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what is the international bank of reconstruction and development ibrd | the international bank of reconstruction and development ibrd is a development bank administered by the world bank the ibrd offers financial products and policy advice to countries aiming to reduce poverty and promote sustainable development the international bank of reconstruction and development is a cooperative owned by 189 member countries understanding the ibrdthe international bank of reconstruction and development ibrd is one of the two major institutions that make up the world bank with the other being the international development association ida the ida is a financial institution dedicated to making developmental loans to the world s poorest countries the ibrd was founded in 1944 with the goal of helping war torn european countries rebuild their infrastructure and their economies following the recovery from world war ii the international bank of reconstruction and development broadened its mandate to increasing global economic growth and eliminating poverty today the ibrd focuses its services on middle income countries or countries where the per capita income ranges from 1 026 to 12 375 per year the ibrd adjusts these and other figures a bit yearly to account for inflation economic changes within middle income countries and other factors these countries like indonesia india and thailand are often home to fast growing economies that attract a lot of foreign investment and large infrastructure building projects at the same time middle income countries are home to 70 of the world s poor people as the benefits of this economic growth are unevenly distributed across their populations the success of middle income countries is precarious as many economies that look promising will collapse under the weight of corruption and economic mismanagement the goal of the international bank of reconstruction and development is to provide financing and economic policy advice to help the leaders of middle income countries navigate the path toward greater prosperity it will often help finance infrastructure projects that grow a country s economic potential while helping governments manage public finances and cultivate the confidence of foreign investors the ibrd was founded in anticipation of the end of world war ii during the bretton woods conference of 1944 a gathering of the 44 allied nations of the second world war meant to establish the post war global financial order along with establishing a new global monetary policy regime the bretton woods conference was also where the international monetary fund and the ibrd were formed the first loan ever issued by the international bank of reconstruction and development was to the government of france to help finance the reconstruction of critical infrastructure following the reconstruction of europe the ibrd shifted its focus to promoting economic development in other parts of the world | |
what is an international banking facility ibf | an international banking facility allows depository institutions in the u s to offer deposit loan and other banking services to foreign residents and institutions while being exempted from the federal reserve s reserve requirements as well as some state and local income taxes 1understanding international banking facilitiesbanks are permitted to conduct international banking facility ibf activities from their existing offices but must keep separate books for ibf business the federal reserve approved the establishment of ibfs and exempted them from its reserve requirements in 1981 ibf operations remain under the jurisdiction of the federal reserve and other state and federal regulators they are not insured by the federal deposit insurance corporation fdic 1competition to attract ibf business has led some states to offer additional tax breaks in florida for example ibfs are exempt from state income tax intangible personal property tax and documentary stamp tax 2because of the exemptions they enjoy ibfs enable u s banks and u s based financial institutions to compete more effectively for overseas deposits and loans business in the eurocurrency markets international banking facility regulationibfs permit u s banks to use their domestic u s offices to offer foreign customers deposit and loan services which formerly could be provided competitively only from foreign offices among depository institutions which may establish an ibf are u s commercial banks edge act corporations foreign commercial banks through branches and agencies in the u s savings and loan associations and mutual savings banks an edge act corporation eac is a subsidiary of a u s or foreign bank that engages in foreign banking operations these subsidiaries are named after the 1919 edge act which authorized them the edge act named after the u s senator who sponsored it was an amendment to the federal reserve act of 1913 that was introduced to increase the competitiveness of american financial firms on a global stage 3a similar vehicle an agreement corporation is essentially a state chartered edge act corporation in the u s banks may operate nationally as part of the national association na or as state chartered banks within its borders an agreement corporation is a permission given to a bank by a state that allows it to engage in international banking and transactions congress passed the agreement corporation act in 1916 this new law authorized american banks to invest 10 of their capital into state chartered banks and corporations permitted to finance projects internationally the state chartered bank would need to enter into an agreement with the federal reserve agreeing to be bound by the rules and regulations set out in the act it was from these agreements that the term agreement corporation arose 4 | |
what is an international bond | an international bond is an investment in debt that is issued by a foreign entity for example a u s based international bond fund might invest in australian government bonds chinese corporate bonds and other government and corporate bonds issued in foreign countries as with any bond international bonds pay interest at specified intervals and repay the principal amount back to bondholders at the maturity date many mutual funds in the united states hold these bonds some investors buy international bonds in order to diversify their portfolios and add some exposure to foreign investments understanding international bondsas business becomes more globalized companies discover ways to access cheaper sources of financing outside of their country of operations instead of relying on investors in domestic markets businesses and governments can tap into the pockets of global investors for much needed capital one way companies can access the international lending scene is by issuing international bonds most international bonds are issued within the nation s borders and in its local currency from the perspective of an investor residing in the united states an international bond is one that is issued by a corporation or government in any country that uses a currency other than the u s dollar types of international bondsthere are several broad categories of international bonds that are of greatest interest to investors in the u s they include eurobonds global bonds and brady bonds eurobonds are issued in a currency other than the native currency of the corporation or other issuer for example a company that is based in switzerland that plans to build a manufacturing plant in mexico might issue a bond that is denominated in pesos the company is getting direct access to the mexican pesos it will need for the project probably at a lower cost than borrowing from a mexican bank mexican investors are getting an investment that does not involve the currency risk of exchanging swiss francs for pesos it can get more complicated for example a french company might issue a bond in japan that is denominated in u s dollars rather than euros this also is a eurobond or more specifically a eurodollar bond other common types of eurobonds are euroyen bonds issued in japanese yen and euroswiss bonds issued in swiss francs global bonds are similar to eurobonds but they can also be traded and issued in the country whose currency is used to value the bond for example a global bond could be issued by a french company denominated in u s dollars and offered to investors in both japan and america brady bonds are sovereign debt securities denominated in u s dollars and backed by u s treasury bonds but they are issued by other nations classified by the federal reserve as a type of emerging markets bond they were created by the u s to help developing nations with burdensome foreign debts 1part of a program developed in 1989 and named after then treasury secretary nicholas brady the bonds are meant to help emerging nations restructure their debts and reach financial stability most brady bonds are rated below investment grade 1international bonds vs foreign bondsalthough the terms are sometimes used interchangeably international bonds and foreign bonds are not the same foreign bonds are issued in one market and denominated in its currency but issued by a foreign company for example a u s company that does business in canada might issue a bond in canada that is valued in canadian dollars often foreign bonds bear cute names that reflect the local currency or country in which they re issued the bond in the example above would be referred to as a maple bond other types of foreign bonds include special considerations | |
are international bonds the same as foreign bonds | no foreign bonds are issued in one country and priced in that country s currency but the corporation that issues it is foreign based the buyers will primarily be investors who live in the country in which the bonds are issued international bonds are for the most part issued in one country and sold to investors in other countries | |
are there international bond funds for investors | there are many international bond funds that invest in the corporate and government debt of other countries a few of these funds include the fidelity global credit fund fgbfx the templeton global bond fund tpinx and the pimco global bond fund unhedged | |
are there international bond etfs for investors | there are a number of exchange traded funds etfs that either focus on or include international bonds a few of them are ishares international treasury bond etf igov spdr bloomberg international treasure bond etf bwx and invesco total return bond etf gto a note of caution high yield bond can be a euphemism for junk bond when investing in bonds foreign or domestic check their credit ratings and be sure you know the degree of risk you re taking on the bottom lineinternational bonds are a great way to diversify a portfolio as the investor can gain exposure to foreign securities that may not necessarily move in tandem with securities trading on local markets however since international bonds are typically denominated and pay interest in a foreign currency the value of the bond will fluctuate depending on the economic conditions and exchange rates between the domestic host country and the foreign country that houses the issuer that means international bonds are subject to currency risk investors should take caution when investing in international bonds because they may be subject to different regulatory and taxation requirements than the ones with which they are familiar | |
what is the international chamber of commerce icc | the international chamber of commerce is the largest most diverse business organization in the world the icc represents 45 million companies in over 100 countries with broad business interests the icc s networks of committees and experts represent the full range of business sectors they also maintain contact with the united nations the world trade organization and other intergovernmental agencies understanding the international chamber of commerce icc the icc aims to foster international trade and commerce to promote and protect open markets for goods and services and the free flow of capital the icc is responsible for a number of functions including the establishment of rules dispute resolution policy advocacy and training the icc also wages war on commercial crime and corruption to bolster economic growth create jobs and stabilize employment and ensure overall economic prosperity 1because members of the icc and their associates engage in international business the icc has unparalleled authority in setting rules that govern cross border business while these rules are voluntary thousands of daily transactions abide by the icc established rules as part of regular international trade the history of the international chamber of commerce icc the icc was founded in paris france in 1919 the organization s international secretariat was also established in paris and its international court of arbitration was formed in 1923 the first chair of the chamber was tienne cl mentel the early 20th century french politician 2the icc s governing bodiesthere are four primary governing bodies of the icc 3 the lead governing body is the world council which is composed of national committee representatives the highest officers of the icc the chair and vice chair are elected by the world council every two years the executive board provides strategic direction for the icc the board is elected by the world council and is comprised of 30 business leaders and ex officio members the executive board s prominent duties are the development of icc strategies and policy implementation the international secretariat is the operational arm of the icc and is responsible for developing and implementing the icc s work program and introducing business perspectives to intergovernmental organizations the secretary general who is appointed by the world council oversees this governing body the finance committee acts as an advisor to the executive board on all financial aspects this committee prepares the budget on behalf of the board submits regular reports reviews the financial implications of icc activities and oversees all expenses and revenue flow | |
international depository receipt idr an overview | an international depository receipt idr is a negotiable certificate issued by a bank it represents ownership of a number of shares of stock in a foreign company that the bank holds in trust international depository receipts are more often known in the u s as american depository receipts adrs in europe they are known as global depository receipts and trade on the london luxembourg and frankfurt exchanges the acronym idr also is used to identify indian depository receipts understanding the idridrs are purchased by investors as an alternative to the direct purchase of foreign stocks on foreign exchanges for example american traders can buy shares of the swiss bank credit suisse group ag or swedish automaker volvo ab directly from american exchanges via adrs for the companies the idr makes it easier and cheaper to reach international buyers the company is not required to comply with all of the listing and regulatory requirements of every country in which it wishes to sell shares idrs generally represent fractional ownership of the underlying stock with each idr representing one two three or 10 shares the price of the idr usually trades close to the value of the underlying shares on a currency conversion basis occasional divergences in price are exploited for arbitrage opportunities arbitrage is the simultaneous purchase and sale of an asset with the aim of profiting from an imbalance in the price on various exchanges and various currencies the trade exploits the price differences of identical or near identical financial instruments arbitrage can exist as a result of market inefficiencies special considerations on idrsthe regulatory body for the capital markets of india the securities and exchange board of india sebi issued new guidelines in 2019 for companies listing depository receipts the guidelines allow for indian companies to list depository receipts on a limited number of foreign exchanges including the nasdaq the nyse and the london stock exchange 1 2 this is a departure for regulators of the markets in india while indian companies were able to issue debt securities called masala bonds on international exchanges the same option was not available for equity shares the value of an adr should precisely match the value of the underlying stock tiny discrepancies in prices among exchanges are exploited by arbitrage traders the national stock exchange of india nse was founded in 1992 and started trading in 1994 in contrast with the bombay stock exchange bse which has been in existence since 1875 both exchanges follow the same trading mechanism trading hours and settlement process | |
what is international finance | international finance sometimes known as international macroeconomics is the study of monetary interactions between two or more countries focusing on areas such as foreign direct investment and currency exchange rates understanding international financeinternational finance deals with the economic interactions between multiple countries rather than narrowly focusing on individual markets international finance research is conducted by large institutions such as the international finance corp ifc and the national bureau of economic research nber furthermore the u s federal reserve has a division dedicated to analyzing policies germane to u s capital flow external trade and the development of global markets international finance analyzes the following specific areas of study example of international institutions of international financethe bretton woods system was created at the bretton woods conference in 1944 where the 40 participating countries agreed to establish a fixed exchange rate system the collective goal of this initiative was to standardize international monetary exchanges and policies in a broader effort to create post world war ii stability the bretton woods conference catalyzed the development of international institutions that play a foundational role in the global economy these include the international monetary fund imf a consortium of 189 countries dedicated to creating global monetary cooperation and the international bank for reconstruction and development which later became known as the world bank special considerationsinternational trade is arguably the most important influencer of global prosperity and growth but there are worries related to the fact the united states has shifted from being the largest international creditor to becoming the world s largest international debtor absorbing excess amounts of funding from organizations and countries on a global basis this may affect international finance in unforeseen ways international finance involves measuring the political and foreign exchange risk associated with managing multinational corporations | |
what is the international finance corporation ifc | the international finance corporation ifc provides financing of private enterprise investment in developing countries around the world through both loans and direct investments affiliated with the world bank it also provides advisory services to encourage the development of private enterprise in nations that might be lacking the necessary infrastructure or liquidity for businesses to secure financing | |
how the international finance corporation ifc works | the ifc was established in 1956 as a member of the world bank group focused on investing in economic development it claims to be the largest global development institution focused on the private sector in developing countries the ifc says it also seeks to ensure that private enterprises in developing nations have access to markets and financing 1the ifc s most recent stated goals include the development of sustainable agriculture expanding small businesses access to microfinance supporting infrastructure improvements as well as promoting climate health and education policies the ifc is governed by its 184 member countries and is headquartered in washington d c ifc global financingto raise money the ifc issues bonds in markets around the world as of 2021 the ifc has issued 10 553 billion worth across 178 bonds in 20 currencies 2in fiscal year 2021 the ifc invested 31 5 billion in long term and short term finance including 10 8 billion mobilized from other investors 3the total amount of fast track financing to support private companies and developing countries impacted by the economic downturn caused by the spread of covid 19 the 14 million results from an 8 million increase announced in march 2020 4example of an ifc investmentthe ifc provided 145 million in financing to help one of the world s largest dairy producers frieslandcampina acquire a controlling stake of 51 of engro foods pakistan s leading dairy processor 5 although pakistan is the fourth largest milk producing country in the world demand has consistently outpaced supply due to poor infrastructure and an outdated supply chain small subsistence farms account for nearly 80 of the industry s output frieslandcampina has promised to share its experience and best practices with the smaller farmers who supply engro foods along with the majority of the dairy processors in pakistan the stated goal is to help these small farmers increase productivity and reduce waste the ifc said it expects that 200 000 farmers and 270 000 distributors will benefit from frieslandcampina s acquisition of engro foods in addition the investment is projected to create 1 000 new jobs in the dairy supply chain 5criticism of the ifcthe ifc has faced criticism as its size and influence around the globe have grown it says one of its primary goals is to reduce poverty through economic development but critics say it has begun to act more like a private investment bank with a focus on corporate profit sometimes with disregard for the environmental and social impacts of its projects | |
