Category: Commerce Notes PPT

Liquid Assets meaning relates to those Assets that may be easier to convert into cash or sell without any loss in its value. It helps an individual or an organisation to Liquid funds at any point in time.

Liquid Assets Formula

The consolidated Liquid Assets are cash and such securities that can be readily subjected to cash conversion without the current liabilities. The formula is mentioned below.

Liquid Assets Examples 

The examples of a Liquid Asset would comprise both cash and investments.

Legal tender by way of cash is easily accessible and highly disposable. It can be utilised immediately for paying any existing liabilities. Cash available, whether at a Bank or in hand, is considered to be Liquid as it may be immediately used without any associated formalities. 

Specific investments can also be considered as Liquid as they can be Liquidated readily. In case of any financial urgency, it may be converted to cash quickly. Investments comprise a large number of instruments such as mutual funds, bonds, money market instruments and stocks, among others.

List of Liquid Assets 

Among a host of Liquid Assets, few have been mentioned below.

Cash at a Bank pertains to the sum of the amount that is deposited in a financial institution. It is considered to be a current Asset in a highly Liquid form. 

It usually refers to the total accessible cash of an organisation. In the context of a company, cash in hand helps in the inference of the number of days for which an organisation can carry on with paying its operating expenses with the available cash. 

The short-term investment securities are known as cash equivalents with maturity periods to be usually around 90 days or less. Examples of cash equivalent include Treasury bills, legal tender, cheques that are received but not deposited etc. 

A government may issue debt security to raise funds. The holder of a government bond earns a fixed amount of interest against the amount loaned to a governmental body.

A promissory note is a financial instrument that shows the written promise by an issuer to pay a definite sum of money to a payee on a determined future date. It creates a legal obligation on the issuer to pay such loan. 

Accrued income is such an amount of money that has already been earned but yet not received. Interest earned on investment that has not been received is an example of accrued income. 

It is an investment in company shares representing ownership corresponding to the volume of stocks owned. Through an increase in the value of stocks, investors can earn capital gains by selling such shares. 

Account receivables pertain to such proceeds or payment that the customers of a company will have to pay for purchasing services or goods on credit. 

Importance of Liquid Assets 

The importance of Liquid Assets for companies arise from the fact that Liquidity happens to be a key component of financial health, based on which investment decisions are undertaken. It becomes crucial in the instances of emergency debt payment, and payment of taxes or wages etc. 

Liquidity Ratio 

The analysis of Liquidity is done by a number of ratios. Liquidity ratio is significant as it indicates whether a business holds the capacity to pay off its short-term debts. The two significant Liquidity ratios are –

This ratio measures the ability of a company to settle its short-term obligations within a particular financial year. 

It is the extent to which a company may settle its short-term financial liabilities without securing additional financing or selling off its inventory. It is also known as the acid-test ratio.

Test Your Knowledge –

1. Which of the following do you think is the most Liquid Asset?

1. Government securities 

2. Cash

3. Land 

4. Stocks 

2. Which of these below-mentioned options can be considered as a Liquid Asset?

1. Cash in hand 

2. Stocks 

3. Marketable securities 

4. All of the above

3.  Investments can never be considered to be Liquid?

1. True 

2. False

3. At times 

4. Only when sanctioned by the government 

Solutions

(b) Cash

(d) All of the above 

(b) False 

If you want to learn this topic and several other related topics in-depth, feel free to refer to the study materials available on ‘s website. Do not forget to download the app on your device.

Some Disadvantages of Liquid Assets

No Guarantee Liquid Finances are also linked to the request. Hence, they witness constant oscillations. There’s no guarantee of safety of stars in a Liquid fund. 

For illustration Suppose you invested Rs 5 lakhs in a Bank FD. On maturity the Bank guarantees to repay you Rs 5 Lakhs. So, you don’t lose your invested capital. 

This guarantee isn’t available in Liquid Finances. Since Liquid Finances are pronounced linked, there’s a chance of the capital getting eroded. But since Liquid collective Finances invest in AAA rated papers, they’re veritably safe. 

