Money Banking & Finance 33
13. Industrial Revolution:
Money can be thought of as an important factor that brought about the industrial revolution during the last century. It made possible the valuation of different resources so that they can be used in the most profitable way. It also helped in the valuation of certain professional services such as lawyers, auditors etc. The feasibility reports can be prepared with reasonable certainty because we can calculate present and future values of assets and expenses in monetary terms. The profound research and development carried on in today's world also owes great to the money.
14. Growth of Multinationals:
Money has accelerated the process of creation of joint stock companies and emergence of multi nationals. It has brought more flexibility in business and trade. It has greatly helped in .the movement of resources across countries and continents.
15. Government:
Money is perhaps the basic need of the governments besides lot of others. Governments need money to perform all such functions as maintenance of law and order, defence expenditure, provision of justice, etc. Governments also need money to make huge transfer payments such as pensions, gratuity, allowances etc.
Role of Money in a Socialist Economy:
Socialist economy is one which is characterised by social ownership of means of production, economic equality and equality of opportunity. All decisions regarding production, consumption are taken up and implemented by the Government. In such an economy the role of money is somewhat restricted and limited. As there is no freedom of choice and private enterprise so profit motive is also absent. The planning and development policies are adopted by govt. and resources belong to the central authority. Due to these factors true worth of the resources is not established and as price mechanism is suppressed in socialist economy so there is a lack of incentive and motivation to increase productivity and efficiency. But inspite of all this money is important for such an economy too. Governments have to prepare budgets whether,they are ruling a capital or a jocialist economy. Further they have to hold and accumulate foreign exchange reserves "or different purposes. A socialist economy is equally in need of money to perform variety of functions such calculation of national economic indicators, preparation of fudgets, borrowing and debt servicing, payment of wages, salaries, pensions, allowances, ubsidies, etc.
lole of Money in Mixed Economy:
It is important to note that neither perfect capitalism, nor perfect socialism exist nywhere on the earth. All the economies of the world are the mixture of these systems
:ith different proportion of each.
^
Saturday, January 30, 2010
Friday, January 29, 2010
Money banking & finance
Today in almost all economies money plays an important role as discussed above. It is the driving force that is running the wheels of every economy. It has made our lives quite easier and, enjoyable. It has contributed a lot towards the improvement of living standards in different parts of world However the use of money has also contributed to different ills and bads. This is explained in next questions.
Money - The Other Side of the Picture
Money no doubt has contributed very effectively and generously towards modern economy. However at the same time it has produced certain world wide 'ills'.and 'bads'. These are explained below:
In fact if analysed strictly money itself il nothing good or bad. It is the monetary system and society that makes use of it either in a good way or bad way. So following -disadvantages of money may be correctly deemed as defects of Monetary Policy, Fiscal Policy and Society Behaviour.
Economic Disadvantages:
1. Class Conflict:
Money has given rise to the class conflict. It has made some people very rich at the expense of million of others. This fact is also the cause of widespread disturbance and crimes in the modern world. The money has greatly helped to increase interaction among lots of people but at the same time it has created a very dangerous distinction between people. It has divided people in to "haves" and "have nots". This division or distinction is extremely bitter and poignant. It has not only divided people of different areas but it has also parted members of families and blood relatives.
2. Trade Cycles:
Trade -cycles are also an outcome of mismanagement of money (monetary) forces. The great depressions of 1920s and 30s were greatly because of faulty fiscal and monetary policies and mismanagement of exchange rates. Trade cycles not only effect industrialists or
land lords but they do equal harm to poor and ordinary people. Investment fades, industries
shut down, unemployment increases, purchasing power decreases, these are some
examples of what happens during depression phase of trade cycle.
3. Inflation:
It is natural that a thing that is chosen as a standard must be free of any alternation. But although money has been chosen as a standard of value yet it itself is subject to inflation. This factor has made people suspicious about the power of their currency (specially those currencies which are weak). Inflation over time leads to decrease in the purchasing power of money and in the value of any claim that is expressed in money terms. It also causes much anxiety to the poor and pensioners.
Money - The Other Side of the Picture
Money no doubt has contributed very effectively and generously towards modern economy. However at the same time it has produced certain world wide 'ills'.and 'bads'. These are explained below:
In fact if analysed strictly money itself il nothing good or bad. It is the monetary system and society that makes use of it either in a good way or bad way. So following -disadvantages of money may be correctly deemed as defects of Monetary Policy, Fiscal Policy and Society Behaviour.
Economic Disadvantages:
1. Class Conflict:
Money has given rise to the class conflict. It has made some people very rich at the expense of million of others. This fact is also the cause of widespread disturbance and crimes in the modern world. The money has greatly helped to increase interaction among lots of people but at the same time it has created a very dangerous distinction between people. It has divided people in to "haves" and "have nots". This division or distinction is extremely bitter and poignant. It has not only divided people of different areas but it has also parted members of families and blood relatives.
2. Trade Cycles:
Trade -cycles are also an outcome of mismanagement of money (monetary) forces. The great depressions of 1920s and 30s were greatly because of faulty fiscal and monetary policies and mismanagement of exchange rates. Trade cycles not only effect industrialists or
land lords but they do equal harm to poor and ordinary people. Investment fades, industries
shut down, unemployment increases, purchasing power decreases, these are some
examples of what happens during depression phase of trade cycle.
3. Inflation:
It is natural that a thing that is chosen as a standard must be free of any alternation. But although money has been chosen as a standard of value yet it itself is subject to inflation. This factor has made people suspicious about the power of their currency (specially those currencies which are weak). Inflation over time leads to decrease in the purchasing power of money and in the value of any claim that is expressed in money terms. It also causes much anxiety to the poor and pensioners.
Thursday, January 28, 2010
Accouting Details Money Topic
Calculation of Macro Economic Variables;
Money has made it possible to calculate and determine different macro-econ variables such as GDP, GNP, NT, etc. It has created a whole new field of econ< sciences. Money and finance management have now, become equally important for r nationals and a sole proprietor,
7. Distribution of National Income:
.The distribution of NI is also based on money. Government with the hel money can distribute resources among various poor sectors of the economy. It is
possible to make reliable comparison about standards of living in different areas 0]
world. The poverty line is also stated in terms of currency units. This line indicates degree of poverty in the economy.
8. Public Finance:
The tax collection and the imposition uC Iivw UIAC5 arc possible JUSt DCCaUSC
have money in our economy. Taxes are imposed by governments on the money inci of people. These are collected also in terms of money.
9. Borrowing and Debt Servicing:
The loan that you take from your friend-and the borrowing of the governn from IMF, all these are possible only because there is money flowing in the econo Further the debt servicing and rescheduling is also possible because of existence* money. Just imagine how awkward would it be to reschedule a debt if you are living moneyless economy.
10. Satisfaction and Optimal Use of Resources:
Money is important as it helps in determining the standard of satisfaction ; optimal allocation of resources. The profitability, productivity and efficiency n1 ^.sured in money terms. These measures help in determining the profitable volume sates and usage of resources.
11. Working of Banks & Financial Institutions:
Money is-ihe basis for the functions and operations of banks and financial institutic It is also equally important for money lenders, brokerage houses, acceptance houses and for
those.who generate their livelihood just because there is money in the World.
.
12. International Trade:
Money has also greatly expanded the international trade. The difference betwt costs of production among various parts of world can be calculated as we have got mor to value scarce as well as abundant resources. This difference in costs leads to the gai of international trade.