what are international financial reporting standards ifrs | international financial reporting standards ifrs are a set of accounting rules for the financial statements of public companies that are intended to make them consistent transparent and easily comparable around the world ifrs currently has complete profiles for 168 jurisdictions including those in the european union the united states uses a different system the generally accepted accounting principles gaap 1the ifrs is issued by the international accounting standards board iasb the ifrs system is sometimes confused with the international accounting standards ias which are the older standards that the ifrs replaced in 2001 2investopedia paige mclaughlinunderstanding international financial reporting standards ifrs ifrs specify in detail how companies must maintain their records and report their expenses and income they were established to create a common accounting language that could be understood globally by investors auditors government regulators and other interested parties the standards are designed to bring consistency to accounting language practices and statements and to help businesses and investors make educated financial analyses and decisions they were developed by the international accounting standards board which is part of the not for profit london based ifrs foundation the foundation says it sets the standards to bring transparency accountability and efficiency to financial markets around the world 3ifrs vs gaappublic companies in the u s are required to use a rival system the generally accepted accounting principles gaap the gaap standards were developed by the financial standards accounting board fsab and the governmental accounting standards board gasb the securities and exchange commission sec has said it won t switch to international financial reporting standards but will continue reviewing a proposal to allow ifrs information to supplement u s financial filings 4there are differences between ifrs and gaap reporting for example ifrs is not as strict in defining revenue and allows companies to report revenue sooner a balance sheet using this system might show a higher stream of revenue than a gaap version of the same balance sheet ifrs also has different requirements for reporting expenses for example if a company is spending money on development or on investment for the future it doesn t necessarily have to be reported as an expense it can be capitalized instead standard ifrs requirementsifrs covers a wide range of accounting activities there are certain aspects of business practice for which ifrs set mandatory rules in addition to these basic reports a company must give a summary of its accounting policies the full report is often seen side by side with the previous report to show the changes in profit and loss 6a parent company must create separate account reports for each of its subsidiary companies chinese companies do not use ifrs or gaap they use chinese accounting standards for business enterprises asbes 7history of ifrsifrs originated in the european union with the intention of making business affairs and accounts accessible across the continent it was quickly adopted as a common accounting language although the u s and some other countries don t use ifrs currently 168 jurisdictions do making ifrs the most used set of standards globally 1who uses ifrs ifrs is required to be used by public companies based in 168 jurisdictions including all of the nations in the european union as well as canada india russia south korea south africa and chile the u s and china each have their own systems 1 | |
how does ifrs differ from gaap | the two systems have the same goal clarity and honesty in financial reporting by publicly traded companies ifrs was designed as a standards based approach that could be used internationally gaap is a rules based system used primarily in the u s although most of the world uses ifrs standards it is still not part of the u s financial accounting world the sec continues to review switching to the ifrs but has yet to do so several methodological differences exist between the two systems for instance gaap allows a company to use either of two inventory cost methods first in first out fifo or last in first out lifo lifo however is banned under ifrs | |
why is ifrs important | ifrs fosters transparency and trust in the global financial markets and the companies that list their shares on them if such standards did not exist investors would be more reluctant to believe the financial statements and other information presented to them by companies without that trust we might see fewer transactions and a less robust economy ifrs also helps investors analyze companies by making it easier to perform apples to apples comparisons between one company and another and for fundamental analysis of a company s performance the bottom linethe international financial reporting standards ifrs are accounting rules for public companies with the goal of making company financial statements consistent transparent and easily comparable around the world this helps with auditing tax purposes and investing | |
what is the international fisher effect | the international fisher effect ife is an economic theory stating that the expected disparity between the exchange rate of two currencies is approximately equal to the difference between their countries nominal interest rates 1understanding the international fisher effect ife the ife is based on the analysis of interest rates associated with present and future risk free investments such as treasuries and is used to help predict currency movements this is in contrast to other methods that solely use inflation rates in the prediction of exchange rate shifts instead functioning as a combined view relating inflation and interest rates to a currency s appreciation or depreciation the theory stems from the concept that real interest rates are independent of other monetary variables such as changes in a nation s monetary policy and provide a better indication of the health of a particular currency within a global market the ife provides for the assumption that countries with lower interest rates will likely also experience lower levels of inflation which can result in increases in the real value of the associated currency when compared to other nations by contrast nations with higher interest rates will experience depreciation in the value of their currency 2this theory was named after u s economist irving fisher 3calculating the international fisher effectife is calculated as e i 1 i 2 1 i 2 i 1 i 2 where e the percent change in the exchange rate i 1 country a s interest rate i 2 country b s interest rate begin aligned e frac i 1 i 2 1 i 2 approx i 1 i 2 textbf where e text the percent change in the exchange rate i 1 text country a s interest rate i 2 text country b s interest rate end aligned e 1 i2 i1 i2 i1 i2 where e the percent change in the exchange ratei1 country a s interest ratei2 country b s interest rate for example if country a s interest rate is 10 and country b s interest rate is 5 country b s currency should appreciate roughly 5 compared to country a s currency the rationale for the ife is that a country with a higher interest rate will also tend to have a higher inflation rate this increased amount of inflation should cause the currency in the country with a higher interest rate to depreciate against a country with lower interest rates 4the fisher effect and the international fisher effectthe fisher effect and the ife are related models but are not interchangeable the fisher effect claims that the combination of the anticipated rate of inflation and the real rate of return are represented in the nominal interest rates the ife expands on the fisher effect suggesting that because nominal interest rates reflect anticipated inflation rates and currency exchange rate changes are driven by inflation rates then currency changes are proportionate to the difference between the two nations nominal interest rates 5application of the international fisher effectempirical research testing the ife has shown mixed results and it is likely that other factors also influence movements in currency exchange rates historically in times when interest rates were adjusted by more significant magnitudes the ife held more validity however in recent years inflation expectations and nominal interest rates around the world are generally low and the size of interest rate changes is correspondingly relatively small direct indications of inflation rates such as consumer price indexes cpi are more often used to estimate expected changes in currency exchange rates | |
what is international investing | international investing involves selecting global investment instruments as part of a diversified portfolio people often invest internationally to increase the diversification of their portfolios and spread investment risk among foreign markets and companies understanding international investinginternational investing provides investors with a broader investment universe for selecting portfolio selections it can broaden an investor s diversification potentially adding new sources of return in some cases it can also help mitigate some systematic risks associated with a specific country s economy international investing provides a wide range of eligible instruments for an investment portfolio beyond just domestic investments an investor can look to the same types of investment options internationally that they have domestically including variations of stocks bonds and mutual funds investors can also invest in options and futures on underlying international investments and currencies while economists and advisors advocate investing internationally most portfolios are dominated by domestic securities international investing optionsinvestors will find an array of investment options in the international markets looking to government debt and international equity indexes provides a basis for international investing global governments issue debt to help fund their financial budgets government debt is issued in the form of notes and bonds with varying maturities and interest rates derived from the underlying investment duration countries can be classified as developed emerging or frontier to better understand their economies and country risks developed countries are the world s most advanced economies and therefore provide less risk emerging and frontier markets can offer long term opportunities for investment as economies and infrastructures develop over time credit market ratings can help to provide an investor with an understanding of a fixed income investment s risk globally countries receive credit ratings from credit rating agencies that help to determine the risk to investors comprehensive lists of country credit ratings are available online in the equity markets international indexes provide a basis for international investment considerations for comprehensive global market exposure investors can look to world index funds these funds include stocks from countries across the globe two leading index examples are the ftse global all cap index and the vanguard total world stock index fund developed emerging and frontier market indexes also help to break down the global equity markets into three categories developed market equities typically offer the lowest risk since financial market infrastructures and corporate markets are more advanced emerging and frontier markets have greater risks emerging markets are often a category in high demand for international investors these markets have higher risks due to their emerging growth but have greater potential for returns msci is an index provider that is well known for its international indexes and provides global indexes such as the msci all country world index the msci eafe index the msci emerging markets index and the msci frontier markets index international investing risksall types of investments involve risk and international investing may include the following | |
what is the international labour organization ilo | the international labour organization ilo is a united nations u n agency the goal of the ilo is to advance social and economic justice by setting international labor standards the ilo has 187 member states and is headquartered in geneva switzerland with approximately 40 field offices around the world the standards upheld by the ilo are broadly intended to ensure accessible productive and sustainable work worldwide in conditions of freedom equity security and dignity understanding the ilothe international labour organization ilo was founded in 1919 under the league of nations and incorporated into the u n as a specialized agency in 1946 the ilo is the first and oldest specialized agency of the u n the organization s goal is to serve as a uniting force among governments businesses and workers it emphasizes the need for workers to enjoy conditions of freedom equity security and human dignity through their employment the ilo promotes international labor standards through its field offices in africa latin america and the caribbean the arab states asia and the pacific and europe and central asia the organization provides training on fair employment standards offers technical cooperation for projects in partner countries analyzes labor statistics and publishes related research and regularly holds events and conferences to examine critical social and labor issues the ilo was awarded the nobel peace prize in 1969 the organization was recognized for improving fraternity and peace among nations pursuing decent work and justice for workers and providing technical assistance to developing nations the labor standards set forth by the ilo have been published in 190 conventions and six protocols these standards recognize the right to collective bargaining attempt to eliminate forced or compulsory labor and abolish child labor and eliminate acts of discrimination in respect to employment and occupation as a result the protocols and conventions of the ilo are a major contributor to international labor law the organization has a three tiered structure that brings together governments employers and workers the three main bodies of the ilo are the international labour conference the governing body and the international labour office the international labour conference meets annually to formulate international labor standards the governing body meets three times a year serving as the executive council and deciding the agency s policy and budget and the international labour office is the permanent secretariat that administers the organization and implements activities ilo list of international labor standardsthese are legal instruments created by governments employers and workers that set basic principles and rights at work they take the form of either conventions protocols which are legally binding international treaties ratified by member states or recommendations which are nonbinding guidelines the former are created and adopted at the annual international labour conference after which they must be ratified by the governing bodies such as a parliament or congress of member states there are eight fundamental conventions there are also four governance conventions which are considered important for the functioning of the international labour standards system ilo programsthe ilo has consolidated its current technical projects into five flagship programmes designed to enhance the efficiency and impact of its development cooperation with constituents on a global scale these programs are devoted to improving working conditions in the factories of the garment and footwear industries this program is jointly run with the world bank group s international finance corporation the emphasis is on lasting improvements rather than quick fixes and involves eight countries on three continents working hands on with 1 250 factories and in excess of 1 5 million workers the program s goal is to prove that safe dignified work means more productive factories and a more profitable business model that benefits workers managers countries and consumers alike this program was launched in 2016 and its long term intention is to extend social protection to the five billion people who are partially covered or living without social protection and the dignity it affords according to the ilo 73 of the globe s population lacks social protection with five billion people living with daily anxiety the ilo hopes to change that by creating nationally appropriate social protection systems and measures for all including floors it will support governments workers and employers confederations and civil society organizations in 21 countries in collaboration with other u n agencies the first goal of the global flagship programme was to change 130 million lives by 2020 through establishing comprehensive social protection systems in 21 countries and conducting a global knowledge development and education campaign as of april 2021 the website gives no indication of whether or not that goal was met with the advent of the covid 19 pandemic it has also taken on the challenge of including countries responses to the pandemic in its mission to protect workers according to the ilo there are 152 million children performing child labor 40 million men women and children in modern slavery 24 9 million people in forced labor and 15 4 million people in forced marriages this program hopes to put an end to these scourges it is a relatively new program that combined two older ones on child labor and forced labor ipec collaborates with governments employers and workers to the goals are to eliminate child labor by 2025 and end forced labor and human trafficking by 2030 in accordance with the u n s 2030 sustainable development agenda which was adopted in 2015 originally known as the global action for prevention on occupational safety and health gap osh program this was meant to improve the health and safety of workers in small and medium sized enterprises through fostering a global culture of prevention created in 2016 it has been active in 15 countries and globally according to the ilo 2 78 million workers die every year from work related injuries and illnesses and 374 million more suffer nonfatal ones the lost workdays account for nearly 4 of the world s annual gross domestic product gdp its particular targets are with the advent of covid 19 it has been repurposed to offer a tailored set of interventions to address the immediate and longer term safety and health needs of constituents related to covid 19 this program focuses on creating jobs in countries where there are conflicts and disasters with an emphasis on employment for young people and women its key objectives which it hopes to achieve through building institutions social dialogue and establishing fundamental principles and rights at work are the number of new jobs that could be created around the world through transitioning to a green economy the future of the international labour organization ilo in 2019 the ilo convened for the global commission on the future of work in preparation for the conference about 110 countries participated in dialogues at the regional and national levels the ensuing report made recommendations for governments on how best to approach the challenges of the 21st century labor environment among these recommendations were a universal labor guarantee social protection from birth to old age and entitlement to lifelong learning the ilo also assessed what impact a transition to a green economy would have on employment according to the ilo if the right policies are put in place a transition to a greener economy could create 24 million new jobs around the world by 2030 | |
