Project Planning, appraisal & Control (EDL 407)-Semester IV

Project Planning, appraisal & Control (EDL 407)-Semester IV

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1st Module Assessment

Case Study # What it takes to be a great project manager?

Many challenges confront today’s project managers — new technologies, remote workforces and a global market to name a few. To take a project from inception to finish can be grueling and you’ve got to have great dedication and skills if you’re going to be successful. But what sets apart good project managers (PMs) from the truly great ones? What does it take to go from being the manager of projects to a game-changing leader? Here are six skills the great PMs share.

Become a customer relationship management expert

Develop positive mutually aligned connections with stakeholders: The first thing any project leader should work on is developing a positive relationship or connection with key stakeholders and project sponsors within an organization. Simply jumping into a project and bypassing this step can elevate risks right out of the gate and could further increase communication gaps down the road. Being able to understand the perspective, experience and resulting behaviors of the primary players helps to create a platform for improved communication and reduces friction.

Develop an understanding of a specific business and its needs: It’s not important to know every detail there is to know about a customer’s industry; however, making an effort to research key facts, norms and challenges demonstrates sincere interest as it relates to potentially unique business needs. After all, how can you sell any company on the benefits of your skills as a PM without understanding potential challenges, opportunities and impacts to their business? Once you are able to clearly articulate that you understand their obstacles and their needs, it’s less of an uphill battle selling the benefits of a project and alleviating fears.

Pay attention to the big picture, but don’t miss the details: The ability to see the broader picture yet not skip over the details is another skill that enables good project leaders to become great project leaders. Being able to connect the dots from start to finish, all the while keeping the higher-level end goal in sight is a valuable skill that offers organizations peace of mind. Organizational leadership simply doesn’t have time to ensure project leaders are on top of things. These leaders rely heavily on a project manager to understand their business needs and goals, and also navigate project tasks and milestones with minimal guidance.

Don’t just manage teams — motivate and influence them

Be an effective project leader by leading people, not managing them: Teams need to be able to rely on a project manager to provide them with sufficient guidance when needed and to excel in areas like motivation and communication. As a PM you can’t be everywhere or do everything, and this highlights the need to trust the knowledge, skills and abilities of team members. Establishing trusting relationships with stakeholders and team members provides smoother navigation through difficult situations and creates a greater degree of transparency.

Help to build respect among teams and stakeholders: Projects offer opportunities for a diverse set of individuals to bring unique skills, experiences and ideas to the table and helps to build better solutions. Problems often arise when individuals are in conflict and demonstrate a lack of respect for difference or override the contributions of others. This is where tact and skill as a project manager can alleviate tension and encourage team members to refocus on what’s best for the stakeholder(s), rather than remaining self-focused. A strong PM is always able to shed light on key factors and help individuals to see the merits of both sides. The need for mutual respect should be expected and communicated from the start, and ground rules and applicable consequences should be laid out to avoid disruption and lost productivity.

Influence individuals and teams to optimize their contributions. A large part of the role of a project leader is to influence each team member to give their best regardless of personal views, obstacles, and conflicts. Influence is both an art and learned behavior that is often undervalued and overlooked. It’s important to note that influence shouldn’t be confused with manipulation. The real value in positive influence is the ability to translate this soft skill into action that results in a win-win for the stakeholders and team. Further, it’s imperative individual team members and the team as a whole not only understand their role and how it fits within the project goals, but also that they are committed to continuous improvement for optimal results that benefit the customer.

Putting it all together

Companies are increasingly seeking well-rounded project leaders who exhibit the technical know-how and leadership prowess required to see things and execute from different vantage points. A project manager who has the underlying training combined with these core soft skills can uniquely position him or herself to stand out in their field, achieve optimal results and become a sought after thought leader.

Question-1: A large part of the role of a project leader is to influence each team member to give their best regardless of, obstacles, and conflicts.

 a. personal views

 b. obstacles

 c. conflicts

 d. All

Question 2. A project manager who has the underlying training combined with these core soft skills is ????. For job.

 a. Suitable

 b. Not Suitable

 c. Influential

 d. None

Question 3. A strong PM is always able to shed light on key factors and help individuals to see the ????..of both sides.

a. Demerits

 b. merits

 c. Swot

 d. Mirror

Question 4. For the success of a project, PMs are becoming ??..

 a. CRM Expers

 b. Dedicated

 c. Skilled

 d. Experts

Question 5. Is it right t say that primary players helps to create a platform for improved communication and reduces friction.

 a. Can’t Say

 b. TRUE

 c. FALSE

 d. Sometimes

Question 6. Simply jumping into a project and bypassing this step can ?????. risks.

 a. Nullify

 b. Elevate

 c. Reduce

 d. Stable

Question 7. The ability to see the broader picture yet not skip over the details is another skill that enables good project leaders to become great project leaders.

 a. Rare

 b. Always

 c. Sometimes

 d. Never

Question 8. Trusting relationships with stakeholders and team members provides smoother navigation.

 a. TRUE

 b. FALSE

 c. Can’t Say

 d. Sometimes

Question 9. What challenges are faced by today’s Project Managers?

 a. New Technology

 b. Remote Workforce

 c. Global Market

 d. All

Question 10. What is required for a successful project.

 a. Patience

 b. Dedication

 c. Skill

 d. All

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2nd Module Assessment

Case Study- Project’s Technical  Analysis

Technical aspects relate to the production or generation of the project output in the form of goods and services from the project’s inputs. Technical analysis represents study of the project to evaluate technical and engineering aspects when a project is being examined and formulated. It is a continuous process in the project appraisal system which determines the prerequisites for meaningful commissioning of the project.

Aspects of Technical Analysis

Technical analysis broadly involves a critical study of the following aspects, viz.,

1) Selection of Process/ Technology: For manufacturing a product, more than one process/technology may be available. For example, steel can be manufactured either by the Bessemer process or by the open-health process. Cement can be manufactured either by the wet process or by the dry process.

The choice of technology also depends upon the quantity of the product proposed to be manufactured. It the quantity to be produced is large, mass production techniques should be followed and the relevant technology is to be adopted. The quality of the product depends upon the use to which it is relevant technology is to be adopted. The quality of the product depends upon the use to which it is meant for. A product of pharmaceutical grade or laboratory grade should have high quality and hence sophisticated production technology is required to achieve the desired quality. Products of commercial grad do not need such high quality and the technology can been chosen accordingly.

A new technology that is protected by patent rights, etc., can be obtained either by licensing arrangement or the technology can be purchased outright. Appropriate technology: A technology appropriate for one country may not be the ideal one for another country. Even within a country, depending upon the location of the project and other features, two different technology may be ideal for two similar projects set up by two different firms at two different locations. The choice of a suitable technology for a project calls for identifying what is called the ‘appropriate technology’.

The term ‘appropriate technology’ refers that technology that is suitable for the local economic, social and cultural conditions.

2) Scale of operations: Scale of operations is signified by the size of the plant. The plant size mainly depends on the market for the output of the project. Economic size of the plant varies from project to project. Economic size of the plant for a given project can be arrived at by an analysis of capital and operating costs as a function of the plant size. Though the economic size of the plant for a given for a given project can be theoretically arrived at by above process, the final decision on the plant size is circumscribed by a number of factors, the main factor being the promoter’s ability to raise the funds required to implement the project. If the funds required implementing the project as its economic size is beyond the promoter’s capacity to arrange for and if the economic size is too big a size for the promoter to manage, the promoter is bound to limit the size of the project that will suit his finance and managerial capabilities. Whenever a project is proposed to be to be set up at a size below its economic size, it must be analyzed carefully as to whether the project will survive at the proposed size (which is below the economic size). Performance of existing units operating at blow economic size will throw some light on this aspect.

3) Raw Material: A product can be manufactured using alternative raw materials and with the alternative process. The process of manufacture may sometimes vary with the raw material chosen. If a product can be manufactured by using alternative raw materials, the raw material that is locally available may be chosen. Since the manufacturing process and the machinery/requirement to be used also to a larger extent depend upon the raw material, the type of raw material to be used should be chosen carefully after analyzing various factors like the cost of different raw materials available, the transportation cost involved, the continuous availability of raw material , etc. Since the process of manufacture and the machinery/ equipments required depend upon the raw material used, the investment on plant and machinery will also to some extent depend upon the raw material used, the investment on plant and machinery will also to some extent depend upon the raw material chosen. Hence the cost of capital investments required on plant and machinery should also be studied before arriving at a decision on the choice of raw material.

4) Technical Know-How: When technical know-how for the project is provided by expert consultants, it must be ascertained whether thee consultant has the requisite knowledge and experience and whether he has already executed similar projects successfully. Care should be exercised to avoid self-styled, inexperienced consultants. Necessary agreement should be executed between the project promoter and the know-how supplier incorporating all essential features of the know-how transfer. The agreement should be specific as to the part played by the know-how supplier (like taking out successful trial run, acceptable quality of final product, imparting necessary training to employees in the production process, taking out successful commercial production, performance guarantee for a specified number of years after the start of commercial production, etc). The agreement should also include penalty clauses for non-performance of any of the conditions stipulated in the agreement.

5) Collaboration Agreements: If the project promoters have entered into agreement with foreign collaborators, the terms and conditions of the agreement may be studied as explained above for know-how supply agreement.

Apart from this, the following additional points deserve consideration:

(i) The competence and reputation of the collaborators needs to be ascertained through possible sources including thee Indian embassies and the collaborator’s bankers.

(ii) The technology proposed to be imported should suit to the local conditions. A highly sophisticated technology, which does not suit local conditions, will be detrimental to the project.

(iii) The collaboration agreement should have necessary approval of the Government of India.

(iv) There should not be any restrictive clause in the agreement that import of equipment/machinery required for the project should be channelized through the collaborators.

(v) The design of the machinery should be made available to the project promoter to facilitate future procurement and/or fabrication for machinery in India at a later stage.

(vi) The agreement should provide a clause that any dispute arising out of interpretation of the agreement, failure to, comply with the clauses contained in the agreement, etc., shall be decided only by courts within India.

(vii) It must be ensured that the collaboration agreement does not infringe upon any patent rights.

(viii) It is better to have a buy–back arrangement with the technical collaborator. This is to ensure that the collaborator would be serious about the transfer of correct know-how and would ensure quality of the output.

6) Product Mix: Customers differ in their needs and preferences. Hence, variations in size and quality of products are necessary to satisfy the varying needs and preferences of customers, the production facilities should be planned with an element of flexibility. Such flexibility in the production facilities will help the organization to change the product mix as per customer requirements, which is very essential for the survival and growth of any organization.

For example, a plastic container manufacturing industry can be produced according to the market requirement. This will give the unit a competitive edge.

7) Selection and Procurement of Plant and machinery

Selection of machinery: The machinery and equipment required for a project depends upon the production technology proposed to be adopted and the size of the proposed. Capacity of each machinery is to be decided by making a rough estimate, as under; thumb rules should be avoided.

i) Take into consideration the output planned.

ii) Arrive at the machine hours required for each type of operation.

iii) Arrive at the machine capacity after giving necessary allowances for machinery maintenance/breakdown, rest time for workers, set up time for machines, time lost during change of shifts, etc.

iv) After having arrived at the capacity of the machinery as above, make a survey of the machinery available in the market with regard to capacity and choose that capacity which is either equal to or just above the capacity theoretically arrived at.

In case of process industries, the capacity of the machines used in various stages should be so selected that they are properly balanced.

Procurement of Machinery

Plant and machinery form the backbone of any industry. The quality of output depends upon the quality of machinery used in processing the raw materials (apart from the quality of raw material itself). Uninterrupted production is again ensured only by high quality machines that do not breakdown so often. Hence no compromise should be made on the quality of the machinery and the project promoter should be on the lookout for the best brand of machinery available in the market. The performance of the machinery functioning elsewhere may be studied to have first-hand information before deciding upon the machinery supplier.

