PROJECT FINANCING (Assignment)

1. Project report

2. Capital rationing - ppt

The act of placing restrictions on the amount of new investments
or projects undertaken by a company. This is accomplished by
imposing a higher cost of capital for investment consideration or
by setting a ceiling on the specific sections of the budget. 

Limiting a company's newinvestments, either by setting

acaponpartsof thecapital budgetor by using a highercost
of capitalwhen weighing themeritsof potential
investments. This might happen when acompanyhas not
enjoyed goodreturnsfrom investments in the recent
past.Capitalrationing also couldtakeplace if a company
hasexcessproduction capacityon hand.
Capital rationing is technique which is used with capital
budgeting techniques. Capital rationing technique is used
when company has limited fund for investing in
profitableinvestment proposals. In other words Capital
rationing is a strategy employed by companies to make
investments based on the current relevant circumstances
of the company. 

Explanation of Capital Rationing With Simple

Example 

For example, Company fixes his priority to invest

his money in more profitable projects. Suppose a
 company has $ 1 million dollar and after using the
Profitability index technique of capital budgeting company
found that three projects of $ 600000, $ 300000 and $
400000 are profitable out of seven projects but if
company has limited cash of $ 1 million only. With this
money, company can use capital rationing technique.
Under this technique, if company sees that First and third
proposal’s profitability index is high than second, then
they will select only two projects combination out of
three projects

3. Capital budgeting process - (ppt)

Capital Budgeting Process 
Evaluation of Capital budgeting project involves six steps:
 First, the cost of that particular project must be known.
 Second, estimates the expected cash out flows from the
project, including residual value of the asset at the end of its
useful life.  
 Third, riskiness of the cash flows must be estimated. This
requires information about the probability distribution of the cash
outflows.
 Based on project’s riskiness, Management find outs the cost
of capital at which the cash out flows should be discounted.
 Next determine the present value of expected cash flows.
 Finally, compare the present value of expected cash flows
with the required outlay. If the present  value of the cash flows is
 greater than the cost, the project should be taken. Otherwise, it
should be rejected.
                                                                                                     
OR
  If the expected rate of return on the project exceeds its cost
of capital, that project is worth taking.
Firm’s stock price directly depends how effective are the firm’s
capital budgeting procedures. If the firm finds or creates an
investment opportunity with a present value higher than its cost of
capital, this would effect firms value positively.

4. Feasibility studies
A feasibility study is an evaluation of a proposal designed to
determine the difficulty in carrying out a designated task. Generally,
a feasibility study precedes technical development
and projectimplementation. In other words, a feasibility study is an
evaluation or analysis of the potential impact of a proposed project.

Definition of Feasibility Studies: A feasibility study looks at the

viability of an idea with an emphasis on identifying potential problems
and attempts to answer one main question: Will the idea work and
should you proceed with it?

Before you begin writing your business plan you need to identify how,
where, and to whom you intend to sell a service or product. You also
need to assess your competition and figure out how much money you
need to start your business and keep it running until it is established.
Feasibility studies address things like where and how the business will
operate. They provide in-depth details about the business to determine if
and how it can succeed, and serve as a valuable tool for developing a
winning business plan.

5. Business strategies Business strategy is the

foundation of successful business. But there are,
of course, different types of business strategy.
The best business strategies must steer a course
between the inevitable internal pressure for
business continuity and the demands of a rapidly
changing world for revolutionary business
strategies.

But what is business strategy? Andrew Grove, who led

Intel to greatness, makes a clear distinction between
strategic action and strategic plans. He believes
that business strategy models should not: just be
statements of intent; come across like a political speech;
have concrete meaning only to management; concern
themselves with events far in the future or have little
relevance to today.
If you are unsure of how to write a business
strategy or what types of business strategy are right for
your business, try this as a simple exercise: take a piece
paper and at the bottom, write a brief account of where
the business is now. Then at the top, write where you
want the business to be in ‘x’ amount of years (you
decide the period). Next, in between the two write what
you need to do and when you to do it to get from the
bottom of the page to the top. This kind of
rough business development strategy shouldn’t take
more than an hour.

6. Environmental scanning ----- Environmental scanning is a

process of gathering, analyzing, and dispensing information for
tactical or strategic purposes. The environmental scanning
process entails obtaining both factual and subjective
information on the business environments in which a company
is operating or considering entering.
There are three ways of scanning the business environment:

 Ad-hoc scanning - Short term, infrequent examinations

usually initiated by a crisis
 Regular scanning - Studies done on a regular schedule (e.g.
once a year)
 Continuous scanning (also called continuous learning) -
continuous structured data collection and processing on a
broad range of environmental factors
Most commentators feel that in today's turbulent business
environment the best scanning method available is continuous
scanning because this allows the firm to act quickly, take
advantage of opportunities before competitors do and respond to
environmental threats before significant damage is done.

Environmental scanning is a data collection practice. It is aimed at

collecting information about an environment such as an office or
institution that can be used in planning, development, and
ongoing monitoring by managers and supervisors. Once data has
been collected with scanning it can be processed and analyzed to
create a brief to be used in decision making.

Some environmental scanning is performed on an ad-hoc basis,

as needed. This scanning is done in response to a specific issue
or concern such as the need to plan for a new product launch.
Regularscanning is conducted on a regular basis; an example
might be an annual review of a working environment conducted
with surveys, observation, and other study methods. In
continuous scanning, an environment is constantly being scanned
and analyzed. While a continuous process is time consuming and
costly, it allows for rapid adaptations to changing situations.

One reason to use environmental scanning is in preparation for a

major change such as a new facility, a big shift in policy, or a
product launch. Scanning and gathering data before entering the
planning stage is a useful tool to help identify weaknesses,
opportunities, threats, and strengths. These can be built upon in
the planning stage to create a strong and effective plan to
address issues identified during environmental scanning. Failure
to collect information before starting plans can result in costly
mistakes and missed opportunities.

Companies that use environmental scanning can move quickly

when they identify a problem or an opportunity. This includes
everything from a product release by a competitor that might
threaten a company's market share to a security issue in an
office. The data gathered in environmental scanning can be
processed to develop an organized report to provide information
to managers and other officers of the company who may be
interested. Dispensing the information effectively is an important
part of this practice, as data is useless if it never gets into the right
hands.

Numerous tools can be used for environmental scanning. These

include surveying employees to get information about working
conditions, considering a workplace within a larger social and
economic context, and evaluating company communications to
determine what kinds of messages the company sends to the
public. A third party may be called in to objectively evaluate or a
company may scan internally. Using insiders can sometimes
result in getting more information because insiders know where to
look, but their bias can also affect the outcome of the scanning

7. Cost of project –
ppt

8. Means of project finance - Project finance is the long

term financing of infrastructure and industrial projects based
upon the projected cash flows of the project rather than the
balance sheets of the project sponsors. Usually, a project
 financing structure involves a number of equity investors,
known assponsors, as well as a syndicate of banks that
provide loans to the operation. The loans are most
commonly non-recourse loans, which aresecured by the
project assets and paid entirely from project cash flow, rather
than from the general assets or creditworthiness of the project
sponsors, a decision in part supported by financial modeling.
[1]
 The financing is typically secured by all of the project assets,
including the revenue-producing contracts. Project lenders are
given a lien on all of these assets, and are able to assume
control of a project if the project company has difficulties
complying with the loan terms.
Generally, a special purpose entity is created for each project,
thereby shielding other assets owned by a project sponsor from
the detrimental effects of a project failure. As a special purpose
entity, the project company has no assets other than the project.
Capital contribution commitments by the owners of the project
company are sometimes necessary to ensure that the project is
financially sound. Project finance is often more complicated than
alternative financing methods. Traditionally, project financing has
been most commonly used in
the mining,transportation, telecommunication and public
utility industries. More recently, particularly in Europe, project
financing principles have been applied to public infrastructure
under public–private partnerships (PPP) or, in the UK, Private
Finance Initiative (PFI) transactions.
Risk identification and allocation is a key component of project
finance. A project may be subject to a number of technical,
environmental, economic and political risks, particularly
in developing countries and emerging markets. Financial
institutions and project sponsors may conclude that the risks
inherent in project development and operation are unacceptable
(unfinanceable). To cope with these risks, project sponsors in
these industries (such as power plants or railway lines) are
generally completed by a number of specialist companies
operating in a contractual network with each other that allocates
risk in a way that allows financing to take place.[2] The various
patterns of implementation are sometimes referred to as "project
delivery methods." The financing of these projects must also be
distributed among multiple parties, so as to distribute the risk
associated with the project while simultaneously
ensuring profits for each party involved.
A riskier or more expensive project may require limited recourse
financing secured by a surety from sponsors. A complex project
finance structure may incorporate corporate
finance, securitization, options, insurance provisions or other
types of collateral enhancement to mitigate unallocated risk.[2]
Project finance shares many characteristics with maritime
finance and aircraft finance; however, the latter two are more
specialized fields

