“CONVENTIONAL BANKING & PRECTICES” “Muhammad Umar” 18221554-007 Presented To: “Mr.Usman Saeed” • The character of a business, whether it is a sole trader, What Is The Character Of A Business? partnership or limited company, not surprisingly, is shaped by the personal character of the individual(s) who run the business. • The sole trader apart, the other business structures are heavily influenced by the ability of the individuals to interact with each other and identify and agree common goals and objectives. • Once this is achieved, the real test is their capability to work as a team to proceed in the chosen direction, respond constructively when things go wrong, and ultimately meet desired targets. 2 Capacity The areas to consider here are: • The capacity of the management. • The capacity of the business. • The capacity of the industry and how the business compares with the industry norms. • The overall effects of the economy on the business. 3 Premises • Does the business own or lease its premises? If the premises are owned, is there borrowing? • If there is borrowing outstanding, is the business generating sufficient profit to make capital reductions and meet interest payments? • If the premises are leased, what are the terms of the lease? • What is the rent and when are the rent reviews scheduled? Is there sufficient space for the business to expand? Are there special conditions in the lease? • Are these conditions acceptable to the bank? • Seasonality Seasonality plays an important role in business. Oftentimes, it is the cause of otherwise unexplained increases and decreases in sales. Those who lack an understanding of an industry’s natural cycle might misdiagnose a decline in sales, especially if it lasts longer than two months. 5 • Management Management is a process of planning, decision making, organizing, leading, motivation and controlling the human resources, financial, physical, and information resources of an organization to reach its goals efficiently and effectively. 6 Succession planning • Succession planning ensures that a business can continue successfully after the loss (whether planned or unexpected) of any individual manager or member of staff, so it is vital to identify and plan for key positions in the future. 7 When considering the quality and ability of the human resources available, the following checklist will help: Staff • • • • • • Recognition/reward schemes. • Training issues. Staff morale/turnover. Commitment. Under-/over-staffed. Labour relations. Dependency on specialist skills - easily recruited/replaced 8 • Product & Services A product is a tangible item that is put on the market for acquisition, attention, or consumption, while a service is an intangible item, which arises from the output of one or more individuals. Although it seems like the main distinction between the two concepts is founded on their tangibility, that is not always the case. In most cases services are intangible, but products are not always tangible. 9 • • Market • • • • A market is a place where buyers and sellers can meet to facilitate the exchange or transaction of goods and services. Markets can be physical like a retail outlet, or virtual like an e-retailer. Other examples include the black market, auction markets, and financial markets. Markets establish the prices of goods and services that are determined by supply and demand. Does the business rely on one supplier or obtain raw materials from a range of suppliers? Who are the customers and what is the potential for expansion? Where is the business placed in the supply chain? 10 • • Plant And Equipment • Property, plant, and equipment are also called fixed assets, meaning they are physical assets that a company cannot easily liquidate. PP&E are long-term assets vital to business operations and the long-term financial health of a company. Purchases of PP&E are a signal that management has faith in the long-term outlook and profitability of its company. Is the machinery owned, leased or under hire purchase contract? How old is the machinery? Will it need to be replaced? Does it work at full capacity? Is there any machinery that is obsolete? Is the machinery critical? Alternative means of manufacture. 11 • Technology Business technology refers to applications of science, data, engineering, and information for business purposes, such as the achievement of economic and organizational goals. The main element of technology is the idea of change, and how it can affect business and society. 12 Competition • Competition in business is the contest or rivalry among the companies selling similar products and/or targeting the same target audience to get more sales, increase revenue, and gain more market share as compared to others. • • Who are the competitors of the business? • In many industries there is no longer room for everybody; one business’s increase in customers represents another business’s loss What size is the business in relation to its competitors? Can the business allow a reduction in its sales prices to maintain its customer base or attract new customers and at the same time continue to be profitable? 