Month: January 2010

What is Depreciation?

Accounting is called the language of business, in which different jargons are used for each concept. Depreciation is one of them and it is the most important concept used in accounting, finance and economics. Depreciation is the process, in which the value of fixed assets except Land diminishes over the period of time due to variety of reasons. The important reasons of the reduction in the value of an asset are because of its usage, damage, technological obsolescence etc. Depreciation is considered as an expense in accounting, which normally follows the Matching Concept, in which the expenses and revenues of each year must be matched. Depreciation is non cash expense, which affects both the income statement and the balance sheet. In depreciation, the cost of an asset is spread over its estimated life. Each asset has its own estimated life, which normally varies from one another due to nature of an asset. The expense which is calculated every year is called Depreciation expense and the sum of all the previous years’ depreciation is called Accumulated depreciation. Accounting functions on the principle of double entry system, this means that every transaction has two aspects i-e Debit and Credit. When the cost of an asset is spread over its estimated life in the form of depreciation, then the debit part of that transaction would be depreciation expense and the credit part...

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Organization Structure

Organization structure is that form organization which is obvious in terms of departments, functions, divisions and also the way people interact and are linked together. Organization structure shows the horizontal links between the top managers and the lower level employees and the vertical operational responsibilities which is usually represented by the organization chart almost like a family tree. “The complexity of an organization’s structure is often proportional to its size and its geographic dispersal. The traditional organization structure for many businesses in the 20th century was the bureaucracy, originally defined by Max Weber.” The most recent forms in the organization structure include the ‘team structure, network structure, boundary-less structure and the virtual structure which is mainly part of the boundary-less structure. Harold J. Leavitt defines organization structure as: “Organization structure is inextricably linked to the technology and people who perform the tasks.” Whereas Charles Handy explains that “it is also directly linked to corporate culture.” Organizational structure however should not be confused with organizational design as both of them are different. Organizational structure is defined as “The formal system of task and reporting relationships that controls, coordinates, and motivates employees so that they cooperate to achieve an organizations goals” whereas organizational design is defined as “The process by which managers select and manage various dimensions and components of organizational structure and culture so that an organization can achieve it’s...

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Managing Diversity

People often take the meaning of diversity in terms of race, gender, ethnicity etc, but the truth is that diversity has a much broader scope than that. Diversity is mainly related to the different kinds of human qualities that are present in each of us but vary on different terms. The various dimensions of diversity comprise of but are not limited to the following factors according to Loden & Rosener in “Work Force America, Managing Employee Diversity as a Vital Resource”. •    Age •    Ancestry •    Gender •    Physical abilities/qualities •    Race •    Sexual orientation •    Educational background •    Parental status •    Work experience •    Religious beliefs •    Income •    Marital status The important thing is to understand how these factors influence motivation, performance and interaction of employees with others. Managing diversity basically means to understand the differences in people and acknowledging them as important aspects in the work place. This practice helps to enhance the “good management practices” and prevents situations of discrimination. However; good management alone cannot help you work with a diverse workforce, because it is often complicated to distinguish what part diversity plays in a particular spot of management. Managing diversity is a lot more than just observing the policy and legal requirements. Fair vs. Same Treatment It is a common belief amongst people that fairness means to treat everyone the same, but the main...

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Current Ratio Analysis

The current ratio is very poplar liquidity ratio; it is used to determine the short term liquidity of the company means that enough current assets (Cash, prepaid Insurance, Cash equivalents, Account receivable and Inventory etc) are available with company to meet it short term liabilities obligations. In other words current ratio determines the company ability to pay off its short term liabilities via available current assets. In theory, higher the current of the company better will be the liquidity position. Formula: Current ratio figure is calculated after dividing the company current assets with current liabilities of the company. Example: Let’s assume company ABC balance sheet contains currents assets of 10,000 dollars and 5,000 dollars current liabilities. Current Ratio = $ 10,000/$ 5000 = 2.0 Analysis: The current ratio is a good tool to investigate company liquidity but sometimes it’s misleading. Higher current ratio is not necessarily mean better liquidity and lower current ratio is not necessarily bad liquidity. Current ratio focuses on amount of current assets and liabilities although the fact is that turning current assets to cash require time which varies company to company. Let compare two companies’ current ratios.   Company A Company B Current Assets $ 6000 $ 3,000 Current Liabilities $ 2000 $ 1,500 Working Capital $ 4,000 $ 1,500       Current Ration 3.0 2.0 From the example one can easily say that...

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Service Marketing Mix

Traditional marketing mix consist of 4P’s (Product, Price, Place, Promotion) now it’s extended to 7P’s the additional 3P’s are useful for services industry which will help the company to provide good services to their consumers. Only the additional 3P’s will be discussed which is related to services industry Following are the additional 3P’s 1.    People 2.    Process 3.    Physical evidence People So let’s start with the additional first “P” which is people. Which people are included in marketing mix for services?  The services providers and the one who consume services both are included in people lets make it more simple the one who is directly or indirectly involved in providing and consumption of services. The company has to select the staff with good interpersonal skills and train them because they are the one who have to interact with the consumer and deliver services to them if the staff who delivers services are well trained and have complete knowledge of services which they are delivering consumers will have positive perception and happily pay for the services. Process Now we will discuss the second additional “P” which is process. The mechanism by which the consumer consume the services we can also call it “customer management process”  lets take an example if customer entered in restaurant and ordered meal and they delivered it in 5 minutes so what is it? Its basically...