9. Profitability projection -

10. Effective demand – effective demand in a market is the demand for

a product or service which occurs when purchasers are constrained
in a different market. It contrasts with notional demand, which is
the demand that occurs when purchasers are not constrained in any
other market. In the aggregated market for goods in general,
effective demand is the same thing as aggregate demand when the
demand for goods is influenced by spillovers from quantity
constraints from other markets. The concept of effective
supply parallels the concept of effective demand. The concept of
effective demand or supply becomes relevant when markets do not
continuously maintain equilibrium prices

OR

Effective demand (in macroeconomics often seen as

synonymous with "aggregate demand"), refers to the very
simple economic idea that says that it's not enough to want
something such as food or luxuries. One must also
have money or other assets (purchasing power) or some
product to sell in order to make that demand effective.
Many classical economists such as Adam Smith and David
Ricardo embraced Say's Law, which says (in very simple
terms) that "supply creates its own demand." This says that for
every time there's an excess supply (glut) of goods on one
market, there's a corresponding excess demand (shortage) on
another. That is, there can never be a general glut in which
there is inadequate demand for products at
the macroeconomic level.
Economists such as Thomas Malthus and Jean Charles
Leonard de Sismondi [1] struggled to show that Say's Law was
wrong. In the process, they created and clarified the concept of
effective demand. In the 20th century, John Maynard
Keynes and Keynesian economics finished the job. In his
economics, effective demand "creates its own supply." If
demand is less than supply, this causes an unplanned
accumulation of inventories, which leads to a fall in production
and of labor employment and incomes. This starts
a multiplierprocess which causes the economy to gravitate to
an underemployment equilibrium.
11. Project rating index –

The steps involved in determining the project rating index are

as follows

Identify factors relevant for project rating

· Assign weights to these factors ( the weights are supposed to reflect
their
relative importance)
· Rate the project proposal on various factors, using a suitable rating
scale
(Typically a 5-point scale or a 7-point scale is used for this purpose.)
· For each factor, multiply the factor rating with the factor weight to get
the
factor score
· Add all the factor scores to get the overall project rating index

12. Portfolio planning tools

13. Corporate appraisal One important reason for formulating

marketing strategy is to prepare the company to interact with
the changing environment in which it operates. Implicit here
 is the significance of predicting the shape the environment is
likely to take in the future. Then, with a perspective of the
company’s present position, the task ahead can be
determined. Study of the environment is reserved for a later
article. This article is devoted to corporate appraisal. An
analogy to corporate appraisal is provided by a career
counselor’s job. Just as it is relatively easy to make a list of
the jobs available to a young person, it is simple to produce a
superficial list of investment opportunities open to a
company. With the career counselor, the real skill comes in
taking stock of each applicant; examining the applicant’s
qualifications, personality, and temperament; defining the
areas in which some sort of further development or training
may be required; and matching these characteristics and the
applicant’s aspirations against various options. Well-
established techniques can be used to find out most of the
necessary information about an individual. Digging deep into
the psyche of a company is more complex but no less
important. Failure by the company in the area of appraisal
can be as stunting to future development in the corporate
sense as the misplacement of a young graduate in the
personal sense. How should the strategist approach the task
of appraising corporate perspectives? What needs to be
discovered? These and other similar questions are explored in
this article.
MEANING OF CORPORATE APPRAISAL Broadly, corporate
appraisal refers to an examination of the entire organization
from different angles. It is a measurement of the readiness of
the internal culture of the corporation to interact with the
external environment. Marketing strategists are concerned with
those aspects of the corporation that have a direct bearing on
corporate-wide strategy because that must be referred in
defining the business unit mission, the level at which marketing
strategy is formulated. Of these, the first four factors are
examined in this article. Two important characteristics of
strategic marketing are its concern with issues having far-
reaching effects on the entire organization and change as an
essential ingredient in its conduct. These characteristics make
the process of marketing strategy formulation a difficult job and
demand creativity and adaptability on the part of the
organization. Creativity, however, is not common among all
organizations. By the same token, adaptation to changing
conditions is not easy. As has been said: Success in the past
always becomes enshrined in the present by the over-valuation
of the policies and attitudes which accompanied that
success. . . . With time these attitudes become embedded in a
system of beliefs, traditions, taboos, habits, customs, and
inhibitions which constitute the distinctive culture of that firm.
Such cultures are as distinctive as the cultural differences
between nationalities or the personality differences between
individuals. They do not adapt to change very easily.
Human history is full of instances of communities and cultures
being wiped out over time for the apparent reason of failing to
change with the times. In the context of business, why is it that
organizations such as Xerox, Wal-Mart, Hewlett- Packard, and
Microsoft, comparative newcomers among large organizations,
are considered blue-chip companies? Why should United States
Rubber, American Tobacco, and General Motors lag behind? Why
are General Electric, Walt Disney, Citicorp, Du Pont, and 3M
continually ranked as “successful” companies? The outstanding
common denominator in the success of companies is the
element of change. When time demands that the perspective of
an organization change, and the company makes an appropriate
response, success is the outcome. Obviously, marketing
strategists must take a close look at the perspectives of the
organization before formulating future strategy. Strategies must
bear a close relationship to the internal culture of the
corporation if they are to be successfully implemented.
FACTORS IN APPRAISAL: CORPORATE PUBLICS Business exists
for people. Thus, the first consideration in the strategic process
is to recognize the individuals and groups who have an interest
in the fate of the corporation and the extent and nature of their
expectations.

14. Sources of working capital (ppt)

Working Capital
This is the short-term capital or finance that a business
keeps. Working capital is the money used to pay for the
everyday trading activities carried out by the business -
stationery needs, staff salaries and wages, rent, energy
bills, payments for supplies and so on. Working capital is
defined as:
Working capital = current assets - current liabilities
Where:
current assets are short term sources of finance such
as stocks, debtors and cash - the amount of cash and
cash equivalents - the business has at any one time.
Cash is cash in hand and deposits payable on demand
(e.g. current accounts). Cash equivalents are short term
and highly liquid investments which are easily and
immediately convertible into cash. 
current liabilities are are short term requirements for
cash including trade creditors, expense creditors, tax
owing, dividends owing - the amount of money the
business owes to other people/groups/businesses at any
one time that needs to be repaid within the next month
or so
ppt

15. Characterization of market

1. Effective demand in the past and present: To test the
effective demand in the past and present , the starting pint
typically is apparent consumption which is define = production +
imports – exports – changes in stock level.  
2.  breakdown of demand: Market segment may be defined by =
nature of product , consumer group  and geographical.  
3. Price:  4 types of price a) manufactures price quoted as FOB,
price of CIF B) landed price for imported goods C) average
wholesale price D) average retail price
 4.Methods of distribution and sales promotion: the method of
distribution may vary with the nature of the product . Capital
goods , industrial raw materials and consumer products tend have
different distribution channels.  
5. consumers: age, sex, income, residence, profession, social
background, Preferences, Habits, Attitudes , responses.
 6. supply and competition: the following lines may be gathered =
location ,present ,production capacity, planned expansion,
capacity utilization level, and cost structure. 
7. govt policy: the role of government in flouncing the demand and
market for a product may be significant. 

16. Demand forecasting

Demand forecasting is the activity of estimating the quantity of a
product or service that consumers will purchase. Demand forecasting
involves techniques including both informal methods, such as educated
guesses, and quantitative methods, such as the use of historical sales data
or current data from test markets. Demand forecasting may be used in
making pricing decisions, in assessing future capacity requirements, or
in making decisions on whether to enter a new market.