what is the international maritime organization imo | the international maritime organization imo is a specialized agency of the united nations that is responsible for measures to improve the safety and security of international shipping and prevent marine pollution from ships imo oversees every aspect of worldwide shipping regulations including legal issues shipbuilding and cargo size understanding the international maritime organization imo the international maritime organization s objectives can be best summed up by its slogan safe secure and efficient shipping on clean oceans the imo sets policies for international shipping and sets regulations on safety security and environmental best practices 1the imo is also involved in legal issues matters pertaining to international shipping such as liability and compensation matters and facilitating international maritime traffic the imo assembly the agency s governing body meets every two years to address issues in international shipping and to look at the organization s budget to break down the workload and to ensure each area of concern of the imo is getting the attention it deserves there are five committees tasked with making policies and developing going over and overhauling rules and guidelines those committees include the technical co operation committee the maritime safety committee the marine environmental protection committee the legal committee and the facilitation committee furthermore there are seven sub committees working under these committees 2the international convention for the safety of life at sea solas the international convention on standards of training certification and watchkeeping for seafarers stcw and the international convention for the prevention of pollution from ships marpol are some of the vital international maritime organization treaties 3the international convention for the safety of life at sea is regarded as the most crucial treaty regarding safety at sea the first draft of it was adopted in 1914 following the sinking of the titanic before the creation of the imo 4member states and organizations of the imothe imo has 176 member states accounting for most of the membership of the united nations in addition there are three associate members that are not considered states hong kong macao and the faroe islands 5in addition the imo regularly interacts with non governmental organizations ngos and intergovernmental organizations on maritime policy there are 66 intergovernmental organizations with observer status in the imo including the council of europe the organization of american states and opec 6 there are also 85 ngos with consultative status most of them associated with the maritime or shipping industries 7imo structurethe governance structures of the imo consist of the assembly representing the member states and a council elected by the members at two year intervals the council acts as an executive body and performs all the responsibilities of the assembly when it is not in session the council is also responsible for appointing the secretary general of the organization 2in addition there are several committees and sub committees responsible for various aspects of maritime regulation for example the marine safety committee is responsible for setting the rules of navigation construction and transportation to reduce hazards on the seas the marine environmental protection committee considers matters relating to pollution and the legal committee is responsible for questions of maritime law 2strategic plan of the imoevery six years the assembly of the imo established a strategic plan describing the organization s mission and priorities the current strategic plan enacted in 2018 is to promote safe secure environmentally sound efficient and sustainable shipping through cooperation 8the plan also sets out the strategic direction of the imo and establishes performance indicators to measure the success of the organization s work in addition to the traditional goals relating to facilitating trade and ocean governance the current strategic plan also sets the goal of responding to climate change in its vision statement the imo is pledged to support member states in implementing the 2030 agenda for sustainable development 8special considerationsit s important to note that the imo does not implement or enforce policies the imo was created to adopt policy not enforce it when a government accepts an imo convention those policies become national laws that the government is responsible for enforcing the imo developed a program to audit compliance with maritime policies effective as of january 2016 however there are no countermeasures available if a country does not enforce the policies set by the imo instead the imo provides feedback and advice on a country s current performance 9beyond shipping an imo is also an independent marketing organization this is an organization that works with insurance companies to market its products the duties of an imo can include other marketing tasks such as distribution | |
what is the purpose of the international maritime organization imo | the purpose of the imo is to establish intergovernmental regulations concerning maritime trade safe shipping and access to the seas in addition it also sets the rules for preventing ocean pollution and accidents | |
how many countries are in the international maritime organization imo | there are 176 member states of the imo as well as three associate members that are not considered states 5who funds the international maritime organization imo funding for the international maritime organization imo is provided by contributions from member states as well as through various trusts donations and partnership agreements the organization also makes money from certain commercial activities such as selling books or hosting conferences 1011the bottom linethe international maritime organization imo is a united nations agency responsible for regulating international shipping it s tasked with developing rules related to safety and security of maritime transportation as well as water pollution it is represented by 176 member states and is based in london u k | |
what is the international monetary fund imf | the international monetary fund imf is an international organization that promotes global economic growth and financial stability encourages international trade and reduces poverty quotas of member countries are a key determinant of the voting power in imf decisions votes comprise one vote per 100 000 special drawing rights sdr of quota plus basic votes sdrs are an international type of monetary reserve currency created by the imf as a supplement to the existing money reserves of member countries investopedia xiaojie liuunderstanding the international monetary fund imf the international monetary fund imf is based in washington d c the organization is currently composed of 190 member countries each of which has representation on the imf s executive board in proportion to its financial importance quotas are a key determinant of the voting power in imf decisions votes comprise one vote per sdr100 000 of quota plus basic votes same for all members 23the imf s website describes its mission as to foster global monetary cooperation secure financial stability facilitate international trade promote high employment and sustainable economic growth and reduce poverty around the world 2history of the imfthe imf was originally created in 1945 as part of the bretton woods agreement which attempted to encourage international financial cooperation by introducing a system of convertible currencies at fixed exchange rates the dollar was redeemable for gold at 35 per ounce at the time 1the imf also acted as a gatekeeper countries were not eligible for membership in the international bank for reconstruction and development ibrd a world bank forerunner that the bretton woods agreement created in order to fund the reconstruction of europe after world war ii unless they were members of the imf 45since the bretton woods system collapsed in the 1970s the imf has promoted the system of floating exchange rates meaning that market forces determine the value of currencies relative to one another this system remains in place today 6imf activitiesthe imf s primary methods for achieving these goals are monitoring capacity building and lending the reports the imf publishes on its monetary surveillance include the world economic outlook the global financial stability report and the fiscal monitor the imf collects massive amounts of data on national economies international trade and the global economy in aggregate the organization also provides regularly updated economic forecasts at the national and international levels these forecasts published in the world economic outlook are accompanied by lengthy discussions on the effect of fiscal monetary and trade policies on growth prospects and financial stability the imf provides technical assistance training and policy advice to member countries through its capacity building programs these programs include training in data collection and analysis which feed into the imf s project of monitoring national and global economies 7the imf makes loans to countries that are experiencing economic distress to prevent or mitigate financial crises members contribute the funds for this lending to a pool based on a quota system in 2019 loan resources in the amount of sdr 11 4 billion sdr 0 4 billion above target were secured to support the imf s concessional lending activities into the next decade 8imf funds are often conditional on recipients making reforms to increase their growth potential and financial stability structural adjustment programs as these conditional loans are known have attracted criticism for exacerbating poverty and reproducing colonialist structures 9 | |
where does the imf get its money | the imf gets its money through quotas and subscriptions from its member countries these contributions are based on the size of the country s economy making the u s with the world s largest economy the largest contributor | |
how much are the imf grants | imf grants are given to charities in washington d c and member countries the grants are meant to foster economic independence through education and economic development the average grant size is 15 000 10 | |
what is the difference between the international monetary fund and the world bank | the international monetary fund is primarily focused on the stability of the global monetary system and monitoring the currencies of the world the aim of the world bank is to reduce poverty across the world and strengthen the low to middle class populations the bottom linethe imf works to help reduce poverty encourage trade and promote financial stability and economic growth around the world it accomplishes this by monitoring capacity building and providing loans while the imf is currently working on these goals with its 190 member nations the organization has still faced criticism for the possible negative impacts of its structural adjustment programs | |
what is the international monetary market | the international money market or imm is a division of the chicago mercantile exchange cme that deals with the trading of currency and interest rate futures and options trading on the imm started in may 1972 when the cme and the imm merged international monetary market explainedthe imm division of the cme includes such currencies as the u s dollar the british pound the euro and the canadian dollar along with currencies the imm trades the london interbank offer rate libor the 10 year japanese bond and the u s consumer price index cpi history of the international monetary market imm the chicago mercantile exchange was founded in 1898 its original name was the chicago butter and egg board although it changed its name in 1919 the cme was the first financial exchange to demutualize and become publicly traded in 2002 in 1961 the cme launched its first futures market for frozen pork bellies in 1969 it added financial futures and currency contracts the first interest rate bond and futures contracts commenced in 1972 according to its 2019 annual report the cme on average handles an average daily volume of 19 2 million contracts a slight decline from 2018 while some trading continues to take place in the traditional open outcry method 80 of trading is done electronically through its cme globex electronic trading platform in 2007 the cme merged with the chicago board of trade to create the cme group one of the largest financial exchanges in the world the cme acquired nymex holdings inc the parent of the new york mercantile exchange nymex and commodity exchange inc comex all in 2008 in 2010 the cme had expanded further purchasing a 90 interest in the dow jones stock and financial indexes in 2012 it continued on its growth spree cme with the purchase of the kansas city board of trade which was the dominant player in hard red winter wheat in 2017 the cme began trading in bitcoin futures additionally cme group operates cme clearing a leading central counter party clearing provider limitations of the international monetary marketwhile significant rewards are possible when trading financials futures the cme outlines specific risks related to this segment of its business including | |
what is the international organization for standardization iso | the international organization for standardization iso is an international nongovernmental organization made up of national standards bodies the iso develops and publishes a wide range of proprietary industrial and commercial standards and is comprised of representatives from various national standards organizations understanding the international organization for standardization iso the international organization for standardization was founded in 1947 and is headquartered in geneva switzerland the organization began in the 1920s as the international federation of the national standardizing associations isa after being suspended during world war ii the united nations standards coordinating committee unscc proposed a new global standards body and the international organization for standardization was formed 1the iso works in 167 countries members of the organization are the foremost standards organizations in their countries there is only one member per country while individuals and companies cannot become members of iso there are various ways that industry experts can collaborate with the iso 2members of iso meet annually at a general assembly to discuss the strategic objectives of the organization in addition there is a 20 person council with rotating membership that provides guidance and governance for the organization 3meaning of isothe organization s abbreviated name iso is not an acronym it derives from the ancient greek word sos meaning equal or equivalent because the organization would have different acronyms in different languages the founders of the organization decided to call it by the short form iso 4activities of the international organization for standardization iso iso develops and publishes standards for a vast range of products materials and processes currently the organization has over 24 362 standards which are included in the iso standards catalog which is broken down into various segments such as healthcare technology railway engineering jewelry clothing metallurgy weapons paint civil engineering agriculture and aircraft in addition to producing standards iso also publishes technical reports technical specifications publicly available specifications technical corrigenda and guides 5the iso plays an important role in facilitating world trade by providing common standards among different countries these standards are intended to ensure that products and services are safe reliable and of good quality for the end user and consumer these standards ensure that certified products conform to the minimum standards set internationally in some cases iso is used to describe the product that conforms to an iso standard as a result of the ubiquity of these standards for example the speed of film or the sensitivity of a photographic film to light is referred to by its iso number iso 6 iso 2240 and iso 5800 6who approves iso international standards the iso standards are internationally agreed upon by experts in the related fields these are people who know what their industries need individuals such as manufacturers sellers buyers customers trade associations users or regulators 7 | |
what are the 2 most popular iso standards | the two most popular iso standards are iso 9001 and 14001 8 9001 provides criteria for quality management systems while 14001 provides criteria for environmental management systems | |
what is an example of an iso standard | some examples of iso standards include the calibration of thermometers food safety regulations and the manufacturing of wine glasses iso standards also cover shoe sizes musical pitches security management and environmental management | |
what is iso 9000 | iso 9000 is a standard that focuses on quality management and quality assurance the standard is used by companies to develop and maintain their quality systems the goal of iso 9000 is to apply to companies in all industries areas of focus include relationship management customer focus and leadership 9the bottom linethe iso or international organization for standardization is responsible for setting uniform standards across the globe it creates uniform rule systems for quality management health and safety energy efficiency and other industries allowing businesses to interact smoothly with their counterparts around the world | |
what is an international securities identification number isin | an international securities identification number isin is a 12 digit alphanumeric code that uniquely identifies a specific security the organization that allocates isins in any particular country is the country s respective national numbering agency nna understanding international securities identification numbers isins an isin is often confused with a ticker symbol which identifies the stock at the exchange level for example according to isin organization ibm common stock is traded on close to 25 trading exchanges and platforms and its stock has a different ticker symbol depending on where it is traded however ibm stock has only one isin for each security the isin code is the only common securities identification number that is universally recognized isins are used for numerous reasons including clearing and settlement 1all internationally traded securities issuers are urged to use the isin numbering scheme which is now the accepted standard by virtually all countries 2 both the united states and canada use a similar scheme known as a cusip number 3isin codes have a total of 12 characters that consist of both letters and numbers these include the country in which the issuing company is headquartered first two digits along with a number specific to the security middle nine digits and a final character which acts as a check 4an example of an isin number for a us company s stock certificate could look like this us 000402625 0 dashes incorporated for simplicity on the other hand a theoretical namibian company could have an isin which appears as na 000k0vf05 4 the middle nine digits of the isin are computer generated in a complex formula these are critical in helping protect against counterfeiting and forgery an isin should not be confused with a ticker symbol which identifies stock at the exchange level a company s security could have more than one ticker symbol depending on the trading platform but the security will have only one isin history of isinsuniversal acceptance of isin allows global straight through processing gstp which is the electronic handling of trade clearing and settlement isins are used to track the holdings of institutional investors in a format that is consistent across markets worldwide isins were first used in 1981 but were not widely accepted until 1989 when the g30 countries recommended their adoption a year later they were endorsed by the international organization for standardization iso in 1994 the global isin access mechanism was created to electronically exchange isin information across regions through a digital information exchange process called giam 2 4the relevant national numbering agency nna in each country issues isins in the united states this is the cusip service bureau established in 1964 the cusip service bureau was created to improve country wide standards for the financial services industry 5in the united states isins are extended versions of 9 character cusip numbers and are formed by adding a two digit country code at the beginning of the cusip number and appending a check digit at its end the international organization for standardization iso 6166 currently defines an isin s structure 6 currently an isin can be assigned to most forms of securities including but not limited to equity shares units and or depositary receipts debt instruments including bonds commercial paper stripped coupons and principal amounts t bills rights and warrants derivatives commodities and currencies | |
how do you find an isin | you can find the isin number for u s securities listed on the stock certificate or the prospectus for the shares in question | |
what s the difference between isin and cusip | cusip is a nine digit standard for identifying securities but it is only used for securities issued in the united states and canada isin is a worldwide standard that uses twelve characters as a unique identifier for any security issued anywhere in the world | |
what is the difference between a ticker and an isin | a stock ticker is an abbreviation for certain stocks or securities that are listed in the order books for an exchange usually limited to three letters or fewer an isin is a unique twelve digit code that identifies any public security in the world unlike the isin ticker symbols are not unique the same company can have a different ticker symbol on each exchange where it is traded and two companies can use the same ticker symbol if they trade in different markets however a given security can only have one isin and vice versa 4the bottom linean international securities identification number or isin is a unique twelve digit code that is assigned to every security issuance in the world this number is used to facilitate the trading clearing and settlement of securities transactions especially across borders | |
