Economics of Consumer Finance Finance Infprmation

Sources of Consumer Credit

Credit occupies a prominent place in commercial affairs, undertaken by many people. It provides an opportunity to avail the benefit of purchases of goods and services, without giving the required money upfront.

A bank is a financial institution which is licensed by a government, and plays the important role in lending money. They also act as important players in financial markets and offer financial services like investment funds. Besides the credit cards provided by banks, which can be used for cash advances, many banks offer a variety of consumer credit services like loans with or without collateral, for major purchases such as automobiles and home mortgages. also provide credits for taking a vacation, investing in a business, paying off another loan, or a myriad of other purposes. These credits can be paid back to the bank in the form of installments. However, while giving credits, the banks are rather selective and look out for individuals and businesses with established credit histories.


Things You Need to Know about Balanced Scorecard Methodology

Employees dozing off in the company’s business meeting is nothing new. These meetings could be boring sometimes, but then for the board of directors and stake holders, they are very crucial. Such meetings are essential for the company to tap the targets, profits and check if things are going according to the set objectives. For keeping tabs if the company is progressing according to the objectives, the method of balanced scorecard is used.

Balanced Scorecard Methodology
Robert Kaplan and David Morton first introduced this concept in 1992. Since then, this has become a significant field of research and consultation. Balanced Scorecard methodology is an instrument for performance management, that helps in measuring if the operational activities of a firm are corresponding with its objectives. It is based on the vision and strategy of the company.

It is a kind of holistic approach for checking the performance of the company. It does not concentrate only on the financial output, but also on developmental, marketing and operational inputs. It helps the organizations function to the best of its capability with regards to long term interests. Moreover, using finance as the criteria for strategic control of the firm is not supposed to be a good business strategy.

There was an original methodology which consisted of tables categorizing financial, customer, internal business process, learning and growth perspectives. This technique is still used, in spite of being somewhat redundant.

Financial Perspective
It fundamentally integrates the tangible outputs of the strategy in typical financial terms. It is used to analyze whether the execution of the company’s strategy is benefiting the bottom line improvement of the company. Revenue growth, profit margins, net operating income are a few common examples of financial measures which are included in the financial perspective.

Customer Perspective
It specifies what value proposition the company applies to live up to the expectations of the customers. Consequently, can create more sales for the most profitable consumer groups. The value proposition can revolve either around operational excellence, customer intimacy, or product leadership.

New Methodology
The new methodology came up in the mid 1990s. Measures are chosen on the basis of a set of strategic objectives planned on a strategy map. Kaplan and Norton proposed 4 perspectives, which aid in selecting and gathering the correct performance measures for the company.

Internal Process Perspective
It is related to the procedures that generate and provide the customer value proposition. The focus here is on key activities essential for the company to excel effectively and productively in giving what is expected by the customers.

Innovation and Learning
This perspective is the basis of any strategy, and as such it emphasizes on the non-material (intangible) assets of a company or an organization. It involves internal capabilities and skills needed for backing up the process for internal value creation. It is good to start with the human resource department when it comes to this perspective.

This methodology is mainly used for working towards converting the vision into operational goals, planning of the business, linking the individual performance to the vision and getting a feedback and adjusting the business strategy on the lines of the feedback.

Within each of these perspectives, 5 or 6 goals have to identified by the manager. Then it is followed by interconnecting these goals and marking causal links on the chart. This new methodology is believed to be more successful than the original one, and many companies use this tool for performance enhancement and management.

Importance of Finance

Finance plays a very important role in the day-to-day lives of each individual or corporation. It is a very wide term and it can be said to be the study of the science of managing funds. Usually finance includes the areas of public, personal and business finance. It includes things related to lending, spending and saving money. An important aspect of finance is that individuals and corporations deposit money in a financial institution, especially banks, who in turn lend out money and charge an interest for their services.

Pivotal Roles of Finance

Corporate Finance
Corporate finance deals with financial decisions which an organization makes, whether it’s investments, analysis of credit, selling of assets or products or acquiring assets. Maximizing corporate value and at the same time managing risks associated with investing in a particular product or project is the main aim of corporate finance. Moreover, corporate finance also studies the short-term and long-term implications of a decision and looks into matters related with dividends to shareholders’ debt or equity. Matters related to taxes which a corporation has to pay are also taken into consideration when dealing with corporate finance.

Finance for a business can’t be undervalued and it can be regarded as the lifeline of a business which is required for its well-being. It acts as a lubricant helping to keep the business running. Whether you have a small, medium or large business, you will always need finance, right from promoting and establishing your product, acquiring assets, employing people, encouraging them to work for the development of your product and creating a brand name. In addition to that, a current business may need finance for expansion or making changes to its products as per the market requirements.

Finance Department in a Company
This department is of utmost importance as it is responsible for financial planning, thus ensuring that adequate funds are available for achieving the objectives of the organization. Moreover, it is the finance department which makes sure that the prices are controlled, besides looking after the cash flow and controlling profitability levels. One of the most important jobs of the finance department of a company is to identify the necessary financial information (like return on assets, return on capital employed or the net profitability which reveal the outcome of efforts made by the company and its employees) which should be revealed to managers so that they can make informed decisions and judgments. The department is also responsible for making financial documents and preparing the final accounts so that they can be presented in the annual general meetings of the company.

Personal Finance
Personal finance budgeting is an important part of your long-term plans to gain financial stability, especially after retirement. You need to have a clear idea of what you want in future such as the amount of money you need after retirement, the location of a place you live in, etc. You need to have a plan and goal of translating these ideas into reality. You also need to consider the things you have purchased in the past and the kind of things which you will purchase later on. This is an important step as this reflects that you will come up with a retirement plan for the future. You must be capable of identifying the good as well as bad choices you make. is such a thing that can’t be substituted by anything, so make sure you use your finances in the proper order, so that you can secure your future.