The process involves gathering relevant financial information, setting financial goals, scrutinizing your current financial position and coming up with an approach or plot for how you can encounter your goals given your current condition and future plans. Financial Planning provides direction and connotation to your financial decisions. It allows you to comprehend how each financial decision you make affects other areas of your finances. By observing each financial decision as part of the whole, you can consider its short and long-term effects on your financial goals. You can also adapt more easily to financial changes and feel more secure that your goals are on track.
Personal financial planning, also called personal financial management, is the process that allows you to plan and manage your financial affairs in order to achieve personal economic satisfaction (“Personal finance basics,” n.d. p. 2). In other words, it allows you to control your financial situation and to plan your spending. It can also help you anticipate financial problems and manage them effectively. Why is a financial plan needed? Because it can help you lead a better life and can assist you in reducing uncertainty about your future (“Personal finance basics,” n.d. p. 2).
Carefully and deftly calculated cash forecast helps a firm to: (i) Select securities with suitable maturities and practical risk, (ii) Avoid over and under-financing and (iii) Capitalize on profits by investing idle money. Short-run cash forecasts serve many forms of purposes. For an example, multi-divisional firms use them as an instrument to organize the flow of funds between their various divisional levels as well as to make financing preparations for these operations. These forecasts may also be useful in shaping the margins or least balances to be preserved with banks. Still other usages of the forecasts are explained below: • Planning bargains of short and long-term debt.
According to Rama Gopal (2009), ratio analysis is an important and powerful technique or method, generally, used for analysis of Financial Statements. Ratios are used as a yardstick for evaluating the financial condition and performance of a firm. Analysis and interpretation of various accounting ratios gives a better understanding of financial condition and performance of the firm in a better manner than the perusal of financial statements. Brigham and Houston (2011) stated that ratios help us evaluate financial statements. Financial statements analysis involves careful selection of data from financial statements for the primary purpose of forecasting the financial health of the company.
It comprises forecasting revenue levels and expenses, the organisations profit capital expenditure, cash flows, and gives management a framework for control. A budget therefore has multiple purposes. It is a financial management tool that ensures prudent allocation of an organisation’s financial resources. Budgets help organisations keep track of the progress the organisation is making towards attainment of its strategic goals and objectives. It assists the organisation forecast profits and future cash flows and can be used as its road
By looking at the previous research, it was found that financial literacy is defined differently by every researcher. Financial literacy is the ability of a person to manage financial resources effectively for a lifetime of financial well-being by using his or her knowledge and skills (The United States Financial Literacy and Education Commission, 2007). Lusardi (2008) mentioned that financial literacy is the knowledge of basic financial concepts such as the working of compounding interest, the difference between nominal and real values and the basic risk diversification. According to Mason and Wilson (2000), financial literacy is a process of meaning-making in which individuals use combination of skills, resources and contextual knowledge in order to process information and to make decisions based on the knowledge on financial consequences of that decision. Financial literacy is used to measure how well an individual can understand and use personal finance-related information in life (Huston, 2010).
The service and facilities offered by the commercial bank should be readily available at reasonable cost. Banker should educate the user on making the most out of the services and facilities by giving simple pep talks and publishing pamphlets and brochures, clarifying on the procedure and advantage of the various types of services and facilities available. As the financial intermediaries between the depositor and borrower, bank have to ensure that such fund lent out are for productive and economically viable purpose and activity for the betterment of the country as a whole. The functions of commercial bank are: • Retail banking service such as acceptance of deposit, granting of loan and financial guarantee • Trade financing facilities such as letter of credit, discounting of trade bill, shipping guarantee, trust receipt and Banker’s
Quantitative easing can be classed as a monetary policy that is used as an extension of the cash supply to buy assets. In other words, Quantitative easing assigns a utilization of monetary policy that is exercised in the smooth transitioning of the economy. Usually, the central banks provide a back up support to banking sector post any crisis, to ease pressure by pumping money into markets, which helps the banking sector to try and maintain the lending level. Central banks are normally responsible for keeping the inflation rates and bank rates under the target range as set by the governments, considering the economic conditions that would encourage the economy by an increase in spending. Quantitative easing usually involves a structure where
1.1 INTRODUCTION TO FINANCIAL ANALYSIS Financial analysis converts raw information of financial statements in useful financial information. Only after financial analysis, we can use financial statements for decision making. This financial information is useful for planning, evaluating and making financial decisions. Further, financial analysis helps in assessing the past performance along with the current financial position, in order to make predictions about the future performance of the company. The process of evaluating business, projects, budget and other finance related entities to determine their suitability for investment.
In this system both private and government decision are important. The role of financial intermediaries in economic system Into the economies it is very important to exist channels through which the money from those who have savings can reach the ones who make investments and generally use it in a more productive way. The financial markets and the financial intermediaries have this role in the contemporary economic systems, by providing financial services that have two main objectives: reduce the costs of the money transfer between borrowers and lenders and make the proper distribution of capital resources in order to endure economic growth, safeguard liquidity and facilitate risk sharing. a) Definition of “financial intermediary” A financial intermediary is an entity that acts as a mediator between two parties in a financial transaction, business deal, investment etc. As financial intermediary is possible to act a commercial or investment bank, a broker or a consultant.