Category: Commerce Notes PPT

What is a Money Market?

Money Market transacts in itself very short-term debt investments. At the wholesale level, the market involves large-volume trades between the institutions and the traders. While at the retail level, it includes money market mutual funds that are bought by the individual investors and respective money market accounts are opened by the bank customers.

The money market is a pillar who contributes to the global financial system. The market involves overnight swaps of vast amounts of money between the banks and the various governments. The majority of the transactions happening in the money market are wholesale transactions which take place between the financial institutions and companies.

Money Market Explained

More specific way to understand what a money market is, we will understand the same from the below mentioned points:

• The money market involves the purchase and sale of large volumes but of very short-term debt products, like the overnight reserves or even the commercial paper.

• An individual may invest in this money market by purchasing a money market mutual fund, may be a T-bill or by opening a money market account in the bank.

• The money market is characterized by assurance of high degree of safety with relatively low rates of return.

Money Market Instruments

The money market instruments that facilitates the functioning of this market and are used for various purposes are discussed hereunder:

1. Certificate of Deposits

These are commonly offered to the consumers by banks, thrift institutions and credit unions.

2. Repurchase Agreements 

These are short-term loans which operates for less than a week and more frequently for one day 

3. Money Market Mutual Funds

 A short-term instrument debt operated by professional institutions. 

4. Commercial Paper

Short term instruments like the promissory notes that are issued by the company at discount on the face value.

5. Treasury Bills

Short-term debt obligations of a national government which are opened to be matured within three to twelve months.

6. Money Funds

These are the pooled short-maturity, standard investments that buy money market securities on behalf of retail or institutional investors. 

7. Foreign Exchange swaps

Exchanging the set of currencies at a spot date and then reversing the exchange of currencies at a predetermined time. 

8. Short-lived Mortgaged 

They are the asset backed securities.

Money Market Controlled by

RBI (Reserve Bank of India) controls the money market. Money Market is a big segment of the financial market in India where the borrowing and lending function occurs in short-term funds which take place in these markets. The maturity of the money market instruments is from minimum one day to a maximum of one year. 

In India, the Money Market is regulated by both RBI (the Reserve bank of India) and also the SEBI (the Security and Exchange Board of India). The nature of transactions in this kind of market is such that they are functions in large amounts and high in volume. 

So, we can say that the entire market is dominated by a small number, yet with large players. The RBI together with the SEBI lays down the regulations as are followed by the participants in this market, also they regulate the market and any faults occurring in these markets, respective penalties are too fixed by the two bodies. 

Wholesale transactions even make their way into the hands of consumers who are actually the components of money market mutual funds and of other investments.

Entrepreneurship as a discipline does not have any real definition. Some scholars accept the study as business formation while others highlight it as an entrepreneurial opportunity that recognises dimension. 

The definition of entrepreneurship is viewed as a change, this includes other values other than the economic ones. Narrower definitions of entrepreneurship are described as the process of designing, launching and running a new business.

Entrepreneurship and Management are closely related terms in business, there is a definite difference between both these processes. In this article, you will learn more about these two terms.

 

Entrepreneurship and Management Entrepreneur

Management talks about the span of organizational studies. Simply speaking, management explains each aspect of the organization which discusses the organization and coordinates the activities to achieve a destined set of objectives. Harold Koontz, the great scholar, highlighted management as the art which talks about how to achieve the things done by people. He also pointed out the importance of formal groups in this process. 

Thus, the management discusses the overall organizational function which is to achieve the desired objectives. This also tells that the interconnection between management and entrepreneurship is a set because the entrepreneurship proceeds to the management level. In general, entrepreneurship features the business creation whose management is required to target the objectives of an entrepreneurial venture.

 

Entrepreneurship and its Scope

The scope of entrepreneurship is far-reaching. 

• Entrepreneurship moves even beyond the closed system of an enterprise. 

• Entrepreneurship in its capacity stimulates the economy which enables societal change not only for fulfilling a need but also to generate revenue for the entrepreneur, entrepreneurship thus provides jobs for the society and develops communities.

• Entrepreneurship instigates a lot more than the mere creation of business. 

• Entrepreneurship promotes the new business and provides opportunities to improve the new business sectors. 

In the long back, when washing machines were not invented, women had to spend their time washing clothes without energy resources or water resources. This once inspired a new company to sell low energy washing machines. This would save time which in turn utilised the extra time to educate themselves.  

