Tuesday, 20 August 2013

Business Environment, Stock Market and Financial Profitability

Financial profitability, environmental sustainability and social equity are the three new pillars that hold an organization in a stable form. These are like base that builds profit for the organization in the long term. This philosophy helps to make strategic financial plans so as to increase the profitability. These factors help to drive the customers, investors and employees to make investments with the firm.

Business environment:The term business environment is composed of two words – business and environment. In order to understand this term, you need to understand it by breaking the two words from the term. The first is business which means any act that keeps a person or group of person engaged in some task which may be done with the motive of gaining profit. The next word environment is the term that is used to refer the surroundings. Surroundings refer to the social, legal, political, economic, and institutional scenario that affects the functioning of the organization. Business environment has two components:

1.      Internal Environment: Internal environment include material, men, management and machinery which are under the control of the business but can bring positive and negative effect on business and its functioning. By bringing changes in the functioning of the business it can affect the profitability of the firm.

2.      External Environment: External factors are those that are beyond the control of business and are role players in proper functioning of the business. These factors include Geo-Physical Factors, Government Factors, Political Factors, Demo-Graphic Factors, Sociology-Cultural Factors, etc.

Financial Profitability: Plans to Increase It

Profitability of a firm depends on various factors and without proper research and taking appropriate action, you cannot expect your desired goal. Strategic planning are therefore made. These plans are made by the business so as to make more profit from the business that are dealing with. Proper acceptance of those strategies would help in short as well as long term financial benefit. The strategy concentrates on certain crucial factors that are responsible for bringing changes into the financial condition of the firm. It shows you a clear vision of the present state of the company and future goal. Once you are aware of the present condition and the final goal, it becomes easier for you to make plans and work accordingly so that you reach your goal on time. Factors like the financial resources available, current practices, policies followed, success rate of policies, competition, etc., are taken into consideration. Keeping all these factors in concern, the company plans its further actions so that it can make out profits.

Strategic planning works on the below mentioned facts

·         Organization’s goal

·         Present resources

·         Usage of resources

·         Competitors in the market

·         Company’s business environment

The primary intension behind developing a strategic plan to reach to a certain goal. The managers of the organization work in the specific fields for proper execution of the plan. Although the factors mentioned above are from different departments of a business, all the managers from different departments need to make a coordinated attempt to fulfill their needs. This includes all the possible business areas like team management needs, staffing, sales, R&D, marketing, finance, accounting, etc. As all these departments work together for business benefit, they all need to work in coordination for proper execution of the plan.

How are these plans useful in financial profitability?

·         Acts as a base to make decisions

·         Assist in monitoring the performance of the firm

·         It shows a clear view of the present company status

·         The findings can be used as a blueprint for further developments

·         It finds the loopholes in the business processes

Making strategic plans is necessary for every business as it helps to find the problems and acts as a factor to be relied upon while making improvements. Financial profitability is greatly dependent on these plans as the sole intention behind all pain is to increase the financial profits. Business environment plays an important role in deciding the revenue generated by a company.

Monday, 12 August 2013

Stock Market Basics Information

There is not much difference to point out between gambling and the functioning of the stock market. The investors put in money in the stocks and just leave it on fate for the company to do well so that the investors gets back profits generated by the company as per the share that they have bought. Although much of analysis is done to predict the future performance of a share, it depends greatly on fate and nothing can be said for sure whether a company will do better or fall down in its business. This makes it similar to gambling.
New investors think stock market nothing more than a gambling place where their investment would either bring huge profit that will make their life or will bring devastating losses. This makes no big difference between a game of roulette and stock market investment. However, this is just a view through the eyes of a newbie in this field and as you get deeper into stock business, you get more experience and understand the nature of market well. Experience helps you manage your money in a better way and possibly, it keeps your hard-earned cash safe as well as helps you obtain enough profit from your investment.
The unexpected and unpredictable behavior of the stock market might threaten a lot many investors from putting in their money in shares. However, understanding the in depth facts regarding it might help you get relieved from the stress and fear that you have regarding stock market investment. Here is some basic information about stock market. A share that an investor buys is actually a share of ownership in the company. When an investor buys a share, he is entitled to a small fraction of the assets of the company and the same fraction of the profits of the company.
Once you buy a share, you possess ownership to a part of every asset that a company possesses including building, trademark and equipment. They also have share in all the profit that the company generates by selling its products but they also have to suffer the losses if the company suffers from loss.  There are two types of shares – preference share and equity share holders. The preference shareholders are paid the dividend before paying to any equity shareholder. They receive dividend at a fixed rate irrespective of what profit the company is generating and even if the company is in loss. However, the equity shareholders receive huge dividend as per company profits but they may need to suffer from losses if case company suffers the same.
One question might arise in your mind that why would a company allow shareholders to buy shares. The reason for this is that the company needs money to cover the startup investment or to expand itself and so it accepts money from people all around the world. They accept shares with a specific face value, which is a price of one share of the company. That is the minimum amount of investment that a person can make in the company. The face values for different companies are different and may vary as per market conditions and their needs.