But since Liquid collective Finances invest in AAA rated papers, they’re veritably safe. 

Taxation Short term capital earnings in Liquid collective Finances are added to your income and tested as per your duty arbor. So, investors falling in the loftiest duty type end up paying advanced short term capital earnings duty.  

Operation Freights When you invest in Bank deposits, you don’t have any pay any fund operation freights. This is because the Bank only holds your plutocrat. It doesn’t manage your plutocrat. But in a Liquid fund, your fund director manages your portfolio and charges a fund operation freights. 

Compared to 2-2.5 expenditure rate of equity Finances, the expenditure rate of Liquid Finances is veritably low. For illustration The expenditure rate for TATA Liquid Fund – Regular – Growth is only 0.33. 

As you can see, the advantages of Liquid Finances far overweigh the disadvantages. Hence Liquid Finances are the perfect investment option for retail investors. 

Investors looking to deem fat short- term cash or perk can consider investing in Liquid Finances.  

But just because Liquid Finances carry lower threat, doesn’t mean that all Liquid Finances are great for investment. 

RankMF has discovered the 5 stylish Liquid Finances in India. These Finances have constantly beaten the request and are top players. Find out and start investing in the stylish Liquid Finances in India by opening a FREE RankMF account. 

Modern businesses are very complex. A whole gamut of knowledge of many subjects such as economics and the role of managerial economics, econometrics, statistics, managerial accounting, human resource management, organization behaviour and so on is an absolute necessity these days. A systematic study of these subjects provides an understanding of different managerial roles in organization. It enables one to develop those skills which eventually help in strategic decision making. There are many managerial roles in management but the basic functions of all managers remain the same- planning, organizing, staffing, leading, and controlling. This article aims to discuss the various managerial roles and functions in an organization. 

What are the types of Managerial Roles?

There are three main types of managerial roles in an organization: 

• Interpersonal- In this group of managerial roles and functions, the manager plays a pivotal role in the organization that includes legal as well as social duties. Here, the manager must have leadership qualities so that he/she can build a team, motivate the employees, coach them whenever necessary and contribute towards building a strong relationship. Lastly, it also requires developing and maintaining a good network of people that can provide assistance and valuable information when required.

• Informational- This role requires the manager to have relevant information about things that are affecting the company. The manager here needs to monitor the information flow in and outside the organization. Also, he needs to disseminate important information that concerns the organization. In other words, the manager should be the spokesperson of the organization. 

• Decisional- This role requires the manager to handle unexpected challenges with suitable and immediate action plans. He/she needs to ensure that the resources of the company are being utilised in an optimum manner. He/she is also required to participate in all the negotiations of the company. 

Besides these three types, there are three more managerial roles and functions in the principle of management. These are:

General Managers: They oversee the performance of the entire organization or a major self-reliant subunit of the enterprise.

Functional Managers: They are responsible for specific task/s or operations such as sales, marketing, R&D, PR and communication, production, logistics, and information technology. In other words, functional managers lead a function or a particular subunit of a function. 

Frontline managers: Found at the lowest level of an organization’s management hierarchy, frontline managers manage employees directly. 

Therefore, these are basically managerial roles definition. Before discussing other types of managerial roles and managerial rules, let us see- what is the role of managerial economics in business, followed by the management accountant role.  

Role of Managerial Economics

The role of managerial economics is to apply the knowledge of economic concepts and analytical tools to the managerial decision-making process. One of the main functions of managerial economist is to identify profit-maximizing ways by equating marginal cost with marginal revenue. Managerial economics unlike traditional economics deals with real people in real business setups. 

Management Accountant Role

Managerial roles in organization involve the management of the accounts. The risk managers take care of all the financial aspects of the business including budgeting, resource allocation, monitoring of the resource utilisation, evaluation of the output, and report generation. They look after the accounts of the company and formulate strategies that can be implemented to generate maximum profits. The managerial roles and skills involved in such a position include deep-thinking, cost-benefit analysis, and a 360-degree awareness about the market. 

