Economies of Scale and Economies of scope are two important strategies used by most of the organizations to gain cost effectiveness. The economies of scale, represents the savings in cost of production by increasing the scale of production or the size of the plant. On the other hand, economies of scope refer to the benefits obtained due to producing multiple products using the same operations efficiently. Economies of scope, is nothing but the savings in cost received by producing two or more … [Read more...]

Have you ever thought of investing your money in the funds like ETF and index fund? As both are collective investment tools, people get frequently confused amidst the two investment vehicles. Nevertheless, they are different in the sense that an  Exchange Traded Fund (ETF) is a kind of Index fund which is a basket of securities traded on an exchange. But an index fund is a form of mutual fund, which attempts to track the performance of a specific index. Since last few years, the stock market … [Read more...]

Economics is a science as well as art. But which type of science is a big question here, i.e. positive or normative? Positive economics is related to the analysis which is limited to cause and effect relationship. On the other hand, normative economics aims at examining real economic events from the moral and ethical point of view. It is used to judge whether the economic events are desirable or not. While Positive economics is based on facts about the economy. Normative economics is value … [Read more...]

Since the last few decades, factoring and forfaiting have gained immense importance, as one of the major sources of export financing. For a layman, these two terms are one and the same thing. Nevertheless, these two terms are different, in their nature, concept, and scope. Factoring is a financial affair which involves the sale of firm's receivables to another firm or party known as a factor at discounted prices. On the other hand, forfaiting simply means relinquishing the right. In this, the … [Read more...]

Every country requires capital for its economic growth and the funds cannot be raised alone from its internal sources. Foreign Direct Investment (FDI) and Foreign Portfolio Investment (FPI) are the two ways through which foreign investors can invest in an economy. FDI connotes a cross-border investment, by a resident or a company domiciled in a country, to a company based in another country, with an objective of establishing a lasting interest in the economy. On the contrary, FPI connotes a … [Read more...]

There is always a risk incorporated in every investment like shares or debentures. The two major components of risk systematic risk and unsystematic risk, which when combined results in total risk. The systematic risk is a result of external and uncontrollable variables, which are not industry or security specific and affects the entire market leading to the fluctuation in prices of all the securities. On the other hand, unsystematic risk refers to the risk which emerges out of controlled and … [Read more...]

Hedge funds and Mutual funds are two popular pooled investment vehicles, wherein a number of investors entrust their money to a fund manager, who invest the same in different kinds of publicly traded securities. A mutual fund is an investment, that offers the investor an opportunity to make an investment in a diversified and professionally managed basket of securities, at comparatively low cost. On the other hand, hedge fund are nothing but unregistered private investments. that uses a … [Read more...]

ADR and GDR are commonly used by the Indian companies to raise funds from the foreign capital market. The principal difference between ADR and GDR is in the market; they are issued and in the exchange, they are listed. While ADR is traded on US stock exchanges, GDR is traded on European stock exchanges. Depository Receipt is a mechanism through which a domestic company can raise finance from the international equity market. In this system, the shares of the company domiciled in one country … [Read more...]

Futures contract are mainly used by hedgers, speculators, and arbitrators, which plays a pivotal role in the market. In this context, people often juxtapose the terms hedging and speculation as they are in the way connected with the unanticipated price movements, but they are different in a number of grounds. Hedging is performed by the hedgers to protect themselves against the risk or say to reduce the risk of the changes in the price of the underlying commodity. On the contrary, speculators … [Read more...]

A forward contract is a contract whose terms are tailor-made i.e. negotiated between buyer and seller. It is a contract in which two parties trade in the underlying asset at an agreed price at a certain time in future. It is not exactly same as a futures contract, which is a standardized form of the forward contract. A futures contract is an agreement between parties to buy or sell the underlying financial asset at a specified rate and time in future. While a futures contract is traded in an … [Read more...]