Education

When an acquirer company takeovers a target company by going directly to the latter’s shareholders or fighting back till the management is replaced to get the acquisition approved is called as a hostile takeover. It can be accomplished with a tender offer or through a proxy fight. Hostile takeover’s key characteristic is that the management of a target company does not want this deal to go through. At times, company’s management would defend against such unwanted takeovers by using controversial strategies like poison pill, golden parachute, crown-jewel defense or the Pac-Man defense. A company can protect themselves from hostile takeovers by establishing stocks with differential voting rights (DVR). Or else, they can establish an employee stock ownership program (ESOP), a tax-qualified plan where the employees own substantial interest in the company. For example, in 2011, billionaire activist investor Carl Icahn tried to acquire household goods giant Clorox by attempting ...

A person who is responsible for managing other employees directly and also the operations of a business while reporting to a higher ranked manager is called as a Line Manager. He is often used interchangeable for the role of direct manager. Line manager plays a pivotal role in the operation of many firms. He is responsible for managing employees and resources in pursuit of achieving certain functional and organizational goals. His responsibilities include recruiting and hiring people to fill the vacant positions in a team; provide training and support new hires; cross-train employees to ensure proper job rotation and reduce assignment coverage gaps; provide coaching and performance feedback to team members; communicate and ensure that there is proper understanding of functional & departmental goals, etc. Line or direct managers directly influence the level of employee satisfaction and engagement, directly linking to organizational productivity and customer satisfacti...

Just-in-Time is referred to as a type of inventory management system where products are acquired just a couple of hours before they are put to use. This system is used by organisations to decrease the unnecessary burden of inventory management, if the demand for products are lower than the inventory that has been raised. It's objective is to raise inventory turnover and to reduce costs like holding costs and others associated with it. This term was popularised by Japanese firms which produced goods on the same day they received an order Just-in-Time system prevents the requirement to carry large inventories and bear the costs associated with it by the manufacturer A proper Just-in-Time system is when there is a synchronisation between the manufacturer and the supplier when it comes to quality and delivery of material or products. There is a lot of pressure in this process as the manufacturers must be ready with the material as per the quantity mentioned within the time ...

Incoterms, also known as International Commercial Terms, are a series of pre-defined commercial terms that are published by ICC, International Chamber of Commerce, regarding international commercial law. It is a series of three-letter trade terms which relates to common contractual sales practices. Incoterms rules are intended basically for clear communication of costs, tasks and risks associated with international or global transportation and delivery of goods. It informs sales contracts which defines respective obligations, risks and costs involved in the goods delivery from seller to buyer but they do not themselves conclude a contract, currency or credit terms, determine price payable, govern contract law or define where title to goods transfers. These rules are accepted by legal authorities, governments and practitioners all around the world for the interpretation of most commonly used terms in international trade. It is intended to reduce uncertainties arising altogeth...

An item that has a limited life span and whose value irreversibly declines over a period of time is called as a wasting asset. For example, a machinery or a vehicle. Wasting asset, in financial markets are referred to as options contracts. Options are the most common type of wasting asset in investing. Its value has two components – time value and intrinsic value. When the expiration date for options nears, the time value of it gradually decreases to zero. During expiration, its worth is only in its intrinsic value. Investors should always be aware of the duration of such items (expiration), especially about options. Traders trading options can turn this problem or flaw into a benefit by writing options. Sellers, known as writers, of options collect money at the start of their contracts and it lets them keep the entire amount of money with them, called as premium, if the options expire worthless. In contrast, the options buyer loses the entire money paid, also called as pr...

Something for something or a favour for a favour is what this Latin term Quid pro quo means. It describes a situation when two parties engage in a mutual agreement to exchange goods and services where one transfer is contingent upon a reciprocal transfer. It is used in business and legal contexts to mean that a good or service has been exchanged to another party for something having equal value. The key to a quid pro quo business agreement is consideration in the form of a good, service, financial instrument or money. A bartering arrangement between two parties is a good example of Quid pro quo, in the political world, sometimes refers to giving financial support or otherwise to a political candidate in exchange for the expectation of direct support for an activity that is of the political benefactor. It may appear as bribery in these cases and such support must always be tested prior itself for conflicts of interest. Quid pro quo is considered to be of great value...

