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Inventory Control Methods

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Syskool
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Inventory Control Methods
There are many used for inventory control methods, here are those inventory control methods, along with their benefits and limitations:
Min-Max System: In this method, after a careful examination of you inventory needs, you set two lines – one at the top and one at the bottom of how much of each product you must keep on hand. When you reach the bottom line, you order enough of that product so you won’t go above the top line. As long as you’re somewhere in the middle, you’re okay.
Benefit: This method is simple and it makes the task of balancing inventory fairly straightforward.
Limitation: Its simplicity could lead to trouble because you might order too many products or run out before they arrive.
Two-Bin System: In this system, you have  main bin and a backup bin of products. You normally use the main bin, but once you run out and need to reorder, you use the backup bin to fill orders until the new products are received.
Benefit: You’ve always got spare products for emergencies and sudden rises in demand.
Limitation: The products in the backup bin could spoil or become obsolete unless they are cycled into the main bin every now and then. Also, you need to keep an eye on your carrying costs.
ABC Analysis: Separate your products into three groups: A, B and C. Expensive items go into A, less-expensive items go into B, and small parts and other inexpensive items go into C. This way, you can organize your data and know how long it will take to order different parts and products, based on which group they’re in.
Benefit: Now this is more like it. This system doesn’t set rigid standards on how many products to keep on hand; it simply tells you how long it will take to order those products. You can do the rest with the help of inventory control software.
Limitation: It still requires a lot of work to maintain healthy inventory levels.
Order-Cycling System: Forget constantly checking your inventory. This system lets you do inventory checks at set intervals (e.g. 30 days) and reorder products that are likely to run out by the next check.
Benefit: If you’re REALLY good at inventory management, you might be able to pull this off. It certainly doesn’t require as much time as other methods.
Limitation: This system is risky and costly! Doing a physical inventory check every 30 days or so will get expensive quickly. And there’s no margin for error on ordering the right amount of products at each check.
There you go! Now you can decide which of these inventory control methods will work best for your organization, depending on your size, products and needs.
by Robert Lockard
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Limitations of Securities and Exchange Board of India (SEBI)

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Syskool
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Securities and Exchange Board of India

