Tag: Introduction

  • What does Income Tax mean? Introduction, Meaning, and Definition

    What does Income Tax mean? Introduction, Meaning, and Definition…Waiting for best or correct answers.

  • What does Cash Flow Statements mean? Introduction, Meaning, and Definition

    What does Cash Flow Statements mean? Introduction, Meaning, and Definition

    Cash Flow Statements; In financial accounting, a cash flow statement, also known as the statement of cash flows, is a financial statement. That shows how changes in balance sheet accounts and income affect cash and cash equivalents, and breaks the analysis down to operating, investing, and financing activities. What does Cash Flow Statements mean? Introduction, Meaning, and Definition; Essentially, the cash flow statement concerns with the flow of cash in and out of the business. The statement captures both the current operating results and the accompanying changes in the balance sheet.

    Know and Understand the concept of Cash Flow Statements with their Introduction, Meaning, and Definition.

    The cash flow statement was previously known as the flow of funds statement. The cash flow statement reflects a firm’s liquidity. The balance sheet is a snapshot of a firm’s financial resources and obligations at a single point in time. And, the income statement summarizes a firm’s financial transactions over an interval of time. These two financial statements reflect the accrual basis accounting used by firms to match revenues with the expenses associated with generating those revenues.

    The cash flow statement includes only inflows and outflows of cash and cash equivalents. It excludes transactions that do not directly affect cash receipts and payments. These noncash transactions include depreciation or write-offs on bad debts or credit losses to name a few. The cash flow statement is a cash basis report on three types of financial activities: operating activities, investing activities, and financing activities. Noncash activities are usually reporting in footnotes. As well as know more; Cash Flow Statement: Explanation, Classification, and Objectives.

    #Introduction to Cash Flow Statements:

    Did you know? You can earn our Financial Statements Certificate of Achievement when you join PRO Plus. To help you master this topic and earn your certificate, you will also receive lifetime access to our premium financial statements materials. These include our video seminar, visual tutorial, flashcards, cheat sheet, quick tests, a quick test with coaching, business forms, and more. The official name for the cash flow statement is the statement of cash flows. The statement of cash flows is one of the main financial statements.

    #Meaning of Cash Flow Statements:

    Cash Flow Statement is a statement which describes the inflows (sources) and outflows (uses) of cash and cash equivalents in an enterprise during a specified period. Such a statement enumerates the net effects of various business transactions on cash. And, its equivalents and takes into account receipts and disbursements of cash.

    A cash flow statement summarizes the causes of changes in the cash position of a business enterprise between dates of two balance sheets. According to AS-3 (Revised), an enterprise should prepare a cash flow statement and should present it for each period for which financial statements are prepared.

    Extra Knowledge:

    The terms cash, cash equivalents, and cash flows are used in this statement with the following knowledge of meaning below are:

    • Cash comprises cash on hand and demand deposits with banks.
    • The cash equivalents are short term, highly liquid investments that are readily convertible into known amounts of cash and which are subject to an insignificant risk of changes in value.
    • Cash equivalents are held to meet short-term cash commitments rather than for investment or other purposes.
    • For an investment to qualify as a cash equivalent. It must be readily convertible to a knows amount of cash and be subject to an insignificant risk of change in value. Therefore, an investment normally qualifies as a cash equivalent only. When it has a short-maturity, of say, three months or less from the date of acquisition.
    • Investments in shares are excluding from cash equivalents unless they are, in substance, cash equivalents. For example, preference shares of a company acquired shortly before their specified redemption date.
    • If the effect of the transaction increases cash and its equivalents. It calls an inflow (source) and if it results in the decrease of total cash, it knows as outflow (use) of cash.

    Cash flows exclude movements between items that constitute cash or cash equivalents. Because these components are part of the cash management of an enterprise rather than part of it’s operating, investing and financing activities. Cash management includes the investment of excess cash in cash equivalents.

    What does Cash Flow Statements mean Introduction Meaning and Definition
    What does Cash Flow Statements mean? Introduction, Meaning, and Definition, #Pixabay.

    #Definition of Cash Flow Statements:

    Cash flow statements a statement of changes in the financial position of a firm on a cash basis. It reveals the net effects of all business transactions of a firm during. A period on cash and explains the reasons for changes in cash position between two balance sheet dates.

    It shows the various sources (i.e., inflows) and applications (i.e., outflows) of cash during. A particular period and their net impact on the cash balance. The following definition of Cash flow statements as define by different-different authors below;

    According to Khan and Jain:

    “Cash Flow statements are statements of changes in financial position prepared on the basis of funds defined as cash or cash equivalents.”

    The Institute of Cost and Works Accountants of India defines Cash Flow statement as,

    “A statement setting out the flow of cash under distinct heads of sources of funds and their utilization to determine the requirements of cash during the given period and to prepare for its adequate provision.”

    Thus, a cash flow statement is a statement which provides a detailed explanation for the changes in a firm’s cash balance during a particular period by indicating. The firm’s sources and uses of cash and, ultimately, the net impact on cash balance during that period.

    Explanations:

    The cash flow statement intends to provide information on a firm’s liquidity and solvency. And, its ability to change cash flows in future circumstances provide. Additional information for evaluating changes in assets, liabilities, and equity improve the comparability of different firm’s operating performance by eliminating the effects of different accounting methods indicate the amount, timing and probability of future cash flows.

