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Saturday, April 30, 2011

Money saving tips for purchasing an energy efficient refrigerator

New replacement refrigerators can be purchased with energy efficiency in mind as each model of refrigerator has different features, model criteria and energy consumption that affect its energy use. Since the energy efficiency of refrigerators became regulated starting in 1993, energy star efficiency ratings have come into effect increasing the energy efficiency of these appliances even more. 

When buying an efficient refrigerator, first consider consulting energy star's 'refrigerator retirement savings calculator' to see how size and model of a new refrigerator can affect operating costs. Also, one should not only take into consideration the energy guide located on or near the refrigerator but other factors that can influence the cost savings of refrigerator use.

Friday, April 29, 2011

How to save money on razor blades

Men's and Women's razors have become the finished product resulting from a refined and optimized art and science of razor design and consumer behavior. This effort has not been in vain, nor gone to waste, but rather allowed the heightened possibility of increased product yield to feed the starved material objectives demanded by corporate shareholders. However, these razors do not necessarily save money.
 Traditional straight blade razor with sharpening strap
Disposable razors and replacement cartridges are unnecessary with straight blade razors
Traditional razors can be resharpened and reused multiple times
So what does that actually mean? Razors are created first for profit and second for actual functionality. This has never been more obvious than with the large, 5 blade razors now on the market. These razors may provide a smoother, softer and closer shave and therefore cost more and are not as easy to prolong usage for. That is because 5 bladed beasts can't be resharpened with products such as “Save a Blade". However, products such as "Razor Shield" allegedly do prolong the life of all types of razor blades. Look out though, as getting hair out of the 5 bladers is tough; the tightly bound blades are hair nets that inhibit the functional life of the razor even if it still is sharp. In other words, newer isn't necessarily better unless you're keeping an old  blade new. For razors that don't fit in the Save a Blade device the two unconventional techniques illustrated in the video below may prove beneficial.

Additional ways to save money on razor blades

Old out of stock razor blades are a gold mine of inexpensive shaving and help save money on razor blades. These blades are no longer 'valuable' from a marketing and statistical sales perspective and are consequently more likely to be sold on the cheap. After that they are all gone so looking around in clearance bins, discount overstock retailers, and anywhere else classic shaving products are offered can save money on razor blades. For example, on April 29, 2011 10 Gillette Sensor blades cost $12.95 on Amazon but 4 Gillette Fusion Pro-Glide cartridges cost $14.24 at Amazon.

Then there's classic blades replicas like the Sweeney Todd Straight Razor listed on 'Google Products'. This razor started at $6.99 on the day of this blog post and can last a literal lifetime if they're cared for and manually resharpened with a sharpening stone also available for under $10.  These were eliminated from mass marketing probably for the same reason 5 blade cartridges replaced the two and three blade razors. The fact is classic blades work and cost less and can also save money on razor blades. They may look scary, but men especially should be able to get over that fear. Some additional saving tips:

  • Go natural
  • Consider an at-home wax kit
  • Use a battery or electric razor
  • Shave less
  • Go European style with armpits

For men and women not looking to go classical, coupons and bulk are another way to go to save money on razor blades. A warehouse retailer like BJs discounts bulk and accepts double coupons. For example, if BJs has  a razor special and a manufacturer's coupon came in the mail, that's two more price reducing opportunities. Granted this does take a little effort, but once it's over a decent supply of razors at a lower cost does inevitably save time shopping and money spent. Also, don't forget the dollar shops just because they sell razors and blades for around a dollar!

Source: Dr. K, GFDL, CC By-S.A 3.0

The U.S. auto industry stages a comeback

Recent reports have forecasted General Motors will return to the World's number one auto seller sometime in the near future. Reuters reported GMs sales in China were up 10 percent in Q1, 2011 and it sold just over 25,000 more vehicles than Toyota. This is due in part to a culmination of events and steps taken in the last few years, but also because of disruptions caused in the supply chain management of its leading competitor. For the most part, GMs resurgence can be attributed to how the company and the government dealt with the outfall of an outdated business model and financial turmoil amplified by the financial crisis in the late 2000s.

Now that the U.S. auto industry has taken its pain of vast financial losses and bankruptcy in the case of GM, it can start picking up the pieces of its broken industry and reemerge once again into the global auto making industry as a leaner, fuel efficient, cost effective, product friendly and more environmentally friendly set of businesses. Whether or not the new American Auto industry will be in Detroit alone remains to be seen as operational costs may be lower in other locations.

