Tag: Techniques

  • Strategic Marketing Process Meaning Scope Importance

    Strategic Marketing Process Meaning Scope Importance

    The strategic marketing process may describe as a system of segmentation, targeting, and positioning (STP). To summarize, strategic advertising includes building sturdy, sustainable aggressive positions inside selected marketplace segments.

    Here is the article to explain, Meaning, Scope, and Importance, Process of Strategic Marketing!

    Over the beyond few years, strategic advertising has become increasingly more popular within organizations. Yet, as a little confusion nevertheless exists concerning what exactly strategic advertising is and the position it performs in agencies, this weblog will explain all you need to recognize. What is the nature and process of strategic marketing? Below are you’ll understand step by step;

    What is strategic marketing? Meaning and Definition;

    Strategic Advertising and Marketing process is a technique thru which an agency differentiates itself from its competition via specializing in its strengths to offer better service and fees to its customers. In a nutshell, strategic marketing intends to make the maximum of a corporation’s advantageous differentiation over its competition through the consumers’ angle.

    Strategic Marketing has been described because the control feature is chargeable for identifying, looking forward to, and enjoyable client requirements profitably. Strategic Marketing is, therefore, each a philosophy and a set of strategies that cope with such topics as research, product design, and improvement, pricing, packaging, income and sales promoting, advertising, public relations, distribution, and after-sales provider. These activities define the wide scope of advertising and marketing and their balanced integration within a marketing plan is called the advertising and marketing mix.

    An amendment of a definition of strategic advertising suggests that advertising is the management system that seeks to maximize returns to shareholders through creating an aggressive benefit in presenting, speaking, and handing over fees to customers thereby growing an extended-term dating with them. This definition defines the goals of advertising and how its overall performance should evaluate. Also, The particular contribution of marketing in the organization lies inside the formula of strategies to pick out the proper patron, construct relationships of agree with them and create a competitive advantage.

    The implementation of strategic advertising and marketing involves 3 questions, which include:

    • Where to compete;
    • How to compete;
    • When to compete.

    Once those questions were responded to, then the strategic advertising and marketing planning section can begin.

    Phases concerned in the strategic advertising making plans system:

    • Planning section: In this segment, the numerous components of a business enterprise, consisting of its strengths, weaknesses, and technology are assessed. The usual kingdom of the enterprise is also presented to the management. This section incorporates 4 components, which include.
    • SWOT analysis: This technique analyses the strengths, weaknesses, possibilities, and threats related to the organization. Also, The results of this analysis assist in growing a strategic advertising and marketing notion for the organization.
    • Marketing mix method: Once the SWOT evaluation has been conducted, the right advertising blend method is then prepared. Also, The marketing mix method includes combining and reading a variety of additives that assist in strengthening an agency’s emblem and in promoting its products or services.

    What is the Scope of Strategic Marketing?

    Marketing is a philosophy that results in the system through which businesses, businesses, and individuals acquire what they need and want by using figuring out value, presenting it, communicating it, and handing over it to others. The middle standards of marketing are customers’ wishes, needs, and values; products, trade, communications, and relationships. Also, Marketing is strategically concerned with the direction and scope of the long-time period sports finished by using the organization to obtain an aggressive benefit. The organization applies its assets inside a converting environment to meet patron wishes while meeting stakeholder expectations.

    Implied on this view of strategic marketing process is the requirement to broaden a method to cope with competition, perceive marketplace possibilities, broaden and commercialize new services and products, allocate sources amongst advertising sports, and layout the ideal organizational structure to ensure the performance desired carries out.

    There isn’t any particular strategy that succeeds for all agencies in all situations. In questioning strategically approximately marketing many factors have to take into consideration:

    • the volume of product range and geographic coverage within the employer,
    • the number of market segments served,
    • also, advertising channels used,
    • the position of branding,
    • the extent of advertising and marketing effort,
    • and the function of first-rate.

    It is also important to do not forget the enterprise’s technique to new product improvement, especially, its role as a technology chief or follower, the quantity of innovation, the organization’s fee function and pricing coverage, and its courting to customers, competitors, suppliers, and companions.

    What is the task or challenge of strategic marketing and advertising?

    The task of strategic advertising and marketing is, therefore, to manipulate advertising complexity, patron and stakeholder expectancies, and to reconcile the effects of a converting environment within the context of a fixed of aid abilities. It is also essential to create strategic opportunities and to control the concomitant modifications required inside the organization. In this international of advertising, agencies are searching to maximize returns to shareholders by using developing a competitive benefit in identifying, offering, communicating, and delivering the price to customers, widely described, and within the procedure growing lengthy-time period mutually pleasurable relationships with the one’s customers.

    A strategic marketing technique attempts to determine approaches of supplying advanced cost to the extra profitable segments without unfavorable person customer relationships. A strategic advertising and marketing approach reflects an included technique based totally on studies and feedback. Customer needs are first evaluated thru market research, an incorporated advertising effort evolve to satisfy clients so that the organization achieves its dreams, especially those affecting shareholders. This is client orientation and contrasts very bluntly with a slim competitor orientation based totally on sales wherein the business enterprise through capitalizing on the weaknesses of inclined competitors or through disposing of its aggressive weaknesses attempts to gain high sales and lengthy-run profits.

    The Significance or Importance of strategic marketing in an organization:

    • Helps in evaluating the present-day environment: Strategic marketing helps in assessing the positioning and performance of an organization. It is essential to understand what resources are at the disposal of a business enterprise at any given time. The statistics that amass allow in understanding how nicely a corporation is appearing within the normal competitive surroundings. Also, This may even assist the agency in planning for future strategic marketing sports or plans.
    • Helps in establishing clean marketing targets: Having a strategic advertising plan in the region helps in organizing potential advertising and marketing targets. Also, The goals should have a specific time frame and should be measurable.
    • Streamlines product development: Strategic advertising allows in growing products and services that offer the employer high profits. This is due to the fact strategic advertising starts evolved by accomplishing a SWOT evaluation of the company, a market evaluation of the clients, and the prevailing traits within the market. This fact then use to create the most fulfilling services and products for the consumers.

    The difference between strategic marketing and a marketing approach;

    Although people every so often use these terms interchangeably, they may be very exclusive and imply different things. To recognize this higher, here are some of the differences between strategic marketing and a marketing strategy:

    Strategic marketing;
    • Strategic marketing is a method thru which an organization differentiates itself from its competition by using specializing in its strengths to provide better providers and fees to its customers.
    • This is a making plans technique and it includes 3 levels.
    • This is related to the management degree because it includes determining budgets, allocation of assets, and improving product pleasant.
    • Also, Strategic covers the advertising dreams of the employer as an entire and consists of all products.
    • This is a manner this is put in region to achieve organizational dreams.
    • Strategic Advertising and marketing analyses various factors which include enterprise overall performance, competition surroundings, competitors, and demographic conduct of clients to achieve organizational dreams.
    Marketing strategy;

    Marketing at the extent of enterprise method, also known as strategic advertising and marketing, commonly expresses as a strategic advertising plan that explains the segmentation, focused on, and positioning strategies of an enterprise or enterprise unit. Also, marketing strategy entails knowing the way to group customers sensibly into homogenous marketplace segments, determining which to goal and searching for superiority over rivals.

    • This is an employer’s plan to goal people and converts them into purchasers of the enterprise’s services and products.
    • Also, This plan is an implementation of a predefined strategy
    • Marketing strategy does not contain better management, because it simplest includes creating advertising strategies for specific products or services. The techniques could include a promotional plan, distribution, and rate of the product.
    • This constrain to the advertising goals and approach of a single product or service.
    • Also, This is part of one of the practical strategies that assist in attaining organizational goals.
    • An advertising approach focuses on the products and services of an employer and its positioning about attracting clients.

    The Strategic Marketing Process;

    • Start with a challenge declaration.
    • Include a financial summary that illustrates graphically projected revenue and income for the entire making plans period.
    • Include a marketplace assessment. Keep it simple, use lifestyles cycles, estimates, and pie charts.
    • Identify the important thing segments and do a SWOT evaluation for each one.
    • Make a quick announcement approximately the important thing issues that need to address inside the planning length.
    • Summarize the SWOTs use a portfolio matrix to illustrate the critical relationships among your key merchandise and markets.
    • List your assumptions.
    • Set goals and strategies.
    • Summarize your useful resource requirements for making plans length within the shape of finance.

    Market opportunities, possibilities can identify in several methods:

    • Conducting a client evaluation may lead to latent or unfulfilled desires, or underserved market segments emerging as possibilities.
    • Market demand analysis may additionally result in the identification of marketing opportunities.
    • Analyzing the competitive panorama is an essential component of figuring out market opportunities.

    There are three fundamental targeting strategic or techniques:

    Undifferentiated or mass advertising, wherein one product offer to the full market. There are few examples of absolutely undifferentiated advertising strategies; but this may be more common in commodities markets that observe an approach of cost management, including the marketplace for coal.

    Differentiated advertising and marketing, where a distinct product is obtainable to every segment; which includes Shoprite’s cave logo target at a decrease profit, Shoprite at middle income, and Checkers at high-profit people.

    Focused advertising and marketing targets a few segments (or one segment, inside the case of a niche method) with a product, which include Capitec targeting low to middle-earnings people with a constrained range of banking services.

    In positioning products within segments, there are two essential components:

    Choice of aggressive method can have an impact on positioning, such as if a spot approach adopted, this could have a clean effect on how opposition takes area and which advertising and marketing plans and programs have to accompany.

    Branding and differentiation generally build on the competitive strengths identified inside the positioning analysis and awareness on strengthening perceptions inside the phase, together with Volvo have differentiated itself in phrases of safety.

    The Role of the Marketing Function in Strategic Marketing:

    The marketing feature is liable for:

    • Understanding marketplace dynamics.
    • Identifying potential markets, segments, and clients.
    • Quantifying and qualifying the needs of described consumer businesses (segments) within recognized markets.
    • Determining fee propositions to meet section desires.
    • Communicating value propositions internally to personnel and externally to segments.
    • Playing the perfect component in delivering value propositions (advertising usually handiest has direct management over marketing communications).
    • Monitoring value brought to segments.
    Strategic Marketing Process Meaning Scope Importance Image
    Strategic Marketing Process Meaning Scope Importance; Image by Elf-Moondance from Pixabay.
  • Project Management: Meaning, Importance, Benefits, and Scope

    Project Management: Meaning, Importance, Benefits, and Scope

    Project Management – It is the specialty of dealing with all the parts of a project from origin to conclusion utilizing a logical and organized system. The term project might be utilized to characterize any undertaking that is impermanent in nature and with a start or an end. The project should make something novel whether it is an item, administration, or result, and should be dynamically explained. As the definition suggests, a few out of every odd undertaking can view as a project. It is beneficial to remember this definition when classifying projects and contemplating their part in the achievement of the association. With the above definition of the project, one gets away from what a project is.

    Here is the article to explain, Project Management: Meaning, Definition, Importance, Advantages, Benefits, Disadvantages, Limitations, and Scope.

    Program Management characterizes as a division that incorporates the management of projects. This means the PMO or the Project Management Office is a storehouse of the multitude of projects that are being executed in an association. Also, Program Management serves the CIO (Chief Information Officer) by giving that person standard announcements concerning the advancement of the relative multitude of projects in the organization.

    Meaning and Definition of Project Management:

    What is Project Management? A project in any association is cooperation across divisions to accomplish a solitary all around the characterized objective. The way toward arranging, coordinating, and overseeing assets to accomplish the hierarchical goal call project management.

    Project management is vital in the creation of merchandise and enterprises. Thought age to conclusive creation of item or administration, each progression can be classified as individual projects. Any project requires a project director, who drives the project to its obvious result. The project administrator is answerable for naming colleagues with various foundations however fundamental in the culmination of the project.