    The cash flow statement has been adopting a standard financial statement. Because it eliminates allocations, which might derive from different accounting methods. Such as various time-frames for depreciating fixed assets.

  • What does the Value-added Tax (VAT) mean? Introduction, Meaning, and Definition

    What does the Value-added Tax (VAT) mean? Introduction, Meaning, and Definition…Waiting for best or correct answers.

  • What does Value-added Services mean? Introduction, Meaning, and Definition

    What does Value-added Services mean? Introduction, Meaning, and Definition…Waiting for best or correct answers.

  • Introduction to Public Finance, Expenditure, Revenue, and Debt

    Introduction to Public Finance, Expenditure, Revenue, and Debt

    What does Public Finance Management mean? Introduction to Public Finance, Expenditure, Revenue, and Debt (In Hindi); Collection of sufficient resources from the economy in an appropriate manner along with allocating and use of these resources efficiently and effectively constitute good financial management. Resource generation, resource allocation, and expenditure management (resource utilization) are the essential components of a public financial management system – By Wikipedia.

    The Concept of Public Finance Management explains with its Expenditure, Revenue, and Debt.

    The following subdivisions form the subject matter of public finance.

    Step by step explains each one; Public expenditure, Public revenue, Public debt, Financial administration, and Federal finance.

    Public finance is the management of a country’s revenue, expenditures, and debt load through various government and quasi-government institutions. This guide provides an overview of how public finances manage; what the various components of it are, and how to easily understand what all the numbers mean. A country’s financial position can evaluate in much the same way as a business’ financial statements.

    Public Finance:

    The study of government’s role in the public finance economy is, it is the branch of economics; which evaluates the government expenditure of government revenue and government authorities, and one or the other adjustment to achieve desirable effects and avoid undesirable people.

    The federal government helps prevent market failure by supervising the allocation of resources, distribution of income, and stabilization of the economy. Regular funding for these programs mostly secures through taxation.

    Borrowing from banks, insurance companies, and other governments and earning dividends from their companies helps fund federal government, state and local governments also receive grants and assistance from the federal government, in addition to ports, airport services And user fees with other features; Penalty derived from breaking the law; Revenue from licenses and fees, such as for driving; And the sale of government securities and bond issues is also the source of public finance.

    Public Expenditure:

    Public expenditure refers to government expenditure ie government expenditure. This is done by the central, state, and local governments of any country. Of the two main branches of public finance, i.e. public revenue and public expenditure, we will first study public expenditure.

    Public expenditure can define in this way,

    “The expenditure incurred by public authorities like central, state and local governments to satisfy the collective social wants of the people is known as public expenditure.”

    But now, the cost of the government across the world has increased a lot. Therefore, modern economists have started analyzing the effects of public expenditure on production, distribution, and income levels, and employment in the economy.

    Classical economists did not analyze the effects of public expenditure in the nineteenth century, due to very limited governmental activities for public expenditure.

    During the 19th century, most governments followed laissez-faire economic policies, and their work was limited to protecting aggression and to maintain law and order. The size of the public expenditure was very small.

    Public Revenue:

    To maximize the social and economic welfare of the governments, there is a need to do various tasks in the field of political, social, and economic activities. To do these duties and tasks, the government needs a large number of resources. These resources call public revenues. Public revenue includes revenue from administrative activities such as taxes, fines, fees, gifts, and grants.

    According to Dalton, however, the word “Public Revenue / Income” has two senses – broad and narrow. In its broadest sense, it contains all the income or receipts that can secure a public authority at any time of time. In its narrow sense, however, it includes only the sources of public authority’s income, which is commonly known as “revenue resources”. To avoid ambiguity, thus, the former calls “public receipts” and later “public revenue”.

    As such, receipts from public lending (or public debt) and public property sales mainly exclude from public revenue. For example, the budget of the Government of India is classified as “Revenue” and “Capital”. In the “heads of revenue”, the heads of income under the capital budget calls “receipts”, thus, the word “receipts” includes. Public income sources that exclude from “revenue”.

    Revenue receipts and capital receipts are both. Revenue receipts derive from the taxes of various forms. Capital receipts include primary internal market borrowing and external debt. However, a large portion of the state’s revenue comes from internal sources. The main point of difference between the two is that where there is a gain or earning of people in the form of a source; then there is public property in the form of a source.

    Don’t Confuse they are differences and similarities; Public and Private Finance: Differences, Similarities, and Dissimilarities.

    Introduction to Public Finance Expenditure Revenue and Debt
    Introduction to Public Finance, Expenditure, Revenue, and Debt, #Pixabay.

    Public Debt:

    In simple terms, government / public debt (also known as public interest, government debt, national debt, and sovereign debt) is the outstanding debt by the government. Borrowing by public authorities is of recent origin. This practice of revenue collection was not prevalent before the eighteenth century.

    “Public debt” often uses interchangeably with sovereign debt terms. Public debt usually refers only to National debt. But in some countries, loans outstanding by states, provinces, and municipalities also include.

    In the Middle Ages, borrowing was a rare event. Whenever there is urgency, there is usually a war; the emperor relies on their deposits or borrows on their own debts. However, such lending was not recognized by society. It was considered a “dead-weight” loan.