Money has made it possible to calculate and determine different macro-econ variables such as GDP, GNP, NT, etc. It has created a whole new field of econ< sciences. Money and finance management have now, become equally important for r nationals and a sole proprietor,
7. Distribution of National Income:
.The distribution of NI is also based on money. Government with the hel money can distribute resources among various poor sectors of the economy. It is
possible to make reliable comparison about standards of living in different areas 0]
world. The poverty line is also stated in terms of currency units. This line indicates degree of poverty in the economy.
8. Public Finance:
The tax collection and the imposition uC Iivw UIAC5 arc possible JUSt DCCaUSC
have money in our economy. Taxes are imposed by governments on the money inci of people. These are collected also in terms of money.
9. Borrowing and Debt Servicing:
The loan that you take from your friend-and the borrowing of the governn from IMF, all these are possible only because there is money flowing in the econo Further the debt servicing and rescheduling is also possible because of existence* money. Just imagine how awkward would it be to reschedule a debt if you are living moneyless economy.
10. Satisfaction and Optimal Use of Resources:
Money is important as it helps in determining the standard of satisfaction ; optimal allocation of resources. The profitability, productivity and efficiency n1 ^.sured in money terms. These measures help in determining the profitable volume sates and usage of resources.
11. Working of Banks & Financial Institutions:
Money is-ihe basis for the functions and operations of banks and financial institutic It is also equally important for money lenders, brokerage houses, acceptance houses and for
those.who generate their livelihood just because there is money in the World.
.
12. International Trade:
Money has also greatly expanded the international trade. The difference betwt costs of production among various parts of world can be calculated as we have got mor to value scarce as well as abundant resources. This difference in costs leads to the gai of international trade.
Wednesday, January 27, 2010
Money Banking & Finance
Money Banking & Finance
13.Industrial Revolution:
Money can be thought of as an important factor that brought about the industrial revolution during the last century. It made possible the valuation of different resources so that they can be used in the most profitable way. It also helped in the valuation of certain professional services such as lawyers, auditors etc. The feasibility reports can be prepared with reasonable certainty because we can calculate present and future values of assets and expenses in monetary terms. The profound research and development carried on in today's world also owes great to the money.
14.Growth of Multinationals:
Money has accelerated the process of creation of joint stock companies and emergence of multi nationals. It has brought more flexibility in business and trade. It has greatly helped in .the movement of resources across countries and continents.
15.Government:
Money is perhaps the basic need of the governments besides lot of others. Governments need money to perform all such functions as maintenance of law and order, defence expenditure, provision of justice, etc. Governments also need money to make huge transfer payments such as pensions, gratuity, allowances etc.
Role of Money in a Socialist Economy:
Socialist economy is one which is characterised by social ownership of means of production, economic equality and equality of opportunity. All decisions regarding production, consumption are taken up and implemented by the Government. In such an economy the role of money is somewhat restricted and limited. As there is no freedom of choice and private enterprise so profit motive is also absent. The planning and development policies are adopted by govt. and resources belong to the central authority. Due to these factors true worth of the resources is not established and as price mechanism is suppressed in socialist economy so there is a lack of incentive and motivation to increase productivity and efficiency. But inspite of all this money is important for such an economy too. Governments have to prepare budgets whether,they are ruling a capital or a jocialist economy. Further they have to hold and accumulate foreign exchange reserves "or different purposes. A socialist economy is equally in need of money to perform variety of functions such calculation of national economic indicators, preparation of fudgets, borrowing and debt servicing, payment of wages, salaries, pensions, allowances, ubsidies, etc.
lole of Money in Mixed Economy:
It is important to note that neither perfect capitalism, nor perfect socialism exist nywhere on the earth. All the economies of the world are the mixture of these systems
:ith different proportion of each.
13.Industrial Revolution:
Money can be thought of as an important factor that brought about the industrial revolution during the last century. It made possible the valuation of different resources so that they can be used in the most profitable way. It also helped in the valuation of certain professional services such as lawyers, auditors etc. The feasibility reports can be prepared with reasonable certainty because we can calculate present and future values of assets and expenses in monetary terms. The profound research and development carried on in today's world also owes great to the money.
14.Growth of Multinationals:
Money has accelerated the process of creation of joint stock companies and emergence of multi nationals. It has brought more flexibility in business and trade. It has greatly helped in .the movement of resources across countries and continents.
15.Government:
Money is perhaps the basic need of the governments besides lot of others. Governments need money to perform all such functions as maintenance of law and order, defence expenditure, provision of justice, etc. Governments also need money to make huge transfer payments such as pensions, gratuity, allowances etc.
Role of Money in a Socialist Economy:
Socialist economy is one which is characterised by social ownership of means of production, economic equality and equality of opportunity. All decisions regarding production, consumption are taken up and implemented by the Government. In such an economy the role of money is somewhat restricted and limited. As there is no freedom of choice and private enterprise so profit motive is also absent. The planning and development policies are adopted by govt. and resources belong to the central authority. Due to these factors true worth of the resources is not established and as price mechanism is suppressed in socialist economy so there is a lack of incentive and motivation to increase productivity and efficiency. But inspite of all this money is important for such an economy too. Governments have to prepare budgets whether,they are ruling a capital or a jocialist economy. Further they have to hold and accumulate foreign exchange reserves "or different purposes. A socialist economy is equally in need of money to perform variety of functions such calculation of national economic indicators, preparation of fudgets, borrowing and debt servicing, payment of wages, salaries, pensions, allowances, ubsidies, etc.
lole of Money in Mixed Economy:
It is important to note that neither perfect capitalism, nor perfect socialism exist nywhere on the earth. All the economies of the world are the mixture of these systems
:ith different proportion of each.
knowledge about money
Danger of Over Issue:
As the supply of currency is elastic and is under the control of the Central there is a danger of over issuance. The over issuance can cause serious eo disturbances and can lead to drastic inf ^lion. The increase in-money supply also I increase in the volume of credit in the CLonomy. This may cause further disturbs the State Bank is not in a position to control credit potential of commercial banks
3. Demonetization:
Paper currency can any times be demonetized by the State. Under such does not remain legal tender and no body accepts it. As these notes have no • value, so they become completely useless.
4. Monetary Mismanagement:
Purchasing power of paper currency is volatile (meaning it evaporates) in This means though its face value remains constant but its purchasing power nx-due to any monetary mismanagement. Monetary mismanagement may lead to inflation which could be disastrous.
5. Price Instability:
Paper currency has given rise to wide scale price fluctuations in countries of world. The fluctuations in exchange rate market also produce scnouw on the general price level in the economy. Weak paper currencies fail to confidence of the people and cause price instability.
6. Limited to Country:
The use of paper currency is limited to its issuing country. Outside the a ceases to be a legal tender. So people have to exchange their currencies whe-abroad.
7. Loss Due to Fire or Water:
Although the paper currency is not affected by any apparent wear and of colour yet it can be damaged due to fire or water.
8. Uncertainty:
Paper currency has no value of its own. All the value it commands is its status as a legal tender. If however this status is ever lost the currency worthless. Apart from this the purchasing power held by the currency is also ei fluctuations. All these factors implies that there is a degree of uncertain!) currency.
Summing Up:
Paper currency is by far the most commonly used form of money in to< The basic reason of this is the ease with which it can be used and managed disadvantages of the paper currency are no doubt considerable but they can suppressed by effective monetary management
As the supply of currency is elastic and is under the control of the Central there is a danger of over issuance. The over issuance can cause serious eo disturbances and can lead to drastic inf ^lion. The increase in-money supply also I increase in the volume of credit in the CLonomy. This may cause further disturbs the State Bank is not in a position to control credit potential of commercial banks
3. Demonetization:
Paper currency can any times be demonetized by the State. Under such does not remain legal tender and no body accepts it. As these notes have no • value, so they become completely useless.
