Comparative Study On Housing Loans Of Sbm - Free Essay Example

This research article is aimed to compare and critically analyse the housing loan schemes offered by State Bank of Mysore and Union Bank of India, Bangalore Branch, India OBJECTIVE OF THE STUDY To recognize and evaluate literature relevant to the theories of home loans. To evaluate the general awareness of the various schemes currently offered by HFCs / banks and the purpose of which housing loan are given. To perform comparative analysis for housing loan schemes for State Bank of India and Union Bank of India. To study the documentation process in HFCs (Housing Finance Companies) and critically evaluate problem faced by clients during the process of lending housing finance in banks. To assess and suggest appropriate Conclusions and Recommendations with regards to housing loan schemes offered by SBM or UBI Bank to the customers. Introduction This article explains the housing loan schemes offered by banks in order to bolster the current housing finance situation in India and to taper down the margin between the housing demand and the availability of houses, The National Housing Bank was set up in the year 1988. This was done by keeping in mind that a home seeker though does have a desire for a house but lacks the resources for construction or buying it. To give an enhancement to private housing finance institutions the National Housing Bank came into the picture. It is a principal agency to promote housing finance institutions both at local and regional levels and to provide financial and other support to such institutions. While it is important to keep in mind that the National housing Bank itself does not give loans or finance individuals or a party as such. It is only a corporate body to promote, establish, support or aid the housing finance institutions.   India have been serving the people for around three decades and providing various housing loan schemes according to the customers various needs at attractive and reasonable interest rates. In order to facilitate the best housing loan schemes at the least interest rate this research article will help in critically evaluating and comparing the schemes of housing loan for two banks i.e. State Bank Of India and Union Bank of India, Bangalore, India in order to know the best offers provided by the banks as well their performances in order to retain in competition within marketplace. This research article analyses the effectiveness and efficiency of housing loan schemes provided by SBM and UBI bank which will provide its customers a attractive interest rates in on housing loan. Company Overview of SBM and UBI State Bank of Mysore was formed as Bank of Mysore Ltd. in 1913 under the benefaction of the former Government. Of Mysore, on the illustration of the banking commission headed by the great Engineer-Statesman,  Late Dr. Sir M.Visvesvaraya. Subsequently, in March 1960, the Bank became an Associate of State Bank of India. State Bank of India holds 92.33% of shares. The Banks shares are listed in Bangalore, Chennai, and Mumbai stock exchanges. Branch Network The Bank has a widespread network of six hundred eighty two only (682) branches (as on 30.09.2009) and 20 extension counters spread all over India which includes 5 specialised SSI branches, 4 Industrial Finance branches, 3 Corporate Accounts Branches, 4 specialised Personal Banking Branches, 10 Agricultural Development Branches, 3 Treasury branches, 1 Asset Recovery Branch and 8 Service Branches, offering wide range of services to the customers. Human Resources The Bank has a dedicated workforce of 9720 employees consisting of 3169 supervisory staff, 6551 non-supervisory staff (as on 31.03.2008). The skill and competence of the employees have been kept updated to meet the requirement of our customers keeping in view the changes in the environment. (Source: https://www.statebankofmysore.co.in/profile.htm) Union Bank of India UBI Bank is consistently dedicated to bind and maintain its distinctiveness as a foremost, pioneering cost-effective Bank, by means of a down to business approach to the shifting requirements of the general public. A extensive scale of goods and services has been resulted and also made accessible to its precious customers to cater the least of their requirements. Today, with its well-organized, value-added services, continual intensification, reliable productivity and expansion of innovative technology, UBI bank has ensured comprehensive shopper delight, keeping up its image,  Ãƒ ¢Ã¢â€š ¬Ã…“GOOD QUALITY POPULACE TO BANK WITHà ¢Ã¢â€š ¬?.   The key to the triumph of any organisation lies with its personnel or manpower. No wonder, UBI dedicated tem of dynamic and enthusiastic skilled personnel consists of 26000 thousand employee who contribute to the maximum in order to ensure growth for UBI. The bank went for Initial Public offer (IPO) on 20th august 2002 which was fol lowed by the public offer made on February 2006.Government of India holds fifty five percent (55.43%) share capital of Union Bank the current share capital holding of the bank is forty four point five seven percent 44.57 % which includes Individuals and Others. Reason behind choosing the topic for the study Housing is the one of the main priority sector needs a lot attention now days the interest rate of the housing loan is raising very high customers are worried about the rates due to indefinite fluctuation. This study is about the comparison of the various schemes and the interest rate of the two banks State Bank of Mysore and Union Bank of India. After this study we will be able to know that which bank is more convenient in the lending of loan. Different schemes of the bank are convenient in different manner according to customerà ¢Ã¢â€š ¬Ã¢â€ž ¢s