Creating Low-Code Loan Applications using the Trisotech Mortgage Feature Set
Assignment
1. 2. Discuss fully the various tools of strategic evaluation
Nature and purpose of Strategic Evaluation :
Strategic evaluation may be defined as the process of determining the
effectiveness of a given strategy in achieving the organizational objectiveness
and taking corrective action whenever required. The nature of strategic
evaluation is to the effectiveness of the strategy – Strategic evaluation enables
the management to perform the crucial task of keeping the organization on the
right track. In the absence of an evaluation system for strategic choicer,
organization the management may not be in a position to know whether or not
the strategy is on the correct track to produce the desired result. The importance
of strategic evaluation lies in its ability to coordinate the tasks of varied
functions and SBUs effectively. Strategic evaluation helps to keep a check on
the validity of strategic choice.
Tools of strategic evaluation competitive cost Dynamics as one of the
tools of strategic evaluation, refers to the cost aspects in getting competitive
advantage for the enterprise, over its competitors.
Competitive advantage frequently changes when a segment change
occurs in the absolute or relative costs of inputs such as labour, raw materials,
energy, transportation etc – in essence.
2. Cost Reduction
This is one of the main routes increasing the value added in its products /
services strategy.
The usual methods of cost reduction followed are
Designing – in cost reduction come not from activity in the production
plant, but before the product even reaches the factory. By careful designing the
product, for example, it has a fewer parts or is simpler to manufacture, with less
member of processes, real reduction in costs may be achieved.
Supplier relationship :
If a supplier is willing to maintain quality and help reduce costs in
materials procurement function of the enterprise, the organization gets the
advantage of cost reduction.
The BCC Growth share – competitive position – suggests that an
analysis of the market can best be summarized by knowing its growth rate and
that the best indications of a firms strength in a market in its relative market
shore.
3. Features of the above matrix
Stars :
High share SBU, operating in high share market will have a heavy need
for cash to support firm‟s growth. The SBU, (firms) have a high margins and
be generating large amounts of cash. The (firms) SBUs will be both use and
providers of large cash flows. The high market – share shows that the SBUs.
have economics of scale and hence are able to generate large amount of cash.
They are generally self – supporting with respect to their cash needs.
Cash flows :
These are firms or SBUs, in a low growth market, but with high market –
share. The business is mature, the cash investment needs should be slight and
these businesses should be therefore a source of substantial amounts of cash that
can be channeled to the other areas. It is therefore likely that they will be able
to generate both cash and profits. Such profits may be transferred to support the
stars.
Dogs
These are the firms or SBUs having low market share and low growth
market. Their profits are low and hence their products have investments efforts
to measure expand market share is very costly. They are often regarded
4. unattractive for long term investment, hence they are recommended for
liquidation and disposal.
Problem Children
This is also called question mark or wild cats. The firms or SBUs, of this
class have low market share in high growth markets. Problem children are
assumed to have heavy cash needs. Although they need found growth they
generate little cash because they are not very far down the experience curve. If
a problem child‟s market share cannot be changed it will continue to absorb
cash. As its market matures, it will become a cash absorbing do – a cash trap
scenario. However, if the market – share can be adequately improved the
question mark can be converted into a star.
The strategic implications
The general strategy is that the firms or SBUs must be disciplined to
make sure that cash cow, do infect, generable cash to be used elsewhere. The
cash cows should receive a maintenance investment level, but any tendency
automatically to reinvest the cash they are generating should be avoided. Stars
on the other hand should be managed to maintain share; current profitability
should be lesser concern.
5. Given that the stars are adequately financed a limited number of the most
promising question marks are selected for improvement to try to improve their
share. The other question marks should not receive investment. They should be
sold, abandoned, or milked for whatever cash they can produce.