4. Monetary Mismanagement:
Purchasing power of paper currency is volatile (meaning it evaporates) in This means though its face value remains constant but its purchasing power nx-due to any monetary mismanagement. Monetary mismanagement may lead to inflation which could be disastrous.
5. Price Instability:
Paper currency has given rise to wide scale price fluctuations in countries of world. The fluctuations in exchange rate market also produce scnouw on the general price level in the economy. Weak paper currencies fail to confidence of the people and cause price instability.
6. Limited to Country:
The use of paper currency is limited to its issuing country. Outside the a ceases to be a legal tender. So people have to exchange their currencies whe-abroad.
7. Loss Due to Fire or Water:
Although the paper currency is not affected by any apparent wear and of colour yet it can be damaged due to fire or water.
8. Uncertainty:
Paper currency has no value of its own. All the value it commands is its status as a legal tender. If however this status is ever lost the currency worthless. Apart from this the purchasing power held by the currency is also ei fluctuations. All these factors implies that there is a degree of uncertain!) currency.
Summing Up:
Paper currency is by far the most commonly used form of money in to< The basic reason of this is the ease with which it can be used and managed disadvantages of the paper currency are no doubt considerable but they can suppressed by effective monetary management
Tuesday, January 26, 2010
Role of Money in Modem Economy
Role of Money in Modem Economy
As already stated that money performs a variety of functions in the modern economy. These functions have made the role of money extremely important.
The role that money plays in our today's economy can be judged from the following examples.
Money in Capital Economy:
Capital economy is characterised by freedom of choice and enterprise. Consumer is sovereign and the price mechanism works'freely without any government intervention.
1. Production:
Starting with the production, the producer produces because of profit motive which is expressed completely in terms of money. The decision regarding what to produce, how to produce, for whom to produce are made in the framework in which money is at the base. The cost of production which consists of costs of direct material, direct labour and overhead expenses is calculated in terms of money and sale price is also determined in monetary terms.
2. Consumption:
In capitalistic society, consumer is a king, free to make choice about what he should consume. The consumption depends on income. Both the income and consumption expenditures are stated in terms of money. The equi marginal utility theory of economics leading towards maximum satisfaction is only workable because of existence of money. The channelling of wealth among different choices of consumption is only possible because a consumer knows in exact terms how much purchasing power he got and how expensive a particular product is.
3. Pricing of Factors of Production:
The money has made it possible to evaluate the human effort and thus to determine its wage or reward. The factors of production whether material or human are all priced in term of money.
4. Pricing of Environmental Factors:
Money has helped in pricing and thus determining the importance of snvironmental and natural resources. The gas and oil in wells, fishes in oceans, trees in jungles are all priced in monetary terms.
5. Penalties of Environmental Deterioration:
It is evident that you can't assign value to fresh clean water, clean environment, fhese are all precious things. However the penalty for any deterioration of such factors is tlways stated in money terms. Thus money also helps in a way to discourage the leterioration of natural resources.
As already stated that money performs a variety of functions in the modern economy. These functions have made the role of money extremely important.
The role that money plays in our today's economy can be judged from the following examples.
Money in Capital Economy:
Capital economy is characterised by freedom of choice and enterprise. Consumer is sovereign and the price mechanism works'freely without any government intervention.
1. Production:
Starting with the production, the producer produces because of profit motive which is expressed completely in terms of money. The decision regarding what to produce, how to produce, for whom to produce are made in the framework in which money is at the base. The cost of production which consists of costs of direct material, direct labour and overhead expenses is calculated in terms of money and sale price is also determined in monetary terms.
2. Consumption:
In capitalistic society, consumer is a king, free to make choice about what he should consume. The consumption depends on income. Both the income and consumption expenditures are stated in terms of money. The equi marginal utility theory of economics leading towards maximum satisfaction is only workable because of existence of money. The channelling of wealth among different choices of consumption is only possible because a consumer knows in exact terms how much purchasing power he got and how expensive a particular product is.
3. Pricing of Factors of Production:
The money has made it possible to evaluate the human effort and thus to determine its wage or reward. The factors of production whether material or human are all priced in term of money.
4. Pricing of Environmental Factors:
Money has helped in pricing and thus determining the importance of snvironmental and natural resources. The gas and oil in wells, fishes in oceans, trees in jungles are all priced in monetary terms.
5. Penalties of Environmental Deterioration:
It is evident that you can't assign value to fresh clean water, clean environment, fhese are all precious things. However the penalty for any deterioration of such factors is tlways stated in money terms. Thus money also helps in a way to discourage the leterioration of natural resources.
Monday, January 25, 2010
Business money World information
Monetary Management:
As the supply of paper currency can be regulated by central bank thus monetary management becomes easy. The volume of currency in circulation can be easily kept under observation by the Central Bank. The Central Bank can use its monetary powers to influence the supply of currency and credit in the economy.
11. Record:
Paper currency is always numbered. Each note has a distinct number. So in case of a robbery or bank frauds, the involved people can be traced out when they use the embezzled money.
12. Ease of Counting:
The paper money can be easily counted and piled up in bundles. It can be counted either manually or by specialised currency counting machines. These machines can also detect any fake currency note while counting.
13. Convertibility:
Paper currency is easily convertible into other credit instruments such as drafts, promissory notes, bills etc
14. Saving in the Use of Metal:
Paper currency indirectly leads to the saving in the metallic reserves of the country. Due to the issuance of paper currency there is no need to issue coins in greater value. Thus metal is saved and can be used for other more useful purposes.
15. Ease of Issuance:
The paper currency is easy to issue and administer. There are different methods for the issuance of paper currency which can be altered to meet the typical requirements of any economy. The method of issuance can also be changed in response to changes in the pattern of economy.
Disadvantages: 1. Inflation:
The major disadvantages of paper currency is that it is exposed to inflation. The
face value remains unchanged but the purchasing power declines. This has made people
suspicious about its validity. The problem of inflation is mainly faced by under developed
countries. In such countries people try to hold savings in the form of forejgn currencies
just as we people cherish to hold dollars. This further leads to business of speculation in
the economy. People try to make easy money by taking advantage of the fluctuations in
the exchange rates
As the supply of paper currency can be regulated by central bank thus monetary management becomes easy. The volume of currency in circulation can be easily kept under observation by the Central Bank. The Central Bank can use its monetary powers to influence the supply of currency and credit in the economy.
11. Record:
Paper currency is always numbered. Each note has a distinct number. So in case of a robbery or bank frauds, the involved people can be traced out when they use the embezzled money.
12. Ease of Counting:
The paper money can be easily counted and piled up in bundles. It can be counted either manually or by specialised currency counting machines. These machines can also detect any fake currency note while counting.
13. Convertibility:
Paper currency is easily convertible into other credit instruments such as drafts, promissory notes, bills etc
14. Saving in the Use of Metal:
Paper currency indirectly leads to the saving in the metallic reserves of the country. Due to the issuance of paper currency there is no need to issue coins in greater value. Thus metal is saved and can be used for other more useful purposes.
15. Ease of Issuance:
The paper currency is easy to issue and administer. There are different methods for the issuance of paper currency which can be altered to meet the typical requirements of any economy. The method of issuance can also be changed in response to changes in the pattern of economy.
Disadvantages: 1. Inflation:
The major disadvantages of paper currency is that it is exposed to inflation. The
face value remains unchanged but the purchasing power declines. This has made people
suspicious about its validity. The problem of inflation is mainly faced by under developed
countries. In such countries people try to hold savings in the form of forejgn currencies
just as we people cherish to hold dollars. This further leads to business of speculation in
the economy. People try to make easy money by taking advantage of the fluctuations in
the exchange rates
paper currency
Unlimited Legal Tender:
Paper currency is unlimited legal teider i.e., any amount of debt can be paid in it.