what is the international swaps and derivatives association isda | the international swaps and derivatives association isda is a private trade organization whose members mainly banks transact in the otc derivatives market this association helps to improve the market for privately negotiated over the counter otc derivatives by identifying and reducing risks in that market for nearly three decades the industry has used the isda master agreement as a template for entering into a contractual obligation for derivatives creating a basic structure and standardization where there were only bespoke transactions before understanding the international swaps and derivatives association isda the international swaps and derivatives association was created to make the world of privately negotiated derivatives safer and more efficient the isda fulfills this role by providing templates for counterparties in derivatives contracts to use in negotiation and by providing a platform for the institutions that deal in the market to network and raise common concerns and issues the isda identifies its three key work areas as the isda was created due to the challenges the growing derivatives market posed for financial institutions the demand for derivatives grew with the increasingly global nature of finance but a lack of clarity on what the parties in a derivatives transaction were risking and receiving hurt the industry the isda was created to help demystify the derivatives market thereby enabling further growth created in 1985 the isda has members from institutions around the world as of june 2021 isda boasts of having over 950 member institutions spread over 76 countries these member institutions include participants in all levels of the derivatives market spanning everyone from commodity companies law firms and investment managers to international banks derivatives exchanges and clearinghouses the isda master agreementthe isda is responsible for creating and maintaining the isda master agreement that is used as a template for discussions between a dealer and the counterparty looking to enter a derivatives transaction the isda master agreement was first published in 1992 and was updated in 2002 and provides an outline of all the areas for negotiation in a typical transaction this includes events of default and termination events how the agreement will be closed out if an event occurs and even how tax consequences will be dealt with the isda master agreement is also supported by a variety of materials that establish the definitions for the terms in the contract and user guides for counterparties and dealers beyond the isda master agreement the isda is a source for new industry tools information on best practices and a general resource for all things derivatives | |
internationalization describes the process of designing products to meet the needs of users in many countries or designing them so they can be easily modified to achieve this goal internationalization might mean designing a website so that when it s translated from english to spanish the aesthetic layout still works properly this may be difficult to achieve because many words in spanish have more characters than their english counterparts they may thus take up more space on the page in spanish than in english | in the context of economics internationalization can refer to a company that takes steps to increase its footprint or capture greater market share outside of its country of domicile by branching out into international markets the global corporate trend toward internationalization has helped push the world economy into a state of globalization in which economies throughout the world become highly interconnected due to cross border commerce and finance as such they are greatly impacted by each others national activities and economic well being understanding internationalization | |
when a company seeks to sell its goods abroad it may find that there are several roadblocks in the way some may be technical barriers that need to be overcome for instance different voltages of household electricity or different plug shapes found around the world these may be remedied via technological adaptations other barriers may be cultural for instance in india many hindus do not eat beef this means that to internationalize mcdonald s must focus on chicken fish and other non beef menu items that better conform to local custom and culture being able to flexibly adapt lends itself to greater internationalization | there are many incentives that might inspire companies to strive for internationalization for example in the united states companies that pay exorbitant overhead costs can shave expenses by selling products in nations with relatively weaker currencies or in countries that have lower costs of living companies may also benefit from internationalization by reducing the cost of business via reduced labor costs that are outsourced to foreign markets where goods will be sold internationalization can thus lead to product internationalization since products sold by multinational companies are now often used in several different countries as of 2019 over 50 of the revenue earned by companies in the u s s p 500 index came from sources outside of the united states this is a clear sign that large u s companies are conducting a large amount of their business internationally companies looking to step up internationalization efforts should be cognizant of potential trade barriers that may restrict their prospects for overseas commerce examples of internationalization | |
when a company produces goods for a wide range of customers in different countries the products that are internationalized often must be localized to fit the needs of a given country s consumers | for example an internationalized software program must be localized so that it displays the date convention as november 14 in the united states but as 14 november in england likewise units in america are measured in feet or miles while in europe and canada they use the metric system this means that cars sold across these markets must be able to quickly interchange between miles and kilometers | |
what is the internet of things iot | the internet of things iot is a name for the aggregate collection of network enabled devices excluding traditional computers like laptops and servers types of network connections can include wi fi connections bluetooth connections and near field communication nfc the iot includes devices such as smart appliances like refrigerators and thermostats home security systems computer peripherals like webcams and printers wearable technology such as apple watches and fitbits routers and smart speaker devices like amazon echo and google home | |
how the internet of things works | these devices use internet protocol ip the same protocol that identifies computers over the world wide web and allows them to communicate with one another the goal behind the internet of things is to have devices that self report in real time improving efficiency and bringing important information to the surface more quickly than a system depending on human intervention the term internet of things is attributed to kevin ashton of procter gamble who in 1999 used the phrase to describe the role of rfid tags in making supply chains more efficient 1 the internet of things promises to transform a wide range of fields in medicine for example connected devices can help medical professionals monitor patients inside and outside of a hospital setting computers can then evaluate the data to help practitioners adjust treatments and improve patient outcomes another field that s also experiencing a transformation is urban planning when sensors that have an ip address are placed under a busy street for instance city officials can alert drivers about upcoming delays or accidents meanwhile intelligent trash cans are able to notify the city when they become full thus optimizing waste collection routes the use of smart devices will also likely mean a competitive advantage for businesses that use them strategically for instance by tracking data about energy use and inventory levels a firm can significantly reduce its overall costs connectivity may also help companies market to consumers more effectively by tracking a consumer s behavior inside a store a retailer could theoretically make tailored product recommendations that increase the overall size of the sale once a product is in a consumer s home that product can be used to alert the owner of upcoming service schedules and even prompt the owner to book the appointment as with all questions of personal data there are many privacy concerns that have yet to be addressed when it comes to the internet of things the technology has advanced much faster than the regulatory environment so there are potential regulatory risks facing companies that are continuing to expand the range of internet connected devices | |
what are interpersonal skills | interpersonal skills are the behaviors and tactics a person uses to interact with others effectively people use interpersonal skills all the time when dealing with others whether in the workplace in social situations or within a family in the business world the term generally refers to an employee s ability to work well with others interpersonal skills range from ways of communicating and listening to attitude and deportment investopedia madelyn goodnightunderstanding interpersonal skillsinterpersonal skills are often referred to as people skills social skills or social intelligence they involve reading the signals that others send and interpreting them accurately in order to form effective responses individuals show their interpersonal skills all the time simply by interacting with others everyone has a personal style and an interpersonal style some people are more successful than others at using interpersonal skills for specific desired results interpersonal skills may be based in part on personality and instinct however good ones can also be introduced to people and improved upon while interpersonal skills can be developed they cannot be learned solely from a textbook for some people they should be practiced used daily observed and then tweaked that is to say these skills may come naturally to certain individuals but others have to work at cultivating them this cultivation often happens through continuous interaction with other individuals in many organizations employees with strong interpersonal skills are valued for their pleasant demeanor and positive solution oriented attitude these employees are seen as team players who work well with others to achieve a goal in more human terms everyone likes being around them that s a welcome attribute in any social interaction including those involving work interpersonal skills are strongly linked to a knowledge of social expectations and customs whether that knowledge is inherent or learned people with the strongest interpersonal skills adjust their tactics and communications as needed depending on the reactions of others to their messages and meanings those without good interpersonal skills can still succeed in business if they are allowed to work in areas that don t require regular interactions with a variety of people these areas might include research development coding and system testing examples of interpersonal skillsthe many types of interpersonal skills that can lead to great outcomes at work include benefits of interpersonal skillsthe importance of solid properly used interpersonal skills in the workplace can t be overstated their benefits provide advantages for individual employees and companies as a whole these benefits can include can interpersonal skills be learned normally social or interpersonal skills are learned by taking part in daily group activities through specific daily actions involving others and by watching other people succeed or fail in simple interactions everyday life within a family at school at church or on the playing field offers a wealth of opportunities to be introduced to and practice your interpersonal skills these skills can be picked up naturally and used with sincerity the best interpersonal skills are never forced even if they are used with specific purposes in mind they are a tool for positive results and living whether at work or within a community or a family strong interpersonal skills are prerequisites for many professional jobs and for a successful career using interpersonal skills in the job searchinterpersonal skills are highly valued in the business world job seekers should use every opportunity to show their interpersonal skills on resum s and at interviews some of the highly valuable interpersonal skills for business that you can display include on a resum a job seeker can highlight the interpersonal skills they have as they relate to the skills sought by the employer they can underscore those accomplishments that tie directly to important interpersonal skills for instance they might highlight an example of teamwork that got a task done to rave reviews successfully communicating useful ideas to others at a stressful time or building relationships that underpinned a positive financial outcome it can be difficult for an interviewer to gauge a prospective employee s actual ability to perform a particular job in one potentially short interview therefore candidates should put their interpersonal skills to work during any such opportunity to meet bear in mind that one of the most important interpersonal skills could be simply making a connection with the interviewer be friendly empathetic understanding and enthusiastic then look for opportunities in the conversation to drill down to some specifics for instance sharing your positive interpersonal skill experiences on a resum and during job interviews in this way can help a company determine how well your skills would fit not just the job that you ve applied for but also within the larger organization using interpersonal skills in the workplacestrong interpersonal skills such as negotiating problem solving and knowledge sharing can be the main requirements for certain jobs other interpersonal skills seen as essential for all employees include to showcase these skills try to get involved with colleagues to solve problems volunteer to take on tasks that no one else will or be enthusiastic about tasks you re given that you may not enjoy be confident and positive in every dealing with colleagues or managers ultimately being successful with interpersonal skills in the workplace comes down to coming up with and using ideas smartly to build good relationships with others it s difficult to imagine a company thriving if its employees do not have interpersonal skills most jobs are not isolated and require interaction between many individuals within a firm these can be colleagues on your level or those more highly placed in the firm such as a managing director or ceo poor interpersonal skills can be a detriment to an individual and to the workplace overall even if an employee does their work well poor interpersonal skills could limit their career development at a firm it could even be a factor in their termination remember that people want to work with individuals that they like and whose personalities improve their workday strong interpersonal skills help every employee and company according to research firm gartner just 8 of communications executives feel that their staffs have the communications skills that are necessary to meet their companies business needs 1 | |
how to improve interpersonal skills | once acquired interpersonal skills can be improved they are best honed by practice expressing appreciation for team members and support staff displaying empathy moderating and resolving disputes quickly and controlling displays of temper are all good activities for improving your interpersonal skills active listening can be practiced by repeating back a speaker s comment to make sure true communication is taking place furthermore people can demonstrate their active listening skill by providing a carefully considered and appropriate answer courses often teach these skills and many firms offer them to their employees as a part of cultivating a strong workforce | |
what is an example of interpersonal skills | types of interpersonal skills include being a good listener understanding what s being said and providing a positive useful response someone with good interpersonal skills might decide to resolve an argument among colleagues that s preventing them from getting an important task done | |
how do you show interpersonal skills | you show interpersonal skills by the way you behave toward other people someone with good interpersonal skills will be supportive kind empathetic patient and respectful in the way they work with colleagues typically they ll be a pleasure to be around | |
how can i improve my intrapersonal skills | the way to improve your interpersonal skills is to practice them every day in your daily activities whether at work home or in social situations remember that these skills essentially are relationship skills skills you use to get along with others when you notice someone who uses these skills well you might observe them as they put them to work and try to emulate their behavior as you practice | |
what is an interpolated yield curve i curve | an interpolated yield curve i curve is a yield curve derived by using on the run treasuries because on the run treasuries are limited to specific maturities the yield of maturities that lies between the on the run treasuries must be interpolated interpolation is a way to determine the value of an unknown entity often by using numerical analysis to estimate the value of that entity financial analysts and investors interpolate yield curves in order to help predict future economic activity and bond market price levels they can accomplish this by using a number of methodologies including bootstrapping and regression analysis understanding the interpolated yield curve i curve the yield curve is the curve that is formed on a graph when the yield and various maturities of treasury securities are plotted the graph is plotted with the y axis depicting interest rates and the x axis showing the increasing time durations since short term bonds typically have lower yields than longer term bonds the curve slopes upwards from the bottom left to the right | |
when the yield curve is plotted using data on the yield and maturities of on the run treasuries it is referred to as an interpolated yield curve or i curve on the run treasuries are the most recently issued u s treasury bills notes or bonds of a particular maturity 1 | conversely off the run treasuries are marketable treasury debt consisting of more seasoned issues the on the run treasury will have a lower yield and higher price than a similar off the run issue and they only make up a small percentage of the total issued treasury securities interpolationinterpolation is simply a method used to determine the value of an unknown entity treasury securities issued by the u s government are not available for every period of time for example you will be able to find the yield for a 1 year bond but not a 1 5 year bond to determine the value of a missing yield or interest rate to derive a yield curve the missing information can be interpolated using various methods including bootstrapping or regression analysis once the interpolated yield curve has been derived yield spreads can be calculated from it as few of the bonds have maturities comparable to those of the on the run treasuries because yield curves reflect the bond market s opinion of future levels of inflation interest rates and overall economic growth investors can use yield curves to help them make investing decisions bootstrappingthe bootstrapping method uses interpolation to determine the yields for treasury zero coupon securities with various maturities using this method a coupon bearing bond is stripped of its future cash flows that is coupon payments and converted into multiple zero coupon bonds typically some rates at the short end of the curve will be known for rates that are unknown due to insufficient liquidity at the short end you can use inter bank money market rates to recap first interpolate rates for each missing maturity you can do this using a linear interpolation method once you have determined all the term structure rates use the bootstrapping method to derive the zero curve from the par term structure it is an iterative process that makes it possible to derive a zero coupon yield curve from the rates and prices of coupon bearing bonds special considerationsseveral different types of fixed income securities trade at yield spreads to the interpolated yield curve making it an important benchmark for example certain agency collateralized mortgage obligations cmos trade at a spread to the i curve at a spot on the curve equal to their weighted average lives a cmo s weighted average life will most likely lie somewhere within the on the run treasuries which makes the derivation of the interpolated yield curve necessary | |
what is an interpolated yield curve i curve | an interpolated yield curve i curve is a yield curve derived by using on the run treasuries because on the run treasuries are limited to specific maturities the yield of maturities that lies between the on the run treasuries must be interpolated interpolation is a way to determine the value of an unknown entity often by using numerical analysis to estimate the value of that entity financial analysts and investors interpolate yield curves in order to help predict future economic activity and bond market price levels they can accomplish this by using a number of methodologies including bootstrapping and regression analysis understanding the interpolated yield curve i curve the yield curve is the curve that is formed on a graph when the yield and various maturities of treasury securities are plotted the graph is plotted with the y axis depicting interest rates and the x axis showing the increasing time durations since short term bonds typically have lower yields than longer term bonds the curve slopes upwards from the bottom left to the right | |
