Blogs on Accounting, Finance & Economics

One of the biggest questions most financial consultants are trained to ask is about your financial goals. Only if they know what you want in your life can they suggest a way for you to reach there, at least in financial terms. From an individual’s perspective, this question is often confusing. For most people, the goal is to derive the maximum yield from their money while minimizing the risk. They would like to know how they can get to lead the life of a Bill Gates or Jeff Bezos, despite their far more limited resources. In between lies a vast space of reasonableness. Financial consultants are not magicians. They are financial consultants. At the same time, financial goals are not dreams or flights of fancy. They are financial goals. Hence, they need to be rooted in realism and reasonableness. Personal Finance Essentials is a compact guide to understanding the subject of “financial planning”. Personal Finance Essentials You Always Wanted To Know is the newest guidebook by Vibrant Publishers which explains everything about financial planning. This blog will help you set your financial goals so that you can begin your personal finance journey.   The Relevance Of Financial Goals As sentient, intelligent beings, we owe it to ourselves and our dependents to create the best life we can. It is a matter of strategy or choice. We can’t rely on good luck as is not a strategy or a plan. It might happen sometimes and deliver good outcomes but most of the time it does not. In fact, our life is full of goals, some stated and many unstated. We want to do well in class. We want to win in sports. We want to look like a movie star. We want to study a certain subject in college. We want to visit the pyramids and take the Alaska cruise. As we mature and grow older, we find that money becomes an integral part of many of these goals. This is why we need to set financial goals too. How you live is your own responsibility. It is for each individual to determine the desirable trajectory of life for themselves as well as their dependents for as long as they remain dependents. This trajectory is nothing but a set of goals that act as a guiding light for actions and decisions. By no means are they cast in stone. There are many variables that have the power to derail the trajectory. Moreover, money management changes with age too. Read more at <insert blog 1 link>. Hence, financial goals need to be evaluated and reset periodically. Financial goals can be long-term or short-term. They can be annual or monthly. They can cover retirement, education, travel, savings, debt reduction, net worth, or anything else relevant to an individual. It is all a personal choice. The SMART framework is a checklist to help individuals set realistic financial goals.   Framework For Setting Effective Goals As stated earlier, goals are goals, and not dreams and wishes. The more rooted they are in reality, the greater the probability of achievement. Hence, financial goal-setting needs to take into account factors such as earnings, expenses, assets, liabilities, dependents, age, and other financial priorities and factors relevant to one’s life and situation. Despite understanding their importance, many people struggle with financial goal-setting. There are several frameworks introduced by experts designed to facilitate the process and make it effective. Illustrated here is a framework that has come to be known as SMART, and we will soon see why. The SMART framework is also a popular framework used by organizations in their goal-setting exercises, typically done at least once a year. S Specific “I will have $10,000 saved in my bank account” is a specific, and hence desirable goal, as compared to “I will save a lot of money in my bank account.” M Measurable “Every month for the next 12 months, I will save $500 and put it in a separate account, to pay for the next family vacation,” can be measured while “I will save the $6,000 needed for the next family vacation by reducing my expenses” is not. A Attainable This can also be called “realistic.” For a person with an annual income of $100,000, “I will pay off the outstanding mortgage of $250,000 in 5 years” may be a much more attainable goal than “I will pay off the outstanding mortgage of $250,000 in 12 months.”  R Relevant “My neighbor’s salary should be reduced” might make you feel good temporarily if it does happen, but it has no relevance to your situation. “I will strive for a 10% increase in salary on the basis of a strong performance” would be more relevant. T Time-bound “My equity holdings should exceed $50,000” is a specific and measurable goal, but, without the dimension of time-integrated, may not bring much joy. “My equity holdings should exceed $50,000 within the next 2 years” makes it time-bound.   What Should Your Financial Goals Be? Though the specifics will vary, we recommend some broad areas around which you should have financial goals. Besides, they are likely to be interconnected. Achieving one will increase your ability to achieve others, and vice versa. Debt – reduce and eliminate debtSome debt may need to be taken on, such as a mortgage, as otherwise, it is almost impossible to buy a house early enough in your life. By and large, for an individual, all debt is bad and needs to be paid off. The earlier the better. The interest you pay on your debt will be higher than what you earn on your credit balances. In the interim, even moving to a lower-cost borrowing might be a desirable goal. Spending – spend less than what you earnThis is Financial Planning 101. The simplest and most necessary of all financial goals. Once you achieve this, you can live like a king or queen. Knowing that your bank account will not sound the empty sound at you when you dip into it is a liberating feeling. Income – increase; create multiple streamsThis is the second step in financial planning 101. The more you have the more you have to take care of your expenses, positioning you better to save and provide for old age. Of course, easier said than done. You are probably already doing what is possible to earn your potential. It could be investing your saved money in a manner that creates an opportunity to earn, such as buying a rental property. Or, it could be a side hustle that you are good at and that does not require an investment. You must be on a constant lookout for such opportunities. To understand your income, expenditure, and finances better, read Components of Financial Statements.   