It can be used to discharge all kinds of bu-insss obligations and liabilities. No one can
refuse to accept it in settlement of any debt. ,
It can be used to discharge all kinds of bu-insss obligations and liabilities. No one can
refuse to accept it in settlement of any debt. ,
3. Elasticity in Supply:
The supply of paper currency is elastic. It can bt increased or decreased according to monetary situation. It gives an ease of control to central authority over monetary matters. In times of need the central bank can print more notes to stimulate the economy. -On the other hand during inflationary cycles the central bank can reduce the supply of currency and credit to check general price level.
4. Convenience:
The paper currency is convenient to carry and transfer. It can be easily kept in pocket or wallets. Further it can also be readily converted into cheques, drafts, TC's etc. Further it can also be transferred over long distances in no time.
o. Difficulty to Copy:
The design of paper currency is very intricate and special type of paper and ink is used hence it is impossible to copy it. Even if it is copied by some fake means then also it can be checked by some electronic machines.
6. Uniformity:
The paper currency stays uniform. The apparent loss of colour or tearing of paper does not effect the face value. It can be used many times by different people without any loss of value or damage. The writings on it or any other marks also do not effect its validity.
7. Growth & Development:
The present era of economic-prosperity and development owes great to the paper currency. Paper currency is at the base of world's vast economy. It has given new meanings to exchange and trade. The brisk trading of today's world is possible because of rapid means of payments and receipts. Paper currency has also helped the banks and financial houses to flourish rapidly. It is also the root for development of numerous other paper credit instruments such as drafts, cheques etc.
8. Price Mechanism:
Our market forces of demand and supply works because of the price mechanism. Paper currency has greatly helped in making price mechanism workable and effective.
9. International Trade:
The present state of international trade also owes great to paper currency. Different paper currencies can be conveniently interchanged and used in-different parts of world. This has increased the liquidity of world's economy. Moreover it has greatly contributed to increase foreign trading in all the regions of the world.
Sunday, January 24, 2010
Paper Currency
Paper Currency
Paper currency is the most advanced form of money. It fulfils nearly all the characteristics of an ideal money. It is economical, easily recognisable, stable and conveniently storable.
Paper currency (as already explained previously) can be classified into representative, convertible and fiat money.
Now a days almost majority of the paper currency is fiat money. In words of Keynes:
"Fiat money is one which is created and issued by state but is not convertible by law into anything other than itself and has no fixed value in terms of an objective standard."
Other definitions of the paper currency are as follows: According to Hanson:
"Paper money means the paper instruments such as bank notes, cheque, bills, and other forms which act as a currency"
According to F. Perry:
"Paper money is a document representing money such as bank notes, promissory notes, bills of exchange, etc
Thus paper currency is in convertible but at the same time it is unlimited legal tender. Following are the advantages and disadvantages of paper currency.
Advantages:
1. Economical:
Paper currency is very economical to issue. The cost of currency as compared to its face value is very low. Printing of paper currency requires certain special type of paper, ink and printing technology. These tilings are no doubt costly but the overall cost of printing paper currency is quite low.
Paper currency is the most advanced form of money. It fulfils nearly all the characteristics of an ideal money. It is economical, easily recognisable, stable and conveniently storable.
Paper currency (as already explained previously) can be classified into representative, convertible and fiat money.
Now a days almost majority of the paper currency is fiat money. In words of Keynes:
"Fiat money is one which is created and issued by state but is not convertible by law into anything other than itself and has no fixed value in terms of an objective standard."
Other definitions of the paper currency are as follows: According to Hanson:
"Paper money means the paper instruments such as bank notes, cheque, bills, and other forms which act as a currency"
According to F. Perry:
"Paper money is a document representing money such as bank notes, promissory notes, bills of exchange, etc
Thus paper currency is in convertible but at the same time it is unlimited legal tender. Following are the advantages and disadvantages of paper currency.
Advantages:
1. Economical:
Paper currency is very economical to issue. The cost of currency as compared to its face value is very low. Printing of paper currency requires certain special type of paper, ink and printing technology. These tilings are no doubt costly but the overall cost of printing paper currency is quite low.
Saturday, January 23, 2010
Importance of Near Money
Importance of Near Money:
Near money holds a great importance in the monetary set up. This is explained in the following heads.
1. Spending & Consumption:
The quantity and stock of near money directly affects the spending and consumption volume of the economy. When the amount of near money is high this means people have less of perfectly liquid money, so they are able to consume and spend less. On the other hand, if more people-are holding their wealth in perfectly liquid form, there will be tendency to spend it and this will increase the consumption expenditure of economy.
2. Inflationary Trends:
Quantity of near money and their conversion directly affects trends of economy. If during boom period, people convert their near money in perfectly liquid money, then this will increase the spending and will lead to inflation in the economy.
3. Economic Policies:
Near money are also important determinant of economic policies. If there are inflationary trends in the economy, government increases the interest rate. TTiis directs people to convert their cash in near money to gain interest. This will reduce the cash holdings and will help to decrease inflation. On the other hand, if government wants to generate rapid economic activity it reduces the interest rate. This induces people to convert their near money into cash and enjoy current consumption.
4. Liquidity Preference:
Near money is also an important factor of liquidity preference theory of Keynes. According to this theory the quantity of near money in the economy has an important bearing on the rate of interest and the equilibrium quantity of money supply. The degree of willingness of the people to hold wealth in the form of near money and other interest earning assets affect the level of interest rates prevailing in the economy.
Use as Security:
Near money are also used as security to obtain loans and credits from banks and other financial institutions. Banks also grant loans against investment in different deposit schemes. Near money are generally shown under the current asset in the balance sheet. Thus it also effects the current ratio of the business.Friday, January 22, 2010
Money Banking & Finance part 3
Crime:
As already stated money has made some people very ricli at the expense of others. This has resulted in widespread deprivation. Also the ratio of crime has increased in almost all societies. Murder, robbery, theft forme sake of money has now become the order of the day. This it self has led to numerous evils. The moral values are no longer observed with respect. The content and peace have dried away from our lives. The alarming increase in the crime and abuse have increased the governments expenditures on establishment of police forces and law enforcing agencies. The money for these additional "expenses is of course derived by imposing new taxes and surcharges which further add to the miseries of common man.
3. Exploitation:
The rich are exploiting poor masses in different ways. The deprivation is increasing at an alarming rate. Every year millions of people fall below the poverty line. The increased rate of suicides is also the result of this deprivation. The money is the most commonly used instrument for such exploitations. Rich all around the world have a greater say in governments. They intentionally vote for such policies that are aimed at making them more rich and comfortable. Such policies have increased the working hours of the whole world's labour force over the last decade but their living standards have deteriorated further. Thinkers are afraid that the deprivation could lead to bloody revolution all over the world.
4. Gambling:
It is said that "Easy Come Easy Go". So is the case with rich people of this world. As their wealth is increasing day by day they are in need of some way out to spend lavishly. Unfortunately inspite of spending for the welfare of needy and poors much is spent on gambling, crime etc.
5. Diseases:
The lust of money besides making people psychologically ill has also contributed to numerous physical ailments and miseries. The sharp increase in diseases all around the World is due to the fact that luxuries have made people weak and fragile. They are more exposed to deadly diseases. The use of different insecticides and pesticides to get high yield of crops has also produced serious hazards to health.
6. The Drug Trade:
The greed of money has given rise to huge under ground economy. Drug trade is perhaps the biggest of such activity. Besides this the smuggling of goods, women and children are the burning issues of today's World. The money generated from such activities is not invested in factories but is mainly used for the promotion of same and other evils.