    This promises to the government with them that the holders of these bonds will be paid interest at regular intervals, at the end of the term, at the lump sum rates at the regular intervals.

    Prof. According to Taylor,

     “Government debt arises out of borrowing by the Treasury, from banks, business organizations, and individuals. The debt is in the form of promises by the treasury to pay to the holders of these promises a principal sum and in most instances interest on that principle.”

    Prof. Adams points out that public debt is the source of advance revenue which is opposite with direct/derived revenue; and, therefore every question of public debt should be judged in the light of this fact.

  • Venture Capital: Definition Advantages Disadvantages

    Venture Capital: Definition Advantages Disadvantages

    What does Venture Capital mean? They define and comprise two words that are, “Venture” and “Capital”. It is a type of funding for a new or growing business. It usually comes from venture-capital firms that specialize in building high-risk financial portfolios.

    The concept of Venture Capital explained by their points in Meaning, Introduction, Definition, Characteristics, Advantages, and Disadvantages.

    Capital invested in a project in which there is a substantial element of risk, typically a new or expanding business. The venture is a course of processing, the outcome of which is uncertain but to which attended the risk or danger of “loss”. “Capital” means resources to start an enterprise. To connote the risk and adventure of such a fund, the generic name Venture-Capital existed coined.

    #Meaning of Venture Capital:

    Venture capital’s a type of private equity, a form of financing provide by firms or funds to small, early-stage, emerging firms that exist deemed to have high growth potential, or which have demonstrated high growth. This is a very important source of financing for a new business. Here money is provided by investors to start a business that has a strong potentiality of high growth and profitability. The provider of venture capital also provides managerial and technical support. Venture capital stands also known as risk capital.

    #Introduction of Venture Capital:

    Venture capital’s considered the financing of high and new technology-based enterprises. It exists said that Venture-capital involves investment in new or relatively untried technology, initiated by relatively new and professionally or technically qualified entrepreneurs with inadequate funds. The conventional financiers, unlike Venture capitals, mainly finance proven technologies and established markets.

    However, high technology need not be a prerequisite for them. They have also existed described as “unsecured risk financing”. The relatively high risk of venture capital’s compensated by the possibility of high returns usually through substantial capital gains in the medium term. They are in the broader sense is not solely an injection of funds into a new firm; it is also an input of skills needed to set up the firm, design its marketing strategy, organize and manage it.

    Thus it is a long-term association with successive stages of the company’s development under high-risk investment conditions, with a distinctive type of financing appropriate to each stage of development. Investors join the entrepreneurs as co-partners and support the project with finance and business skills to exploit the market opportunities. Venture capital’s not passive finance.

    It may be at any stage of the business/production cycle, that is, start-up, expansion or to improve a product or process; which exist associated with both risk and reward. They make higher capital gains through appreciation in the value of such investments when the new technology succeeds. Thus the primary return sought by the investor is essentially capital gain rather than steady interest income or dividend yield.

    #Definition of Venture Capital:

    “The support by investors of entrepreneurial talent with finance and business skills to exploit market opportunities and thus obtain capital gains.”

    They commonly describe not only the provision of start-up finance or “seed corn” capital but also development capital for later stages of business. A long-term commitment of funds exists involved in the form of equity investments, with the aim of eventual capital gains rather than income and active involvement in the management of customers’ business.

    #Characteristics of Venture Capital:

    The following features/characteristics below are;

    Participation In Management:

    They provide value addition by managerial support, monitoring, and follow-up assistance. It monitors physical and financial progress as well as a market development initiative. It helps by identifying the key resource person. They want one seat on the company’s board of directors and involvement, for better or worse, in the major decision affecting the direction of the company.

    This is a unique philosophy of “hands-on management” where Venture capitalist acts as complementary to the entrepreneurs. Based upon the experience of other companies, a venture capitalist advises the promoters on project planning, monitoring, financial management, including working capital and public issue. Their investor cannot interfere in day to day management of the enterprise but keeps close contact with the promoters or entrepreneurs to protect his investment.

    High Risk:

    By definition, their financing is highly risky and chances of failure are high as it provides long-term start-up capital to high risk-high reward ventures.

    Venture capital assumes four types of risks, these are:

    • Management risk; Inability of management teams to work together.
    • Market risk; Product may fail in the market.
    • Product risk; Also, Product may not be commercially viable.
    • Operation risk; Operations may not be cost effective resulting in increased cost decreased gross margins.

    High Tech:

    As opportunities in the low technology, area tend to be few of lower order, and hi-tech projects generally offer higher returns than projects in more traditional areas, venture-capital investments stand made in high tech. areas using new technologies or producing innovative goods by using new technology.

    Not just high technology, any high-risk ventures where the entrepreneur has conviction but little capital gets venture finance. Venture capital’s available for expansion of existing business or diversification to a high-risk area. Thus technology financing had never been the primary objective but incidental to venture capital.

    Length of Investment:

    Venture capitalists help companies grow, but they eventually seek to exit the investment in three to seven years. An early-stage investment may take seven to ten years to mature; while most of the later-stage investment takes only a few years. The process of having significant returns takes several years and calls on the capacity and talent of venture capitalists and entrepreneurs to reach fruition.