Some of the encouraging news prior to the collapse of General Motors proved to be overly optimistic and was not an accurate reflection of things to come. The American auto industry has a tough path to climb as a number of auto industries that didn't collapse are far more advanced and evolved. Edward Demmings, a U.S. innovator exported his operational methodology to Japan a long time ago, but the U.S. didn't want to change its existing operational model until it was too late. This article will discuss the U.S. auto industry in terms of conditions before and after its decline. In such it will become apparent that not only can news be misleading, but that the U.S. auto industry is in for a change long over due.

Auto industry news prior to GMs bankruptcy

"General Motors Corp.'s second-quarter profits of $891 million were viewed on Wall Street as an important sign of progress in the automaker's comeback bid." (1) The worst is over for Detroit's major automobile manufacturers. For the last year prior to August 2007 General Motors, Ford and Chrysler have been exercising aggressive measures in many fronts to ensure a competitive future for their Global and Domestic market positioning. One need only look at recent developments to realize U.S. auto manufacturers are in the automobile market for the long haul and aren't going to just give up their legacy of Global automobile market positioning. Both General Motors and Ford have been taking drastic but essential measures that will ensure both their survival and competitiveness in the future of automobile manufacturing. A few of these efforts are illustrated in the two following corporate summaries:

General Motors:

• General Motors is already positioned in the Worlds top two auto manufacturers
• Union negations with the Union of Auto Workers (UAW) could lower Health care costs
• Aggressive sales incentives could boost car sales
• Capital restructuring of GMAC and other parts of GM improves cost accounting numbers
• New developments in Energy Efficient automobiles enhances competitiveness
• International profit margins have recently performed well for General Motors

Ford Motors:

• European profit margins have improved for Ford and an 8.2% share of European market
• Niche car markets such as Jaguar, and Mustang have strong brand equity and appeal
• New small sub-compact auto designs could further boost European market share
• Fuel cell technology research such as hydrogen pellets allows Ford to compete 

The video below illustrates how the U.S. auto industry impacts the economy and the magnitude of its effects when it began to fail in 2008:

The new auto industry landscape

Traditionally as Japanese automobile manufacturers have rivaled the U.S. in auto sales and innovation U.S. Auto manufacturers have consistently stepped up to the plate to compete. The current situation is no exception. While the effects of widespread plant shutdowns and layoffs seems daunting this is a necessary step for U.S. car and truck companies so they can adjust for current conditions. The business environment is competitive and the restructuring events of the recent past have reflected that. What they do not reflect is these companies lack of ability to succeed in the future.

To say Detroit is doomed because of restructuring is like comparing apples to oranges. Steps taken to ensure market positioning is the key to these companies reemerging to be global auto industry leaders. The U.S. auto industry has sold off less profitable product lines, restructured its debt and begun the path to a new business model that replaces an outdated antiquated one. The U.S. has the technology, know how, engineering capacity and financial infrastructure necessary to bring itself back into the forefront of the auto industry. This comes at a time when the U.S. is facing challenging competition internationally and confidence in the U.S. economy has wained. What this doesn't have to mean is that the game is over. The video below highlights some of the important reasons why the U.S. auto industry has re-emerged as competitive and how it has done so.

Understanding the U.S. and International auto market is also key to rebuilding the U.S. Auto industry. According to auto industry statistics from the Wall Street Journal, the signs of a declining auto industry became increasingly clear in years past. Japanese manufacturers have gained an ever increasing piece of the U.S. market share. Apparently, many American consumers prefer more reliable, efficient vehicles from overseas. This has to be for a reason and it is these reasons the U.S. Auto industry should consider when re-branding, and re-designing future models. Internationally, the same story is important, obtaining market share means providing quality, reliability, efficiency and vehicle models that match the financial and social characteristics of new generations.


1. http://www.detnews.com/apps/pbcs.dll/article?AID=/20070801/AUTO01/708010343/1148
2. http://biz.yahoo.com/ap/070824/gm_technology.html?.v=4
3. http://www.reuters.com/article/marketsNews/idUKN2434970120070824?rpc=44
4. http://online.wsj.com/article/SB118790376498007050.html?mod=yahoo_hs&ru=yahoo
5. http://phx.corporate-ir.net/phoenix.zhtml

Tips on ending a general partnership

Business partnerships involve two or more persons who are owners and in many cases officers of a company. This type of business relationship usually requires significant joint responsibility and collaboration on behalf of the partners for the partnership to succeed. When a partnership is broken it is called dissolution of partnership and the reasons and method for obtaining such dissolution are several.

Dissolution of partnership

A dissolution of business partnership can be caused by conflicts or irreparable differences between one or more of the partners. Additionally, an unsuccessful partnership may influence a partner's decision to leave along with a host of other possible reasons such as health, other commitments, passing away, loss of interest, dispute etc.