    Attributes or Characteristics of Project:

    A project is certifiably not a typical everyday movement attempted by the association rather it is a particular; non-routine action of differing time spans and affects the reasonability of the business over the long haul. A run of the mill project has the accompanying attributes:

    • Timetable: A project has an unequivocal course of events with a quantifiable beginning and endpoint.
    • Assets: A project has restricted assets of capital and labor.
    • Apparatuses: Special kinds of devices and strategies utilized for project management (Gantt Charts, and so forth)
    • Group: Project management requires a different group extending across offices and capacities.

    Project Life Cycle:

    A run of the mill project partition into the accompanying stages. Each period of the project affects the general achievement of the project.

    • Commencement Phase; In this period of the project, input got from clients dissect; and, conceptualizing done to build up another item or change a current item to fulfill the new needs.
    • Project Definition Phase; In this period of the project endeavors make to characterize the answer for the issue presented by clients.
    • Plausibility Study; In this stage, the arranging of the project makes unequivocal achievements are set up.
    • Project Execution; In this stage, all exercises and achievements set up in the prior stage execute in an opportune and deliberate way. This stage uses the limit, all things considered.
    • Project Conclusion; This is the last period of the project. In this stage, the eventual outcome or administration hand over to the activities group for business creation.

    Project Management Activities:

    Project management exercises chiefly separate into three fundamental classes Planning, Scheduling, and Controlling.

    • Arranging: Planning exercises incorporate characterizing project targets, asset arranging, and so on
    • Booking: Scheduling exercises incorporate creating definite achievements and rules for the project. These exercises perform commonly before the genuine commencement of the project.
    • Controlling: Controlling exercises incorporate creating financial plans and money control focuses, estimating planned undertakings perform.

    Project Management Techniques:

    There are a few procedures use for project management. A portion of the procedures are as per the following, and they mostly utilize for project planning.

    • Gantt Charts; These diagrams utilize to portray the project assignments against time. It screens the advancement of individual project undertakings and likewise features reliance if any between those project assignments.
    • Organization Planning Techniques; These strategies show the connection between project exercises, project span, basic way, imperatives of non-basic exercises, and asset usage. There are two kinds of organization arranging procedures Critical Path Method (CPM) and Program Evaluation and Review Technique (PERT).

    Future of Project Management:

    The following Future of Project Management below are;

    Projectification of Societies:

    Projectification of social orders characterizes as the level of dissemination of project management in all areas of the social orders. Also, Pointers of this pattern is the time and cash spent on projects just as the measure of monetary, social, and social benefits and misfortunes brought about by projects. Progressively more areas of social orders will actualize the techniques of project management for settling their unpredictable novel undertakings

    Drivers of Trend:

    • Post-industrialization of the social orders, which makes more unpredictable assignments
    • New advances empowering and making new types of a coordinated effort
    • The changing estimations of Generation Y may encourage and change project management in the future.

    Potential Implications of Trend:

    Project Management will turn into an essential skill for everyone: not just architects and directors will know the procedures, yet also experts that have no contact with project management today like in the wellbeing or schooling area. Also, They will turn out to be more explained and broadened.

    Ladies or Women in Project Management:

    The expanding number of ladies overseeing and driving projects, projects, and portfolios will change the way how projects are overseen in the future; yet additionally, the assessment measures for project supervisors. Also, This includes the initiative style, correspondence style, meeting style, group creation and improvement; and, the participation culture when individuals are managing unpredictability, adapting to difficulties and dangers;

    Drivers of Trend:

    • The corporate societies and shares for administrative sexual orientation syntheses in the associations.
    • Further drivers are sexual orientation explicit schooling, inspiration, preparing, and improvement openings just as the absence of qualified male subject matter experts, especially in maturing social orders.

    Potential Barriers:

    A typical boundary against this improvement is the alleged “discriminatory constraint that shields qualified ladies from ascending to the upper rungs of the professional bureaucracy paying little mind to their capabilities or accomplishments. Different hindrances incorporate the missing help that ladies get from associations to coordinate their work with everyday life just as an absence of comprehension in the interest of male partners and bosses when ladies offer need to their family obligations.

    Coping or Adapting to Complexity:

    The intricacy of projects driven by the size and volume of projects; the number of partners associated with the project, and the vagueness of their assumptions.

    Drivers of Trend:

    • Projects are adapting to an expanding vulnerability; for example concerning innovative turns of events, administrative changes, serious moves, and changing client prerequisites.
    • Globalization, Virtualization, Urbanization, and Growth.

    Potential Implications of Trend:

    To all the more likely respond with these conditions especially in the zone of ICT coordinated strategies determined. These techniques rely upon to additionally create crossbreed strategies coordinating the exemplary methods with light-footed ideas. Further ramifications are:

    • Communitarian strategies will increment.
    • Normalization, modularization, and coordinating instruments will multiply.
    • Large information, reenactment, and measurable investigation apparatuses will increase.
    • Foundational approaches will progressively request.

    Importance of Project Management for Organizations:

    Project management is the specialty of dealing with the project and its expectations to create completed items or administrations. There are numerous manners by which a project can do and how it executes is project management. It incorporates; distinguishing necessities, building up clear and feasible objectives, adjusting the contending requests from the various partners, and guaranteeing that shared trait of direction accomplish. Obviously, except if there is an organized and logical way to deal with the act of management; associations would get themselves loose in the Ocean called the hierarchical turn of events; and, consequently would be not able to address the bunch difficulties that the cutting edge period tosses at them.

    Henceforth, the importance of project management to associations can’t be stressed more; and, the succeeding sections give a few reasons why associations should pay attention to the act of project management. Without a logical way to deal with the undertaking of dealing with the projects and accomplishing objectives; it would be exceptionally hard for the associations to effectively execute the projects inside the limitations of time, scope, and quality and convey the necessary outcome. At the end of the day, there must be a system and a characterize method of getting things done to guarantee that there is a design to the craft of project management. Accordingly, project management ties in with making structure and dealing with the project responsibilities and the conveyance of settled upon results.

    Other importance:

    By utilizing the techniques for project management as portrayed in the PMBOK and associated specialized diaries; associations can try to accomplish command over the projected climate and guarantee that the project expectations overseeing. Also, Administrators face what know as the “triple requirement”. This is the contending requests of time, scope, and quality upon the project supervisor’s rundown of activities; and, how well the project director deals with these requirements goes far in deciding the achievement of the project. Without the utilization of Project Management, supervisors and associations would end up confronting an unusual and tumultuous climate over which they have little control.

    Accordingly, Project Management is both fundamental and vital for the accomplishment of the project. Project Management is too enormous a territory to canvass in a couple of pages and the endeavor is to give succinct and clear definitions of the different terms and wordings related to a project. Note that project management gives a system inside which ensuing activities by the association can be taken and along these lines; it is fundamental for associations to receive the structure given by the act of project management.

    Advantages or Benefits of Project Management:

    Project management alludes to the demonstration of getting sorted out, arranging, and overseeing assets to finish explicit objectives, advantages, and motives. There are various benefits of project management; and, that is the reason chiefs should found an arrangement that will assist them with accomplishing their set objectives. Also, Project management contains the components that represent a connection between customer and supervisor.

    Better creation productivity:

    Project managements fabricate a “guide” to evade potholes that impede you from working more intelligently. It is the way to creation effectiveness since it guarantees project fulfillment.

    Expanded consumer loyalty:

    At the point when you complete a project on schedule; the customer fulfillment that you can convey a similar degree of effectiveness in the future. A glad customer will continually get new clients. Also, It really gives the vital instruments to guarantee there is an enduring connection between administrator/customer.

    Improved productivity in conveying administrations:

    Project managements permit you to finish a few projects at the same time. It additionally gives improved development inside your labor force, which assists with building inspiration in your group. This prompts proficiency in conveying administrations as each part persuades to bring out certain outcomes, advancing adequacy in arranging and association.

    Spending Management:

    This is another reward of an adaptable and multipurpose programming framework; especially for administrators who need to watch out for the expense of a project and guarantee it doesn’t wind wild. By having genuine quantifiable proof of which representative has done what; and, for how long, those in charge of the financial plan can see costs continuously and distinguish where an excess of cash is being spent. This, thusly, can illuminate choices pushing ahead, permitting administrators to change was vital or unexpectedly apportion hours. The importance of being monetarily capable can frequently get ignored when the attention is solidly on the actual project; and, this is one of the more inconspicuous benefits of utilizing a dependable project management apparatus.

    Serious edge:

    The significant advantage of project management is that it draws out a serious edge in the working environment as well as outside too. Also, Verbal ventures quickly, which energizes unrivaled execution in the consistently serious commercial center.

    Better adaptability:

    Maybe adaptability is the best advantage of project management; since it allows you to think of a viable technique that will own your project. Also, The excellence of project management is that it gives a keen “guide” for private companies. At the point when you have a straightforward project that requires less exertion, it turns out to be not difficult to achieve your objectives. Nonetheless, you may think that it’s hard to deal with a few projects all the while when you are on a cutoff time.

    Better Scheduling:

    Monitoring achievements in a project can be precarious, particularly as every colleague has to realize what must be finished and by when. To battle this, cooperative programming can utilize clear and simple-to-follow Gantt outlines of the project timetable which would then be able to be continually refreshed. Also, This is profoundly helpful when things unavoidably change immediately and assets must be moved. It likewise permits virtual chiefs to execute guidelines in a reasonable and available manner, showing singular assignments outwardly and telling everybody where they remain at the snap of a catch. This guarantees that among the overall confusion of a bustling project; the helpless association can’t blame for missing a cutoff time.

    Coordinate New Team Members:

    Bringing somebody onto a project partially through can be an overwhelming encounter for the two players, as an abundance of data and setting needs to clarify and learn in an extremely short space of time. With a simple to-utilize instrument, any new increments to the group can unmistakably survey the advancement of the project from the beginning, just as any bearing changes en route. Also, This implies they can space into the group easily, requiring insignificant joining and having the option to deliver a compelling commitment straight away.

    Disadvantages or Scope or Limitations of Project Management:

    Before beginning, we need to characterize the meaning of impediment in this unique situation. Constraint a limitation force by the use of (generally conventional) Project Management. Limitations contrast from detriments as the last undesired outcomes originating from the selection/utilization of Project Management; while limitations are limits falsely make by Project Management. The nonattendance of these limits brings about better management of projects just as predominant quality in the conveyed item/administration.

    There are a few scope or disadvantages or limitations to Project Management, primarily:

    Limitations or disadvantages 1]:

    Powerlessness to “stick” with the project scope; Project Management, by definition, can’t focus on the first project scope because of steady change demands. Project Management recognizes this with the proper incorporation of Change Management. This limit causes a lot of issues and is the motivation behind why such countless projects end up route over a spending plan and numerous months/a long time late, now and again even dropped or killed.

    Limitations or disadvantages 2]:

    Powerlessness to completely adjust the project objectives to the business/authoritative procedure; By definition, Project Managers oversee projects, not their association. Even though partners/heads normally start projects with an unmistakable connection and full arrangement with the in general corporate technique; Project Managers are inadequate, without help from anyone else, to ensure that their projects are stayed lined up with the’s procedure. To address this impediment in Project Management, Program Management was presented as a higher layer of administrative control to ensure and support arrangement.

    Limitations or disadvantages 3]:

    Failure to oversee projects with a vague financial plan or potential plan; is most likely the greatest constraint in the customary manifestation of Project Management. Envision if, millennia prior, pyramid building was limited to a spending plan and a timetable. Would the pyramids have kept going so long? Would they have been viewed as radiant marvels? Project Management forces a spending plan and a cutoff time on any project and in this way makes a significant issue; All projects completing on schedule and on time (and they are exceptionally uncommon) have their quality bargained (when was the last time you saw flawlessness in any project?). Assets are not permitted to put forth a valiant effort, gold plating view as a terrible practice, and assets completing on schedule, paying little mind to the conveyed quality, are considered saints.