A demand forecast is the prediction of what will happen to your

company's existing product sales. It would be best to determine
the demand forecast using a multi-functional approach. The
inputs from sales and marketing, finance, and production should
be considered. The final demand forecast is the consensus of all
participating managers. You may also want to put up a Sales and
Operations Planning group composed of representatives from the
different departments that will be tasked to prepare the demand
forecast.

Determination of the demand forecasts is done through the

following steps:

•  Determine the use of the forecast

•  Select the items to be forecast

•  Determine the time horizon of the forecast

•  Select the forecasting model(s)

•  Gather the data

•  Make the forecast

•  Validate and implement results

17. General source of business information

Business information encompasses a broad spectrum of sources

that people involved in the world of commerce can turn to for data
on and discussion of business-related subjects. These sources,
which can range from daily newspapers and nationally distributed
financial magazines to professional associates, colleagues, and
social contacts, can be invaluable in helping small business
owners to tackle various aspects of operations, such as marketing,
product forecasting, and competitive analysis.

Writing in his bookBusiness Information: How to Find It, How

to Use It, Michael R. Lavin commented that business information
is of tremendous value in two fundamental aspects of operations:
problem solving and strategic planning: "Information can be used
to evaluate the marketplace by surveying changing tastes and
needs, monitoring buyers' intentions and attitudes, and assessing
the characteristics of the market. Information is critical in keeping
tabs on the competition by watching new product developments,
shifts in market share, individual company performance, and
overall industry trends. Intelligence helps managers anticipate
legal and political changes, and monitor economic conditions in
the United States and abroad. In short, intelligence can provide
answers to two key business questions: How am I doing? and
Where am I headed?"

Business analysts cite two primary sources of business

information: external information, in which documentation is
made available to the public from a third party; and internal
information, which consists of data created for the sole use of the
company that produces it, such as personnel files, trade secrets,
and minutes of board meetings.

EXTERNAL BUSINESS INFORMATION

External information comes in a variety of forms—from printed

material to broadcast reports to online dissemination.

PRINT INFORMATIONThe category of print covers not only a

vast array of books and periodicals, but also includes microfilm
and microfiche, newsletters, and other subcategories. State and
federal government reports also fit into this category; indeed,
Lavin described the U.S. Government Printing Office as "the
largest publisher in the free world; its products can be purchased
by mail, telephone or through GPO bookstores in major cities."

Perhaps the most accessible documents in the print category are

books and periodicals. Certainly business owners have a wide
array of book titles to choose from, many of which find their way
onto the shelves of public, business, and university libraries every
year. In addition to books that provide general reference
information on human resources management, start-up
financing, product development, establishing a home-based
business, and a plethora of other topics of interest to small
business owners, the publishing industry has seen a surge of
books that tackle more philosophical issues, such as balancing
work and family life, establishing healthy personal interactions
with co-workers and employees, the nature of entrepreneurialism,
and many others.

Many other small business owners, meanwhile, get a considerable

amount of their business information from print sources. As with
books, entrepreneurs and established business owners (as well as
corporate executives, human resource managers, and nearly every
other category of person involved in business) can turn to a
variety of periodical sources, each with their own target niche.
Some magazines and newspapers, such asBusiness WeekandWall
Street Journal,provide general interest coverage, while others
(Forbes, Fortune, Inc.) provide more of an emphasis on subjects
of interest to investors and executives in large firms. Still others—
most notablyEntrepreneur, Small Business Start-
Ups,andNation's Business(published by the U.S. Chamber of
Commerce)—publish information specifically targeted at small
business owners. These magazines can provide entrepreneurs
with helpful information on every aspect of operations, from
creating a good business plan to determining which computer
system is most appropriate for your enterprise.

Then there are the trade journals, an enormous subsection of

print aimed at very select audiences. These trade journals, which
typically provide narrow coverage of specific industries (journals
targeted at owners of bakeries, amusement parks, real estate
businesses, grocery stores, and a variety of other businesses can
all be found), often contain valuable industry-specific
information. Another subcategory of the specialized print category
is the material published through business research services and
associations such as Commerce Clearing House, the Bureau of
National Affairs, and Dun & Bradstreet.

Finally, both government agencies and educational institutions

publish a wide variety of pamphlets, brochures, and newsletters
on a range of issues of interest to small business owners and
would-be entrepreneurs. While government brochures and
reports have long been a favored source of business information—
in some measure because many of these documents are available
free of charge—consultants indicate that valuable studies and
reports compiled by educational institutions are often
underutilized by large and small companies alike.

TELEVISION AND RADIO MEDIAThis source of business

information is perhaps the least helpful of the various external
sources available to small business owners. Programs devoted to
general investment strategies and the changing fortunes of large
companies can be found, of course, but the broad-based nature of
broadcasting makes it difficult, if not impossible, to launch
programs aimed at narrow niche audiences (like dental
instrument manufacturers or accounting firms, for example).

ONLINE INFORMATIONThe phenomenon of online

information is burgeoning as much as computers are themselves.
"The power of the computer to store, organize and disseminate
vast amounts of information has truly revolutionized business
publishing," noted Lavin. "Large online systems can help
overcome the incredible fragmentation of published information.
Many online vendors offer global search capabilities, allowing
access to the contents of dozens of databases simultaneously, the
equivalent of reading dozens of different reference books at the
same time."

Many of these databases offer information that is pertinent to the

activities of small business owners. As Ying Xu and Ken Ryan
observed inBusiness Forum,the Internet includes data on
demographics and markets, economics and business, finance and
banking, international trade, foreign statistics, economic trends,
investment information, and government regulations and laws.
This information is provided by Internet news groups, online
versions of newspapers and magazines, and trade associations. In
addition, "many colleges, universities, libraries, research groups,
and public bodies make information freely available to anyone
with an Internet connection," stated Robert Fabian inCMA—The
Management Accounting Magazine."Often, the motivation is to
make information available to people within the institution. But it
can be less costly to provide general access than to screen access."
He also noted that "increasingly, governments are publishing
information on the Internet and insisting that organizations they
fund also publish on the Internet. It's a practical way to move
towards open government, and does make information, which is
paid for by the taxpayers, far more accessible to those taxpayers
(and any others with Internet access). The range of available
information is impressive."

By the late 1990s, it was becoming easier than ever for small
businesses to keep abreast of competitive and industry
developments over the Internet. A number of information services
sprung up to deliver personalized business information to online
subscribers. These companies "are changing the way business
information is delivered over the Internet," Tim McCollum wrote
inNation's Business."They're bringing order and relevance to the
boundless data available on the Web, repackaging information
from newspapers, magazines, television, and wire services and
delivering it to computer users based on their interests." The
information may come in the form of e-mail messages, links
placed on a special Web site, or headlines that appear as a screen
saver and allow the computer user to click for further information.

CD-ROM INFORMATIONCD-ROM (compact disc read only

memory) is a popular alternative to online services. As the name
implies, CD-ROM is not so much an interactive system; in usage it
is close to traditional print. In fact, CD-ROM versions of such
print staples as theOxford English Dictionaryare now commonly
available. Business applications for CDROM include corporate
directories such as Dun & Bradstreet'sMillion Dollar Diskand
demographic statistics such as Slater Hall Information
Products'Population Statistics. An advantages of CD-ROM over
online services is the amount of data that can be stored. The
primary drawback associated with business CD-ROM products is
the absence of current information, although many publishers of
CD-ROM products offer updates on an annual—or even more
frequent—basis.

OTHER SOURCES OF BUSINESS INFORMATION

External sources of business information can be invaluable in

helping a small business owner or entrepreneur determine
appropriate courses of action and plan for the future. But
researchers note that members of the business community often
rely on personal contact for a great deal of their information.