priority. The study is important also in case of comparison of the many other banksà ¢Ã¢â€š ¬Ã¢â€ž ¢ schemes to these two banks. Literature Review Meaning of Loan: Loan is a method of lending under which bank gives credit to a borrower for a fixed period and for a specific purpose. Loan are promises for future payment, they have to be repaid in periods beyond a year and are therefore long-term liabilities 3.3Types of Loan: Generally bank grant loans for different period like shorts, medium and long and for different purpose. Broadly, the loans granted by banks are classified follows Bank Loans (1) Short-term Loans: Short-term loans are granted to meet the working capital needs of the borrowers. These loans are granted against the securities of tangible assets mainly the movable assets like goods and commodities, share debenture, etc. (2) Term Loans: Medium and long-term loans are usually called term loans. These loans are granted for more than a year and are meant for purchase of capital assets for the establishment of new units and for expansion or diversification of an existing unit. Loan Procedure: Generally various banks adopt following procedure for loan. Appraisal of Loan Submit the Application Documentation Convene to loan applicant To Issue Draft or Pay order Submit the Application: First of all the loan borrower should submit application to the particular bank. The borrower is required to fill out a common application form, which seeks comprehensive information about proprietorà ¢Ã¢â€š ¬Ã¢â€ž ¢s and loan borrowerà ¢Ã¢â€š ¬Ã¢â€ž ¢s back ground and his business network and as well as his cost of project and economic consideration. Appraisal of Loan: The bank follows good appraisal system for effective lending and to make easy repay in future way. The main task of the lending bank is to make sure that the income generated from the loan is sufficient to repay the loan installments according to the terms and conditions of amortization. The risk involved in term lending is much more than the risk in short-term lending because the loans are given to new undertaking, or for the modernization and expansion of existing undertaking and for loan period. Before sanctioning any loan a banker should assure himself that the borrowing concern shall be able to earn sufficient income to pay the loan installments. The methods of analysis and standard to be adopted for an appraisal of loan are more similar to investment decision than to short-term lending. The appraisal of loan included projection of future trends of output, sales estimated of costs, returns and flow of funds. It is extremely difficult to have a clever cut formula for the appraisal of term loan since many factors have to be considered such as the type of borrowing bank and its activities, the markets potential, its management, and financial position. The amount of loan and the period of its repayment. Another important factor is whether to give weight age to profitability or to its broad economic significance in the development of the economy. A term loan may be appraised by considering four different aspects of the proposal. They are: Technical feasibility Economic feasibility Managerial competence Financial feasibility Documentation: After completing the step of submit the application and appraisal system of loan. Then loan applicant should collect the document for borrowing loan, every documents and requirement are needed according to the co-operative bank rate. If the loan applicant wants to borrow loan of huge amount, so at a time strong documents are presented by loan applicant against bank like evident of shareholders, original and photocopy of propertyà ¢Ã¢â€š ¬Ã¢â€ž ¢s documents, photocopy last three years income tax returns file, etc. if loan applicants has no any recommendation from share holder so firstly the bank becoming share holders of his bank by issuing share to them, so above types of documents are used to borrow loan and advances from the bank. Convene to Loan Application: After collecting the necessary documents, an officer of the recipient bank review it to ascertain whether it is complete for processing, when the application is considered complete. Then the co-operative bank held meeting of his loan applicant and sanctioned the particular loan. Generally this meeting is convened on Monday and Thursdays in every week. Otherwise expected it in other contingent situation and gives date, day and time for delaying particular meeting. To Issue Draft or Pay order: At the last stage is that, after convening of loan applicant and sanctioning loan, borrower should pay its stamp duty, margin and one installment of loan, then in the stamp document or stamp procedure. Then bank gives to them pay order or draft. If the any loan borrowers want to purchase machinery or vehicle from out of city so he need quotation of that particular company, and finally bank made draft of companyà ¢Ã¢â€š ¬Ã¢â€ž ¢s name otherwise if the quotation of city area so at a time the co-operative bank made pay order of companyà ¢Ã¢â€š ¬Ã¢â€ž ¢s name. Them it gives to company through loan applicant. Thus above procedure is followed by the loan applicant, who wants to borrow loan from banks and satisfied his goal or objectives. 