Disputing dissolution

Dissolution of partnerships can be contested in a court that has jurisdiction over the geographic area in which the business is registered and/or operated. Generally a court ordered dissolution takes place when an out of court settlement can't be reached. In such cases the judge will review the the positions of the partner(s) seeking dissolution and make a judgment based on his or her hearing of the case and review of the appropriate law. Judges may order a dissolution through appeal to a number of legitimate causes such as infraction of business terms of agreement, mental incapacity, or failure of a partner to comply with financial obligations within the partnership.

Ending business partnerships out of court

Most partnership laws within the United States require certain actions to be taken before a partnership is considered ended. Since partnerships are not incredibly formal types of businesses, the amount of paperwork that needs to be filed can be minimal if the ending of the partnership, and its terms are agreed upon by the partners without lawsuit. The required actions are as follows:

1. Give proper public and governmental notice as required by law
2. Pay all creditors what they are owed
3. Return Capital investments as originally invested by the partners
4. Distribute remaining assets and profits evenly among partners

The above steps may be more difficult than they sound especially if one partner goes bankrupt and leaves the remaining partner(s) with all the debt. For example, even though all partners are equally liable for debt in a partnership, a partner with no assets can't pay what isn't there after a bankruptcy. Before detailing tips to consider before ending a partnership, the following attorney presentation highlights the relevance of owner resolutions such as buying out of partners.

• Partnership agreements

Contractual partnership agreements are legally binding contractual documents that can be drawn up and signed during the formation of a partnership. However, it is not necessarily the case that such agreements can only be made at the beginning of a partnership and may help in the process of defining how assets in a partnership will be dissolved.

• Financial documents

Obtaining copies of all the partnerships financial documents at the time of dissolution is essential for determining each partners share of liability if any and also for supporting cases in which partners do not hold themselves accountable for their share of the partnerships debt.

• Avoid going to court

Going to court can be expensive, especially if all the partners decide they need attorneys to represent their interests. Amicable dissolutions are always more cost effective and the partnership laws generally put precedence on the interest of the partnership above the partners anyway.

• Refer to partnership laws

Understanding and referring to laws governing partnerships can be a good measure when one or more members ends their partnership. This is so for purposes of know how and legality. More specifically, the Business Partnership Act of 1958 and the relevant State law in which the partnership operates. The Unified Partnership Act is a more recent federal law that has been adopted by States in the regulation of partnerships.

• Know when to consult a small business attorney

There is a small difference from employing attorneys in the dissolution of a partnership and consulting a small business attorney for issue pertaining to the continuation of a partnership. For one thing it can more cost affective to receive attorney advice than have an attorney manage a case. Secondly, for partnerships that continue to exist after one or more partners leave the business there are on going legal concerns apart from the dissolution.

Ending a business partnership can be easy to do if the partners are agreeable, knowledgeable and capable of doing so. Since the legal formalities of partnerships are somewhat casual and/or limited, the dissolving of a partnership has the potential to be a straightforward process.

The dissolution process can be complicated by financial issues such as excess liability, and failure of one or more partners to agree to the dissolution and terms of dissolution. Consulting the IRS Closing a Business Checklist may also a good idea, however the information, steps and tips in this article are provided as a supplemental resource only, and do not replace the terms of agreement between business partners or the laws governing partnerships.


1. http://tinyurl.com/ctz8j (IRS)
2. http://findarticles.com/p/articles/mi_m1272/is_2676_130/ai_78256887
3. http://tinyurl.com/3wm3eog (Entrepreneur.com)

The Significance of Hewlett Packard's Palm Acquisition

The significance of Hewlett Packard (HPQ) buying Palm, Inc. (PALM) is expected to be its capacity to gain market share in specific areas of Mobile Communications and Technology such as cellular phones and hand held computing devices. Hewlett Packard's acquisition of Palm, Inc. is scheduled to occur on July 31, 2010. The company will then have improved access to a larger and fast growing market with its new Palm assisted horizontally integrated product line.

Palm is a company that's specialty is hand held computing devices be they phones or mini-computing devices. The company d├ębuted in the late 1990's with its first Palm hardware and has since seen its share prices decline from $100's to around $5.76 in April of 2010. Hewlett Packard has taken advantage of  Palm's low share prices to acquire it  for the price of $1.2 billion or $5.70 per share according to an April 28, 2010 HP press release. (2)

Thursday, April 28, 2011

Why GDP can decline following improvements in quality of life

Standard of living decreases along with declines in Gross Domestic Product (GDP) due to an intrinsic correlation between the two. Consequently, GDP is the only measurement of progress needed. This article will expand upon the connection between GDP and quality of life in addition to illustrating why GDP is the more important of the measurements.