The dogs usually the most numerous category present a challenge. First a
dog can sometimes become very profitable, to produce of a „focus‟ segment
strategy in which business specializes in a small miche when it can dominate. In
effect, it would then be the star or cash cow of the redefined market. Second,
investment can be with held and the business milked or harvested of whatever
cash is forth coming until the business dies. Third, the business can be sold, or
simply liquidated. Management should be wary of „turnaround‟ plans for the
dogs particularly when there is no fundamental change in the market or
environment. In essence, the BCC, matrix model is a scheme of reach
management. It suggests that over decision need to be made regarding whether
an SBU is to be a cash generator or a cash user. It further suggests that the
number of SBU selected to be cash user should be limited so that enough
resources will be available to the cash cows and those dogs and problem
children selected for milking should generate cash and be allowed only the
minimal investment. It is also helpful to apply this analysis to competitors as a
means of predictive what they might do, especially if the competitors are known
to be using a portfolio model.
6. 1. Explain strategic formulation of corporate goals and objective, taking
into consideration a leading existing corporate house’s vision and mission
CORPORATE GOALS AND OBJECTIVES FORMULATION
STRATEGY
All managers need objectives. A very important consideration in setting
objectives is to convert the organization into integrated networks. The process
should be such that the shared values and identify of the organization is
reflected in the process.
Objective setting is generally a top-down process. This achieves unity
and cohesion throughout the organization. Managers at different levels in the
organizational hierarchy are concerned with different kinds of objectives. The
board of directors and top managers are involved in determining the vision, the
mission and the strategic objectives of the firm. They are also involved in
deciding upon the specific overall financial objectives in the Key Result Areas.
The middle management is involved in setting up objectives for the Key
Result Areas, objectives at the divisional levels, at the departmental and
individual levels. Lower level managers set objectives of units as well as their
subordinates.
Setting objectives converts the strategic vision and mission into target
outcomes and performance milestones. Objectives represent a managerial
7. commitment to producing specified results in a specified time frame. They spell
out how much of what kind of performance by when. They direct attention and
energy to what needs to be accomplished.
Corporate goals and objectives include profitability (net profits), growth
(increase in total assets, etc.), Utilization of resources (ROE or ROI) and Market
leadership (market share).
Objectives are the results or outcomes an organization wants to achieve in
pursuing its basic mission. The basic purpose of setting objectives is to convert
the strategic vision and mission into specific performance targets. Objectives
function as yardsticks for tracking an organization‟s performance and progress.
Objectives should be :
Specific
Quantifiable
Measurable
Clear
Consistent
Reasonable
Challenging
Contain a deadline for achievement
Communicated, throughout the organization.
8. Role of Objectives
Objectives play an important role in strategic management. They are
essential for strategy formulation and implementation because :
They provide legitimacy
They state direction
They aid in evaluation
They create synergy
They focus coordination
They provide basis for resource allocation
They act as benchmarks for monitoring progress
They provide motivation.
Hierarchy of Objectives
In a multi-divisional firm, objectives should be established for the overall
company as well as for each division. Objectives are generally established at the
corporate, divisional and functional levels, and as such, they form a hierarchy.
The zenith of the hierarchy is the mission of the organization. The objectives at
each level contributed to the objectives at the next higher level.
Long-range and Short-range Objectives
Organizations need to establish both long-range and short-range
objectives (Long-range means more than one year, and short-range means one
9. year and less). Short-range objectives spell out the near term results to be
achieved. By doing so, they indicate the speed and the level of performance
aimed at each succeeding period. Short-range objectives can be identical to
long-range objectives if an organization is performing at the targeted long-term
level (for example, 20% growth – rate every year). The most important
situation where short-range objectives differ from the long-range objectives
occurs when managers cannot reach the long-range target in just one year, and
are trying to elevate organizational performance. Short-range objectives (one-
year goals) are the means for achieving long-range objectives. A company that
has an objective of doubling its sales within five years can‟t wait until the third
or fourth year of its five-year strategic plan. Short – range objectives then serve
as stepping-stones or milestones.
Multiplicity of Objectives
Organizations pursue a number of objectives. At every level in the
hierarchy, objectives are likely to be multiple. For example, the marketing
division may have the objective of sales and distribution of products. This
objective can be broken down into a group of objectives for the product,
distribution, research and promotion activities. To describe a single, specific
goal of an organization is to say very little about it. It turns out that there are
several goals involved. This may be due to the fact that the enterprise has to
meet internal as well as external challenges effectively. Moreover, no single
10. objective can pl ace the organization on a path of prosperity and progress in the
long run.
