Wednesday, 31 August 2016

Brand Equity


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What is brand equity?
Ans: Brand equity refers to a value premium that a company generates from a product with a recognizable name, when compared to a generic equivalent. Companies can create brand equity for their products by making them memorable, easily recognizable, and superior in quality and reliability.
Mass marketing campaigns also help to create brand equity.

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Brand equity has three basic components: Consumer perception, negative or positive effect, and the resulting value. First and foremost, brand equity is built by consumer perception, which includes both knowledge and experience with a brand and its products. The perception that a consumer segment holds about a brand directly results in either positive or negative effects. If the brand equity is positive, the organization, its products and its financials can benefit. If the brand equity is negative, the opposite is true.
     Finally, these effects can turn into either tangible or intangible value. If the effect is positive, tangible value is realized as increases in revenue or profits and intangible value is realized as marketing as awareness or good will. If the effects are negative, the tangible or intangible value is also negative. Foe example, if consumers are willing to pay more for a generic product than for a branded one, the brand is said to have negative brand equity. This might happen if a company has a major product recall or causes a widely publicized environmental disaster.
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Brand equity is a phrase used in the marketing industry which describes the value of having a well-known brand name, based on the idea that the owner of a well-known brand name can generate more money from products with that brand name than from products with a less well known name, as consumers believe that a product with a well-known name is better than products with less well-known names.
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       Brand equity refers to the value of a brand. In the research literature, brand equity has been studied from two different perspectives: Cognitive phychology and information economics. According to cognitive phychology, brand equity lies in consumer's awareness of brand features and associations, which drive attribute perceptions. According to information economics, a strong brand name works as a  credible signal of  product quality for imperfectly informed buyers and generates price premiums as a form of return to branding investments. It has been empirically demonstrated that brand equity plays an important role in the determination of price structure and in particular, firms are able to charge price premiums that derive from brand equity after controlling for observed product differentiation.
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Monday, 29 August 2016

Private equity strategies

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How many type of private equity strategies investors should know?
Ans: Private equity is an asset class that involves the use of equity securities and debt to purchase shares of private companies or those of public companies that will eventually be delisted from the public stock exchange. In 2014, the aggregate capital funds was $495. Bn. with 79% of LP's looking to either maintain or increase their allocations to private equity in the next 12 months, if is clear that appetite for this asset class remains strong. Here are 7 private equity strategies investors should know... 
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(1.) Venture Capital: Venture capital refers to investments made in startups and young companies with little to no track record of profitability venture capital investments are made with the goal of generating out-sized returns by identifying and investing in the most promising companies and profiting from a successful exit. Venture capital is a growing asset class. According to the national venture capital association(NVCA), new commitments to venture capital funds in the U.S increased from $17.7 Bn in 2013 to $30 Bn In 2014.
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(2.) Real Estate: Private equity real estate involves pooling together investor capital to invest in ownership of various real estate properties. Four common strategies used by private equity real estate funds are: -
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(A). Core: Investments are made in low-risk /low-return strategies with predictable cash flows.
(B.) Core Plus: Moderate-risk / moderate-return investment in core properties that require some form of value added element.
(C.) Value Added: A medium-to-high-risk / medium-to-high-return strategy which involves the purchasing of property to improve and sell at a gain. Value Added strategies typically apply to properties that have operational or management issues, require physical improvements, or suffer from capital constraints.
(D.) Opportunistic: A-high risk / high-return strategy, opportunistic investments in properties require massive amounts of enhancements. Examples include investments in development, raw land, and mortgage notes.
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(3.) Growth Capital:- Growth capital investments are made in mature companies with proven business models that are looking for capital to expand or restructure their operations, enter new markets, or finance a major acquisition. Typically, these are minority investments, and companies that take on growth capital are more mature then venture-funded companies. Such companies generate revenue and profits that may not be enough to fund big-expansions, acquisitions or other investments while growth equity may sound similar to venture capital and control buyouts, there are some key differences.
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(4.) Mezzanine Financing: While some companies might take on growth capital to finance their expansions, mezzanine financing is an alternate way. Mezzanine financing consists of both debt and equity financing used to finance a company's expansion with mezzanine financing companies take on debt capital that gives the lender the right to convert to an ownership or equity interest in the company if the loan is not repaid in a timely manner and in full. Companies that take on mezzanine financing must have an established product and reputation in the industry, a history  of profitability, and a viable expansion plan.
                              A key reason why a company may prefer mezzanine financing is that it allows it to receive the capital injection needed for business without having to give up a lot of equity ownership(as long as it is able to pay back its debt on time and in full). Another advantage of taking on mezzanine financing is that it may be easier to receive traditional bank financing since it's treated like equity on a company's balance sheet.
                            On the flip side, there are some disadvantage to companies that take on mezzanine financing since mezzanine financing is not collateralized, the lender takes on greater risk. There fore mezzanine financing is typically conducted by unconventional lending institutions versus standard lending institutions. As a result, interest rates and terms can be much higher than traditional debt financing.

