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Protecting Your Business Cash Flow

Filed Under: Carlos Hank Rhon Financial Decisions, Rhon Financial Statements by admin — Leave a comment
October 19, 2011

Below are steps you can take to protect your cash flow:

Maximize your profitability: Eliminate unnecessary expenses. Seek continuous improvement and streamline your business processes. Develop effective sales and marketing strategies to increase your customer base, sales revenue and total profits.

Make sure your customers pay on time: Be pro-active in your accounts receivable practices. Ensure that the payment period described in your terms and conditions of sale is suitable for your business. Be proactive in debt collection and overcoming payment disputes. If necessary, business owners can offer incentives to motivate customers to pay on time.

Take advantage of credit facilities for large purchases: Purchasing on credit can help free up your cash reserves. Large capital expenses can be paid off in smaller increments over time. This minimizes the impact of the expenditure on your cash flow.

Maintain the correct inventory levels: Holding too much stock locks up your cash reserves. Ensure that you have enough stock to meet demand without incurring excessive inventory surpluses.

Develop a budget: This can be used to forecast and monitor your business performance over a specific period of time. A budget provides the organization with a plan for the allocation of company resources. In addition to this, a budget can also prove to be helpful when negotiating with the bank or other lending institutions.

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Business Sustainability and Cash Flow

Filed Under: Carlos Hank Rhon Financial Decisions, Carlos Hank Rhon Profits, Rhon Financial Statements by admin — Leave a comment
October 17, 2011

Maintaining a flourishing cash flow is a critical aspect to maintaining business sustainability and keeping your shareholders satisfied. Cash flow problems are a very common cause of business failure. It is important to make a distinction between cash flow and profitability. Both cash flow and profitability are needed to secure the long term success of your business. However, they will each impact your business in different ways.

A business can be profitable, but it may not have enough cash reserves to cover financial obligations. For this reason, even a profitable business, can be forced to close down if it does not have cash flow available when it is needed.

Alternatively, a business that is not profitable can still have a surplus of cash resources. Naturally, this surplus will be eroded if it cannot be replenished with company profits. If the amount cash flowing out of your business exceeds the amount of cash coming into your business, you cannot continue to operate in the long term. Understanding your company’s financial statements is vital to this process.

Finding the optimum level of profitability depends on maximizing your gross profit on goods to services sold. Innovative sales and marketing strategies can help you increase sales volume, revenue and total profits. On the other end of the spectrum, businesses can increase their profit margins by controlling business expenditure and running leaner and more streamlined operations.

It is essential to take a pro-active approach in managing business cash flow. Ensure that you do not misjudge the level of cash reserves needed to meet business requirements. Businesses should be vigilant in estimating the impact of a cash flow shortfall before it actually eventuates.

Effective cash flow management can be used to uncover periods when your business will be low on cash reserves. This helps you put a contingency plan in place to overcome challenges. An effective cash flow forecast will assist you in meeting financial commitments during periods when your business is vulnerable.

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Analysis of Financial Statements for Understanding

Filed Under: Carlos Hank Rhon Financial Decisions, Carlos Hank Rhon Investing, Carlos Hank Rhon Profits, Rhon Financial Statements by admin — Leave a comment
September 20, 2011

All financial statements are essentially historically historical documents and usually begin with a letter to the shareholders. They tell what has happened during a particular period of time. However, most users of financial statements are concerned about what will happen in the future. Stockholders are concerned with future earnings and dividends. Creditors are concerned with the company’s future ability to repay its debts. Managers are concerned  with the company’s ability to finance future expansion. Despite the fact that financial statements are historical documents, they can still provide valuable information bearing on all of these concerns.

Financial statement analysis involves careful selection of data from financial statements for the primary purpose of forecasting the financial health and future favorable results of the company. This is accomplished by examining trends in key financial data, comparing financial data across companies, and analyzing key financial ratios.