As already stated money has made some people very ricli at the expense of others. This has resulted in widespread deprivation. Also the ratio of crime has increased in almost all societies. Murder, robbery, theft forme sake of money has now become the order of the day. This it self has led to numerous evils. The moral values are no longer observed with respect. The content and peace have dried away from our lives. The alarming increase in the crime and abuse have increased the governments expenditures on establishment of police forces and law enforcing agencies. The money for these additional "expenses is of course derived by imposing new taxes and surcharges which further add to the miseries of common man.
3. Exploitation:
The rich are exploiting poor masses in different ways. The deprivation is increasing at an alarming rate. Every year millions of people fall below the poverty line. The increased rate of suicides is also the result of this deprivation. The money is the most commonly used instrument for such exploitations. Rich all around the world have a greater say in governments. They intentionally vote for such policies that are aimed at making them more rich and comfortable. Such policies have increased the working hours of the whole world's labour force over the last decade but their living standards have deteriorated further. Thinkers are afraid that the deprivation could lead to bloody revolution all over the world.
4. Gambling:
It is said that "Easy Come Easy Go". So is the case with rich people of this world. As their wealth is increasing day by day they are in need of some way out to spend lavishly. Unfortunately inspite of spending for the welfare of needy and poors much is spent on gambling, crime etc.
5. Diseases:
The lust of money besides making people psychologically ill has also contributed to numerous physical ailments and miseries. The sharp increase in diseases all around the World is due to the fact that luxuries have made people weak and fragile. They are more exposed to deadly diseases. The use of different insecticides and pesticides to get high yield of crops has also produced serious hazards to health.
6. The Drug Trade:
The greed of money has given rise to huge under ground economy. Drug trade is perhaps the biggest of such activity. Besides this the smuggling of goods, women and children are the burning issues of today's World. The money generated from such activities is not invested in factories but is mainly used for the promotion of same and other evils.
Money Banking & Finance part 2
Debt Traps:
The money has made.some nations debtors and other creditors (again note that money itself has not done it. It is the international monetary system which is responsible for this). The massive debt over developing countries have contributed to huge ailments. The debt trap has bounded present and coming generations of poor countries in chains of economic slavery. The debtor countries are forced to implement heavy taxes and penalties on their poor people to accumulate money to pay off these debts. The interest burden alone has caused havocs for finance ministries of debtor countries. All this have led to revolutions and great monetary and fiscal disturbances in many countries.
5. Domination of Multinationals:
'TI:c money .economy has resulted in concentration of wealth in few hands. The multinationals have taken hold of the major proportion of whole world's trading and business. It is estimated that some 100 multinational are controlling nearly 80% of whole world's business. The seriousness of this problem can be judged from the fact that world's top 10 richest people have accumulated so much wealth that is sufficient to provide food, water and shelter to all the poor population of the world.
6. Environmental Degradation:
The greed of money has made man so selfish that he is collecting wealth at the cost of the well being of his future generations. Due to rapid and reckless industrialisation and usage of natural resources we have reduced the life of our environment. The massive pollution has snatched the beauty of nature which is so precious that it cannot be measured in any currency of the world.
7. The Credit Economy:
The availability of money has considerably contributed to the expansion of credit throughout the economies. The credit creation of the commercial banks is also based on availability of primary deposits(money). However besides promoting investment and growth the credit has also created a deceptive economy along side. This deceptive economy is.not based on currency or money but on written claims and lOU's. this deceptive -economy has tied people into chains of never ending and ever expanding interest burden. This interest factor has caused much harm to our peaceful lives and it also in turns leads to the evil of concentration of wealth in few hands
(Note: The evils of interest have been explained in detail in the chapter on Islamic banking)
Social Disadvantages:
1. Greed:
The amenjties of new world has increased the greed of men. The luxuries and modern facilities have made man aggressive and selfish. So everyone is iii a race to snatch more and more money. This has made people too much materialistic and they have forgotten the duties they owe to their Creator
The money has made.some nations debtors and other creditors (again note that money itself has not done it. It is the international monetary system which is responsible for this). The massive debt over developing countries have contributed to huge ailments. The debt trap has bounded present and coming generations of poor countries in chains of economic slavery. The debtor countries are forced to implement heavy taxes and penalties on their poor people to accumulate money to pay off these debts. The interest burden alone has caused havocs for finance ministries of debtor countries. All this have led to revolutions and great monetary and fiscal disturbances in many countries.
5. Domination of Multinationals:
'TI:c money .economy has resulted in concentration of wealth in few hands. The multinationals have taken hold of the major proportion of whole world's trading and business. It is estimated that some 100 multinational are controlling nearly 80% of whole world's business. The seriousness of this problem can be judged from the fact that world's top 10 richest people have accumulated so much wealth that is sufficient to provide food, water and shelter to all the poor population of the world.
6. Environmental Degradation:
The greed of money has made man so selfish that he is collecting wealth at the cost of the well being of his future generations. Due to rapid and reckless industrialisation and usage of natural resources we have reduced the life of our environment. The massive pollution has snatched the beauty of nature which is so precious that it cannot be measured in any currency of the world.
7. The Credit Economy:
The availability of money has considerably contributed to the expansion of credit throughout the economies. The credit creation of the commercial banks is also based on availability of primary deposits(money). However besides promoting investment and growth the credit has also created a deceptive economy along side. This deceptive economy is.not based on currency or money but on written claims and lOU's. this deceptive -economy has tied people into chains of never ending and ever expanding interest burden. This interest factor has caused much harm to our peaceful lives and it also in turns leads to the evil of concentration of wealth in few hands
(Note: The evils of interest have been explained in detail in the chapter on Islamic banking)
Social Disadvantages:
1. Greed:
The amenjties of new world has increased the greed of men. The luxuries and modern facilities have made man aggressive and selfish. So everyone is iii a race to snatch more and more money. This has made people too much materialistic and they have forgotten the duties they owe to their Creator
Accouting Details Money Topic
Calculation of Macro Economic Variables;
Money has made it possible to calculate and determine different macro-econ variables such as GDP, GNP, NT, etc. It has created a whole new field of econ< sciences. Money and finance management have now, become equally important for r nationals and a sole proprietor,
7. Distribution of National Income:
.The distribution of NI is also based on money. Government with the hel money can distribute resources among various poor sectors of the economy. It is
possible to make reliable comparison about standards of living in different areas 0]
world. The poverty line is also stated in terms of currency units. This line indicates degree of poverty in the economy.
8. Public Finance:
The tax collection and the imposition uC Iivw UIAC5 arc possible JUSt DCCaUSC
have money in our economy. Taxes are imposed by governments on the money inci of people. These are collected also in terms of money.
9. Borrowing and Debt Servicing:
The loan that you take from your friend-and the borrowing of the governn from IMF, all these are possible only because there is money flowing in the econo Further the debt servicing and rescheduling is also possible because of existence* money. Just imagine how awkward would it be to reschedule a debt if you are living moneyless economy.
10. Satisfaction and Optimal Use of Resources:
Money is important as it helps in determining the standard of satisfaction ; optimal allocation of resources. The profitability, productivity and efficiency n1 ^.sured in money terms. These measures help in determining the profitable volume sates and usage of resources.
11. Working of Banks & Financial Institutions:
Money is-ihe basis for the functions and operations of banks and financial institutic It is also equally important for money lenders, brokerage houses, acceptance houses and for
those.who generate their livelihood just because there is money in the World.
.
12. International Trade:
Money has also greatly expanded the international trade. The difference betwt costs of production among various parts of world can be calculated as we have got mor to value scarce as well as abundant resources. This difference in costs leads to the gai of international trade.
