4th Chapter Financial maketing & services

Marketing & Financial
Services
16-1

OObbjjeeccttiivveess
Copyright © 2009 Pearson Prentice
Hall. All rights reserved. 16-2

Importance of marketing services
Market research involves gathering statistical data to develop
the organisation’s marketing strategy and plan. Advertising and
promotion focus on communicating information with various
departements. The important marketing services are :
A) advertising agencies.
b) market research companies.
c) logistics.
d) customer support
e) crm service providers.
f) public relationship management companies,

What is logistics ?
logistics is the management of the flow of goods from point
of origin to the point of consumption.
Material handeling ,packaging , transportation,warehousing, and
often security are some of the services provided by logistic
undertaking firms.

Inbound v/s Outbond logistics
Inbond logistics :
concentrating
on purchasing and
arranging the inbound
movement of materials,
parts, and/or finished
goods from
manufacturing unit ,
assembly point or
warehouses
• Outbond logistics : related
to the storage and
movement of final
products and related
information flow from the
end of production line to
the end user/consumer.

LOGISTICAL FIELDS
• Various logistical fields are :
• Procrument logistics : consists of activities
like market research, requirements planning,
make-or-buy decisions, supplier management.
• Production logistics: connects to distribution
logistics
• Distribution logistics: main task is to delivery
the finished products to the consumer

Contd…
• Disposal logistics: main function is to reduce
logistics costs and enhance services related to
the disposal of waste produced in production.
• Reverse logistics: the reverse logistics deals
with products being returned back to the
vendors by the buyers.the opposite of reverse
logistics is forward logistics

• Green logistics: describes all atempts to
measure and minimize the ecological impact of
logistics activities. This includes path
optimization, vehicle saturation and use of city
logistics.
• Domestic logistics: within the boundaries of a
region or a nation.
• International logistics: multiple counries.
16-9

• Example:-
• DHL (dalsey hillblom lynn) Is the world’s
largest logistical company headquarted in
Bonn, (germany) with operations in allmost all
countries of the world including:
USA,russia,malaysia,iran,iraq,singapore,china,
canada,india,vietnam,australlia and various
other african countries.

Leasing
• Leasing is the process by which a firm can
obtain the use of certain fixed assets for which
it must make a series of contractual, periodic,
tax-deductible payments.
• The lessee is the receiver of the services of the
assets under a lease contract.
• The lessor is the owner of the assets that are
being leased.
4-11

12
A lease is an agreement whereby the
lessor conveys to the lessee in return for
payment or a series of payments the right
to use an asset for an agreed period of
time
©
2011
IFRS
Found

TYPES OF LEASES
Operating lease
Financial lease
Sale and lease back
Direct lease
Leveraged lease
Domestic lease
International lease

• Situations that individually or in
combination normally indicate a finance
lease:
– lease transfers ownership of the asset to
lessee
– lease term is for the major part of asset’s
economic life
– specialised asset (only lessee can use
without major modifications)

Leasing: Operating Leases
 An operating lease is a cancelable contractual
arrangement whereby the lessee agrees to make
periodic payments to the lessor, often for 5 or fewer
years, to obtain an assets services.
 Generally, the total payments over the term of the lease
are less than the lessor’s initial cost of the leased asset.
 If the operating lease is held to maturity, the lessee
returns the leased asset over to the lessor, who may
lease it again or sell the asset.
 Eg :Mines ,Trucks ,Automobiles

Leasing: Financial (or Capital) Leases
 A financial (or capital) lease is a longer-term lease
than an operating lease.
 Financial leases are non-cancelable and obligate the
lessee to make payments for the use of an asset over a
predefined period of time.
 The total payments over the term of the lease are
greater than the lessor’s initial cost of the leased asset.
 Eg : Financial leases are commonly used for leasing
land, buildings, and large pieces of equipment.

Sale-leaseback arrangement is a lease under
which the lessee sells an back the same asset
for a cash to a prospective lessor and then
leases
The assets are not physically exchanged but
it all happens in records only
This is nothing but paper transaction
It is not suitable for the assets which are not
subjected to depreciation but appreciation

Leasing: Leasing Arrangements
• A direct lease is a lease under which a
lessor owns or acquires the assets that are
leased to a given lessee
• The direct lessor includes manufacturers
finance companies, independent lease
companies

A leveraged lease is a lease under which
the lessor acts as an equity participant,
supplying about 20 percent of the cost of the
asset with a lender supplying the balance.
Here the third party is involved other than
lessee and lessor

• Domestic Lease : when all the parties of the
lease arrangement reside in the same country it
is called domestic lease
• International lease are of two types
• Import and Cross Border Lease
• When lessee and lesorr reside in the same
country and equipment supplier stays in
different country the lease arrangement is called
import lease

Cross Border Lease
• When the lessor and lessee are residing in two
different countries and no matter where the
equipment supplier stays the lease is called
cross border lease

Leasing Arrangements
• Operating leases normally require maintenance
clauses requiring the lessor to maintain the assets and
to make insurance and tax payments.
• Renewal options are provisions that grant the lessee
the option to re-lease assets at the expiration of the
lease.
• Finally, purchase options are provisions frequently
included in both operating and financial leases that
allow the lessee to purchase the asset at maturity—
usually at a pre-specified price.