Managers and the board of directors are also widely concerned with the financial ratios. First the ratios provide indicators of how well the company and its business units are performing. Some of these ratios would ordinarily be used in a balanced scorecard approach. The specific ratios selected depend on the company’s strategy. For example a company that wants to emphasize responsiveness to customers may closely monitor the inventory turnover ratio. Since managers must report to shareholders and may wish to raise funds from external sources, managers must pay attention to the financial ratios used by external inventories to evaluate the company’s investment potential and creditworthiness. Another key part of these statements is the balance sheet and one should be able to properly analyze this information.

Although financial statement analysis is a highly useful tool, it has two limitations, explains Carlos Hank Rhon. These two limitations involve the comparability of financial data between companies and the need to look beyond ratios. Comparison of one company with another can provide valuable clues about the financial health of an organization. Unfortunately, differences in accounting methods between companies sometime makes it difficult to compare the companies’ financial data. For example if one company values its inventories by the LIFO method and another firm by average cost method, then direct comparisons of financial data such as inventory valuations are and cost of goods sold between the two firms may be misleading. Some times enough data are presented in foot notes to the financial statements to restate data to a comparable basis. Otherwise, the analyst should keep in mind the lack of comparability of the data before drawing any definite conclusion. Nevertheless, even with this limitation in mind, comparisons of key ratios with other companies and with industry averages often suggest avenues for further investigation.

An inexperienced analyst may assume that ratios are sufficient in themselves as a basis for judgment about the future. Nothing could be further from the truth. Conclusions based on ratio analysis must be regarded as tentative. Ratios should not be viewed as an end, but rather they should be viewed as a starting
point, as indicators of what to pursue in greater depth. They raise may questions, but they rarely answer any question by themselves. Strategy and market perception are also factors in analyzing reports. In addition to ratios, other sources of data should be analyzed in order to make judgments about the future of an organization. They analyst should look, for example, at industry trends, technological changes, changes in consumer tastes, changes in broad economic factors, and changes within the firm itself. A recent change in a key management position, for example, might provide a basis for optimism about the future, even though the past performance of the firm may have been mediocre.

Few figures appearing on financial statements have much significance standing by themselves. It is the relationship of one figure to another and the amount and direction of change over time that are important in financial statement analysis.

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Defining the Financial Statements

Filed Under: Carlos Hank Rhon Financial Decisions, Rhon Financial Statements by admin — Leave a comment
September 20, 2011

What is a financial statement? In common term, financial statement shows you where a company’s money came from, where it went and where it is now. Reading a financial statement can be hard to some people but once you learned the basics of understanding financial statements, it will be simple just same as reading an electricity, credit card bill or bank statement of account. Actually, is is not difficult. If you know how to understand a billing statement from banks or service companies, you can learn how to learn a financial statement. Understanding basic financial statement is easy, it just requires little patience.

Maybe you are wondering why do you need to understand a financial statement. As I said earlier, a financial statement will impart you a knowledge of a company’s financial situation and history. It is much important for a person to be familiar with the financial situation of a firm before he buys its stocks or some investment it have.

A financial statement will tell you if a company has many property or many liabilities. It is designed in order to easily understand by ordinary persons who are not inclined to complex financial accounting or calculations. It is really simple and usually it is in tabulated form just like to any kinds of billing statements.

A financial statement may be categorized into four parts: balance sheets, income statements, cash flow statements and statements of shareholder’s equity. Balance sheets show what a company owns or its assets and what it owes or spends at a fixed point in time for example in a financial year. Income statement is a company’s financial statement that shows how the revenue is transformed into the net income.

In a financial statement, a cash flow statement details how cash is generated and out in the balance sheet and income of the company and shows the investing and financing activities of the company. The fourth portion is the statement of shareholder’s equity that outlines the changes on the company’s shareholders over the time.

In conclusion, a financial statement is a helpful tool to evaluate if the company is a good company to purchase in terms of investing in its stocks. It is the representation of the financial condition of the company and it gives the over-all performance made by the company in a particular period.