Plant Layout

The efficiency of a manufacturing operation depends upon the layout of the plant and machinery. Plant layout is the arrangement of the various production facilities within the production area. Plant layout should be so arranged that it ensured steady flow production and minimizes the overall cost.

The following factors should be considered while deciding plant-layout:

i) The layout should be such that future expansion can be done without much alteration of the existing layout.

ii) The layout should facilitate effective supervision of work.

iii) Equipments causing pollution should be arranged to be located away from other plant and machinery. For example, generator is a major source of noise pollution.

iv) There should be adequate clearance between adjacent machinery and between the wall and machinery to enable undertaking of regular inspection and maintenance work.

v) The plant layout should ensure smooth flow of men and material from on stage to another.

vi) The plant layout should be one that offers maximum safety to the personnel working inside the plant.

vii) The plant layout should provide for proper lighting and ventilation.

viii) The plant layout should properly accommodate utilities like power and water connections and provisions for effluent disposal.

8) Location of Projects: Choosing the location for a new project is to be done taking many factors into account. The study for plant location is done in two phases. First a particular region/ territory is chosen that is best suited for the project. Then, within the chosen region, the particular site is selected. Thus, we may say that there are two major factors, viz., Regional factors and site factors, to be considered.

Question-1: A technology appropriate for one country may not be the ideal one for another country.

 a. FALSE

 b. TRUE

 c. Sometimes

 d. Never

Question 2. Cement can be manufactured by ????? process.

 a. Wet

 b. Dry

 c. None

 d. Both

Question 3. For pharma prodcution, which technology is required for production.

a. High

 b. Imported

 c. Automated

 d. Sophisticated

Question 4. It is always better to have a buy?back arrangement with the technical ??????…

 a. officer

 b. Assistant

 c. collaborator

 d. Expert

Question 5. Scale of operations is signified by the ??????. of the plant.

 a. Price

 b. Size

 c. Production

 d. All

Question 6. Technical aspects relate to the ?????????… of the project output in the form of goods and services from the projects inputs.

 a. Production

 b. Generation

 c. None

 d. Both

Question 7. The agreement should also include penalty clauses for ???????. of any of the conditions stipulated in the agreement.

 a. Spoilage

 b. Fraud

 c. non-performance

 d. All

Question 8. The choice of a suitable technology for a project calls for identifying what is called the ???????. technology?

 a. Cold

 b. Hot

 c. Vibrated

 d. Appropriate

Question 9. The ultimate choice of technology depends upon the ??????.. of the product proposed to be manufactured.

 a. Quantity

 b. Price

 c. Material

 d. Age

Question 10. What form the backbone of the industry

 a. Plant

 b. Location

 c. None

 d. Both

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3rd Module Assessment

Case Study- Financial Analysis of a Project

One of the most important parts of the project planning process is the financial analysis. The goals of this phase are to determine whether or not to take on the project, to calculate its profits and to ensure stable finances during the project. In other words, financial analysis evaluates project liquidity and profitability. Liquidity is assured by cash flow analysis, while the profitability is evaluated by the following techniques:

•         Payback period analysis

•         Accounting rate of return

•         Net present value

•         Internal rate of return

Cash Flow Analysis: A cash flow is one of the most important parts of the financial analysis for a project or a business. It represents a listing of the project cash inflows and outflows divided into time periods. The time periods may be months, quarters or years, depending on the project needs. A cash flow can be created for either the past accounting period (it is called the cash flow statement) or the future accounting period (the cash flow budget). Apart from the cash flow projections, the cash flow budget may contain the actual cash inflows and outflows, allowing you to monitor the accuracy of your projections.

The main benefit of cash flow budgeting is that it quickly points out any liquidity problems in the future. It shows when the company would experience cash deficits and allows you to take corrective actions in advance by reducing the outflows, changing the time of certain transactions or borrowing the money. The cash flow budget can also identify the time periods when the company will have excess amounts of cash, allowing you to use this cash in order to create additional revenue.

Payback Period Analysis: Payback period analysis is a method that will tell you in how much time you can earn the same amount of money that you would spend on the project.

When this method is used for project comparison, the projects with shorter payback period rank higher — they are more liquid and less risky than the projects with longer payback periods. A payback period of three years or less is considered good, while the projects with payback period of one year of less should be considered very important and should be prioritized.

However, the payback period formula has two disadvantages. First, it ignores the revenues after the payback period, meaning that the project that returns $20,000 after a five year payback period ranks lower than the project that returns nothing after a three year payback period. Secondly, and more importantly, it ignores the time value of money.

Accounting Rate of Return (ARR): Accounting rate of return is a simple method used to quickly estimate a project’s net profits. It represents yearly profits as a percentage of the initial investment:

Salvage value is the value you can earn by selling the asset after its useful life has passed. For the purpose of this formula, useful life of an asset is measured in years. For example, if you buy a machine for $10,000, use it for four years and then sell it for $2,000, the depreciation would be:

After calculating the depreciation, we can use its value to calculate the accounting rate of return. If the new machine would earn us $4,000 per year, the accounting rate of return would be:

Another advantage of the accounting rate of return is that the project’s entire useful life is considered, not just the payback period. On the other hand, this method does not use cash flow data and does not consider the time value of money.

Net Present Value: Unlike the previous two methods, net present value (NPV) considers the time value of money. Basically, due to its earning capacity, the same amount of money is worth more right now than at some point in the future. For example, if you deposit $100 in a savings account with a 5% interest rate, the money invested today would be worth $105 in one year. On the other hand, $100 received one year from now would be worth $95.24 today.

So, the net present value allows you to find the today’s value of the future net cash flow of a project. If the value is greater than the cost, the project will be profitable. You could also compare multiple projects, where those with greater difference between the net present value and the cost are ranked higher.

Internal Rate of Return (IRR): The internal rate of return is another financial analysis method that allows you to calculate the time value of money. The IRR of an investment represents the discount rate at which the net present value of costs (negative cash flows) of the investment equals the net present value of the benefits (positive cash flows) of the investment. In other words, it represents the interest rate which is equivalent to the amount of money you expect to earn on the project.

Theoretically, all projects in which the internal rate of return is higher than the cost of capital are profitable. However, it is advised to only accept projects where the internal rate of return is several percentage points higher than the cost of borrowing, in order to compensate for the risk and time associated with the project.

Question-1: ………………………..Means the period required for getting the invested money back.

 a. ARR

 b. NPV

 c. IRR

 d. Pay Back

Question 2. Cash Flow Analysis deals with ??????..

 a. Cash Inflows

 b. Cash Outflows

 c. Both

 d. None

Question 3. Financial Analysis is one of the ????? part of Project Analysis.

 a. Primary

 b. Secondary

 c. Important

 d. Wasteful

Question 4. Future value is used to know the ????. Value of an asset.

 a. Present

 b. Future

 c. Equal

 d. Greater

Question 5. In case of multiple projects, the project whose NPV is greater, would be rejected.

 a. FALSE

 b. TRUE

 c. Sometimes

 d. Can’t Say

Question 6. IRR is a point where NPV is ?????

 a. Greater

 b. Lower

 c. Zero

 d. None

Question 7. NPV is the difference between Present Value of cash inflows and cash outflows.

 a. TRUE

 b. FALSE

 c. Can’t Say

 d. Sometimes

Question 8. The main advantage of cash flow budgeting is that it quickly points out any ??????.. problems in the future.

 a. Funds

 b. Accounting

 c. Technical

 d. liquidity

Question 9. The NPV is used because it considers the ????.. Value of the invested money.

 a. Present

 b. Forecasted

 c. Future

 d. Approximate

Question 10. The projects in which the internal rate of return is higher than the cost of capital are ??????.

 a. Losers

 b. Stable

 c. Profitable

 d. Perfact

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Module 4th Assesment

Case Study – Project Risk Analysis

Risk Management is the process of identifying, analyzing and responding to risk factors throughout the life of a project and in the best interests of its objectives. Proper risk management implies control of possible future events and is proactive rather than reactive.

For example: An activity in a network requires that a new technology be developed. The schedule indicates six months for this activity, but the technical employees think that nine months is closer to the truth. If the project manager is proactive, the project team will develop a contingency plan right now.

They will develop solutions to the problem of time before the project due date. However, if the project manager is reactive, then the team will do nothing until the problem actually occurs. The project will approach its six month deadline, many tasks will still be uncompleted and the project manager will react rapidly to the crisis, causing the team to lose valuable time.

Proper risk management will reduce not only the likelihood of an event occurring, but also the magnitude of its impact. I was working on the installation of an Interactive Voice Response system into a large telecommunications company. The coding department refused to estimate a total duration estimation for their portion of the project work of less than 3 weeks. My approach to task duration estimation is that the lowest level task on a project whose total duration is 3 months or more should be no more than 5 days. So… this 3 week duration estimation was outside my boundaries. Nevertheless, the project team accepted it. It appeared an unrealistic timeline for the amount of work to be done but they were convinced that this would work. No risk assessment was conducted to determine what might go wrong. Unfortunately, this prevented their ability to successfully complete their tasks on time. When the 3 weeks deadline approached and it appeared that the work wouldn’t be completed, crisis management became the mode of operation.

Risk Management Systems: Risk Management Systems are designed to do more than just identify the risk. The system must also be able to quantify the risk and predict the impact of the risk on the project.

The outcome is therefore a risk that is either acceptable or unacceptable. The acceptance or non- acceptance of a risk is usually dependent on the project manager’s tolerance level for risk.

If risk management is set up as a continuous, disciplined process of problem identification and resolution, then the system will easily supplement other systems. This includes; organization, planning and budgeting, and cost control. Surprises will be diminished because emphasis will now be on proactive rather than reactive management.

Risk Management…A Continuous Process: Once the Project Team identifies all of the possible risks that might jeopardize the success of the project, they must choose those which are the most likely to occur.

They would base their judgment upon past experience regarding the likelihood of occurrence, gut feel, lessons learned, historical data, etc.

Early in the project there is more at risk then as the project moves towards its close. Risk management should therefore be done early on in the life cycle of the project as well as on an on-going basis.

The significance is that opportunity and risk generally remain relatively high during project planning (beginning of the project life cycle) but because of the relatively low level of investment to this point, the amount at stake remains low. In contrast, during project execution, risk progressively falls to lower levels as remaining unknowns are translated into knowns. At the same time, the amount at stake steadily rises as the necessary resources are progressively invested to complete the project.

The critical point is that Risk Management is a continuous process and as such must not only be done at the very beginning of the project, but continuously throughout the life of the project. For example, if a project’s total duration was estimated at 3 months, a risk assessment should be done at least at the end of month 1 and month 2. At each stage of the project’s life, new risks will be identified, quantified and managed.

Risk Response: Risk Response generally includes:

· Avoidance…eliminating a specific threat, usually by eliminating the cause.

· Mitigation…reducing the expected monetary value of a risk event by reducing the probability of occurrence.

· Acceptance…accepting the consequences of the risk. This is often accomplished by developing a contingency plan to execute should the risk event occur.

In developing Contingency Plans, the Project Team engages in a problem-solving process. The end result will be a plan that can be put in place on a moment’s notice. What a Project Team would want to achieve is an ability to deal with blockages and barriers to their successful completion of the project on time and/or on budget. Contingency plans will help to ensure that they can quickly deal with most problems as they arise. Once developed, they can just pull out the contingency plan and put it into place.