 

Need of Entrepreneurship

The need for entrepreneurship is detailed down in the following section:  

1. Passion, Perseverance & Persistence

Passion is a strong and uncontrollable emotion that is based on something higher to achieve than what the person is carrying within himself. Perseverance is a mature emotion that comes through experiences gathered and analysed. While persistence is the sail that will row the boat of an entrepreneur through the toughest of climates. 

2. Big Dreamer

Dreaming big further strengthens an entrepreneur with his ability to dream and see the wide picture. This is the very first step that sets the path to self-discovery. 

3. Learning

Learning is never to stop irrespective of age and thus arming oneself with education does play a vital role in forming leadership qualities when needed.

4. Good Listener

The ability to contribute will only come once we have abundance in ourselves, and this comes by absorbing the words of others. The ability to truly listen to the customers and employees is actually what makes a difference. This very skill leads to a successful venture.

5. Financing Partner

Choosing a financing partner who understands the business needs is very much essential. This is as critical as choosing the business which the entrepreneur wants to pursue. Also, a business loan from the right lender will for sure play a pivotal role in realizing the dreams of becoming a successful entrepreneur.

Role of an Entrepreneur in the Process of Nation-Building

Entrepreneurs play a very important role in the process of nation-building, especially in a developing country like India. entrepreneurs start many entrepreneurial ventures which in turn hire many people thereby giving them employment, livelihood and vocational opportunities. These people earn money in the form of salaries, wages, stipends, etc. Also, entrepreneurs borrow money from banks, shareholders, investors, etc. who earn interest, dividends, profits, etc. All this money is indirectly used in the economic development of the nation. Thus entrepreneurs facilitate the economic development of the nations. And economic development is a very important component of nation-building.

Conclusion

After reading this article we understand the meaning of entrepreneurship, its scope, the various roles played by an entrepreneur and what are the needs of an entrepreneur. Apart from this, you will also learn about the crucial role entrepreneurs play in the process of nation-building and economic development. 

Reading this article will help you get your basics clear on the topic and you can study advanced leveled concepts related to entrepreneurship in the future. Reading this article will help Class 11 and Class 12 students to come out with flying colors in their respective exams. 

Generally accepted principles of accounting means a common set of accounting principles, standards and procedures which is issued by the Financial Accounting Standards Board (FASB). GAAP is required to be followed by the public companies in the U.S. when their accountants compile the financial statements of their business firms. This improves consistency, comparability, clarity, and communication of the financial norms and details of the financial background.

There are 10 principles of GAAP:

• Principle of Regularity – The accountants are strictly required to adhere to established rules and regulations according to the GAAP compliance.

• Principle of Consistency – The financial reporting process includes all the consistent standards which are applied throughout.

• Principles of Sincerity – There is the commitment of accuracy and impartiality according to the GAAP compliant accountants

• Principles of Permanence of Methods – There is a consistent set of procedures that are used for the preparation of financial reports.

• Principles of Prudence – The reporting of financial data is not influenced by speculation.

• Principle of Non-compensation – The reporting with no prospects of debt compensation is conducted from all the aspects of an organization whether it is positive or negative.

• Principle of Continuity – The operations of the organization will continue according to the valuation of the assets.

• Principle of periodicity – Fiscal quarters or disc years included reporting of revenues which is divided by standard accounting periods.

• Principle of Materiality – The organization’s full monetary situation is disclosed by financial reports.

• Principle of Utmost Good faith – The assumed parties are expected to be acting honestly.

Why are Accounting Principles Important?

Accounting principles are important as they ensure consistency when it comes to keeping financial records worldwide. They describe certain values ​​and principles, which companies are expected to adhere to obtain a more accurate and effective view of the company’s statements and reports.

Among the Several Accounting Concepts, the Following are the Most Important:

Money Measurement policy: In accounting, all business transactions are measured financially as a standard unit of measurement. Since money is a standard unit of measurement, as a measure of accounting, you are only allowed to record those transactions or events that can be measured or disclosed in cash.

Business entity concept: This concept of accounting system looks at the business and the business owner differently in terms of their financial transactions. Legally, your business can exist without you and your company can sue or be sued in its name.