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Choosing Your Investments – Equity Funds

Filed Under: Carlos Hank Rhon Financial Decisions, Carlos Hank Rhon Funds, Carlos Hank Rhon Investing, Rhon Investment Fund Tips by admin — Leave a comment
September 20, 2011

While an equity fund is simply a fund that invests in stocks, there are various types of equity fund types to invest in. To effectively choose an equity fund that’s right for you, it’s first vital that you understand these different types of equity funds. Some of the different types of equity fund types available to investors include: the growth fund, value fund, index fund, sector fund, income fund, balanced fund, and asset allocation funds. What’s more, each type of fund is different from the next in the way it functions and the results it delivers in terms of return on investment.

So it’s ultimately wise to make an informed decision when it comes to investing in any type of fund. When many people look to invest, they’re drawn to do so with companies that demonstrate rapid growth. For these investors, there’s the growth fund. Growth companies tend to re-invest a significant amount of their profits for research and development, and support investments that are based on generating capital gains rather than income.

Value funds, on the other hand, invest in “value” stocks – stocks with companies that are usually older and more established which allows you to invest and profit. These types of funds tend to be more stable, but don’t usually demonstrate the rapid movements of growth funds. Another type of fund investment – the index fund – follows a market index rather than being actively managed. This type of fund has a low management fee, but also usually has a minimal turnover of securities.

Meanwhile sector funds invest in a particular area of an industry – such as gold or technology funds – and offer high appreciation potential. However, these equity funds can also pose a higher risk to the investor.

Another type of equity investment has to do with the income fund. Income funds focus on current income over growth – an objective that can be achieved by investing with companies that have a proven history of dividend payments. The balanced fund, however, invests in bonds for income and stocks for appreciation. Asset allocation funds divide investment between income stocks, growth stocks, and cash or money instruments. Advisers and fund managers then switch the percentage of  holdings in each category based on how that group performs.

If you’ve invested in funds before, you might have an idea of the type of equity fund you want to invest in now. However, if you’re new to equity investment, it’s always best to seek professional advice from an investment specialist. An adviser can take into account your unique financial goals to suggest an investment fund that’s right for you. He or she can also outline any potential gains and risks of equity investment, ensuring you’re aware of what investment entails before making any financial moves.

Many people today are familiar with equity funds – funds that invest in equities, or, what’s commonly known as stocks. However, the term can also cause confusion, considering the various types that are available on the market – each serving a unique purpose. So, what are the various types of funds available to consumers, and how can you find one that’s right for your financial goals and needs?

To begin, it’s important to differentiate between equity funds and mutual or exchange-traded funds. Equity funds are usually held in stock or cash, as opposed to notes, bonds or other securities – which is typically the case with mutual or exchange-traded funds. The intention of an equity fund is capital growth over a long term, inclusive of dividends and interest, while other types of funds aim to achieve capital growth over a shorter amount of time. Specific funds of this type might also concentrate on a particular sector of the market, or may be tailored toward a certain level of risk.

Some of the various types of equity funds include: index funds, growth finds, value funds, and sector (specialized funds). An index fund invests in securities to mirror a market index, with minimum securities turnover. As a result, index funds generally have lower management costs than other types of funds. Growth funds, however, invest in company stocks that are growing rapidly and typically focus on generating capital gains rather than income. Value funds invest in “value” stocks, with the typical value fund clients being older, more established businesses that pay dividends.

And finally, sector funds track one area of industry, with a minimum of 25 per cent of a company’s assets invested in its specialty. This type of fund offers high appreciation potential, but may also pose a higher risk to the investor. Examples of sector funds include gold funds (gold mining stock), technology funds, and utility funds.

When considering investing in an equity fund, it’s always a good idea to equip yourself with knowledge on the options that are available to you, as well as what each option entails. However, one of the most effective ways to determine which type of equity fund is right for you is to speak with a qualified specialist. A specialist can ask you all the right questions with regard to your financial goals and needs – not to mention take into account important aspects of your business, such as its ‘cap’ size – to ultimately point you in the direction of a suitable fund investment option.

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Hedge Funds and Return on Investment

Filed Under: Carlos Hank Rhon Funds, Carlos Hank Rhon Investing by admin — Leave a comment
September 20, 2011

Because sophisticated investors demand higher returns for their investments, hedge fund investments are created to fill that need. Once a hedge fund can show a steady track record of high performance (much higher than the regular markets), money begins to flow in. The more explosive the return on investment the greater the allure of the hedge fund. No two hedge funds are alike; they all function independently and in general they become a reflection of the personality of their managers, but in particular of the personality of the general partner.