    Limitations or disadvantages 4]:

    Reliance on practical management; Traditional (non-nimble) Project Management is clear about the authority of the Project Manager over the assets: he has none. It is the useful administrators who own the assets; they have their faithfulness (assets are faithful to their useful supervisors just like the ones who report quarterly on their exhibition); they have their appreciation (most assets employed straightforwardly by their utilitarian directors), and they have their regard.

    The reliance on practical management is a significant restriction in Project Management, as Project Managers are continually helpless before both the useful directors and the assets (in a roundabout way, for instance, a magnificent asset disliking the presence of the Project Manager may resist him, while as yet being upheld and supported by his useful supervisor), and they need to bargain, or “offer something” consequently, just to complete things. Note that this impediment is practically unimportant in exceptionally project associations.

    Limitations or disadvantages 5]:

    Following a selective philosophy Project Management powers the Project Manager to pick and follow a technique, be it the conventional (cascade) strategy, or a more current system, for example, Agile. In Project Management, a project must be overseen utilizing one strategy, and, in practically all cases, isn’t changed from one philosophy to the next (normally technique exchanging isn’t per project and a choice make at the association level), in any event, when the other system demonstrated to be exceptionally effective for that kind of project. Being confined by a select, non-variable technique, either at the project level or the authoritative level subverts and restricts the capability of the project just as the assets.

    Project Management Meaning Definition Functions Importance Benefits Limitations and Scope Image
    Project Management: Meaning, Importance, Benefits, and Scope; Image from Pixabay.
  • Old and New Industrial Pattern During for 5 Year Plans in India

    Old and New Industrial Pattern During for 5 Year Plans in India

    Old and New India Industrial Pattern: Indian industries provided all nearby needs as well as empowered India to trade its finished items. Indian fares comprised primarily of fabricates like cotton and silk textures, calicoes, masterful product, silk, and woolen material. The effect of the British association and industrial transformation prompted the rot of Indian handiworks. Here is the explain Patterns of Indian Industrial. Instead, machine-made merchandise began pouring into India. The void made by the rot of Indian painstaking work was not filled by the ascent of the current industry in India in light of the British arrangement of encouraging the import of produces and fare of crude materials from India.

    The main highlights of the industrial pattern in India just before planning (1950) were as under:

    Lopsided pattern of industry – First Industrial Pattern:

    The quirk of the industrial pattern of India was the high grouping of business either in little production lines and family unit undertakings. For example the most reduced size gathering or that there was a high convergence of work in enormous manufacturing plants, for example, the most noteworthy size gathering. The medium size industrial facilities didn’t create in India. The presence of these disproportionate industrial patterns was because of the pioneering idea of our economy. The foreign firms and those claimed by enormous business and industrial magnates were of a huge size coming at the highest point of the pyramid, and at the base were countless indigenous little size firms. The imbalance of the industrial patterns was reflected without the center business visionaries running medium-sized firms.

    Low capital Intensity – Second Industrial Pattern:

    Another element of the industrial pattern of India was the commonness of low capital intensity. It was the aftereffect of two variables – first, the overall degree of wages in India was low, and second, the little size of the home market on account of the low per capita income and the restricted utilization of large scale manufacturing (or high capital intensity) procedures brought about low capital per laborer utilized.

    Composition of Manufacturing yield – Third Industrial Pattern:

    There was an underlying lopsidedness in the industrial patterns. For the situation of buyer products, the homegrown stock was more than the interest. The index of the homegrown stockpile of purchaser products was 112 when contrasted with homegrown interest equivalent to 100. In any case, for the situation of maker products, the homegrown supplies missed the mark regarding homegrown interest. The index number of homegrown supplies about interest was 80. This increased our reliance on different nations in the capital merchandise area.

    The ends were self-evident. There was an extraordinary requirement for increasing the yield of the firm and intermediate maker products to address the unevenness between their interest and supply. Industrial improvement “isn’t exclusively a cycle of expanding yield to fulfill the rising need made by growing capita incomes; it is additionally a cycle in which existing interest for fabricates is met increasingly for homegrown creation instead of from foreign sources.

    So, the industrial plant pattern’s in Indian just before planning was set apart by low capital intensity, restricted improvement of medium-sized manufacturing plant undertakings, and lopsidedness between shopper products and capital merchandise industries. It would be of interest to examine the degree to which the Five Year Plan has endeavored to improve the industrial area patterns, right its imbalance build up the capital products area.

    Here is the article on Old and New nine Industrial Pattern During for 5 Year Plans in India.

    The pattern of the industrial areas in India has experienced significant changes during the time of planning. We can think about the progressions under the following heads:

    Infrastructure:

    An impressive extension of the infrastructure of the economy is fundamental for the present-day industrial turn of events. Therefore, efforts were coordinated towards building up essential offices like force, transport, and interchanges in the 5-year plans. Duration of 5 years Plan list:

    • First Five Year Plan (1951-56)
    • Second Plan (1956-61)
    • Third Plan (1961-66)
    • Fourth Plan (1969-74)
    • Fifth Plan (1974-78)
    • Sixth Plan (1980-85)
    • Seventh Plan (1985-90)
    • Eighth Plan (1992-97)
    • Ninth Plan (1997-2002)
    • Tenth plan (2002-2007)

    Increasing Share of Industry in GDP:

    We can see the increase in the portion of the industrial area in the GDP over the planning time frame. The administration area is the biggest area of India. Net or Gross Value Added (GVA) at current costs for the administration area assess at 100.46 lakh crore INR in 2019-20. The administration area represents 54.77% of absolute India’s GVA of 183.43 lakh crore Indian rupees. With GVA of Rupees. 50.40 lakh crore, the Industry area contributes 27.48%. While Agriculture and associated area share 17.76%.

    According to CIA Fackbook, area shrewd Indian GDP creation in 2017 is as per the following: Agriculture (15.4%), Industry (23%), and Services (61.5%). With the creation of the horticulture movement of $375.61 billion, India is the second bigger maker of farming items. India represents 7.39 percent of all-out worldwide farming yield. India is route behind China, which has $991 bn GDP in the agribusiness area. The gross domestic product of the Industry area is $560.97 billion, and the world position is 6. India’s reality rank is eight in the Services area, and its GDP is $1500 billion.

    Hefty and Capital Goods Industries:

    To reinforce the industrial base of the economy, the Mahalanobis model offered significance to the advancement of substantial machine-building industries and capital products industries. After the weighty investment in this area, it can’t be rejected that the industrial base of the nation is currently a lot more grounded than it was in 1950-51. Be that as it may, the new patterns are troubling.

    Synthetics, Petrochemicals, and Allied Industries:

    Prior, the quickest developing area involved industrial gatherings of fundamental metals, metal items, and machinery; however, in the 1980s, the main players were the synthetics, petrochemicals, and associated industries. Metal-based items and machinery items lost their supremacy in industrial development during the 1980s and confronted the possibilities of additional decline later on. The 1980s along these lines mark a huge period in industrial improvement in the country.

    The development of the Public Sector:

    There was nothing similar to a public area in pre-independent India and all exercises in the industrial area were under the private area. After independence, the public area arose and extended monstrously. At the hour of the beginning of the First Plan, the public area units numbered five with an absolute capital of Rupees 29 crore as it were. Regardless of their shortcomings, it is incorrect to excuse their commitment to the Indian economy as insignificant. PSEs have assumed a significant part in the creation of energizes, fundamental metal industries, non-ferrous metal industries, composts, correspondence hardware, and so forth

    Progression:

    From the 1990s onwards, the private area investment has increased massively; the private area would now be able to enter practically any field of the monetary and industrial movement. The part of the public area is, consequently, declining.

    Purchaser Durables:

    The purchaser sturdy products industries have extended quickly because of the strategy of advancement follows by the public authority in the 1980s.

    Dawn Industries:

    Dawn industry is a slang term for another emerging industry that requires to turn into a solid area. Also, Dawn industries fill quickly in an economy and are probably going to become market pioneers right away. What makes dawn industries effective is a right investment that can give capital appreciation for the time being and consistent returns in the long haul. Dawn industries include banking and finance, retail, medical services, and entertainment.

    In India, dawn industries have developed since the time of advancement. As a component of the reform cycle, the Indian telecom area was opened to the private area. The telecom industry, alongside information innovation, banking, retail, entertainment, flight, and accommodation has arisen as the leading dawn industries in India. These territories have obtained a colossal push and show scope for significant development.

    Footloose industry:

    The footloose industry is an overall term for an industry that can be put in any area without being influenced by variables, for example, assets or transport. These industries regularly have spatially fixed costs; which implies that the expenses of the items don’t change independently of where the item is collected.

    They for the most part rely upon crude materials that are light thus can effortlessly ship from somewhere else. Or then again such industries may have generally accessible crude materials, for instance, a pastry shop, or use parts from a wide scope of providers, for instance, the gadgets industry.

    Jewels and microprocessors are a few instances of footloose industries. For example, the industry can be sited in any of a few spots, regularly because transport costs are immaterial. Quite possibly the main footloose industries are computing and information innovation; since this industry isn’t attached to any place or wellspring of crude material, and it can pick its own areas.

    Normally, a footloose industry will find itself someplace helpful close to significant courses; and, so on where it can likewise pull in the best staff. Footloose industries likewise allude to transnational organizations that utilize individuals in foreign nations at a less expensive rate, than they could in their host nations. In India, footloose industries have arisen in the areas of metals and minerals, computing and information innovation, and so forth.

    What Pattern is the technique or Strategy for Industrial Development and Growth?

    The industrial area should develop at more than 10% to accomplish the objective development; the pace of 8 percent development for GDP during the Tenth Plan time frame. The industry will, nonetheless, need to confront more grounded international rivalry as a result of the expulsion of quantitative limitations on imports since April 2001. Besides, divestment in broad daylight ventures will bring about a consistent increase in the part of the private undertaking. Above we are read it Nine Industrial Patterns of India; The Tenth Plan must, therefore, center around creating an industrial arrangement climate helpful for productive and serious activities.

    A decrease of projective duty obstructions will progressively use to upgrade the serious capacity of the industrial endeavor. Additionally, the arrangement of advancement should make more unavoidable and a portion of the unwieldy administrative component that continues to persevere should be destroyed. Thirdly, the 10th Plan should likewise guarantee that strategies encouraging the business intensive limited scope area sought after. Nonetheless, there is a need to survey and rewind a portion of the reservations of items for the limited scale area. Fourthly, the private endeavor should likewise willingly and consistently gear itself to a climate of rivalry. Seeking strategy measures for the elimination of rivalry will nullify the upsides of the advancement strategy structure.

    Old and New Industrial Pattern During for 5 Year Plans in India Image
    Old and New Industrial Pattern During for 5 Year Plans in India; Image from Pixabay.
  • Explain Prevention with Techniques of Forensic Accounting

    Explain Prevention with Techniques of Forensic Accounting

    Forensic accounting is a branch of accounting that focuses on investigating the business and financial records to determine if fraud, money laundering, or other crime has occurred. The article is explaining Prevention with Techniques of Forensic Accounting, also studies along with the Advantages and Disadvantages of Forensic Accounting. “Forensic” means “belonging to or suitable to use in a court of law”, which is why forensic accountants strive to produce findings that can use in court.

    Here is Explaining the Advantages, Disadvantages, Prevention with Techniques of Forensic Accounting.

    These professionals are also calling on to give evidence during trials. Forensic accounting offers several benefits at first glance but, if you look closer, you’ll see that it also has its drawbacks. A forensic accountant can assist in the areas of Bankruptcy, Economic Damages, Family Law, Valuation and Fraud Prevention/Detection.

    Specialized skill sets and knowledge needs for the practitioner to be effective. Because of what is required of a forensic accountant in these areas it is also important for them to be effective communicators to assist the attorney to accomplish their objective [1].

