Monthly Archives: May 2018

Investors take on Working Capital of the Business

Investors are constantly looking at how well the business can be run with a keen eye on the cash conversion cycle of the enterprise where they have a financial interest in.

Their comprehensive view of the balance sheet has 3 main metrics: the assets performance, the manner in which the structure of Capital is assembled and the adequate working capital of the business. The efficiency in managing the above financial standpoints, it is important for the business to run its operational cycle smoothly.

Investors View

As they say, Revenue is Vanity, profit for Sanity and Cash is the reality which perpetuates the fact on how well the conversion of cash equivalents’ are done in the business during the short span of time necessitated for funding the short-term requirements in the enterprise. Investors look in the:

  • a good analysis of the healthy working capital ratios which are mostly the improvement of the cash flow cycle in the business including how well the conversion period is
  • accelerating the cash inflows in the business which takes on the customer’s purchase decision, credit decisions, payment terms, the collection period and improvising the debt collection, payment, and deposit of funds
  • the credit policy and checking where and how the policy works effectively in the business along with the Credit insurance
  • the forecasting of the cash inflows, the collection period, the sales ratio including the aging schedule, projected outgoings from the business, combined together to understand the incoming and outgoing projections together gives a good cash flow movement understanding
  • the surplus and shortage forecasting and asset sales will determine the projection of how well the cash inflow and outflow is happening in the business however large or small it is
  • Study of the ratio’s in financial terms gives the overall picture of how the company accounts are used to understand and bring out the quick view of the operating cycle of the business.

As investors judge on how well the short-term assets are managed in the business to generate the funds, to inject in the business expansion or special projects the liquidity should be determined in the correct way without having to circle around the numbers for long, as cash is King, it works on like the sixth sense for the business, without which all the five senses are in vain. Managing the collections of the business with priority on the collection method employed and the terms help the overall process of managing the business efficiently.

How Is A Forex Broker Paid?

If you are new to the Forex market then there is one feature that will invariably hold your interest and make you want to invest in it and that is the promise of no exchange fees. For a trader who has just joined the bandwagon and is yet to settle himself, it is a great piece of information to be able to start trading without spending money on transactions. However, you might also wonder how your broker will be paid. If you are not paying the money, who is?

The forms of commission

Forex brokers make use of three forms of commissions. The first form of the commission is known as a fixed spread, the second form is known as a variable spread and the third form of commission happens to be a certain percentage of the entire spread. You might instantly take a liking to the fixed spread because it seems doable but before you choose this option, do understand that there are other factors involved.

Ask Price and Bid Price

The difference between the bid price and the asking price is what is popularly known as the spread. It is the difference in price between what the market maker might pay you because you have bought the currency and the price at which he will sell the currency to you. This spread is the broker’s commission. A broker could charge a commission as well as a spread, depending upon the type of trade.

Variable Spread

If the spread is variable then it will depend on the movement of the market. Sudden market movements such as changing interest rates etc could change the spread as well. This could work in your favor or could go against you, depending on what your position is. If the market conditions are volatile, you might end up paying way more than what you would have if your broker had a fixed variable spread payment method.

Commission based payments

If you have a broker who is being paid on the basis of commission then the size of the commission will depend on the things that the broker offers. If he is offering you good services then paying that extra bit of commission is worth the trouble.

Whatever the mode of payment, you must ensure that the broker you have hired has been in the business for a long time and has enough experience in the Forex market. You should also take a note of the experience that he might have had in terms of managing a firm.