However, an organization should not set too many objectives. If it does, it
will lose focus. Too many objectives have a number of problems. For example:
(a) They dilute the drive for accomplishment
(b) Minor objectives get highlighted to the determent of major objectives
There is no agreement to the number of objectives that a manager can
effectively handle. But, if there are so many that none receives adequate
attention, the execution of objectives becomes ineffective; there is a need to be
cautious. It will be wise to identify the relative importance of each objective, in
case the list is not manageable.
Network of Objectives
Objectives form an interlocking network. They are inter-related and inter-
dependent. The implementation of one may impact the implementation of the
other. If there is no consistency between company objectives, people may
pursue goals that may be good for their own function but detrimental to the
company as a whole. Therefore, objectives should not only “fit” but also
reinforce each other. As observed by Koontz et.al., “it is bad enough when
goals do not support and interlock with one another. It may be catastrophic
when they interfere with one another”.
11. Types of Objectives
Objectives are needed for each key result area which is important to
success. Two types of key result areas are financial performance and strategic
performance. Objectives are also classified into two categories:
1. Financial objectives
2. Strategic objectives
Which is more important : Financial or Strategic Objectives ?
Achieving acceptable financial results is a must. Without adequate
profitability and financial strength, a company‟s pursuit of its strategic vision as
well as its long-term health and ultimate survival is jeopardized. Further, low
earnings and a weak balance sheet may alarm shareholders and creditors, and
put the jobs of senior executives at risk.
But good financial performance, by itself, is not enough. Of equal or
greater importance is a company‟s strategic performance relating to company‟s
market position and competitiveness. A company‟s financial measures are really
lagging indicators, which reflect a company‟s future financial performance and
business prospects. For example, if a company has set aggressive strategic
objectives and is achieving them, such that its competitive strength and market
position are on the rise, then its future financial performance will be better than
its current financial performance. If a company is losing ground to competitors
12. and its market position is slipping, which reflects weak strategic performance,
then its ability to maintain its present profitability is highly suspect. Thus
improved strategic performance fosters better financial performance.
That is why a growing number of companies are using the “balanced
scorecard” approach for measuring company performance by setting both
financial and strategic objectives and tracking their achievement.
13. 1. Show the entrepreneurial growth in India after Independence
Definition of an Entrepreneur
The word “entrepreneur” is derived from French word “enterprendre”
which means “to undertake”. The entrepreneur is often associated with a person
who starts his own, new and small business. The term entrepreneur is defined as
one who innovates, raises money, assembles inputs, chooses managers and sets
the organization going with his ability to identify them.
The New Encyclopedia Britannica considers an entrepreneur as “an
individual who bears the risk of operating a business in the face of uncertainty
about the future conditions”.
Joseph A. Schumpeter recognized an entrepreneur as a person who
introduces innovative changes. He treated entrepreneur as an integral part of
economic growth. The fundamental source of equilibrium was the entrepreneur.
14. Growth and Development of Entrepreneurship in India
Entrepreneurship in India is as old as the human civilization itself. Its
evolution could be traced back to as early as Vedic period, when metal
handicrafts existed in the society. The handicrafts entrepreneurship was
observed among the artisans in the Cities like Banaras, Allahabad, Gaya, Puri,
Mirzapur, Bombay and Hyderabad. Indian artisanship was well recognized all
over the world but it could not develop properly for reasons like lack of
initiative from the colonial power structure and infrastructural problems.
Entrepreneurial growth and development during the Post Independence
After the independence, the Government of India realized the magnitude
of the adverse effects of imbalanced growth of industries. It also recognized the
vital role played by the small and medium enterprises in the socio-economic
development. The Government of India devised a scheme for achieving
balanced growth. It introduced the first industrial policy, in 1948 which was
revised from time to time. Three important measures were taken by the
Government.
1. To maintain a proper distribution of economic power between private and
public sector.
15. 2. To encourage the tempo of industrialization from the existing centres to
other cities, towns and villages.
3. To spread the entrepreneurship from a few dominant communities to a
large number of industrially potential people of varied social strata.
To attain these objectives, the Government accorded emphasis on the
development of small scale industries in cities, small towns and villages. Under
the five year plans, particularly in the Third five year plan, the Government
started providing various incentives and concessions in the form of capital,
technical know-how, markets and land to potential entrepreneurs to set up
industries in potential areas to remove the regional imbalances in development.
