economics24.com

October 30, 2008

If you open a small business mowing lawns, what is the best/most common way to contract your customers?

Filed under: Small Business — Tags: , , , , , , , , , — admin @ 5:52 am
Business
Nick P asked:


I’ve been thinking about opening a business mowing lawns in the summer and plowing snow in the winter now for the last 2 years now, except I’ve never actually worked in the industry. I was just wondering if anyone could give me any information about the way that these business owners contract their business. Do they get a year or two contract with each business or is it by the job? Also, in either of the two scenarios how much money would be considered going rate to their customers? Thanks in advance for the information.

October 29, 2008

How realistic is it to switch from a psychology BS to Economics?

Filed under: Higher Education (University +) — Tags: , , , , , — admin @ 6:00 pm
economics
Mike B asked:


Im about to graduate with a BS in Psychology with a 3.5 GPA. I want to get a masters in Economics at a good school. I know there are others many good schools, but my question is what is the feasibility that I can switch from a BS in Psychology to going into a masters program in economics?

October 26, 2008

What You Need to Know About Investing

Filed under: Investing — Tags: , , , , , , , , , , , , , , , , , , , — admin @ 7:14 am
Investing
Brian Walker asked:


We all need to save money for the future. But bank interests from saving accounts can barely beat inflation. As the future of social security becomes unknown and many companies’ retirement plan becomes undependable, investing has become the most important way to insure our financial future.

Before you start investing, you should learn the basics of investment. At the same time, you need to have a good understanding of your risk tolerance and be clear about your investment goals. Ask yourself the following questions: What do you want to achieve through investments? Retiring? Buying a home? Funding college education? Will it be long term investing or short term investing? How much money can you invest? Knowing your goal will help you make better investment decisions.

There are different types of investments, such as stocks, bonds and cash. You need to learn about each type and should decide on which ways to invest based on your own situation. There are three types of investors: conservative investors, moderate investors and aggressive investors. Conservative investors invest in cash, including bank saving accounts, CDs, US treasury bills etc. Moderate investors invest in cash and bonds and may also invest in the stock market and low risk real estate. Aggressive investors do most of investing in the stock market and might also invest in business ventures and high risk estate.

How much many should you invest? To answer this question, you need to first determine how much you can afford to invest and what your financial goals are. It’s important to always keep three to six months of living expenses ready in savings. Then, you can determine how much you can add to your investments in the future. Also, keep in mind that some types of investments require a certain initial investment amount.

When you start investing, you should try to avoid some common mistakes that people tend to make. First of all, don’t put all your eggs into one basket. Diversification should be an important part of your investment strategy. Also, don’t expect to get rich quickly. Don’t put off investing until later, and don’t invest aggressively until you are in the financial position to do so. When you invest, it’s important to plan for the long-term because investors who focus on long-term gains benefit most.



October 25, 2008

I’ve been filing a business write-off on my personal taxes. How do I close out the business on my tax return?

Filed under: United States — Tags: , , , , , , , — admin @ 7:10 am
Business
sullivan_vl asked:


I am a writer who has filed business write-offs on my personal tax return for 5 years as per the law. I have not made profits in those years. I have been advised by my accountant that tax regulations do not favor my continuing to file business write-off because I have not made a profit so should close out the writing business. How do I go about filing my taxes now? Do I just ignore the past years write offs as thought they were never deductions?

October 21, 2008

Foreign Direct Investment

Filed under: Business — Tags: , , , , , , , , , , , , , , , , , , , — admin @ 5:03 pm
Investing
Heidi Grumm asked:


FDI stands for Foreign Direct Investment, a component of a country’s national financial accounts. Foreign direct investment is investment of foreign assets into domestic structures, equipment, and organizations. Foreign direct investment is thought to be more useful to a country than investments in the equity of its companies because equity investments are potentially “hot money” which can leave at the first sign of trouble, whereas FDI is durable and generally useful whether things go well or badly

The resilience of foreign direct investment during financial crises may lead many developing countries to regard it as the private capital inflow of choice. Although there is substantial evidence that such investment benefits host countries, they should assess its potential impact carefully and realistically

Economists tend to favor the free flow of capital across national borders because it allows capital to seek out the highest rate of return. Unrestricted capital flows may also offer several other advantages. First, international flows of capital reduce the risk faced by owners of capital by allowing them to diversify their lending and investment. Second, the global integration of capital markets can contribute to the spread of best practices in corporate governance, accounting rules, and legal traditions. Third, the global mobility of capital limits the ability of governments to pursue bad policies.