Question-1: ………………………… plans will help to ensure that they can quickly deal with most problems

as they arise.

a. Active

b. Positive

c. Contingency

d. Advance

Question 2

A successful Project analysis requires???? management.

a. Action

b. Proper

c. Efficient

d. Crisis

Question 3

Accepting the consequences of the risk is called???..

a. Avoidance

b. Mitigation

c. Acceptance

d. Rejection

Question 4

In developing Contingency Plans, the Project Team engages in ?????.. process.

a. Precautionay

b. Maximising

c. Copying

d. Problem solving

Question 5

Once the Project Team identifies all of the possible risks that might jeopardize the success of the project, they must choose those which are the most likely to ????…

a. Paass

b. Fail

c. Occur

d. None

Question 6

Proper risk management implies control of possible future events and is ????… rather than reactive.

a. Safer

b. Dangerous

c. Neutral

d. proactive

Question 7

Risk Management is a ?????.. Process.

a. Positive

b. Negative

c. Profitable

d. Continuous

Question 8

Risk Management is the process of identifying, analyzing and responding to risk factors throughout the

life of a project and in the best interests of its objectives.

a. Identifying

b. Analysing

c. Responding

d. All

Question 9

The process of eliminating a specific threat, usually by eliminating the cause is called??

a. Active

b. Proactive

c. Responding

d. Avoidance

Question 10

The process of eliminating a specific threat, usually by eliminating the cause is called??

a. Active

b. Proactive

c. Responding

d. Avoidance

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Module 5 Assesment

Case Study- Project Implementation Issues

“The basic requirement for starting the implementation process is to have the work plan ready and understood by all the actors involved. Technical and non-technical requirements have to be clearly defined and the financial, technical and institutional frameworks of the specific project have to be prepared considering the local conditions. The working team should identify their strengths and weaknesses (internal forces), opportunities and threats (external forces). The strengths and opportunities are positive forces that should be exploited to efficiently implement a project. The weaknesses and threats are hindrances that can hamper project implementation. The implementers should ensure that they devise means of overcoming them. Another basic requirement is that the financial, material and human resources are fully available for the implementation”.

Implementation of Social Projects: As mentioned before, social projects are also very common in the water and sanitation field, as they usually target the human factor that is crucial for achieving sustainability of the SSWM measures. These projects are usually related to the change of  behaviours and strengthening of capacities by awareness-raising campaigns, training activities, institutional set-ups, etc.

As these projects cover a wide range of activities that are case-specific, how the implementation will take place will vary from case to case. However, the implementation of a project will always be successful if management strategies and coordination guidelines are clearly defined.

Independent of the type of project to be carried out, a work plan is needed indicating the pursued objectives, the expected results, the activities to be developed, as well as the budget available and

timeframe given. Each of the activities has to be assigned to a particular individual, department or organisation that should have proven experience and the capacity to achieve the goals. Local community workers, who can speak the local languages, are the first to integrate into the project, as these types of actions require that the implementers know the culture of the community to gain their trust and achieve a real impact.

It is of primordial importance that the financial resources are readily available at the beginning of the action, so the members of the team have the budget to initiate the activities and cover their own expenses. The management team should look for strategic partnerships with local leaders and spokespersons, giving institutional backup to the actions. Directors and CEOs of the leading organization should participate in the opening ceremonies or kick-off meeting supporting the local workers, thus facilitating future activities that will be done in the field.

Activity and financial reporting procedure have to be prepared and communicated to the members of the team. It should be clear from the beginning of the action, how all the costs incurred will be reported and reimbursed. It is important to keep procedures as simple as possible, using simple tables and template for reporting costs, field visits, interviews, workshops, meeting minutes, etc.

A controlling strategy has to be developed, in order to monitor the work done on the field. A clearly defined decision making process will set the roles and responsibilities of the members of the team: field worker & task leaders & work package leader & project manager -> coordinator of the project -> steering committee. This ladder will allow for immediate correction of actions and efficient use of (human) resources.

Communication channels should be kept open between the field workers and the management team, making use of mobile phones, SMS, E-mails, etc. It is important to avoid overloading the team with bureaucratic procedures that nobody will follow (like newsletters, long reports, weekly E-mails, etc).

Instead, monthly meetings should be planned, bringing the field workers together to report, exchange experiences and learn from each other’s successes and failing stories.

Question-1: A ????. the strategy has to be developed, in order to monitor the work done on the field.

a. Controlling

b. Defensive

c. Active

d. Proactive

Question 2

As per the case, Communication channels should be kept open between the field workers and the

management team.

a. Field Workers

b. Management

c. None

d. Both

Question 3

For a social Projects what type of people are required.

a. Soft Skilled

b. Unskilled

c. Skilled

d. Local

Question 4

It is important to keep procedures as ???… as possible, using simple tables and template for reporting

costs, field visits, interviews, workshops, meeting minutes, etc.

a. Lengthy

b. Forward

c. International

d. Simple

Question 5

Social projects normally relate to ????.

a. Sanitation

b. Water

c. None

d. Both

Question 6

The basic requirement for starting the implementation process is to have the work plan?????…by all the

actors involved.

a. Ready

b. Understood

c. Both

d. None

Question 7

The implementation of a project will always be successful if management strategies and coordination

guidelines are clearly ????…

a. Written

b. Presented

c. Defined

d. All

Question 8

The working team should identify their ???. For the success of a project.

a. Strengths

b. Weaknesses

c. Threats

d. All

Question 9

What hinders the Project Implementation?

a. Weaknesses

b. Threats

c. Both

d. None

Question 10

Who should participate Directors and CEOs of the leading organisation should participate in the opening

ceremonies or kick-off meeting supporting the local workers, thus facilitating future activities that will

be done in the field.

a. Directors

b. CEOs

c. Both

d. None

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Assignment 2

Case Study- Project Implementation: Issues and Prospects

Implementation is the process that turns strategies and plans into actions in order to accomplish strategic objectives and goals. Implementing your strategic plan is as important, or even more important, than your strategy. The video The Secret to Strategic Implementation is a great way to learn how to take your implementation to the next level.

Critical actions move a strategic plan from a document that sits on the shelf to actions that drive business growth. Sadly, the majority of companies who have strategic plans fail to implement them.

According to Fortune Magazine, nine out of ten organizations fail to implement their strategic plan for many reasons:

· 60% of organizations don’t link strategy to budgeting

· 75% of organizations don’t link employee incentives to strategy

· 86% of business owners and managers spend less than one hour per month discussing strategy

· 95% of the typical workforce doesn’t understand their organization’s strategy.

A strategic plan provides a business with the roadmap it needs to pursue a specific strategic direction and set of performance goals, deliver customer value, and be successful. However, this is just a plan; it doesn’t guarantee that the desired performance is reached any more than having a roadmap guarantees the traveller arrives at the desired destination.

Getting Your Strategy Ready for Implementation

For those businesses that have a plan in place, wasting time and energy on the planning process and then not implementing the plan is very discouraging. Although the topic of implementation may not be the most exciting thing to talk about, it’s a fundamental business practice that’s critical for any strategy to take hold. The strategic plan addresses the what and why of activities, but implementation addresses the who, where, when, and how. The fact is that both pieces are critical to success. In fact, companies can gain a competitive advantage through implementation if done effectively. In the following sections, you’ll discover how to get support for your complete implementation plan and how to avoid some common mistakes.

Avoiding the Implementation Pitfalls: Because you want your plan to succeed, heed the advice here and stay away from the pitfalls of implementing your strategic plan.

Here are the most common reasons strategic plans fail: Lack of ownership: The most common reason a plan fails is lack of ownership. If people don’t have a stake and responsibility in the plan, it’ll be business as usual for all but a frustrated few.

· Lack of communication: The plan doesn’t get communicated to employees, and they don’t understand how they contribute.

· Getting mired in the day-to-day: Owners and managers, consumed by daily operating problems, lose sight of long-term goals.

· Out of the ordinary: The plan is treated as something separate and removed from the anagement process.

· An overwhelming plan: The goals and actions generated in the strategic planning session are too numerous because the team failed to make tough choices to eliminate non-critical actions. Employees don’t know where to begin.

· A meaningless plan: The vision, mission, and value statements are viewed as fluff and not supported by actions or don’t have employee buy-in.

· Annual strategy: Strategy is only discussed at yearly weekend retreats.

· Not considering implementation: Implementation isn’t discussed in the strategic planning process.

The planning document is seen as an end in itself.

· No progress report: There’s no method to track progress, and the plan only measures what’s easy, not what’s important. No one feels any forward momentum.

· No accountability: Accountability and high visibility help drive change. This means that each measure, objective, data source, and initiative must have an owner.

Lack of empowerment: Although accountability may provide strong motivation for improving performance, employees must also have the authority, responsibility, and tools necessary to impact relevant measures. Otherwise, they may resist involvement and ownership.

It’s easier to avoid pitfalls when they’re clearly identified. Now that you know what they are, you’re more likely to jump right over them!

Covering All Your Bases: As a business owner, executive, or department manager, your job entails making sure you’re set up for a successful implementation. Before you start this process, evaluate your strategic plan and how you may implement it by answering a few questions to keep yourself in check.

Take a moment to honestly answer the following questions:

· How committed are you to implementing the plan to move your company forward?

· How do you plan to communicate the plan throughout the company?

· Are there sufficient people who have a buy-in to drive the plan forward?

· How are you going to motivate your people?

· Have you identified internal processes that are key to driving the plan forward?

· Are you going to commit money, resources, and time to support the plan?

· What are the roadblocks to implementing and supporting the plan?

· How will you take available resources and achieve maximum results with them?

· Implement your strategic plan effectively

Our solution includes a dedicated strategy advisor that will support the completion of your plan and it’s successful implementation.

You don’t need to have the perfect answers to all these questions right now, but just make sure that you’ve given all the questions equal consideration. You don’t want to look back six months from now and wish you had identified some big issues that are now threatening your success. If you’ve identified some red flags, assess if they’re huge obstacles or small ones. If they’re big, get them out of the way before you implement, even if it means pushing your timeline out for a while.

Question-1: …………………… is required for the success of a plan.

a. Mission

b. Vision

c. Goal

d. All

Question 2

A????. plan provides a business with the roadmap it needs to pursue a specific strategic direction and

set of performance goals.

a. Written

b. Defined

c. Strategic

d. Positive

Question 3

As per case,???.. % of organizations don?t link strategy to budgeting

a. 40

b. 50

c. 60

d. 70

Question 4

Companies can gain competitive advantage through implementation if done ????..

a. Jointly

b. Properly

c. effectively

d. Same day

Question 5

Employees don?t know where to begin is ????. Plan.

a. International

b. National

c. Overwhelming

d. Short

Question 6

For those businesses that have a plan in place, wasting time and energy on the planning process and then not implementing the plan is very ????…

a. Positive

b. Negative

c. Discourging

d. effectivel

Question 7

How many percentage of the typical workforce doesn?t understand their organization?s strategy.

a. 75

b. 60

c. 90

d. 86

Question 8

If people don?t have a stake and responsibility in the plan, it?ll be business as usual for all but a frustrated few is lack of ????..

a. Confidence

b. Finance

c. Ownership

d. Positivity

Question 9

The plan doesn?t get communicated to employees, and they don?t understand how they contribute is due to lack of ?????

a. Understanding

b. Communication

c. Conflicts

d. Lack of confidence

Question 10

The plan is treated as something separate and removed from the management process is due ????

a. Geniusness

b. Newness

c. Ordinary

d. Simplicity

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Management of Financial Institutions (EDL 406)-Semester IV