Going Concern Concept: This principle applies to the fact that every transaction is recorded assuming that the business will remain viable for a long time and will be able to fulfill its obligations accordingly.

Cost Principle: This accounting policy sets out the rules for accounting for fixed assets. In terms of cost, all fixed assets are calculated at the actual cost i.e. the amount paid to acquire them and thereafter, year after year, the value decreases based on usage, aging, accidents, overtime etc.

Dual-Aspect concept: This calculation principle states that for every deduction, corresponding credit is made. This is the foundation on which the accounting system is implemented. This is important to understand it in detail.

Accounting Year concept: This means that each entity selects a specific period to complete the accounting and reporting cycle. In short, this principle deals with the periodicity of accounting. The time can be monthly, quarterly or yearly.

Matching Concept: The concept emphasized in the accounting principle is that if any revenue is recognized the costs associated with earning that revenue should also be considered. This gives a true picture of the profit earned during the accounting process.

Realization concept: The concept of accounting suggests that revenue is reported when received, regardless of when the payment is received. Anything paid or received is not considered profitable until the goods or services have been delivered to the buyer.

Any organization works in a defined framework which allows the organization to grow over time. The definite structure will provide clarity to the managers, employees and also will keep the functioning of the organization in sync. The employee’s clarity helps the manager to keep expectations and enables efficient decision-making capability. An organizational structure which outlines how the activities are directed in order to achieve the destined goals of an organization. An organizational structure determines the flow of information between the levels within the company.

A Traditional organizational structure is generally of four different types – functional, divisional, matrix and flat. Our discussion is based on the structure of the organization thus, we now proceed ahead.

Organizational Structure Meaning

An organizational structure is a system which crafts the outline about how certain activities are being directed in order to achieve the organizational goals. 

For the smooth flow of information and to avoid unnecessary discrepancies, an organizational structure is of utmost importance. Like, in a centralized structure, the decisions flow from the top level to the lower level. While in a decentralised organization, the right to make decisions is shared all over the organization. 

Be it an MNC or a small local business, businesses of all shapes and sizes uses organizational structures as they define a specific hierarchy form within the organization. A good organizational structure defines each employee’s job role and how that sync within the overall system. 

This structuring of the company provides a good visual representation of how it is shaped and how this can move forward for achieving its goals. An organizational structure outlines how certain activities are directed to achieve the goals of an organization.

Key Points of this Context –

• A successful organizational structure defines the job of an employee 

• This also assures how the job fits within the overall organization system.

• A centralized structure is also defined as a chain of command.

• The decentralized organizational structure gives every employee a decision to take. 

Divisional Organization Structure

Divisional Structures one of the important organizational structures, this is to be grouped into a product or regional divisions.

Key Points of this structure is as follows –

• The divisional structure is a type of organizational structure which is grouped into each organizational function and further into a division. These divisions then can correspond to their related functions.

• The division contains all the necessary resources and the functions that are required for support in that product line.

• A multidivisional form abbreviated as M-form is a legal structure in which one parent company owns another subsidiary company, each of the company uses the parent company’s brand and name.

• The divisional structure acts as shockproof. With the failure of one division, another division can function independently. It doesn’t directly threaten the working of rest divisions. In the multidivisional structure, the subsidiary companies benefit from the use of the brand and capital of the parent company.

• One disadvantage of divisional structure is that it includes operational inefficiencies as it is often separated from specialized functions.

• For the multidivisional structure, disadvantages can include increased accounting and taxes.

Organizations are structured in many ways and these structures are used in determining the character in which these organizations operate and perform. A divisional organization groups each organizational function into a definite division.

Certain obligations are undertaken towards each other by both the promisor and the promisee in a contract. The obligations could be defined in the form of a promise in exchange for another promise or a reciprocal promise too. The law on performance of a reciprocal promise is provided by Sections 51 to 58 of The Indian Contract Act, 1872. Let’s discuss the provisions of all of these sections in detail. This would help us learn more about the rules regarding the performance of reciprocal promises.

Section 51 – Simultaneous Performance of a Reciprocal Promise

When certain contracts constitute promises that are to be carried out at the same time or a reciprocal promise, the promisor is never obligated to execute his promise until the promise wills to proceed with his reciprocal promise.