    Illiquid Investment:

    Their investments are illiquid, that is, not subject to repayment on demand or following a repayment schedule. Investors seek to return ultimately using capital gains when the investment stands sold at the marketplace.

    The investment is realized only on the enlistment of security or it is lost if the enterprise is liquidated for unsuccessful working. It may take several years before the first investment starts to lock for seven to ten years. Venture capitalist understands this illiquidity and factors this in their investment decisions.

    Equity Participation & Capital Gains:

    Investments are generally in equity and quasi-equity participation through direct purchase of shares, options, convertible debentures where the debt holder has the option to convert the loan instruments into the stock of the borrower or debt with warrants to equity investment.

    The funds in the form of equity help to raise term loans that are a cheaper source of funds. In the early stage of business, because dividends can delay, equity investment implies that investors bear the risk of venture and would earn a return commensurate with success in the form of capital gains.

    #Advantages and Disadvantages of Venture Capital:

    The following advantages and disadvantages below are;

    Advantages of Venture Capital:

    Business expertise: Aside from financial backing, obtaining venture-capital financing can provide a start-up or young business with a valuable source of guidance and consultation. This can help with a variety of business decisions, including financial management and human resource management. Making better decisions in these key areas can be vitally important as your business grows.

    Additional resources: In several critical areas, including legal, tax, and personnel matters, a VC firm can provide active support, all the more important at a key stage in the growth of a young company. Faster growth and greater success are two potential key benefits.

    The advantages of venture capital are as follows:

    • New innovative projects financed through venture-capital which generally offers high profit­ability in long run.
    • In addition to capital, venture-capital provides valuable information, resources, technical assistance, etc., to make a business successful.

    Disadvantages of Venture Capital:

    Loss of control: The drawbacks associated with equity financing, in general, can compound with venture-capital financing. You could think of it as equity financing on steroids. With a large injection of cash and professional, and possibly aggressive, investors, it is likely that your VC partners will want to exist involved. The size of their stake could determine how much say they have in shaping your company’s direction.

    Minority ownership status: Depending on the size of the VC firm’s stake in your company; which could be more than 50%, you could lose management control. Essentially, you could be giving up ownership of your own business.

    The disadvantages of venture capital are:

    • It is an uncertain form of financing.
    • Benefit from such financing can realize in long run only.
    Venture Capital Introduction Definition Characteristics Advantages and Disadvantages
    Venture Capital: Introduction, Definition, Characteristics, Advantages, and Disadvantages, #Pixabay.

    #Know and understand the Dimensions of Venture Capital:

    It is associated with successive stages of the firm’s development with distinctive types of financing, appropriate to each stage of development. Thus, there are four stages of the firm’s development, viz., development of an idea, startup, fledgling, and establishment. The first stage of development of a firm is the development of an idea for delineating precise specifications for the new product or service and establishing a business plan.

    The entrepreneur needs seedling finance for this purpose. Venture capitalist finds this stage the most hazardous and difficult; because the majority of the business projects are abandoned at the end of the seedling phase. The Start-up stage is the second stage of the firm’s development. At this stage, the entrepreneur sets up the enterprise to carry into effect the business plan to manufacture a product or to render a service.

    In this process of development, venture-capitalist supply start-up finance. In the third phase, the firm has made some headway, entered the stage of manufacturing a product or service, but is facing enormous teething problems. It may not be able to generate adequate internal funds. It may also find its access to external sources of finance very difficult.

    To get over the problem, the entrepreneur will need a large amount of fledgling finance from the venture capitalist. In the last stage of the firm’s development when it stabilizes itself; and may need, in some cases, establishment finance to explicit opportunities of scale. This is the final injection of funds from venture capitalists. It has been estimated that in the U.S.A., the entire cycle takes a period of 5 to 10 years.

  • Public Revenue: Introduction, Meaning, Definition, Sources, and Classification

    Public Revenue: Introduction, Meaning, Definition, Sources, and Classification

    What does Public Revenue mean? Public revenue money receives by a Public. The article on Public Revenue: Introduction, Meaning, Definition, Sources, and Classification. Each explains as, Introduction to Public Revenue, Meaning of Public Revenue, Definition of Public Revenue, Sources of Public Revenue, and Classification of Public Revenue. It is an important tool for the fiscal policy of the Public and is the opposite factor of Public Spending.

    Here are explain the Concept of Public Revenue; their key points – Introduction, Meaning, Definition, Sources, and Classification.

    By Wikipedia; Revenues earned by the government are received from sources such as taxes levied on the incomes and wealth accumulation of individuals and corporations and the goods and services produced, exports and imports, non-taxable sources such as government-owned corporation’s incomes, central bank revenue and capital receipts in the form of external loans and debts from international financial institutions. It is used to benefit the country.

    Governments use the revenue to better develop the country, to fix roads, build homes, fix schools, etc. The money that the government collects pays for the services that are provided for the people. The public sector in three concepts very important, Public Finance, Public Expenditure, and Public Revenue.

    Introduction to Public Revenue:

    Governments (Public) need to perform various functions in the field of political, social & economic activities to maximize social and economic welfare. To perform these duties and functions, the government requires a large number of resources. The revenues from different sources received by the government call public revenues. Some regularly collect whereas some irregularly collect.