Money has made it possible to calculate and determine different macro-econ variables such as GDP, GNP, NT, etc. It has created a whole new field of econ< sciences. Money and finance management have now, become equally important for r nationals and a sole proprietor,
7. Distribution of National Income:
.The distribution of NI is also based on money. Government with the hel money can distribute resources among various poor sectors of the economy. It is
possible to make reliable comparison about standards of living in different areas 0]
world. The poverty line is also stated in terms of currency units. This line indicates degree of poverty in the economy.
8. Public Finance:
The tax collection and the imposition uC Iivw UIAC5 arc possible JUSt DCCaUSC
have money in our economy. Taxes are imposed by governments on the money inci of people. These are collected also in terms of money.
9. Borrowing and Debt Servicing:
The loan that you take from your friend-and the borrowing of the governn from IMF, all these are possible only because there is money flowing in the econo Further the debt servicing and rescheduling is also possible because of existence* money. Just imagine how awkward would it be to reschedule a debt if you are living moneyless economy.
10. Satisfaction and Optimal Use of Resources:
Money is important as it helps in determining the standard of satisfaction ; optimal allocation of resources. The profitability, productivity and efficiency n1 ^.sured in money terms. These measures help in determining the profitable volume sates and usage of resources.
11. Working of Banks & Financial Institutions:
Money is-ihe basis for the functions and operations of banks and financial institutic It is also equally important for money lenders, brokerage houses, acceptance houses and for
those.who generate their livelihood just because there is money in the World.
.
12. International Trade:
Money has also greatly expanded the international trade. The difference betwt costs of production among various parts of world can be calculated as we have got mor to value scarce as well as abundant resources. This difference in costs leads to the gai of international trade.
The Concept of Near Money
THE CONCEPT OF NEAR MONEY
Strictly speaking money includes the currency notes and coins which are legal tender and perfectly liquid. However besides these, there are number of other assets that can be converted into cash with reasonable certainty and without, loss of value. Such assets are called Near Money*'.
Near Money is not perfect money but something adjacent to it. It possesses certain characteristics of perfect money and can be converted into money easily.
In practice near money is such assets that are called M2 and M3 (see question on Definition of Money). A characteristics of near money is that mostly they are interest earning assets.
Difference between Money and Near Money
Following are the points of differences between money and near money.
Money Near Money
Money Near Money
1. Interest Earning
No interest is earned on it. Its value is Interest is earned on near money that is
affected by the rate of inflation. If the why when interest rates are high there is a
general price level increases the value of tendency to hold wealth in form of near
liquid money falls. On the other hand if moneys. The rate" of inflation however
there is an appreciation in the exchange affects the real rate of interest. Due to
market, the value of money increases. increase in the rate of inflation real
interest rate decreases.
2. Content
It is denoted by Ml and includes currency, It includes M2 + M3 (fix deposits, bearer
coins. certificates, bonds etc.)
coins. certificates, bonds etc.)
3. Liquidity
It is perfectly liquid. It is the most readily It can be used as money but it is not
available source to pay off any business perfectly liquid. It has to be converted into
obligation cash before using it for any general
available source to pay off any business perfectly liquid. It has to be converted into
obligation cash before using it for any general
purpose.
4. Legal Tender
Money (currency and coins) are legal This is not a legal tender. The creditor can
tender. These can be used to discharge any refuse to take payment in the form of near
»amount of business obligations. money.
tender. These can be used to discharge any refuse to take payment in the form of near
»amount of business obligations. money.
5. Standard Unit
This is a standard unit. All prices, debts, This is not a standard unit. It cannot be
amounts are stated in it. Further the estimate used to state value of any assets or
of likely liabilities and future economic estimate of any liabilitybenefits can also be stated in terms of money.
Monday, January 11, 2010
salemanship
Salesmanship
anculd immediately shift the attention of the customer to an equally ifccd commodity with a low price manufactured by an other firm. A ssesman should read the liking and disliking of the product by the ic*s:omer from his facial expression also.
5. Knowledge of the technique of selling. There are numerous tecnniques of promoting the sales of a product. A salesman should *«B«e a thorough knowledge about the various techniques of selling.
5. QUALITIES OF A GOOD SALESMAN
Every customer is an individual. The salesman should have the acuity to deal with each customer according to his feelings, tastes, attitude. The basic qualities which a salesman should possess are as
fallows:
He should know the qualities of the product. A good
salesman should know his product. He should be in position to
the questions raised by the customer about the usefulness of
l~e commodity which he intends to buy.
Customer's likes and dislikes. The reaction of the
Customer is indicated by his body movement or his facial expression.
T"~e intelligent salesman would immediately assess the likes and
dislike of the customer. If the customer show a liking of a commodity
ca by knowing its price decides to leave the shop, the salesman
would immediately shift his attention to an equally good commodity
with a low price manufactured by another firm. It will thus lead to the
s'ose of the sale.
A positive approach to the sale. An alert and good
salesman would always adopt a positive approach to the sale of
commodity. He will, for instance, say to the customers "May I show, a new product" (The negative approach is, "I hope you won't
ii*e to see a new product'). He is not supposed to be a loose talker.
Praise should be fair. A salesman should give due praise
to the taste of the customer on the selection of the commodity. The
customer is definitely pleased to the gentlemanly behaviour of the
salesman. The praise should be judicious and may not be considered
lattery.
Knowledge of technique of selling. A salesman
should have a knowledge of the technique of selling. He should be
ware of the basic principles of attending the customers.
Personal qualities. A salesman should posses
basic character qualities like (i) courage, (ii) initiative, (iii)
anculd immediately shift the attention of the customer to an equally ifccd commodity with a low price manufactured by an other firm. A ssesman should read the liking and disliking of the product by the ic*s:omer from his facial expression also.
5. Knowledge of the technique of selling. There are numerous tecnniques of promoting the sales of a product. A salesman should *«B«e a thorough knowledge about the various techniques of selling.
5. QUALITIES OF A GOOD SALESMAN
Every customer is an individual. The salesman should have the acuity to deal with each customer according to his feelings, tastes, attitude. The basic qualities which a salesman should possess are as
fallows:
He should know the qualities of the product. A good
salesman should know his product. He should be in position to
the questions raised by the customer about the usefulness of
l~e commodity which he intends to buy.
Customer's likes and dislikes. The reaction of the
Customer is indicated by his body movement or his facial expression.
T"~e intelligent salesman would immediately assess the likes and
dislike of the customer. If the customer show a liking of a commodity
ca by knowing its price decides to leave the shop, the salesman
would immediately shift his attention to an equally good commodity
with a low price manufactured by another firm. It will thus lead to the
s'ose of the sale.
A positive approach to the sale. An alert and good
salesman would always adopt a positive approach to the sale of
commodity. He will, for instance, say to the customers "May I show, a new product" (The negative approach is, "I hope you won't
ii*e to see a new product'). He is not supposed to be a loose talker.
Praise should be fair. A salesman should give due praise
to the taste of the customer on the selection of the commodity. The
customer is definitely pleased to the gentlemanly behaviour of the
salesman. The praise should be judicious and may not be considered
lattery.
Knowledge of technique of selling. A salesman
should have a knowledge of the technique of selling. He should be
ware of the basic principles of attending the customers.
Personal qualities. A salesman should posses
basic character qualities like (i) courage, (ii) initiative, (iii)
Sunday, January 10, 2010
increase Business earning
3. STEPS IN THE SALES PROCESS
A salesman, if he is to be effective, must follow certain steps in Inaking a sale. The main steps or stages in the sales process are as lander:--
1. Prospecting. Prosecuting means the location of new
I customers. A salesman should not be contended with the customers
I who purchase the product from him. He should always be on the look
[out to add new prospects to his list. The location of potential
|customers will help him in increasing the sales.