  1. In April/May 1992, the Securities and Exchange Board of India issued operational guidelines to financial intermediaries i.e., stock broker and sub-brokers operating on the stock exchange and insist for the registration. This was followed by tussle between the Securities and Exchange Board of India and the stock booking community over registration related issues and finally assumed rather disturbing dimensions with stockbroker vehemently protesting against SEBI’s authorization approach, trading on all the major stock exchange has remained suspended for serial days may 1992.it is an example of under haste with which SEBI has handled the registration issue. This type of postures of confrontation adopted by SEBI and stockbroker was undesirable. The market reformer, which SEBI desire to introduce, will not be effective with such attitude on the part of Securities and Exchange Board of India. It will be a sad day for the market when SEBI starts dictating that the market should behave the way it deems proper. The Ex-SEBI chief never seems to tri of accusing the stock exchange of  the not taking appropriate action against erring broker who are often left free with small penalties which do not deter them for defaulting again. In brief, the way Securities and Exchange Board of India is going about with its package of reformers for the healthy development of the capital market is not calculated to endear it to the various financial intermediaries it seeks to reform. it is one thing to spell out the operational guideline for financial intermediaries but it is a difficult matter when it comes to enforcing them. This demand larger and efficient surveillance machinery fully backed up by administrative capability. Going by the past performance, it appears that SEBI is not different from other bureaucratic organization. Such attitude on the part of SEBI is neither fair not useful for the healthy growth and development of capital market in India. SEBI should encourage self-regulation among financial intermediaries so that SEBI is not forced to put restrictions and controls on them. Fortunately, the present approach of SEBI toward financial intermediaries appears to be quite reasonable, positive and constructive.
  2. Securities and Exchange Board of India keeps doling out regularly information about investors’ complaints. When it is good to bring investors’ grievance to public notice, one would like to know what kind of breakthrough SEBI has achieved in the redressed of these grievances. Since an overwhelmingly large percentage of the complaints related to non-receipt of refunds allotment letters, dividends on share and interest on debenture these have very little to do with the performance and the function of the stock exchanges. The introduced of “stock invest” should go a long way in mitigating the evil of non-receipt of refunds.
  3. It is a fact that stock exchange in India suffers from many organization, procedural and deficiencies.The reformer is necessary to ensure the efficient and healthy functioning of capital markets secondary as well as primary. It is the responsibility of the stock exchange supervisory body to see that all players conduct themselves in a responsible and ethical way. But that needs not call for direct intervention in the market by SEBI. Reforms should be aimed primarily at strengthening the market’s organizational formwork and rectifying infrastructure inadequacies to enable to the stock exchange to efficiently cope up with the expanding volume of business. This essence of reform is not given adequate attention and important by SEBI. The attitude of imposing reforms on the stock exchange will not give positive benefits but will lead to new problems and confrontation between Securities and Exchange Board of India on the one side and other agencies (intermediaries) as well as stock exchange on the other side.
  4. Securities and Exchange Board of India is supposed to protect the interest of investors in capital issues. For the year, this responsibility was given to the controller if capital issues (CCI). The CCI underpriced every issue, thereby protecting the investor at the expense of the issuer. Recognizing that this discourages many an honest of the issuer from equity issue while pushing several dishonest promoters into the void the government now favors free pricing, SEBI’s discussion note on the subject, however, confuses its role. Instead of recognized that the free rider problem can only be minimized and not prevented totally in a free pricing environment, SEBI has sought to promote guideline, some if which will, if implemented, return the situation on the day to rigid CCI control. There are many points noted in the guideline but are not clear. Such confusion is undesirable. SEBI is supposed to rectify its guideline and remove such confusions.
  5. One of the major criticisms against the SEBI Act was that it did not provide SEBI with sufficient powers it still has not got many of the circle powers. It is seeking including the rights to prosecute or fine. Under the Act SEBI can only recommend action to Government, but it cannot launch direct action against any erring capital market operator. In contrast, the securities exchange commission of the US can prosecute and fine anyone on offenses ranging from unlawful representation to deliberate misuse of the capital market. SEBI should be given the power of notification regulation without government approval and prosecute without government sanction.
  6. The image of SEBI as a regulator body is not a positive one. To make an impact, regulatory bodies should be well supported by the self-regulatory organization as regulatory bodies would be ineffective unless they foster institution or self- regulation to help them along.
    SEBI is not increasingly emerging to be the regulator-par excellence .SEBI intends to share this regulator role through self-regulatory with the co-operation of self-regulator bodies like AMBI (Association of Merchant Banker of India) or stock exchange etc. however self-regulation is still to find its root among various players of Indian capital market, unlike in USA, UK, and other development countries.
  7. A year after being given the legal sanctions the SEBI finds itself embroiled in an unending number of controversies. Much of this springs from the week foundation if the low organizational structure on which it is established. Other comes from the strong resistance to change amongst the stock market community, who so far has got way with very little regulation. This situation has affected the smooth working and positive contribution of a SEBI. In fact, SEBI has been facing problem in implementing its directive because the stock exchange and brokers are seeking shelter under the securities contracts (Regulation) Act in Indian companies Act.
  8. The moral support offered by the government to SEBI in not very effective. Many of SEBI problem are due to lack of adequate powers given to SEBI. Moreover, SEBI received power on a piecemeal basic and this in the turn reflected in the piecemeal guideline. Such piecemeal rendering of power is not useful to SEBI. As a regulator, the SEBI’s image is not good as every announcement of SEBI could be taken to court and eventually changed. This is unfair as what a regulator says should stay. It is necessary to give premier stated of SEBI in regard to regulation of stock exchange by transferring all necessary powers from the company law board and department if company affairs to SEBI. Such consolidation of power will make SEBI a strong regulator agency. It is also necessary to give more autonomy to SEBI and present bureaucratic control on SEBI must be removed.
  9. Securities and Exchange Board of India is a good watchdog. However, it has an adopted practical and cautious approach while introducing reforms in the various area under its control. Unfortunately, the top administration of SEBI fails to take into consideration the fact that a lot of education is required to change people. The practice of taking the unilateral decision is not proper on the part of SEBI. It should take a decision on the basic of consensus and compressive with unconcerned parties. The ex-chairman of Securities and Exchange Board of India has rightly pointed out that SEBI’s intention is not to interfere in the corporate sector’s working and capital market but the protect the invest of the investors. This approach indicated the positive change on the part of the Securities and Exchange Board of India.

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Elements of the cash flow stream of a project

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Syskool
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Elements of the cash flow stream of a project
To evaluate a project, must determine the relevant cash flow, which are the incremental after-tax cash flows associated with the project.
The cash flow stream of a conventional project – a project which involves cash outflows followed by cash inflows – comprises three basic components:
  • Initial investment
  • Operating cash inflows, and
  • Terminal cash inflow
The initial investment is the after-tax cash outlay on capital expenditure and net working capital when the project is set up. The operating cash inflows are the after cash inflows resulting from the operations of the project during its economic life. The terminal cash inflow is the after-tax cash flow resulting from the liquidation of the project at the end of its economic life.