Management of Financial Institutions (EDL 406)-Semester IV

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1st Module Assessment

Case Study

 # Lendingkart to offer its credit risk analytics software to financial institutionsLendingkart, an online lender to small and medium enterprises (SMEs), will offer its credit risk analytics software as a service for other financial institutions in 2018, and aim to double its reach in the next six months, a top company executive said.“We plan to offer our analytics technology to other NBFCs (non-banking financial companies) and financial institutions sometime in 2017,” said Lendingkart’s co-founder Harshvardhan Lunia in a telephonic interview. “We aim to increase our reach across various credit product, geography and customer segments by monetizing our data analytics and credit scoring platform, which other lenders can use to evaluate the credit worthiness of the borrowers…Also, it will help us to disburse more loans without increasing our book size thus, increasing returns of assets for us,” Lunia added in an email response.Since its inception in 2014, the online NBFC, Lendingkart Finance Ltd has disbursed 7,000 loans to SMEs in over 450 cities. The company expects this number to cross 10,000 covering over 800 cities in next six months. Lendingkart Finance and Lendingkart Technologies Pvt. Ltd are part of the Lendingkart Group. Lendingkart Technologies has built analytics software to evaluate borrowers’ credit worthiness.Founded by Lunia and Mukul Sachan, Lendingkart underwrites working capital loans online to SMEs, which have an annual turnover of Rs12 lakh to Rs1-1.5 crore. On an average, these SMEs are lent Rs5.5-6 lakh at an annualized interest rate ranging between 16% to 24%, for a duration of six to 12 months. Lendingkart claims to have a loan application approval rate of 22-23%. The credit risk analytics technology analyses the borrower or an SME on the basis of over 2200 variables and data points, which includes industry type, business cash-flows and transactions, income tax return filings of the business, its previous loan and repayment records, among others. This is the technology that Lendingkart plans to share with other financial institutions.Lunia explains there are two possible ways in which it could monetize this service. “Using our (risk analytics) technology, we could co-lend with other financial institution in cases where SMEs have larger (capital) needs. The other way is that we charge (the financial institutions) for using our technology,” he said. However, Lunia added that it is too soon to forecast how much revenue Lendingkart will earn from its technology.Lendingkart, which has 350 employees across offices in Ahmedabad, Bengaluru and Mumbai, has raised over $40 million from Betelsmann India Investment, Darrin Capital Management and Mayfield India, among other investors. The fintech company competes with Bengaluru-based Capital Float (Zen Lefin Pvt. Ltd), Instakash Technlogies Pvt. Ltd, Neogrowth Credit Pvt. Ltd, IndiaLends (GC Web Ventures Pvt. Ltd), among others.In May, Capital Float raised $25 million (Rs170 crore) in an investment round led by US-based Creation Investments. In August, Mumbai-based NeoGrowth raised Rs15 crore from Frontier Investments Group and IndiaLends raised about Rs6.5 crore from DSG Consumer Partners, Siddharth Parekh and other angel investors.

Question 1. According to case, the Lendingkart Finance Ltd has disbursed almost ………… loans.

 a. 70,000

 b. 700

 c. 450

 d. 7000

Question 2. AS per the case Lendingkart offered its services in 2018 primarily to ……………… .

 a. MNCs

 b. SMEs

 c. Large Sized Companies

 d. Entrepreneurs

Question 3. AS per the case, Lendingkart’s main target to tap which type of industry as its new business plan?

 a. 3

 b. 9

 c. 6

 d. 12

Question 4. Lendingkart claims to have a loan application approval rate of ………… percent.

 a. 16

 b. 18

 c. 19-20

 d. 22-23

Question 5. Lendingkart company has planned to double its targerts in next ?????.. Months.

 a. 3

 b. 6

 c. 9

 d. 12

Question 6. NBFCs stands for Non Banking ………….. Companies.

 a. Future

 b. First Cash

 c. Finance

 d. Fastest Growing

Question 7. The credit risk analytics technology analyses the borrower or an SME on the basis of over ………. variables.

 a. 1000

 b. 2000

 c. 3000

 d. 4000

Question 8. What’s the Employee strength of the Lendingkart?

 a. 300

 b. 350

 c. 260

 d. 170

Question 9. Which software has been built by Lendingkart Technologies ……………. software to evaluate borrowers’ credit worthiness.

 a. Sustainable

 b. Super

 c. Lenskart

 d. Analytics

Question 10. Who are the promoters of Lendingkart?

 a. NBFCs

 b. SMEs

 c. Lunia and Mukul

 d. Investors

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2nd Module Assessment

Case Study

Case: Marketing Mix in Banking

Promotion mix includes advertising, publicity, sales promotion, word – of – mouth promotion, personal selling and telemarketing. Each of these services needs to be applied to different degree. These components can be useful in the banking business in the following ways:

Advertising is paid form of communication. Banking organizations use this component of the promotion mix with motto of informing, sensing and persuading the customers. While advertising it is essential to be aware of key decision making areas so that instrumentally helps banks at micro and macro levels.

Finalizing the budget:

This is related to the formulation of the budget for advertisement. The bank professionals, senior executives and even the policy planners are found to be involved in the process. The business of a bank determines the scale of the advertisement budget. In addition, the intensity of competition also plays a decisive role since in the majority of cases; we find a increase in the budget due to a change in the competitor’s strategy.

Selecting a suitable vehicle:

There are a number of devices to advertise, such as broadcast media, telecast media and print media. In the face of the budgetary provisions, it is necessary to select a suitable vehicle. For promoting the banking business, the print media is found to be economic as well as effective.

Making possible creative:

The advertising professionals bear the responsibility of making the appeals, slogans and messages more creative. Here, creative means making the advertisement programs distinct to the competitive organizations, which are active in influencing the impulse of the customers and successful in informing and sensing the customers. This requires an in-depth knowledge of the receiving capacity of the target market for which the advertisements are designed.

Testing the effectiveness:

It bears an analogous significance that our advertisements are effective in influencing the impulse of customers by energizing persuasion. For making the process effective, it is essential to test the effectiveness before launching of the commercial advertisements.

An instrumentality of branch managers:

At micro level, a branch manager bears the responsibility of advertising locally so that the messages reach the target audience.

Characters and themes:

At apex level it is also important that while advertising the senior executives watch the process minutely and select events, characters having a regional orientation. The popular characters and sensational moments are likely to be impact generating. The theme for appeals and messages also needs due attention. Of course, they have a legitimate right of advertising but it is not meant that like the goods manufacturing organizations, the service generating organizations also start making invasion on culture. It is necessary to regulate a bias to gender, profession, region or so.

Public relations:

In the banking services the effectiveness of public Relations is found in high magnitude. It is in this context that difference is found in designing of the mix for promoting the banking services.

Telemarketing:

The telemarketing is a process of promoting the business with the help of sophisticated communication network. Telemarketing is found instrumental in advertising the banking services and the banking organizations can use this tool of the promotion mix both for advertising and selling. This minimizes the dependence of banking organizations on sales people and just a counter or center as listed in the call numbers may service multi- dimensional services.

Telemarketing is likely to play an incremental role in marketing the banking services. The leading foreign banks and even some of the private sector commercial banks have been found promoting telemarketing and they have been getting positive results for their efforts.

Word-Of-Mouth

Much communication about the banking services actually takes place by word- of- mouth information, which is also known as word- of- mouth promotion. Oral publicity plays an important role in eliminating the negative comments and improving the services. This also helps the banker to know the feedback, which may simplify the task of improving the quality of services. This component of promotion mix is not to influence budget adversely or generate additional financial burden. By improving the quality of services and by offering small gifts to the word- of- mouth promoters, bankers can get more business command in their area.

The above facts make it clear that such kind of promotion is influenced by a number of factors. The most dominating factor is the quality of services offered. The bank professionals, the frontline staff and the senior executives should realize that degeneration in quality would make this tool effective.

Question-1: ………….is likely to play an incremental role in marketing the banking services

 a. Telemarketing

 b. Radio

 c. Television

 d. Posters and banners

Question 2. Advertisement are considered effective when they?..

 a. Energize persuasion

 b. Cost effective

 c. Increase profit

 d. Both option B and Option C

Question 3. In the banking services the effectiveness of??. is found in high magnitude

 a. Cost

 b. Slogans

 c. Profit

 d. Public Relations

Question 4. Promotion mix includes advertising, publicity, sales promotion, word ? of ? mouth promotion ???.

 a. Telemarketing

 b. Personal selling

 c. Both option A and option B

 d. Neither option A nor option B

Question 5. What determines the scale of the advertisement budget.?

 a. Customers

 b. Sales

 c. Profit

 d. Business

Question 6. What is more important for advertisement professionals while making the advertisement programs.?

 a. Appeals

 b. Slogans

 c. Creativity

 d. Cost effective

Question 7. What plays an important role in eliminating the negative comments and improving the services?.

 a. Informing, sensing and persuading the customers

 b. Telemarketing

 c. word- of- mouth promotion

 d. Telecast media

Question 8. Which device of advertisement is economic as well as effective.?

 a. Radio

 b. Print media

 c. Telecast media

 d. Broad cast media

Question 9. Who bears the responsibility of advertising locally.?

 a. Senior manager

 b. Branch manager

 c. sales manager

 d. Area manager

Question 10. Why organizations use advertisement.?

 a. Informing, sensing and persuading the customers

 b. Informing, selling and persuading the customers

 c. Informing, publicity and promotion

 d. Both option B and Option C

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3rd Module Assessment

Case Study

Global Depository Receipt (GDR) :

Issues and ProspectsGlobal Depository Receipt (GDR) is an instrument in which a company located in domestic country issues one or more of its shares or convertibles bonds outside the domestic country. In GDR, an overseas depository bank i.e. bank outside the domestic territory of a company, issues shares of the company to residents outside the domestic territory. Such shares are in the form of depository receipt or certificate created by overseas the depository bank.Issue of Global Depository Receipt is one of the most popular ways to tap the global equity markets. A company can raise foreign currency funds by issuing equity shares in a foreign country. A company based in USA, willing to get its stock listed on German stock exchange can do so with the help of GDR. The US based company shall enter into an agreement with the German depository bank, who shall issue shares to residents based in Germany after getting instructions from the domestic custodian of the company. The shares are issued after compliance of law in both the countries. The mechanism of GDR is understood with the help of following example – The domestic company enters into an agreement with the overseas depository bank for the purpose of issue of GDR. The overseas depository bank then enters into a custodian agreement with the domestic custodian of such company. The domestic custodian holds the equity shares of the company.On the instruction of domestic custodian, the overseas depository bank issues shares to foreign investors.The whole process is carried out under strict guidelines. GDRs are usually denominated in U.S. dollars. Let’s now look at the advantages and disadvantages of Global Depository Receipt.ADVANTAGES OF GDRThe following are the advantages of Global Depository Receipts:•         GDR provides access to foreign capital markets.•         A company can get itself registered on an overseas stock exchange or over the counter and its shares can be traded in more than one currency.•         GDR expands the global presence of the company which helps in getting international attention and coverage.•         GDR are liquid in nature as they are based on demand and supply which can be regulated.•         The valuation of shares in the domestic market increase, on listing in the international market.•         With GDR, the non-residents can invest in shares of the foreign company.•         GDR can be freely transferred.•         Foreign Institutional investors can buy the shares of company issuing GDR in their country even if they are restricted to buy shares of foreign company.•         GDR increases the shareholders base of the company.•         GDR saves the taxes of an investor. An investor would need to pay tax if he purchases shares in the foreign company, whereas in GDR same is not the case. DISADVANTAGES•         The following are the disadvantages of Global Depository Receipts:•         Violating any regulation can lead to serious consequences against the company.•         Dividends are paid in domestic country’s currency which is subject to volatility in the forex market.•         It is mostly beneficial to High Net-Worth Individual (HNI) investors due to their capacity to invest high amount in GDR.•         GDR is one of the expensive sources of finance. ConclusionGDR is now one of most important source of finance in today’s world. With globalization, every company is willing to expand its wings. GDR makes it possible for such companies to reach and tap international markets. GDR provides companies in emerging markets with opportunities for rapid growth and development.