Your financial plan should also include your dependents You need to ensure they are provided for when you are alive, and when you are not. This means that you need life insurance to step in, in the unfortunate event of you as the primary provider dying early. The other aspect is to ensure your financial affairs are sorted out to a degree that your successors do not face any issues. Emergency fund – define and identifyWhile we need to pack away our savings in investments that provide the best returns, we may need to make a compromise in some cases to ensure that we have a certain amount of money available on call in case we need it. It is understood that money available on call does not earn the return that money committed for a longer period might. However, there are compensating advantages. Knowing that you have access to a fund that can help you tide over temporary emergencies can be a morale booster and a mental relief provider, enabling better financial outcomes. In conclusion, financial goals are as important as personal or professional goals that one may set in life. Financial goals can either be short-term, or long-term, but they need to be reasonable  and achievable. Eliminating debt, if any, should be a primary financial goal, followed by increasing income and saving to create an emergency fund. One may also have other financial goals depending upon their lifestyle and ambitions. All-in-all setting financial goals and striving to achieve them will propel you towards success and secure you for the future. This blog is written by Ankur Mithal , author of  Personal Finance Essentials You Always Wanted To Know and Organizational Development Essentials You Always Wanted To Know    

For a non-finance person, it is bewildering to understand the long financial statements. Questions like “what does a financial statement include?” “how to read a financial statement?” and  “who needs financial statements?” may have crossed your mind. In this blog, we strip apart the components of an financial statement, show what financial statements look like and who needs financial statements.   There are three main components to a company’s financial statements: a) Balance Sheet b) Income statement (also called Profit and Loss statement) c) Statement of Cash Flows   These days, financial statements also contain several mandatory and voluntary disclosures. Below are simple examples of the three main components.       Below are the main users of financial statements.     a) Lenders Lenders want to ensure that the company would be in a position to pay interest on a regular basis and the principle at maturity. These are generally banks, individuals, financial institutions and even other companies.     b) Investors Individual as well as corporate investors invest in a company  if they feel that the company can provide attractive returns, based on the risk profile of the company. They can ascertain this by looking at the company’s financial statements and  assume that the past performance is also representative of the future.     c) Management Although management has a more detailed view by way of managerial accounting, there are still things in the financial statement that they use, like sales growth, profit margins, cash available, etc.     d) Suppliers Extending supplier credit is a norm in most industries but suppliers are generally more comfortable extending greater credit periods or greater credit amounts to those companies who they feel would be in a better position to make the payment on the agreed date. They do so by looking at the company’s financial statement that provides information about the financial strength and cash available with the company. They also look at the company’s past payment  record to make a decision.     e) Customers There are some goods which require a good deal of after-sales support, like aeroplanes. Customers want to know that the aeroplane manufacturer will not go out of business after they  buy the plane from them. Financial statements help them gauge the company’s financial strength.     f) Employees Financial statements often determine employees’ bonus, pension, health care benefits, etc. A financially strong company is also preferred by employees looking for a secure job.     g) Competitors Companies often look at the competitor’s financial statements to compare their relative performance in terms of revenue, profit, margins etc. This information helps companies to  benchmark the best in the industry and devise plans to match or better them.     h) Government Agencies Federal and state governments, IRS, SEC and other agencies frequently refer to the financial statements of companies to ensure investors’ safety and to make policy decisions.     i) Press/Media Whenever the press wants to report about a company, it can find a significant amount of information in the company’s financial statements. Significant events like a large drop in profits, huge losses, and questionable practices are generally predicted with the help of the data present in the financial statements.     This excerpt is taken from the book Financial Accounting Essentials You Always Wanted To Know by Kalpesh Ashar. His books are written in a simple-to-understand manner, avoiding technical jargon.  This book elucidates the concepts of financial accounting with the help of examples, practice exercises and case studies! Check out the book here.     © 2022, By Vibrant Publishers, USA. All rights reserved. No part of this publication may be reproduced or distributed in any form or by any means, or stored in a database or retrieval system, without the prior permission of the publisher.      