Some general partners with cowboy personalities will ride over all open fields: buyouts, IPOs, stock splits, arbitrage, and foreign currencies. For many stock investors, the index “earnings per share” (EPS) is the absolute measure of profitability and an indicator of future corporate performance. For the hedge manager, however, a much better crystal ball is the corporation’s statement of cash flows.

Why is the statement of cash flows preferred by the hedge fund managers over the EPS? Hedge fund managers know that EPS can be ‘doctored up,’ manipulated, disguised, and shaped to look good, when the underlying reality may be different-even grim. Cash flows on the other hand can be double checked with the banks that hold the cash accounts. The pieces that go into the preparation of the cash flows statement must fit perfectly and harmonize with the balance sheet and the income statement.

From the top section of the financial statement we read the inflows and outflows from the main line of business-operations. From the middle section we read the investing activities: what cash was generated and used by non-current assets and non-current liabilities. From the third section we can see the inflows and outflows due to dividends, and bond and stock issues. The Statement of cash flows paints a detailed panorama of all the significant activities that management engaged in during the year. Of most importance are the clues that the figures give to hedge funds managers as to the direction of the company: what plant expansions are taking place, what restrictions are being placed on retained earnings, and so forth.And if the company is having difficulties with liquidity, this can be gleaned, too.

Hedge fund managers and business financial experts value fresh, current, timely, and accurate information. Not only do they value information, but they also cultivate good sources of information and connections. In this respect, hedge fund managers must tread lightly so as not to become prey to “insider trading.”To squeeze the maximum return on investment, hedge fund managers employ several brokers, always seeking to make economies on broker fees and commissions. Given the volume and large amounts of money their savings can be significant, which in the end will add to the fund’s bottom line.

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An Investment in Hedge Funds

Filed Under: Carlos Hank Rhon Investing, Rhon Investment Fund Tips by admin — Leave a comment
September 20, 2011

A hedge fund is an aggressively managed portfolio of securities set up for investors who have a net worth of over one million dollars. Investors who participate in a hedge fund must sign a letter of agreement specifying that they are knowledgeable investors and that they are aware of the risks.

The hedge fund managers use advanced strategies to maximize the return on investment to the fund. The strategies employ highly leveraged positions in long and short derivative positions in both domestic and international markets. Derivatives include options (puts and calls), futures (contracts), and swaps, which they combine to protect the bulk of the portfolio. Most hedge funds (but not all) use sophisticated mathematical models to design protective “collars.”

A normal requirement for hedge funds is that the investor must leave their investments in the fund for at least one year. To withdraw funds investors must notify the hedge fund manager within a narrow window (one or two months) and at no other time.

Regulation

Since hedge funds don’t deal with the regular public but with sophisticated “accredited” investors, they aren’t regulated. Therefore, managers have great flexibility in their choice of instrument. Although hedge funds resemble mutual funds, they aren’t considered mutual funds (which are regulated and banned from using derivatives).

Yet, since hedge funds participate in organized and regulated markets they become subject to US law, and they may be scrutinized by the SEC and the Fed. In this respect, despite the fact that hedge funds aren’t regulated, “insider trader” laws and other laws also apply to them.

Investors with cold blood in their veins, strong hearts, and strong stomachs will entrust -risk, may be a better word- their money to hedge funds. Is there any protection? None. They go into the funds with open eyes, trusting only the personality of the general partner.

Many universities, hospitals, museums, art organizations, and other non-for profit organizations invest in hedge funds? Yes, they may. The overseers, trustees, directors, and in particular those in finance and investment committees will be considered ‘accredited’ investors. And in keeping with their fiduciary responsibility they will follow the “prudent man” philosophy of diversification, investing only a fraction of their endowments.

