial operations. Also, Corporate banking involves a specialized loan department that oversees the process of granting loans to the corporation; compliance with the credit regulation policies, and other management-related functions. The loan department of corporate banks must ensure that they must maintain the bank’s profit.

    Reference:

    • www.myaccountingcourse.com/accounting-dictionary/corporate-banking
    • corporatefinanceinstitute.com/resources/knowledge/finance/corporate-banking/
    • tin.tin.nsdl.com/tan/Bank.html
    • medium.com/@imarticus/whats-the-difference-between-retail-banking-and-corporate-banking-5bb1e4da9e06
    • www.234finance.com/the-importance-of-a-corporate-bank-account/
    • www.enterpriseedges.com/corporate-banking-development-of-economy
  • Diminishing or Reducing Balance Method of Depreciation

    Diminishing or Reducing Balance Method of Depreciation

    Diminishing or Reducing Balance Method; Under this method, depreciation calculates at a certain percentage each year on the balance of the asset which is brought forward from the previous year. The article from the calculation of Depreciation methods, the chapter of Depreciation in the Accounting Book. The amount of depreciation charged on each period is not fixed but it goes on decreasing gradually as the beginning balance of the asset in each year will reduce. Thus, the amount of depreciation becomes higher at the earlier periods and becomes gradually lower in subsequent periods, when repairs and maintenance charges increase gradually.

    Diminishing or Reducing Balance Method of Depreciation: Meaning, Definition, Advantages, Disadvantages, and Differences.

    What is the Diminishing or Reducing Balance Method? Reducing Balance Method, also known as declining balance depreciation or diminishing balance depreciation, the depreciation charges at a fixed rate like the straight-line method (also known as fixed installment method or straight-line depreciation). However, unlike the fixed installment method, the rate percent not calculates the cost of assets but on the book value of the asset, which in turn calculates by subtracting depreciation from its cost.

    Under reducing-balance, the rate of depreciation is deliberately calculated to be higher, so most of the benefits of deducting the depreciation expense are seen early on. Typically, the percentages used are 200% (the double-declining balance formula) and 150%. Because you’re subtracting a different amount every year, you can’t simply repeat the same calculation each year, as you can with the straight-line method. As mentioned earlier, this approach is particularly useful for a property whose value will decrease rapidly after you acquire it.

    Definition of Diminishing or Reducing Balance Method:

    Diminishing Balance Method of Depreciation also called as reducing balance method where assets depreciate at a higher rate in the initial years than in the subsequent years. Under this method, a constant rate of depreciation applies to an asset’s (declining) book value each year. This method results in accelerated depreciation and results in higher depreciation values in the early years of the life of an asset.

    The book value of an asset obtains by deducting depreciation from its cost. The book value of assets gradually reduces on account of charging depreciation. Since the depreciation rate percent applies to reduce the balance of assets, this method calls reducing balance method or diminishing balance method.

    Under the fixed installment method the amount of annual depreciation remains the same but under reducing balance method the amount of annual depreciation gradually reduces. This method is especially suitable for assets with long life, e.g., plant and machinery, furniture, motor car, etc.

    Under this method, the real cost of using an asset is the depreciation and repair expenses so this method gives better results because in the early years when repair expenses are less the depreciation is more. As the asset gets older repair charges on its increase and the number of depreciation decreases. So the combined effect of both these costs remains almost constant on the profit and loss of each year.

    Advantages of Diminishing or Reducing Balance Method:

    The following advantages below are;

    • It is a simple and easy method.
    • Every year, there is an equal burden for using the asset. This is because depreciation goes on decreasing every year whereas the cost of repairs increases.
    • The obsolescence problem gives due care since the major part of the depreciation charges in earlier years and the management may find it easy to replace the asset.
    • All items including additions are added together and depreciated at the same rate.
    • Income tax authorities recognize this method.

    Disadvantages of Diminishing or Reducing Balance Method:

    The following disadvantages below are;

    • It is difficult to determine an appropriate rate of depreciation.
    • The value of the asset cannot be brought down to zero.
    • It results in lower Net Income during the initial years of an asset as Depreciation is higher initially.
    • It is not an ideal method for those assets which don’t lose their value quickly like Equipment and Machinery.
    • Depreciation is neither based on the use of the asset nor distributed evenly throughout the useful life of the asset.

    Diminishing or Reducing Balance Method of Depreciation Image
    Diminishing or Reducing Balance Method of Depreciation, Image from Pixabay.