If you’re here, it’s likely because you’ve been looking out for good finance and accounting books. You may be wondering what kinds of books would be useful as an introductory guide to this field, or why concepts like financial accounting and cost accounting are relevant to today’s workplace. As the time draws near for the scheduled release of the new editions of Financial Accounting Essentials, Financial Management Essentials, and Cost Accounting & Management Essentials, we’ve asked the author, Kalpesh Ashar, to answer all of these questions and give us his insights into these concepts. Join us in conversation with Mr. Ashar as we discuss his thoughts on these three books as essential guides for different types of readers.   Why did you decide to write this book? Most decision-makers in an organization do not have a financial background. However, they need to know the basics of finance for making sound decisions. This makes financial accounting, financial management, and cost accounting and management important skills that they need to have. So, I decided to document some of the key practices of finance in these books.   How are these books different from others on these topics? There are several good books in the field of finance. However, all of them go into a lot of detail. The drawback is that one loses focus in trying to study too many concepts and not concentrating on the critical areas. I realized that most people would like to know the key areas to give them a starting point in sound decision making, on which they could build further much more easily. These books are not a complete guide to finance, but an essential guide to the most important financial techniques.   What are the two main takeaways for the readers of this book? In order to learn anything, a person needs two things: knowledge and skills. Knowledge stands for theoretical concepts, and skill stands for the application of those concepts. The two takeaways are based on this thinking. Takeaway #1: These books provide the reader with the key financial concepts in a simple-to-understand manner so that even a novice in this field would not feel left out. Takeaway #2: They connect concepts to practice, so that the reader’s understanding of the concepts is as complete as possible—both theoretically and practically.   Why do the readers need to read these book NOW? Organizations today look for employees who not only have relevant technical knowledge but also other key skills required for decision-making in a dynamic environment. Financial accounting, financial management, and cost accounting and management are on the top of that list of key skills. Reading these books could be a great start towards learning these skills and making yourself more valuable to your current or future organizations.   What is the difference between FA and FM? Financial Accounting is about understanding the financial statements. Financial Management is about making decisions based on the financial statements.   Who should read FA (Financial Accounting) and who should read FM (Financial Management? In reality, Financial Accounting and Financial Management are best read together, since the prior gives an understanding of the numbers, whereas the latter provides frameworks for decision making using those numbers.   What is CAM (Cost Accounting and Management)? How is it different from FA and FM? Cost Accounting and Management is meant for those who are in decision-making positions within an organization, as it requires access to the organization’s cost data that is not available to everybody. Financial Accounting and Financial Management are meant for anybody who wants to understand the publicly available data about a company and to make decisions based on that data.   Who should read the CAM Essentials book? Cost Accounting and Management Essentials is meant for decision-makers within an organization.   Should engineers or doctors read these books? How will the books help them? These books are meant for all those who would like a crash course in finance or costing. It gives them a solid and essential base to understand a company’s data and to make good decisions based on it. This book could be a very useful resource to engineers and doctors due to the simplicity of the text and less use of heavy finance jargon. The book is written keeping in mind that the reader might not be from an accounting or finance background. Financial Accounting Essentials, Financial Management Essentials, and Cost Accounting and Management Essentials have received rave reviews from professors and industry experts since they were released. These new editions contain updated information and reflect the constantly changing trends in the fast-paced world of accounting and finance. They are now available for review on NetGalley. Review Financial Accounting Essentials on NetGalley.Review Financial Management Essentials on NetGalley. Stay tuned for the NetGalley release of Cost Accounting & Management Essentials!  

BOOKAUTHORITY RANKS 2 OF OUR BOOKS AS BEST SELLING SELF-LEARNING BOOKS OF ALL TIME! ‘Financial Management Essentials’ and ‘Operations and Supply Chain Management Essentials’ were listed as ‘18 Best-Selling Self-Learning Books of All Time’ by BookAuthority at 15th and 16th position respectively.   We are honoured to share with you that our books, ‘Financial Management Essentials You Always Wanted To Know’ was ranked No.15 and ‘Operations and Supply Chain Management Essentials You Always Wanted To Know’ was ranked No.16 in the ‘18 Best-Selling Self-Learning Books of All Time’ by BookAuthority.   As featured on CNN, Forbes and Inc. – BookAuthority identifies and rates the best books in the world, based on public mentions, recommendations, ratings and sentiment. It gives us immense joy and motivation to keep working for many other such titles. Thank you to all our readers for your reviews, ratings, recommendations and all your support.   All our books are available in Paperback as well as E-book format on Amazon and our website www.vibrantpublishers.com.    