This was the major step taken to initiate interested people of varied social strata
to enter into the field of small scale entrepreneurial ventures.
Government has established several institutions like Directorate of
Industries, Financial Corporation, Small-Scale Industries Corporations and
Small Industries Service Institutes to facilitate the new entrepreneurs in setting
up their enterprises. This resulted in a rapid growth of small scale units and
there was a tremendous increase in their number from 1,21,619 in the year 1966
to 1,90,727 in 1970. During this period some entrepreneurs grew from small to
16. medium-scale and from medium to large-scale manufacturing units. Some of
the family entrepreneurship units like Tata, Birla, Dalmia, Kirloskar etc. grew
beyond the size and established new frontiers in business.
Entrepreneurship Development
The Government is attaching much importance for developing
programmes to stimulate and encourage entrepreneurship development.
Entrepreneurship development is a process in which persons are injected with
motivational drives of achievement and insight to tackle uncertain and risky
situation in business undertakings.
The process of entrepreneurship development focuses on training,
education, reorientation and creation of conducive and healthy environment for
the growth of enterprise. The entrepreneurship development should be viewed
in the total perspective and should integrate entrepreneurial training, provision
of incentives, consultancy services, sectoral development and other strategies
of intervention.
Several Entrepreneurship Development Institutions were set up by the
Government both at Central and State level. They are engaged in identification,
17. selection and training of potential entrepreneurship. The programmes are
specially designed to take an integrated approach by providing instruction and
counseling right from identification of the project to the actual operation of the
enterprises. Various Entrepreneurship Development Institutions are listed
below.
i. National Small Industries Corporation Ltd (NSIC)
ii. Small Industries Development Organisations (SIDO)
iii. Small Industries Development Corporation (SIDCO)
iv. Small Industries Service Institutes (SISI‟s)
v. District Industries Centres (DIC‟s)
vi. National Institute of Entrepreneurship and Small Business
Development (NIESBUD)
vii. National Institute of Small Industries Extension Training (NISIET)
viii. Technical Consultancy Organisations (TCO‟s)
ix. National Alliance of Young Entrepreneurs (NAYE)
x. Centres for Entrepreneurship Development (CED)
These institutions provide a wide range of service, support and facilities
to promote and foster the growth and development of entrepreneurship in India.
18. 1. Calculate any ten accounting ratios for your data
1. Liquidity Ratios
The liquidity ratios measure the liquidity of the firm and its ability to
meet its maturing short-term obligations. Liquidity is defined as the ability to
realize value in money, the most liquid of assets.
Liquidity refers to the ability to pay in cash, the obligations that are due.
Current Ratio
This ratio measures the solvency of the company in the short – term.
Current assets are those assets which can be converted into cash within a year.
Current liabilities and provisions are those liabilities that are payable within a
year.
Current Assets, Loans and Advances
-------------------------------------------
Current liabilities and Provisions
A current ratio 2:1 indicates a highly solvent position. A current ratio of
1.33:1 is considered by banks as the minimum acceptable level for providing
working capital finance.
Quick Liquid / Acid Test Ratio
Quick ratio is used as a measure of the company‟s ability to meet its
current obligations since bank overdraft is secured by the inventories, the other
current assets must be sufficient to meet other current liabilities.
Current Assets, Loans and Advances - Inventories
---------------------------------------------------------------
Current liabilities and Provisions – Bank Overdraft
A quick ratio of 1:1 indicates highly solvent position. This ratio serves as
a supplement to the current ratio is analyzing liquidity.
2. Capital Structure Ratios and Leverage Ratio
Leverage or capital structure ratios are those ratios which measures the
relative interest of lenders and proprietors in a business organization. These
19. ratios indicate the long-term solvency position of an organization. These ratios
help the management in the proper administration of the capital.
Shareholders Equity Ratio
The ratio is calculated as follows :
Shareholders Equity
--------------------------
Total Assets (tangible)
It is assumed that larger the proportion of the shareholders equity, the
stronger is the financial position of the firm. This ratio will supplement the
debt-equity ratio. In this ratio, the relationship is established between the
shareholders funds and the total assets.