    Forensic Accounting as Prevention [2]:

    As respects a suitable reaction to a misrepresentation that has been distinguished, each foundation requires an incorporated corporate methodology. An irreverent business environment defiles genuine representatives. The economy can’t manage the cost of business to wind up a facilitator for wrongdoing and unscrupulousness, simply because it has ended up helpful not to convey guilty parties to equity.

    In building up a fitting misrepresentation reaction arrangement, a foundation must consider the accompanying strides:

    • What are the association’s real hazard ranges and what is its arrangement position on culprits of misrepresentation?
    • To whom is the duty regarding dealing with the reaction apportioned? What is the level of extortion mindfulness inside an association?
    • Are controls powerful?
    • Are clients or exchanging accomplices mindful of the organization’s strategy on misrepresentation?
    • Do representatives comprehend the organization’s state of mind to misrepresentation and contemptibility?
    • Can representatives report misrepresentation secretly? Is enrollment hones perfect with a legit workforce?
    • Do disciplinary procedures apportion equity fairly and all the more vitally, are then seen to do as such?

    Techniques of prevention of Forensic Accounting (Fraud) [2]:

    The customary bookkeeping and evaluating with the assistance of various bookkeeping devices like proportion procedure, income strategy, a standard measurable device examination of proofs are all a player in legal bookkeeping.

    In cases including critical measures of information, the present-day legal bookkeeper has innovation accessible to acquire or source information, sort and investigate information and even evaluate and stratify comes about through PC review and different strategies. Smith (2005), Gavish(2007), Dixon (2005), Frost (2004), Cameron (2001) had suggested some of the methods require in Forensic Accounting to inspect the cheats are:

    Benford’s Law:

    In 2000, Mark Nigrini distributed a critical book called “Advanced analysis using Benford’s Law”. Nigrini (2000). Even though Benford’s Law is presently exceptionally old and was examined in extortion writing. Slope (1995); Busta (1998); Nigrini(1999) before the book, Nigrini’s work acquainted the procedure with the substantial group of onlookers of reviewers.

    It is a numerical instrument and is one of the different approaches to figure out if variable under study is an instance of inadvertent blunders (missteps) or extortion. On distinguishing any such marvel, the variable under study subjects to a definite examination. The law expresses that manufactured figures (as a marker of extortion) have an alternate example from irregular figures.

    Meaning and Definition:

    The means of Benford’s law are extremely basic. Once the variable or field of budgetary significance chooses, the left-most digit of the variable under study separate and compress for the whole populace. The rundown finishes by grouping the main digit field and ascertaining its watched check rate. At that point, Benford’s set connects. A parametric test called the Z-test completes gauging the criticalness of fluctuation between the two populaces, i.e.

    Benford’s rate numbers for the first digit and watched rate of the first digit for a specific level of certainty. On the off chance that the information affirms to the rate of Benford’s law, it implies that the information is Benford’s set, i.e. there is 68% (right around 2/third) risk of no blunder or extortion. The principal digit may not generally be the main pertinent field.

    Benford has given separate sets for second, 3rdand for the last digit also. It likewise works for blend numbers, decimal numbers, and adjusted numbers. There are numerous preferences of Benford’s Law like it not influence by scale invariance and is of help when there is no supporting archive to demonstrate the legitimacy of the exchanges.

    Theory of Relative Size Factor (RSF):

    It highlights every strange variance, which might steer from misrepresentation or certified blunders. RSF measures the proportion of the biggest number to the second biggest number of the given set.

    Practically speaking there exist certain cutoff points (e.g. budgetary) for every element, for example, merchant, client, worker, and so on. These points of confinement might characterize or investigate from the accessible information if not characterize.

    On the off chance that there is any stray occasion of that is route past the typical extent, then there is a need to examine further into it. It helps in the better discovery of peculiarities or outliners.

    In records that fall outside the endorsed extent are associated with blunders or extortion. These records or fields need to identify with different variables or components to discover the relationship, consequently setting up reality.

    Computer-Assisted Auditing Tools (CAATs):

    CAATs are PC programs that the reviewer use as a major aspect of the review methods to process information of review criticalness contained in a customer’s data frameworks, without relying upon him. CAAT helps reviewers to perform different evaluating methodologies; for example, 1) Testing points of interest of exchanges and adjusts; 2) distinguishing irregularities or huge changes; 3) Testing general and application control of PC frameworks; 4) Sampling projects to concentrate information for review testing, and; 5) Redoing figuring performed by bookkeeping frameworks.

    Data mining techniques:

    Black (2002); Paletta (2005); Lovett (1955) It is an arrangement of help strategies intended to consequently mine substantial volumes of information for a new, cover-up or unforeseen data or examples. Information mining procedures are arranged in three ways: Discovery, Predictive displaying and Deviation, and Link examination.

    It finds the typical learning or examples in information, without a predefined thought or theory about what the example might be, i.e. with no earlier information of fraud. It clarifies different affinities, affiliation, patterns and varieties as the contingent rationale. In prescient displaying, designs found from the database utilizes to foresee the result and to figure information for new esteem things.

    In Deviation examination the standard discovers initially, and after that those things are recognizing that go amiss from the typical inside an offered edge (to discover abnormalities by removed examples). Join disclosure has risen as of late to detect a suspicious example. It, for the most part, uses deterministic graphical strategies, Bayesian probabilistic easygoing systems. This technique includes “design coordinating” calculation to “concentrate” any uncommon or suspicious cases.

    Ratio Analysis:

    Another helpful fraud recognition procedure is the figuring of information investigation proportions for key numeric fields. Like money related proportions that give signs of the monetary soundness of an organization, information investigation proportions report on the extortion wellbeing by distinguishing conceivable side effects of fraud.

    According to the perspectives by Albrecht, et. Al (2009) three generally utilized proportions are:

    1. The proportion of the most noteworthy quality to the least esteem (max/min).
    2. The proportion of the most astounding quality to the second most noteworthy worth (max/max2), and.
    3. Also, the proportion of the present year to the earlier year.

    Utilizing proportion investigation, a money related master concentrates on connections between indicated expenses and some measure of creation, for example, units sold, dollars of offers or direct work hours. For instance, to touch base at overhead expenses per direct work hour – Total overhead expenses may isolate by aggregate direct work hours. Proportion investigation may help forensic accountants to gauge costs.

    Explain Prevention with Techniques of Forensic Accounting
    Explain Prevention with Techniques of Forensic Accounting, Cryptocurrency Bitcoin finance #Pixabay.

    Advantages of Forensic Accounting [3]:

    After Prevention and Techniques, The following three advantages of Forensic Accounting below are;

    1. It helps to solve financial crimes: As mentioned above, forensic accounting can greatly help in solving financial crimes. These can involve bribery within government offices as well as fraud and money laundering within business organizations. Forensic accounting not only helps with gathering evidence for crimes but can also use in detecting and identifying crimes.
    2. It helps monitor professionals: Forensic accounting can use to assess the work of professionals, including accountants themselves. The findings from this assessment, in turn, can use to file professional negligence claims against those who have been proving to have made critical errors (whether intentionally or not).
    3. Also, it helps businesses with their finances: Businesses can use forensic accounting to detect anomalies among their staff and with third parties they’re working with. For instance, a company can ask a forensic accountant to check an employee’s purchasing records to see if all of his purchases were for business use or if he diverted some for his personal use.

    Disadvantages of Forensic Accounting [3]:

    The following three disadvantages of Forensic Accounting below are;

    1. It takes a lot of time: Forensic accounting is never easy. It requires accountants to go through every piece of document to ensure that their investigation is complete and that they’ll uncover every evidence that will solve the case. This can take many days and can even stretch to many weeks or months, depending on the magnitude of the case; the size of the organization involved, and the number of documents to review.
    2. They can be expensive: Because of the lengthy period need, forensic accounting can turn out to be expensive. This isn’t a problem for huge corporations that have more than enough funds; but, it can be an issue for smaller businesses that have limited budgets.
    3. Also, it can be distracting: Forensic accounting can cause a distraction among employees, particularly when outside accountants are brought in. The process can disrupt the staff’s normal routine and cause their productivity and efficiency to suffer.

    Reference:

    1. https://www.sbrn.org/kb-article/what-is-forensic-accounting
    2. https://shodhganga.inflibnet.ac.in/bitstream/10603/148390/10/10_chapter%201.pdf
    3. https://connectusfund.org/7-advantages-and-disadvantages-of-forensic-accounting
  • Construction, Costs Associated, and Techniques of Plant Layout

    Construction, Costs Associated, and Techniques of Plant Layout

    Construction, Costs Associated, and Techniques of Plant Layout…

    Construction of Plant Building:

    For effective and efficient operation of the plant, the design of the building is one of the main considerations. The building housing the plant should be designed in such a way that it can meet the requirements of the concern’s operations and its layout.

    According to James Lundy,

    “An ideal plant building is one which is built to house the most efficient layout that can be provided for the process involved, yet which is architecturally ultra active and of such a standard shape and design as most flexible in its use and expensive units construction.”

    The layout may be said to be efficient if it is housed in a building that ensures comfort and health of workers engaged in the plant concerning heat, light, humidity, circulation of air, etc. and on the other hand, it protects the plant and equipment and materials from the weather.

    There are several factors which are to be considered in constructing a new building for housing the plant. These are:

    Adaptability:

    The building structure should be adaptable fully to the needs and requirements of the plant. In the beginning, most of the enterprises carry their business in a rented building which is generally not suitable to the needs and special requirements of the industries with the obvious reason that landlord constructs the building to suit average conditions of a manufacturing unit and they cannot be persuaded to make the necessary changes affecting the flexibility. As to the degree of adaptability, it may be needed that buildings are more easily adapted to fit the needs of the continuous process than to those of any other.

    Provision for additions and extensions:

    In designing and constructing a new factory building, care must be taken to provide for additions and extensions which may arise to meet the necessary and peculiar needs in due course of time. There must be every possibility to add new units without disturbing the existing manufacturing system. Kimball and Kimball have rightly suggested that “an ideal building plan is one built on some (unit) system like a sectional bookcase so that additional units can be added at any time without disturbing the manufacturing system and organization”. As a general rule extension can be made most conveniently at right angles to the direction of flow of work.

    The number of stories:

    Another important decision while designing new plant building is to consider the number of stories to be built, Le., whether the building should be single-stories or multi-stories. The choice between single and multi-stories depends obviously on various factors such as the nature of the product, proposed layout, the value of land, the cost of construction. Before deciding the number of stories, the management should bear in mind the comparative advantages and disadvantages of one story and many stories.

    Costs Associated With Plant Layout:

    The costs associated with a decision on plant layout are;

    • Cost of movement of materials from one work area to another.
    • The cost of space.
    • Cost of a production delay, if any, which are indirect costs.
    • Cost of spoilage of materials, if any, when the materials are stacked or stored in conditions which deteriorate the quality of the material.
    • The cost of labor dissatisfaction and health risks.
    • Cost of changes required, if the operational conditions change in the future. This is a long-term cost.

    A good layout should minimize all these costs put together.

    Techniques of Plant Layout:

    In designing or improving the plan of plant layout, certain techniques or tools are developed and are in common use today.

    The techniques or tools are as follows;

    Charts and Diagrams:

    To achieve work simplification, production engineers make use of several charts and diagrams for summarising and analyzing production process and procedures.

    These include;

    • Operation Process chart: It subdivides the process into its separate operations and inspections. When a variety of parts and products are manufactured which follow different parts across several floor areas, an operation process chart may be necessary for the important material items or products. The flow lines on the chart indicate the sequence of all operations in the manufacturing cycle.
    • Flow process chart: This chart is a graphic summary of all the activities taking place on the production floor of an existing plant. By preparing this type of chart, it can be found out as to where operations can be eliminated, rearranged, combined, simplified or sub-divided for greater economy. This chart will also identity inflexible processes which cannot be adapted to the output of redesigned models or related outputs.
    • Process flow diagram: The diagram is both a supplement and substitute of process flow chart. It helps in tracking the movement of material on a floor plan or layout drawing. A diagram may be drawn to scale on the original floor plan to show the movement of work. It is a good technique to show long material hauls and backtracking of present layouts, thereby indicating how the present layout may be improved. The flow of several standard products can be shown by colored lines.