    These resources call Public Revenues. Public revenue consists of taxes, revenue from administrative activities like fines, fees, gifts & grants. Revenues are not repayable. Some of them are obtained from the sale of public utilities whereas some are obligatory payments to the government.

    Meaning and Definition of Public Revenue:

    The income of the government through all sources calls public income or public revenue.

    According to Dalton, however, the term “Public Income” has two senses — wide and narrow. In its wider sense, it includes all the incomes or receipts which a public authority may secure during any period. In its narrow sense, however, it includes only those sources of income of the public authority which are ordinarily known as “revenue resources.” To avoid ambiguity, thus, the former is termed “public receipts” and the latter “public revenue.”

    As such, receipts from public borrowings (or public debt) and the sale of public assets are mainly excluded from public revenue. For instance, the budget of the Government of India is classified into “revenue” and “capital.” “Heads of Revenue” include the heads of income under the capital budget are termed as “receipts.” Thus, the term “receipts” includes sources of public income that are excluded from “revenue.”

    There are both rev­enue receipts and capital receipts. Revenue receipts are derived from taxes of different forms. Capital receipts include primary inter­nal market borrowing and also external loans. However, the bulk of state revenue comes from internal sources. The major point of dis­tinction between the two is that while the former has the receipts or earnings of the people as the source, the later has the public prop­erty as the source.

    Sources of Public Revenue:

    The following key points highlight the two main sources of public revenue from India.

    • Tax Revenue, and.
    • Non-Tax Revenue.

    Now, explain;

    A] Tax Revenue:

    Taxes are the first and foremost sources of public revenue. It is compulsory payments to the government without expecting direct benefit or return by the taxpayer. Taxes collected by Government are used to provide common benefits to all mostly in the form of public welfare services. They do not guarantee any direct benefit for the person who pays the tax. It is not based on a direct quid pro quo principle.

    Features of Tax Revenue:

    The main characteristic features of a tax are as follows:

    • A tax is a compulsory payment to pay by the citizens who are liable to pay it. Hence, the refusal to pay a tax is a punishable offense.
    • There is no direct, quid pro quo between the tax-payers and the public authority. In other words, the taxpayer cannot claim reciprocal benefits against the taxes paid. However, as Seligman points out, the state has to do something for the community as a whole for what the taxpayers have contributed in the form of taxes. “But this reciprocal obligation on the part of the government is not towards the individual as such, but towards the individual as part of a greater whole.”
    • A tax is levied to meet public spending incurred by the government in the general interest of the nation. It is a payment for an indirect service to make by the government to the community as a whole.
    • A tax is payable regularly and periodically as determined by the taxing authority.

    Taxes constitute a significant part of public revenue in modern public finance. Taxes have macro-economic effects. Taxation can affect the size and mode of consumption, the pattern of production and distribution of income and wealth. Progressive taxes can help in reducing inequalities of income and wealth by lowering the high-income group’s disposable income.

    Disposable income is meant the income left in the hands of the taxpayer for disbursement after-tax payment. Taxes imply a forced saving in a developing economy. Thus, taxes constitute an important source of development finance.

    Types of Tax Revenue:

    The following types below are;

    1] Union Excise Duties:

    They are, presently, by far the leading source of revenue for the Central Government and are levied on commo­dities produced within the country, but exclu­ding those commodities on which State excise is levied (viz., liquors and narcotic drugs). The most important commodities from the revenue point of view are sugar, cotton, mill cloth, tobacco, motor spirit, matches, and cement.

    2] Customs:

    Customs duties include both import and export duties. These are the second-most important source of revenue for the Central Government.

    3] GST Tax:

    Goods and Services Tax is an indirect tax levied in India on the supply of goods and services. GST levies at every step in the production process but is meant to refund to all parties in the various stages of production other than the final consumer.

    India’s biggest indirect tax reform in the form of Goods and Services Tax (GST) has completed plus 1 year. A comprehensive dual GST was introduced in India from 1 July 2017.

    4] Income Tax:

    Income tax is at present another important source of revenue for the Central Government. It levies on the incomes of individuals, Hindu undivided families, and unregistered firms.

    5] Corporation Tax:

    The income-tax on the net profits of joint-stock companies calls corporation tax.

    6] Wealth Tax:

    It is an annual tax on the net wealth of individuals and Hindu undivided families. It is a progressive tax.

    7] Gift Tax:

    It is a tax on gifts of property by an individual in his lifetime to future succe­ssors.

    8] Capital Gains Tax:

    It applies to capital gains resulting from the sale, exchange or transfer of capital assets.

    9] Hotel Expenditure Tax:

    Recently, a new tax has been levied on those who patronize high-class hotels.

    10] Tax on Foreign Travel:

    Another new tax levied on foreign travel for conserving foreign exchange as well as to raise revenue.

    B] Non-Tax Revenue:

    The revenue obtained by the government from sources other than the tax calls Non-Tax Revenue. Public income received through the administration, commercial enterprises, gifts, and grants is the source of non-tax revenues of the government.

    The following sources of non-tax revenue below are:

    1] Interest Receipts:

    This largest non-tax source of Central Government’s revenue receipts is the interest it earns mainly on the loans it has advanced to State Governments, to financial and industrial enterprises in the public sector.