"Common experience and the result of numerous research studies

show quite clearly that managers, and indeed all seekers of
information, frequently prefer personal and informal contacts and
sources to published documents and formal sources generally,"
wrote David Kaye inManagement Decision."The reasons are well
understood. A knowledgeable friend or colleague will often
provide, not only the facts requested, but also advice,
encouragement, and moral support. He or she may be able to
evaluate the information supplied, indicate the best choice where
there are options, relate the information to the enquirer's needs
and situation, and support the enquirer's action or decision. Many
such personal contacts will of course be found within the
manager's own organization, which is for many people the prime
source of facts, knowledge, and expertise…. Any organizationis a
complex information processing system in which actions and
decisions are underpinned by an array of oral and written
instructions, reports, regulations, information, and advice.
Accordingly, many managers seldom look beyond the
organization's boundaries in their search for information."
Business analysts note, however, that companies that do rely
exclusively on internal information sources run the risk of 1)
remaining uninformed about important trends in the larger
industry—including new products/services and competitor moves
—until it is too late to respond effectively; and 2) receiving skewed
information from employees whose goals and opinions may not
exactly coincide with the best interests of the business.

18. Delphimethod The Delphi method is a systematic,

interactive forecasting method which relies on a panel of
experts. The experts answer questionnaires in two or more
rounds. After each round, a facilitator provides an anonymous
summary of the experts’ forecasts from the previous round as
well as the reasons they provided for their judgments. Thus,
experts are encouraged to revise their earlier answers in light
of the replies of other members of their panel. It is believed that
during this process the range of the answers will decrease and
the group will converge towards the "correct" answer. Finally,
the process is stopped after a pre-defined stop criterion (e.g.
number of rounds, achievement of consensus, stability of
results) and the mean or median scores of the final rounds
determine the results.[1]
Delphi [pron: delfI] is based on the principle that forecasts from a
structured group of experts are more accurate than those from
unstructured groups or individuals.[2] The technique can be
adapted for use in face-to-face meetings, and is then called mini-
Delphi or Estimate-Talk-Estimate (ETE). Delphi has been widely
used for business forecasting and has certain advantages over
another structured forecasting approach, prediction markets.[3]

19. Project charts and layout

20. Plant location (paper notes)

In particular, the choice of plant location should be based

on following consideration 

i) Availability of Raw material  

(ii) Nearness to the potential market 
(iii) Location should be near to the source of
operating power  
(iv) Supply of labour 
(v) Transport and communication facilities 
(vi) Integration with other group of companies
(vii) suitability of land and climate
(viii) Availability of housing, other amenities and
services
(ix) Local building and planning regulations 
(x) Safety requirements 
(xi) Other like low interest on loan , spc grants ,
living std .

21. Criteria for choice of technology

22. Projected balance sheet

 23. Financing agencies

24. Refinancing schemes

Refinancing refers to applying for a secured loan intended to
replace an existing loan secured by the same assets. The most
common consumer refinancing is for a home mortgage.
Refinancing may be undertaken to reduce interest costs (by
refinancing at a lower rate), to pay off other debts, to reduce
one's periodic payment obligations (sometimes by taking a
longer-term loan), to reduce risk (such as by refinancing from a
variable-rate to a fixed-rate loan), and/or to liquidate some or all
of the equity that has accumulated in real property during the
tenure of ownership.
It is advisable to speak with a financial professional, familiar
with your existing home loan, before deciding to refinance.
Certain types of loans contain penalty clauses that are
triggered by an early payment of the loan, either in its entirety
or a specified portion. Also, some refinanced loans, while
having lower initial payments, may result in larger total interest
costs over the life of the loan, or expose the borrower to greater
risks than the existing loan. Calculating the up-front, ongoing,
and potentially variable costs of refinancing is an important part
of the decision on whether or not to refinance.

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  Don’t you think it is better to consolidate your
Calculator debts under a single mortgage refinancing
  scheme. Then you are going to save thousands
Buy a Home of dollars, your hard earned money. But before
  you barge in, just find out whether it is the right
time to make your go. However for Californians
Mortgage
Consultant there is a long array of Refinance options. 
 
Refinance schemes help you cut down on your
California refinance  monthly payments or reduce the life-span of
Home Improvement  your loans, by giving you a lower interest rate
Cash out Refinancing  or a new loan term. You could also benefit more
Cash Out Refinancing  if you use Refinance to pay off the debt over
Second Mortgage  your credit cards or other installment loans.
CA Home Equity This reason behind this is interest over your
Loan  mortgage may be tax-deductible, while in the
Bad credit mortgage  other loan types it may be not so.
CA Mortgage Loan 
Home Mortgage Loan Some of the important points why you should
CA 
Buy a home 
California home loan 
CA Mortgage Lender  consider Refinance is; you get a lower-rate
CA Mortgage Broker  mortgage, you can transform the adjustable
California mortgage  rate mortgage to a fixed one, you can change a
California real estate  first and second mortgage into one lower rate
Home mortgage  mortgage and moreover you get sufficient cash
Home mortgage loan  for family expenses.
Mortgage loan for bad
credit  Even today the demand for Refinance loans is
Refinance  incredibly high. Providers of Refinance for
Refinance loan  home now helps homeowners in reducing their
Refinance mortgage  current interest rate and payments. They also
help them out in attaining the cash they need
for debt consolidation, home maintenance etc. 
Whether you are a homeowner with excellent
credit, bad credit, slow payment histories, no
income verification, or
bankruptcies, Refinance will lend you a helping
hand. 

Refinance providers specialize in all types of

home refinance loans. They offer "financial
solutions" to allow homeowners achieve their
financial objectives. Borrowers with good to
excellent credit, are offered competitive rate
programs and may borrow up to 100%
financing. It includes fixed and adjustable rate
programs spanning up to 30 years. Refinance
throws open numerous alternatives to
borrowers, on whom other conventional lenders
may have turned their back.
The progressive and positive approach has been
taken by Refinance groups towards the
mortgage industry. It allows the Refinance
providers to customize loans to match unique
circumstances. Borrowers even if they lack in
perfect credit history, proper income
documentation, credible employment, low debt
state, up-to-date mortgage payment histories,
or other such things, the Refinance gives them
the much needed support.
TheRefinance providers work out situations
individually and develop customized
programs.Refinance realizes that a negative
can result by chance or due to circumstances
beyond the credit holder’s control. Refinance is
the safe way open to them. Thus Refinance help
them revive their current poor financial status,
by helping them pay off some of their current
bills.

Among various mortgage

programs Refinance offers, FHA and
conventional refinance loans are important
ones. This help one to refinance a current
mortgage up to 100% with good credit history.
Under the Refinance program at 100% CLTV
(combined Loan To Value) with unlimited cash
out is available. The benefits of 100%
refinancing loan is as flexible as any other
programs. The Refinance guidelines turns a
Nelson’s eye towards those with past credit
 problems, since they are as flexible as
conventional loan programs. Whatever be the
case, Refinance stands together with the
borrowers to help them sort out their financial
worries.

California being a state with coastal property,

financial districts, and wine & entertainment
industries along with several other facilities has
been a popular choice for residential
settlements. Areas such as San Francisco,
Orange County, Los Angeles, and San Diego
showed greatest appreciation of home values.
Low interest rates on California home
loan,Refinance loans, an influx of people
California, and seasonal buyers raising the
demand for second homes and vacation rentals,
gave a spurt to the market growth. 

With sudden increase in the home value in

Californian, homeowners began taking
advantage of schemes provided
by Refinance like Pay Option ARMs or Pick Up
A Payment Plan, interest only, debt
consolidation, and HELOC loans. These
California home loans andRefinance loans
  allow borrowers to utilize equity in their homes
to come over their financial constraints. The
high price value of homes has
helped Refinance to encourage buyers to buy
more houses, they might not have dreamt of.
However, experts are very much skeptical about
the sustainability of record appreciation rates
throughout California. 

In California refinance, Pay Option ARM

(Adjustable Rate Mortgages) or or Pick Up A
Payment Plan, is an adjustable rate mortgage
with added flexibility. The flexibility helps
making one among several possible payments
on your mortgage every month. This facilitates
better management of monthly cash flow. The
low introductory start rate of the option permits
you to make very low initial mortgage
payments. The low qualifying rates allows you
to qualify for more homes.

The minimum payment option eases your

monthly payments. If the minimum monthly
payment does not suffice to pay the monthly
interest due, you can choose the interest-only
payment option, by doing away with deferred
interest. Pay Option ARM or or Pick Up A
Payment Plan, offers at least two fully
amortized payment choices, allowing a quicker
loan payback. If you chose to pay off the loan in
time, you can make 30-year based, fully
amortized payment. For quickest equity build-
up, you can pick out the 15-year payment
option. In most cases, you can also pay back
the principal in addition. This will in turn reduce
the amount you ought to pay in following
months.