    This diagram can be used to analyze the effectiveness of the arrangement of plant activities, the location of specific machines, and the allocation of space. It shows how a more logical arrangement and economical flow of work can be devised.

    Machine data card:

    This card provides full information necessary for the placement and layout of equipment. The cards are prepared separately for each machine. The information generally given on these cards include facts about the machine such as the capacity of the machine, space occupied, power requirements, handling devices required and dimensions.

    Templates:

    The template is the drawing of a machine or tool cut out from the sheet of paper. The area occupied by a machine is shown by cutting to scale. The plant layout engineer prepares a floor plan based on relevant information made available to him.

    Templates representing machines, tools, conveyors, furnaces, ovens, inspection stations, tanks, storages, bins, trucks etc. are then laid out on the floor plan according to the sequence or groupings indicated on the operation process chart and the overall layout plan prepared by the engineers and helps in trying out at possible alternative arrangements.

    The template technique is important because;

    • It eliminates unnecessary handlings.
    • Minimized backtracking of materials.
    • It makes the mechanical handling possible.
    • They provide a visual picture of the proposed or existing plan of the layout at one place, and.
    • They offer flexibility to meet future changes in production requirements.
    Scale models:

    Though two-dimensional templates are now in extensive use in the field of layout engineering it is not of much use to executives who cannot understand and manipulate them. One important drawback of the template technique is that it leaves the volume, depth, height, and clearances of machines to the imagination of the reader of the drawing.

    These drawbacks of template technique have been removed through the development of miniature scale models of machinery and equipment cast in metal. With scale models, it has now become possible to move tiny figures of men and machines around in miniature factors. The miniature machines and models of material handling equipment are placed in a miniature plant and moved about like pawn on a chessboard.

    Layout drawings:

    Completed layouts are generally represented by drawings of the plant showing walls columns, stairways, machines and other equipment, storage areas and office areas.

    The above techniques and tools are used for the planning of layout for the new plant.

  • Techniques and methods of costing in Cost accounting

    Techniques and methods of costing in Cost accounting

    The techniques and methods of costing in Cost accounting are to explain their points one by one. First, Techniques of Costing: Historical Absorption, Marginal, Budget and Budgetary Control, Differential, and Standard Costing. As well as Methods of Costing: There are two methods of costing, namely; Job costing and Process costing.

    What are the techniques and methods of costing in Cost accounting? Discussion.

    In addition to the different costing methods, various techniques are also using to find the costs.

    Techniques of Costing:

    The following are the main types or techniques of costing for ascertaining costs:

    The techniques of costing in Cost accounting
    The techniques of costing in Cost accounting

    1] Historical Absorption Costing:

    It’s the ascertainment of costs after they have been incurring. It defines as the practice of charging all costs, both variable and fixed, to operations, process or products. It also knows as traditional costing. Its ascertainment of costs after they have been incurring. It aims at ascertaining costs incurred on work done in the past.

    It has a limited utility, though comparisons of costs over different periods may yield good results. Since costs are ascertaining after they have been incurring, it does not help in exercising control over costs. However, It is useful in submitting tenders, preparing job estimates, etc.

    2] Marginal Costing:

    It refers to the ascertainment of costs by differentiating between fixed costs and variable costs. In this technique, fixed costs are not treated as product costs. They are recovering from the contribution (the difference between sales and variable cost of sales).

    The marginal or variable cost of sales includes direct material, direct wages, direct expenses, and variable overhead. It is the ascertainment of marginal cost by differentiating between fixed and variable costs.

    It uses to ascertain the effect of changes in volume or type of output on profit. This technique helps management in taking important policy decisions such as product pricing in times of competition, whether to make or not, selection of product mix, etc.

    3] Budget and Budgetary Control Costing:

    A budget is a quantitative statement preparing before the defined period to help achieve certain objectives of the firm. When we talk about the techniques of costing, budgetary control is an important technique. This budget can be in the form of quantities or can be a monetary statement. A budget will lay down the objectives of this period, and the firm’s methods to achieve them.

    For example, a production budget will deal with quantities of goods to produce. On the other hand, a marketing budget will be a monetary statement. Another important feature of a budget is that it prepares ahead of time. So the budget can be for the next quarter or the next year or any such predetermined period.

    Budgetary control is the preparation of budgets and analysis of the actual performance of the firm in comparison to the budgeted numbers. If there is a lot of variation from the budget the firm can take corrective action. This is how budgetary control works.

    4] Differential Costing:

    Differential cost is the difference in total cost between alternatives-evaluate to assist decision making. This technique draws the curtain between variable costs and fixed costs. It takes into consideration fixed costs also (unlike marginal costing) for decision making under certain circumstances.

    This technique considers all the revenue and cost differences amongst the alternative courses, of action to assist management in arriving at an appropriate decision.

    5] Standard Costing:

    It refers to the ascertainment and use of standard costs and the measurement and analysis of variances. Standard cost is a predetermining cost that computes in advance of production based on a specification of all factors affecting costs. A comparison makes of the actual cost with a pre-arranged standard cost and the cost of any deviation (called variances) analyzes by causes.

    This permits management to investigate the reasons for these variances and to take suitable corrective action. The standards are fixed for each element of cost. To find out variances, the standard costs are comparing with actual costs. The variances are investigating later on and wherever necessary, rectification steps are initiating promptly. The technique helps in measuring the efficiency of operations from time to time.

    Methods of Costing:

    In this article, we are studying the topic techniques and methods of costing. After discussing the topic of Costing Techniques, so now we can study the topic of Costing Methods. The basic principles of ascertaining costs are the same in every system of cost accounting. However, the methods of analyzing and presenting the cost may vary from industry to industry. The method to use in collecting and presenting costs will depend upon the nature of production.

    The methods of costing in Cost accounting
    The methods of costing in Cost accounting

    There are two methods of costing, namely: Job costing and Process costing.

    A] Job costing:

    Job costing uses where production is not repetitive and is done against orders. The work usually carries out within the factory. Each job treats as a distinct unit, and related costs are recording separately. This type of costing is suitable for printers, machine tool manufacturers, job foundries, furniture manufactures, etc.

    The following methods are commonly associated with job costing:

    1] Batch costing:

    Where the cost of a group of product ascertains, it calls “batch costing”. In this case, a batch of similar products treats as a job. Costs are collecting according to batch order number and the total cost divide by the numbers in a batch to find the unit cost of each product. Batch costing generally follows in general engineering factories that produce components in convenient batches, biscuit factories, bakeries, and pharmaceutical industries.

    2] Contract costing:

    A contract is a big job and, hence, takes a longer time to complete. For each contract, the account keeps recording related expenses separately. It usually follows by concerns involve in construction work e.g. building roads, bridges, and buildings, etc.

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    B] Process Costing:

    Where an article has to undergo distinct processes before completion, it is often desirable to find out the cost of that article at each process. A separate account for each process opens and all expenses are charging thereon. The cost of the product at each stage is, thus, accounted for.

    The output of one process becomes the input to the next process. Hence, the process cost per unit in different processes adds to find out the total cost per unit at the end. Process costing is often found in such industries as chemicals, oil, textiles, plastics, paints, rubber, food processors, flour, glass, cement, mining, and meatpacking.

    The following methods are used in process costing:

    1] Output/Unit Costing:

    This method follows by concerns producing a single article or a few articles which are identical and capable of being expressed in simple, quantitative units. This uses in industries like mines, quarries, oil drilling, cement works, breweries, brickworks, etc. for example, a tone of coal in collieries, one thousand bricks in brickworks, etc.

    The object here is to find out the cost per unit of output and the cost of each item of such cost. A cost sheet prepares for a definite period. The cost per unit calculates by dividing the total expenditure incurred during a given period by the number of units produced during the same period.

    2] Operating Costing:

    This method is applicable where services are rendering rather than goods produce. The procedure is the same as in the case of unit costing. The total expenses of the operation are divide by the units and cost per unit of service arrives at. This follows in transport undertakings, municipalities, hospitals, hotels, etc.

    3] Multiple Costing:

    Some products are so complex that no single system of costing is applicable. Where a concern manufactures several components to assemble into a complete article, no one method would be suitable, as each component differs from the other in respect of materials and the manufacturing process.

    In such cases, it is necessary to find out the cost of each component and also the final product by combining the various methods discussed above. This type of costing follows to cost such products as radios, airplanes, cycles, watches, machine tools, refrigerators, electric motors, etc.

    4] Operating Costing:

    In this method, each operation at each stage of production or process is separately identifying and cost. Also, the procedure is somewhat similar to the one followed in process costing. Process costing involves the costing of large areas of activity whereas operation costing confines to every minute operation of each process.

    This method follows in industries with a continuous flow of work, producing articles of a standard nature, and which pass through several distinct operations sins a sequence to completion. Since this method provides for minute analysis of cost, it ensures greater accuracy and better control of costs.

    The costs of each operation per unit and cost per unit up to each stage of operation can calculate quite easily. This method is in force in industries were toys, leather, and engineering goods are manufacturing.

    5] Departmental Costing:

    When costs are ascertaining department by department, such a method calls “departmental costing“. Where the factory divides into several departments, this method follows. The total cost of each department ascertains and divides by the total units produced in that department to obtain the cost per unit. This method follows departmental stores, publishing houses, etc.

  • Forecasting: Definition, Elements, and Techniques

    Forecasting: Definition, Elements, and Techniques

    What is the Forecasting? It is a process of predicting or estimating the future based on past and present data. Business Forecasting can be broadly considered as a method or a technique for estimating many future aspects of a business or other operation. Planning for the future is a critical aspect of managing any organization, and small business enterprises are no exception. Forecasting provides information about the potential future events and their consequences for the organization. It may not reduce the complications and uncertainty of the future. However, it increases the confidence of the management to make important decisions.

    The Concept of Planning is explaining Forecasting for Business, in points of Meaning, Definition, Elements, Importance, and Techniques.

    In this article, we will discuss Forecasting for Business Planning: First Meaning of Forecasting, then Definition of Forecasting, after those Elements of Forecasting, Importance of Forecasting, and finally discussing Techniques of Forecasting. Forecasting is the basis of promising. Forecasting uses many statistical techniques. Therefore, it is also called a Statistical Analysis. Indeed, their typically modest capital resources make such planning particularly important.

    In fact, the long-term success of both small and large organizations is closely tied to how well the management of the organization is able to foresee its future and to develop appropriate strategies to deal with likely future scenarios. Intuition, good judgment, and an awareness of how well the industry and national economy is doing may give the manager of a business firm a sense of the future market and economic trends.

    Nevertheless, it is not easy to convert a feeling about the future into a precise and useful number. Such as next year’s sales volume or the raw material cost per unit of output. Forecasting methods can help estimate many such future aspects of a business operation.

    #Meaning and Definition of Forecasting:

    As we know planning is:

    “A systematic economic and rational way of making decisions today that will affect tomorrow.”

    Then forecasting becomes an integral part of the planning process, especially, strategic planning which is long-range in nature.

    Lyndall Unrwick defined forecasting as it is involved to some extent in every conceivable business decision. The man who starts a business is making an assessment of future demand for its products. Also, The man who determines a production programme for the next six months or twelve months is usually also basing it on some calculation of future demand. The man, who engages staff, and particularly Young staff, usually have an eye to future organizational requirements.

    Business forecasting refers to a systematic analysis of past and present conditions with the aim of drawing inferences about the future course of events.

    Louis Allen defines forecasting as,

    “A systematic attempt to probe the future by inference from known facts.”