    2] Surplus Profits of the Reserve Bank of India (RBI):

    The surplus profits of the RBI is also a part of the revenues of the Central Government. In recent years, these have been quite substantial because of the large borro­wing by the Government from the RBI against Treasury Bills for financing the Five-Year Plans.

    3] Currency, Coinage, and Mint:

    The Govern­ment also derives income from running the Currency Note Printing Presses. Moreover, profits are made from the circulation of coins — this profit is the difference between the face value of the coins and their manu­facturing cost.

    4] Railways:

    The railways in India are owned and run by the Government of India. Accor­dingly, they pay a fixed dividend to general revenues, i.e., to the Central Government, on the capital invested in the railways. Besides, a part of the net profits made by the railways is also payable to the Central Government.

    5] Profits of Public Enterprises:

    Public enter­prises owned by the Central Government, e.g., the Steel Authority of India (SAIL), Hindustan Machine Tools (HMT), Bharat Heavy Electricals Ltd. (BHEL), State Trading Corporation (STC). The profits of such Public Sector Units (PSUs) are another source of revenue for the Government of India.

    6] Other Non-Tax Sources of Revenue:

    The main source among them is the Departmental Receipts of the various ministries of the Cen­tral Government by way of fees, penalties, etc.

    Public Revenue Introduction Meaning Definition Sources and Classification
    Public Revenue: Introduction, Meaning, Definition, Sources, and Classification, #Pixabay.

    Classification of Public Revenue:

    A scientific classification enables us to know in what respects these various sources resemble one another and in what ways they differ. Different economists have classified the sources of public revenue differently. Of the various classifications of public revenue available in economic literature, we shall review a few important ones.

    1. Taylor’s Classification:

    The most logical and scientifically based classification of public revenue is however provided by Taylor. He divides public revenue into four categories:

    • Grants and gifts.
    • Taxes.
    • Administrative revenues, and.
    • Commercial revenues.

    Now, explain;

    Grants and gifts:

    Grants-in-aid are how one government provides financial assistance to another to enable it to perform certain specified functions, for example, education and health grants made to the states by the central government.

    Grants-in-aid are the cost payments made by the grantor government and revenue receipts to the grantee, and no obligation of repayment involves. Gifts are voluntary contributions from individuals or institutions for specific purposes. Grants and gifts are voluntary and there is the absence of quid pro quo to the donor.

    Taxes:

    These are compulsory payments made to the government without expecting a direct return of benefits. The taxes involve varying degrees of coercive powers.

    Administrative Revenues:

    Under this group, fees, licenses, fines, and special assessments include. Most of these are voluntary and based upon the direct benefits accruing to the payer. They generally arise as a by-product of the administrative or control function of the government.

    Commercial Revenues:

    These are the receipts by way of prices paid for government-produced goods and services. Under this group, postal charges, tolls, interest on loans of state financial institutions or nationalized banks, tuition fees of public educational institutions include.

    2. Dalton’s Classifications:

    Dalton provides a very systematic, comprehensive and instructive classification of public revenue. In this opinion, there are two main sources of public revenue — taxes and prices. Taxes pay compulsorily whereas prices pay voluntarily by individuals, who enter into contracts with the public authority. Thus, prices are contractual payments.

    Taxes are sub-divided into:
    • Taxes in the ordinary sense.
    • Tributes and indemnities.
    • Compulsory loans, and.
    • Pecuniary penalties for offenses.
    Prices are sub-divided into:
    • Receipts from public property passively held such as rents received from the tenants of public lands.
    • Receipts from public enterprises charging competitive rates.
    • Fees or payments charged for rendering administration services, such as birth and death registration fees, and.
    • Voluntary public debt.

    These two groups must add to another group to make the classification exhaustive. Under this group, the following items include:

    • Receipts from public monopolies, charging higher prices.
    • Special assessments.
    • The issue of new paper money or deficit financing, and.
    • Voluntary gifts.

    3. Seligman’s Classification:

    Seligman classifies public revenue into three groups:

    • Gratuitous revenue.
    • Contractual revenue, and.
    • Compulsory revenue.

    Now, explain;

    Gratuitous revenue; comprises all revenues such as gifts, donations, and grants received by the public authorities free of cost. They are entire of a voluntary nature. Further, these are very insignificant in the total revenue.

    Contractual revenue; includes all those types of revenue which arise from the contractual relations between the public authority and the people. Fees and prices fall into this category. A direct quid pro quo is usually present in these types of revenue.

    Compulsory revenue; includes the income derived by the state from administration, justice, and taxation. Taxes, fines, and special assessments regard as compulsory revenue. These revenues express an element of state sovereignty. It is the most significant type of public revenue in modern times.

  • Investment Banking: Introduction, Concept, and Types

    Investment Banking: Introduction, Concept, and Types

    What does Investment Banking mean? Investment banks are essentially financial intermediaries, who primarily help businesses and governments with raising capital, corporate mergers and acquisitions, and securities trade. Investment Banking: Introduction, Concept, and Types; It is a much wider term than merchant banking as it implies significant fund-based exposure to the capital market.

    Does Investment Banking explain their concept of what they are?