Pay Option ARM or Pick Up A Payment loan

program of Refinance is the best bet if you
wish to own the property for a short time span,
and if you need affordability and flexibility in
your monthly payment. However, if your choice
falls on the minimum payment option in the
early years, be prepared for possible increases
in your monthly payment, all on a sudden. Pay
Option ARM or Pick Up A Payment Plan loans
provide 4 key types of payment options
Minimum Payment, Interest-Only Payment,
Fully Amortizing 30-Year Payment and Fully
Amortizing 15-Year Payment 

Minimum Payment: Here the monthly payment

is set for 12 months. The interest rate is the
initial rate. Thereafter, the payment changes
annually, subject to payment cap limitations,
each year. Negative Amortization may occurs
under this payment.

Interest-Only Payment: The interest-only

payment option is provided, if the interest-only
payment would be below the minimum
payment. Also, this option does not lead to
principal reduction.

Fully Amortizing 30-Year Payment: You pay

both principal and interest here. Your payment
is calculated per month based on the interest
rate of the previous month, loan balance and
remaining loan term.

Fully Amortizing 15-Year Payment: The 15-year

payment option helps you to payoff the loan
faster and saves on total interest costs of a 30-
year loan. Notably, this option is open only on
the 30-year (or 40-year) term. The option
remains void when the loan has been paid to its
16th year. 

Pay Option ARM or Pick Up A Payment Plan loan

programs with many variations, provided
by Refinance community, are gaining
popularity day by day. However, the world time
is fast changing! The increasing market
inventory, procrastinated job growth, as well as
unbelievably low affordability can retard the
pace of home appreciation rates in California in
the coming years. In this context it may be
assumed that Refinance would have a bleak
future. 
 

Cash Out Refinancing

As its name suggests, “cash out refinancing” is
a financing arrangement where the amount of
money you receive from new financing exceeds
the amount of your outstanding debt. So, for
example, say you have a house that is worth
$150,000, but where the outstanding mortgage
is only $100,000. You need to borrow $30,000
to pay for your child’s college education – but
you don’t want a personal loan because the
financing costs are too high. In this case you
can consider (a) applying for a second mortgage
for the $30,000; or (b) doing a refinancing
where you ask a lender to lend you $130,000,
in return for which you’ll give the lender a
mortgage over your house. Should the lender
lend you the money, you repay your existing
$100,000 mortgage loan and pocket the
$30,000 to pay for your child’s college
education. The second of these two scenarios is
a cash out refinancing scheme.

Why Would I Want To Consider Cash Out

Refinancing?
Most of the realistic reasons why homeowners
want to consider a cash out refinancing have
already been mentioned – like to pay for a
child’s college education, or to do some home
decorating. However, one reason why more and
more homeowners are considering cash out
refinancing as a financing option, regardless of
whether or not they have an immediate cash
need, has something to do with a three-letter
word - tax (Refinance). 

As a homeowner, with an outstanding mortgage

loan, the interest part of your home mortgage
loan repayments are tax deductible against your
income. However, if you no longer have a home
mortgage loan: you no longer have any
entitlement to claim for a tax reduction of your
income tax based on your home mortgage
repayments. For this reason, it becomes
lucrative and financially rewarding for those
with money, as well as those without, to
consider a cash out refinancing option every
now and then so that they can maintain their
income tax reduction entitlement (Refinance). 

Having said that: sadly the older you get the

less likely it is that you’ll be able to obtain a
mortgage over any significant period of time;
say 10 to 20 years (Refinance). So, if you are
close to your 50s, in the prime of your career
earnings, coming near to the end of your
mortgage repayments, this is exactly the time
when you could do with a tax reduction – but
you’re just about to lose it! In such an event,
you should have considered a cash out
refinancing option in your mid-40s, before it
was too late, taken the holiday of a life-time,
and then used the increased mortgage on your
house as a tax reduction on your future
earnings!

In short then, homeowners may want to

consider a cash out refinancing option to:
* pay for their child’s education;
* consolidate their debt;
* do home improvements;
* use it as a tax avoidance scheme.

Are There Any Issues To Be Aware Of?

Yes; because of its very nature, applying for
cash out refinancing can take some time
(california refinance). For example, to do cash
out refinancing you need to have your house’s
value appraised by an appraiser (of your
lender’s choosing) to determine that the house’s
value is indeed the same as what you say it is in
your mortgage loan application
form (Refinance). You also need to repay your
existing lender, then arrange the mortgage for
your new lender. This will all take time.
Consequently, whilst cash out refinancing is a
superb option available to homeowners, it can
rarely be used if your financial needs, as a
borrower, are immediate (Refinance).

Also, when considering the cash out refinancing

option, you do need to give considerable
thought to what fees and costs your existing
lender may charge you. It’s very common to
find, in mortgage loan agreements, terms that
penalize borrowers if they try and make a full
repayment before the completion of their
existing mortgage loan – so check this out!
Any Other Consideration If I want to Do
Cash Out Refinancing?
Yes; as mentioned cash out refinancing is an
excellent option – but you do need to consider
some issues, as follows:

* Will my new lender penalize me if I do

another cash out refinancing in a few years
time?
* What interest rate am I really paying? – check
the Annual Percentage Rate (APR);
* What fees will I need to pay? – like application
fees; appraisal fees; etc.;
* How soon will I need the money – and is a
cash out refinancing going to give me the
money soon enough?
* Are there any restrictive covenants, in the
new home mortgage loan agreement, meaning I
cannot do what I want with the house?
* Is there not a cheaper way of financing the
borrowing?
* Are my monthly repayments going to be
higher or lower than they already are?
* Can I refinance against the whole appraisal
value? – the answer here is likely to be “no”. In
most cases your refinancing lender will only
allow you the opportunity to refinance up to 80
percent of the appraised value of the house –
not 100 percent. In this regard, cash out
refinancing is very similar in nature to a
mortgage agreement – part equity / part debt
 borrowing.

And Finally…
And so, if you’re looking refinance to repay your
outstanding personal loan, put your children
through school, or even pay for that second
home near the beach, a cash out refinancing
may be the best, and most sensible, option
available to you!

learn more about these programs and benefits

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25. Financial leverage

The degree to which aninvestororbusinessis utilizing
borrowedmoney.Companiesthat are highly leveraged may
beat riskofbankruptcyif they are unable to
makepaymentson theirdebt; they may also be unable to
find newlendersin the future.Financialleverageis not
always bad, however; it can increase the
shareholders'returnon theirinvestmentand often there
aretaxadvantages associated withborrowing.also
calledleverage.

Financial leverage refers to the use of debt to acquire additional assets.

Financial leverage is also known as trading on equity. Below are two
examples to illustrate the use of financial leverage, or simplyleverage.
In finance, leverage is a general term for any technique to
multiply gains and losses.[1] Common ways to attain leverage are
borrowing money, buying fixed assets and using derivatives.
[2]
 Important examples are:

 A public corporation may leverage its equity by borrowing

money. The more it borrows, the less equity capital it needs, so
any profits or losses are shared among a smaller base and are
proportionately larger as a result.[3]
 A business entity can leverage its revenue by buying fixed
assets. This will increase the proportion of fixed, as opposed
to variable, costs, meaning that a change in revenue will result
in a larger change in operating income.[4][5]
 Hedge funds often leverage their assets by using derivatives.
A fund might get any gains or losses on $20 million worth of
crude oil by posting $1 million of cash as margin.