In addition to these advantages, which in principle apply to all kinds of private capital inflows,the gains to host countries from Foreign Direct Investment (FDI) can take several other forms:

• FDI allows the transfer of technology—particularly in the form of new varieties of capital inputs—that cannot be achieved through financial investments or trade in goods and services. FDI can also promote competition in the domestic input market.

• Recipients of FDI often gain employee training in the course of operating the new businesses, which contributes to human capital development in the host country.

• Profits generated by FDI contribute to corporate tax revenues in the host country.

Foreign Direct Investment ( FDI) versus other flows

Despite the strong theoretical case for the advantages of free capital flows, the conventional wisdom now seems to be that many private capital flows pose countervailing risks. many host countries, even when they are in favor of capital inflows, view international debt flows, especially of the short-term variety, as “bad cholestero.

In contrast, FDI is viewed as “good cholesterol” because it can confer the benefits enumerated earlier. An additional benefit is that FDI is thought to be “bolted down and cannot leave so easily at the first sign of trouble.” Unlike short-term debt, direct investments in a country are immediately repriced in the event of a crisis.

Recent evidence

To what extent is there empirical support for such claims of the beneficial impact of Foreign Direct Investment?

A comprehensive study by Bosworth and Collins (1999) provides evidence on the effect of capital inflows on domestic investment for 58 developing countries during 1978-95. The sample covers nearly all of Latin America and Asia, as well as many countries in Africa. The authors distinguish among three types of inflows: Foreign Direct Investment, portfolio investment, and other financial flows (primarily bank loans).

Countries should concentrate on improving the environment for investment and the functioning of markets. They are likely to be rewarded with increasingly efficient overall investment as well as with more capital inflows.” Although it is very likely that FDI is higher, as a share of capital inflows, where domestic policies and institutions are weak, this cannot be regarded as a criticism of Foreign Direct Investment per se. Indeed, without it, the host countries could well be much poorer.

Fire sales, adverse selection, and leverage. Foreign Direct Investment http://korea.ixs.net/foreign-direct-investment.aspx is not only a transfer of ownership from domestic to foreign residents but also a mechanism that makes it possible for foreign investors to exercise management and control over host country firms—that is, it is a corporate governance mechanism. The transfer of control may not always benefit the host country because of the circumstances under which it occurs, problems of adverse selection, or excessive leverage.

Both economic theory and recent empirical evidence suggest that Foreign Direct Investment has a beneficial impact on developing host countries. But recent work also points to some potential risks: it can be reversed through financial transactions; it can be excessive owing to adverse selection and fire sales; its benefits can be limited by leverage; and a high share of Foreign Direct Investment in a country’s total capital inflows may reflect its institutions’ weakness rather than their strength. Though the empirical relevance of some of these sources of risk remains to be demonstrated, the potential risks do appear to make a case for taking a nuanced view of the likely effects of Foreign Direct Investment. Policy recommendations for developing countries should focus on improving the investment climate for all kinds of capital, domestic as well as foreign.

For More Information about Foreign Direct Investment visit : http://eng.ifez.go.kr/guide/org/foreign-direct-investment.asp



October 18, 2008

How old to invest in the stock market?

Filed under: Investing — Tags: , , , , , , , , — admin @ 1:47 am
Stock market
Andrew G asked:


I was wondering if there is a legal age limit for Canadian citizens investing in the stock market. I understand that American citizens under the age of 18 may have a legal guardian cosign the stock. Is it the same case for Canadians?

October 16, 2008

What career can I pursue with a major in Economics?

Filed under: Other - Careers & Employment — Tags: , , , , , , , , , , , , , , , , — admin @ 4:26 pm
economics
ASDF asked:


I am an incoming freshman planning to major in Economics at UC Davis. I would like to work at a bank, become an accountant, or do something related to finance for my career. I don’t know much about these careers, but I really want a job that pays well.
My opinion so far on some specific jobs:
Accounting- seems boring, but a stable job. Are there different types of accounting? What classes should I take? What’s the average salary?
Management- requires an outgoing and friendly person with a good attitude and outstanding leadership skills, able to handle situations on the spot. Not everyone can do it, but if you have these skills, you’ll excel in this area.
Investment banking- extremely competitive to get into, extremely competitive job in general, work 60+ hours per week, but extremely good pay. I especially want information for this. What classes should I take? What would help me get a job in this area?

October 14, 2008

Purchase Order & Letter of Credit Financing

Filed under: Finance — Tags: , , , , , , , , , , , , , , , , , , , — admin @ 3:46 pm
Finance
Gregg Elberg asked:


Many business opportunities come with an associated challenge. For most entrepreneurial businesses, the greatest challenge is financing the business opportunities created by your sales efforts. What are your options if you have a sales opportunity that is clearly too large for your normal scale of operations? Will your bank provide the necessary financing? Is your business a startup, or too new to meet the bank’s requirements? Can you tap into a commercial real estate loan or a home equity loan in sufficient time to conclude the transaction? Do you decline the order? Fortunately there is an alternative way to meet this challenge: You can use Purchase Order Financing & Letter of Credit financing to deliver the product and close the sale.