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The Financial Investment Market – Index Funds

Filed Under: Carlos Hank Rhon Financial Decisions, Carlos Hank Rhon Funds, Carlos Hank Rhon Investing by admin — Leave a comment
September 20, 2011

There are so many facets to the financial market, but understanding index funds is key to understanding your investments. Index funds tend to have fewer fees and fewer administrative costs than actively managed mutual funds, which makes them a fairly sound investment overall. Knowing what they are and how they work will let you make the decision about how to invest your money and how to look for the fund most likely to get you a great return.

What are Index Funds?

Index funds and mutual funds have a lot in common. In both types of investments, the fund that you invest in represents a group of stocks picked for their high return value. You don’t buy an individual stock, you buy a share of these stocks as a whole. Your investment sees returns based on how well the entire group does. Because of this, these funds tend to be lower risk than many individual stocks. While some of the stocks will lose value, many will probably also increase in value leading to a high probability of an overall gain.

The difference between an index fund and a mutual fund is in how it is managed. Mutual funds have managers actively selecting stocks to include in or remove from the fund. They fully research each stock to make sure that they are choosing the ones that are most likely to grow. Index funds also hope to have a great return, but they go about this in another way. Instead of being actively managed, they follow an index of the stock market. An index is a subsection of the stock market (such as the Standard and Poor’s 500). By choosing a subset of the stock market that is performing well, the fund buys these stocks and hopes to see a return on the investment. Because an index fund uses this predetermined group of stocks instead of actively selected ones, the administrative costs are lower and this savings is passed down to you.

Risks of Index Funds

While the costs are lower, less oversight makes these funds a bit riskier according to investment professionals. Since they follow a financial index, they can never outperform it. A mutual fund, on the other hand, can remove a stock from the fund that is under performing in the interests of raising the profits. An index fund may take money out of under performing stocks, but they tend to follow the market instead of trying to outguess it, and that can lead to lower returns. When trying to understand index funds, however, you should know that they tend to perform quite well overall when you account for the additional fees mutual funds charge.

Making the Choice between Mutual Funds and Index Funds

Understanding index funds is an important step when you are trying to decide what will give your money the best rate of return. Knowing the risks and the advantages of these funds, especially as compared to mutual funds, is critical and you’ll want to have a strategy for investing. You want the best rate of return on your investments, so taking this into account along with your tolerance of risk will help you decide which option is best for you.

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Stocks Versus Mutual Funds

Filed Under: Carlos Hank Rhon Financial Decisions, Carlos Hank Rhon Funds, Carlos Hank Rhon Investing by admin — Leave a comment
September 20, 2011

Mutual funds are merely a diversified portfolio of managed funds. Instead of having to invest a huge sum of money, you chip into a pool of funds with thousands of other people. These mutual funds are then managed by a single company, so even if one investment flops others will succeed and you are guaranteed your funds back.

1. What is the advantage of a diversified portfolio as an investment strategy?

Diversity is good because you will have a greater chance of success. With diversity, we have protection against rapid market losses of any one particular stock. If a portfolio is spread across 20 stocks, if any one of those stocks quickly loses value the effect is less than if the portfolio consisted of that one stock by itself.

2. Don’t put all your eggs in one basket

When investing it is always a good idea to diversify as strategy and market trends come into play.. The problem for small investors is that they often don’t have the funds to buy a variety of stocks. Mutual funds allow small investors to benefit from diversification with a small amount of money.

Besides stocks, mutual funds can be made up of a variety of holdings including bonds and money market instruments. A mutual fund is actually a company and investors that buy into a fund are buying shares of that company. Shares in a mutual fund are bought directly from the fund itself or brokers acting on behalf of the fund. Shares can be redeemed by selling them back to the fund.

Some funds are managed by investment professionals who decide that securities to include in the fund. Non-managed funds are also available. They are usually based on an index such as the Dow Jones Industrial Average. The fund simply duplicates the holdings of the index it is based on so that if the Dow Jones (for example) rises by 5% the mutual fund based on that index also rises by the same amount. Non-managed funds often perform very well sometimes better than managed funds.