Long-term Debt to Shareholders Net Worth Ratio
The ratio is calculated as follows :
Long – term Debt
--------------------------------------
Shareholders Net Worth
The ratio compares long-term debt to the net worth of the firm i.e., the
capital and free reserves less intangible assets.
Capital Gearing Ratio
It is the proportion of fixed interest bearing funds to equity shareholders
funds.
Fixed interest bearing funds
----------------------------------
Equity Shareholder‟s funds
The fixed interest bearing funds include debentures, long-term loans and
preference share capital. The equity shareholders funds include equity share
capital, reserves and surplus.
Debt-Equity Ratio
20. Debt-Equity Ratio measures the relative claim of creditor and owners in a
business organization.
Debt Equity ratio can be expressed as follows :
Debt
-----------
Equity
Debt = All external long term liabilities
Equity = Share capital and all reserves and provisions.
Ideal ratio of the debt-equity ratio is 2:1 i.e., 2 debt for one equity. Any
higher ratio is considered as a risky position for the firm as more debt is
involved and a lower ratio indicates a sound financial position.
3. Inventory Turnover Ratio
Cost of Goods sold Sales
----------------------- or -------------------------
Average Inventory Average Inventory
Average Inventory = (Opening Stock + Closing Stock) / 2
The higher the stock turnover rate or the lower, the stock turnover period
the better, although the ratios will vary between companies. For example, the
stock turnover rate in a food retailing company must be higher than the rate in a
manufacturing concern.
The inventory turnover ratio measures how many times a company‟s
inventory has been sold during the year.
Inventory Ratio
The level of inventory in a company may be assessed by the use of the
inventory ratio, which measures how much has been tied up in inventory.
Inventory
------------------------ x 100
Current Assets
21. Debtors Turnover Ratio
Debtors turnover, which measures whether the amount or resources tied
up in debtors is reasonable and whether the company has been efficient in
converting debtors into cash. The formula is :
Credit Sales
---------------------
Average Debtors
The higher the ratio, the better the position.
Debtors Collection Period or Debtors Velocity Ratio
Average debtors collection period measures how long it take to collect
amounts from
Average Debtors
------------------------ x 365 (in days)
Credit Sales
The actual collection period can be compared with the stated credit terms
of the company.
If it is longer than those terms, then this indicates inefficiency in
collecting debts.
Bad Debts to Sales Ratio
It measures the proportion of bad debts to sales
Bad Debts
------------------------ x 100
Sales
Bad debts to sales ratio indicates the efficiency of the credit control
procedures of the company.
Interest Cover
The interest coverage ratio shows how many times interest charges are
covered by funds that are available for payment of interest. Interest cover
indicates how many times a company can cover its current interest payments out
22. of current profits. It gives an indication of problem in servicing the debt. An
interest cover of more than 7 times is regarded as safe and more than 3 times is
desirable. An interest cover of 2 times is considered reasonable by financial
institutions.
Profit before Interest, Depreciation and Tax
--------------------------------------------------
Interest
A very high interest cover ratio indicates that the firm is conservative in
using debt and a very low interest coverage ratio indicates excessive use of debt.
Dividend Cover
This ratio indicates the number of times the dividends are covered by net
profit. This highlights the amount retained by a company for financing of future
operations.
(a) Equity Dividend Cover
Net Profit after Tax – Preference Dividend
--------------------------------------------------
Equity Dividend
(b) Preference Dividend Cover
Net Profit after Tax
------------------------
Preference Dividend
4. Debt Service Coverage Ratio (DSCR)
Debt Service Coverage Ratio (DSCR) ratio is the key indicator to the
lender to assess the extent of ability of the borrower to service the loan in regard
to timely payment of interest and payment of loan installment. The ratio is
calculated as follows :
Profit after Tax + Depreciation + Interest on Loan
-----------------------------------------------------------
Interest on Loan + Loan repayment in a year
The greater debt service coverage ratio indicates the better debt servicing
capacity of the organization. A ratio of 2 is considered satisfactory by the
financial institution. By means of cash flow projection, the borrower should
work DSCR for the entire duration of the loan. This will be useful to lender to
take correct view of the borrower‟s repayment capacity. This ratio indicates
whether the business is earning sufficient profits to pay not only the interest
charges, but also the installments due of the principal amount.