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Performance Management

Performance management encompasses two different categories of management. In one category the performance of the company is analyzed as whole, on the other hand the employee’s performance is analyzed, or in more explanatory terms an analyst views the complete performance of a company along with evaluating the efficiency of managers as well as the heads of companies in achieving goals on the other hand a system is created to evaluate employee performance to assist them in reaching rational objectives to ensure that the organization executes tasks in a better way. Performance management consist activities that ensure that organization goals and objectives are being met in an effectual and proficient way. It focuses on the routine of work of the organization, different departments, the process in building products/service and employees. The different activities concerned with performance management are discussed in this article. Experts say that: “Employee performance management works best when work is planned and goals are consistent. This may mean having a clear way to communicate regarding work expected at the moment and upcoming work. Planning also includes defining expectations of the employee so that he or she is not broadsided by evaluation criteria not included in planning.” Basically performance management of individual employees is varied; it usually consists of the following: • Setting goals • Planning work • Offering Feedback/reviews • Offering opportunities to learn more in a...

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Correlation Analysis

Correlation is a measure of relationship between two variables. The two variables must be numeric or scale. So basically correlation is applied on the quantitative variables. Correlation Coefficient Correlation Coefficient gives the mathematical value for measuring the strength of the linear relationship between two variables. It ranges from -1 to +1. • +1 representing absolute positive linear relationship (X increases, Y increases). •    -1 representing absolute inverse relationship (X increases, Y decreases). •    0 representing no linear relationship (X and Y have no pattern). Bivariate Correlation Bivariate Correlation tests the strength of the relationship between two variables without giving any consideration to the interference some other variable might cause to the relationship between the two variables being tested. Partial Correlation It allows us to examine the correlation between two variables while controlling for the effects of one or more of the additional variables without throwing out any of the data. Please Note that: •    One-tailed test is appropriate if we are making predictions about a positive or negative relationship between the variables. •    Two-tailed test should be used if there is no prediction bout the direction of relation between the variables to be tested. The null hypothesis for both bivariate and partial correlation is same and is given below. Ho: There is no correlation between the given variables. Note: Reject the null hypothesis if P value (two-tailed) corresponding to...

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ANOVA Analysis

Assumptions •  The dependent variable should be interval or ratio. •  The population in which samples are drawn should be normally distributed. •  Sample cases should be independent of each other. •  Variance between the groups should be approximately equal. One-Way ANOVA (It uses F-Statistic) One way ANOVA is a statistical technique that is used to compare the means of more than two groups based on a single treatment factor. OR we can say that it assess the effects of one independent variable on a single dependent variable. Examples: The owner is interested to know the average daily sale of new brand at three metro cities. The vice chancellor is interested to know the average CGPA of three institutes. Ho: The average sale of the new brand of gasoline is same in all three metro cities. Note: Reject the null hypothesis if the sig value corresponding to F-statistic is less than 0.05. Rejection of the null hypothesis in ANOVA only tells us that all population means are not equal. But if we are interested to know the difference between (group1 and group2) or (group 2 and group 3) then we will also apply Post-Hoc multiple comparison. Procedure: One-Way ANOVA can be applied by using Univariate GLM which is used to assess the effects of several independent variables on a single dependent variable. Two-Way ANOVA This is used to know...

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Marketing Objectives

Objective plays an important role in business because it shows the path that what to achieve if company don’t have any objective and keep on workings will never be satisfy of their work because employees will really don’t know that what they want to achieve? What is their aim? What is the reason of the business existence? Setting objective is very important for business it makes the focus of employees on specific aim and goal that what they want to achieve in a specified time period when goal, time and obligations are specified then employees are get motivated towards achieving the objective. Objective is not only set for business it can be for new lunched product, services, growth objective, profitability objective, market share objective,  etc Acronym used for setting the objectives is SMART objective SMART objective “S” stands for specific: Goals should be well defined and to the point and not confusing which can be easily understood by the staff. “M” stands for measurable: The objective should be meaningful which should motivate the staff and staff should be able to manage it. “A” stands for attainable: The goal should be appropriate, agreed by the staff and which can be achieved. “R” stands for realistic: the company should have the resources which are necessary for achieving the goal i.e. men money machine material if the company doesn’t have the resources...

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Direct Mail

Direct mail is actually a form of advertising, used by advertisers. Advertisers send printed ads, letters etc. to a large group of targeted consumers. These letters are mailed in bulk to reduce mailing cost; the main focus on target market mailing is done to get good response. Though it used in different situations, the method is usually limited to the advertisers’ imagination. New stores, fast food places, small niche shops use direct mail to advertise their products. However distribution of coupons also comes under direct mailing. The foremost challenge for direct mail advertisers is that consumers usually throw away mail related with ads that is why direct mail marketers have started to use different techniques to make sure that the addressee opens their mail. To ensure that, marketers make the effort to make their mail look a little personal and special; others use target mailing, that is mailing ads to customers who are most likely to use the product. Most direct mail marketers have understood that their foremost challenge is to get the receiver to simply open and read the ad. One important point is that, “not all direct mail is mailed to a “large number” of people. One of the secrets is pinpoint targeting. Another is creating a good offer.” Since the boom in technology, direct mail has entered the world of Internet, emails are now sent to...

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