'Progress' is a relative term open to debate and depending on who one asks. However, if the concept of more is tied with progress, then more productivity as measured by Gross Domestic Product is not the only metric a society can attain increases in. More happiness, more health, more freedom, more rights etc. are all gains in life some might consider progress. 

A significant question of possibility emerges out of this divergent view of progress however. Specifically, can progress be sustained if other metrics of progress besides GDP and related measurements such as Job growth are not the only indicators of progress? In other words, can productivity continue grow side by side with other types of progress? After all, people might get lazy when they're happy so having more of other things considered progress might just be counterproductive to progress. This article will discuss other types of progress side by side with GDP in light of the above considerations.

Since gross domestic product measures the total output of goods and services produced by a country, that measurement is a measurement of total material wealth produced for a given year as valued by currency prices for the cost of those goods and services. The first question one might ask is ,if the GDP were to decline, could other aspects of 'progress' continue to rise? For example, if there is less medical equipment, fewer doctors produced, less health care services etc. one can draw the connection progress in health care may also decline along with the decline in GDP if such GDP declines are comprised of declines in health related products and services. The result becomes less progress in this case, and may be further debilitated by declines in production related to other aspects of the economy.

To further illustrate, progress is linked to the economy and the economy is measured by GDP. While GDP is not the only measurement of an economy, it is a key indicator of the wealth available to a 'population'. The less wealth there is, the lower the standard of living becomes. Since standard of living is related to quality of life, a decline in GDP which is a measure of standard of living means there is likely to be a correlation between GDP and quality of life. So from this perspective, GDP is a measurement of quality of life in so far as the two are related. So why then does the question of quality of life indicators even arise? This is a good question.

The need for quality of life indicators can be thought of as a cry for help regarding disproportionate distribution of Gross Domestic Product. To illustrate, if everyone were to suddenly become rich, a great majority may find it simply unnecessary to work, or their productivity would decline in their lack of need to work. After a short while, inflation would rise, GDP would decline due to so many people being rich, and the quality of life would fall. Granted, some may still be motivated to work for love of labor, and other forms of gain such as social status, or even some kind of ethical conviction. However, the principles of human nature tell us, we are motivated by greed and that greed includes greed for a worry free life. That worry free life would end up leading to a decline in the overall quality of life.

So how can this apparent paradox between GDP and quality of life be solved? That is another question for another day. For the time being, one might realize quality of life is merely the call for more share of the GDP. If one is still not convinced of this relationship consider the notion of quality of life further. Love, comfort, harmony, amenities, entertainment, luxury, services etc. can't all be bought with money but certainly can be facilitated by wealth. 

Since wealth is measured by GDP at the macro-economic level, the correlation between the two is theoretically sound. As we have seen, a micro-economic distribution of GDP that is spread more evenly, has a strong possibility of leading to a decline in GDP and thus quality of life. Human nature is at the bottom of issue but who has the time to worry about that when everyone is chasing the GDP?

Guide to home office tax deductions

The home office deduction can be used when a business is run out of the home in the form of a sole proprietorship . For the tax deductions to quality, the office must be used exclusively for business purposes which do not include non-profit activities or non-business activities that may be profitable. Generally speaking, for the business to qualify as such, the home office must be used regularly to service clients for profitable gain. This article will illustrate the forms needed to file home office deductions in addition to the types of deductions the proprietor can take.

Tax forms

In the United States the Internal Revenue Service and U.S. Department of the Treasury oversee the implementation of tax laws and regulations through efforts to make the public aware of the requirements placed upon their income whether it be business, personal or otherwise. This being the case, the IRS has specific forms required for filing home office deductions. A useful publication for further understanding the IRS regulations regarding home office deductions is called publication 587.

Specifically, this form required by the IRS for home office deductions is an addendum to the form 1040 known as form 8829. Form 8829 is entitled 'Expenses for Business Use of Your Home' and must be filed by April 15 of a given tax year if no extension has been applied for and approved. In addition to form 8829 the proprietor must also submit all other required forms such as the 1040, 1099's, W-2's, Schedule C's etc. depending on one's specific tax situation. If one is an employee using part of the home exclusively for employment purposes a form 2106 may be used in addition to the form 1040 and other form requirements.

Types of businesses that qualify

There are many types of business types that may qualify for a home office deduction including day care facilities, landscaping businesses, cleaning companies, consulting or counseling proprietorship etc. Areas of homes and built in apartments can also qualify as home office business deductions when the area is used solely for a rental business.

In the case of employees, telecommuters such as computer programmers, customer service representatives and freelance artists may also qualify for at home business deductions. There art two exceptions to the exclusive use qualification according to the Internal Revenue Service. These exceptions are use of space for business inventory and daycare operations. For more detailed information about qualifying it may be advisable to consult the IRS Publication 587.