Preapproach. Preapproach is an important stage in the sales
[process. Before approaching the prospects (potential customer) the
[salesman should have full knowledge (i) about the product, the
[company which he represents etc and (ii) personal knowledge about
[Ifae potential customer (prospect).
Approach. A salesman should be neatly dressed in the first
lace to face meeting with the prospect. He should approach the
prospect cheerfully and gracefully and under favourable conditions.
I He should talk about the business of the prospects, his personality, general reputation etc. He should not open conversation about the product which can be put off quickly with an answer; "sorry I do not
I need it."
Demonstration. Demonstrating the value of the product or
service is the heart of the sales process. In order to arouse arfd
sustain interest in the product or service, the salesman should use
chart, diagrams, booklets, photographs, miniature models etc. and
tfius secure the attention of the product. He should also explain the
usefulness of the product and the benefits which the prospect will
derive from the use of product or service etc. etc.
Objections. A salesman should always be mentally prepared
iO listen to the objections raised by the prospect. He should avoid
entering into argument or controversy with the potential customer. A
skilled salesman actually welcomes objections and answers them
through suggestions and persuasions in mild tone.
Closing. A salesman after creating desire for the purchase of
a product or service enters into a crucial stage of closing the sale. An
efficient salesman recognises the precise moment at which the
customers reaches a decision and then he closes the sale promptly.
A salesman, if he is to be effective, must follow certain steps in Inaking a sale. The main steps or stages in the sales process are as lander:--
1. Prospecting. Prosecuting means the location of new
I customers. A salesman should not be contended with the customers
I who purchase the product from him. He should always be on the look
[out to add new prospects to his list. The location of potential
|customers will help him in increasing the sales.
Preapproach. Preapproach is an important stage in the sales
[process. Before approaching the prospects (potential customer) the
[salesman should have full knowledge (i) about the product, the
[company which he represents etc and (ii) personal knowledge about
[Ifae potential customer (prospect).
Approach. A salesman should be neatly dressed in the first
lace to face meeting with the prospect. He should approach the
prospect cheerfully and gracefully and under favourable conditions.
I He should talk about the business of the prospects, his personality, general reputation etc. He should not open conversation about the product which can be put off quickly with an answer; "sorry I do not
I need it."
Demonstration. Demonstrating the value of the product or
service is the heart of the sales process. In order to arouse arfd
sustain interest in the product or service, the salesman should use
chart, diagrams, booklets, photographs, miniature models etc. and
tfius secure the attention of the product. He should also explain the
usefulness of the product and the benefits which the prospect will
derive from the use of product or service etc. etc.
Objections. A salesman should always be mentally prepared
iO listen to the objections raised by the prospect. He should avoid
entering into argument or controversy with the potential customer. A
skilled salesman actually welcomes objections and answers them
through suggestions and persuasions in mild tone.
Closing. A salesman after creating desire for the purchase of
a product or service enters into a crucial stage of closing the sale. An
efficient salesman recognises the precise moment at which the
customers reaches a decision and then he closes the sale promptly.
Saturday, January 9, 2010
saleman tips That must be Used in Real life
self control, (iv) diligence, (v) courage, (vi) stability, (vii) cheerful-ness, (viii) straightforwardness, (xi) good appearance and (x) maturity.
6. SALESMAN DEALINGS WITH CUSTOMERS ATA
GLANCE
Nervous customers
(Kind of customers) Tired and cross Fussy and nervous Excitable Impatient Unreasonable
Timid and sensitive
Undecided
Old and deaf people
Children
Foreigners
Skeptical Inquisitive Talkative Insulting
Critical
Indifferent
Silent
Bargain Hunters
Pleasant Intelligent
(Treatment) Patience Consideration Quit manner Despatch Calmness Dependent Customers
Gentleness
Decision
Sympathy
Love and affection
Helpfulness
Disagreeable customers
Candid manner Knowledge Courteous, brevity Self control Trying customers
Knowledge of goods Tact
Perseverance Convincing manner. Commonsense customers
Smile on the face Efficient service
7. PLANS FOR PAYING SALESMAN
There are three main plans of remuneration for salesmen. They are: (1) Straight Salary Plan (2) The Commission Plan and (3) Salary and Commission Combined.
1. Straight Salary Plan. In a straight salary plan, a salesman is paid a fixed amount as salary regardless of his sales volume. The beginning salesman usually prefer this plan as it give him (1) an assured income (2) a sense of financial security (3) minimizes the
6. SALESMAN DEALINGS WITH CUSTOMERS ATA
GLANCE
Nervous customers
(Kind of customers) Tired and cross Fussy and nervous Excitable Impatient Unreasonable
Timid and sensitive
Undecided
Old and deaf people
Children
Foreigners
Skeptical Inquisitive Talkative Insulting
Critical
Indifferent
Silent
Bargain Hunters
Pleasant Intelligent
(Treatment) Patience Consideration Quit manner Despatch Calmness Dependent Customers
Gentleness
Decision
Sympathy
Love and affection
Helpfulness
Disagreeable customers
Candid manner Knowledge Courteous, brevity Self control Trying customers
Knowledge of goods Tact
Perseverance Convincing manner. Commonsense customers
Smile on the face Efficient service
7. PLANS FOR PAYING SALESMAN
There are three main plans of remuneration for salesmen. They are: (1) Straight Salary Plan (2) The Commission Plan and (3) Salary and Commission Combined.
1. Straight Salary Plan. In a straight salary plan, a salesman is paid a fixed amount as salary regardless of his sales volume. The beginning salesman usually prefer this plan as it give him (1) an assured income (2) a sense of financial security (3) minimizes the
Business Increasing Maintain Growup Details
Introduction to Business
For instance, if a prospect begins to pause in making a final decision, the salesman steps in and closes the sale. Similarly, if the facial expression of the prospects indicate willingness, it is time to close the sale. If the tone of the buyer is low, even then the sale can be closed without offending the customer. The salesman should congratulate the prospect on the close of the sale and appreciate him on his good judgement.
7. Follow up. When the prospects signs the order, the sales process does not finally end here. A salesman should follow up in the supply of goods or service as per conditions of the order.
4. FUNDAMENTALS OF SUCCESS IN SALESMANSHIP
Salesmanship is highly skilled profession. A person who is to learn the art of inducing prospects to buy goods which benefits both the seller and the buyer, is a most difficult job. A salesman before entering this profession must be carefully scholar in the fundamentals or principles of success in salesmanship. The main requisites or fundamentals of success in salesmanship are: (1) Knowledge of self (2) knowledge of product (3) Knowledge of company (4) Knowledge of customers and (5) Knowledge of technique of selling. These fundamentals are now discussed in brief.
Knowledge of self. A promotional salesman should have a
fair assessment of himself. He should be conscious of his good points
in persuading the customer to purchase the goods. He should avoid
the display of his weaknesses, if any.
Knowledge of the product. A successful salesman should
have full knowledge of the nature of the product. He should be well
equipped to answer the questions about the quality, prices,
usefulness, comparison with other similar products etc. raised by the
customers.
Knowledge of the company. A salesman is required to have
full information about the product and the company which he
represents. A customer is impressed if the company has a long
standing in trade and is operated to achieve twin objectives of profit
and service.
Knowledge of the customer. An effective salesman handles
his customer very carefully. As a customer is different from an other
customer in his habits, likes and dislikes, a rational salesman,
therefore, deals with them according to the requirements of the
situation. For instance, if a customer shows a liking for a commodity
but by knowing its price decides to leave the shop, the salesman
For instance, if a prospect begins to pause in making a final decision, the salesman steps in and closes the sale. Similarly, if the facial expression of the prospects indicate willingness, it is time to close the sale. If the tone of the buyer is low, even then the sale can be closed without offending the customer. The salesman should congratulate the prospect on the close of the sale and appreciate him on his good judgement.