For example, when we are buying something, the seller agrees on giving us the product in exchange for the money we are paying. This is a classic example of reciprocal promise where we promise to pay the monetary value of the product and the seller promises to give us the goods on receiving the amount. If either of us is not willing to perform our promise, then the contract could be deemed ended by the other party. 

Section 52 – Order of Performance of a Reciprocal Promise

If there is a reciprocal promise included in a contract, the parties involved in the contract can decide on the sequence in which the promises are to be carried out. In such cases, the order of performance of a reciprocal promise as mentioned in the contract is to be paid heed to. 

However, if the contract does not specifically mention any such sequence, the order of performance of a reciprocal promise is dictated depending on the sole nature of the transaction. 

For example, Party A promised Party B to help find a property in lieu of Party B’s promise to pay an amount of commission for the same purpose. Here the contract does not mention the sequence of performance of the promise. However, the nature of the business is suggestive that Party A has to help Party B find the property before Party A expects Party B to fulfil his promise of paying Party A the commission.

Section 53 – One party Preventing the Other From the Performance of the Promise

In a contract with reciprocal promises, if one party does not let the other party perform their promise, the party prevented from performing their promise is allowed the option of declaring the contract void.

Moreover, the party prevented from the performance can demand and claim reimbursement from the hindering party for any losses that he might bear because of the non-performance of the contract. 

For example, Robert and Dave entered a contract where Robert promises to deep-clean Dave’s kitchen. In exchange, Dave promises to pay Robert Rs. 15,000 and empty the kitchen of all the appliances and utensils before Robert starts work. However, when Robert begins work, he discovers that Dave has not cleared the stuff as promised and does not endorse his pleas too. So, Robert can declare the contract null and void and claim the money he was promised by Dave since Dave obstructed him and did not let him perform his promise.

Section 54 – Reciprocal and Dependent Promises

In a contract where the reciprocal promises are dependent on each other, if the promisor who is required to fulfil his promise before the other fails to fulfil it, he cannot demand the execution of the reciprocal promise. 

He also stays liable to reimburse the other party for any losses he could suffer because of the non-performance of the contract. 

For example, Dave hires a private detective for a month and promises to pay the detective a certain amount. The detective promises to start work within 48 hours of receiving an advance payment from Dave. Dave fails to make the payment and doesn’t perform his end of the promise. The detective also does not start working.

Now, Dave cannot demand the performance of the detective’s promise due to his failure to perform his promise first. He would also have to reimburse the detective for any losses endured by the detective due to non-payment of advance by Dave.

Section 55 – Failure to Perform within the Stipulated Time in a Time-sensitive Contract.

If it is essential to the contract that a certain promise is performed in a specific time frame, and the promisor fails in doing so, then the promisee could void the contract and claim compensation for any losses sustained.

E.g., share trade is a contract where time is of the essence due to its fluctuating price.

The contract cannot be voided against the expiration of the time for performance of a promise if time is not of the essence. The promisee is only entitled to compensation for any losses generated from the delay from the promisor. 

The promisee can also void the contract if the promise is not performed within a reasonable time, even when time is not of the essence. The promisee could also waive his right to void the contract if the promisor fails to perform it in a reasonable time frame in a time-sensitive contract. The promisee also has to serve a notice of his intent to the promisor to demand compensation when he accepts the performance of the contract. Otherwise, he cannot claim any compensation for non-performance of the promise from the promisor within the agreed time.

E.g. Dave promises to pay Robert’s fees for the next academic year. Dave needs to ensure the payment is made before the last date specified by the College, although it’s not mentioned in the contract. Here Dave’s failure to perform before the last date could cause losses to Robert.

Section 56 – Impossible or Unlawful Act

If in a contract the promisor takes up an unlawful or impossible act, the contract is void. The act could be unlawful or impossible at the time of signing the contract, or certain subsequent events could turn it impossible.

Initial Impossibility

The contract is void if the promisor and the promisee know that the act is unlawful or impossible. Even if they are not aware of the act being so during the signing, the contract stays void. If the promisor is aware and the promisee is not, then the promisor is liable to compensate the promisee for any sustained losses of the promisee. 

Subsequent Impossibility

If the promise was lawful and possible when they entered the contract but subsequent events made it unlawful or impossible and the promisor could not prevent it from happening, the contract is void from the time the act becomes unlawful or impossible.