What is purchase order financing?

Purchase order financing is a specialized method of providing structured working capital and loans that are secured by accounts receivables, inventory, machinery, equipment and/or real estate. This type of funding is excellent for startup companies, refinancing existing loans, financing growth, mergers and acquisitions, management buy-outs and management buy-ins.

Purchase order financing is based upon bona fide purchase orders from reputable, creditworthy companies, or government entities. Verification of the validity of the purchase orders is required. The financing is not based on your company’s financial strength. It is based on the creditworthiness of your customers, the strength of the commercial finance company funding the transaction, and in most cases a letter of credit.

What is a letter of credit?

A letter of credit is a letter from a bank guaranteeing that a buyer’s payment to a seller will be received on time and for the correct amount. If the buyer is unable to make payment for the purchase, the bank is required to cover the full amount of the purchase. In a purchase order financing transaction, the bank relies on the creditworthiness of the commercial finance company in order to issue the letter of credit. The letter of credit “backs up” the purchase order financing to the supplier, or manufacturer.

Is purchase order financing appropriate for your sales program?

The perfect paradigm is a distributor buying products from a supplier and shipping directly to the purchaser. Importers of finished goods, exporters of finished goods, out-source manufacturers, wholesalers and distributors can effectively use purchase order financing to grow their businesses.

Is purchase order financing appropriate for growing your sales orders?

Purchase order financing requires you to have management expertise- a proven track record in your particular business. You must have bona fine purchase orders from reputable firms that can be verified. And you must have a repayment plan; often this is from a commercial finance company in the form of accounts receivable or asset-based financing.

You should have a gross margin of at least 25% to benefit from purchase order financing. Sellers of services or commodities with low margins, such as lumber or grain, will not qualify.

The bottom line decision for purchase order financing:

It can take two or more years to develop a profitable business. Banks generally base their lending limits on a business’ performance for the past two or three years. Purchase order financing, combined with letters of credit and/or accounts receivable or asset-based financing can give you sufficient funds to cover your operating costs, financing costs and still realize significant profits. If you qualify for purchase order financing, you can grow your business by taking advantage of large purchase orders and eventually qualify for bank financing.



October 13, 2008

Difficult Church Loan and Business Finance Solutions

Filed under: Finance — Tags: , , , , , , , , , , , , , , , , , , , — admin @ 6:43 pm
Finance
Stephen Bush asked:


Church loans often suffer from several problems, and as a result specialized business finance strategies are required. Typical church financing will involve multiple difficulties.

Church loans are probably the most difficult form of commercial financing to successfully close. Churches are an integral part of local communities, so it is necessary to improve church financing solutions. In almost all cases financing will require a very specialized commercial real estate loan that is typically not widely available.

Churches are not typical commercial enterprises but they do have substantial business financing requirements. This article will offer an overview of four key church loan financing difficulties and a listing of six practical church financing strategies.

Four Major Church Financing and Business Finance Difficulties -

Before addressing possible solutions for the most common church loan needs, it is important to discuss the typical barriers to obtaining appropriate financing. Historically church financing has been difficult to arrange for several reasons:

(1) Church Loan Obstacle Number One: Church properties are unique. Lenders are therefore concerned that if commercial loan payments are not made in a timely manner and the lender is required to assume ownership of the property, it will be very difficult to find a new owner because of the unique property features.

(2) Church Financing Difficulty Number Two: Commercial lenders usually require individual guarantors for church financing, and this is inappropriate for a church loan. The financial structure of churches simply does not lend itself to a traditional lender/guarantor approach. Many commercial lenders are not comfortable with the potential lack of individual guarantors because of the difficulty of reselling the church property if negative financial circumstances occur in the future.

It is unfortunately very common for church financing to have been secured only after church members have authorized an individual guarantee for church financing. The need for individual guarantors acts as a serious barrier first because church members might be unwilling to do so and second because there might not be individuals who have enough financial resources to provide an individual guarantee for larger church financing needs.

(3) Church Financing Difficulty Number Three: When church financing is obtained, there are frequently unacceptable business finance terms such as very small loans, low loan-to-value (LTV) of 50% to 60%, short-term loans and high interest rates. These onerous terms are tantamount to the church loan being declined, and if the terms are accepted, the church is likely to experience continuing financial difficulties due to unrealistic commercial mortgage requirements.