1.) In December 2006 Fulbag Singh and Reema Sharma had studied about the housing Finance in India. Housing, as one of the three basic needs of life, always remains on the top priority of any person, economy, government and society at large. In India, majority of the population lives in slums and shabby shelters in rural areas. From the last decade, the Government of India has been continuously trying to strengthen the housing sector by introducing various housing loan schemes for rural and urban population. The first attempt in this regard was the National Housing Policy (NHP), which was introduced in 1988. The National Housing Bank (NHB) was set up in 1988 as an apex institution for housing finance and a wholly-owned subsidiary of Reserve Bank of India (RBI). The main objective of the bank is to promote and establish the housing financial institutions in the country as well as to provide refinance facilities to housing finance corporations and scheduled commercial banks. Moreover, f or the salaried section, the tax rebates on housing loans have been introduced. The paper is based on the case study of LIC Housing Finance Ltd., which analyzes region-wise disbursements of individual house loans, their portfolio amounts and the defaults for the last ten years, i.e., from 1995-96 to 2004-05 by working out relevant ratios in terms of percentages and the compound annual growth rates. A relevant chart has also been prepared to highlight the results. 2) In May 18, 2007 Michael La Cour-Little had studied about the Economic Factors Affecting Home Mortgage Disclosure Act Reporting. The public release of the 20042005 Home Mortgage Disclosure Act data raised a number of questions given the increase in the number and percentage of higher-priced home mortgage loans and continued differentials across demographic groups. Here we assess three possible explanations for the observed increase in 2005 over 2004: (1) changes in lender business practices; (2) changes in the risk profile of borrowers; and (3) changes in the yield curve environment. Results suggest that after controlling for the mix of loan types, credit risk factors, and the yield curve, there was no statistically significant increase in reportable volume for loans originated directly by lenders during 2005, though indirect, wholesale originations did significantly increase. Finally, given a model of the factors affecting results for 2004-2005, we predict that 2006 results will c ontinue to show an increase in the percentage of loans that are higher priced when final numbers are released in September 2007 3.) à ¢Ã¢â€š ¬Ã…“The housing finance market has been consistently exhibiting rapid growth in the past few years. Growth has been largely concentrated on urban areas and in the middle to high income groups, focusing on the salaried class. This growth was partly fuelled by the entry of commercial banks seeking asset growth in a sluggish business environment coupled with the tax incentives on housing loans. The banks, with their lower cost of funds, extensive branch network, capability to provide a range of personal banking services and aided by the average low default rates in housing finance, could expand the market considerably. They however, continued to focus on middle to higher income groups. Lower income groups, self employed and the rural population are by and large excluded. While the middle and higher income groups may continue to access conventional housing finance, increasing attention will need to be paid to the needs of the underservedà ¢Ã¢â€š ¬?. (Source: Saravanan P. Recent Experiences in the Housing Finance Sector A Study with Reference to India.  Housing Finance International  [serial online]. September 2007; 21(5):45-48. Available from: Business Source Complete, Ipswich, MA. Accessed June 17, 2010) 4.) The innovations in housing finance systems in advanced economies over the past two decades have altered the role of housing sector in business cycle and in the monetary transmission mechanism. It concludes that these changes have spilovers from the hosuing sector to the rest of the economy and have amplified their impact by strengthening the role of housing as collateral. This analysis suggests in economies were developed mortgage markets, monetary policymakers may need to respond over aggressively to developments in housing sectors, within a risk-management approach that treats house price dynamics as one of the key factors to be considered in assuming balnce of risks to output and influence. (Source: World Economic Outlook(International Monetary fund), 2008, ISBN 978-1-58906-719-6) 5.) Today, the housing finance market has evolved into an oligolpolistic structure (SSKI, 20606) with three dominant providers-DFC, the largest housing company, ICICI bank the largest private sector bank, State Bank of India the largest bank in country. According to SSKI India research estimation in 200, the three leading housing credit providers accounted for approximately 75 of the market. Only a few foreign banks are involved and they tend to focus on à ¢Ã¢â€š ¬Ã‹Å"High net worthà ¢Ã¢â€š ¬Ã¢â€ž ¢ individuals.Towards the end of 2005, India saw a graduate inching uo of interest rates. Despite this, close to 85 % of housing credit customers still prefer floating rate of interest.(Source: Housing Finance mechanism in India, 2008, ISBN- 978-92-1-131970-5, [emailprotected] United Nations Human Settlement Programme 2008) 6.) à ¢Ã¢â€š ¬Ã…“As per a article report published in wall street the trend in housing sector in India as on February 20,2008 were heading for a slowdown. The withdrawal of an Initial Public offering (IPO) by Emaar MGF Pvt. Ltd is an indication of difficulties companies worldwide are having in tapping market. (Source: Kilbinger, Sara Seddon. India Faces Housing Slowdown.  Wall Street Journal Eastern Edition  20 Feb. 2008: B7.  