23. Return on Capital Employed (ROCE) or ROI
This ratio is also called Return on Investment (ROI). The strategic aim of
a business enterprise is to earn a return on capital. If in any particular case, the
return in the long-run in not satisfactory, then the deficiency should be corrected
or the activity be abandoned for a more favorable one. The rate of return on
investment is determined by dividing net profit or income by the capital
employed or investment made to achieve that profit.
ROI consists of two component viz.,
(a) Profit margin, and
(b) Investment Turnover, as shown bellows:
Net Profit Net Profit Sales
----------------------- x ------------------------ x ---------------------------
Capital Employed Capital Employed Capital Employed
Advantages or uses of ROI Ratio
1. It helps in making comparison of inter-divisional and inter-firm
comparison.
2. It helps in measuring the profitability of the firm.
3. It indicates how effectively the operating assets are used in earning
return.
4. It can be used as a sensitive gauge of profit making ability of the firm.
6. Return on Capital Employed Ratio
Return on capital employed is the ratio of adjusted net profit to capital
employed. It is expressed in percentage. The return on “Capital Employed” may
be based on Gross Capital or Net Capital Employed. Formulation for calculation
of return on capital employed is as follows :
Profit
Return on Capital Employed Ratio = ------------------------------------ x 100
Net Capital Employed
24. Net capital employed will be calculated as follows :
Net capital employed consists of total assets (i.e. fixed assets, investments
and current assets) of the business less is current liabilities (i.e., creditors, bank
overdraft etc.) Thus,
Net Capital Employed = Fixed Assets + Investments + Current Assets –
Current Liabilities.
„Thus, Net Capital Employed = Fixed Assets + Investments + Working
Capital.
In other words, we may also express the Net Capital Employed as below :
Net Capital Employed = Issued Share Capital + Capital Reserves + Revenue
Reserves + Debentures and Long term Loans –
Fictitious Assets.
Adjusted Net Profit
Following adjustments should be made, if necessary, with the figure of
net profit to arrive at the adjusted net profit for the purpose of computing return
on capital employed.
(a) Add any abnormal or non – recurring losses,
(b) Add interest on long term liabilities. Moreover, the return on gross
capital employed is to be calculated, add interest on short term liabilities
also.
(c) Add Income – tax paid and provision for income – tax,
(d) Deduct additional depreciation based on the replacement cost,
(e) Deduct income from investments outside the business,
(f) Deduct any abnormal or non-recurring gains.
7. Earnings Per Share (EPS)
Net Profit after Tax and Preference Dividend
EPS = -----------------------------------------------------
No. of Equity Shares
Benefits of P/E Ratio
1. This ratio indicates how much an investor is prepared to pay per rupee of
earnings.
25. 2. PIE ratio reflects high earnings potential and a low ratio reflects the low
earnings potential.
3. PIE ratio reflects the market‟s confidence on company‟s equity.
4. This ratio helps to ascertain the value of equity share.
5. Price – earning approach to share valuation is simple and more popular.
6. This ratio reflects the market‟s assessment of the future earnings potential
of the company.
8. Dividend Payout Ratio
Dividend payout ratio indicates the extent of the net profits distributed to
the shareholders as dividend. A high payout signifies a liberal distribution
policy and a low payout reflects conservative distribution policy. This ratio is
calculated by dividend per share divided by the earnings per share :
Dividend Per Share
-----------------------
Earnings Per Share
9. Book Value
The book value is a reflection of the past earnings and the distribution
policy of the company. A high book value indicates that a company has huge
reserves and is a potential bonus candidate. A low book value signifies a liberal
distribution policy of bonus and dividends, or a poor track record of
profitability. Book value ratio indicates the net worth per equity share
Equity Capital + Reserves – Profit and Loss A/c Debit balance
--------------------------------------------------------------------------
Total number of Equity Shares
10. Dividend Yield
Dividend yield ratio reflects the percentage yield that an investor receives
on this investment at the current market price of the shares. This ratio is
computed by dividend per share divided by market price multiplied by hundred.
Dividend Per Share
Dividend Yield = ------------------------ x 100
Market Price