7. Follow up. When the prospects signs the order, the sales process does not finally end here. A salesman should follow up in the supply of goods or service as per conditions of the order.
4. FUNDAMENTALS OF SUCCESS IN SALESMANSHIP
Salesmanship is highly skilled profession. A person who is to learn the art of inducing prospects to buy goods which benefits both the seller and the buyer, is a most difficult job. A salesman before entering this profession must be carefully scholar in the fundamentals or principles of success in salesmanship. The main requisites or fundamentals of success in salesmanship are: (1) Knowledge of self (2) knowledge of product (3) Knowledge of company (4) Knowledge of customers and (5) Knowledge of technique of selling. These fundamentals are now discussed in brief.
Knowledge of self. A promotional salesman should have a
fair assessment of himself. He should be conscious of his good points
in persuading the customer to purchase the goods. He should avoid
the display of his weaknesses, if any.
Knowledge of the product. A successful salesman should
have full knowledge of the nature of the product. He should be well
equipped to answer the questions about the quality, prices,
usefulness, comparison with other similar products etc. raised by the
customers.
Knowledge of the company. A salesman is required to have
full information about the product and the company which he
represents. A customer is impressed if the company has a long
standing in trade and is operated to achieve twin objectives of profit
and service.
Knowledge of the customer. An effective salesman handles
his customer very carefully. As a customer is different from an other
customer in his habits, likes and dislikes, a rational salesman,
therefore, deals with them according to the requirements of the
situation. For instance, if a customer shows a liking for a commodity
but by knowing its price decides to leave the shop, the salesman
Increase Business sale Tips
Improvements in the products. The salesman are in direct touch with the consumers the suggestions, impressions and complaints about the product are easily brought to the notice of the
producers. This brings improvements in the products. Increase in the rate of turnover of goods. Due to salesmanship, the rate of turnover of goods is increased. This leads to increased business activity and reduced unsold stock of goods.Help in selection of goods. Consumers get useful
information from the salesman about the quality of the goods. This enables them to select the right type of goods.Increased employment opportunities Effective salesmanship increases business activity in the country. This leads to increased employment opportunities, increased community increase. Lucrative career. Salesmanship is a lucrative career for
intelligent youngmen and women.
2. METHODS OF SALES PROMOTION
There are various methods which are used by the producers to increase sales. They in brief are (1) Advertising (2) Competition. (3) Free samples (4) Price reduction (5) Free gifts.
Advertising. The main object of advertising is to increase sales through different media, create demand for new products, provide information to the consumers about the change in the nature
of the product and project a favourable image of the company to the consumers etc. etc. In short, advertising is an ^effective tool for promoting sales of a goods or service in the market.
Free samples. If a good is cheap and has a wide market, it can be introduced by distributing it free to the people on a particular shop in the area. The loss can be made good in the long run. Tea was introduced in the Subcontinent by giving free packets to the people.
3. Price reduction. Price reduction is another effective technique of sales promotion. The Bata Shoe Company, Service Shoe Company and other retailers announce price reduction on
different goods in a particular month of the year.
4. Competition. The producers sometimes organize
competitions among themselves to increase sales. They for example
allow a price reduction on the purchase of 10 packets of the goods.
The sale of goods by packets boosts the sales and thus increases
production.
producers. This brings improvements in the products. Increase in the rate of turnover of goods. Due to salesmanship, the rate of turnover of goods is increased. This leads to increased business activity and reduced unsold stock of goods.Help in selection of goods. Consumers get useful
information from the salesman about the quality of the goods. This enables them to select the right type of goods.Increased employment opportunities Effective salesmanship increases business activity in the country. This leads to increased employment opportunities, increased community increase. Lucrative career. Salesmanship is a lucrative career for
intelligent youngmen and women.
2. METHODS OF SALES PROMOTION
There are various methods which are used by the producers to increase sales. They in brief are (1) Advertising (2) Competition. (3) Free samples (4) Price reduction (5) Free gifts.
Advertising. The main object of advertising is to increase sales through different media, create demand for new products, provide information to the consumers about the change in the nature
of the product and project a favourable image of the company to the consumers etc. etc. In short, advertising is an ^effective tool for promoting sales of a goods or service in the market.
Free samples. If a good is cheap and has a wide market, it can be introduced by distributing it free to the people on a particular shop in the area. The loss can be made good in the long run. Tea was introduced in the Subcontinent by giving free packets to the people.
3. Price reduction. Price reduction is another effective technique of sales promotion. The Bata Shoe Company, Service Shoe Company and other retailers announce price reduction on
different goods in a particular month of the year.
4. Competition. The producers sometimes organize
competitions among themselves to increase sales. They for example
allow a price reduction on the purchase of 10 packets of the goods.
The sale of goods by packets boosts the sales and thus increases
production.
How to increase Sale
Before the Industrial Revolution, the goods were produced in wrai quantities. They were sold in the local market without any pnobiem. After the Industrial Revolution, the position is entirely '•Hanged. The goods are produced on large scale. There is a keen among the producers of goods. Each manufacturer tries int outbid other from the market.
With the revolution in the means of transport, the importance of function has further increased. Goods are produced not only for seling in the home market but also in different other countries. There •dc. the manufacturers face stiff competition. The success of business «p* depends as to how well the goods are sold in the market, salemanship is the life blood of a business.
Difference between selling and salesmanship.
Selling. There is a difference between selling and salesmanship. Srting in business refers to the process of transfer of goods or or services to a buyer in exchange for money. Through selling, goods •me services finally flow to the consumers who need them. The important methods of selling are (a) Personal selling, (b) Indirect through media, (c) Sale by inspection, description, samples IS Mail order selling, (e) Hire purchase selling etc.
Salesman ships. Salesmanship, on the other hand, is the ability *» persuade people to buy goods and services. It is an art of persuasion. Salesmanship consists in persuading people to buy •(Nat you have for sale, in making them want it, in helping them to •eke up their minds to purchase it at a price profitable to both.
Importance of Salesmanship.
The importance of salesmanship is recognized everywhere •may. The importance of salesmanship to the manufacturers, consumers and to the community in general is briefly discussed
Mow.
1. Creation of demand Salesmanship creates demand for •he goods. This leads to increase in production and increase in profits manufacturers.
With the revolution in the means of transport, the importance of function has further increased. Goods are produced not only for seling in the home market but also in different other countries. There •dc. the manufacturers face stiff competition. The success of business «p* depends as to how well the goods are sold in the market, salemanship is the life blood of a business.
Difference between selling and salesmanship.
Selling. There is a difference between selling and salesmanship. Srting in business refers to the process of transfer of goods or or services to a buyer in exchange for money. Through selling, goods •me services finally flow to the consumers who need them. The important methods of selling are (a) Personal selling, (b) Indirect through media, (c) Sale by inspection, description, samples IS Mail order selling, (e) Hire purchase selling etc.
Salesman ships. Salesmanship, on the other hand, is the ability *» persuade people to buy goods and services. It is an art of persuasion. Salesmanship consists in persuading people to buy •(Nat you have for sale, in making them want it, in helping them to •eke up their minds to purchase it at a price profitable to both.
Importance of Salesmanship.
The importance of salesmanship is recognized everywhere •may. The importance of salesmanship to the manufacturers, consumers and to the community in general is briefly discussed
Mow.
1. Creation of demand Salesmanship creates demand for •he goods. This leads to increase in production and increase in profits manufacturers.
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