IntroductionFirst of all let us understand the meaning of Financial Management. Financial Management means effective and efficient usage of funds. By effective usage we mean the optimum deployment of funds raised and efficient usage means raising the funds to be deployed at less cost.For a small business to be optimum at its financial management, it needs to adhere to the following points: Have a rational business idea. Arrange the proper men and material for the business. Monitor business continuously. Raise more funds efficiently if the business has begun its growth journey. Follow legal compliance and good practices always. So, we can say that financial management starts right from the point of planning for a business till following all the necessary points for the business to be sustainable and growing in the long run.Let’s start our discussion of the above five points mentioned above with:1) Have a rational business ideaThe entrepreneur should think of what business he can do given his skills and abilities and scarce small capital. Also, his business idea should have enough demand in the economic system so that the business income outweighs the costs. Cost- Benefit analysis is required here.2) Arrange the proper Human Resources and Physical Resources for the businessThe proper human resources and the physical resources i.e. raw material and plant & machinery etc. are required for running a business. The people hired in the organization should have the necessary skills and abilities, qualifications and work integrity in order to be a part of the business. For example, a small potato chips trading business would hire drivers and sales agents to maintain contacts with the retailers and wholesalers, respectively.The material required by the small business should be of good quality and the plant & machinery should be capable of generating economies to scale. In our example, the material would be good quality potato chips purchased from the manufacturer and commercial vehicles purchased for delivery having good mileage.It’s very important to be efficient while raising the human and physical resources required for the small business.3) Monitor your business continuouslyOnce the small business has all its resources and their respective functions in place and is up and running, proper monitoring of the business becomes essential. This monitoring can be ensured by having a look at the financials of the business. This can be done by having a proper understanding of the Cash Flow statement, Trading & P & L A/c, Balance Sheet and Income Statement by the entrepreneur. For this, the entrepreneur must hire a Professional Accountant. Hence, a Professional Accountant would also be hired by the Small Chips Trading Company in our example for making all of the above financial tools mentioned. A proper look and understanding of these tools would enable the entrepreneur to determine answers to crucial questions like: Are debtors on a very high level or not? Are sales near to the level estimated to cover the costs or not? Is the average creditors payment period and average debtors collection period on the required footing i.e. as desired by the entrepreneur? Is there enough liquidity and profitability and hence a balance between the two or not? Are operating and non-operating expenses on a higher side? Is EBITDA margin and top line on a linear path? Is bottom line growing? Is financial leverage on a higher note? Is the business cash flow positive or negative on account of its operational, investing and financing activities? Is there a question mark on the solvency front both in short as well as in the longer run etc? When the financial statements mentioned above have been made for a considerable time period let’s say five years, these can also be used for making Financial Projections and Estimates of the smaller business for the future taking into account the future business environment. The financial projections serve as a financial management tool as Planning and Controlling functions of management can be discharged on the basis of them.Also, proper supervision over the day to day operations of the smaller business is required. This can be ensured by undertaking surprise entrepreneurial visits and hidden cameras etc.4) Raise more funds efficiently if the business has begun its growth journeyIf the smaller business has begun its trajectory to become a medium scale one, then it should look for bank/debt financing and its retained earnings i.e. funds generated via strong financial operations as possible finance sources for growth and expansion purposes. It should fund its growth, first through retained earnings part and remaining portion if any, through debt financing. In this case, the cost of capital charged by banks for other similar businesses must be investigated into by the small business entrepreneur in order to maintain efficiency in financing activity. Over-leveraging must be avoided here. It can later tap stock market when it reaches a medium scale backed by strong business goodwill established over a period of time, via equity financing.5) Follow the concept of Corporate Social ResponsibilityTimely payment of the tax dues and other legal duties is mandatory for a sustainable functioning of the smaller business. Also, rewarding the employees for their hard efforts by giving them salary hikes and bonuses etc. form an essential part of a long running successful business. Keeping the employees i.e. the internal customers of the business happy and in a good morale is equally important for a smaller business as providing quality products or services to the target market (External Customer).The Final TakeawayPrudent Financial Management of a smaller business comprises of having a good justifiable business idea, arranging the necessary resources for the business at less cost, a continuous monitoring of business, raising more funds if required for growth & expansion purposes in an efficient manner and adhering to Corporate Social Responsibility (CSR) concept.