    Neter and Wasserman have defined forecasting as:

    “Business forecasting refers to the statistical analysis of the past and current movement in the given time series so as to obtain clues about the future pattern of those movements.”

    Perfect accuracy is not obtainable,” warned Richard Brealey and Stewart Myers in Principles of Corporate Finance.

    “If it were, the need for planning would be much less. Still, the firm must do the best it can. Forecasting cannot be reduced to a mechanical exercise. Naive extrapolation or fitting trends to past data are of limited value. It is because the future is not likely to resemble the past that planning is needed. To supplement their judgment, forecasters rely on a variety of data sources and forecasting methods.”

    For example, forecasts of the economic and industry environment may involve the use of econometric models. Which take account of interactions between economic variables. In other cases, the forecaster may employ statistical techniques for analyzing and projecting time series. Forecasts of demand will partly reflect these projections of the economic environment. But they may also be based on formal models that marketing specialists have developed for predicting buyer behavior or on recent consumer surveys to which the firm has access.

    #Elements of the Forecasting:

    The following elements of the forecasting process:

    These are:

    • Prepare the groundwork.
    • Create a future business.
    • Comparing actual with estimated results, and.
    • Refining the forecasts.

    Now, explain each one:

    Prepare the Groundwork:

    The group work preparation requires a thorough study, investigation, and analysis of the company, its products, its market share, its organizational structure, and the industry. The investigation will involve the past performance of all these factors. Their growth over a period of time and the extent of their inter-relationships and inter-dependence. The aim is to build a foundation on which future estimates can be based.

    Create a Future Business:

    The future expectancy of the business can be reasonably computed from the past data as well as the input from the key executives of the organization, sales personnel, and other specialists. This forecast is developed with the participation of the key personnel and is officially communicated to all. Thus all these people assume responsibility for meeting these forecasts and accountability for any deviations from this forecast.

    Comparing Actual with Estimated Results:

    The forecast estimates over the future years provide benchmarks against which the actual growth and results can be measured and compared. If there are significant variations between the two, one way or another, the reasons for such deviations can be investigated and analyzed.

    Refining the Forecasts:

    In the light of any deviations found, the forecast can be refined to be more realistic. If some conditions have changed during the periodic evaluation, then the new values of the variables can be incorporated into the estimates.

    Thus, these constant revisions and refinements and improvements would add to the experience and skill in forecasting, since proficiency in forecasting can only be gained through practice and experience. The above elements indicate a systematic approach to the problem of forecasting. As to materiality, these elements are found in any research procedure.

    #Importance of Forecasting:

    Importance of forecasting involves the following key points:

    • Forecasting provides relevant and reliable information about the past and present events and the likely future events. This is necessary for sound planning.
    • It gives confidence to the managers for making important decisions.
    • It is the basis for making planning premises, and.
    • It keeps managers active and alert to face the challenges of future events and the changes in the environment.

    #Techniques of Forecasting:

    The following Forecasting technique can be classified into two major categories:

    Qualitative Techniques:

    The following techniques three types:

    • Jury or executive opinion
    • Salesforce estimates.
    • Customer expectations.

    Now, Explains:

    Jury or Executive Opinion: 

    The jury of expert opinion sometimes referred to as the Dolphi technique; involves soliciting opinions or estimates from a panel of “experts” who are knowledgeable about the variable being forecasted. In addition to being useful in the creation of a sales or demand forecast, this approach is used to predict future technological developments. This method is fast less expensive and does not depend upon any elaborate statistics and brings in specialized viewpoints.

    Sales Force Estimates: 

    This approach involves the opinion of the sales force and these opinions are primarily taken into consideration for forecasting future sales. The sales people, being closer to consumers, can estimate future sales in their own territories more accurately. Based on these and the opinions of sales managers, a reasonable trend of the future sales can be calculated.

    These forecasts are good for short-range planning since salespeople are not sufficiently sophisticated to predict long-term trends. This method known as the “grassroots” approach lends itself to easy breakdowns of product, territory, customer etc., which makes forecasting more elaborate and comprehensive.

    Customer Expectations: 

    This type of forecasting technique is to go outside the company and seek subjective opinions from customers about their future purchasing plans. Also, Sales representatives may poll their customers or potential customers about the future needs for the goods and services the company supplies. Direct mail questionnaires or telephone surveys may be used to obtain the opinions of existing or potential customers.

    This is also known as the “survey method” or the “marketing research method” where information is obtained concerning. Customer buying preferences, advertising effectiveness and is especially useful where the target market is small such as buyers of industrial products, and where the customers are co-operative.

    Quantitative Techniques:

    Quantitative techniques are based on the analysis of past data and its trends. These techniques use statistical analysis and other mathematical models to predict future events.

    Some of these techniques are:

    • Time series analysis.
    • Economic models.
    • Regression analysis.

    Now, Explains:

    Time Series Analysis: 

    Time series analysis involves decomposition of historical series into its various components, viz., trend, seasonal variations, cyclical variations, and random variations. Also, Time series analysis uses index numbers but it is different from barometric technique. In the barometric technique, the future is predicted from the indicating series, which serve barometers of economic change.

    In time series analysis, the future is taken as some sort of an extension of the past. When the various components of a time series are separated, the variations of a particular phenomenon, the subject under study stay say price, can be known over the period of time and projection can be made about future.

    A trend can be known over the period of time, which may be true for the future also. However, time series analysis should be used as a basis for forecasting when data are available for a long period of time and tendencies disclosed by the trend and seasonal factors are fairly clear and stable.

    Economic Models: 

    Utilize a system of interdependent regression equations that relate certain economic indicators of the firm’s sales, profits etc. Also, Data center or external economic factors and internal business factors interpreted with statistical methods. Often companies use the results of national or regional econometric models as a major portion of a corporate econometric model.

    While such models are useful in forecasting, their major use tends to be in answering “what if”? Questions. These models allow management to investigate and in major segments of the company’s business on the performance and sales of the company.

    Regression Analysis: 

    Regression Analysis is statistical equations designed to estimate some variables such as sales volume, on the basis of one or more ‘independent’ variables believed to have some association with it.

  • Business Forecasting Techniques, Elements, and Steps

    Business Forecasting Techniques, Elements, and Steps

    Discover essential techniques, elements, and steps for effective business forecasting. Enhance your decision-making with our comprehensive insights and resources. Business forecasting is an act of predicting the future economic conditions on the basis of past and present information. Also, It refers to the technique of taking a perspective view of things likely to shape the turn of things in the foreseeable future. As the future is always uncertain, there is a need for an organized system of forecasting in a business.

    The Concept of Accounting explains Business Forecasting in the points of Elements, Techniques, and Steps.

    In this article discussing Business Forecasting: First Essential Elements of Business Forecasting, then the second Techniques of Business Forecasting, and finally Steps of Business Forecasting. Also, Business forecasting reduces the risk associated with business cycles. Prior knowledge of a phase of a trade cycle with its intensity and expected period of happening may help businessmen, industrialist, and economists to plan accordingly to reduce the harmful effects of trade cycle’s statistics is thus needed for the purpose of controlling the business-cycles. So, discussing each point of Business Forecasting.

    Essential Elements of Business Forecasting

    The following Essential Elements below are:

    1. Essential Elements of Business Forecasting:

    The need for forecasting is apparent from the key role it plays in planning. Forecasting has great use in developing plans. The making of forecasts and their review by managers results in thinking ahead, looking to the future, and making provisions for it. Also, the very act of forecasting may disclose areas where necessary control is lacking. Forecasting, especially where widely participated by all in the organization, may help to unify and coordinate plans. By focussing attention on the future, it assists in bringing a singleness of purpose to planning.

    2. Elements of Forecasting:

    Forecasting helps us to know the future. It also helps us to compare, to estimate and to analyze the data to arrive at the estimated results. It leads to the regular investigation of different aspects of production and management within and outside the organization. Forecasting prepares a ground to work together and brings better co-ordination, co-operation, and control in the organization. Under forecasting, future prospects, stability, and the discrepancies are properly weighed and studied. Also, This helps the management to remove any hindrances that may come in the way of management.

    Thus company results are compared with the estimated ones, the other element which is quite conspicuous with forecasting. Whenever the large difference is found, further investigation is undertaken to find out the reasons for such discrepancy. Forecasting, therefore, helps to know the expected profits or losses and just by going through certain reports and records of the company, enables the forecaster to take necessary decisions. Decision-making becomes better and easier when forecasting is undertaken on a scientific basis.

    James W. Redfield has summarized the essential elements as follows:

    • Developing the groundwork: It carries out an orderly investigation of products, company, and industry.
    • Estimating future business: This follows a clear-cut plan for working out future expectancies in the form of natural undertaking with key executives.
    • Comparing actual with estimated results: Checking the attained with anticipated results of the business periodically and tracking down reasons for major differences.
    • Refining the Forecast Process: Once familiarity with estimating the future of the business is gained through practice, sharpening the approach and refining the procedure becomes quite easy.

    Techniques of Business Forecasting:

    The following Techniques of Business Forecasting below are:

    Direct/Bottom-up method:

    Under this method, different departmental heads and their subordinates collect information and data for different aspects of production, sales, purchases, personnel etc. Also, This data, later on, is compiled together as the data for the company as a whole. It means every department/section makes its own forecast which is, later on, clubbed together as an aggregated data for the company.

    Indirect/Top-Down method:

    The requirements of the entire trade or industry are estimated first and then the share of the particular unit is ascertained. The constituent departments, later on, get their share from the company and hence the estimation has been made indirectly without giving any free hand in the compilation of data. In this case, the responsibility of successful forecasting rests with the top executives.

    Empirical Method:

    Under the empirical method, the future is predicted in terms of past experience which is the basis of prediction. The empirical forecasting is based on the method of the sequence which assumes that business follows a pattern that certain indexes anticipate the general business trend. They strive to find out such an index and devote much time to constructing curves.

    Scientific Forecasting:

    Scientific forecasting strives to use scientific methodology in establishing causal relationships. In this case, the businessmen mostly rely upon the past experience in predicting the future. Previous experience properly organized and interpreted in terms of causal relationship is the basis of scientific forecasting. The scientific forecaster may use many of the tools of the empirical forecaster, but he uses them as guides or aids in interpreting causal relationships.

    Historical Method:

    This method mainly deals with the analysis and interpretation of past events as a basis for understanding current problems and forecasting future trends. Here data concerning the past production, sales, purchases, capital needs etc. of the industry as a whole and the particular firm are compiled and tabulated. This method helps the management to know not only the future trend but also effects of trade cycles, and the correlation between different aspects of production.

    Its principal advantages are as follows:

    • It takes into consideration the past records.
    • Such past records can be easily procured, and.
    • Also, The present is also not neglected.

    Some of its disadvantages are:

    • It is not always possible to find the trend or cyclical movements of past data or to develop correlation or mathematical relationship between them and other variables which have bearing upon them, and.
    • It is not possible for firms of average size to afford such a costly investigation.

    Deductive Method:

    This method is just the reverse of the historical method. No past information or data is taken into account under this method for deciding the future trend. Forecasters, under this method, believe that the old data becomes obsolete after the lapse of a certain time and hence give more emphasis on the current data available in the organization. But objective and subjective judgments are given all the importance. The forecaster at his individual discretion analyses the current information and derives certain conclusions, pertaining to the results in the near future.

    Its main advantages are as follows:

    • It takes into account the latest development; hence it is more dynamic in character.
    • It enables the management to get information as to the future without waiting for the past information, and.
    • Delay in forecasting certain events or results is avoided. The main drawback of this method is that it relies more on individual judgment than on the past record.

    Joint-Opinion Method:

    Any work of forecasting under this method is done in consultation with persons who are directly concerned with the problem. The responsibility of exactness is shared by many and the error of judgment is avoided to a greater extent. It is based on the committee type of approach and as such, better understanding and co-operation is expected in arriving at the accurate judgment. The number of experienced experts who are in direct touch with the forecast pools their judgment. The forecasting in this way is likely to be more accurate. This method is a definite improvement on the deductive method and the individual’s discretionary views or monopoly is discarded.