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(5.) Leveraged Buyouts(LBO): Leveraged buyouts are conducted when a company borrows a significant amount of capital (from loans and bonds) to acquire another company. Private equity firms make buyout investments when they believe that they can extract value by holding and managing a company for a period of time and exiting the company after significant value has been created.
                                                                                                                                 Leveraged buyouts typically utilize debt to finance the buyouts, and the firm performing the LBO has to provide a small amount of the financing (typically around 90% of the cost in financed through debt.)
                                                                                                                      The goal of a leveraged buyout is to generate returns on the acquisition that will outweigh the interest paid on the debt. For the firm that's performing the LBO, this is a way to generate high returns while only risking a small amount of capital.Oftentimes a financial sponsor is involved and the assets of the company being acquired are used as collateral for the debt. Private equity firm will then either (1.) Sell off part of the acquired company or (2.) Use the acquired company's future cash flows to pay off the debt and then exit a profit.
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(6.) Special Situations aka Distresses PE: Special situations funds specifically target companies that need  restructuring, turnaround, or are in any other unusual circumstances. Investments typically profit from a change in the company's valuation as a result of the special situation. Examples of special situations include a large public company. Spinning off one of its smaller business unit into its own public company, tender offers mergers and acquisitions and  bankruptcy proceedings. Besides private equity funds, hedge funds also implement this type of investment.

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(7.) Fund Of Funds: A "fund of funds"(FoF) is an investment strategy where by investments are made in other funds rather than directly in securities, stocks, or bonds.      
     
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                                                                                    By investing in a fund of funds, investors are granted diversification and the ability to hedge their risk by investing in various fund strategies. Unfortunately, fund of funds may be costly because investors are subject to an additional layer of fees. In addition to the management fees and a performance fee that's charged at the underlying individual fund level, investors have to incur additional fees at the FoF Level.     
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Private Equity


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What is private equity?
Ans: In finance, Private equity is an asset class consisting of equity securities and debt in operating companies that are not publicly traded on a stock exchange. A private equity investment will generally be made by a private equity firm, a venture capital firm or an angel investor. Each of these categories of inventories of investor has its own set of goals, preferences and investment strategies, however, all provide working capital to a target company to nature expansion, new-product development, or restructuring of the company's operations, management, or ownership.
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Private equity is a source of investment capital form high net worth individuals and institutions for the purpose of investing and acquiring equity ownership in companies. partners at private-equity firms raise funds and manage these monies to yield favorable returns for their share holder clients, typically with an investment horizon between four and seven years.

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                                                                                        These funds can be used in purchasing shares of private companies, or in public companies that eventually become delisted from public stock exchanges under go-private deals. The minimum amount of capital required for investors can vary depending on the firm and fund raised. Some fund have a $250,000 minimum investment requirements; others can require millions of dollars.