Business Source Complete. EBSCO. Web. 17 June 2010) 7.) à ¢Ã¢â€š ¬Ã…“The housing market in the Indian metropolitan city of Bangalore. Some problems of housing finance from the viewpoints of families and of public authorities are indicated. It is argued that it is these financial problems that make access difficult for the poorer half of the population of Bangalore to forms of housing other than inner city slums or urban fringe informal housing. Public housing with its unrealistic standards of service provision, but especially its high initial access costs is not well designed to meet the needs of the majority of families. The paper concludes that unless public housing authorities emulate the private housing market they will continue to play a marginal role in housing in a city such as Bangalore. There are signs that this is happening in India with experimentation in both housing finance and lower service standard. (Source: Blore, Ian. Housing and the working class in an Indian metropolis.  Public Administration Developmentà ƒâ€šÃ‚  9.5 (1989): 557-568.Business Source Complete. EBSCO. Web. 17 June 2010.) 8.) The housing sector in India for several decades faced a number of set-backs, such as an unorganized market, development disparities, a compartmentalized development approach and a deterrent rent control system. There was not even a concerted attempt to understand the housing problem let alone promote it. Reforms introduced in the sector during the 1990s, however, have overturned the situation to a great extent. The designing of a shelter policy, the organization of the housing finance market, the introduction of fiscal incentives, increased public investment, legal reforms and others initiatives have brought about a number of changes in the housing sector. Interestingly, these changes have been concerned with both reducing the housing shortage and increasing the number of quality housing stock besides increased access to various other housing amenities like safe drinking water, good sanitation and household electricity. However, the reform initiatives of the housing sector need t o take deep roots and to go a long way to address the growing incidence of sub-standard and dilapidated housing stock for further minimizing the deprivations of housing amenities. This paper considers a few policy options towards addressing the challenges of the housing sector. (Source: Mahadeva M. Reforms in housing sector in India: impact on housing development and housing amenities.  Habitat International[serial online]. September 2006;30(3):412-433. Available from: Business Source Complete, Ipswich, MA. Accessed June 17, 2010) OPERATIONAL DEFINITION OF THE CONCEPT EMI- Equated Monthly Installment is what a loaner pays the Banks every month towards repayment of loan. It is comprises of principle and interest. EMI = L * r (1 + r) n x 1 (1 + r) n à ¢Ã¢â€š ¬Ã¢â‚¬Å" 1 12 Interest rate- It is the amount which banks charge along with the principal amount per year on the basis of fixed rate or floating rate. UBI- Union Bank of India SBM- State Bank of Mysore HFC- Housing Finance Company METHODOLOGY The study dwells on both secondary and primary data. The primary data is collected through interviewing staffs of the banks, secondary data is collected through past details of the Housing finance structure, reports, pamphlets, brochures etc Primary research is form of research which includes the gathering of new data using an acknowledged research method. This could be in form of opinion poll, questionaaire, telephonic interviews or personal interview etc For this research article the author has chosen to carry out primary research by collecting data in form of questionnaire or by interviewing SBM and UBI with the support of bank officials or staff members of bank. Secondary Research is referred to data which is not a original creation. This form of data is already available to a researcher in order to carry out the research process in form of websites, journals or newspapers or company annual reports. How Primary data can be collected: 1.) Questionnaire or Opinion Polls: Questionnaire or opinion polls are intended to gather primary data from a sample taken into consideration, with a aim to critically evaluate or analyse the data in form of tabulated results e.g. stastical data or even by simplifying the results in form of a inference of the numeric data. Questionnaire can be performed in several ways such as telephonic interview, Emails, Online surveys or face to face. These methods of opinion polls are elaborated in broader perspective: Telephone interview: This is the most important and widely accepted method of collecting the original and accurate data for resolving the complex issues and providing the accurate solutions. Merit: From the author point of view the main merit of this method is that its more time consuming and a person can explain views more easily which they cannot do sometime face to f ace. Demerit: The demerit of this method could be that the rejection for telephonic interview which doesnà ¢Ã¢â€š ¬Ã¢â€ž ¢t allow the researcher to receive any data for the research. Online Surveys: Surveys nowadays most commonly and widely accepted method of research as it can be presented in many dimension and can be analysed and interpreted based on the requirement of the person and also can be presented in form of tabulation sheets or some analytical software. Merit: This method is very advantageous as a researcher can have a global access from the respondent and its more faster and accurate and easy to administer. Demerit: For this method to have access a user must be well versed with computers as well as its more global method a user should ahve access to internet so that could be a biggest drawback in order to collect data if the respondent donà ¢Ã¢â€š ¬Ã¢â€ž ¢t have knowledge or access to these resources. Personal interview: This form of method is acceptable by everyone as its being designed and implemented based on the convenience of the respondent. A respondent can choose their timing to answer the questionnaires as well its helps in solving the complex issues as it provides the accurate data as well a discussion about the analysis of data from the respondent Merit: The main advantage of