Home office tax deductions

The good part of home office deductions is they can be deducted from income in addition to the standard 1040 deductions making one's taxable income potentially very low. In the case of mortgage interest deductions and overhead expenses such as electricity or gas, the square footage percentage of the home is first calculated, then that percentage is multiplied by the total mortgage interest and overhead expense to arrive at the deductible business portion of the expense.

Additional deductions include real estate insurance expenses, real estate taxes, repairs and/or maintenance, utilities, "listed equipment" depreciation, and allowable "other" and operating expenses. Listed equipment may include computers, furniture, fax machines etc. that are used more than 50% of the time for the business or businesses in question. In other words, while space must be used 100% of the time, with the aforementioned exceptions, equipment only has to be used 50% or more of the time. Other expenses not included on the form 8829 can be listed on form Schedule C of the 1040 which includes expense deductions such as advertising, employee expenses, businesses services received and equipment maintenance.

Home office deductions can be a great way to make use of extra space as an income tax deduction. Such deductions should not be abused or used dishonestly as this would be tax fraud. For the home office to qualify for deductions it must be an area of the home used solely for the purpose of business. Equipment used in that space only has to be used 50% or more of the time for that business. The space must be used consistently for business use and two exceptions to the sole use requirement exist with the cases of business inventory storage and day care facilities.

How to start a business in Texas

The process for starting a business in the State of Texas first and foremost can benefit from assessment of the achievability/feasibility of the business via careful planning and business strategy,   determining what kind of business it will be ex- sole proprietorship,  which county or counties the business will operate out of,   the name of the business if any and  the service category of the business ex-cattle ranch. Several preliminary steps to starting a Texas business may be garnered by contacting and reviewing the following resources:

• U.S. Small Business Administration (SBA)
• University of Houston Small Business Development Center Network
• Texas Secretary of State
• U.S. Internal Revenue Service
• Texasonline.com "The official portal of Texas"

The above institutions and websites offer information and tips on starting businesses in Texas, steps required for business formation, corporate documentation fees, and provide links to the State's requirements for incorporation and the federal government's tax related requirements. Additional resources may include research of individual businesses through discussion with business owners and/or literature review of business start up procedures written by Texas business owners and organizations.

Texas business related forms and procedure

Depending on the type of business being created, official procedure with local, state and federal Government entities may include any of the following steps 1) Permit or license acquisition 2) Completion of federal tax related forms 3) Certification and documentation of business formation with the Texas Secretary of State and 4) establishment of any additional legal, insurance and tax related agreements.

Documents and forms that may be required to start a business in Texas vary on the category of business, business operation, employees if any, and business structure i.e. shareholders vs. single owner, partnership or limited liability. A few of the forms, applications and procedures that may be required are listed below and are the same as other States in the case of Federal tax related documentation requirements.

• Business license or permit
• Business name registration with county clerk
• U.S. Internal Revenue Service Form SS-4 (EIN application)
• Certificate of business formation (for corporations and partnerships)
• Articles of incorporation and bylaws (if required)
• Trademark and/or patent registration
• Attaining of a registered agent

Obtaining a Texas 'registered agent' can be of assistance in the formation of a business as these entities serve as facilitators of business formation but do require a fee. According to Section 5.251 of the Texas Business Organizations Code, the office of the Secretary of State assumes the role of a registered agent if no registered agent is obtained. Unlike other states this may bypass the services and requirement of obtaining a registered agents.

Essential documentation and requirements vary on the type of business, location of business and complexity of business operations. Generally, the simpler a business is, the less paperwork is required to start the business. For example, in the case of sole proprietorships an Employer Identification Number (EIN) is not required and is replaceable by a social security number of the sole proprietorship has no employees. Additionally, a sole-proprietorship does not require a certificate of business formation and if one's individual name is used as the name of the business, no name registration is needed.

In the case of partnerships, limited liability corporations, S-corporations and C-corporations, registration, documentation requirements and federal filings can vary along with associated fees. Ideally, a business will already have a good idea of its plan, capital structure, ownership, licensing needs, property and/or location related requirements before the official formation or transformation from another type of business occurs. For individuals looking to start a home-based business in Texas, the following video offers some helpful tips:

In some instances of business formation, especially with larger and more elaborate business types, the need for business related services might arise. In other words, when there is doubt about specifics in a business's legality, strategic or tax plan, obtaining the assistance of professionals that specialize in the area of business pursued may be helpful. Specifically, tax accountant, business attorney, and business consulting services are obtained by businesses for matters requiring specialized knowledge in these areas.