    Its principal advantages are:

    • It is very easy and simple to administer
    • There is no need for detailed statistical study
    • Experience of the experts is properly utilized.

    Some of its disadvantages are:

    • Members of the committee may not take the keen interest in preparing the forecasts as the responsibility is a joint and not several ones
    • Also, It sometimes degenerates into mere guesswork
    • It cannot be applied to the forecast of a section, department or another subordinate unit.

    Steps of Forecasting:

    The process of forecasting consists of the following steps, also described as elements of forecasting:

    Developing the Basis:

    The first step involved in forecasting is developing the basis of the systematic investigation of the economic situation, the position of industry and products. Also, The future estimates of sales and general business operations have to be based on the results of such investigation. The general economic forecast marks as the primary step in the forecasting process.

    Estimating Future Business Operations:

    The second step involves the estimation of conditions and course of future events within the industry. On the basis of information/data collected through investigation, future business operations are estimated. The quantitative estimates for a future scale of operations are made on the basis of certain assumptions.

    Regulating Forecasts:

    The forecasts are compared with actual results so as to determine any deviations. The reasons for his variations are ascertained so that corrective action is taken in future.

    Reviewing the Forecasting Process:

    Once the deviations in forecasts and actual performance are found then improvements can be made in the process of forecasting. The refining of the forecasting process will improve forecasts in the future.

    Sources of Data Used In Business Forecasting:

    Collection of data is the first step in any statistical investigation. It is the basis for any analysis and interpretations. Before the collection of data, many questions shall occupy the mind of the manager. The manager must be able to answer these questions before the task of the collection is started.

    These questions are:

    • Why collect data?
    • What kind of data to be collected?
    • When it is to be collected?
    • Where from it should be collected?
    • Who will collect it?
    • Also, How it shall be collected?

    The answer to these questions is nothing but planning the collection of data. Planning for data collection refers to thinking or preparing before doing the actual task of data collection. The purpose or object of data collection, the scope of the data, the unit of data collection, the technique and sources of data are the important consideration in planning the data collection. Data may be collected from primary or secondary sources depending upon the time, resources, and purpose of the investigation.

    Primary Sources:

    It is a first-hand data collected personally by the investigator. It is costly and time-consuming. Primary data is collected if secondary data is not available. It is collected by personal interviews, questionnaires or observations.

    Secondary Sources:

    These sources of data refer to already published data or data collected by other agencies. It is a secondhand data. Here the task is more of a compilation of data.

    The sources of secondary data are:

    • Official reports of the government.
    • Publications Financial source, Financial institutions etc.
    • Also, Annual reports of companies.
    • Journals, Newspapers, Magazines etc.

    A lot of care and caution is necessary before using the secondary data. Such data is cheaper, quicker and easily available. The essence of all the above Steps and Sources is that business forecasting is a technique to analyze the economic, social and financial forces affecting the business with an object of predicting future events on the basis of past and present information.

  • Objectives, Techniques, and Types of Financial Statement Analysis

    Objectives, Techniques, and Types of Financial Statement Analysis

    Types of Financial Statement Analysis; The financial statement of a business enterprise is intending to provide much of the basic data used for decision making, and in general, evaluation of performance by various groups such as current owners, potential investors, creditors, government agencies, and in some instance, competitors. Financial statements are the reports in which the accountant summarizes and communicates the basic financial data. The creditors are primarily interested in the liquidity of the company. The government interests in the regulatory point of view. Besides, other stakeholders such as economists, trade associations, competitors, etc are also interested in the financial performance of the company. So, what we discussing is – Objectives, Techniques, and Types of Financial Statement Analysis.

    Cost Accounting explains the Objectives, Techniques, and Types of Financial Statement Analysis.

    In this article what discuss: Basic Objectives of Financial Statement Analysis, Main Objectives of Financial Statement Analysis, then Techniques of Financial Statement Analysis, and finally discussing the Types of Financial Statement Analysis. The following content is below: Financial statement analysis helps to highlight the financial performance of the company. It is the process of identifying the financial strength and weakness of a firm by properly establishing the relationship between the items on the Balance Sheet and those on the Profit and Loss Account.

    Objectives and Importance of Financial Statement Analysis:

    The primary objective of financial statement analysis is to understand and diagnose the information contained in the financial statement to judge the profitability and financial soundness of the firm and to make the forecast about the prospects of the firm. The purpose of analysis depends upon the person interested in such an analysis and his object.

    However, the following purposes or objectives of financial statements analysis may state to bring out the significance of such analysis:

    • To assess the earning capacity or profitability of the firm.
    • To assess the operational efficiency and managerial effectiveness.
    • Assess the short term as well as long-term solvency position of the firm.
    • To identify the reasons for the change in profitability and financial position of the firm.
    • Make the inter-firm comparison.
    • Make forecasts about the prospects of the firm.
    • To assess the progress of the firm over some time.
    • Help in decision making and control.
    • Guide or determine the dividend action, and.
    • Provide important information for granting credit.

    Basic Objectives of Analysis and Explains:

    The users of financial statements have definite objectives to analyze and interpret. Therefore, there are variations in the objectives of interpretation by various classes of people.

    However, there are certain specific and common objectives which are listed below:

    • To interpret the profitability and efficiency of various business activities with the help of a profit and loss account.
    • Measure the managerial efficiency of the firm.
    • Measure the short-term and long-term solvency of the business.
    • Ascertain earning capacity in the future period.
    • Determine the future potential of the concern.
    • Measure the utilization of various assets during the period, and.
    • Compare the operational efficiency of similar concerns engaged in the same industry.

    Main Objectives of Financial Statement Analysis:

    The major objectives of financial statement analysis are to provide decision-makers with information about a business enterprise for use in decision-making. Users of financial statement information are the decision-makers concerned with evaluating the economic situation of the firm and predicting its future course.

    Financial statement analysis can use by different users and decision-makers to achieve the following objectives:

    Assessment of Past Performance and Current Position:

    Past performance is often a good indicator of future performance. Therefore, an investor or creditor is interested in the trend of past sales, expenses, net income, cash flow and return on investment. These trends offer a means for judging management’s past performance and are possible indicators of future performance.

    Similarly, the analysis of the current position indicates where the business stands today. For instance, the current position analysis will show the types of assets owned by a business enterprise and the different liabilities due to the enterprise. It will tell what the cash position is, how much debt the company has about equity and how reasonable the inventories and receivables are.

    Prediction of Net Income and Growth Prospects:

    The financial statement analysis helps in predicting the earning prospects and growth rates in the earnings which are using by investors while comparing investment alternatives and other users interested in judging the earning potential of business enterprises.

    Investors also consider the risk or uncertainty associated with the expected return. The decision-makers are futuristic and always concerned with the future. Financial statements that contain information on past performances are analyzing and interpret as a basis for forecasting future rates of return and for assessing risk.

    Prediction of Bankruptcy and Failure:

    Financial statement analysis is a significant tool in predicting the bankruptcy and failure probability of business enterprises. After being aware of probable failure, both managers and investors can take preventive measures to avoid/ minimize losses. Corporate management can effect changes in operating policy, reorganize financial structure or even go for voluntary liquidation to shorten the length of time losses.

    In the accounting and finance area, empirical studies conducted have suggested a set of financial ratios that can give an early signal of corporate failure. Such a prediction model based on financial statement analysis is useful for managers, investors, and creditors. Managers may use the ratios prediction model to assess the solvency position of their firms and thus can take appropriate corrective actions.

    Investors and shareholders can use the model to make the optimum portfolio selection and to bring changes in the investment strategy by their investment goals. Similarly, creditors can apply the prediction model while evaluating the creditworthiness of business enterprises.

    Loan Decision by Financial Institutions and Banks:

    Financial statement analysis uses by financial institutions, loaning agencies, banks, and others to make a sound loan or credit decision. In this way, they can make the proper allocation of credit among the different borrowers. Financial statement analysis helps in determining credit risk, deciding the terms and conditions of the loan if sanctioned, interest rate, maturity date, etc.

    Techniques of Financial Statement Analysis:

    Various techniques are using in the analysis of financial data to emphasize the comparative and relative importance of data presented and to evaluate the position of the firm.

    Among the more widespread use of these techniques are the following:

    • Horizontal Analysis.
    • Vertical Analysis.
    • Trend Analysis.
    • Ratio Analysis.
    • Cash flow analysis.
    • Funds flow analysis.
    • Comparative financial statements.
    • Common measurement or size statements, and.
    • Net Working capital analysis.

    Now, explain each;

    Horizontal Analysis:

    The percentage analysis of increases and decreases in corresponding items in comparative financial statements calls horizontal analysis. The horizontal analysis involves the computation of amount changes and percentage changes from the previous to the current year.

    The amount of each item on the most recent statement compares with the corresponding item on one earlier statement. The increase or decrease in the amount of the item is then listed, together with the percent of increase or decrease. When the comparison makes between two statements, the earlier statement uses as the base.

    If the horizontal analysis includes three or more statements, there are two alternatives in the selection of the base. First, the earliest date or period may use as the basis for comparing all later dates or periods or second, each statement may compare with the immediately preceding statement.

    The percent change computes as follows:

    Percentage change = Amount of change/Previous year amount x 100.

    Vertical Analysis:

    The analysis uses percentages to show the relationship of the different parts to the total in a single statement. Vertical analysis sets a total figure in the statements equal to 100 percent and computes the percentage of each component of that figure. The figure to use as 100 percent will be total assets or total liabilities and equity capital in the case of the balance sheet and revenue or sales in the case of the profit and loss account.

    Trend Analysis:

    Using the previous year’s data of a business enterprise, trend analysis can finish observing percentage changes over time in selected data. In trend analysis, percentage changes are calculating for several successive years instead of between two years. Trend analysis is important because, with its long-run view, it may point to basic changes like the business.

    By looking at a trend in a particular ratio, one may find whether that ratio is falling, rising or remaining relatively constant. From this observation, a problem is detecting or the sign of good management is found. Trend analysis uses an index number over some time. For index number, one year, the base year is equal to 100 percent. Other years are measuring that amount. For example, an analyst may interest in sales and earnings trends for the past five years.

    For this purpose, the sales and earnings data of a company are given to prepare further the trend analysis or percentages. The above data show a fairly healthy growth pattern but the pattern of change from year to year can determine more precisely by calculating trend percentages. To do this, a base year selects and then the data are divided for each of the other years by the base year data.

    Ratio Analysis:

    Ratio analysis is an important means of expressing the relationship between two numbers. A ratio can compute from any pair of numbers. To be useful, a ratio must represent a meaningful relationship, but the use of ratios cannot take the place of studying the underlying data.

    Ratios are guides or shortcuts that are useful in evaluating the financial position and operations of a company and in comparing them to previous years or other companies. The primary purpose of ratios is to point out areas for further investigation. They should use in connection with a general understanding of the company and its environment. Comparison of income statement and balance sheet numbers, in the form of ratios, can create difficulties due to the timing of the financial statements.

    Specifically, the profit and loss account covers the entire fiscal period, whereas the balance sheet is for a single point in time, the end of the period. Ideally then, to compare an income statement figure such as sales to a balance sheet figure such as receivable, we usually need a reasonable measure of average receivables for the year that the sales figure covers.

    However, these data are not available to the external analyst. In some cases, the analyst should take the next best approach, by using an average of beginning and ending balance sheet figures. This approach smoothes out changes from beginning to end, but it does not eliminate the problem due to seasonal and cyclical changes. It also does not reflect changes that occur unevenly throughout the year.

    Cash flow Analysis:

    Cash flow analysis depicts the inflows and outflows of cash. The cash flow statement is the device for such an analysis. It highlights causes that bring changes in cash position between two balance sheet dates.