Section 57 – Reciprocal Promise of Legal and Illegal Acts

If the parties entered a contract to do certain legal things, but afterwards, under certain circumstances agree to do illegal things, the first batch of promises is a valid contract but the second is void.

Section 58 – Alternative Promise of Legal and Illegal Acts

If a contract made with an alternative promise, later branches out to an illegal act, then only the legal branch stays viable to be enforced.

The Secondary data is that specific data that has been already collected by the primary sources and made the data readily available for other researchers to use for their own research study. This is a type of data that has been previously collected and is further used by the required study.

A researcher might collect this data for a specific project, then after this, it is made available to be used by another researcher. The data in its primary form may also have been collected for general use with no specific research purpose like in the case of a national census.

This is the case when the primary data is being reused.

Limitations of Secondary Data 

There are limitations involved in the usage of Secondary Data. The limitations are as follows:

Data Quality

The data which is being collected through the secondary sources may not be as authentic as if using the primary data which gives first-hand information when collected directly from the source. 

Irrelevant Data

The Researchers do spend a lot of time searching for many irrelevant data before finally bumping into the relevant one. 

In cases like this, a researcher may not find the exact data he or she needs, but have to settle for the next best alternative, which might not be totally relevant.

Exaggerated Data

These data sources are known to be exaggerated as the information which is being shared may be biased to maintain a good public image or due to a paid advert.

Outdated Information

Some of the data sources are really outdated and thus there are no new available data to replace the old ones. For example, the national census is not usually updated yearly, and hence, this may lead us to outdated information about a particular study.

Precautions to be taken Before Using Secondary Data 

The investigator is required to take adequate precautions before using the secondary data. For this, the following precautions should be taken into account.

Suitable Purpose of Investigation

The investigator must ensure that the data are quite suitable for the purpose of inquiry or his study.

Inadequate Data

Adequacy of the data is needed to be judged in the light of the requirements of the survey and also the geographical area covered by the available data.

Definition of Units

The investigator must also ensure that the definitions of the units are used by him are the same as in the same investigation.

Degree of Accuracy

The investigator is required to keep in mind the degree of accuracy that is maintained by each investigator.

Time and Condition of Collection of Facts

This is to be ascertained that before making use of the available data to the period and conditions, the data is to be collected.

Comparison

The investigator should keep in mind whether the secondary data is reasonable, consistent, and comparable to his required study or not.

Test Checking

The use of the secondary data must do the test checking appropriately and see that the totals and rates are correctly calculated.

Homogeneous Condition

It is not safe to take the published statistics at their face value without knowing their means, values, and limitations which might be irrelevant totally. 

Sources of Secondary Data

The sources of secondary data include books, personal sources, using the journal, reading the newspaper, website surfing, government record, etc. Secondary data are known to be readily available compared to that of the primary data. This requires very little research and need for manpower to harness these sources.

With the advent of electronic media and the internet, secondary data sources have become even more easily and readily accessible. Some of these sources are highlighted below-

What is Primary Data and Secondary Data ?

While identifying and researching a problem of a population group the researcher collects the information and opinions of every individual in that group. It is done by various methods such as interviewing, surveying, voting, sample experiments, etc. If it is collected by the researcher himself or any body appointed by him then the data obtained is termed as the Primary Data. Various private research organizations as well as government institutions carry out these activities under project to project basis for different objectives. It is done to evaluate market scenarios or for arrangement of different facilities for the greater mass. Gathering of data is a very time consuming and costly affair.  

There are also some instances when any entity doing such research programs do not go for gathering information or data by themselves. They rather prefer to obtain the data collected previously by any organisation and use it for their own research. This data, that was already existing, when obtained for further research purposes is popularly known as secondary data.

The primary data collected by government institutions or by using public money is often available in the public domain to be used by anybody in need of it. But the data collected by private institutions or individuals is often available by payment of the predetermined price fixed by the entity who has collected that primary data set.

However when obtaining any primary data to use as secondary data some precautions are required to be taken. It protects the research from getting compromised due to wrong data or its interpretation. The data quality and it’s authenticity should be always kept in mind while obtaining any data. As it is very rare to find the very exact data that anybody is searching for, utmost care must be taken while adopting the next best data set available before.  Any exaggerated or outdated data must be identified very early. Any inadequacy in data can be supplemented with research or any other sources of pre-existing data. Finally every data must undergo through test checking before its use.