    Internationally, investment banking has progressed both in the fund based & fee-based segments of the industry. In India, the dependence is heavily on merchant banking, more particularly with issue management & underwriting. In the USA, such banks are the most important participants in the direct market by bringing financial claims for sale. They help interested parties in raising capital, whether debt or equity in the primary market to finance capital expenditure.

    Once the securities sell, investment bankers make secondary markets for the securities as brokers and dealers. In 1990, there were 2500 investment banking firms in the USA doing underwriting business. About 100 firms are so large that they dominate the industry. In recent years some investment banking firms have diversified or merged with other financial institutions to become full-service financial firms.

    Introduction to Investment Banking:

    Banking and financial institution on the one hand and the capital market on the other are the two broad platforms of institutional that investment for capital flows in the economy. Therefore, it could be inferred that investment banks are those institutions that are counterparts of banks in the capital markets in the function of intermediation in the resource allocation.

    Investment bankers have always enjoyed celebrity status, but at times, they have paid the price for excessive flamboyance as well. Investment banks help companies, governments, and their agencies to raise money by issuing and selling securities in the primary market. They assist public and private corporations in raising funds in the capital markets, as well as in providing strategic advisory services for mergers acquisitions and other types of financial transactions.

    However downturn in the primary market has forced merchant banks to diversify & become full-fledged investment banks. Over the decades, backed by evolution & also fuelled by recent technological developments, investment banking has transformed repeatedly to suit the needs of the finance community & thus become one of the vibrant & exciting segments of financial services.

    The future for investment banks is bright with scope for merchant banks to convert themselves into investment banks. Much of the investment banking in its present form, thus owes its origins to the financial market in U.S.A due to which, American investment banks have been the leader in the American & Euro market as well.

    Therefore, the term “Investment banking” can say to be of American origin. Their counterparts in the U.K. were termed as “Merchant banks” since they had confined themselves to capital market intermediation until the U.K & European markets & extended the scope of such businesses.

    Investment Banking in India:

    For more than three decades, investment banking activity was mainly confined to merchant banking services. The foreign banks were the forerunners of merchant banking in India. The erstwhile Grindlays Bank began its merchant banking operations in 1967 after obtaining the required license from RBI. Soon after Citibank followed through. Both the banks focused on syndication of loans and raising of equity apart from other advisory services.

    In 1972, the Banking Commission report asserted the need for merchant banking activities in India and recommended a separate structure for merchant banks different from commercial bank’s structure. The merchant banks were meant to manage investments and provide advisory services. The SBI set up its merchant banking division in 1972 and the other banks followed suit. ICICI was the first financial institution to set up its merchant banking division in 1973.

    More Things;

    The advent of SEBI in 1992 was a major boost to the merchant banking activities in India and the activities were further propelled by the subsequent introduction of free pricing of primary market equity issues in 1992. Post-1992, there were a lot of fluctuations in the issue market affecting the merchant banking industry. SEBI started regulating merchant banking activities in 1992 and a majority of the merchant banker registers with it. The number of merchant banker registers with SEBI began to dwindle after the mid-nineties due to the inactivity in the primary market.

    Many of the merchant bankers into issue management or associate activity such as underwriting or advisory. Many merchant bankers succumbed to the downturn in the primary market because of the over-dependence on issue management activity in the initial years. Also, not all the merchant bankers were able to transform themselves into full-fledged investment banks. Currently, bigger industry players who are in investment banking are dominating the industry.

    The Scenario for Investment Banking in India?

    In India commercial banks restricted from buying and selling securities beyond five percent of their net incremental deposits of the previous year. They can subscribe to securities in the primary market and trade in shares and debentures in the secondary market.

    Further, acceptance of deposits limits to commercial banks. Non-bank financial intermediaries accept deposits for a fixed term restricted to financing leasing/hire purchase, investment and loan activities and housing finance.

    They cannot act as issue managers or merchant banks. Only merchant bankers registered with the Securities and Exchange Board of India (SEBI) can undertake issue management and underwriting, arrange mergers and offer portfolio services. Merchant banking in India is non-fund based except underwriting.

    Structure of Investment Banking in India:

    The Indian investment banking industry has a heterogeneous structure for the following reasons:

    • The regulations do not permit all investment banking functions to perform by a single entity for two reasons: 1) To prevent excessive exposure to business risk, and. 2) To prescribe and monitor capital adequacy and risk mitigation mechanisms.
    • Commercial banks prohibited from getting exposed to stock market investments and lending against stocks beyond certain specified limits under the provisions of the RBI and Banking Regulation Act.
    • Merchant banking activities can carry out only after obtaining a merchant-banking license from SEBI.
    • Merchant bankers are other than banks and financial institutions not authorized to carry out any business other than merchant banking.
    • The Equity research activity has to carry out independent of the merchant banking activity to avoid conflict of interest, and.
    • Stockbroking business has to be separated into a different company.

    Regulatory Framework for Investment Banking in India:

    An overview of the regulatory framework furnish below:

    • All investment banks incorporated under the Companies Act, 1956 governed by the provisions of that Act.
    • Those investment banks that incorporate under a separate statute regulate by their respective statute. Ex: SBI, IDBI.
    • Universal banks that function as investment banks regulate by RBI under the RBI Act, 1934.
    • All Non-banking Finance Companies that function as investment banks regulate by RBI under RBI Act, 1934.
    • SEBI governs the functional aspects of Investment banking under the Securities and Exchange Board of India Act, 1992.
    • Those investment banks that carry foreign direct investment either through joint ventures or as fully owned subsidiaries govern by the Foreign Exchange Management Act, 1999 concerning foreign investment.