    Differences between the Straight Line Method and Diminishing or Reducing Balance Method:

    Key differences between the straight-line method and reducing balance method enumerate as following;

    Differences in Straight-line method:

    • Meaning; Under this method, the cost of an asset uniformly fixed divides into the number of years of the useful life of an asset.
    • The rate of depreciation and the amount remain constant.
    • The cost of assets each year forms the basis of determining the depreciation percentage.
    • As the asset ages, the cost of its repair goes up. But as mentioned in point number one, the depreciation amount remains unchanged. This diminishes annual profit.
    • The value of an asset at the end of its life is zero.
    • The computation of depreciation under the straight-line method is relatively easy and straightforward.
    • Straight Line Depreciation Method is ideal for those assets which require negligible maintenance expenses and are not prone to technological obsolescence.

    Differences in Diminishing or Reducing balance method:

    • Meaning; Under this method, a constant rate applies over the assets declining book value (Cost minus Accumulated Depreciation).
    • The rate of depreciation remains unchanged but the amount gradually decreases.
    • The book value of assets forms the basis of determining depreciation percentage.
    • As the asset ages, the cost of its repair goes up, but so does the depreciation amount. These two balance each other and hence there is little or no effect on annual profit/loss.
    • The value of an asset at the end of its life is never zero.
    • Computation of depreciation under reducing balancing method is always possible, but it comes with its share of complexities.
    • Declining Balance Method is appropriate for assets that require more repairs and maintenance expenses as they get older and also for those assets which are prone to technological obsolescence as it results in higher depreciation during the initial years of an asset’s life.

    Differences between the Straight Line Method and Diminishing or Reducing Balance Method Image
    Differences between the Straight Line Method and Diminishing or Reducing Balance Method.

  • Difference between Average and Super profit

    Difference between Average and Super profit

    Average and Super Profits; The valuation of goodwill depends upon assumptions made by the valuer. Meaning; The average profit is the average of the profits in the past few years; Or, super profit is an excess of average profit over normal profit. This article explains the difference between Average and Super profit; Methods to adopt in the valuation of goodwill would depend on the circumstances of each case and are often based on the customs of the trade.

    The distinction/difference between Average profit and Super profit.

    Methods of Goodwill Valuation; Goodwill is the value of the reputation of a firm built over time concerning the expected future profits over and above the normal profits. Also, Goodwill is an intangible real asset which cannot see or felt but exists in reality and can buy and sell. In partnership, goodwill valuation is very important. Thus, we will here discuss the various methods of Goodwill Valuation.

    The various methods that can adapt to the valuation of goodwill are the following:

    • Average Profit Method.
    • Super Profit Method.

    Now, explain each one;

    Average Profit:

    Average profit is the average of all the agreed profits of past years. It calculates by dividing the total profits by the number of years. This is the most common method of calculating goodwill.

    Average Profits = Total Profits/Number of years

    A buyer always wants to estimate the future profits of the business. Also, Future profits always depend upon the performance of the business in the past. Past profits indicate what profits are likely to accrue in the future. Therefore, past profits are averaged.

    The first step under this method is the calculation of average profit based on the past few years’ profits. As well as, Past profit adjust in respect of any abnormal items of profit or loss which may affect future profit. Also, Average profit may be based on a simple average or weighted average.

    If profits are constant, equal weight-age may give in calculating the average profits i.e., the simple average may calculate. However, if the trend shows increasing or decreasing profit, it is necessary to give more weight-age to the profits of recent years.

    Types of Average Profits Method:
    1. Simple Average: Under this method, the goodwill values at the agreed number of years of the purchase of the average profits of the past years.
    2. Simple Average: Under this method, the goodwill values at the agreed number of years of the purchase of the average profits of the past years.

    Super Profit:

    This Profit is the excess of average profit over the normal profit. It shows the exceptional ability of the firm to earn more profits in comparison to other firms in the industry.

    Super Profits = Actual Profits – Normal Profits

    It calculates by deducting the normal profits from average profits. Super profit is the excess of estimated future maintainable profits over normal profits. Super profit represents the difference between the average profit earned by the business and the normal profit i.e., the firm’s anticipated excess earnings. As such, if there is no anticipated excess earning over normal earnings, there will be no goodwill.

    An enterprise may possess some advantages which enable it to earn extra profits over and above the normal profit that would earn if the capital of the business was invested in some other business with similar risks. Also, the goodwill under this method ascertains by multiplying the super-profits by a certain number of year’s purchases.

    Types of Super Profits Method:
    • The Number of Years Purchase Method: Under this method, the goodwill values at the agreed number of years’ purchase of the super-profits of the firm.
    • Annuity Method: This method considers the time value of money. Here, we consider the discounted value of the super profit.

    Difference between Average and Super profit table
    Difference between Average and Super profit table.

    References:

    1. commerceiets.com/average-profit-vs-super-profit/
    2. www.toppr.com/guides/principles-and-practice-of-accounting/treatment-of-goodwill/methods-of-goodwill-valuation/
    3. www.yourarticlelibrary.com/accounting/goodwill/accounting-procedure-for-valuation-of-goodwill-4-methods/57243