    Funds Flow Analysis:

    Funds flow statement signifies the sources and applications of funds. The term ‘funds’ refers to working capital. Funds flow analysis clearly shows internal and external sources of working capital and the way funds have been using. Funds flow derives from analysis of changes that have taken place in assets and equities between two balance sheet dates.

    According to Foulke,

    “A statement of sources and application of funds is a technical device design to analyze the changes in the financial position of a business concern between two periods.”

    Funds flow analysis helps judge creditworthiness, financial planning, and budget preparation.

    Comparative Financial Statements:

    This is yet another technique used in financial statement analysis. This is statements summarize and present related data for several years. Incorporating therein changes (absolute and relative) in individual items of financial statements.

    The statements normally comprise comparative balance sheets, comparative profit, and loss account. And, comparative statements of change in total capital as well as in the working capital. Also, these statements help in making inter-period and inter-firm comparisons and also highlight. The trends in performance efficiency and financial position.

    Common Size Statements:

    Common size statements indicate the relationship of various items with some common items, (expressed as a percentage of the common item). In the income statements, the sales figure takes as the basis and all other figures are expressing as a percentage of sales.

    Similarly, in the balance sheet, the total assets and liabilities are taking. As the base and all other figures are expressing as the percentage of this total. The percentages so calculate are comparing with corresponding percentages in other periods or other firms and meaningful conclusions are drawn. Generally, a common size income statement and common size balance sheet are preparing.

    Networking Capital Analysis:

    Networking capital statement or schedule of changes in working capital prepares to disclose net changes in working capital on two specific dates (generally two balance sheet dates). It is preparing from current assets and current liabilities on the specified dates to show a net increase or decrease in working capital.

    Types of Financial Statement Analysis:

    The process of financial statement analysis is of different types. The process of analysis is classifying based on information use and “Modus Operandi” of analysis.

    The classification is as under – (1) based on Information:

    External Analysis:

    This analysis is base on published the financial statements of a firm. Outsiders have limited access to internal records of the concern. Therefore, they depend on publishing financial statements. Thus, the analysis done by outsiders namely, creditors, suppliers, investors, and government agencies knows as external analysis. This analysis serves a very limited purpose.

    Internal Analysis:

    This analysis is done based on internal and unpublished records. It is done by executives or other authorized officials. It is very much useful and significant to employees and management.

    (2) Based on “Modus Operandi” of Analysis:

    Horizontal Analysis:

    This analysis is also known as ‘dynamic’ or ‘trend’ analysis. The analysis is done by analyzing the statements for several years. According to John N. Myer, “the horizontal analysis consists of a study of the behavior of each of the entities in the statement”. Thus, under horizontal analysis, we study the behavior of each item shown in the financial statements.

    We examine as to what has been the periodical trend of various items shown in the statements i.e., whether they have to increase or decrease over some time. If the comparative statements are preparing for more than two periods, then one of the years takes as a basis to calculate the percentage of increase or decrease. Some analysts prefer to choose the earliest year as the basis, while some others prefer to take just the preceding year as the basis.

    Vertical Analysis:

    The analysis also knows as ‘static analysis’ or ‘structural analysis’. This analysis makes based on a single set of financial statements preparing on a particular date. Under vertical analysis, the quantitative relationship is establishing between different items shown in particular statements. Common-size statements are a form of vertical analysis. Different items shown in the statement are expressing as a percentage to any one item as the base. The use of both methods of analysis is very much requiring for proper analysis. Each method provides a specific type of information and in fact, both methods constitute the backbone of financial analysis.

    Objectives Techniques and Types of Financial Statement Analysis
    Objectives, Techniques, and Types of Financial Statement Analysis. Image credit from #Pixabay.

  • What do you think of Data Warehousing?

    What do you think of Data Warehousing?

    Companies using data warehousing and its effects, How many Types of Data Warehousing? What are the benefits of using data warehousing? The term data warehouse or data warehousing was first coined by Bill Inmon in the year 1990 which was defined as a “warehouse which is subject-oriented, integrated, time variant and non-volatile collection of data in support of management’s decision-making process”. When referring to data warehousing as subject-oriented, it simply means that the process is giving information about a particular subject rather than the details regarding the on-going operations of the company. It is a blend of technologies and components which allows the strategic use of data. You are read and studying to learn, What do you think of Data Warehousing? Download PDF.

    A data warehousing is a technique for collecting and managing data from varied sources to provide meaningful business insights. What do you think of Data Warehousing? Download PDF.

    It is electronic storage of a large amount of information by a business which is designed for query and analysis instead of transaction processing. It is a process of transforming data into information and making it available to users in a timely manner to make a difference. Moreover, when data warehousing was referred to as integrated it means that the data or information which are gathered from a number of sources are then all gathered to synthesize a coherent whole.

    On the other hand, data warehousing being time variant simply means that the data available were identified during a particular period. Lastly, data warehousing as being non-volatile means that the data is stable and when a new data is added to the system, the old data are never removed, instead they just remain there and this enables the organization to be able to give the management consistency in their business. In the existence of modern times with the advent of technological advancements inevitably affecting the businesses in major ways, there has also been a development and emergence of new measures, practices, and techniques which used technology to be able to provide an unwavering solution to the problems in the organization with regards to the level and kind of information that the organization needs to be able to survive and prosper amidst the increasing competition in the market.

    Undeniably, one of this techniques and practices refers to the emergence of data warehousing as a tool for helping today’s businesses to be able to manage competition and the turbulent economic condition. The birth f the concept of data warehousing can be contributed to various researches and studies which were conducted in the past to provide various organizations with the means of getting information in a manner which is efficient, effective, and flexible. The data warehousing which is known today among the corporate practice is not what it was when it started almost two decades ago. The practice of data warehousing nowadays is a result of the experiences and technologies in the last twenty years. Bill Inmon and Ralph Kimball are two of the heavyweights when it comes to data warehousing.

    However, although their names are known in this field, these two scholars have two varying views with regards to data warehousing. The paradigm which was illustrated by Inmon holds that the data warehouse forms only a part of the general business intelligence system. On the other hand, the paradigm of Kimball assumes that the data warehouse is a conglomerate of all the data in the organization.

    Other researchers assume that there is no right or wrong theories among the two assumptions from the two heavy weighs in data warehousing. However, most of them support the notion of Kimball’s paradigm. They believe that most data warehouses started only as efforts from various departments starting with what they call as data marts until they develop and evolve to become a data warehouse. Furthermore, data warehousing has been heralded as one of the sustainable solutions to management information and dilemma and such also provide the organization and environment which entails various benefits if they are practiced in the right way and if the perspectives are directed towards the right goal.

    The process of data warehousing is said to have the intention of providing an architectural model which can best provide an illustration of the flow data from the systems regarding the operation of the decision support environments. However, according to the same author, one problem stems down from the data warehousing technique – that is such a system is said to be too expensive to be affordable for some organizations or businesses.

    It is undeniable that data warehousing continues to attract interest, it is also undeniable that many projects are failing to deliver the expectations from what they are supposed to deliver and they still prove to be too high of accost to be handled by some businesses. However, to be able to justify this relatively high cost, it has been said that organizations should look at the long-term benefit of the warehouse rather than simply looking at the short-term benefits that such an offer. Moreover, data warehousing is also said to be designed to be able to support ad-hoc data analysis, inquiry and reporting by end-users, without programmers, interactively and online.

    There are some key factors which can make the data warehousing practice a success among different organizations. One of the key ingredients to the success of the practice is to make the management, especially the higher management, aware and conscious of all the benefits which this tool entails and what can data warehousing do to improve the performance of the business.

    Another key to the success of data warehousing is choosing the right people to make it happen. By choosing the right people, the contribution of individual minds should be recognized to form a synthesis and a greater whole. Training strategy, the right structure or architecture, a sustainable mission statement, showing early benefits, ensuring scalability, understanding how important is the quality of data and using only proven and effective methodology are some of the other key ingredients to make data warehousing a successful practice, Data Warehousing file Download in PDF.

    Why needs Data warehousing?

    The data warehousing is needed for all types of these users like:

    • If the user wants fast performance on a huge amount of data which is a necessity for reports, grids or charts, then Data warehouse proves useful.
    • Decision makers who rely on the mass amount of data.
    • It is also used by the people who want simple technology to access the data.
    • It also essential for those people who want a systematic approach to making decisions.
    • The data warehouse is a first step If you want to discover ‘hidden patterns’ of data-flows and groupings.
    • Users who use customized, complex processes to obtain information from multiple data sources.

    The Companies using data warehousing and its effects.

    An example of a known company which uses data warehousing is WalMart. Being the world’s largest retailer, many say that the company should be also the organization with the largest data warehouse which is going to serve as the database of its inventory and all transactions related to their business performance. The data warehousing also has a big implication on the business of WalMart.

    According to the management of the world’s largest retailer, more than any other purpose, their data warehouse is helping them to be able to make decision support systems between the company and its various suppliers. Aside from that, another implication of data warehousing on WalMart is that it enables the suppliers to be able to access a large amount of online information and data which will be helpful with their suppliers in terms of improving their operations.

    One example of companies using and reaping the benefits of adapt warehousing will be various pharmaceutical companies, or on a larger scale, the general healthcare industry. For most of the pharmaceutical businesses which are under operation, they were able to acknowledge the fact that they lack a sustainable focus on their promotional practices, resulting in diffused sales efforts. With that, they regard that data warehousing technique has a big implication in their business because they regard such as the best medicine and remedy for the aforementioned problem.

    They are even using data warehousing to be able to attain a sustainable competitive edge against other businesses in the industry. In the case of pharmaceutical companies, it has an implication also in the marketing department. Data warehousing helps the marketing department, through various information contained, to come up with promotional and marketing activities which can yield the maximum results. Moreover, data warehousing also has an implication on the human resources department of the organizations because they can also help in the effective allocation of people and resources.

    How many Types of Data Warehousing?

    There are three main types of Data Warehousing are:

    • Enterprise Data Warehousing: Enterprise Data Warehouse is a centralized warehouse. It provides decision support service across the enterprise. It offers a unified approach to organizing and representing data. It also provides the ability to classify data according to the subject and give access according to those divisions.
    • Operational Data Store: Operational Data Store, which is also called ODS, are nothing but data store required when neither Data warehouse nor OLTP systems support organizations reporting needs. In ODS, Data warehouse is refreshed in real time. Hence, it is widely preferred for routine activities like storing records of the Employees.
    • Data Mart: A data mart is a subset of the data warehouse. It specially designed for a particular line of business, such as sales, finance, sales or finance. In an independent data mart, data can collect directly from sources.

    What are the benefits of using data warehousing?

    Some of the benefits of data warehousing that it offers include the fact that it has a relative orientation on the subject area, it has the ability to provide an integration of data which were retrieved from diverse and multiple sources, it allows data analysis from time to time, it adds ad hoc inquiry and reporting, it provides decision makers with the capabilities to analyze, it relieves the IT from information development.

    It has the ability to provide better performance for complex analytical queries, it relieves the burden of processing databases which are based on transactions, it allows a planning process that is perpetual and continuous, and lastly, it converts corporate data to make them strategic information which can help them in planning for a better performance of the organization.

    Another benefit of data warehousing is that it enables and it helps different organizations in the strategic decision making resulting into the formulation of strategic decisions which are geared towards enabling a better business performance and yielding better results.

    It can be assumed that most data warehousing practices are not intended for strategic decision making because they are normally used for post-monitoring of decisions regarding how effective they are. Nonetheless, it should not be also disregarded that data warehousing, can also be sued for strategic decision making and can be used profitably.

    Another benefit of data warehousing is that it enables the user to have unlimited access to a relatively very large amount of enterprise information which can be used to potentially solve a large number of enterprise problems which can even be used to increase the profitability of the company. A very well-designed data warehouse can yield a greater return-on-investment with unlimited benefits had the ability to better assess the risks associated with the organization. Fully read on PDF file and download.

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