when the yield curve is plotted using data on the yield and maturities of on the run treasuries it is referred to as an interpolated yield curve or i curve on the run treasuries are the most recently issued u s treasury bills notes or bonds of a particular maturity 1 | conversely off the run treasuries are marketable treasury debt consisting of more seasoned issues the on the run treasury will have a lower yield and higher price than a similar off the run issue and they only make up a small percentage of the total issued treasury securities interpolationinterpolation is simply a method used to determine the value of an unknown entity treasury securities issued by the u s government are not available for every period of time for example you will be able to find the yield for a 1 year bond but not a 1 5 year bond to determine the value of a missing yield or interest rate to derive a yield curve the missing information can be interpolated using various methods including bootstrapping or regression analysis once the interpolated yield curve has been derived yield spreads can be calculated from it as few of the bonds have maturities comparable to those of the on the run treasuries because yield curves reflect the bond market s opinion of future levels of inflation interest rates and overall economic growth investors can use yield curves to help them make investing decisions bootstrappingthe bootstrapping method uses interpolation to determine the yields for treasury zero coupon securities with various maturities using this method a coupon bearing bond is stripped of its future cash flows that is coupon payments and converted into multiple zero coupon bonds typically some rates at the short end of the curve will be known for rates that are unknown due to insufficient liquidity at the short end you can use inter bank money market rates to recap first interpolate rates for each missing maturity you can do this using a linear interpolation method once you have determined all the term structure rates use the bootstrapping method to derive the zero curve from the par term structure it is an iterative process that makes it possible to derive a zero coupon yield curve from the rates and prices of coupon bearing bonds special considerationsseveral different types of fixed income securities trade at yield spreads to the interpolated yield curve making it an important benchmark for example certain agency collateralized mortgage obligations cmos trade at a spread to the i curve at a spot on the curve equal to their weighted average lives a cmo s weighted average life will most likely lie somewhere within the on the run treasuries which makes the derivation of the interpolated yield curve necessary | |
what is intertemporal choice | intertemporal choice is an economic term describing how current decisions affect what options become available in the future theoretically by not consuming today consumption levels could increase significantly in the future and vice versa understanding intertemporal choicemany of the choices we make have consequences for the future for instance deciding how much money to spend in the present and how much to squirrel away can greatly impact our quality of life both now and in the years ahead for companies various investment decisions involve intertemporal choice for individuals on the other hand decisions made in the near term that can affect future financial opportunities relate mostly to saving and retirement an individual who saves today consumes less causing their current utility to decline over time the savings grow increasing the number of goods the individual can consume and therefore the person s future utility most individuals tend to be limited by budget constraints that prevent them from consuming to the extent of their desires nevertheless behavioral finance theorists generally find that present bias is common suggesting that people prefer to spend now regardless of the impact it might have in later years it is common for people to make intertemporal choices that accommodate near term needs and wants over long term objectives intertemporal choice exampleif an individual makes an exorbitant purchase such as paying for an around the world vacation that exceeds their usual budget and requires additional financing to cover this could have a substantial impact on the person s long term wealth the individual might take out a personal loan max out credit cards or when possible even withdraw funds from retirement accounts in order to cover the expense making such a choice would reduce the assets the individual has available to continue to save for retirement the person may have to fund supplemental forms of income to augment their salary to compensate for the decline in assets this could be further exacerbated if unforeseen events affect current income a sudden loss of employment for example would make it difficult to recoup recent expenses and set aside funds for retirement if a consumer made a sizable purchase and then was laid off their intertemporal choices combined with those external factors stand to change their future opportunities perhaps the individual planned to retire by a certain age or was on track to finish paying off a mortgage the shortfall in assets could mean postponing retirement or taking out a second mortgage to help deal with the more immediate issues other types of intertemporal choicedecisions on employment can also factor into intertemporal choices a professional might be presented with two job opportunities with salaries that vary depending on the intensity and demands of the role one position may be high stress with long hours required the compensation might also be higher than what is standard for such a position as an intertemporal choice taking such a job might allow for more options on later pension plans conversely taking the job that offers a lower salary but a better work life balance may mean having fewer retirement options with less funding available | |
what is an inter vivos trust | an inter vivos trust is a fiduciary relationship used in estate planning created during the lifetime of the trustor also known as a living trust this trust has a duration that is determined at the time of the trust s creation and can entail the distribution of assets to the beneficiary during or after the trustor s lifetime the opposite of an inter vivos trust is a testamentary trust which goes into effect upon the death of the trustor | |
how an inter vivos trust works | a trust is typically established to hold assets for the benefit of a party called the trust beneficiaries a trustee is typically assigned to manage those assets and to ensure that the trust agreement is followed which would include making sure the assets are distributed to the named beneficiaries however an inter vivos trust is a living trust since it allows the owner or trustor to use the assets and benefit from the trust during the trustor s lifetime once the trustor passes away the assets would be distributed by the trustee to the beneficiaries while living the trustor or trustors in the case of a married couple can be the trustee managing the assets until they are no longer able at which time a named backup trustee assumes the duties there are two categories of trusts that a living trust can fall under revocable or irrevocable a revocable trust is a trust that allows changes to be made to the trust by the trustor or grantor the trust can also be canceled by the trustor and any income earned in the revocable trust is paid to the trustor following the death of the trustor the income and assets are transferred to the beneficiaries of the trust revocable trusts are helpful since they re flexible during the lifetime of the trustor but also allow the distribution of the assets from the trustor s estate an irrevocable trust is a trust that does not allow changes to be made to the trust by the trustor or grantor the trust cannot be canceled or altered once established as an irrevocable trust once assets are placed in an irrevocable trust the trustor has essentially given up legal ownership of those assets the trustee would manage the assets and distribute them to the beneficiaries upon the death of the trustor benefits of an inter vivos trustan inter vivos trust is an important estate planning tool because it helps avoid probate which is the process of distributing the deceased s assets in court the probate process can be lengthy costly and expose a family s private financial matters by making them a matter of public record a properly established trust helps to ensure that the assets get distributed to their intended recipients in a timely and private manner as a result the surviving family members receive the assets in a smooth transition without any disruption in their use in a living revocable trust the trustor can also be the trustee which means that the assets are controlled by the owner however since the assets are in the trustor s name estate taxes might apply if the value of the assets exceeds the estate tax exemption at the time of the trustor s death if the trustor creates a living irrevocable trust the trustor essentially reduces the value of the estate since all rights to the assets have been relinquished and would thus reduce the taxes on the estate a living trust is typically established as a revocable trust and essentially becomes an irrevocable trust after the death of the trustor establishing an inter vivos trustin establishing a trust the grantor names the trust parties which include the grantors typically the spouse the beneficiaries and the trustee sometimes the spouses are named as trustees however a contingent trustee should be named in the event both spouses die just about any asset can be owned by a trust assets such as real estate investments and business interests can be re titled in the name of the trust some assets such as life insurance and retirement plans pass to a designated beneficiary so they need not be included in addition to assigning assets to specific beneficiaries a trust can include instructions for the trustee to guide the timing of distribution and management of the assets while they are still held by the trust a will is needed to execute the trust essentially the trust becomes the primary beneficiary of a will in addition a will acts as a catch all mechanism that determines the disposition of assets that might have been excluded from the trust it is also the will that establishes guardianship for minor children | |
what is intestate | intestate refers to dying without a legal will when a person dies intestate deciding how their assets will be distributed becomes the responsibility of a state probate court an intestate estate can also be one in which the will presented to the court was deemed to be invalid understanding intestate | |
when an individual who has a valid will dies their assets will be divided among the beneficiaries listed in that will as well as through any trusts that they might have established | however many people die without preparing a will in fact a 2024 caring com survey showed that only 32 of americans had a will the percentage does rise among older people caring found but even at ages 55 and up only 43 of americans reported having one 1if a person dies without a will they are said to have died intestate dying in intestacy means that a state probate court will have to determine how their assets are to be distributed it is crucial for most people to make a will often with the assistance of an attorney to ensure that their assets will go to the people or organizations that they want them to go to otherwise a court may decide to distribute the estate to people whom the deceased person never would have chosen it is also important for people to make sure their will is kept up to date in case their wishes change | |
how the probate process works if you die intestate | probate courts typically begin the process by appointing an administrator to oversee the estate of the deceased the administrator will compile a list of the deceased s assets pay off any debts and then distribute the remaining assets to the parties deemed beneficiaries by a probate judge in other words an administrator functions like an executor a legal representative normally named in a will one of the administrator s duties is to locate the legal heirs of the deceased which could include surviving spouses children parents siblings and other relatives the order in which heirs inherit from a decedent s estate when there is no will to rely on is called intestate succession the probate court will decide who gets what | |
how assets will be distributed can vary from state to state the laws in most states divide property among the surviving spouse if any and children if any of the deceased 2 | in community property states spouses are considered to be joint owners of any property acquired during the marriage and are typically entitled to at least half of the estate community property states are arizona california idaho louisiana nevada new mexico texas washington and wisconsin along with the u s territories of guam and puerto rico 3in other states mostly common law states the distribution hierarchy also starts with the surviving spouse depending on the court s determination they may receive less than half more than half or even the entire estate if the dead person left no living children or grandchildren if the person was unmarried or widowed at the time of their death their assets will be divided among any surviving children before any other relative if no next of kin can be located then the assets in the estate will be transferred to the custody of the state this is referred to as escheatment 4close friends of the deceased are not usually part of the list of beneficiaries under a state s probate laws for intestate estates however if the deceased had a joint account with right of survivorship or owned property jointly with another person then the joint asset will automatically belong to the surviving party or parties 5 | |
what does it cost to make a will | according to investopedia s estimates the cost of making a will can be as little as 10 or so if you use a do it yourself kit if you engage a lawyer often a good idea expect to pay anywhere from 150 for a simple will to 1 000 and up for a more complicated one | |
what is the advantage of a trust | a trust can be a way to bypass the probate process which all wills typically go through so that heirs receive their inheritances more smoothly and quickly people with trusts often have a pour over will as well to handle the disposition of any assets that aren t accounted for in their trust | |
what is a testamentary will | a testamentary will is another name for a traditional will sometimes referred to as a last will and testament the person whose wishes the will represents is known as the testator the bottom line | |
what is the intraday momentum index imi | the intraday momentum index imi is a technical indicator that combines aspects of candlestick analysis with the relative strength index rsi in order to generate overbought or oversold signals the intraday indicator was developed by market technician tushar chande to aid investors with their trading decisions understanding the intraday momentum index imi investors use technical indicators to estimate when a security such as a stock should be bought or sold technical analysis which uses technical indicators examines the relationship between a security s price and volume over varied periods of time indicators such as the relative strength index and bollinger bands seek to generate buy and sell signals without examining a security s fundamentals as such they are generally considered more useful for short term traders than long term investors the imi looks at the relationship between a security s open and close price over the course of the day rather than how the open close price varies between days it combines some features of the relative strength index namely the relationship between up closes and down closes and whether there is an indication that a stock is overbought or oversold with candlestick charts candlestick charts for a given day contain a real body highlighting the gap between the open and close price and price points above the high and low called upper and lower shadows technical analysts can use the imi to anticipate when a security is overbought or oversold the formula for imiimi d 1 n gains d 1 n gains d 1 n losses 100 where gains cp op on up days i e close open cp closing price op opening price losses op cp on down days i e open close d days n number of days 14 is typical begin aligned text imi left frac sum d 1 n text gains sum d 1 n text gains sum d 1 n text losses right times 100 textbf where text gains text cp text op on up days i e close text open text cp text closing price text op text opening price text losses text op text cp on down days i e open text close d text days n text number of days 14 is typical end aligned imi d 1n gains d 1n losses d 1n gains 100where gains cp op on up days i e close opencp closing priceop opening pricelosses op cp on down days i e open closed daysn number of days 14 is typical the imi is calculated as the sum of gains on up days divided by the sum of gains on up days plus the sum of losses on down days this is then multiplied by 100 if the resulting number is greater than 70 then the security is considered overbought while a reading of less than 30 indicates that a security is oversold the investor will look at the imi over a period of days with 14 days being the most common time frame to look at example using the intraday momentum indexlet s take a look at the intraday momentum index applied to the spdr s p 500 etf spy image by sabrina jiang investopedia 2021the chart above shows how oversold or overbought imi readings can generate buy and sell trade signals on a popular index while these signals aren t always accurate they may provide a greater degree of accuracy than simply using the rsi many traders combine these insights with other forms of technical analysis to maximize their chances of a successful trade for example they may look for oversold conditions and a breakout from a chart pattern before entering into a long position | |
what is intraday | intraday means within the day in the financial world the term is shorthand used to describe securities that trade on the markets during regular business hours these securities include stocks and exchange traded funds etfs intraday also signifies the highs and lows that the asset price crossed throughout the day intraday price movements are particularly significant to short term or day traders looking to make multiple trades over the course of a single trading session these busy traders will settle all their positions when the market closes the basics of intraday tradingintraday is often used to refer to the new highs and lows of any particular security for example a new intraday high means the security reached a new high relative to all other prices during a trading session in some cases an intraday high can be equal to the closing price traders pay close attention to intraday price movements by using real time charts in an attempt to benefit from short term price fluctuations short term traders typically use one five 15 30 and 60 minute intraday charts when trading within the market day typically intraday scalping uses one and five minute charts for high speed trading other intraday trading strategies may use 30 and 60 minute charts for trades that have hold times of several hours the intraday trader may hold their positions for a longer period but still operate under high risks scalping is a strategy of transacting many trades per day with the intent of profiting from small movements in a stock s price volume weighted average price vwap orders are often used on an intraday basis to increase trade execution efficiency by giving an order exposure to a variety of prices throughout the trading day vwap gives an averaged price that particular securities trade at throughout the trading day intraday trading strategiestraders use numerous intraday strategies these strategies include all these strategies depend on timing your trades based on price fluctuations that occur within a single day sometimes within minutes of each other advantages and disadvantages of intraday tradingthe most significant benefit of intraday trading is that positions are not affected by negative overnight news that materially impacts the price of securities such news includes vital economic and earnings reports as well as broker upgrades and downgrades that occur either before the market opens or after the market closes trading on an intraday basis offers several other key advantages one advantage is the ability to use tight stop loss orders which is the act of raising a stop price to minimize losses from a long position another includes the increased access to margin and hence greater leverage intraday trading also provides traders with more learning opportunities because so many trades are executed so quickly however there are also drawbacks to intraday trading strategies intraday trading may provide insufficient time for a position to see increases in profit or in some cases any profit at all if a trader experiences losses instead of profits these can mount quickly some assets are off limits for intraday trading including mutual funds finally intraday trading strategies also come with increased commission costs due to trading more frequently these costs can eat away at the profit margins a trader can expect positions are unaffected by risk from overnight news or off hours broker moves tight stop loss orders can protect positions regular traders have access to increased leverage numerous trades increase hands on learning experience frequent trades mean multiple commission costs some assets are off limits like mutual funds there may not be sufficient time for a position to realize a profit before it has to be closed out losses can mount quickly especially if margin is used to finance purchases intraday pricing and mutual fundsmutual funds are off limits for intraday trading the design of these funds is for the long term investor and they can only be bought and sold through a broker or the fund s investment company also a mutual fund s price posts only once at the close of the trading day this price is known as the net asset value nav and reflects all of the intraday movement of the fund s assets less its liabilities calculated on a per share basis so mutual funds do not offer intraday pricing as their assets fluctuate in market value and their managers make buy and sell decisions all day however etfs their passively managed cousins are priced according to their intraday market value within a trading session real world example of intradaythe price movements of any stock are posted throughout the trading day and summarized at the end of the trading day for example april 4 2022 shares of apple inc aapl opened at 174 57 and closed at 178 44 during the day as indicated in the day s range listed to the right of the closing price shares dropped as low as 174 44 the intraday low and hit a peak of 178 49 the intraday high day traders and technical analysts who follow apple would study the shares moves to see if they could discern any pattern or uncover any significant gap that is a sudden jump in the price with no trading in between | |