Question1. Dividends are paid in the domestic country’s currency.

 a. TRUE

 b. FALSE

 c. Sometimes

 d. Always

Question 2. Does GDR provides access to foreign capital markets.

 a. Yes

 b. No

 c. Sometimes

 d. Never

Question 3. GDR are ????… in nature as they are based on demand and supply which can be regulated.

 a. Solid

 b. Exchange

 c. Liquid

 d. Cash Equal

Question 4. GDR is one of the ????? sources of finance.

 a. Vital

 b. Significanct

 c. Cheap

 d. Expensive

Question 5. GDR saves the taxes of an investor.

 a. TRUE

 b. Sometimes

 c. Never

 d. FALSE

Question 6. GDRs are suitable for ???????..

 a. Indians

 b. Chineese

 c. Foreigners

 d. Australians

Question 7. HNI stands for High Net-Worth ???????.. .

 a. Indians

 b. Indications

 c. Invoices

 d. Individuals

Question 8. Is it right to say that GDR can be freely transferred.

 a. FALSE

 b. TRUE

 c. Sometimes

 d. Never

Question 9. Issue of Global Depository Receipt is one of the most popular ways to tap the global ??????? markets.

 a. Bonds

 b. Equity

 c. Loans

 d. Debentures

Question 10. Under GDRs, whar are issued?

 a. Shares

 b. Notes

 c. Cheques

 d. Invoices

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4th Module Assessment

Case Study

Competition in the Insurance Sector

A simple way to get a sense of competition in the insurance sector is to look at aggregation sites like (policybazar.com or for example). You will get 15-20 quotes for a query about vehicle insurance and as many if not more for other categories, such as life or health. Not so long ago, there were five Indian insurers, and each was entirely government owned. Today, the Insurance Regulatory and Development Authority lists a total of 24 life insurers, 33 general insurers, two re-insurers, and 17 health insurers. Most are private service providers, often with an overseas major partner. The opening up of the sector has meant vast improvements in terms of choices. This has also led to fraud in some cases, such as the notorious mis-selling of Unit Linked Insurance Plans or ULIPs in the early 2000s.

In the last year or so, the sector has seen the launch of multiple initial public offerings. The IRDA allowed insurers to tap the financial market only in August 2016, when it finalised the norms for making public issues, through which companies could list their stocks in the market for public investment. ICICI Prudential Life Insurance launched the first IPO in September 2016, within a month of IRDA’s go-ahead.

Numerous other companies have followed, including ICICI Lombard General Insurance, SBI Life and General Insurance Corporation to name a few. Just this month, the government-owned New India Assurance kicked off its IPO followed by HDFC Standard Life Insurance, which made its debut on the stock market on Friday after floating its IPO earlier this month. Each of these issues raised substantial sums. There are more primary issues from insurers in the pipeline, including from public sector units. The government wants to divest 25% in each of the insurers it owns, in several tranches, and it has started this process with the General Insurance Corporation and the New India Assurance IPOs. The stock market is booming, which means that the insurance sector might easily mop up Rs 35,000 crore or more through IPOs in this financial year.

Scope for growth

India is exceedingly under-insured by global standards. In the last financial year, insurance penetration reached 3.4% in India. The country accounts for less than 1.5% of all global premiums (by number) and just about 2% of life insurance premiums. But with close to 12% of global population, it can aim for a growth of at least six times in the sector. The gross premiums for general insurance (all kinds of insurance barring life, health and reinsurance) are reckoned to be about 0.8% of India’s GDP – that’s about one-third the global average of around 2.5% of the GDP.

Overall, insurance per capita is $13 for India and around $285 globally. India’s nominal per capita ($1,709 in 2016, according to World Bank Data) is also much lower than the global average per capita ($10,150). But even adjusting for that, India’s per-capita insurance cover is roughly one-fourth of what it could be. Hence, the Ministry of Commerce estimates that the Indian insurance sector could grow four times in the next decade, growing to $240 billion from its current size of $60 billion. Those estimates may not be out of line.

From a historical perspective, insurance has been the fastest-growing global industry over several centuries. The European voyages of exploration that opened up sea routes to Asia were generally backed by pioneering insurers. Marine insurance for ships and cargoes and agricultural insurance against crop failures – these were early risks covered in pre-industrial societies. By the 19th century, everything from new railway lines, to undersea telegraph cables and Chicago slaughterhouses were being insured. Modern commerce would be inconceivable without insurance cover for most big projects. Even factors like risks arising from political instability are covered by global insurers. offering a backstop to businesses that operate in volatile environments.

This business can be vastly profitable. A comparison of the insurance and banking sectors is illuminating. Banks borrow money at varied rates of interest and tenures. Some of those loans are demand deposits that can be redeemed anytime, as in savings accounts. Other loans have defined tenures for deposits. Insurers, on the other hand, receive premiums. For term insurance, which is the most common kind, customers pay a premium regularly and insurance companies need to pay up only if there is a valid claim. Even “money-back” premia on some life insurance policies carry very low interest or zero interest. Insurers, therefore, have access to long-term funds at nearly zero cost.

Banks have problems lending money out for longer than the average tenure of loans they have taken. Let us say the bulk of a bank’s funds consist of loans for tenures of one year or less (money people have put into fixed deposits or savings accounts). That bank cannot safely lend this for five-year tenures, since the creditors may want their money back. Hence, banks are always struggling to handle asset-liability mismatches, when the liabilities (loans taken) are short-tenure and profitable assets (or the loans given) are long-term.

Insurers do not have that problem. They can lend, or otherwise invest, for the very long-term. The world’s greatest investor, Warren Buffett, is also one of the world’s largest insurers. That is not coincidental. He has used his insurance funds wisely. Consider something like a toll-road project, a telecom network, or a power plant. These are capital-intensive works. These are also long-gestation – they take years to complete and earn zero revenue until they are ready. Once up and running, these projects may be highly profitable. Insurers can fund this sort of project with much greater comfort than banks.

Proceed with caution: The flip side of the equation: insurers earn a living by taking big bets that can blow up spectacularly. Usually, the premiums charged are a small fraction of the potential risk covered. One tsunami or super-cyclone that wipes out an entire coastline, or a disaster at a nuclear plant (or both), or even a military coup, might drive insurers into bankruptcy. Insurers offering crop insurance have to reckon with the possibility of seasonal droughts or floods that lead to claims across entire districts.

Hence, regulators demand that the promoters of insurance companies have plenty of their own skin in the game so as to be able to cover disasters. There are high equity and reserve requirements. That is one reason for insurers to raise cash through the equity market. So, how does one value an insurance company? This is not easy. You may have a sense of the premium growth potential or the breadth and efficiency of the marketing network, but it hard to get a sense of the risk. Public sector insurance companies are more exposed to risks because they are forced to offer highly-subsidised crop insurance or health covers. They are also often forced to invest in poor public sector assets, like bankrupt banks. As the industry gears up for a potential boom, citizens can tap into it by subscribing to insurance IPOs or buying into already-listed insurance companies. But this comes at high risk. And the old principle of caveat emptor – let the buyer beware – applies.

Question-1: As per case there are how many registered insurance companies in total.

 a. 64

 b. 74

 c. 84

 d. 57

Question 2. As per case, who is the largest insurer in the world.

 a. IRDA

 b. RBI

 c. Warren Buffet

 d. ICICI-Pru

Question 3. As per global standards, India is declared as ???..

 a. over Insurer

 b. Star Insurer

 c. Undr Insurer

 d. At Par

Question 4. India in the global premium received has how much percentage share?

 a. Less than 05%

 b. Above 10%

 c. Above 21%

 d. 25%

Question 5. Insurers have access to long-term funds at nearly ????..cost.

 a. Half

 b. Full

 c. Partial

 d. zero

Question 6. IPOs stands for ????. Public offer.

 a. Investment

 b. Indian

 c. Intrinsic

 d. Initial

Question 7. Most of the private insurers in India have taken partners from??.

 a. Overseas

 b. India

 c. US

 d. UK

Question 8. Overall, insurance per capita around globe is $ ???.

 a. 13

 b. 343

 c. 10,150

 d. 285

Question 9. The main problem of banks in India is to handle ???????.. Mismatch

 a. Asset

 b. Liability

 c. Both

 d. None

Question 10. ULIP plans are linked to ?????????. Market.

 a. Share

 b. Money

 c. Insurance

 d. Capital

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5th Module Assessment

CASE STUDY

Non-Banking Financial Companies (NBFC) are establishments that provide financial services and banking facilities without meeting the legal definition of a Bank. They are covered under the Banking regulations laid down by the Reserve Bank of India and provide banking services like loans, credit facilities, TFCs, retirement planning, investing and stocking in money market. However they are restricted from taking any form of deposits from the general public. These organizations play a crucial role in the economy, offering their services in urban as well as rural areas, mostly granting loans allowing for growth of new ventures.

NBFCs also provide a wide range of monetary advices like chit-reserves and advances. Hence it has become a very important part of our nation’s Gross Domestic Product and NBFCs alone count for 12.5% raise in Gross Domestic Product of our country. Most people prefer NBFCs over banks as they find them safe, efficient and quick in assisting with financial requirements. Moreover, there are various loan products available and there is flexibility and transparency in their services.

There are a huge number of NBFCs operating in our country but here’s a look at the current top 10 NBFCs in India. (Links to an external site.)

Power Finance Corporation Limited

Finance Corporation Limited was founded in 1986 and is a Navratna Status company. Mukesh Kumar Goel is the Chairman & Managing Director of the company. Power Finance Corporation Limited is known to provide financial assistance to different power projects in the country. It supports organizations involved in Power generation, transmission and distribution. The company is also listed in National Stock Exchange (NSE) and Bombay Stock Exchange (BSE).

Shriram Transport Finance Company Limited

Transport Finance Company Limited focuses on funding commercial and business vehicles, besides others. The company was founded in 1979 and has been offering funding services for Light Duty Trucks, Heavy Duty Trucks, Mini Trucks, Passenger Vehicles, Construction Vehicles and Farm Equipments. The company’s specialisation is in general insurance, mutual funds, common assets, stock broking and general protection.

Bajaj Finance Limited

was founded in 2007 and is a unit of Bajaj Holdings and Investments. It offers loans to doctors for career enhancement, home loans, gold loans, individual Loans, business and entrepreneur loans and is an extremely popular finance company. Apart from these, Bajaj Finserv also provides services like wealth advisory, lending money and general insurance. It has over 1400 branches across the country with more than 20000 employees.

Mahindra & Mahindra Financial Services Limited

& Mahindra Financial Services Limited (MMFSL) was established in 1991 and has over 1000 branches, and a customer base of over 3 million, all over the country. MMFSL is one of the most renowned organizations and has two affiliates offering Insurance services and rural housing financial services. It also specialises in offering gold advances, vehicle advances, corporate advances, home credits, working capital advances and much more.

Muthoot Finance Ltd

Muthoot Finance Ltd is India’s first NBFC tracing its history back to 1888, when it began as a small lender from a village in Kerala. Muthoot Finance Ltd sanctions loans only against pledge of gold ornaments. It is a leader in India’s gold loan and finance market. Besides financing gold transactions, Muthoot Finance Ltd offers foreign exchange services, money transfers, wealth management services, travel and tourism services. Gold coins are also sold at Muthoot Finance Branches. The company has its headquarters in Kerala, India, and operates over 4,400 branches throughout the country.  It is also the parent company of Muthoot Housing Finance (India) Ltd, which offers home loans.