There are downsides to mutual funds. There are usually fees that must be paid no matter how the fund performs, and the individual investor has no say in that securities can be included in the fund. Also, the actual value of a mutual fund share is not known with the same precision as stocks on the stock market.

Mutual funds are often a better choice for the small investor than either stocks or bonds, according finance investent professionals. They offer the diversity that provides cushion against sudden stock market movements and usually provide a greater return than bonds. Of course, mutual funds can also lose value, especially in the short term, so short term investors may be better off with bonds that offer a set rate of return.

There are three main types of mutual funds: money market funds, bond funds and stock funds. Money market funds offer the lowest risk they consist solely of high quality investments such as those issued by the US government and blue chip corporations. Money market funds have rarely lost money, but they pay a low rate of return.

Bond funds aim to produce higher yields than money market funds and therefore carry a correspondingly higher risk. All the risks that are associated with bonds company bankruptcy, falling interest rates also apply to bond funds.

It should be known, however, that stocks still have the greatest potential for profit. The risk is more for short-term holders of mutual funds stocks have traditionally outperformed other investment instruments in the long run. Of course, with this added potential also comes greater levels of risk.

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Invest and Profit with Mutual Funds

Filed Under: Carlos Hank Rhon Funds, Carlos Hank Rhon Investing, Carlos Hank Rhon Profits by admin — Leave a comment
September 20, 2011

A mutual fund is a company that pools money from many investors and invests the money in stocks, debentures/bonds, equities, short-term money market tools or other securities. The income produced through these investments plus the appreciation of capital earned by the scheme are shared by its entity holders depending on the units possessed by them. Thus, mutual funds can be well thought of as financial middleman in the investment trade who collect funds from the people and invest on behalf of the investors. The investment objectives outlined by a Mutual Fund in its prospectus are binding on the Mutual Fund scheme. The investment goals of the mutual fund state the class of securities in which a Mutual Fund can invest. Generally the portfolio of Mutual Funds comprises of various asset classes such as bonds, debentures, equity, and government securities, equipment. Stocks and bonds are the primary assets of the mutual fund while investing in equipment etc. take a back seat.

Like any other corporation with a board of directors, in exchange for cash the mutual fund issues shares of stock to investors. However unlike most corporations, mutual funds do not issue a fixed quantity of stock but with new investments new shares are issued. A mutual fund may be either an actively managed fund or an indexed mutual fund. A fund manager alters actively managed funds regularly in order to maximize their profitability. They fund manager inspects the market and the sectors a fund invests in and reallocate the fund appropriately. An indexed fund follows a different approach by simply taking one of the major indexes and buying according to that index. Indexed funds change much less repeatedly than actively managed funds. However, an active fund is more profit making. Mutual funds provide transparency, efficient performance, liquidity, tax benefits and a wide range of schemes.

You will find different rating systems on mutual funds each with it’s own unique methodology. These ratings are designed to provide ratings to the various mutual funds. However these ratings are sometimes deceptive. Some popular high rating systems are just used as a tool to increase the sales of the funds, as people tend to buy funds with high ratings. Though ranking providers are cautious to notify investors that the ratings don’t forecast the future yet many investors use it.

Ratings are significant in differentiating between good and bad funds. So do a rigorous research while you assess mutual funds. You must look at the quantifiable and computable features of a fund and also check the returns against the target, costs incurred, taxes liable, risks involved and manager term. Although you can refer the rating systems yet you must not just blindly invest in the funds with best ratings. You must check the rating against the real time performance of the mutual funds.

Mutual funds offer various benefits of diversification including risk reduction by holding different disparate investments. So as the profit graph of different investments move up and down, the aggregate return flatten off the risk. Due to various advantages, the mutual funds have become a very widespread form of investing. But you must be very careful in selecting the appropriate mutual fund.

You must not be lured into investing in the currently best performing mutual fund. But you must go for mutual funds that have low purchase rate and are high on selling. However, even the good funds cannot overwhelm the trend of market. So be careful in choosing funds that can be strong in a low market trend. Moreover, you must go through the prospectus to read the risk tolerance. Moreover, diversifying into many mutual funds does not diminish your risk or increment your return.

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