    Investment Banking Introduction Concept and Types
    Investment Banking: Introduction, Concept, and Types. #Pixabay.

    Types of Players in Investment Banking:

    The following Types of Players below are:

    Full-Service Firms:

    These are the type of investment banks that have a significant presence in all areas like underwriting, distribution, M&A, brokerage, structured instruments, asset management, etc. They are all rounder 0f the game.

    Commercial Banks:

    Commercial Banks operating through “Section 20” subsidiaries referring to the subsidiaries formed under section 20 of the Glass- Steagall Act which were allowed to carry on limited investment banking services.

    Boutique Firms:

    These are the type of players who specialize in particular areas of investment banking.

    Brokerage Firms:

    These firms offer only trading services to retail & institutional clients. They have a huge investor base which also use by underwriters to place issues.

    Asset Management Firms:

    These firms offer investment services. This includes activities like fund management, wealth management, cash management, portfolio management depending on the type of investors, Tenure of the corpus, purpose of investments, type of instrument invested in, etc.

  • What is Controlling? Introduction, Meaning, and Definition

    What is Controlling? Introduction, Meaning, and Definition

    What is Controlling? Introduction; Controlling is the last step of the management process but plays a crucial role without which the whole management process is incomplete. It can define as a function through which the actual and desired output are measuring. All organizations, business or non-business, face the necessity of coping with, problems of control. The relationship of Controlling with other Functions of Management.

    Here are explain; What is Controlling? Introduction, Meaning, and Definition.

    Like other managerial functions, the need for control arises to maximize the use of scarce resources and to achieve purposeful behavior of organization members. In the planning stage, managers decide how the resources would utilize to achieve organizational objectives; at the controlling stage; managers try to visualize whether resources are utilizing in the same way as planned.

    Thus control completes the whole sequence of the management process. If the actual output differs from the desired output, the deviations are altogether removing or minimizing. There are basically two types of control mechanisms, viz. pro-active and reactive. The pro-active mechanism tries to predict future hurdles and solves them then and there. The reactive approach tries to rectify the damage done to prevent any similar loss in the future.

    Definition of Controlling:

    Control is any process that guides activity towards some predetermined goals. Thus control can apply in any field such as price control, distribution control, pollution control, etc. However, control as an element of management process can define as the process of analyzing whether actions are being taken as planned and taking corrective actions to make these to conform to planning. Thus control process tries to find out deviations between planned performance and actual performance and to suggest corrective actions wherever these are needed.

    For example,

    According to Henry Fayol,

    “Control consists of verifying whether everything occurs in conformity with the plan adopted, the instructions issued, and the principles.”

    Terry has defined control as follows;

    “Controlling is determining what is being accomplished, that is evaluating the performance and, if necessary, applying corrected measures so that the performance takes place according to plan.”

    The Main Steps in Control Function Include;

    • Establishing performance standards.
    • Measuring actual performance.
    • Determining the gap between set standards and achieved performance.
    • Taking corrective measures.

    An integral activity in the controlling function is feedback. Without appropriate and valid feedback, no control measures can be successfully implemented. Feedback about a particular plan can help in identifying areas of improvement.

    The Controlling Function Involves Following Activities;

    • Bringing actual results nearer to the desired results.
    • Improving the performance level of all activities being performed.
    • Regulating the use of all the resources for achieving planned objectives and goals.
    • The regulating working behavior of employees for maintaining order and discipline.
    • Checking distortions and deviations taking place in occurs in conformity the system to make it more cost-effective.

    If in the controlling step, there is a huge gap in the actual and desired performance, the whole management process is revising.

    What is Controlling Introduction Meaning and Definition
    What is Controlling? Introduction, Meaning, and Definition, #Pixabay.

    Features of Controlling:

    Based on the definition of control, its following features can identify:

    1. Control is forward-looking because one can control future happenings and not the past. However, on the control process always the past performance is measuring because no one can measure the outcome of a happening which has not occurred. In light of these measurements, managers suggest corrective actions for the future period.
    2. Control is both an executive process and, from the point of view of the organizations of the system, a result. As an executive process, each manager has to perform the control function in the organization. It is true that according to the level of a manager in the organization, the nature, scope, and limit of his control function may different as compare to a manager at another level. The word control is also preceding by an adjective to designate a control problem, such as quality control, inventory control, production control, or even administrative control. In fact, it is administrative control, which constitutes the most comprehensive control concept. All other types of control may subsume under it.
    3. Control is a continuous process. Though managerial control enables the manager to exercise control at the point of action, it follows a definite pattern and timetable, month after month and year after year on-a continuous basis.
    4. A control system is a coordinated-integrated system. This emphasizes that, although data collected for one purpose may differ from those with another purpose, these data should be reconciled with one another. In a sense, the control system is a single system, but it is more accurate to think of it as a set of interlocking sub-systems.

    Notes: You will come to know the definitions of all the seven Processes of Scientific Management; Planning, Organizing, Staffing, Directing, Coordinating, Motivating, Controlling.