HDB Finance Services

HDB Financial Services is operated by India’s largest private sector HDFC Bank. It offers a variety of secured and non-secured financial loans through a network of more than 1,000 branches in 22 Indian states and 3 Union Territories. It provides secured and unsecured loans, including personal and business loans, doctor’s loans, auto loans, gold loans, new to credit loans, enterprise business loans, consumer durables loans, construction equipment loans, new and used car loans, equipment loans, and tractor loans. The company operates through Lending Business and BPO Services segments. It is considered the fastest growing NBFC in India today.

Cholamandalam

Cholamandalam Investment and Finance Company Limited (Chola), was incorporated in 1978 as the financial services arm of the Murugappa Group. Chola started as an equipment financing company and has surged ahead as a complete financial services provider offering all kinds of services like – vehicle finance, home loans, home equity loans, SME loans, investment advisory services, stock broking and a host of other financial services to customers. Chola has 725 branches across India with assets under management above INR 35,000 Crores.

Tata Capital Financial Services Ltd

Tata Capital Financial Services Limited is top of India’s leading NBFCs. Established in 2007, it is a subsidiary of Tata Sons Limited. TCFS describes itseld as a one-stop financial service provider that caters to the diverse needs of retail, corporate and institutional customers across businesses. It is registered with RBI as ‘Systemically Important Non-Deposit Accepting Non-Banking Financial Company (NBFC)’. Among the various products offered by TCFS to individuals, families and businesses, are commercial finance, infrastructure finance, wealth management, consumer loans and distribution and marketing of Tata Cards.

L & T Finance Limited

L & T Finance Limited is a strong player in the non banking financial sector and was established in 1994. Headquartered in Mumbai, L & T offers funding services to different sectors like trade, industry, agriculture, Commercial Vehicle loans, Individual Vehicle loans, and corporate and rural loans. The company caters to more than 10 lakh people. In 2010, L & T was awarded the “Company of the year” in the Economic Times awards.

Aditya Birla Finance Ltd.

Aditya Birla Finance Limited, a part of the Aditya Birla Financial Services, was incorporated in 1991 and is an ISO 9001:2008 certified NBFC. ABFL is registered with RBI as a ‘systemically important non-deposit accepting NBFC’ and it ranks among the top five largest private diversified NBFCs in India. It offers precise and customised solutions across a wide range, from corporate finance to commercial mortgage, and from capital markets to structured finance.

Question-1: AS per case, which Indian company is 9001:2008 certified?

 a. Larsen Turbo

 b. Tata

 c. Aditya

 d. Cholamandalam

Question 2. Indian NBFCs are regulated by ?????

 a. ICICI

 b. RBI

 c. Chola

 d. Muthoot

Question 3. NBFCs offer their services I only ??? areas.

 a. Rural

 b. Urban

 c. None

 d. Both

Question 4. Tha main feature of a NBFC ids that they can ????? funds for savings.

 a. Not Accept

 b. Accept

 c. Reject

 d. Insurance

Question 5. Tha main taskof an NBFC is to offer?. Services.

 a. Banking

 b. Financial

 c. Both

 d. None

Question 6. Which company has two affiliates offering Insurance services and rural housing financial services.

 a. Muthoot

 b. Bajaj

 c. Mahindra

 d. Aditya

Question 7. Which Indian NBFC has more than 700 branches across India with assets under management above INR 35,000ÿCrores.

 a. RBI

 b. Aditya

 c. Chola

 d. Larsen

Question 8. Which Indian NBFC is declared as Navratana Status.

 a. Bajaj

 b. Chola

 c. Power Finance

 d. Mahindra

Question 9. Which Indian NBFC is the oldest one in the country.

 a. Tata

 b. Larsen

 c. Aditya

 d. Muthoot

Question 10. Which NBFC was established in 1994?

 a. Larsen Turbo

 b. Tata

 c. Aditya

 d. Cholamandalam

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Assignment 2

Case Study # Monetary Policy working or Not?

That growth rate was “despite falling commodity prices and China’s slowdown”, Paul Bloxham, HSBC’s chief economist for Australia and New Zealand highlighted in a note to clients yesterday. Bloxham said that it’s the RBA and the way it has handled monetary policy, both during the mining boom and since, which “deserves much of the credit”.

Cuts to interest rates over the past four years and a significant fall in the AUD have been the key supports for growth. Low rates have lifted housing prices and construction, which is feeding through to a positive wealth effect on consumer spending. The lower AUD is supporting strong export growth, particularly of tourism and education services to Asia, Bloxham wrote. But Bloxham says there are still headwinds for the economy as it rebalances, meaning monetary policy still has a role to play. That’s because “although local growth has been solid in recent years, it has not been rapid enough to absorb all of the available spare capacity”. He sets out four reasons why the RBA may need to ease again.

1. Low wages, low inflation. Unemployment has fallen to 6% but it is still well above the “full employment level of 5.25-5.5%”. That means wages growth is weak, “even the state with the strongest economic conditions, New South Wales,” Bloxham said. That has contributed to underlying inflation falling to the bottom of the RBA’s 2-3% band. 2. Mining investment will keep falling and oversupplied commodity markets persist. Bloxham highlights the unwind of the mining investment boom has further to run – the RBA has said consistently that this “drag” on economic growth will continue into 2017. Notwithstanding the recent rally in commodities from recent lows, Bloxham says “over-supply in many markets is set to keep them low”.

Global growth is below trend and the Asian economies are being held back by weak global trade, he added.

3. The housing boom is over. It was household consumption that really drove the strength of recent growth, contributing 0.4% of the 1.6% growth rate in the fourth quarter of 2015. Bloxham says that is now at risk given the inevitable slowing in the housing boom. But he says “the end of the housing boom means it is unlikely that household consumption will continue at the same strong pace observed late last year”.

4. The rally in the Australian dollar threatens growth. The Aussie dollar has been a big part of the economic strength and transition. Its fall has helped facilitate the pick up in tourism and service exports. But that is at risk now with the Aussie up near 75 cents, not the 65 cents many had forecast, Bloxham says: Low global inflation, further expected rate cuts from the ECB and Bank of Japan and the markets’ doubts about whether the US Federal Reserve will hike again this year, have meant that speculative positions have turned long on the Australian dollar. The currency has climbed from its low point of US69 cents in January to now trading around US74 cents. A higher Australian dollar is unhelpful for the rebalancing story and likely to put further downward pressure on already low underlying inflation. This begs the question of will “there be enough growth to keep inflation on target?”

That’s doubly important because Australian financial conditions have tightened as the Aussie has rallied and as “effective mortgage and business lending rates have also been lifted in recent months, despite a steady RBA cash rate, as a result of regulatory changes and higher global funding costs,” Bloxham said. So in the end, his call is that if the RBA wants to keep growth on track it will need to cut rates by 25 basis points, 0.25%, in the next few months.

Question-1: According to Bloxham What is supporting strong export growth.?

 a. High AUD

 b. lower AUD

 c. Increment in interest rates

 d. Falling economy

Question 2. According to Paul Bloxham which deserves much of the credit for growth rate?

 a. RBA

 b. Monetary policy

 c. RBA and its way to handle monetary policy

 d. Neither option A nor option C

Question 3. As per the case global growth is?..

 a. Static

 b. Below trend

 c. Above trend

 d. Increasing

Question 4. As per the case oversupplied commodity markets??.

 a. Persists

 b. Ended

 c. Started

 d. Changed

Question 5. As per the case, what drove the strength of recent growth.?

 a. Australian dollar

 b. Inflation

 c. U.S dollar

 d. Household consumption

Question 6. The case study talked about the finding and forecasting of?..

 a. HSBC’s chief economist for Australia

 b. HSBC’s chief economist for Australia and New Zealand

 c. HSBC’s chief economist for New Zealand

 d. Neither option A nor option C

Question 7. What has been the key supports for growth over the past four years ?

 a. Cut in interest rates

 b. Increment in the AUD

 c. Monetary policy

 d. Both option A and option B

Question 8. What have been the key supports for growth.?

 a. Decling interest rates

 b. fall in the AUD

 c. Both option A and option B

 d. Neither option A nor option C

Question 9. What helps in pick up of tourism and service exports.?

a. Fall in Australian Dollar

 b. Increment in the Australian dollar

 c. U.S dollar

 d. Inflation

Question 10. Which state has the strongest economic conditions as per the case.?

 a. U.S

 b. Japan

 c. Australia

 d. New South Wales

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Corporate Tax Planning (EDL 405)-Semester IV

Corporate Tax Planning (EDL 405)-Semester IV

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1st Module Assessment

Case Study

Case Study # Chasing Taxes

Indonesia and India have embarked on big, bold and historic hunts for hidden assets. The moves come amid a global shift in attitude toward tax avoidance and offshore holdings but the emerging economies have singular reasons for seeking undeclared riches. Each wants fresh cash for much-needed infrastructure projects and a chance for a fairer distribution of wealth.

In the last days of September, in the dark of 3 a.m., people began queuing outside a single government building in central Jakarta. They were clutching financial papers that in some cases exposed offshore accounts worth billions of rupiah. Two months earlier, President Joko Widodo had launched a massive tax amnesty campaign to repatriate hidden assets to Indonesia. As the first reporting deadline loomed, crowds swelled into the office that handles the tax affairs of the country’s wealthiest individuals and companies.

More than 10,000 people a day answered the president’s pitch in September: declare assets now and take advantage of a discounted tax rate — as little as 2% compared to 25% — and, in turn, be part of Indonesia’s future. Revenue from the nine-month amnesty, continuing through March, is promised to build railway networks, ports and airports in a country whose prospects, politically and economically, have been on the ascent.

Widodo, who was elected in 2014, has cast the program as good for business — and pivotal to the next generation. Twice before Indonesia tried amnesties to lure money back home but those efforts in 1964-65 and in 1984 failed, in part, due to poor incentives. Now Indonesia has calculated that political stability and a dramatic drop in the tax rate could help to bring in an estimated 11,400 trillion rupiah ($851 billion) parked overseas.

We have a large amount of money outside, Widodo told a group of businessmen in Jakarta this summer. “What is most important now is to bring this money back to our country. We need your participation right now to build the nation.”

Indonesia’s call for revenue echoes across many countries in Asia where private wealth has risen steeply in the past decade. New wealth accounts for about 60% of the total wealth growth in the Asia-Pacific region excluding Japan and, by 2019, the region is expected to account for 26% of all global financial wealth, according to a recent Boston Consulting Group report. It is those potential taxpayers that emerging economies want to rein in as partners in their next phase of development.

People streamed to banks in New Delhi to try to withdraw or deposit old currency notes banned on Nov. 8. India has taken more radical steps this year, starting with amnesty and then launching a wholesale assault on its shadow economy by banning high-denomination bank notes. Life in the cash-starved society has morphed into a kind of collective suffering. But both India and Indonesia see their experiments as helping to secure economic ballast at a critical time to attract domestic and global investment. Transparent accounting at home will help each country to prepare for tougher global standards for financial information that will go into effect next year.

Indonesia’s hunt for revenue is spurred by ambition for this country of 20 million taxpayers. It has enjoyed 5% annual growth for the past few years. In order to keep this growth momentum, the country needs to build and improve its infrastructures such as airports and power grids. The government has estimated 5,500 trillion rupiah is needed through 2019 for infrastructure; the state budget can likely cover a quarter of that.

Amnesty became appealing first to trade associations, law firms and major developers that liked the lower tax rate — and possibly saw future government contracts for big construction. Wealth managers said tax rates were locked in depending on how early declarations were made. That sparked the September rush. “Just with 2% or 4%, you can bring the ‘dark’ money under the sun,” said a private banker in Singapore. “Once you declare amnesty, the money is no longer ‘dark.'”

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2nd Module Assessment

Case Study

Case: Accounting for Merger and Acquisitions

Mergers and acquisitions are types of business combinations in which separate entities or operations of entities are merged into one reporting entity. There are three common forms of mergers that are the result of the relationship between the merging parties.