26. Corporate finance
Accounting leverage has the same definition as in investments.
[8]
 There are several ways to define operating leverage, the most
common.[1] is:

Financial leverage is usually defined[8] as:

Operating leverage is an attempt to estimate the percentage

change in operating income (earnings before interest and taxes or
EBIT) for a one percent change in revenue.[8]
Financial leverage tries to estimate the percentage change in net
income for a one percent change in operating income.[10][11]
The product of the two is called Total leverage,[12] and estimates
the percentage change in net income for a one percent change in
revenue.[13]
There are several variants of each of these definitions,[14] and the
financial statements are usually adjusted before the values are
computed.[8]Moreover, there are industry-specific conventions that
differ somewhat from the treatment above.[15]
 27 IDBI (4.4)

The Industrial Development Bank of India Limited (IDBI)

(BSE: 500116) is one ofIndia's leading public sector banks and 4th
largest Bank in overall ratings. RBI categorised IDBI as an "other
public sector bank". It was established in 1964 by an Act of
Parliament to provide credit and other facilities for the development
of the fledgling Indian industry.[1] It is currently 10th largest
development bank in the world in terms of reach with 1228 ATMs,
725 branches and 486 centers.[2] Some of the institutions built by
IDBI are the National Stock Exchange of India (NSE), the National
Securities Depository Services Ltd (NSDL), the Stock Holding
Corporation of India (SHCIL), the Credit Analysis & Research Ltd,
the Export-Import Bank of India(Exim Bank), the Small Industries
Development bank of India(SIDBI), theEntrepreneurship
Development Institute of India, and IDBI BANK, which today is
owned by the Indian Government, though for a brief period it was a
private scheduled bank.

Industrial Development Bank of India (IDBI)

The Industrial Development Bank of India (IDBI) was established on 1

July 1964 under an Act of Parliament as a wholly owned subsidiary of
the Reserve Bank of India. In 16 February 1976, the ownership of IDBI
was transferred to the Government of India and it was made the
principal financial institution for coordinating the activities of
institutions engaged in financing, promoting and developing industry in
the country. Although Government shareholding in the Bank came down
below 100% following IDBI’s public issue in July 1995, the former
continues to be the major shareholder (current shareholding: 52.3%).
During the four decades of its existence, IDBI has been instrumental not
only in establishing a well-developed, diversified and efficient industrial
and institutional structure but also adding a qualitative dimension to the
process of industrial development in the country. IDBI has played a
pioneering role in fulfilling its mission of promoting industrial growth
through financing of medium and long-term projects, in consonance
with national plans and priorities. Over the years, IDBI has enlarged its
basket of products and services, covering almost the entire spectrum of
industrial activities, including manufacturing and services. IDBI
provides financial assistance, both in rupee and foreign currencies, for
green-field projects as also for expansion, modernisation and
diversification purposes. In the wake of financial sector reforms
unveiled by the government since 1992, IDBI evolved an array of fund
and fee-based services with a view to providing an integrated solution to
meet the entire demand of financial and corporate advisory requirements
of its clients. IDBI also provides indirect financial assistance by way of
refinancing of loans extended by State-level financial institutions and
banks and by way of rediscounting of bills of exchange arising out of
sale of indigenous machinery on deferred payment terms.

IDBI has played a pioneering role, particularly in the pre-reform era

(1964-91),in catalyzing broad based industrial development in the
country in keeping with its Government-ordained ‘development
banking’ charter. In pursuance of this mandate, IDBI’s activities
transcended the confines of pure long-term lending to industry and
encompassed, among others, balanced industrial growth through
development of backward areas, modernisation of specific industries,
employment generation, entrepreneurship development along with
support services for creating a deep and vibrant domestic capital market,
including development of apposite institutional framework.

Narasimam committee [4] recommends that IDBI should give up its

direct financing functions and concentrate only in promotional and
refinancing role. But this recommendation was rejected by the
government. Latter RBI constituted a committee under the chairmanship
of S.H.Khan to examine the concept of development financing in the
changed global challenges. This committee is the first to recommend the
concept of universal banking. The committee wanted to the development
financial institution to diversify its activity. It recommended to
harmonise the role of development financing and banking activities by
getting away from the conventional distinction between commercial
banking and developmental banking.

In September 2003, IDBI diversified its business domain further by

acquiring the entire shareholding of Tata Finance Limited in Tata Home
finance Ltd., signaling IDBI’s foray into the retail finance sector. The
fully-owned housing finance subsidiary has since been renamed ‘IDBI
Home finance Limited’. In view of the signal changes in the operating
environment, following initiation of reforms since the early nineties,
Government of India has decided to transform IDBI into a commercial
bank without eschewing its secular development finance obligations.
The migration to the new business model of commercial banking, with
its gateway to low-cost current, savings bank deposits, would help
overcome most of the limitations of the current business model of
development finance while simultaneously enabling it to diversify its
client/ asset base. Towards this end, theIDB (Transfer of Undertaking
and Repeal) Act 2003 was passed by Parliament in December 2003. The
Act provides for repeal of IDBI Act, corporatisation of IDBI (with
majority Government holding; current share: 58.47%) and
transformation into a commercial bank. The provisions of the Act have
come into force from 2 July 2004 in terms of a Government Notification
to this effect. The Notification facilitated formation, incorporation and
registration of Industrial Development Bank of India Ltd. as a company
under the Companies Act, 1956 and a deemed Banking Company under
the Banking Regulation Act 1949 and helped in obtaining requisite
regulatory and statutory clearances, including those from RBI. IDBI
would commence banking business in accordance with the provisions of
the new Act in addition to the business being transacted under IDBI Act,
1964 from 1 October 2004, the ‘Appointed Date’ notified by the Central
Government. IDBI has firmed up the infrastructure, technology platform
and reorientation of its human capital to achieve a smooth transition.

IDBI Bank, with which the parent IDBI was merged, was a vibrant new
generation Bank. The Pvt Bank was the fastest growing banking
company in India. The bank was pioneer in adapting to policy of first
mover in tier 2 cities. The Bank also had the least NPA and the highest
productivity per employee in the banking industry.

On 29 July 2004, the Board of Directors of IDBI and IDBI Bank

accorded in principle approval to the merger of IDBI Bank with the
Industrial Development Bank of India Ltd. to be formed incorporated
under the Companies Act, 1956 pursuant to the IDB (Transfer of
Undertaking and Repeal) Act, 2003 (53 of 2003), subject to the approval
of shareholders and other regulatory and statutory approvals. A mutually
gainful proposition with positive implications for all stakeholders and
clients, the merger process is expected to be completed during the
current financial year ending 31 March 2005.

The immediate fall out of the merger of IDBI and idbi bank was the exit
of employees of idbi bank. The cultures in the two organizations have
taken its toll. The IDBI BANK now is in a growing fold. With its retail
banking arm expanding further after the merger of United western Bank.

IDBI would continue to provide the extant products and services as part
of its development finance role even after its conversion into a banking
company. In addition, the new entity would also provide an array of
wholesale and retail banking products, designed to suit the specific
needs cash flow requirements of corporates and individuals. In
particular, IDBI would leverage the strong corporate relationships built
up over the years to offer customised and total financial solutions for all
corporate business needs, single-window appraisal for term loans and
working capital finance, strategic advisory and “hand-holding” support
at the implementation phase of projects, among others.
IDBI’s transformation into a commercial bank would provide a gateway
to low-cost deposits like Current and Savings Bank Deposits. This
would have a positive impact on the Bank’s overall cost of funds and
facilitate lending at more competitive rates to its clients. The new entity
would offer various retail products, leveraging upon its existing
relationship with retail investors under its existing Suvidha Flexi-bond
schemes. In the emerging scenario, the new IDBI hopes to realize its
mission of positioning itself as a one stop super-shop and most preferred
brand for providing total financial and banking solutions to corporates
and individuals, capitalising on its intimate knowledge of the Indian
industry and client requirements and large retail base on the liability
side.

IDBI upholds the highest standards of corporate governance in its

operations. The responsibility for maintaining these high standards of
governance lies with its Board of Directors. Two Committees of the
Board viz. the Executive Committee and the Audit Committee are
adequately empowered to monitor implementation of good corporate
governance practices and making necessary disclosures within the
framework of legal provisions and banking conventions.

27.Bill financing (ppt)

finance bill
bill of exchange that, when accepted by a bank, becomes a
source of short-term credit for working capital rather than import
or export finance. Finance bills, which usually have maturities
longer than 60 days, are sometimes issued in tight money
periods. They are subject to reserve requirements, unlike ordinary
bankers' acceptances, and cannot be rediscounted at the Federal
Reserve window. Also called a bankers' bill or working capital
acceptance.