face-to-face or direct interviews is that the researcher can accommodate the questions as necessary, classify doubts and ensure that the responses are properly understood, by repeating or rephrasing the questions. The researcher can identify nonverbal clues from the respondent. Disadvantages: The main disadvantage of face-to-face interviews is that geographical limitations may impose restrictions on the surveys and the vast resources that would be needed if such surveys need to be done nationally or internationally. Respondents may feel uneasy about their privacy of their responses when they interact face-to-face with the interviewer. Postal Interview: The most commonly used method of distribution which is fairly easy to administer. The questionnaire and the covering letter will be posted to the sample, usually with a prepaid envelope for returning the completed questionnaire. For this medium short questionnaire will be used. Advantages: A wide geographical area can be covered with the use of postal interview. The respondents use their convenience to fill the form at their own pace. Anonymity of respondents is high. Disadvantages: Any doubts that respondents have cannot be clarified. The return rates of mail questionarres are typically low. Follow up procedures for non responses are necessary in postal interviews. Sampling: Survey provides representative information about a group from which sample was drawn. This qualitative research will involve nonrandom sampling or non-probability sampling where everyone in the population will not have an equal chance to be chosen as part of a sample. The non-probability samples provide good estimates of a population characteristic. Target Population: The target population of my sample will include all bank employees of IS bank. The recruitment of individuals for participation will require the selection of individuals who are employees of IS bank. The sample for the research survey will be selected mostly by these methods: Convenience Sampling: This will be used to identify bank employees who are willing and available for the research survey. As most of the bank employees will be working and will not be available for questioning convenience sampling would be a better choice. Snowballing: This sampling method will be used to identify the first participant. Then that first participant will be asked to refer to other participants with similar characteristics. I have used this method to select bank employees and their friends. It is easier to get representatives for research through this method that has same characteristics. Secondary data can be obtained by: Comparative Case studies: I will go through case studies of competitors who are offering mortgage products in the Turkey market. This will help in understanding their strategies and policies. It will also help in understanding about how they achieve their goal. It will also help in identifying the challenges they faced during marketing their products. Comparative Case Studies helps in comparing two industries and understanding their shortfalls. Hypothesis Since the interest rate on home loan is frequently changing and it is expected that it will rise again by the end of the year 2010. Customers who want to take loan for a long time i.e. more than 15 years and also the big amount are really worried about the payment of high EMI. The problem is mainly for salaried class people who are unable to pay the EMI fixed by the banks on their monthly salary. As the fixed rate of interest is 12.5% now customers are suggested to take loan on floating rate of interest. So hypothesis will be based on the current and future trend of the interest rates of the banks. Analysis of Data Data for analysis will be present in following ways in order to carry out the research as well to do comparative analysis for the subject by giving information in different perspective. Frequency tables  Ãƒâ€šÃ‚   Bar charts, histograms and pie charts  Ãƒâ€šÃ‚   Contingency tables or cross-tabulations   Quantitative and Qualitative data: Qualitative data is form of data which includes the fact and figures such as financial report of a company and Quantitative data is a form of data which can be used analyse the data which is in form of questionnaire and surveys which help in order to analyse the current situation of company and provide the better solutions for company. For this research article author will be using both the data Quantitative as well Qualitative as the research includes both data collection numeric data as well survey or questionnaire data. 3). LIMITATION OF THE STUDY If there are advantages of study then obviously there are limitations of that study also. So, some limitations of this study are: This is basically an academic study suffers from time and money constraints. The other limitation includes the sample size, which is small. Analyses of only two banks are done rather than more banks Study is limited to local area of Bangalore, India Since banks are not willing to disclose their client details so the availed information is limited to report, pamphlet, brochure etc. SCOPE OF STUDY The study mainly deals with Housing Finance Sectors. The two important sectors identified for this purpose are companies and client of public and private Housing finance sector in Bangalore, India. AREA OF THE STUDY The study is limited to only one branch of both banks i.e. UBI and SBM situated in Bangalore due to time, money and information availability constraints. Ethics As the research article is focused on banking industry the confedentiaity of the data will be used for academic purposes within the field of study that is housing schemes of two banks and as per the accordance of business ethics.

Can Researchers Identify Sea Turtles Through Photo...