Hence, the management accountant role is to ensure that the organization is in the pink of financial health, always. Without their contribution, a company cannot flourish. Therefore, going by the managerial rules, the management accountant role is a crucial one and so are the functions of managerial economist. 

Briefly Explain all Managerial Roles

The role of managerial economics in decision making is key to its success. The other managerial roles and functions are as follows:  

• Planning: Preparing a schedule of events that will happen in a project or creating a blueprint of activities that will be done to complete the project. 

• Organizing: Arranging everything needed for the successful completion of the project and synchronizing the same. 

• Staffing: Grouping of personnel in different teams and allocating them tasks. 

• Leading/Coordinating: Guiding team members towards a common goal and facilitating communication between the teams. 

• Budgeting: Resource planning and allocation to ensure optimal utilisation of the same during the course of project completion within the given time period. 

• Reporting: Preparing reports and presenting the same to the management for further evaluation. 

• Controlling: Bringing everything under control and taking accountability. 

This is all about the managerial roles in management. For further clearing of doubts, you may refer to the solved question on managerial roles. 

Inflation is the pace at which a currency’s value declines and as a result, the general level of costs for goods and services rises. Although the price fluctuations of individual goods can easily be calculated over time human interests reach well beyond one or two such products. To live a comfortable life, individuals need a wide and diversified range of goods as well as a host of services. They include goods such as food grains, metal and fuel, electricity and transportation utilities, and services such as healthcare, entertainment, and labour.

Inflation attempts to calculate the aggregate effect of price increases on a diversified range of products and services and enables the rise in the price level of goods and services in an economy to be measured at a single value over a while. Prices increase as a currency loses value, and it buys fewer goods and services. The general cost of living for the general population is influenced by this loss of buying power, which inevitably leads to a deceleration of economic development.

 

Causes of Inflation:

In an economy, different factors can push prices or inflation. Inflation usually results from an increase in the cost of production or a rise in demand for goods and services.

 

Cost-Push Inflation:

Cost-push inflation happens when prices, such as raw materials and wages rise because of rises in production costs. Demand for products remains constant, although the supply of goods decreases as a result of higher production costs. As a consequence, in the form of higher prices for finished products, the additional costs of production are passed on to customers. As they are big manufacturing inputs, one of the indicators of potential cost-push inflation can be seen in rising commodity prices such as oil and metals.

For instance, if the price of copper increases, businesses that produce their products using copper may raise the prices of their goods. If the demand for the commodity is independent of the demand for copper, the higher cost of raw materials would be passed on to customers by the enterprise. Without any change in demand for the goods purchased, the effect is higher prices for customers. Prices can also be pushed higher by natural disasters. For instance, if a hurricane kills a crop such as maize, as maize is used in many goods, prices will increase in the economy.

 

Cost-Push Inflation Examples

Most commonly cost-push inflation occurs in the sectors of natural gas and oil prices. Gasoline and natural gas are used by almost everyone to fuel their automobiles or heat their home. Crude oil is used in refineries for the manufacturing of gasoline and other fuels. High levels of natural gas are also used by electric power suppliers for the manufacturing of electricity. The reduction in the supply of oil due to change in global policies, creation of warlike conditions or occurrence of natural disasters. These reductions in the supply of oil will ultimately increase the price of gasoline. In this case, the demand for the product remains the same but the raw material available for manufacturing the product is not available due to which the price of the product increases.

 

Demand-Pull Inflation:

Demand-pull inflation can be exacerbated by high demand from customers for a product or service. Prices rise as there is an increase in demand for commodities throughout an economy, and demand-pull inflation is the result. When unemployment is low, consumer morale appears to be high and wages rise, leading to more spending. Economic expansion has a direct effect on an economy’s level of consumer spending, which can contribute to a strong demand for goods and services. As the demand for a specific product or service rises, the supply available decreases. When fewer goods are available, customers are willing to pay more to get the item, as illustrated in the supply and demand economic theory. Owing to demand-pull inflation, the consequence is higher prices.