28. Cash credit A short-term cash loan to

a company. (14.7)
Cash credit Account
This account is the primary method in which
Banks lend money against the security of
commodities and debt. It runs like a current
account except that the money that can be
withdrawn from this account is not restricted to
the amount deposited in the account. Instead,
the account holder is permitted to withdraw a
certain sum called "limit" or "credit facility"
in excess of the amount deposited in the
account.
Cash Credits are, in theory, payable on demand.
These are, therefore, counter part of demand
deposits of the Bank.
Cash credit is a short-term cash loan to a company. A bank
provides this type of funding, but only after the required security is
given to secure the loan. Once a security for repayment has been
given, the business that receives the loan can continuously draw
from the bank up to a certain specified amount. This type of
financing is similar to a line of credit.

Sometimes bank funding is just out of the question. Unless your

business has excellent credit and a proven track record, a bank
loan will be nearly impossible to obtain. Trying to find alternative
sources of funding can also seem like a duanting task since there
are so many options to choose from. A capital directory can make
this process faster and easier since it organizes the criteria of
each individual funding source and allows you to find a perfect
funding match for your business. No more manually sorting
through thousands of different lenders and types of funding to
guess which one might be right for you business.

29. Bank over draft (14.8)

Overdraft
The word overdraft means the act of overdrawing
from a Bank account. In other words, the account
holder withdraws more money from a Bank Account
than has been deposited in it.
A bank overdraft is when someone is able to spend more
than what is actually in their bank account. Obviously the
money doesn't belong to them but belongs to the bank so
this money will need to be paid back; normally
automatically done when money goes into the persons
account. The overdraft will be limited.

A bank overdraft is also a type of loan as the money is

technically borrowed. Money owed to the bank in a
cheque account where payments exceed receipts.

30. Spontaneous sources of financing

31.Term loan ppt

A loan from a bank for a specific amount that has a specified repayment

schedule and a floating interest rate. Term loans almost always
mature between one and 10 years.
A term loan is a monetary loan that is repaid in regular payments
over a set period of time. Term loans usually last between one
and ten years, but may last as long as 30 years in some cases.
A termloan usually involves an unfixed interest rate that will add
additional balance to be repaid.

Term loans can be given on an individual basis but are often used

for small business loans. The ability to repay over a long period of
time is attractive for new or expanding enterprises, as the
assumption is that they will increase their profit over
time. Termloans are a good way of quickly increasing capital in
order to raise a business’ supply capabilities or range. For
instance, some new companies may use a term loan to buy
company vehicles or rent more space for their operations.

A term loan is a monetary loan that is repaid in regular payments

over a set period of time. Term loans usually last between one
and ten years, but may last as long as 30 years in some cases.
A termloan usually involves an unfixed interest rate that will add
additional balance to be repaid.

Term loans can be given on an individual basis but are often used

for small business loans. The ability to repay over a long period of
time is attractive for new or expanding enterprises, as the
assumption is that they will increase their profit over
time. Termloans are a good way of quickly increasing capital in
order to raise a business’ supply capabilities or range. For
instance, some new companies may use a term loan to buy
company vehicles or rent more space for their operations.
Abankloanto acompany, with afixedmaturityand often
featuringamortizationofprincipal. If this loan is in
theformof aline of credit, thefundsare drawn down shortly
after theagreementis signed. Otherwise,
theborrowerusuallyusesthe funds from the loan soon
after they become available. Bankterm loansare very a
common kind oflending.

32. Factoring (17.Definition of Factoring

Definition of factoring is very simple and can be defined as

the conversion of credit sales into cash. Here, a financial
institution which is usually a bank buys the accounts
receivable of a company usually a client and then pays up to
80% of the amount immediately on agreement. The remaining
amount is paid to the client when the customer pays the
debt. Examples includes factoring against goods purchased,
factoring against medical insurance, factoring for
construction services etc.

Characteristics of Factoring
1. The normal period of factoring is 90150 days and rarely
exceeds more than 150 days.
2. It is costly.
3. Factoring is not possible in case of bad debts.
4. Credit rating is not mandatory.
5. It is a method of offbalance sheet financing.
6. Cost of factoring is always equal to finance cost plus
operating cost.

Different Types of Factoring

1. Disclosed 
2. Undisclosed

1. Disclosed Factoring
In disclosed factoring, client’s customers are aware of the
factoring agreement. 
Disclosed factoring is of two types: 

Recourse factoring: The client collects the money from the

customer but in case customer don’t pay the amount on
 maturity then the client is responsible to pay the amount to
the factor. It is offered at a low rate of interest and is in very
common use. 
Nonrecourse factoring: In nonrecourse factoring, factor
undertakes to collect the debts from the customer. Balance
amount is paid to client at the end of the credit period or
when the customer pays the factor whichever comes first.
The advantage of nonrecourse factoring is that continuous
factoring will eliminate the need for credit and collection
departments in the organization.

2. Undisclosed
In undisclosed factoring, client's customers are not notified of
the factoring arrangement. In this case, Client has to pay the
amount to the factor irrespective of whether customer has
paid or not.

33 Forfeiting
Definition of Forfeiting

The terms forfeiting is originated from a old French word

‘forfait’, which means to surrender ones right on something to
someone else. In international trade, forfeiting may be defined
as the purchasing of an exporter’s receivables at a discount
price by paying cash. By buying these receivables, the forfeiter
frees the exporter from credit and the risk of not receiving the
payment from the importer.

How forfeiting Works in International Trade

The exporter and importer negotiate according to the proposed

export sales contract. Then the exporter approaches the
forfeiter to ascertain the terms of forfeiting. After collecting
the details about the importer, and other necessary documents,
forfeiter estimates risk involved in it and then quotes the
discount rate. 
The exporter then quotes a contract price to the overseas buyer
by loading the discount rate and commitment fee on the sales
price of the goods to be exported and sign a contract with the
forfeiter. Export takes place against documents guaranteed by
the importer’s bank and discounts the bill with the forfeiter and
presents the same to the importer for payment on due date.

Documentary Requirements

In case of Indian exporters availing forfeiting facility, the

forfeiting transaction is to be reflected in the following
documents associated with an export transaction in the manner
suggested below:

 Invoice : Forfeiting discount, commitment fees, etc. needs

not be shown separately instead, these could be built into
the FOB price, stated on the invoice.
 Shipping Bill and GR form : Details of the forfeiting costs
are to be included along with the other details, such FOB
price, commission insurance, normally included in the
"Analysis of Export Value "on the shipping bill. The claim for
duty drawback, if any is to be certified only with reference
to the FOB value of the exports stated on the shipping bill.

Forfeiting

The forfeiting typically involves the following cost elements:

1. Commitment fee, payable by the exporter to the forfeiter
‘for latter’s’ commitment to execute a specific forfeiting
transaction at a firm discount rate with in a specified time.
2. Discount fee, interest payable by the exporter for the entire
period of credit involved and deducted by the forfaiter from the
amount paid to the exporter against the availised promissory
notes or bills of exchange.
 

Benefits to Exporter

 100 per cent financing : Without recourse and not

occupying exporter's credit line That is to say once the
exporter obtains the financed fund, he will be exempted
from the responsibility to repay the debt.
 Improved cash flow : Receivables become current cash in
flow and its is beneficial to the exporters to improve
financial status and liquidation ability so as to heighten
further the funds raising capability.
 Reduced administration cost : By using forfeiting , the
exporter will spare from the management of the
receivables. The relative costs, as a result, are reduced
greatly.
 Advance tax refund: Through forfeiting the exporter can
make the verification of export and get tax refund in
advance just after financing.
 Risk reduction : forfeiting business enables the exporter to
transfer various risk resulted from deferred payments, such
as interest rate risk, currency risk, credit risk, and political
risk to the forfeiting bank.
 Increased trade opportunity : With forfeiting, the export
is able to grant credit to his buyers freely, and thus, be
more competitive in the market.

Benefits to Banks

Forfeiting provides the banks following benefits:

  Banks can offer a novel product range to clients, which
enable the client to gain 100% finance, as against 8085% in
case of other discounting products.
 Bank gain fee based income.
 Lower credit administration and credit follow up.