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Dual Credit Thesis - 3720 Words

Chapter Four Results Introduction This chapter presents the statistical results of the correlational study of the relationship between students and college persistence who were enrolled from partnering high schools (Clay County, Corbin, McCreary County, North Laurel, South Laurel, and Whitley County) and the dual credit program. The study theorized that the provision of dual credit programs to participating high schools would affect the students’ choice to attend an institution of higher education or not based upon participation levels in dual credit classes. Furthermore, the study assumed that a relationship will exist in the grade point average earned and dual credit participation. The study was designed to test the assumptions†¦show more content†¦Table 2 represents the results which portrays no difference in the groups, (F [1,154] = 136.6, p .01) where the p value is 5.43. This means that the groups are not statistically different and there is no relationship between the number of dual credi t hours earned and college persistence. Table 2 Source of Variation SS df MS F P-value F crit Between Groups 4268.308 1 4268.308 136.592 5.43E-23 3.902553 Within Groups 4812.282 154 31.24858 Total 9080.59 155 Research Question #2: â€Å"What relationship exists between the grade point average earned in dual credit courses and college persistence?† An Anova test was used to compare the GPA earned and college persistence. Table 3 represents the results which portrays no difference in the groups, (F [1,154] = 643.02, p .01) where the p value is 7.57. This means that the groups are not statistically different and there is no relationship between the GPA earned and college persistence. Table 3 Source of Variation SS df MS F P-value F crit Between Groups 195.2387 1 195.2387 643.0247 7.57E-57 3.902553 Within Groups 46.75832 154 0.303625 Total 241.997 155 Research Question #3: â€Å"Does a relationship exist between dual credit enrollment and English courses?† An Anova test was used to compare the GPA earned and college persistence. Table 4 represents the results which portrays no difference in the groups, (FShow MoreRelatedGraduation Speech - Original Writing893 Words   |  4 Pagesnext year. I wanted to be as prepared as possible to face the new challenges coming my way. I did not want to find myself struggling to write multiple papers for multiple classes in a limited amount of time. I decided Dual Enrollment would be my best bet; and obtaining some college credit wouldn’t hurt either. I strongly believe I have achieved the goals I set for myself. The evidence is presented in this portfolio which includes a collection of papers I wrote throughout the year. 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Impact Of Mexican Cuisine On National Identity - 2264 Words

The Impact of Mexican Cuisine on National Identity Authentic, traditional Mexican food is thought to be a product that was developed by the Mayan Indians. Food was first hunted and gathered so that it was then cooked on ceramic pots or iron skillets over open fires. This ritual was fundamental for the natives. They needed to obtain their food and prepare it in this way so that they could eat. This exemplifies the idea that the preparation of food is not only symbolic of having a meal to eat, but also of nature being transformed into culture. Additionally, everyone has a deep personal connection with the simple act of eating because what one person prefers to eat might be different for another individual. As individuals, we are each born into a culture that most likely has a cuisine different from what others prefer or are accustomed to. All of our palates are distinctly unique. 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Accounting Financial Report

Question: Describe about financial performance, financial Position and limitation of financial statements and ratio. Answer: Introduction The retail chain of Next was launched in the year 1982 and the initial store was opened that contained stylish clothes, shoes, as well as accessories for females. Soon after that, the collection for men and children followed. Next clothes are provided unique style by the design team that is present inn house and provide value for money. In the current scenario, there are more than 500 stores present in the UK and Eire. Furthermore, more than 200 stores are present in more than 40 countries. Several landmarks were made by Next in a sequence. In 2011, it opened the merged fashion and garden store at Shoreham-by-sea. In 2014, two more stores were added and in 2015, it opened High Wycombe store (Next Plc, 2015). Next strives to enhance the customer base by introduction of new and varied techniques like next day delivery that appeals the customers to a considerable extent. Financial Performance Significant achievements were made by Next in the year 2015 that boasts about its strong financial performance. The increment in the EPS and paying dividend to shareholders indicates that the company has made adequate profit and has solidity. The EPS and the ordinary dividend has been a consistent achievement of the company and it has done it for the straight sixth consecutive year. Moreover, the sales, as well as revenue is a classic indication that the company has performed in a strong manner (Investors Chronicle, 2015). The retail sales increased by 5% while the online business saw a jump of 12%. The sales of the entire group went up by 7% and reached a strong figure of 4 billion for the first time. The share prices also indicates that the company performed in a strong manner because the investors vouch for those shares that are fundamentally strong and have a potential to deliver returns consistently (Investors Chronicle, 2015). The share price went up by 62.80 to 71.50 indicatin g the strong financial performance. There was not buying back of the shares rather surplus cash was returned through the way of dividend. A huge sum of 572 million