Starting a business in Texas may be envisioned with the blink of an eye, however the formation of the business doesn't, especially in the case of businesses that are not sole-proprietorships. A good business model, sense of direction, understanding of formalities, knowledge of operating environment, market etc. can help in avoiding losing capital from personal business financing or any other type of business funding. Moreover, consulting resources such as those listed in this article may also assist with some of the requirements necessary for starting a business in Texas. In any case, the State of Texas is considered one of the better States's to start a business because of its low corporate taxes, State economy and in the case of sole-proprietorships lack of State income tax.


1. http://tlo2.tlc.state.tx.us/statutes/bo.toc.htm
2. http://www.texasonline.com/guide/index.jsp
3. http://www.governor.state.tx.us/divisions/ecodev/sba/guide
4. http://www.irs.gov
5. http://www.sos.state.tx.us/corp/related.shtml

How small banks manage financial risk

Risk management is the process of limiting risk while maintaining or growing bank profitability. Assessing risk in a small bank is an ongoing function as the banks clients' credibility can change over time. The same is true for business patrons since local markets and economics can also fluctuate based on various supply and demand trends, competition, lending rates etc. 

Risk management for small banks is achieved through implementing a number of risk management procedures that address the various areas of banking risk. This article will address the different types of risks small banks face and how these risks can be ameliorated for the benefit of the banks ownership and operational performance.

Types of small bank risks

Included in the types of bank risks facing small banks are credit risk,  interest rate risk,  liquidity risk and  price risk. (Fraser, Gup and Kolari, p.9) These risks are linked to the banks solvency, investments, lending and borrowing rates, and clientele. If these risks are too high, the banks net income can decline through written off asset accounts, lowered revenue, and in some cases the bank can face undercapitalization. To illustrate the above credit risk, if small bank A makes credit loans to 100 customers, 25 of whom have less than excellent credit, the bank is taking on more credit risk than it would if all 100 customers had excellent credit.

The above credit risk scenario leads to another risk, specifically underperformance. For example, if bank A's management decides it does not want a high credit risk and instead only lends to customers with excellent credit the risk of underutilizing capital emerges if not enough customers with high credit borrow the same amount of money that would have been lent if people with less than perfect credit were allowed to borrow from the bank on credit. Thus, the adept risk manager will be experienced and knowledgeable enough to realize what adjustments to the bank's credit policy will lead to the highest lending return with the least amount of risk for that return. This is accomplished in part by effectively measuring risk.

Measurement of small-bank risk

Risk can be measured partly with the aid of 'risk ratios' which are usually simple division based mathematical scenarios that focus on specific aspects of the banking operation. For example, risk ratios address small bank concerns such as capitalization,  liquidity, operating efficiency and interest rate sensitivity. (Fraser, Gup and Kolari, p.76-80) Moreover, capitalization ratios quantitatively determine how much money a small bank has set aside for loan charge offs in relation to the amount of loans made. 

This is calculated by dividing the loan loss reserve of a bank by the total dollar amount of loans. Risk management theory can be extensive and involved for the purpose of focusing on sufficiently accounting for and dealing with unnecessary risk. The result of this theory yields a number of risk management case studies and forumulaic, quantitative and qualitative measurements with statistical probabilities of success and viability in some cases. Essentially, if the risk a small bank faces can't be measured, that risk becomes a greater hazard to the bank, hence the need for risk management metrics.

Implementing risk management

Implementation of risk management policy involves developing a risk management bank policy that takes into account risk management metrics/measurements with the goal of profit optimization. This requires the bank's management to accurately record, monitor and forecast financial scenarios in which the bank can operate safely and profitably. The task of risk management is performed well when the small bank manager has a firm comprehension and sensitivity to the quantitative and qualitative factors within the banking industry. Over time, experience and knowledge of the banks capacity combined with adequate metrics and forecasting may yield a successful risk management policy that provides the bank with the financial security and success it often seeks. An example of a risk management model is below:

Risk management
Risk management models differ between organizations but aim for the same goal

Additional forms of risk management involve Federal regulatory policies that impact how a bank can borrow and lend funds, the services the banks can provide and how banks disclose information to their clients and the government for insurance and consumer protection purposes. Still further risk management positively affects the banks legal positioning through sound compliance with banking law in addition to strong public relations that can assist with lowering a banks reputational risk. Technological risk is another area of risk that can be soundly dealt with through a banking information technology management.

Small bank risk management deals with sources of risk to a bank whether it be financial, digital, legal or social and implements risk management policies to prevent and lower the various types of risk that can affect a bank and as described in this article.

Implementation of risk management requires the bank's management to monitor, assess and supervise the banking operation to ensure enhanced profitability, adequate capitalization, needed liquidity, regulatory compliance, public relations and unnecessary debt for the bank.