In a horizontal merger, a company acquires a competitor firm that produces and sells an identical or similar product in the same geographic area.

In a vertical merger, a company acquires a customer or supplier.

Conglomerate mergers include a number of other types of business combinations, regardless of common geographic location or industry affiliation. Conglomerate mergers may arise when a company wants to expand for reasons not directly related to competition in the marketplace, such as when a furniture manufacturer buys an appliance manufacturer or when a sales agency in Ohio buys a sales agency in Florida. There are two main methods of mergers.

Under the pooling method, all assets and liabilities were recorded at existing book values while goodwill was not recorded. As a result, the values for the assets and liabilities listed in the accounting records and financial statements of each company involved in a merger or acquisition were carried forward to the surviving company that remained or was created after the business combination. Under the pooling method, no new assets or liabilities were created by the business combination. Further, the income statement of the surviving company included all of the revenues and expenses of the fiscal year for each company. Ultimately, the operating results for both companies were combined for all periods prior to the closing date, and previously issued financial statements were restated as though the companies had always been combined.

The purchase method is now the preferred accounting method used for business combinations. Under the purchase method, the purchase price and costs of the acquisition are allocated to the identified assets that are acquired, whether tangible or intangible and to any liabilities that are assumed based on the current fair market value of the assets and liabilities. If the purchase price exceeds the fair value of the purchased company’s net assets, the excess is recorded as goodwill. Goodwill or the excess of the cost of an acquired entity over the net of the amounts assigned to assets acquired and liabilities assumed, is almost always present because the purchase price of a target or its assets is almost always higher than the sum of the fair values of all of the assets being purchased. This is because a company is more than just the sum of its assets. It also has intangible qualities such as its reputation in the business community that add to its value beyond the market value of its assets. However, the purchase method does not allow the allocated purchase price for any asset to exceed its fair value. Thus, the excess is recorded as goodwill as a type of catchall category.

Question-1: ………………..  statement of the surviving company included all of the revenues and expenses of the fiscal year for each company.

 a. Loss

 b. Profit

 c. Income

 d. All

Question 2. Goodwill is a ????.. Asset.

 a. Precious

 b. Tangible

 c. Intangible

 d. Accounting

Question 3. If the purchase price exceeds the fair value of the purchased company’s net assets, the excess is recorded as ?????..

 a. Profit

 b. Loss

 c. Goodwill

 d. None

Question 4. In which type of merger, a company acquires a customer or supplier.

 a. Horizontal

 b. Vertical

 c. Conglomerate

 d. All

Question 5. In which type of merger, company acquires a competitor firm that produces and sells an identical or similar product in the same geographic area.

 a. Horizontal

 b. Vertical

 c. Conglomerate

 d. All

Question 6. Under the ???.. method, all assets and liabilities are recorded at existing book values while goodwill is not recorded.

 a. Balance

 b. Vertical

 c. Pooling

 d. Purchase

Question 7. Under the ????. method, no new assets or liabilities were created by the business combination.

 a. Balance

 b. Vertical

 c. Pooling

 d. Purchase

Question 8. What actually comes in business combination?

 a. Merger

 b. Acquisitions

 c. None

 d. Both

Question 9. Which merger includes a number of other types of business combinations?

 a. Horizontal

 b. Vertical

 c. Conglomerate

 d. All

Question 10. Which method is now the preferred accounting method used for business combinations.

 a. Balance

 b. Vertical

 c. Purchase

 d. Pooling

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3rd Module Assessment

CASE STUDY-

Valuation of Goodwill and Shares          

VALUATION OF GOODWILL            

 I. Methods for Valuation of Goodwill:         

Ø  Capitalisation Method             Ø  Super Profits Method             Ø  Annuity Method           

Capitalization Method Steps:           

o   Future Maintainable Profits (FMP)            o   Normal Rate of Return (NRR)             o   Normal Capital Employed (NCE = FMP/NRR)         

o   Actual Capital Employed (ACE)             o   Goodwill = NCE – ACE           

Super Profits Method Steps:           

o   Average Capital Employed (Avg CE)            o   NRR                o   Normal Profits (NP = Avg CE x NRR)            o   FMP               

o   Super Profits (SP = FMP – NP)             o   Goodwill = SP x No of Years           

Annuity Method Steps:            

o   SP                o   Goodwill = SP x Annuity Factor          

II. Capital Employed:            

Ø  Liabilities Side Approach = Equity Share Capital + Reserves and Surplus – Non-Trading Assets – Misc Expenditure (+/-) Adjustments in values of Assets or Liabilities

Ø  Assets Side Approach = Total Assets (Excld Misc Expenditure and Non Trading Assets) – Outside Liabilities – Preference Share Capital

Notes:              

o   Non Trading assets shall be excluded (Investments mentioned in the balance sheet shall be excluded, if nothing is mentioned assume it as non trading investments. If nothing is given regarding purchase date of investment it is assumed it is purchased at the beginning of the year. 

o   Asset must be taken at current cost. If nothing is mentioned take value given in the balance sheet. 

o   If we already have goodwill in balance sheet that shall be excluded. 

o   Proposed dividend is not an outside liability whereas preference dividend is an outside liability. (Appearing in Balance Sheet)

o   Dividend Paid last year if there is no proposed dividend then the dividend paid shall be taken into consideration for capital employed.

o   Sinking Fund is a part of Reserves and Surplus         

o   Workmen’s Compensation fund is a part of Shareholders fund.       

o   Preference shares are treated as cumulative and non-participating if nothing is mentioned    

o   Unclaimed dividend is considered as outside liability it is different from proposed dividend.   

o   If the profits for past and profits for future are given we have to take profits of future for FMP. And less weightage shall be allotted to future profits.

o   Gratuity fund, workmen’s compensation fund is an outside liability.      

o   Capital Employed for Long term funds = Capital Employed as calculated above + Loans and Preference Share Capital

o   The difference in Balance sheet is outside liability if it appears on liability side and assets if vice versa.

Question-1: ………………….Fund is a part of Reserves and Surplus.

 a. Profit

 b. Loss

 c. Suspense

 d. Sinking

Question 2. ACE stand for Average ????? Employed.

 a. Money

 b. Profit

 c. Expense

 d. Capital

Question 3. Difference in Balance sheet is outside liability if it appears on Asset side and liability if vice versa.

 a. TRUE

 b. FALSE

 c. Sometimes

 d. Never

Question 4. Gratuity fund, workmen?s compensation fund is a outside liability.

 a. TRUE

 b. FALSE

 c. Sometimes

 d. Never

Question 5. NRR stands for ?????? rate of return

 a. Nominal

 b. Negative

 c. Normal

 d. Average

Question 6. Unclaimed ???????.is considered as outside liability it is different from proposed dividend.

 a. Dividend

 b. Liability

 c. Asset

 d. Loss

Question 7. Which is not the outside liability?

 a. Proposed Dividend

 b. Average Return

 c. Interest Income

 d. Principle Amount

Question 8. Which is not the part of Capitilisation Method Process.

 a. FMP

 b. NRR

 c. ACE

 d. All

Question 9. While calculating/Valuating goodwill, asset must be taken at current cost.

 a. TRUE

 b. FALSE

 c. Sometimes

 d. Never

Question 10. Workmen?s Compensation fund is a part of ??????. fund.

 a. Stakeholder

 b. Propreitor

 c. Owners

 d. Shareholders

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4th Module Assessment

Case Study # Lessening Income Tax Burden

If you are reading this, you are likely to be someone whose income exceeds the threshold of Rs 2.5 lakhs for paying taxes. There are some legitimate ways of saving taxes and the good thing is that most of them also help you grow your wealth. These options usually have a lock-in period and vary in the nature and amount of return they provide. You must also remember that each of these alternatives also serves specific purposes and tax saving is not the purpose but an ancillary benefit of that.

With the current financial year’s end approaching, there is precious little room for procrastination.  According to various research reports, less than 3% of the Indian population (~35 million taxpayers) bears the total income tax burden of the country, of which, 89% fall in the tax slab of 0-5 lakh.

You might have cough up high amounts if you fail to plan your taxes judiciously. Note that any delays in implementing your tax plans invariably result in non-accrual of tax benefits.

Public provident fund

The amount invested in public provident fund can be claimed as a deduction from gross total income under Section 80C. The interest on PPF account is also exempted from income tax. Most experts reckon that this is one of the preferred investment options.

National pension scheme

This scheme offers a good tax exemption benefit under Section 80CCD of the act. The contribution made by an employee to the NPS qualifies for this tax benefit and the upper limit of 1.50 Lakh (one lakh up to AY 2014-15) under Section 80C of the act.

Equity savings schemes

If you are invested in the stock market or are interested in doing so, invest in listed equity tax savings schemes (under 80C), for example, Equity Linked Savings Scheme (ELSS).

National savings certificate

National Savings Certificate is a scheme introduced by the government to promote the habit of savings among people. Under this scheme, the money is accepted by the government through post offices. An investor can avail tax deduction under Section 80C for such investments.

Life insurance

Apart from offering risk coverage, life insurance premium for self and family are applicable for tax deductions. Premiums for life insurance plans covering you, spouse, and dependent children are eligible for a deduction up to Rs. 1 lakh under Section 80C of the Income Tax Act.

Health insurance

Not only certain expenses incurred during medical treatment, but health insurance premiums are also eligible for tax deduction. Premiums paid up to Rs. 25,000 for medical coverage for yourself, your spouse, and children are eligible for deduction. Further deduction of Rs. 25,000 is available for medical insurance premiums paid for parents. The limit of Rs. 25,000 gets extended to Rs. 30,000 if the plan is for a senior citizen. Always opt for those tax-saving instruments, which fulfil your financial goals and cut your income tax payments.

Question-1: According to income tax act, how much percentage people fall in the tax slab of 0-5 lakh.

 a. 25,000

 b. 98%

 c. 89%

 d. 2.5 Lakh

Question 2. As per this case, up to which amount, there is no tax.

 a. 2 Lakh

 b. 2.5 Lakh

 c. 3 Lakh

 d. Not Clear

Question 3. Do senior citizens get some extra advantage under 80 C, for health insurance expenses.

 a. Always

 b. Sometimes

 c. Only 80 Years above

 d. Only Ex Govt Employees

Question 4. ELSS investments are made in ???. Market.

 a. Money

 b. Capital

 c. Treasury

 d. All

Question 5. Not only certain expenses incurred during medical treatment, but health insurance premiums are also eligible for tax deduction.

 a. TRUE

 b. FALSE

 c. Sometimes

 d. Never

Question 6. NSCs are sold by ?????.

 a. Banks

 b. Insurance Companies

 c. Post Offices

 d. Government

Question 7. Premiums for life insurance plans covering ??????… are eligible for a deduction.

 a. Insurer

 b. Sopouse

 c. Kids

 d. All

Question 8. The interest on PPF amount is tax free.

 a. TRUE

 b. FALSE

 c. Sometimes

 d. Never

Question 9. Under which section of Income Tax act, individuals can do savings and save tax.

 a. 80 C

 b. 80 D

 c. NPS

 d. ELSS

Question 10. Who is covered under health insurance.

 a. Self

 b. Spouse

 c. Kids

 d. All

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5th Module Assessment

Case Study

The merger between AOL and Time Warner

The merger between AOL and Time Warner was declared on 10 January 2000 and it was worth $183 billion. That was the biggest merger in the history of American business world. AOL had about 40% share of online service in the United States and the Time Warner have more than 18% of US media and cable households. The merger is taken into account to be a vertical merger between one amongst the most important web service suppliers and this one amongst the biggest media and entertainment firm. The new company was formed and named as AOL Time Warner and was the fourth biggest company in the US, as evaluated by stock market valuation. After the merger deal, AOL become a subsidiary the Time Warner Company at stage and has operations in Europe, North American countries and Asia. As a web service supplier, AOL on look severely rival from Microsoft, Yahoo and different low price net access suppliers. Thus, the corporate tries to induce advertising and e-commerce growth, thereby separate it by rival (BBC, 2000).