was returned to the shareholders through the scheme of buybacks and dividends. Moreover, the company did not use the investment to return cash to the shareholders and neither by increasing the debt (Northington, 2011). This indicates that the company performed at a true potential that helped it to provide benefits to the shareholders without any compromise. Moreover, next continued the manner of investing in new, as well as larger stores. With the enhancement in the base of the customer, it has now spread to more than 71 countries in total and enhancing the image. The distribution, as well as warehouse capacity is enhanced that enables the company to provide better facilities. There has been a strong change in the administrative, selling expenses that contributed to a strong financial performance. The financial position is mainly expressed through availability of funds and the manner in which the company is able to meet the exchanges in foreign exchange rate and the interest rates. Moreover, compliances with the regulation also play an important role in shedding light on the financial position. Next follows a policy of returning cash to shareholders that is in surplus through buyback, as well as special dividend. Moreover, the company is able to maintain a proper structure of debt that goes in favour of the company. It has an appropriate balance of equity plus debt. Adequate finance is needed that is procured through the operational activities. Next is also prone to credit risk and mainly in the form of Directory customer receivables that stands at 712m that projects the biggest item on the balance sheet. Moreover, next performs through a centralized treasury function that is entrusted with the task of meeting the risk that arises from liquidity, interest and currency risks. T he treasury operates through an approved policy of the board. Next has appropriate medium, as well as long term financing that support the operations of the business and even the cash position that is reported to the Board. Therefore, Next Plc financial performance in the year 2015 has been entirely due to the presence of strong policies and financial management. The annual report clearly shows that the progress made by Next Plc has been considerable as compared to the year 2014. Financial Position The financial performance of the company was strong and has been clearly depicted with the help of income statement, balance sheet, and cash flows. The financial performance of the company is signifies through the income statement, balance sheet (Albrecht et. al, 2011). Moreover, appropriate ratios help in the telling about the financial performance of the company. The sales enhanced in the year 2015 to reach 4 billion and the underlying profit got a good boast reaching a high of 782 million. The financial position was strong because the company paid dividend and without any compromise on the profits. Ordinary, as well as special dividend was paid providing benefits to the shareholders. Buy back of the shares was also done that was of 138 m (Next Plc, 2015). The financial position of the company was done by way of equity, reserves, and investments. No over-dependence was present on debt. Hence, it can be said that the policy stressed entirely on equity and derived strong profitabilit y. The share price also received a great boost and increased by 4.8% displaying solidity. A better projection of the financial position is done with the help of ratios. The following are the ratios that are computed: Current Ratio The current ratio is major ratio when it comes to the ability of the company is meeting the obligations. One of the major ratios that indicates the liquidity of the company (Melville, 2013). The current ratio of Next Plc has increased and is heading towards the standard ratio of 2:1 indicating that the company is in a strong financial position to discharge the obligations and there will be no errors in that. Gross profit Ratio One of the strongest profitability indicators that helps to assess the financial position. The GP ratio has increased marginally that indicates the company is able to manage the cost of goods sold in a proper manner (Melville, 2013). Further enhancement can be seen when there is a further control on the cost of goods sold. Net Profit Ratio The Net profit margin of the company has increased in 2015 and has surpassed the percentage of 2014 indicating a strong sales and generation of strong profit numbers. The operating expenses have been in a strong control and hence a ratio has shown an immense change (Horngren, 2013). Operating profit ratio This ratio is termed as ratio of operating profit to sales. In 2015, the operating profit ratio stands at 20.30% as compared to 19.62% in 2014. The progress in this ratio is entirely by dint of a strong control over the operating expenses (Horngren, 2013). Proprietary Ratio A higher proprietary ratio is always needed because it sheds light on the finance that is done by the shareholders (Christensen, 2011). However, there is a decline in the ratio and the company needs to rectify it in the coming year. Return on Equity Return on equity indicates the profit generated by the company by using the funds of tee shareholders (Christensen, 2011). The ratio has shown a marginal increase that indicates the financial position of the company strong and hence able to use the funds of the shareholders in an effective manner. Receivables collection Period The collection period has enhanced in a marginal manner indicating that the management has used the policies in an effective manner. Hence, efficiency of the management is strong. Payables payment period This ratio indicates the payment made to the suppliers. The average payment period has declined indicating that the company will be able to pay the suppliers in a quick span of time (Merchant, 2012). Price / Earnings Ratio The price earnings ratio of Next Plc is a little lower in 2015, it is 17.05 as compared to 17.15 seen in the year 2015. A slight decline is not of a much