Experienced bank managers are or should be familiar with the banking environment, market forces, banking policies and regulations and sound financial management to properly deal with the risks that can face a bank in its daily operations.


1. Fraser, Gup and Kolari. 'Commercial Banking: The Management of Risk' 2nd edition' South-Western College Publishing, Cincinnati, Ohio. 2001.
2. http://www.chicagofed.org/banking_information/legal_reputational_risk.cfm
3. http://www.chicagofed.org/banking_information/risk_management.cfm
4. http://fic.wharton.upenn.edu/fic/papers/1096.html

Image license: Stuart G. Hamilton, CC BY-SA 3.0

How to start a business in Nevada

With no State corporate, franchise or personal income tax, Nevada may be just the state to start a business in. What's more, business documentation filing fees in Nevada are lower than in several other States and Nevada Limited Liability Corporations (LLC's) can be managed by one person comprising all the roles of executive officers required by law in some other States.
Nevada commercial enterprise is encouraged via business friendly laws
Nevada is known for business friendly regulations

To clarify the distinction of non-taxation of Nevada businesses, the Nevada business code specifies that while LLC's are not taxable as business entities at the State level, the income received from the business by its owners is still reportable at the Federal level via Internal Revenue Service filings. (tax.state.nv.us)

How to start a business in Delaware

Starting a business in Delaware can be a good idea for the simple reason Delaware is a "business friendly state". If considering Delaware as a state to register and/or incorporate, a business has already taken an important step in the process of business formation. Several formalities generally pertaining to registration, licensure and documentation may be required by the state of Delaware. These requirements vary depending on the type, and nature of the business. This article will outline necessary steps for various types of businesses wishing to be identified as Delaware businesses.

Step 1: Business licensure and registration

In Delaware, a business license and registration is required for businesses including sole proprietorships. Licenses can be obtained by applying through the Delaware division of revenue and cost anywhere between $3.00-$750.00 based on the type of business. For example, a cigarette machine business license costs $3.00 and a for profit circus business license costs $750.00. An http address to the Delaware license and registration application form aka "Form CRA", is provided at the bottom of this article.

Additional licensure may be required at the municipal level, thus contacting local city and county halls can be of assistance in determine this requirement. Starting a business in Delaware also requires the use of a registered agent by law. Registered agents assist with legal compliance and communication between business and the Government and may be obtained for as little as $50.00 per year.

Step 2: Type of business and federal registration

If a business is not a sole proprietorship, but rather a corporation or partnership, federal registration is also required at the outset of business. Typically, this involves completing a U.S. Internal Revenue Service form SS-4 i.e. the application for an employer identification number. It is important to note that even a corporation or partnership with no employees is required to apply for an EIN. An http address to the IRS EIN application form is also included with this article.

Determining which type of business is ideal is a matter of business planning in regard to taxation, growth, size, regulation, legal aspects etc. Researching each type of business type and discovering which one applies best to one's intended practice can be useful in this process. Several business types exist to choose from, sole proprietorships, partnerships, Limited Liability Corporation, limited liability partnerships and small businesses or S corporations. Business name reservations can also be obtained via the Delaware division of corporations.

Step 3: Incorporation and certifications

Depending on the type, size and capitalization of the business in question, incorporation documentation may be required to start a business in Delaware. These types of documents may include articles of incorporation, bylaws, certification of incorporation etc. The State of Delaware registered agent requirement can assist with determining which, if and in what circumstances corporate documentation are required. 

Fees are charged for corporate certifications and vary based on the type of business. For example, a "Stock certificate of Incorporation" costs $89.00 for a normal sized application whereas a "Statement of Qualification of Limited Liability Partnership" costs $200.00 per partner according to the State of Delaware division of corporations.

Step 4: Additional business start-up considerations

Starting a new business in Delaware may also encompass additional aspects of procedure. These further needs can depend on the operational structure of the business and the decisions made by the businesses owners and/or management. Consequently, some of the following items are variable and are listed for consideration purposes.

• Professional licensure
• Real estate and zoning related requirements
• Business and business asset insurance
• Legal protection for intellectual property
• Loan and capitalization agreements
• Vendor contracts

The process of starting a business in the State of Delaware may seem overwhelming at first, but is really a matter of filing paperwork, applications and paying start up fees. These steps may be best considered within the initial planning stages of a business rather than after the owners, inventory, business network, franchise license etc. if any have been obtained. 