A tax based on an item’s assessed value like real estate or personal property is called as Ad Valorem Tax. The most common type of it are property taxes levied on real estate. However, it may also extend to a number of tax applications like that of import duty taxes on foreign goods. “Ad valorem” means according to value in Latin. All of it is levied based on the determined value of the item that is being taxed. Ad valorem, in the most common application like municipal property taxes and real estate of property owners, is assessed periodically by a public tax assessor to determine its present value. To compute tax levied annually on a property owner by government entity or municipal, the assessed value of the property is used. It is generally levied on personal and real. Real property includes buildings, land and other structures with any improvements made to the property. Personal property ad valorem taxes are most commonly levied on major personal properties like car and...

Brand Language A body of words, phrases and terminologies used by an organisation to describe their purpose or in reference to their products is called as Brand Language. It is used in marketing to connect certain words or ideas of companies or products by consumers. When developing a brand language, the two fundamental components used are word choice and tone. The vocabulary used in advertising or marketing is what is meant by word choice whereas the attitude of the advertisement is referred to as tone. Tone is not limited to language as it can be incorporated through delivery or visual element. Brand Language is a part of verbal brand identity which includes naming corporation and products they sell and also taglines, tone and idiosyncratic wording choices. The primary function of brand language in advertising industry is to identify a company or product and differentiate them from its competitors. It is used to grab the attention of consumers and relay information o...

Purchasing Power Parity A popular metric to compare economic productivity and standards of living between countries and across time is Purchasing Power Parity (PPP). It is an economic theory which compares the currencies of different countries through a “basket of goods” approach. As per this concept, two currencies are said to be in equilibrium or at par when a basket of goods (considering the exchange rate) is priced for the same amount in both countries. Law of One Price (LOOP) is another economic theory that is closely related to PPP. It is calculated by using the formula: S = P1/ P2 where, S is represented by currency 1’s exchange rate to that of currency 2’s P1 denotes cost of good in currency 1 P2 denotes cost of good in currency 2 PPP is often referred as a difficult task considering the amount of data to be collected and the complexity involved in drawing comparisons. The International Comparison Program was established to facilitate this during the year 1968, w...

Reverse Takeover (RTO) A Reverse Takeover or RTO is a type of merger engaged by private companies to become publicly traded by not resorting to Initial Public Offering (IPO). The transaction requires reorganization of capitalization of the company being acquired. At times, the private company is bought is by public listed company via asset swap and issuing shares. Shareholders of the private company purchases control of the public shell company in reverse takeover and then merges it with that of private company. Here, shell is referred to a publicly traded corporation as all that exists for the original company is the organizational structure. The shareholders of the private company receives a substantial share majority of the public company and a control over its board of directors. This transaction can be completed in a few weeks and it involves the private and shell company exchanging data about each other, negotiating the terms for merger and signing an agreement for sha...

Irrational Exuberance The enthusiasm of investors that drives the prices of assets up to levels that are not supported by fundamentals is called as irrational exuberance. It was a phrase used by Alan Greenspan, the then-Federal Reserve Board chairman, who mentioned in his speech at American Enterprise Institute during the dot-com bubble in 190s. This interprets a warning that the market could be overvalued. It is believed that irrational exuberance gives rise to creating a bubble for the prices of assets. When the bubble bursts, investors engage in a panic selling method where he might even reduce the selling price lower than its worth, which could also cause recession. The phrase became a catchphrase during the economic recession that followed the stock market collapse in the year 2000 when bumper stickers read “I want to be irrationally exuberant” again in Silicon Valley and other places. The term gained a new currency after the US housing market collapse in the ye...

A speculation in securities or buying and selling any financial instruments like stocks, futures, etc. with a goal of making profit from the difference in buying and selling price on the same trading day is called as day trading. It was initially only available to financial companies like banks as they were the only ones having access to the exchanges and market data. But with the development of technology and Internet, individual traders now have direct access to those exchanges and market data enabling trades at very low cost. There are different styles of day trading which are suited to different day traders according to their personalities. From short-term trading like scalping where the positions are only held for a few minutes or seconds to longer-term swing and position trading where the position might be held for the whole trading day. It also has different types of trade like trend trades, ranging trades and counter-trend trades. Trend trades are those...