Time Horizon for Analysis

How is the time horizon for cash flow analysis usually established?
The time horizon for cash flow analysis is generally the minimum of the following:
  1. The physical life of the plant: This refers to the period during which the plant remains in a physically usable condition, i.e., the number of years the plant would perform the function for which it had been acquired. This depends on the wear and tear which the plant is subject to. Suppliers of the plant may provide information on the physical life under normal operation conditions. While the concept of physical life may be useful for determining the depreciation charge, it is not very useful for investment decision-making processes.
  2. Technological life of the plant: New technological developments tend to render existing plants obsolete. The technological life of a plant refers to the period of time for which the present plant  would not be rendered obsolete by a new plant. It is very difficult to estimate the technological life because the pace of new developments is not governed by any law. While it is almost certain that a new development would occur when it would occur is anybody’s guess. Yet an estimate of the technological life has to be made.
  3. Product market life of the plant: A plant may be physically usable, its technology may not be obsolete, but the market for its products may disappear or shrink and hence its continuance may not be justified. The product market life of a plant refers to the period for which the product of the plant enjoys a reasonably satisfactory market.
  4. Investment planning horizon of the firm: The time period for which a firm wishes to look ahead for purposes of investment analysis may be referred to as its investment planning horizon. It naturally tends to vary with the complexity and size of the investment. For small investments (say, installation of a lathe) it may be five years, for medium size investments (say, expansion of plant capacity) it may be 10 years, and for large-size investments (say, setting up of a new division) it may be 15 years.

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Important Financial Organizations

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Syskool
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Here is the list of Important Financial Organizations:
  • 1955: Industrial credit and Investment Corporation India Ltd(ICICI)
  • 1962: Deposit Insurance Corporation
  • 1963: Agricultural Refinance Corporation
  • 1964: Unit Trust of India
  • 1964: Industrial Development Bank of India
  • 1969: National Institute of Bank Management
  • 1971: Credit Guarantee Corporation
  • 1978: Deposit Insurance and Credit Guarantee Corporation (The DIC and CGC were merged and renamed as DICGC)
  • 1982: National Bank for Agriculture and Rural Development
  • 1982: Export-Import Bank of India
  • 1987: Indira Gandhi Institute of Development Research
  • 1988: Discount and Finance House of India
  • 1988: National Housing Bank
  • 1990: Small Industries Development Bank of India
  • 1994: Securities Trading Corporation of India
  • 1995: Bharatiya Reserve Bank Note Mudran Private Limited
  • 1996: Institute for Development & Research in Banking Technology
  • 2001: Clearing Corporation of India Limited
  • 2008: National Payments Corporation of India

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CRISIL Rating

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Syskool
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CRISIL Rating has adopted the conventional rating system prevailing in the advanced centuries. The main symbols used in credit rating of debt securities and their meanings are given below:
For preference shares, the letters “Pp” are prefixed to the debenture rating symbols. The fixed deposit rating symbols commence with “F” and the short-term instruments use the letter “P” from the concept of ‘prime’.

Rating Symbols used for Debentures

AAA (Triple A) Highest Safety

Debentures rated ‘AAA’ are judged to offer the highest safety of timely payment of interest and principal through the circumstance providing this degree of safety are likely to change, such changes can be envisaged are most unlikely to affect adversely the fundamentally strong position of such issues.

AA (Double A) High Safety:

Debenture rated ‘AA’ are judged to offer high safety of timely payment of interest and principal they differ in safety from ‘AAA’ issue only marginally.

A – Adequate Safety

Debentures rated A are judged to offer adequate safety of timely payment of interest and principal; however, change in circumstances can adversely affect such issues more than those in higher-rated categories.

BBB (Triple B) – Moderate Safety

Debentures rated ‘BBB’ are judged to offer sufficient safety of timely payment of interest and principal for the present, however, changing circumstances are more likely to lead to  weaken capacity to pay interest and repay principal than for debentures in higher rated categories.

BB (Double B) – Inadequate Safety

Debentures rated ‘BB’ are judged to carry inadequate safety of timely payment of interest and principal. While they are less susceptible to default than other speculative-grade debentures in the immediate future, the uncertainties that the issuer faces could lead to inadequate capacity to make timely interest and principal payments.

B – High Risk

Debentures rated ‘B’ are judged to have greater susceptibility to default; while currently interest and principal payment adverse business and economic conditions would lead to the lack of ability or willingness to pay interest or principal.

C – Substantial Risk

Debentures rated ‘C’ are judged to have factors present that make them vulnerable to default. Timely payment of interest and principal is possible only if favourable circumstances continue.

D – In Default

Debentures rated ‘D’ are in default and in arrears of interest or payments or are expected to default on maturity.
Such debentures are extremely speculative and returns from these debentures may be realised only a reorganisation or liquidation.

Note:

1. CRISIL Rating may apply + (plus) or – (minus) signs for ratings from AA to D to reflect comparative standing with                   the category.

2. The contents within parenthesis are a guide to the pronunciation of the rating symbols.

3. Preference share rating symbols are identical to debenture rating symbols except the letters Pp are prefixed to the        debenture rating symbols, e.g. Pp AAA.

 

Rating Symbols used for Fixed Deposits

FAAA – Very strong degree of safety
FAA – Strong degree of safety
FA – Satisfactory safety
FB – Inadequate safety
FC – Safety in doubtful
FD – Issue in default or likely to be in default

Rating Symbols used for short-term instruments

P1 – Very strong degree of safety
P2 – Strong degree of safety
P3 – Adequate degree of safety
P4 – Minimal degree of safety
P5 – In default or likely to be in default
CRISIL Rating may apply + (plus) or – (minus) for its rating symbols to indicate the relative position within the rating category.
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