13 • • Before creating business plans or when evaluating existing ones it is important to 'scan' the external environment. This takes the form of a SLEPT analysis, i.e. an investigation of the Social, Legal, Economic, Political, and Technological influences on a business Economic changes are closely related to social ones. The economy goes through a series of fluctuations associated with general booms and slumps in economic activity. In a boom nearly all businesses benefit and in a slump most lose out. Other economic changes that affect business include changes in the interest rate, wage rates, and the rate of inflation (i.e. general level of increase in prices). Businesses will be more encouraged to expand and take risks when economic conditions are right, e.g. low interest rates and rising demand. Economic Conditions 14 • Social issues includes such things as demographics, in the local market, nationally and perhaps even internationally. Social Issues • Is unemployment an issue in the market the business serves? • Is management aware of financial pressures affecting customers and suppliers? • Does management know how their record on social awareness is regarded by customers and potential customers? • Do they have a clear idea of the socio-economic groups they serve? • Do they support local initiatives and are they aware of local attitudes? 15 What is financial System? • • • A financial system is the set of global, regional, or firm-specific institutions and practices used to facilitate the exchange of funds. Financial systems can be organized using market principles, central planning, or a hybrid of both. Institutions within a financial system include everything from banks to stock exchanges and government treasuries. 16 Components of the Financial System. A financial system has five components: 1. Money 2. Banks and Development Financial Institutions 3. Financial Instruments 4. Financial Markets 5. The Central Bank 17 What Sort of impact dose money have on Local Trade? • Currency exchange rates can impact merchandise trade, economic growth, capital flows, inflation and interest rates. • Examples of large currency moves impacting financial markets include the Asian Financial Crisis and the unwinding of the Japanese yen carry trade. • Investors can benefit from a weak greenback by investing in overseas equities. • Investors should hedge their foreign currency risk via instruments such as futures, forwards and options. 18 Difference Between CPI & WPI? • • Wholesale Price Index is a measure of the average change in the price of goods at a wholesale level or in the wholesale market. Consumer Price Index is another price index that calculates price changes of goods and services that a consumer has to pay for consuming a basket of goods 19 • Foreign trade is indispensable for the full economic development of a country and includes framing commercial policies conducting trade negotiations, and making bilateral, regional and international arrangements for promotion of trade. Foreign trade also includes all the merchandise coming from foreign countries into Pakistan through lawful channels under private and government accounts via sea, air, land routes and by parcel post, released by Customs either directly or in the form of bonds. Goods imported and deposited into bonds are not taken into account Does Money Impact on Foreign Trade? If Yes The How? 20 What do you Know About the Concept of Balance Of Trade? • Balance of trade (BOT) is the difference between the value of a country's exports and the value of a country's imports for a given period. Balance of trade is the largest component of a country's balance of payments (BOP). Sometimes the balance of trade between a country's goods and the balance of trade between its services are distinguished as two separate figures. • The balance of trade is also referred to as the trade balance, the international trade balance, commercial balance, or the net exports. 21 • • Use the balance of trade to compare a country's economy to its trading partners. A trade surplus is harmful only when the government uses protectionism. A trade deficit can be beneficial to countries that import heavily and simultaneously invest in economic development. How The Balnce of Trade effect our economy? 22 • Financial markets refer broadly to any marketplace where the trading of securities occurs. • There are many kinds of financial markets, including (but not limited to) money, stock, and bond markets. • These markets may include assets or securities that are either listed on regulated exchanges. • Financial markets trade in all types of securities and are critical to the smooth operation of a capitalist society. • When financial markets fail, economic disruption including recession and unemployment can result. Discuss Financial Markets in your own words? And Explain their key Features. 23 • • The money market is the trade in short-term debt. It is a constant flow of cash between governments, corporations, banks, and financial institutions, borrowing and lending for a term as short as overnight and no longer than a year. The capital market encompasses the trade in both stocks and bonds. These are longterm assets bought by financial institutions, professional brokers, and individual investors. Difference Between Capital & Money Market? 24 “Thanks you” For Your Kind Intention 25