(4) Church Financing Difficulty Number Four: Construction, renovation and land acquisition are even more difficult for churches to finance than purchases or refinancing. As a result, needed repairs are often postponed indefinitely and new churches frequently take many years to become a reality.

Six Practical Church Loan and Commercial Mortgage Solutions -

There are common-sense financing solutions for the church loan issues described above. Here is an overview of church financing that is now available from some non-traditional lenders:

(1) Church Loan Financing Approach Number One: Non-Recourse Loans (instead of guarantors). As noted above, the willingness to forego traditional guarantors does require a non-traditional lender. With this church financing approach, church lending will not depend on individual guarantors.

(2) Church Loan Solution Number Two: Long-term business loans. Church financing will be much more successful when it is long-term instead of short-term (payments will be reduced dramatically).

(3) Church Loan Solution Number Three: Low interest rates (usually a maximum of prime plus 1%). In reality many churches have been taken advantage of and charged excessive interest rates because lenders perceived that they did not have any other realistic options.

With payments limited to prime plus 1% or less, church financing payments will be noticeably reduced. In combination with longer-term loans, the overall payment reduction will make a significant contribution to church cash flow improvements.

(4) Church Loan Solution Number Four: Church loan financing minimum of $500,000. This allows churches to complete most financing in one step rather than piecemeal over a period of years.

(5) Church Loan Solution Number Five: Higher LTV (75%-90% is possible). This results in a more workable amount of 10% to 25% (rather than 40% to 50% with traditional church financing) for the down payment or non-financed portion in refinancing.

(6) Church Loan Solution Number Six: Church financing can now include new construction, renovation, land acquisition, purchase and refinancing. Due to flexible church loan financing, it is not necessary for any of these important church loan activities to be postponed.

Collectively the six church financing solutions described above should benefit a large number of churches by allowing refinancing with much better financial terms and by facilitating the construction of new churches on an accelerated timetable. The six church loan financing approaches should result in financial covenants that will contribute to the long-term financial profile of prudent churches which adhere to the church financing approaches suggested.

Regardless of the practical business finance and commercial mortgage strategies that have been described above, it is appropriate to emphasize that arranging appropriate church financing will almost always be difficult. Due to the specialized nature of a church loan, unavoidable complications with the commercial real estate financing should be anticipated. As a result, prudent church borrowers should attempt to acquire a better understanding of these complex business loan issues.



Keeping An Eye On Your Personal Finances

Filed under: Non Fiction — Tags: , , , , , , , , , , , , , , , , , , , — admin @ 12:34 pm
Personal Finance
David Neehly asked:


The majority of us are sticklers for finances at work, but often disregard our personal finance at home. For those who are not accountants, the process of keeping financial records and ensuring all financial items are squared away can be quite boring and often confusing. Instead of ignoring your personal finance until a problem arises, take the initiative today!
The most important aspect of your personal finance is undoubtedly your credit. Your credit score, often a mystical number of much confusion, is critical to your success in the financial realm. Without a respectable credit score, you will be unable to borrow money or obtain a home or vehicle loan. This number can literally hold you back from completing your goals and can severely limit your future.
The credit in your name has a direct bearing on the credit number. Thus people who do not use their credit cards properly and have huge bills running in their names lend a bad streak to their credit. A point to be noted is that it is not the amount you charge but it is the amount that is kept on credit that poses the threat of being harmful. It is important to keep a check on the monthly statement and you should endeavor to pay it in full each month.
In today’s society, identity theft is often a problem. If someone steals your identity, they can wreck your finances, ruin your credit, and tarnish your good name and reputation. In order to prevent identity theft, carefully monitor all your financial statements and safe guard your personal information.
The attitude of most people towards money is spending today and saving later, thus relegating saving for a later part of their life. But this habit catches them unawares in the later part of their life where they get jolted with the rude shocks of a fast approaching retirement date and a non-existent retirement fund. So do not wait for tomorrow, start saving today by putting some portions of your income in the retirement fund account.
One of the best ways to handle the finances is a budget. This is the best way to keep a tab on the finances and keeping the spending in control. When you create a budget you need to make two columns, one meant for the incomes and the second for expenditures. You need to mention all the items of expenditure in the expenses column such as rent or mortgage payment, car payment, insurance, utilities, and food. Whatever is left after deducting all this from the income is the monthly excess that of course can be used in different ways.
It’s a good idea to consult an accountant if you are not sure about setting your personal finance records straight. This person will help you correct any potential problems and ensure nothing goes wrong in the future.
The world of finance is fascinating. There’s no need to be scared of it. Just keep your finances straight and you will be able to build, or rebuild, your credit score.

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