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Private equity has successfully attracted the best and brightest in corporate America, including top performers from fortune 500 companies and elite strategy and management consulting firms. Top performers at accounting and law firms can also be recruiting grounds, as accounting and legal skills relate to transaction. Support work required to complete a deal and translate to advisory work for a portfolio company's management.
                                       The fee structure for private-equity firms various, but it typically consists of a management fee and a performance fee(in some cases, a yearly management fee of 2% of assets managed and 20% of gross profits upon sale of the company). How firms are incentivized can vary considerably.
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It is a source of investment capital from high net worth individuals with the goal of investing and acquiring equity ownership in companies. The investments in those companies will generally be made by a private equity firm, but also by a venture capital firm or an angel investor.
                                                                                                Private equity is not the name of a solider in the U.S Army(though there is a connection of sorts as well see later). No, it is a way of doing business to make money for large investments of capital.
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Friday, 26 August 2016

Importance Of Sweat equity

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What is importance of sweat equity?
Ans: Sweat equity is as valuable as cash equity. In the case of real estate, sweat equity is realized when selling a home for a profit. In the case of startups, sweat equity is typically rewarded through distributing stock or other types of equity in a new business.
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Sweat equity is essential when cash is not plentiful. When fixing up and selling homes or forming a new company, people typically have more time then money. They must work hard leveraging their time so they increase their revenues. Increasing the money supply means owners may continue focusing on income producing activities while delegating other tasks to paid workers. Therefore, Sweat equity must be carefully measured in terms of the long-term value of an individual's efforts, the commitment of participants and the value each adds to the overall goal of the business.
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For example, Two women start a computer consulting company. Rather than paying for advertising, they provide services for family and friends, make cold calls to potential clients, and work off referrals for building their client base. The women make themselves available at all times so they can help their clients with all their computers needs. After three years , the owners sell their business to a larger consulting company for $ 4 million. The owners built most of their company through sweat equity and made a very large profit because of it.
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Sweat Equity

What is sweat equity?
Ans: Sweat equity is contribution to a project or enterprise in the form of effort and toil. Sweat equity, in the context of real estate, refers to value - enhancing improvements made by home owners to their properties.
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             In business, for example, an entrepreneur who invested $100,000 in her startup sells a 25% stake to an angel investor for $500,000 gives the business a valuation of $2 million(i.e $500,000/0.25), of which the entrepreneur's share is $1.5  million, subtracts her initial investment of
$100,000 and has a sweat equity of $ 1.4 million.

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Sweat equity is the non-monetary contribution individuals make when developing a project, such as rehabilitating homes for resale or starting a new business venture. For example, a person fixing up and selling homes spends time repairing and renovating the properties. A newly formed company's founders, advisors and board members contribute their time building the business.

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Sweat equity is used to describe the non-financial investment that people contribute to the development of a project such as a start-up business. for example, sweat equity is counted from the founders of the company, as well as advisors and board members.
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Wednesday, 24 August 2016

Equity Market

What is equity market?
Ans: The market in which shares are issued and traded, either through exchanges or over -the-counter markets. Also known as the stock market, it is one of the most vital areas of a market economy. Because it gives companies access to capital and investors a slice of ownership in a company with the potential to realize gains based on its future performance.
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Equity markets are the meeting point for buyers and sellers of stocks. The securities traded in the equity market can be either public stocks, Which are those listed on the stock exchange, or privately traded stocks. Often, Private stocks are traded through dealers, which is the definition of an over - the - counter market.
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A market that gives companies a way to raise needed capital and gives investors an opportunity for gain by allowing those companies stock shares to be traded. Also called stock market.
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Tuesday, 23 August 2016

Equity

What is equity?
Ans: - Equity is nothing but ownership; Ownership in business. For example if you hold to 10 shares of XYZ company out of total 1000 shares floated by the company. You are 1% owner in xyz's business. So if XYZ will makes losses your capital will go down (that will be reflected in stock price). A general question - If we ask you to start your own new business how much time do you think you would like to give before you start thinking whether its really worth it or not. 1 week, 1 month, 1 year. You must be thinking we are joking. Ideally we should  think for some long time when we enter in any legitimate business. But this common principle we don't really apply when we invest in others business which can be done through shares/equities.
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  When we buy equities, we start looking at the price next day or next week. For many who call them selves investors, long run is 1 month. But do you think the management of the business of which we buy shares really looks at their business growth in such a short period.

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In equities, the rule of farming applies.
Ans: This basic rules states that:-

(I). You first have to sow a seed.
(II). keep watering it for it to grow.
(III). Wait for some time with patience.
(IV). With passage of time, you will get fruits of your hard work and patience.
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Equity is how you divide up ownership of your company. A company has a certain number of shares (an arbitrary number that you decide) and each person gets a certain number of shares. They are called share holders.