concern as going by the other ratio the company has a strong stability. Dividend Cover Ratio This ratio states the number of times the shareholder will receive dividend (Lapsley, 2012). However, the ratio has fallen marginally, but going by the historic performance and the current number it is still strong and will continue to provide dividend. Going by the above discussion and the ratio analysis it can be stated that Next Plcs financial position is strong and is bound to continue a strong run in the near future. Limitation of financial statements and ratio Ratio analysis fails to consider the intangible factors like brand, skills, labour organization, culture, etc. These are considered important and vital in the long run. However, ignorance of all factors leads to problem. The ratio analysis is done considering the accounting data that is present in the financial statements. However, the financial statements are not free from error and mismanagement. Therefore, simply relying on such data will not project a clear view and may prove to be wrong (Graham Smart, 2012). Different companies use different method of computation and hence comparison of two different companies from different sector cannot be apt. It is because the ratios can be derived from various methods and there is no standard applicability (Davies Crawford, 2012). Hence, in this scenario it becomes difficult to compare and know the result. The computation depends on the data that is available and one company may give greater emphasis to one set of data as compared to other. Financial statements also suffer from deficiency. They cannot be said as the best tool for evaluation because it is prepared considering the historical data. The historical data is not of much relevance when it comes to the [resent scenario. Planning should not be done considering it because it has flaws in it (Davies Crawford, 2012). Conclusion Going by the ratio analysis and view of the annual report it can be said that the company had a strong year where the entire unit performed in a strong manner and reached great height. The profit was strongly supported by the turnover and the resources were used in an efficient manner. Going by the solvency and liquidity it can be said that the company is a good bargain for the long term and one can strive for outer performance (Brealey et. al, 2011). The company has a strong asset base and the cash flow shows that the company has met the situation with great ease. Moreover, the company is strong when it comes to principle of ethics and corporate governance. It has adhered by all the principles and therefore the progress is fast as compared to the peers. Moreover, the shareholders are also provided benefits in the form of dividend that is a major advantage of the company. This is one of the reasons why the investors have invested in this stock. Year by year the company has achieved s ignificant feat that implies Next Plc is adapted to the internal and external environment. The company strives to perform by providing unique design to the customers and the same can be seen in the coming scenario. At current, the company has 4 million customers and with the strong development and line-up, Next Plc is destined to make further advancements and hence is a strong recommendation. Computation of Ratios Current Ratio CURRENT RATIO 2014 2015 Current assets 1,468.10 1,616.00 Current liabilities 886.6 834.5 Current Ratio 1.655876 1.936489 Working Capital 581.5 781.5 GP Ratio GP RATIO 2014 2015 gross profit 1240.1 1343.4 Sales 3,740.00 3,999.80 GP ratio 33.15775 33.58668 Net profit Ratio NP ratio 2014 2015 Net profit 553.2 634.9 sales 3,740.00 3,999.80 NP ratio 14.79144 15.87329 Operating profit ratio operating profit ratio 2014 2015 operating profit 722.8 812.1 sales 3,740.00 3,999.80 Operating P ratio 19.3262 20.30352 Proprietary Ratio Proprietary Ratio 2014 2015 Share capital 1,55,032 1,52,874 Reserves 2,84,154 2,88,528 Shareholders fund 1,677 1,608 Total assets 2,709 2,709 Proprietary Ratio 0.619158 0.593444 Return on Equity 2014 2014 Net profit 553.2 634.9 Shareholders fund 286.20 321.90 Return on equity (%) 1.932914 1.972352 Ratios Formula Computation 2015 2014 7 Receivables collection Period 365 / Debtor's Turnover Ratio 11.69 11.48 8 Payables Payment Period 365/ Creditor's Turnover Ratio 37.06 40.20 9 Price / Earnings Ratio Market price per share / Earnings per share 17.03 17.15 10 Dividend Cover Ratio (Profit After Tax - Preference Dividend) / Dividend paid to Equity Shareholders 2.94 3.33 References Albrecht, W., Stice, E. and Stice, J 2011, Financial accounting, Mason, OH: Thomson/South-Western. Brealey, R., Myers, S. and Allen, F 2011, Principles of corporate finance, New York: McGraw-Hill/Irwin. Christensen, J 2011, Good analytical research, European Accounting Review, vol. 20, no. 1, pp. 41-51 Davies, T. and Crawford, I 2012, Financial accounting, Harlow, England: Pearson. Investors Chronicle 2015, Next Plc Financial, viewed 3 February 2016, https://markets.investorschronicle.co.uk/research/Markets/Companies/Financials?s=NXT:LSEsubview=Overview. Graham, J. and Smart, S 2012, Introduction to corporate finance, Australia: South-Western Cengage Learning. Lapsley, I. 2012, Commentary: Financial Accountability Management, Qualitative Research in Accounting Management, vol. 9, no.3, pp. 291-292. Libby, R., Libby, P. and Short, D 2011,Financial accounting, New York: McGraw-Hill/Irwin. Horngren, C 2013, Financial accounting, Frenchs Forest, N.S.W: Pearson Australia Group. Melville, A 2013, International Financial Reporting A Practical Guide, 4th edition, Pearson, Education Limited, UK Merchant, K. A 2012, Making Management Accounting Research More Useful, Pacific Accounting Review, vol. 24, no.3, pp. 1-34. Northington, S 2011, Finance. New York, NY: Ferguson's. Next Plc Ltd 2015, Next Plc Ltd. Annual Report and accounts 2015., viewed 3 February 2015, https://www.nextplc.co.uk/~/media/Files/N/Next-PLC-V2/documents/reports-and-presentations/2014/next-annual-report-2015-final-web.pdf.