how do day traders make money | day traders make money by trading assets based on small price fluctuations throughout the day they often use high amounts of leverage to make these trades it involves high levels of risk and can be highly lucrative or lead to large losses depending on the traders positions and the amount of leverage used | |
what are the risks of intraday trading | the largest risk of intraday trading is the risk of losing large amounts of money day trading comes with high levels of risk as prices fluctuate it can be difficult to earn any level of long term profit especially for new or inexperienced traders | |
why can t day traders trade mutual funds | the price of a mutual fund only posts at the end of the day so there are no intraday price fluctuations for a day trader to make use of mutual funds are designed for long term investors and can only be bought or sold through a broker or the fund s investment company the bottom lineintraday refers to securities that trade during regular business hours as well as to the movement in their prices over the course of a day intraday traders use these price fluctuations to execute trades trying to make a profit on small changes in price intraday trading strategies include scalping range trading and news based trading as with any trading strategy these come with benefits and drawbacks intraday traders can use tight stop loss orders to protect their positions and they often have increased access to leverage their positions aren t impacted by overnight news that can affect price changes however their losses can easily mount especially if they use margin to finance their positions and high commission costs from frequent trading can eat into any potential profits | |
what is an intrapreneur | an intrapreneur is an employee who is tasked with developing an innovative idea or project within a company the intrapreneur may not face the outsized risks or reap the outsized rewards of an entrepreneur however the intrapreneur has access to the resources and capabilities of an established company roles of intrapreneursintrapreneurs are employees of a company who are assigned to work on a special idea or project they are given the time and freedom to develop the project as an entrepreneur would however they are not working solo intrapreneurs have the resources and capabilities of the firm at their disposal an entrepreneur starts a company as a means of providing a good or service an intrapreneur seeks to improve an existing company intrapreneurs and entrepreneurs have different objectives an entrepreneur envisions creating a company from the ground up an intrapreneur has a broader vision for an established company this vision may involve radical changes to company traditions processes or products the intrapreneur typically has direct applicable skills and experience to bring to the job history of intrapreneurshipthe term intrapreneur is a portmanteau of the two words internal or the prefix intra to mean internal and entrepreneur it was first coined by the couple gifford pinchot iii and elizabeth s pinchot in a 1978 white paper titled intra corporate entrepreneurship for the tarrytown school for entrepreneurs after this white paper was released the term began to gain traction in various academic studies in february 1985 time magazine had an article here come the intrapreneurs which popularized the term even further benefits of intrapreneurshipan entrepreneur starts a company as a means of providing a good or service an intrapreneur explores policies technologies or applications that will help improve the performance of an existing company inevitably as an intrapreneur develops the skills needed to recognize and solve important problems that intrapreneur may turn into an entrepreneur an intrapreneur can expect to be given the freedom and autonomy needed for such a project day to day deliverables are generally not demanded the intrapreneur is expected to analyze and understand the trends necessary for planning the company s future intrapreneurs synthesize their findings and make proposals for staying ahead of their competitors an intrapreneur is usually given the freedom and autonomy needed to explore new projects but sometimes they have to do this in addition to their regular day job intrapreneurs often become a company s executive leaders over time they move the business forward and rise to the top with a deep understanding of the business from all levels when intrapreneurs work at solving problems they foster the growth of other talented intrapreneurs and integrate more new ideas for the good of the entire company characteristics of an intrapreneurin the original intra corporate entrepreneurship whitepaper pinchot outlines that intrapreneurs are people who follow some of the following principles including intrapreneurs are typically highly motivated individuals who have specific skill sets as well as leadership abilities and an innovative vision that others in the corporation can get behind although intrapreneurs may have their day job and usual assignments on top of their new venture they are willing to take certain risks and interpret trends in the marketplace to visualize the next steps that a company may need to innovate or stay ahead of the competition example of an intrapreneurin less than a year on the job as ebay s chief of staff of global product management healey cypher realized the company was missing out on a major business opportunity at the time ebay offered only e commerce services to its clients despite the growth of internet retail the majority of consumer purchases are still made within 15 miles of a consumer s home many ebay retailers told cypher they wanted a physical retail presence as well after consulting with ebay s chief executive officer ceo cypher assembled a team of engineers to develop tools that could be used to create an ebay presence in physical stores the engineers created an interactive storefront that toys r us eventually installed over the following two years the engineers did the same for toms sony and rebecca minkoff cypher s success became a new division of ebay giving workers autonomy for solving problems and moving the company forward cypher became ebay s head of retail innovation | |
what is the difference between an entrepreneur and an intrapreneur | an entrepreneur envisions creating a company from the ground up an intrapreneur works within an established corporation to develop an innovative idea or project who is called an intrapreneur intrapreneurs are employees of a company who are assigned to work on a special idea or project they are given the time and freedom to develop the project as an entrepreneur would | |
what is the role of an intrapreneur | an intrapreneur explores policies technologies or applications that will help improve the performance of an existing company | |
what is the intrapreneurial mindset | an intrapreneur has a broader vision for an established company this vision may involve radical changes to company traditions processes or products the intrapreneur typically has direct applicable skills and experience to bring to the job | |
how do you become an intrapreneur | intrapreneurs are high performing employees who are typically assigned to explore new ways for a company to innovate improve its existing products or stay ahead of the competition however intrapreneurs are not always assigned this role and individuals with innovative ideas can also surface them or work on these projects on the side before introducing them to senior leadership the bottom lineintrapreneurs are often overlooked within the realm of entrepreneurship but innovation with already established corporations can also be world changing in many senses intrapreneurs get the best of both worlds the autonomy to pursue innovative projects and the financial backing of a company that has resources and attention to devote to these strides | |
what is intrapreneurship | intrapreneurship refers to a system within a company or organization that allows employees to act like entrepreneurs intrapreneurs are self motivated proactive and action oriented individuals who take the initiative to develop innovative products or services unlike entrepreneurs intrapreneurs operate within a company s safety net absorbing any failures or losses this support encourages creativity and risk taking allowing intrapreneurs to innovate without fearing personal financial loss by leveraging their creativity and ingenuity intrapreneurs can drive significant innovation and transform their workplaces similar to entrepreneurs 1companies can leverage their employees entrepreneurial spirit by fostering intrapreneurship leading to greater innovation agility and competitive advantage understanding intrapreneurshipsintrapreneurship creates an entrepreneurial environment by allowing employees to apply their entrepreneurial skills to benefit the company and themselves it provides employees with the freedom to experiment and the potential for growth within the organization intrapreneurship aims to foster autonomy and independence as employees seek the best solutions for example an intrapreneur might be tasked with researching and recommending a more efficient workflow for a company s brand within a target group or implementing initiatives to improve company culture employers must recognize and promote intrapreneurs as failing to do so can harm a company s success encouraging intrapreneurship leads to departmental and overall growth driven by innovation and improvement on the other hand companies that don t support intrapreneurs risk losing them to competitors or having them start their own businesses examples of successful intrapreneurship include the post it note gmail from google s 20 time and facebook s like button which were developed during a hackathon 2 intrapreneurs use the company s existing resources and aren t building from scratch or risking their own money but still create innovative products or solutions intrapreneurs leverage company resources to innovate and drive new ventures within the organization while entrepreneurs rely on their own resources to build businesses from the ground up this allows intrapreneurs to focus on creativity and innovation without the financial risks facing entrepreneurs special considerationsintrapreneurship is a valuable step toward entrepreneurship by working as a team intrapreneurs can use their creativity to improve existing products and services within the company without bearing the financial risk of being entrepreneurs they can also test theories and identify the most effective problem solving methods the experience gained as an intrapreneur can eventually be used to start their own business allowing them to reap the benefits of their hard work and innovative ideas rather than having another organization profit from them types of intrapreneursincluding employees from every age group in problem solving processes leads to a wider range of solutions and more efficient resolutions benefiting the entire organization most millennials are particularly drawn to the intrapreneurial work style as they value meaning creativity and autonomy in their roles they re eager to develop their own projects while simultaneously contributing to their company s growth 3characteristics of intrapreneursintrapreneurs tackle specific challenges such as increasing productivity and cutting costs requiring a high level of skill including leadership and innovative thinking they take risks and drive innovation within the business to improve its goods and services better serving the market a successful intrapreneur is comfortable with uncertainty persistently testing their ideas until they achieve the desired results they can interpret market trends and envision how the company needs to evolve to stay competitive intrapreneurs are integral to the company s backbone serving as the driving force that maps out the organization s future examples of intrapreneurshipramzi haidamus the president of nokia technologies is often considered an intrapreneur because of his initiatives with the company within three months of starting his job in 2014 he eliminated individual offices he believed an open office led to more idea sharing and added greater value to the organization haidamus interviewed more than 100 engineers individually to determine which technologies had the greatest chance of being successful in the marketplace at the time 4jeff bezos aimed to speed up amazon s shipping making purchases effortless for customers after principal engineer charlie ward suggested a faster shipping process bezos formed a secret team to develop it in just six weeks amazon s top engineers created what became amazon prime initially code named futurama despite concerns about the logistics and costs of two day free shipping bezos pushed forward resulting in a program revolutionizing amazon and setting a new standard for retailers 5identifying potential intrapreneurs within your organization is often straightforward look for employees who consistently suggest new ideas ask questions about company operations and seek to learn from their colleagues | |
what is the difference between entrepreneurship and intrapreneurship | the main difference between an entrepreneur and an intrapreneur is that an entrepreneur starts their own company while an intrapreneur innovates within an existing company entrepreneurs develop new business concepts create business plans secure financing and build teams in contrast intrapreneurs use their entrepreneurial mindset to drive innovation and lead new initiatives within their organization without bearing the financial risks 6 | |
what is the main goal of intraprenuership | intrapreneurship aims to drive innovation within a company by enabling employees to lead new projects and initiatives it merges entrepreneurship s creativity and initiative with an established organization s support and resources this may benefit the company and its customers by exploring new revenue streams diversifying offerings and boosting productivity and engagement 7 | |
what are the main risks of intrapreneurship | intrapreneurs may lack autonomy over their projects and must align with company goals and approval processes they also generally have less decision making authority and might not receive full credit or financial rewards for successful ventures career advancement may also be stalled if their initiatives aren t successful potentially leading to frustration and decreased motivation 8the bottom lineintrapreneurship encourages innovation by allowing employees to act like entrepreneurs within a company this approach promotes creativity and risk taking without the financial risks of starting a new business leading to new products services and improved processes while intrapreneurs may face limited autonomy and recognition the benefits of increased employee engagement and a boost to a company s growth make it a worthwhile strategy | |
what is intrinsic value | intrinsic value is a measure of what an asset is worth this measure is arrived at by means of an objective calculation or complex financial model intrinsic value is different from the current market price of an asset however comparing it to that current price can give investors an idea of whether the asset is undervalued or overvalued financial analysis uses cash flow to determine the intrinsic or underlying value of a company or stock in options pricing intrinsic value is the difference between the strike price of the option and the current market price of the underlying asset investopedia theresa chiechiunderstanding intrinsic valuethere is no universal standard for calculating the intrinsic value of a company or stock financial analysts attempt to determine an asset s intrinsic value by using fundamental and technical analyses to gauge its actual financial performance while they may build valuation models using qualitative quantitative and perceptual business factors the metric often used in calculations for intrinsic value is discounted cash flows typically investors try to use both qualitative and quantitative factors to measure the intrinsic value of a company but investors should keep in mind that the result is still only an estimate qualitative factors are such things as business model governance and target markets items specific to the what the business does quantitative factors refer to financial performance and include financial ratios and financial statement analysis perceptual factors refer to investors perceptions of the relative worth of an asset they re largely accounted for by means of technical analysis generally speaking intrinsic value can be considered to be how much the business is worth as determined by selling off the whole business and its assets | |
how to calculate intrinsic value | using discounted cash flow dcf analysis cash flows are estimated based on how a business may perform in the future those cash flows are then discounted to today s value to obtain the company s intrinsic value the discount rate used is often a risk free rate of return such as that of the 30 year treasury bond 1 it can also be the company s weighted average cost of capital waac discounted cash flow formuladcf cf1 1 r 1 cf2 1 r 2 tv 1 r ncf the expected cash flow for a specific period e g cf1 cash flow year one r the discount ratetv the terminal value estimated cash flow after the projection period n the specific period e g years quarters months etc as an example let s use the earnings available to investors from our acme bolt company as cash flow say this figure is 200 after adding depreciation and subtracting capital expenditures for the latest year if a hypothetical p e multiple for the s p 500 is 15 acme s per share market value is 3 000 15 x 200 we ll use that figure for the comparison to intrinsic value using an estimated growth rate of 7 the estimated cash flow for each of 10 years is next we discount these cash flows using a theoretical 30 year t bond rate of 3 3 we apply it using the discounted cash flow formula shown above for each year for example the formula for the first year is cf 1 r the discounted cash flow for each of 10 years is the total discounted cash flow is 2439 51 then a quick and common way to estimate the terminal value is to multiply the earnings in the final year of the projection period by a multiple of 15 that s 393 43 x 15 5897 10 that amount discounted is 4262 21 5897 10 1 03310 finally combine the first 10 years of discounted cash flows with the terminal cash flow for the intrinsic value 2439 51 4262 21 6703 72compared to acme s current share price of 3000 the intrinsic value of 6701 72 indicates the stock is undervalued and is worth considering as an investment intrinsic value is at the core of value investing benjamin graham who is considered to be the father of value investing was a mentor to famed investor warren buffett market risk and intrinsic valuea market risk element is also estimated in many valuation models for stocks the risk is measured by beta an estimation of how much the stock price could fluctuate or its volatility a beta of one is considered neutral or correlated with the overall market a beta greater than one means a stock has an increased risk of volatility while a beta of less than one means it has less risk than the overall market if a stock has a high beta there should be greater return from the cash flows to compensate for the increased risks as compared to an investment with a low beta intrinsic value of options contractsintrinsic value helps determine the value of an asset an investment or a company intrinsic value provides the amount of profit that exists in an options contract calculating the intrinsic value of a company can be subjective since it estimates risk and future cash flows the intrinsic value of an option is incomplete since it doesn t include the premium paid and time value intrinsic value is also used in options pricing to determine how in the money an option is or how much profit currently exists to review an options contract grants the buyer the right but not the obligation to buy or sell the underlying security at a preset price called the strike price options have expiration dates by which they must be exercised or converted to the shares of the underlying security the intrinsic value of both call and put options is the difference between the underlying stock s price and the strike price if the calculated value is negative the intrinsic value is zero in other words intrinsic value only measures the profit as determined by the difference between the option s strike price and market price so an option with a strike price that equals the market price at expiration an at the money option will have zero intrinsic value however other factors such as extrinsic value can affect the value of an option and its resulting premium it takes into account other external factors such as how much time is remaining until expiration if an option has no intrinsic value meaning the strike price and the market price are equal it might still have extrinsic value if there s enough time left before expiration to make a profit as a result the amount of time value that an option has can impact an option s premium both intrinsic value and extrinsic value combine to make up the total value of an option s price let s say a call option s strike price is 15 and the underlying stock s market price is 25 per share the intrinsic value of the call option is 10 25 minus 15 if the option premium paid at the onset of the trade were 2 the total profit would be 8 if the intrinsic value was 10 at expiry on the other hand let s say an investor purchases a put option with a strike price of 20 for a 5 premium when the underlying stock was trading at 16 per share the intrinsic value of the put option is the 20 strike price less the 16 stock price or 4 in the money an intrinsic value of 4 at expiry combined with the premium paid of 5 means the investor has a loss despite the option being in the money it s important to note that the intrinsic value does not include the premium it s not the same as the actual profit on the trade since it doesn t include the initial cost intrinsic value only shows how in the money an option is considering its strike price and the market price of the underlying asset | |