Companies, especially if they produce common goods, often play a role in inflation. A business can boost prices simply because the additional amount is willing to be charged by customers. Corporations often openly increase prices because the commodity for sale is something that customers, such as oil and gas, require for daily life. Nevertheless, it is customer demand that gives businesses the power to boost costs.

 

Demand-Pull Inflation Example

The most recent example of demand-pull inflation was seen during the coronavirus pandemic when the global economy was completely shut down in March 2020. The global economy moved towards recovery when the availability of vaccines increased and the pace of vaccination also increased exponentially. This recovery of the global economy is increasing the demand for goods and services which were otherwise not available for the complete year. The increased demand of such products like food, household items and fuel lead to an increase in the prices of the product. The rise in the rate of employment post COVID has also led to rise in the prices of fuel, air tickets and hotel rooms. The low interest rate on properties have also made people buy new houses which has led to an increased demand for copper. Thus, as the global economy has opened up, customers are in favour of spending money but the factories don’t have enough raw material to supply the products at a rate at which the demand of the product is increasing.

 

Effects of Inflation:

• Encouraging Spending, Investing: Buying now rather than later, is a predictable response to declining purchasing power. Cash will only lose value, so it is better to get your shopping out of the way and stock up on things that are not likely to lose value.

• Raises the Cost of Borrowing: Companies and individuals can borrow cheaply to start a business, earn a degree, hire new workers, or buy a shiny new boat if interest rates are low. In other words, spending and investment are encouraged by low rates, which in turn generally stoke inflation.

• Reduces Unemployment: There is some evidence that unemployment can be driven down by inflation. Wages tend to be sticky, which means that in reaction to economic changes, they adjust slowly.

• Increases Growth: Inflation discourages saving unless there is an attentive central bank on hand to drive up interest rates because the buying power of deposits erodes over time. The prospect provides an opportunity for customers and companies to spend or invest.

• Weakens of Strengthen Currency: A slumping exchange rate is generally associated with high inflation, but this is usually a case of the weakened currency contributing to inflation, not the other way around.

 

Remedies of Inflation:

There are three ways by which Inflation can be controlled:

1. Operation of Open Market: Inflation requires the Central Bank to reduce the cash.

2. Interest Rate: During the time of Inflation, the interest rate should be increased. An increase in Interest Rate will result in discouragement of consumption and investment.

1. Price Pegging: The government will decide the floor and ceiling price so that values will not increase rapidly.

2. Encourage Saving: The government raises the contribution to the employee’s Provident Funds.

3. Price Tagging: Every product needs to be labelled to prevent producers from charging to consumers.

Finance is often known as the life blood of the business. Business Finance helps the overall conduct of the business. Capital is also a form of business finance. Business Finance helps the business to grow. To expand a business also, finance is used. Business finance is also used all over the channel for the operation of funding.

Without business finance it is not possible to conduct business, hence studying about the business finance is utmost required by the students studying business. In this context itself, we will discuss the learning of Business Finance and its aspect in the structure of business.

Meaning of Business

A business is an enterprising entity that is engaged in commercial, industrial, or professional activities. Businesses can be both for profit and also it can be non-profit organizations. Non-profit organizations are for the social cause generally. 

The term “business” refers to the collaborative efforts and activities of each individual in an organization to produce and sell goods and services for profit. Businesses are of many kinds – from sole proprietorship business to an international corporation. A business normally starts with a concept and an identity. Before starting a business, extensive researching is needed to turn the business idea into a real business. 

Business Plan is an important document while starting a new business. This plan will not only facilitate planning of the future, but also will facilitate in collecting of capital by showing the strength of the business.  

Business Structures

Businesses organize themselves in various structures. Some organizations work with a single person, while others work in numerous others. The most common structures include the sole proprietorship, partnership, corporations Limited Liability Companies, while sole proprietorship being the most popular among all.

A sole proprietorship, as indicated by the name is operated by the single person. There is no legal separation of the business and the owner.  

Partnership engages two or more partners in its business unit. They indulge their money and share the profit in their profit-sharing ratio as determined.