Methodofexporttradefinancing, especially when dealing

incapital goods(which have longpaymentperiods) or
withhighriskcountries. In forfeiting, abankadvancescashto
anexporteragainst invoices orpromissory
notesguaranteed by the importer's bank.
Theamountadvanced is always 'without recourse' to the
exporter, and is less than theinvoiceornoteamount as it
isdiscountedby the bank. Thediscount ratesdepends on
thetermsof the invoice/note and the level of the
associated risk.

34. Capital gearing The degree to which a

company acquires assets or to which it
funds its ongoing operations with long- or
short-term debt. Capital gearing will differ
between companies and industries, and
will often change over time.

Capital gearing is also known as "financial

leverage".

Capital gearing has to do with how a business engages in the process

of financial leverage. Essentially, this approach focuses on how the
company continues to remain solvent while acquiring new assets or
diverting funds to support its general operations. This process
of capital gearing addresses both debt that is created for the short-term,
as well as long-term debt obligations. The process
of capital gearing involves the application of several common
financial calculations. First, the company must undergorisk
analysis, to determine what type of impact a specific action will
have on the overall stability of the business. The idea is to make
sure that even if the proposed action does not yield the
anticipated return, it will still not undermine the existing operation,
at least not to the point that the operation must close. The current
relationship between what the company owes and the amount of
revenue it generates is also important, especially when dividends
must be paid to investors. Thus, calculating the current
debt/equity ratio is also important to the process
of capital gearing, as it aids in planning strategies for using assets
to best advantage.

One of the ways to understand how capital gearing works is to

consider what must occur when a company chooses to purchase
a competitor. Here, the buyer must look at the cost of the
acquisition, including ancillary factors like legal fees, or the
settlement of debts owed by the business that is acquired. This
cost must be compared to the amount of return that the buyer
hopes to achieve from the transaction, including how long it will
take to retire any debt incurred in order to make the purchase. By
determining both the short-term and the long-term outcomes of
the action, and its impact on the ability of the company to retire
any new debt associated with the purchase, the business can
then develop a capital gearing approach that will allow it to move
forward without endangering any existing operations.

35. Project evaluation techniques

36. Types of working capital ppt
 gross w c Cash and short-term assets expected to be converted to
cash within a year. Businesses use the calculation of gross working
capital to measure cash flow. Gross working capital does not
account for current liabilities, but is simply the measure of total
cash and cash equivalent on hand. Gross working capital tends not
to add much to the business' assets, but helps keep it running on a
day-to-day basis. See also: Fixed asset, Net working capital.

Net Working Capital

Net Working Capital, is defined as Current Assets minus Current
Liabilities. Current assets include stocks, debtors, cash & equivalents
and other current assets. Current liabilities include all the short-term
borrowings. The formula is the following and the figures are
expressed in millions:

= (stocks + debtors + cash & equivalents + current assets,other) -

creditors,short
Permanent working capital refers to the minimum amount of all
current assets that is required at all times to ensure a minimum level
of uninterrupted business operations. Some minimum amount of
raw materials, work-in-progress, bank balance, finished goods etc., a
business has to carry all the time irrespective of the level of
manufacturing or marketing operations. This level of working capital
is referred to as core working capital or core current assets. But the
level of core current assets is not a constant sum at all the times. For
a growing business the permanent working capital will be rising, for
a declining business it will be decreasing and for a stable business it
will almost remain the same with few variations. So, permanent
working capital is perennially needed one though not fixed in
 volume. This part of the working capital being a permanent
investment needs to be financed through long-term funds.

1. Temporary Working capital 

The temporary or varying working capital varies with the

volume of operations. It fluctuates with the scale of
operations. This is the additional working capital required
from time to time over and above the permanent or fixed
working capital. During seasons, more production/sales take
place resulting in larger working capital needs. The reverse
is true during off-seasons. As seasons vary, temporary
working capital requirement moves up and down. Temporary
working capital can be financed through short term funds
like current liabilities. When the level of temporary working
capital moves up, the business might use short-term funds
and when the level for temporary working capital recedes,
the business may retire its short-term loans.

37. Role of debt capital in project finance

38. Time value of money (PPT)

The time value of money is the value of money figuring in a

given amount of interest earned over a given amount of time.
For example, 100 dollars of today's money invested for one year
and earning 5 percent interest will be worth 105 dollars after one
year. Therefore, 100 dollars paid now or 105 dollars paid exactly
one year from now both have the same value to the recipient who
assumes 5 percent interest; using time value of money
terminology, 100 dollars invested for one year at 5 percent
interest has a future value of 105 dollars.[1] This notion dates at
least to Martín de Azpilcueta (1491-1586) of the School of
Salamanca.
The method also allows the valuation of a likely stream of income
in the future, in such a way that the annual incomes are
discounted and then added together, thus providing a lump-sum
"present value" of the entire income stream.
All of the standard calculations for time value of money derive
from the most basic algebraic expression for the present value of
a future sum, "discounted" to the present by an amount equal to
the time value of money. For example, a sum of FV to be received
in one year is discounted (at the rate of interest r) to give a sum
of PV at present: PV = FV − r·PV = FV/(1+r).
Some standard calculations based on the time value of money
are:
Present value The current worth of a future sum of money
or stream of cash flows given a specified rate of return.
Future cash flows are discounted at the discount rate, and
the higher the discount rate, the lower the present value of
the future cash flows. Determining the appropriate discount
rate is the key to properly valuing future cash flows, whether
they be earnings or obligations[2].
Present value of an annuity An annuity is a series of equal
payments or receipts that occur at evenly spaced intervals.
Leases and rental payments are examples. The payments or
receipts occur at the end of each period for an ordinary
annuity while they occur at the beginning of each period for
an annuity due[3].
 Present value of a perpetuity is an infinite and constant
stream of identical cash flows[4].
Future value is the value of an asset or cash at a specified
date in the future that is equivalent in value to a specified
sum today[5].
Future value of an annuity (FVA) is the future value of a
stream of payments (annuity), assuming the payments are
invested at a given rate of interest.

39.Economic appraisal
Economic appraisal is a type of decision method applied to a
project, programme or policy that takes into account a wide range
of costs and benefits, denominated in monetary terms or for which
a monetary equivalent can be estimated. Economic Appraisal is a
key tool for achieving value for money and satisfying
requirements for decision accountability. It is a systematic
process for examining alternative uses of resources, focusing on
assessment of needs, objectives, options, costs, benefits, risks,
funding, affordability and other factors relevant to decisions.
The main types of economic appraisal are:

 Cost-benefit analysis
Cost-benefit analysis is a term that refers both to:

 helping to appraise, or assess, the case for a project,

programme or policy proposal;
 an approach to making economic decisions of any kind.
Under both definitions the process involves, whether explicitly or
implicitly, weighing the total expected costs against the total
expected benefits of one or more actions in order to choose the
best or most profitable option. The formal process is often
referred to as either CBA (Cost-Benefit Analysis) or BCA (Benefit-
Cost Analysis).

 Cost-effectiveness analysis

Cost-effectiveness analysis (CEA) is a form of economic analysis that

compares the relative costs and outcomes (effects) of two or more
courses of action. Cost-effectiveness analysis is distinct from cost-
benefit analysis, which assigns a monetary value to the measure of
effect.[1] Cost-effectiveness analysis is often used in the field of health
services, where it may be inappropriate to monetize health effect.
Typically the CEA is expressed in terms of a ratio where the
denominator is a gain in health from a measure (years of life, premature
births averted, sight-years gained) and the numerator is the cost
associated with the health gain.[2] The most commonly used outcome
measure isquality-adjusted life years (QALY).[1] Cost-utility analysis is
similar to cost-effectiveness analysis.

 Scoring and weighting

Economic appraisal is a methodology designed to assist in
defining problems and finding solutions that offer the best value
for money (VFM). This is especially important in relation to public
expenditure and is often used as a vehicle for planning and
approval of public investment relating to policies, programmes
and projects.
The principles of appraisal are applicable to all decisions, even
those concerned with small expenditures. However, the scope of
appraisal can also be very wide. Good economic appraisal leads
to better decisions and VFM. It facilitates good project
management and project evaluation. Appraisal is an essential part
of good financial management, and it is vital to decision-making
and accountability.
40.Ecological appraisal