why is intrinsic value useful to know | it s useful because it can help an investor understand whether a potential investment is overvalued or undervalued meaning if the market price of stock of a particular company is currently 125 and the intrinsic or true value is calculated at 118 then an investor may decide the stock is too expensive at this time and not worth purchasing | |
what s the difference between market value and intrinsic value | market value equates to the current price of a particular asset for example the market price of a share of abc company stock may be 50 as of yesterday s market close it may have a market price value of 55 at some point today depending on buying interest however intrinsic value is the true value of the company as determined using a valuation model | |
is intrinsic value better than market value for investing | some people believe it is market value is determined by what people are willing to buy an asset for based on any number of reasons these might include someone s financial needs short term trading goals and trading impulses on the other hand intrinsic value measures the value of an investment based on specific information about it such as its cash flows and its actual financial performance the bottom lineknowing how to calculate intrinsic value is useful for investors trying to get at an investment s true value that s because intrinsic value is based on future cash flows not simply where an investment may be trading currently value investors in particular seek to know intrinsic value because it helps them understand whether an investment is appropriately priced according to their investing approach since knowing intrinsic value is considered fundamental to analyzing securities it s a good idea for investors to understand how to calculate it | |
what is an introducing broker | an introducing broker ib is a professional adviser in the futures markets who has a direct relationship with a client but delegates trade executions typically to a futures commission merchant fcm the introducing broker may be employed by a company that is a partner of the commission merchant s firm or a direct subsidiary of it role and responsibilities of an introducing broker ib an introducing broker acts as a middleman matching an individual or a company seeking access to the futures markets with a futures commission merchant who will take on the responsibilities of making the trade and handling the back office operations generally speaking ibs make recommendations while the commission merchant executes the trade the introducing broker and the broker who executes the transaction split the fees and commissions introducing brokers play the same role in the futures markets as stock brokers do in the equities markets however they are regulated by different authorities stock brokers are registered with the securities and exchange commission sec and are regulated by the financial industry regulatory authority finra 1 futures introducing brokers are registered with the commodity futures trading commission cftc and regulated by the national futures association nfa 2this arrangement allows for specialization with the ib focusing on the client while the fcm focuses on trading floor operations today s fcms provide trading platforms on which clients can place trades online and take responsibility for account management however it would not be financially feasible for an fcm to open storefronts across the country to serve their customers ibs can provide that local service the relationship between ibs and fcmsmany ibs are one person operations though some are larger multi location businesses in any case their primary goal is customer service outsourcing the prospecting and servicing of clients to the ibs creates economies of scale for fcms and the futures industry most ibs prefer to outsource trading because it frees them of the substantial overhead involved in executing trades maintaining accounts and handling financial reporting responsibilities ibs allow fcms to do business on a local basis while using the fcm s infrastructure for trading | |
what is the futures market | the futures market is the exchange in which traders buy and sell derivative financial contracts these are agreements to buy or sell a specific commodity or financial instrument at a specific price and date the price is locked in and the buyer will gain or lose depending on the market price when the contract reaches maturity futures have long had a role in the markets for major physical commodities such as crude oil gold and wheat producers and buyers in volatile industries obtain reasonable prices in advance traders may be seeking a hedge against possible losses or making a speculative bet on the direction of commodity prices there are also futures markets for stocks indexes and currencies among others who needs an introducing broker an introducing broker is a financial adviser who specializes in futures investing an investor who is interested in futures but not inclined to dive in alone would consult with an introducing broker futures investing is relatively risky and relatively complex even compared to stock investing anyone determined to participate directly should have a good understanding of the ins and outs of futures trading before jumping into it | |
how much money do i need to trade futures | many platforms for futures traders require a minimum deposit of 5 000 to 10 000 to get started trading futures also requires margin deposits that can range from as little as 300 to more than 7 000 depending on the type of commodity being traded and the amount of the contract keep in mind that a margin account is a type of collateral required in return for borrowing cash from the broker to finance trading the collateral could disappear with a losing investment the bottom linethe introducing broker is best understood as the equivalent of a stockbroker in the futures market a stockbroker maintains a relationship with clients and may recommend investment strategies or specific investments to their clients over time they like introducing brokers are usually the middlemen a trader on the floor actually executes orders for the clients in the futures markets that is the futures commission merchant or fcm | |
what is inventory | the term inventory refers to the raw materials used in production as well as the goods produced that are available for sale a company s inventory represents one of the most important assets it has because the turnover of inventory represents one of the primary sources of revenue generation and subsequent earnings for the company s shareholders there are three types of inventory including raw materials work in progress and finished goods it is categorized as a current asset on a company s balance sheet understanding inventoryinventory is a very important asset for any company it is defined as the array of goods used in production or finished goods held by a company during its normal course of business there are three general categories of inventory including raw materials any supplies that are used to produce finished goods work in progress wip and finished goods or those that are ready for sale as noted above inventory is classified as a current asset on a company s balance sheet and it serves as a buffer between manufacturing and order fulfillment when an inventory item is sold its carrying cost transfers to the cost of goods sold cogs category on the income statement under u s gaap generally accepted accounting policies inventory can be valued in three ways these methods are the company management analysts and investors can use a company s inventory turnover to determine how many times it sells its products over a certain period of time inventory turnover can indicate whether a company has too much or too little inventory on hand special considerationsmany producers partner with retailers to consign their inventory consignment inventory is the inventory owned by the supplier producer generally a wholesaler but held by a customer generally a retailer the customer then purchases the inventory once it has been sold to the end customer or once they consume it e g to produce their own products the benefit to the supplier is that their product is promoted by the customer and readily accessible to end users the benefit to the customer is that they do not expend capital until it becomes profitable to them this means they only purchase it when the end user purchases it from them or until they consume the inventory for their operations types of inventoryremember that inventory is generally categorized as raw materials work in progress and finished goods the irs also classifies merchandise and supplies as additional categories of inventory 1raw materials are unprocessed materials used to produce a good examples of raw materials include work in progress inventory is the partially finished goods waiting for completion and resale wip inventory is also known as inventory on the production floor a half assembled airliner or a partially completed yacht is considered to be a work in process inventory finished goods are products that go through the production process and are completed and ready for sale retailers typically refer to this inventory as merchandise common examples of merchandise include electronics clothes and cars held by retailers inventory managementpossessing a high amount of inventory for a long time is usually not a good idea for a business that s because of the challenges it presents including storage costs spoilage costs and the threat of obsolescence possessing too little inventory also has its disadvantages for instance a company runs the risk of market share erosion and losing profit from potential sales inventory management forecasts and strategies such as a just in time jit inventory system with backflush costing can help companies minimize inventory costs because goods are created or received only when needed it s always a good idea for companies to invest in a good inventory management system this is especially true for larger businesses with multiple sales channels and storage facilities these systems are able to identify waste low turnover and fraud robbery inventory turnoverinventory turnover is a key part of inventory management also called stock turnover this is a metric that measures how much of a company s inventory is sold replaced or used and how often this figure provides insight into how profitable a company is and whether there are inefficiencies that need to be addressed consumer demand is a key indicator that can determine whether inventory levels will turn over at a quick pace or if they won t move at all higher demand typically means that a company s products and services will move from the shelves into consumers hands quickly while weak demand often leads to a slow turnover rate a company s inventory turnover is often expressed as a ratio the inventory turnover ratio is calculated using the following formula company leaders can use this figure to make important decisions about whether they should continue to manufacture certain products and services or determine whether there are issues that need to be addressed | |
how do you define inventory | inventory refers to a company s goods and products that are ready to sell along with the raw materials that are used to produce them inventory can be categorized in three different ways including raw materials work in progress and finished goods in accounting inventory is considered a current asset because a company typically plans to sell the finished products within a year methods to value the inventory include last in first out first in first out and the weighted average method | |
what is an example of inventory | consider a fashion retailer such as zara which operates on a seasonal schedule 2 because of the fast fashion nature of turnover zara like other fashion retailers is under pressure to sell inventory rapidly zara s merchandise is an example of inventory in the finished product stage on the other hand the fabric and other production materials are considered a raw material form of inventory | |
what can inventory tell you about a business | one way to track the performance of a business is the speed of its inventory turnover when a business sells inventory at a faster rate than its competitors it incurs lower holding costs and decreased opportunity costs as a result they often outperform since this helps with the efficiency of its sale of goods the bottom lineinventory provides businesses with materials to keep their operations going this includes any raw materials needed in the production of goods and services as well as any finished goods that companies sell to consumers on the market managing inventory and determining the turnover rate can help companies determine just how successful they are and where they can pick up the slack when the profits begin to dry up | |
what is inventory accounting | inventory accounting is the body of accounting that deals with valuing and accounting for changes in inventoried assets a company s inventory typically involves goods in three stages of production raw goods in progress goods and finished goods that are ready for sale inventory accounting will assign values to the items in each of these three processes and record them as company assets assets are goods that will likely be of future value to the company so they need to be accurately valued in order for the company to have a precise valuation inventory items at any of the three production stages can change in value changes in value can occur for a number of reasons including depreciation deterioration obsolescence change in customer taste increased demand decreased market supply and so on an accurate inventory accounting system will keep track of these changes to inventory goods at all three production stages and adjust company asset values and the costs associated with the inventory accordingly | |
how inventory accounting works | gaap requires inventory to be properly accounted for according to a very particular set of standards to limit the potential of overstating profit by understating inventory value profit is revenue minus costs revenue is generated by selling inventory if the inventory value or cost is understated then the profit associated with the sale of the inventory may be overstated that can potentially inflate the company s valuation the other item the gaap rules guard against is the potential for a company to overstate its value by overstating the value of inventory since inventory is an asset it affects the overall value of the company a company which is manufacturing or selling an outdated item might see a decrease in the value of its inventory unless this is accurately captured in the company financials the value of the company s assets and thus the company itself might be inflated advantages of inventory accountingthe main advantage of inventory accounting is to have an accurate representation of the company s financial health however there are some additional advantages to keeping track of the value of items through their respective production stages namely inventory accounting allows businesses to assess where they may be able to increase profit margins on a product at a particular place in that product s cycle this can be seen most prominently in products that require exceptional time or expense in secondary stages of production items such as pharmaceuticals machinery and technology are three products that require large amounts of expense after their initial designing by evaluating the value of the product at a certain stage such as clinical trials or transportation of the product a company can adjust the variables at that stage to keep the product value the same while increasing their profit margins by decreasing expenses | |
what is inventory financing | the term inventory financing refers to a short term loan or a revolving line of credit acquired by a company so it can purchase products to sell at a later date these products serve as the collateral for the loan inventory financing is useful for companies that must pay their suppliers for stock that will be warehoused before being sold to customers it is particularly critical as a way to smooth out the financial effects of seasonal fluctuations in cash flows and can help a company achieve higher sales volumes by allowing it to acquire extra inventory for use on demand | |
how inventory financing works | inventory financing is a form of asset based financing businesses turn to lenders so they can purchase the materials they need to manufacture the products they intend to sell at a later date 1 the reasons why they rely on this kind of financing include this kind of financing is common for small to mid sized retailers and wholesalers especially those with a large amount of available stock 3 that s because they typically lack the financial history and available assets to secure the institutional sized financing options larger corporations are able to access such as walmart wmt and target tgt because they are generally private companies they cannot raise money by issuing bonds or new rounds of stock companies may use all or part of their existing stock or the material they purchase as collateral for a loan that is used for general business expenses some banks are wary of inventory financing because they don t want the burden of collecting the collateral in case of default special considerationsbanks and their credit teams consider inventory financing on a case by case basis they look at factors like resale value perishability theft and loss provisions as well as business economic and industry inventory cycles as well as logistical and shipping constraints this may explain why so many businesses weren t able to get inventory financing after the credit crisis of 2008 when an economy is mired in recession and unemployment rises consumer goods that aren t staples remain unsold depreciation is another factor lenders consider and not all forms of collateral are equal inventory of any kind tends to depreciate in value over time the business owner who seeks inventory financing may not be able to obtain the full upfront cost of the inventory as such any potential hiccup is factored into setting an interest rate on an asset backed loan inventory financing is not always the solution banks may view inventory financing as a type of unsecured loan that s because if the business can t sell its inventory the bank may not be able to either if a retailer or a wholesaler makes a bad bet on a trend the bank could get stuck with the goods inventory financing is also known as warehouse financing advantages and disadvantages of inventory financingthere are a variety of reasons why businesses may want to turn to inventory financing but while there are plenty of positives there are downsides as well we ve listed some of the most common ones below 42by turning to lenders for inventory financing companies don t have to rely on their business or personal credit ratings or their financial history smaller business owners don t have to put up their personal or business assets in order to secure financing being able to access credit allows companies to sell more products to their consumers over a longer stretch of time without financing business owners may need to rely on their own sources of income or personal assets in order to make the purchases they need to keep their operations going businesses don t need to be established to be eligible for inventory financing in fact most lenders only require companies to be up and running for a minimum of six months to a year in order to qualify this allows newer business owners to access credit quickly new businesses may already be saddled with debt as they try to establish themselves getting inventory financing can add to their liabilities as a result these companies may not have the means to repay which can lead to restrictions on future credit as well as an undue burden on existing finances in some cases lenders may not issue the full amount required to purchase inventory this can lead to delays and shortfalls this may be common in the cases of newer businesses or those that have a harder time securing the amount of money they need to keep their operations running smoothly the costs to borrow may be high fees and interest rates may be high for businesses that are struggling having to pay more in additional charges may put more stress on these companies businesses don t need to rely on business credit ratings history and assets to qualifycompanies can sell more products to customers over longer periods of timenewer businesses are eligible and can access credit quicklyrepayment may be problematic for new and struggling companieslenders may not advance the full amount requestedfees and interest rates are higher for new and struggling businessestypes of inventory financinglenders provide businesses with two different kinds of inventory financing the option that the company chooses is dependent on its business operations interest rates and fees depend on the lender and the type of business | |