Impact of deal on the performance: After the official announcement of deal merger between AOL and Time Warner growth rate in revenue has dramatically declined. The profitability suffered a good plunge when the alliance. The potency of the new united firm was terribly poor as determined from the asset turnover ratio. Even the liquidity of the firm suffered once the merger as evident from this ratio. There are several reasons for failure however the foremost vital reason was the unequal size of the companies, wherever AOL was overvalued as a result of web bubble. According to New York share exchange before the deal the share price of AOL is 73 and Time Warne is 90 but after announcement of the merger deal the shareholders dissatisfaction shown on share market of AOL and Time Warner and the shares drop down to 47 and 71 respectively. AOL and Time Warner fail to keep up shareholders satisfaction levels this conjointly one among the rationale to loosing stability of share holders according to the Times magazine.

The market valuation of both the companies AOL and Time Warner were decline from the starting of the merger to end of the deal. AOL has drop down approximately 60 percent and Time Warner around 30 percent of market value once the deal has been closed. The market valuation of both the companies from 2000 to 2011 was dropped down drastically. The AOL market value has dropped from 167$ billion to 107$ billion and the Time Warner 124$ billion to 99$ billion and is the biggest dropped down of any company in American history.

Reasons for merger Failures: 1+1 = 3 sounds great but in practice or reality every time it’s not working properly and go awry. Historical trends show that roughly 2 thirds of huge mergers can let down on their own terms, which implies they’re going to lose worth on the stock exchange. The motivations that mainly drive mergers are frequently blemished and efficiencies from economies of scale might prove elusive (Investopedia, 2010).

Adoption of the new technology takes time for the normal company. In late twentieth century dramatic changes has occur in web. Migration of recent mode of web service is connected with high barricade and a number of other social and legal problems was encircled around and recently established firms like Yahoo, MSN etc was giving high edge competition. Economical rate of inflation is high, to create economy stronger American government has modified the policy and taxation rules have throwing a dispute for AOL to beat this things merger with Time Warner became a fruit to the AOL. Public and private policies are one of the reasons for the merger failure. The reasons of merger failure is overvaluation of AOL shares has shown a dramatic impact on the deal, whereas stake holders are not satisfied and improper communication with consumers damages the trust of user. The merger’s fail was a result not only because of the replete of the dot-com bubble but it also the failings by AOL Time Warner management to ever really integrate the two firms.

Conclusion

One size does not match all. Several firms think that the most effective way to get ahead is to expand business boundaries through mergers and acquisitions (M&A). Mergers produce synergies and economies of scale, increasing operations and cutting prices. Investors will take comfort within the idea that a merger can deliver increased market power. The same thing happens with the America’s biggest merger deal between AOL and Time Warner. They think that merger is helpful for both the companies but it not matched for both of them. Both AOL and Time Warner synergies shows diversification is that the main goal of the firms to extend the revenue and to attain the value gain because of the amendment in mode of technology and increase in the competition for the well established firms. Throughout the phase of merger web bubbles also the main cause for over valuation of shares. In distinction Time Warner was the victim of net bubble. This type merger failure cases shows support the European Commission to restrict the American companies to merge with the European companies. European commission has a right to govern the European market and make stable the Euro Zone market. The European commission (EC) is thought of defending domestic companies from foreign rival and they encourage their zone mergers. So the European commission doesn’t want any problems like dis-economies of scale, clashes of cultures and reduction of flexibilities by the merger of American companies. So the merger is highly regulated by European Union to avoid major concentration of economic power in euro zone. The merger deals cases like AOL and Time Warner helps the European Commission (EC) to make strict rules to restrict the merger and acquisition (M&A) of American companies with the Euro Zone companies.

Question-1: After the deal announced, the sales growth of both the companies noticed ????

 a. Fall

 b. Increase

 c. Stability

 d. Can’t Say

Question 2. After the historical merger announced, the US share market???

 a. Increased

 b. Decreased

 c. No Impact

 d. Welcomed

Question 3. After the said merger, new company had which position in the US market.

 a. First

 b. Second

 c. Third

 d. Fourth

Question 4. AS per the case, most of the mergers in US have been ????.

 a. Successful

 b. Failed

 c. Welcomed

 d. Stable

Question 5. The AOL and Warner merger took place in which year.

 a. Not Given

 b. 2001

 c. 2000

 d. 2010

Question 6. The main reason for failure of a merger is not to get the benefit of ?????

 a. Goodwill

 b. Economies of Scale

 c. Reputation

 d. All

Question 7. The market valuation of both the companies AOL and Time Warner were ????..from the starting of the merger to end of the deal.

 a. Up

 b. Down

 c. Stable

 d. Can’t Say

Question 8. The same thing happens with the America’s biggest merger deal between AOL and Time Warner.

 a. TRUE

 b. FALSE

 c. Not Given

 d. Can’t Say

Question 9. What is normally expected from a merger initiative?

 a. Economies of Scale

 b. Synergy

 c. Cutting Prices

 d. All

Question 10. What kind of merger it is?

 a. Horizontal

 b. Vertical

 c. Conglomerate

 d. None

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Assignment 2

Case Study # Is FDI the new engine of growth?

The official discussion paper (DP), Industrial Policy—2017, (goo.gl/jEPs6u) is a welcome effort. That said, while it sets down a laundry list of known constraints, it ignores serious analyses of poor industrial performance. Pedantically discussing competitiveness, the policy paper makes very little reference to trends in global trade, or inadequate domestic industrial demand, falling capacity utilization or negative credit growth (“Economic Reforms And Manufacturing Sector” by R. Nagaraj, Economic And Political Weekly, 14 January 2017).

There is an exception, however. Flagging the boom in foreign direct investment (FDI) inflows, the paper claims it as a badge of success for the official policy. The report says, “Total FDI inflow was $156.53 billion since April 2014 ($45.15 billion in 2014-15, $55.56 billion in 2015-16, and $60.08 billion in 2016-17). Highest ever annual inflow ($60.08 billion) was received in 2016-17. FDI equity inflows increased by 52% during 2014-16 and 62% since the launch of Make In India. India is now ranked amongst top 3 FDI destinations (World Investment Report 2016, Unctad) and ninth in the FDI Confidence Index in 2016, up two places from 2015 (AT Kearney)”.

Laudable as that may be, what did the FDI inflow do for the economy? Did it augment industrial output and investment growth (meeting Make In India goals) as expected in theory? The official paper claims it has. But has it really?

In principle, FDI—as against foreign portfolio investment which flows into the secondary capital market—brings in long-term fixed investments, technology and managerial expertise, together with foreign firms’ managerial control. FDI in green field investment is for fresh capital formation, and in brown field investment for acquiring existing enterprises with the expectation of improving the firm’s productivity and profits.

In practice, however, this may be different. Currently, FDI does not come from leading global producers of goods and services, but from shadow banking entities such as private equity (PE) funds. In 2014-15, PE accounted for 60% of total foreign inflows, and the top three recipients were Flipkart, Paytm and Snapdeal (Bain & Co.’s “India Private Equity Report 2016”). These funds are used to finance retail trade of mostly imported consumer goods to expand their market shares, in order to boost the firm’s market valuations. Since PE investments are highly leveraged (high debt-equity ratios), rising markets valuations help them reap disproportionate gains when they make their exit.

PE firms do not commit to fresh capital formation or invest in technology, as expected of FDI. India being a bright spot in world economy lately, global retailers such as Amazon are rushing here to build their brand’s value and acquire market share using abundant low-cost international capital. Could such financing of retail trade with short time horizons constitute the (new) engine of India’s industrial growth and employment generation? I wonder.

This is why despite rising FDI inflows, domestic capital formation rate, or industrial capacity utilization, have declined secularly. What is going on, I would contend, is foreign capital financed import-led consumption growth, not augmenting domestic output to meet Make In India goals. Therefore, the current growth pattern would only contribute to economic fragility under free capital flows, as the social costs of servicing the external capital in rupee terms could be significantly high in the longer run.

The official paper also pins hope on outward FDI to strengthen domestic industrial and services capabilities. Since 2000, the outflow has risen remarkably, often seen as the coming of age of domestic enterprises, acquiring factories and firms (and global brands) mostly in advanced economies, best illustrated by Tata’s acquisition of luxury car maker, Jaguar Land Rover. After a brief dip during the financial crisis, the outflows have maintained momentum. But Indian firms are no longer chasing foreign acquisitions; if anything, they are licking the wounds of hasty misadventures over the past decade—for instance, the Videocon group.

So where is the outflow going? Apparently, India is being used as a conduit for routing international capital for tax arbitrage. Olivier Blanchard and Julien Acalin’s research paper (What Does Measured FDI Actually Measure, Peterson Institute for International Economics, October 2016) offers an insightful answer. It shows that inward and outward FDI flows across emerging market economies are highly correlated, responding to the US policy rate. India ranks sixth in descending order among 25 emerging market economies (far higher than China). The study’s sharp conclusions seem instructive: “…‘measured’ FDI gross flows are quite different from true flows and may reflect flows through rather than to the country, with stops due in part to (legal) tax optimization. This must be a warning to both researchers and policy makers.”

Put simply, inward and outward FDI flows apparently represent channelling of global capital via India to take advantage of tax concessions (called “treaty shopping”). Hence such short-term foreign capital movements in and out of the country may contribute little to augment domestic capability. If the findings are correct, then there is a need to re-examine recent FDI’s true contribution.

Subject to closer verification, if the foregoing arguments and evidence are valid, then the recent FDI flows have contributed little by way of augmenting domestic capabilities, output and employment growth. Inward FDI, increasingly from PE funds, has largely financed e-commerce firms, driving import-led consumption boom. Outward FDI, instead of enabling domestic enterprises to access external markets and technology, has instead helped international capital to take advantage of India’s tax treaties to optimize tax burden of global firms. If the proposed industrial policy is serious about realizing the vision of Make In India, it needs to look elsewhere, not at FDI.

Question-1: Amazon is a ??????.. Brand.

 a. Indian

 b. Gujrati

 c. Canadian

 d. USA

Question 2. Despite rising FDI inflows, domestic capital formation rate, or industrial capacity utilization, have declined secularly.

 a. TRUE

 b. FALSE

 c. Can’t Say

 d. Sometimes

Question 3. Fdi from 2014 – 17 has shown ??????.. Trend.

 a. Decreasing

 b. Increasing

 c. Neutral

 d. Disturbed

Question 4. FDI in green field investment is for ?????. capital formation.

 a. Green

 b. Red

 c. Traditional

 d. Fresh

Question 5. FDI stands for foreign ??????.. Investment.

 a. Dear

 b. Direct

 c. Distance

 d. Demote

Question 6. Foreign Portflio Investment flows in ??????. Market.

 a. Bullian

 b. Mutual Funds

 c. Capital

 d. Money

Question 7. Indian firms are chasing foreign acquisitions.

 a. Right

 b. Wrong

 c. Sometimes

 d. Can’t Say

Question 8. Inward FDI, increasingly from PE funds, has largely financed ???… Firms.

 a. Science

 b. Pharma

 c. e-commerce

 d. Manufacturing

Question 9. PE firms do not commit to fresh capital formation.

 a. TRUE

 b. FALSE

 c. Can’t Say

 d. Sometimes

Question 10. which Indian Company didn’t recive decent FDI amount?

 a. Flipkart

 b. Paytm

 c. Snap Deal

 d. Amazon

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