Your ownership of the company = your shares/the total number of shares.

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Thursday, 18 August 2016

Type Of Financial Advisors

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How many type of financial advisors?
Ans: there are two different types of financial adviser and advice:
(I) Independent 
(II) Restricted
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(I) Independent advisers also called independent financial advisers (IFAs), research and consider all retail investment products or providers available to meet the client's needs. They must provide clients with unbiased and unrestricted advice.
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(II) Restricted advisers only offer limited advice, focusing on a particular range of products or on products from one, or a limited number, of providers.                                                                                                                                              All advisers must inform their clients, before providing advice, whether they provide independent or restricted advice.                                                 
                                                                       Tasks vary depending on the role but typically involve.
(I)  Contacting clients and setting up meetings, their within an office environment or in client's homes or business premises;
(II) Conducting in-depth review of clients financial circumstances, current provision and future aims;
(III) Analyzing information and preparing plans best suited to individual clients requirements;
(IV)  Completing risk analysis;
(V) Researching the market place and providing clients with information on new and existing product and services;
(VI) Designing financial strategies;
(VII) Assisting clients to make informed decisions;
(VIII) Researching information from various sources, including providers of financial products;
(IX) Reviewing and responding to clients changing needs and financial circumstances;
 (X) Promoting and selling financial products to meet given or negotiated sales targets;
(XI) Negotiating with product suppliers for the best possible rates;
(XII) Liaising with head office and financial services providers.
(XIII) Communicating with other professionals, such as estate agents, solicitors and valuers;
(XIV) Keeping up to date with financial products and legislation.
(XV) Producing financial reports;
(XVI) Contacting clients with new of new financial products or changes to legislation that may effect their savings and investments;
(XVII) Meeting the regulatory aspects of the role e.g. requirements for disclosure cost of the services provided and also the advised products.
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Financial Advisor

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What is Financial Advisor?
Ans: A financial advisor provides financial advice or guidance to customers for compensation. Financial advisors, or advisers can provide many different services, such as investment management, income tax preparation and estate planning. They must carry the series 65 license to conduct business with he public ; a wide variety of licenses are available for the services provided by a financial advisor.
"Financial advisor" is a generic term with no precise industry definition, and many different types of financial professionals fall into this general category. Stock brokers, insurance agents, tax prepares, investment managers and financial planners are all member of this group. Estate planners and bankers may also fall under this umbrella.
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Financial advisers provide clients with specialist advice on how to manage their money. The role involves researching the market place and recommending the most appropriate products and services available, ensuring clients are aware of and understand product that best meet their needs and then securing a sale.
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Financial advisors may specialize in particular products, depending on their clients, such as selling employee pension schemes to companies or offering mortgage , pension or investment advice to private clients. Others are generalists, offering advice to clients in all of these areas, as well as saving plans and insurance.
                           In order to give financial advice, advisers must have professional qualifications and follow strict financial industry rules.
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Financial advisers may be known as financial planners or wealth managers.
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Wednesday, 17 August 2016

Benefits of effective legacy planning

What is benefits of effective legacy planning?
Ans: (I) Future support of selected heirs and/or your assets during your lifetime.
(II) The ability to specify and control how your assets will be used following your death.
(III) Favorable tax treatment for estate and income.
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 Legacy planning is an essential part of your family's wealth management resources. A legacy plan helps the the continuity of not just year wealth, but also serves to preserve and grow the things money can't buy: values, ideals, integrity.
                                         Many people think that legacy planning boils down to drawing up an estate plan. But an estate plan is just one component of legacy planning. An estate plan sets up structures to deal with the transfer of property to your beneficiaries, such as wills, trusts or other vehicles. These documents will help dispose of your property effectively and efficiently, and may minimize the burden of estate taxes on your heirs.
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A legacy plan may cover many areas of your life retirement, goals for furthering education, strategic family philanthropy and creating a shared family mission or addressing important issues of a family business. It begins with a conversation- sitting down and talking frankly about what wealth stands for beyond the number on a balance sheet. For example, it you value philanthropic giving, you could get your loved ones involved in the charities you support. Or may be you are interested in setting up a fund to cover education cost for younger family members. Or you may need to create a succession plan for your business.
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