are there any risks associated with inventory financing | inventory financing tends to be fairly risky which is why interest rates tend to be higher compared to other kinds of loans these loans are short term and thus must be paid back sooner another key risk is that the borrower may not sell some or all of the goods that serve as the collateral for the loan which means they may end up in default | |
what are inventory financing costs | inventory financing allows companies to borrow to pay for products that they plan to sell at a later date this inventory is used as collateral for short term loans or lines of credit the costs associated with this type of financing include interest rates origination fees and prepayment fees if the loan is paid off earlier than expected other charges include late payment charges and late payment fees if any | |
why do businesses use inventory financing | inventory financing is a form of short term borrowing companies tend to use it as a way to pay their suppliers before selling their products it is often used by small or mid sized businesses that may not be established or have a credit history it also allows these businesses to access financing without having to put up their business or personal assets for collateral the bottom linebusinesses need cash in order to fund their day to day operations and they have several options in order to secure financing inventory financing is just one way companies can get cash using the products or inventory they intend to sell as collateral while it can provide a quick injection of cash borrowers should be weary of the costs and risks associated with inventory financing | |
what is inventory management | inventory management refers to the process of ordering storing using and selling a company s inventory this includes raw materials components and finished products as well as the warehousing and processing of these items there are different methods of inventory management each with its pros and cons depending on a company s needs investopedia alex dos diazthe benefits of inventory managementa company s inventory is one of its most valuable assets in retail manufacturing food services and other inventory intensive sectors a company s inputs such as raw materials and finished products are the core of its business a shortage of inventory when and where it s needed can be extremely detrimental at the same time inventory can be thought of as a liability if not in an accounting sense a large inventory carries the risk of spoilage theft damage or shifts in demand inventory must be insured and if it is not used up or sold in time it may have to be disposed of at clearance prices or simply destroyed for these reasons inventory management is important for businesses of any size knowing when to restock what quantities to purchase or produce and when to sell and at what price can easily become complex decisions small businesses will often keep track of stock manually and determine the reorder points and quantities using spreadsheet excel formulas larger businesses may use specialized enterprise resource planning erp software the largest corporations use highly customized software as a service saas applications companies are also calling on artificial intelligence to optimize these processes 1appropriate inventory management strategies vary depending on the industry an oil depot is able to store large amounts of inventory for extended periods of time allowing it to wait for demand to pick up if necessary while storing oil is expensive and risky a fire in the u k in 2005 led to millions of pounds in damage and fines there is no risk that the inventory will spoil or go out of style for businesses dealing in perishable goods or products for which demand is extremely time sensitive 2024 calendars or fast fashion items for example sitting on inventory is not an option and misjudging the timing or quantities of orders can be costly for companies with complex supply chains and manufacturing processes balancing the risks of inventory glut and shortages is especially difficult to achieve these balances they may call on several methods for inventory management including just in time jit and materials requirement planning mrp some companies such as financial services firms do not have physical inventory and so instead rely on service process management accounting for inventoryfor accounting purposes inventory represents a current asset since a company typically intends to sell its finished goods within a short period of time usually no more than a year inventory has to be physically counted or measured before it can be put on a balance sheet companies often maintain sophisticated inventory management systems capable of tracking inventory levels in real time inventory can be accounted for in several ways first in first out fifo costing last in first out lifo costing or weighted average costing an inventory account typically consists of four separate categories inventory management methodsdepending on the type of business or the product involved a company may use various inventory management methods these include just in time jit manufacturing materials requirement planning mrp economic order quantity eoq and days sales of inventory dsi while there are others those are the four most common methods used to manage inventory here is how each one works this manufacturing and inventory management model originated in japan in the 1960s and 1970s toyota motor tm is credited with contributing the most to its development 2 jit allows companies to save significant amounts of money and reduce waste by purchasing and keeping on hand only the inventory they need to produce and sell products within a certain time frame this approach reduces storage and insurance costs as well as the cost of liquidating or discarding excess inventory jit inventory management can be risky if demand unexpectedly spikes the manufacturer may not be able to source the inventory it needs to meet that demand damaging its reputation with customers and driving business to competitors even the smallest delays can be disruptive if a key input does not arrive just in time a bottleneck can result this inventory management method is sales forecast dependent meaning that manufacturers rely on detailed sales records to anticipate their inventory needs and communicate those needs to suppliers in a timely manner 3 for example a ski manufacturer using an mrp inventory system might ensure that materials such as plastic fiberglass wood and aluminum are in stock based on forecasted orders inability to accurately forecast sales and plan inventory acquisitions will result in the manufacturer s inability to fulfill orders this model is used in inventory management by calculating the number of units a company should add to its inventory with each batch order to reduce the total costs of its inventory while assuming constant consumer demand the costs of inventory in the model include holding and setup costs the eoq model seeks to ensure that the right amount of inventory is ordered per batch so a company does not have to make orders too frequently and there is not an excess of inventory sitting on hand it assumes that there is a trade off between inventory holding costs and inventory setup costs and total inventory costs are minimized when both setup costs and holding costs are minimized 4this financial ratio indicates the average time in days that a company takes to turn its inventory including goods that are a work in progress into sales dsi is also known as the average age of inventory days inventory outstanding dio days in inventory dii days sales in inventory or days inventory and is interpreted in multiple ways indicating the liquidity of the inventory the figure represents how many days a company s current stock of inventory will last generally a lower dsi is preferred as it indicates a shorter duration to clear off the inventory though the average dsi varies from one industry to another inventory management red flagsif a company frequently switches its method of inventory accounting without reasonable justification it is likely its management is trying to paint a brighter picture than reality would indicate frequent inventory write offs can mean that a company is having issues with selling its finished goods or with inventory obsolescence this can also raise red flags regarding a company s ability to stay competitive and make products that appeal to consumers going forward | |
what are the four main types of inventory management | the four main types of inventory management are just in time management jit materials requirement planning mrp economic order quantity eoq and days sales of inventory dsi each method may work well for certain kinds of businesses and less so for others | |
how does tim cook use inventory management at apple | apple ceo tim cook is known for his focus on inventory management inventory is like dairy products he has been quoted as saying no one wants to buy spoiled milk among other innovations cook brought just in time manufacturing practices to apple reportedly reducing its inventory turnover time from months to as little as five days 5 | |
what is an example of inventory management | let s look at an example of a just in time jit inventory system with this method a company aims to receive goods as close as possible to when they are actually needed so if a car manufacturer needs to install airbags in its cars it arranges to receive those airbags as the cars come onto the assembly line instead of having a stock of them on supply at all times the bottom lineinventory management is a crucial part of business operations proper inventory management depends on the type of business and the products it sells there may not be one perfect type of inventory management because there are pros and cons for each but taking advantage of the most appropriate type of inventory management can go a long way toward ensuring a company s success | |
what is the inventory turnover ratio | the inventory turnover ratio is a financial ratio showing how many times a company turned over its inventory relative to its cost of goods sold cogs in a given period a company can then divide the days in the period typically a fiscal year by the inventory turnover ratio to calculate how many days it takes on average to sell its inventory the inventory turnover ratio can help businesses make better decisions on pricing manufacturing marketing and purchasing it is one of the efficiency ratios measuring how effectively a company uses its assets investopedia nono floresunderstanding the inventory turnover ratiothe inventory turnover ratio is a really useful financial metric especially for those companies that has inventory it measures the number of times a company s inventory is sold and replaced over a specific period typically a year a higher inventory is usually better though there may be downsides to a high turnover like most other ratios analyzing the inventory turnover ratio in conjunction with industry benchmarks and historical trends provides valuable insights into a company s operational efficiency and competitiveness on its own the turnover ratio may not mean much however tracking it over time or comparing it against another company s ratio can be more insightful inventory turnover formula and calculationthe inventory turnover ratio is calculated as follows inventory turnover cogs average value of inventory where cogs cost of goods sold begin aligned text inventory turnover frac text cogs text average value of inventory textbf where text cogs text cost of goods sold end aligned inventory turnover average value of inventorycogs where cogs cost of goods sold cost of goods sold cogs is also known as cost of sales analysts use cogs instead of sales in the formula for inventory turnover because inventory is typically valued at cost whereas the sales figure includes the company s markup some companies may use sales instead of cogs in the calculation which would tend to inflate the resulting ratio secondly average value of inventory is used to offset seasonality effects it is calculated by adding the value of inventory at the end of a period to the value of inventory at the end of the prior period and dividing the sum by 2 1 | |
what can the inventory turnover ratio tell you | inventory turnover measures how often a company replaces inventory relative to its cost of sales generally the higher the ratio the better a low inventory turnover ratio might be a sign of weak sales or excessive inventory also known as overstocking it could indicate a problem with a retail chain s merchandising strategy or inadequate marketing generally speaking a low inventory turnover ratio means the product is not flying off the shelf so demand for the product may be low a high inventory turnover ratio on the other hand suggests strong sales alternatively it could be the result of insufficient inventory as problems go ensuring a company has sufficient inventory to support strong sales is a better one to have than needing to scale down inventory because business is lagging a low inventory turnover ratio can be an advantage during periods of inflation or supply chain disruptions if it reflects an inventory increase ahead of supplier price hikes or higher demand retail inventories fell sharply in the first year of the covid 19 pandemic leaving the industry scrambling to meet demand during the ensuing recovery 2the speed with which a company can turn over inventory is a critical measure of business performance 3 retailers that turn inventory into sales faster tend to outperform comparable competitors the longer an inventory item remains in stock the higher its holding cost and the lower the likelihood that customers will return to shop the fast fashion business is an example competitors including h m and zara typically limit runs and replace depleted inventory quickly with new items slow selling items equate to higher holding costs there is also the opportunity cost of low inventory turnover an item that takes a long time to sell delays the stocking of new merchandise that might prove more popular a decline in the inventory turnover ratio may signal diminished demand leading businesses to reduce output 4inventory turnover and dead stockinventory turnover is an especially important piece of data for maximizing efficiency in the sale of perishable and other time sensitive goods examples include groceries fashion autos and periodicals an overabundance of cashmere sweaters for instance may lead to unsold inventory and lost profits especially as seasons change and retailers restock accordingly 5 such unsold stock is known as obsolete inventory or dead stock the inventory turnover ratio may one way of better understanding dead stock in theory if a company is not selling a lot of one product the cogs of that good will be very low since cogs is only recognized upon a sale therefore products with a low turnover ratio should be evaluated periodically to see if the stock is obsolete related inventory ratiosthe inventory to saies ratio is the inverse of the inventory turnover ratio with the additional distinction that it compares inventories with net sales rather than the cost of sales a higher inventory to sales ratio suggests that the company may be holding excess inventory relative to its sales volume meaning there may be inefficiencies in its inventory management a lower inventory to sales ratio implies that the company has a leaner inventory position relative to its sales which may reflect tighter control over inventory levels and or more efficient allocation of resources another ratio inverse to inventory turnover is days sales of inventory dsi marking the average number of days it takes to turn inventory into sales dsi is calculated as average value of inventory divided by cost of sales or cogs and multiplied by 365 companies tend to want to have a lower dsi and they usually want that dsi to be sufficient enough to cover short term cash needs limitations of the inventory turnover ratiothe inventory turnover ratio is a valuable metric for many companies however there s a bunch of downsides to consider some of the limitations of the inventory turnover ratio include example of an inventory turnover calculationfor fiscal year 2022 walmart inc wmt reported cost of sales of 429 billion and year end inventory of 56 5 billion up from 44 9 billion a year earlier 6 walmart s inventory turnover ratio for the year was 2022 429 billion 56 5 billion 44 9 billion 2 or about 8 5its days inventory equaled this was calculated as 365 8 5 or about 42 days this showed that walmart turned over its inventory every 42 days on average during the year fast forward to 2024 walmart reported cost of sales of 490 billion for the fiscal year ending january 2024 it also reported ending inventory of 54 9 billion as of 1 31 2024 down from 56 6 billion as of 1 31 2023 7 the inventory turnover ratio for 2024 was 2024 490 billion 54 9 billion 56 6 billion 2 or about 8 8this signals that from 2022 to 2024 walmart increased its inventory turnover ratio management should further explore the cause it may be due to more efficient processes or it may be due to more demand for the products it offers however very generally speaking the movement of this ratio from 2022 to 2024 appears to be positive special considerationsinventory turnover is only useful for comparing similar companies because the ratio varies widely by industry for example listed u s auto dealers turned over their inventory every 55 days on average in 2021 compared with every 23 days for publicly traded food store chains 8a relatively high inventory turnover ratio might indicate insufficient stocking that is costing the company sales while low inventory turnover could reflect bulk orders helping the company cut costs or preparations for a product launch rather than inefficient inventory management because the inventory turnover ratio uses cost of sales or cogs in its numerator the result depends crucially on the company s cost accounting policies and is sensitive to changes in costs for example a cost pool allocation to inventory might be recorded as an expense in future periods affecting the average value of inventory used in the inventory turnover ratio s denominator 9 as is the case with other financial ratios accounting practices do have an influence on results | |
what is the inventory turnover ratio | the inventory turnover ratio is a financial metric that measures how many times a company s inventory is sold and replaced over a specific period indicating its efficiency in managing inventory levels and generating sales from it | |
how do you calculate inventory turnover | inventory turnover measures how efficiently a company uses its inventory by dividing its cost of sales or cost of goods sold cogs by the average value of its inventory for the same period it is an especially important efficiency ratio for retailers | |
is high inventory turnover good or bad | companies will almost always aspire to have a high inventory turnover after all high inventory turnover reduces the amount of capital that they have tied up in their inventory it also helps increase profitability by increasing revenue relative to fixed costs such as store leases as well as the cost of labor in some cases however high inventory turnover can be a sign of inadequate inventory that is costing the company sales |
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