32
Nature and Scope of Banking
32.1 Introduction
You have studied in lessons 7 and 10 that banking is an important aid t idsr ad tae ad ta i as poie a vrey o srie o nuty n rd, n ht t lo rvds ait f evcs to the public in general. Indeed banking may be regarded as an indispensable part of the economy of every country. The significance of banking has increased all over the world with the rise in income levels and growth in the volume of financial transactions.
In this lesson, we shall study about the nature and socpe of banking ad is atvte. n t ciiis
32.2 Objectives
After studying this lesson, you will be able to — l describe the terms bank and banking;
l
distinguish between banks and money lenders;
l
…show more content…
A non–professional money lender, on the other hand, is either a merchant, or a trader, or a member of the business community, whose main activity is not money lending. Such money lenders engage in money lending as a side activity.
A money lender normally meets the cash requirements of the public.
He gives loans for consumption purposes such as marriages and other social functions. The rate of interest charged by him is generally very high. He may give loans against the security of jewellery, household ies poet ad ast a wl a aant proa scrt. Patcs tm, rpry n ses s el s gis esnl euiy rcie adopted by money lenders are known to be manipulative in nature. For
4 :: Business Studies
instance, they do not furnish receipt of payments made, manipulate books of accounts, and realise more money than the original loan. The money lending practices of money lenders are considered to be exploitative and socially undesirable.
Distinction between bank and money lender
S.No. Basis
Bank
Money lender
1 Ett
. niy
Banks are organised isiuin ntttos
Money lenders are gnrly idvdas eeal niiul.
2 Nature
.
Banks are professional organisations Money lenders may or may not be professionals.
3 Atvt
. ciiy
Banking activities include acceptance o dpst fr lnig f eois o edn.
Activities of money lenders may not include acceptance of deposits.
4 Cins
. let
Banks meet the needs of people in
There are various categories of banking; these include retail banking, directly dealing with small businesses and persons. Commercial and Corporate banking which offers services to medium and large businesses (Koch & MacDonald 2010). Private banking, deals with individuals, offering them one on one service. The last category is investment banking. These help clients to raise capital and often invest in financial markets. Most global banking institutions provide all these services combined. With all these institutions in existence within the same localities and offering similar services, there is a need to regulate the industry so as to protect the consumer and provide fair working environment for all banks (Du & Girma, 2011).
The Statement of Financial Accounting Standards (SFAS) 117 is how nonprofits regulate their financial statements, providing a standardized methodology across the board in order to prevent confusion and fragmentation of the overall financial health of the organization. SFAS 117 calls for standardized accounting paperwork that provides a simple to read, categorized balance sheet that shows the public what is the current financial health of the organization (McLaughlin, 2016).
To enhance a user’s ability to understand and compare an entity’s operating results, reporting entities are required to describe all significant accounting policies in their financial statements. As such to decide if an accounting principal is significant, is the management’s decision.
NAB has expanded its range of credit cards with two new premium Signature cards – the NAB Qantas Rewards Signature Card and the NAB Rewards Signature Card – which are also the bank’s first black cards. RFi Group data shows 14% of credit card holders currently use a black card as their front-of-wallet card.
Separately, the balance sheet reports a company’s financial position while the income statement reports a company’s fiscal year profits and losses. The balance sheet measures a company’s financial position by reporting its assets, liabilities, and owner’s (shareholder’s) equity. The income statement measures a company’s financial performance by reporting its revenues, expenses, and net income/loss. When combined, they serve two vital purposes: (1) expand the accounting equation and (2) enable analysis using ratios to determine industry position or potential material misstatements. The increase or decrease in owner’s (shareholder’s) equity on the balance sheet is a direct result of the net
Starbucks financial reports were audited by Deloitte & Touche LLP, whom expressed an unqualified opinion on the financial statements as of November 18,2016. The financial statements were in accordance to Generally Accepted Accounting Principles (GAAP) and Public Company Accounting Oversight Board. This concludes SBUX followed accounting principle guidelines and policy when filing and producing their reports. The Securities and Exchange Act of 1933, "was precisely to make sure that adequate information be disclosed to investors in financial statements" (Petroff, 2000). Even though an audit was conducted by an independent auditor, it is still wise and vital for a financial analysis to perform in-depth examination of financial statements and
On JB Hunt’s balance sheet for 2011 lists current assets of $513,542,000 and current liabilities of $438,515,000, yielding a current ratio of 1.17, which indicates the company, has $1.17 of current assets for every $1 of current liabilities. The previous year 2010, the current ratio was 0.91. This shows a 29% increase in the current ratio over the previous year. An organization with a current ratio of 2 or higher is usually viewed by lenders to be a safe risk for short-term credit. Based on the 29% increase in current ratio, JB Hunt is in a better position to obtain
Being an effective manager for any company involves making the right decisions in terms of operations but also involves having the financial intelligence to read a financial report to determine areas of improvement for a company. Being able to decipher a company’s financial statement helps a manager understand the company’s profitability; this statement covers a few key areas which are dissected further in order to visually see where monies are being used. By understanding the income statement, balance sheet, and cash flow statements managers are able to make informed decisions regarding how the company needs to operate in the future, aligning goals in order to be successful. By reviewing revenues, expenses, and profit for a period of time, managers can see where the profit and loss is. By staying informed of the assets,
All of the above have made me interested in working for ATB. I strongly believe that it is a place where my background, experience
Statement of Cash Flow of Pfizer Company for the year ended on 31 March 2014 In Millions
with the massive amount of numbers in company financial statements. For example, they can compute the percentage of net profit a company is generating on the funds ithas deployed. All other things remaining the same, a company that earns a higher percentage of profit compared to other companies is a better investment option.
Based on the financial ratios given, this section will compare and contrast the financial strengths of Company X and Company Y in order to suggest Tringale Ltd to take decision regarding which of the above companies to chose for investment. This section provides comments on financial performance areas based on the data given, and presents report to the Board of Directors of Tringale Ltd by recommending which of the two investment opportunities is better.
Rio Tinto is a multinational company that deals with mineral and metal mining, refining, processing, and marketing. Founded in 1873, this Australian-British company has grown into one of world’s leading mining and Metals Company, dealing in aluminium, copper, diamonds, coal, and iron ore. Refining of bauxite and iron ore are also part of its operations. The transformed metals and minerals give Rio Tinto access to markets across a diverse economic development spectrum, and exposure in varied sectors, including
Based on the graph above, inventory holding period of CN Asia Corporation Berhad slightly increased from 91.28 days in 2014 to 98.97 days in 2015 and drop rapidly to 73.64 days in 2016. Thus, it shows that year 2016 is better than year 2014 and 2015 as the year of 2016 has the lowest inventory holding period ratio. It indicates that the company holds their inventory for 73.64 days before selling it to the customers. So, it demonstrates that CN Asia Corporation Berhad managed their inventories efficiently in year 2016 compared to year 2014 and year 2015. Furthermore, it depicted that the company has fast growth of sales in 2016 compared to other years, which is RM 18,745,524.
Shiseido Co. Ltd. is the largest Japanese company, that produces skin care and hair care products, cosmetics and fragrances, and the fifth biggest company in the world. It was founded in 1872 by Arinobu Fukuhara, who created “Japan’s first Western-style pharmacy” (Wikipedia) in Ginza, Tokyo. “The name Shiseido incorporates the founder’s desire to discover and create new values, a desire that has endured for more than 140 years and has built its unique heritage” (Shiseido group).