Leasing: Advantages of Leasing
• The firm may avoid the cost of obsolescence if the
lessor fails to accurately anticipate the obsolescence
of assets and sets the lease payment too low.
• A lessee avoids many of the restrictive covenants
that are normally included as part of a long-term loan.
• Leasing—especially operating leases—may provide
the firm with needed financial flexibility.
• Sale-leaseback arrangements may permit the firm to
increase its liquidity by converting an existing asset
into cash, which may then be used as working capital.

Leasing: Advantages of Leasing (cont.)
• Leasing allows the lessee, in effect, to depreciate land, which
is prohibited if the land were purchased.
• Because it results in the receipt of service from an asset
possibly without increasing the assets or liabilities on the
firm’s balance sheet, leasing may result in misleading
financial ratios.
• Leasing provides 100 percent financing.
• When the firm becomes bankrupt or is reorganized, the
maximum claim of lessors against the corporation is 3 years of
lease payments, and the lessor gets the
asset back.

Leasing: Disadvantages of Leasing
• A lease does not have a stated interest cost.
• At the end of the term of the lease agreement, the
salvage value of an asset, if any, is realized by the
lessor.
• Under a lease, the lessee is generally prohibited from
making improvements on the leased property or asset
without approval of the lessor.
• If a lessee leases an asset that subsequently becomes
obsolete, it must still make lease payments over the
remaining term of the lease.

Capital market refers to a type of financial market, where individuals and
institutions are trading in financial securities. Public and private institutions or
organisations usually list their securities for selling among investors and for
raising their funds. In this market, long term maturity instruments are listed,
which have a period of more than one year.
Capital market has various instruments for investment : Equity shares,
preference shares, debentures, bond.
As we know, before starting a business, a company needs a certain amount
called capital, and capital is raised through issue of shares. Share capital of a
company consists of individual shares of fixed denomination. A share is a share
in the share capital of a company. The share capital is spilt into large number of
units of same value. Each such unit is called Share and the value of each share
is called face value. Shares which a company issue are of two kinds : Equity
shares and Preference shares

1.Equity shares
• Equity shares are those shares which are ordinary in the
course of the company’s business. They are called ordinary
shares. The shareholders do not enjoy the preferential rights
in the respect of payment of dividend and repayment of
capital. Equity shareholders are paid dividend out of the
profits of made by the company. Higher the profits higher the
dividend and lower the profits lower will be the dividend.
They are also called the real risks takers and care takers of
the company and they enjoy the right of voting.

• Features of equity shares
• Owned capital: equity share capital is owned capital
because it is the money of the shareholders who are
actually the owners of the company.
• Fixed value or nominal value: every share has fixed
value or nominal value. For instance, a company
issued 10,000 shares of Rs 10 each. The price which
is indicated here is the fixed or nominal value

.
•Distinctive number: Every share is given a distinct number just like
roll number for the purpose of identification.
•Attached rights: a share gives to its owner the right to receive
dividend, the right to vote, the right to attend meetings, the right to
inspect the books of accounts.
•Return on shares: every share holder is entitled to a return on
shares which is known as Dividend.
•Transfer of shares: equity shares are easily transferable that if a
person buys shares of a particular company and he does not want
them, he can sell them to anyone, thereby transferring the shares in
name of the name of that person.

Contd..
• Benefit of right issue: when a company makes fresh
issue of shares, the equity shareholders are given
certain rights in the company. The company has to
offer the new shares first to equity shareholders in
the proportion to their existing share holding. In case
they do not take up the shares offered to them, the
same can be issue to others.

Contd…
• Benefits of bonus shares: joint stock companies
which make huge profits, issue bonus shares to their
ordinary shareholders out of accumulated profits.
• Irredeemable: equity shares are always
irredeemable that means equity capital is not
returnable during the life time of the company.

4th Chapter Financial maketing & services

Recommended

Recommended

More Related Content

What's hot

What's hot (18)

Similar to 4th Chapter Financial maketing & services

Similar to 4th Chapter Financial maketing & services (20)

Recently uploaded

Recently uploaded (20)

4th Chapter Financial maketing & services

Editor's Notes