A corporation consists of a group of people who acts together as a single unit. Here the fund of the corporate structure is called ‘common stock’, which is owned by the shareholders. Tax system

Business Sizes

Business sizes range from small companies, such as restaurants, to multinational corporates such as any clothing brand. Larger businesses need large amounts of capital and hence if they want to operate their business, they need to take capital by pooling the funds of the public, where strict regulators are also engaged. While in small business no regulators are engaged as they operate in less funds without any pooling of funds from the public.

Business Industries

A company functioning under a specific industry may take its name while naming the sector of its operations. Like a company is said to be engaged in textile business if its functioning comes under a textile industry. 

Definition of Finance

Finance is the management, creation, and study of money and investments. We divide finance into three categories – Public Finance, Corporate Finance and Personal Finance. 

1. Public Finance

The government allocates resources, distributes income, and stabilizes the economy. Government does regular funding for these programs, this is done mainly by taxation. Public finances also include charges form the ports, airport services, fines imposed on law breakers, sales from governmental bonds and securities.

2. Corporate Finance

Businesses need to obtain finance, these procuring of finance can be done from various resources. A firm might take a long term loan from the bank, or it may raise public loan, or may issue shares to the general public. Managing this debt properly will help the expansion of the company profitably. 

Start Ups may get investment from angel investors or venture capitalists. They get this corporate financing with this method.

3. Personal Finance

Personal finance is about the individual expenses, savings and investment. Personal Finance is also required to do methodically. Predicting the short-term, long-term needs are to be analysed properly. Personal finance is affected by one’s earnings, lifestyle, desires and personal goals. Purchasing of financial products like credit cards, life insurance, home insurance, car insurance. Also, personal banking is too considered as personal finance.

As financed by microcredit, micro-enterprise helps improve the quality of life for people in developing countries like India. Some of the common examples of micro-enterprise businesses include grocery stores that sell dairy products and other groceries, fruits, etc. These businesses not only help in promoting quality of life for business runners but also add value to the local economy. They produce numerous jobs at small-scale, improve income, and boost purchasing power. Learn more about what micro-enterprise is and how they are helpful for the economy of the country.

Definition of a Micro-Enterprise

Microenterprise also refers to micro business, which starts with a smaller amount of capital plus employs a small number of people. Generally, microenterprise serves as a trademark of developing the country as well as its economy. Many people found a shortage of jobs in the formal sector; however, micro-enterprise help them to find a good job in a desirable sector. Apart from creating jobs, they increase purchasing power, reduce production costs, and offer convenience. 

Even the government encourages microenterprise development in low-income areas. It helps not only business but also the economy to grow. In addition to it, such enterprises aim to promote sustainable development. A micro business must get treated in the same way as any large business from a proper business plan to professionalism. The higher commitment and good initiative lead to the development of micro-enterprise businesses into bigger entities.

 

Purposes of a Micro-Enterprise

Microenterprise in India helps in creating large-scale employment in the economy. With the use of limited finances and investment, micro-enterprises aim to provide good jobs to job seekers.

One of the great objectives of microenterprise is to promote trade and industries in an economically backward area. As a result, it helps in the development of the economy.

Micro enterprises help in bringing the backward areas into the plan for national development. They aim to encourage regional development. 

The above picture shows ladies selling food items to earn money and it’s a kind of micro business. They may work in industry or may start their own business. 

Microenterprises help in filling the gap effectively in developing economies. It helps in improving the mobilisation of plenty of natural resources in India.

Irrespective of where people live and work, micro-enterprise helps in improving the living conditions of all citizens.

With the emergence of advanced technologies, it is becoming a challenge for micro-enterprise businesses to balance their reputation. The Government of India has already taken several steps due to which ease of conducting business for microenterprises has increased.

 

Types of Micro-Enterprises in India

Microenterprises contribute a considerable portion to the economy. Some of the business types considered as micro-enterprises are as follows.

The above picture shows a micro-enterprise business where a group of ladies is making pots to earn for their families. 

In some of the cases, people become micro-entrepreneurs by need or necessity. Many people in the country engage in self-employment to fulfil their family needs and serve the community. However, a subset of micro-entrepreneurs comprises highly talented people who prefer entrepreneurship over paid employment. The micro-enterprises have high potential to run highly profitable businesses and enhance the national economy.

 

What is the Role of Micro-Enterprise in Economic Development?

The successive development of micro-enterprise and small-scale industries in the nation has led to a significant rise in the per capita income. It can be seen from various micro-enterprise examples that these contribute to the country’s employment. 

With the economic development of smaller towns and villages, it helps fill the gap between rural and urban areas. The significance of micro-enterprise businesses can be noted from the fact that it serves as one of the largest employment providers in India.

 

The establishment of micro-credit and micro-financing in India is one of the major components in microenterprise development. It allows individuals with low, moderate, or no income to start their own business and earn. 

With a relatively low investment, the micro-enterprise produces immediate employment opportunities. Additionally, it promotes a more reasonable distribution of national income and makes efficient mobilisation of human skills.

Though micro-enterprises play a vital role in the economic development of any country, still there are some challenges that need to be taken into consideration. It requires a lot of government services as well as approvals. However, by making critical efforts to develop self-sufficient groups of manufacturing competence, microenterprise development can be easily measured.

The economy continually keeps changing, and so does the Demand in the current market. Every business and even the industries keep a record of how this Demand changes. The factors affecting it cause fluctuations in the market. For better analysis and understanding, usually, a Demand Curve is created. However, what is a Demand Curve, and how does it help? Is there any difference between the movement and Shift along the Demand Curve? Let us have a better insight into what it exactly is.

What is the Demand Curve?

It is defined as the graphical representation between the Demand and price of commodities and how the graph transforms with a change in their values. The Demand Curve comes as a result of the law of Demand and the law of supply. 

According to the law of Demand, with increases in prices, the Demand decreases. If put in mathematical terms, Demand is an inverse of prices. 

According to the law of supply, with an increase in prices, the quantity supply also increases. 

Both these laws help in understanding the interaction of market prices with the Demand for goods and their supply. It is not just the price and quantity that affect the Demand Curve but there are also several other impactful factors. 

Movement and Shift along the Demand Curve

For all the supplies that a company provides, there are changes in the Demand Curves; but based on what factors does this happen? You can expect the changes in the Demand Curve based on the following two factors.

This leads to the movement and Shift along the Demand Curve. What is the difference between the two? How does it affect the Curve?

Movement in the Demand Curve

Are you wondering what causes a movement along the Demand Curve?

Movement along the Demand Curve happens because of the change in the price of commodities. This further affects the quantity Demanded. All other factors remain unchanged. Under such a scenario, the graph moves along the Y-axis, as the price is plotted against it. At the same time, the other axis remains constant. 

So, in such a scenario, with an increase in price, the Demand decreases, and with a decrease in price, the Demand increases.

The movement happens in a contraction and expansion format. Consider the following example.

Contraction of the Curve: For instance, if the price increases from 10to12 for a commodity, then the supply decreases from 100 to 80. This is called a contraction of the Demand Curve. 

Expansion of the Curve: For instance, if the price decreases from 10to8 for a commodity, then the supply increases from 100 to 120. This is called an expansion of the Demand Curve.

There is no Shift in the position of the Curve, just an increase or decrease in the slope.

Then, what causes a Shift in the Demand Curve?

Shift in the Demand Curve

This happens when there is a change in any other factor apart from the price. It could be due to the quantity, consumer income, or several other factors on which the Demand Curve is based. Under this, even the price can vary. This leads to left or right Shift in the Demand Curve. 

The factors leading to a Shift in the Curve are as follows.

• Increase in Demand quantity of the products due to popularity

• Increase in the price of a competitive good

• A rise in the income of consumers

• Seasonal factors 

It leads to a Shift in the Demand Curve, depending on the factors. 

A movement and Shift can also occur in the same Curve over a longer time period. Initially, an increase in price for a certain commodity could lead to a movement in the Curve. However, with time, it could lead to a Shift in the same Curve, depending on other factors.