Much assistance in the formal business start up process can be obtained by contacting the Delaware division of corporations, business registered agents, municipal government offices and the internal revenue service. Further business start up considerations unique to the state of Delaware may also be necessary in regards to insurance, property and legal protection. If such aspects of starting up a business in Delaware pertain to a new business, contacting the businesses, attorneys and/or agents directly may be necessary to carry out a more successful starting up of business operations.


1. http://dedo.delaware.gov/information/small_business_structure.shtml
2. http://corp.delaware.gov/nameres.shtml
3. http://revenue.delaware.gov/services/Business_Tax/taxforms/Cra/CRA.pdf
4. http://www.irs.gov/pub/irs-pdf/fss4.pdf
5. http://corp.delaware.gov/howtoform.shtml
6. http://ezinearticles.com/?Delaware-Incorporation-A-Very-Business-Friendly-State!&id=689607

Cost effectiveness of an MBA degree

A Master's Degree in Business Administration (MBA) can be worth a lot or a little depending on several factors. When MBA's were in their highest demand the degree was almost a ticket to well paying business jobs. Since the 1980's MBA programs are standard in many Universities and consequently the supply has increased. This does not mean a MBA is useless however; what it does mean is that as a prospective MBA candidate one has to be a little prudent.

With a MBA one can broaden one's horizons significantly. A Doctor might pursue a MBA's to better understand the administrative end of their field; Engineers and Computer Scientists may earn MBA's when considering branching out into small Businesses, Corporate employees possibly seek MBA's to assist in promotion etc. In addition to the career implications of MBA's is the knowledge of the world of Business which is pretty much unavoidable in a MBA program. For anyone who didn't know, Business is a big factor in what makes the World go round these days, so having knowledge of this is useful in and of itself.

In a MBA program one learns things like the time value of money, asset management, strategic marketing, brand value, organizational behavior, financial statement analysis, statistical analysis, entrepreneurship etc. The list is quite extensive as the degree programs can average about 60 credits which is double the course work of some degrees and about one third less than law degrees.

The value of these courses also depends on how one applies the knowledge one learns in the degree. For example, if one invests time and money to learn how to build a car, but never actually builds a car why learn to build a car? A non-MBA student might say, "why not if it's interesting"; an MBA student who has learned his or her coursework would say that is a wasted investment or net loss scenario. One thing that a MBA will teach is how to value money and that is valuable too.

Before delving into some of the costs and valuation of an MBA degree, the following video raises some useful tips about calculating return on investment or ROI for an MBA program and some of the key considerations to take in to account:

The value of the school and the value of the individual

How one is situated and which school one attends can also influence the value of a MBA. A MBA from Wharton is prized but not necessarily valuable depending on how it's used, while a degree from an accredited 3rd tier school will teach essentially the same information, it may take someone quite high and therefore be quite valuable if the individual knows how to use it. Thus, although all MBA's are not always considered equal in rank and therefore 'value', neither are all recipients of MBA's. In other words value can be found in many degrees, if it is turned into something of greater value.

Short run versus long run value

In the long run, a MBA has more potential value than in the short term, as MBA's do incur opportunity cost and expense when pursued. Then, after graduating one has to generally either get a promotion, increased in income, find a career or start a business for the degree to pay off. That takes more time, energy and investment. So naturally, the short term implications are less favorable than the long term.

Face value

Lastly, a MBA may be free if one has an employer, scholarship or college fund pay for it. In this case, the value of the degree is either $0.00 or any positive dollar value above that as no money from the candidates personal funds are used in paying for the degree. In this instance, the real tangible book value of the degree is good, but sometimes it may be negative depending on the cost of the tuition and the financial situation of the individual pursuing the degree. What's more, if student loans are used to pay for the degree they could negatively amortize if the student is unable to make interest payments on the loans after graduation.

So what we have seen here is that MBA's have a lot of potential value and sometimes immediate value depending on how they're financed. Since the 1980's MBA's have become more popular and less in demand thereby reducing their cultural value or value to the workforce however many opportunities still exist for MBA students for the simple reason the World is comprised of so many business'. A MBA can equip an individual with highly useful information that is not unnecessary in any commercial environment and part of the value of that knowledge is multiplied by the value of the individuals ability to use that know how.

Money saving dorm room decor tips

Welcome to University aka college life. Chances are it's not going to be luxury living and your undersized room may already be furnished with a squeaky bed, small desk and dresser. Theoretically, dorm rooms don't have to be decorated especially if you spend all your time in the library, with friends, the dining hall and in class. However, if you do decide to make your student living more pleasant, decorating on the cheap can be easy to do.

Ways to finance college costs

College financing
Multi-sourced college financing can be used to optimize costs

Paying for college is something that can be facilitated by a few practical and thoughtful steps. The opportunity cost of going to college can be in the tens of thousands of dollars, not to mention the actual expenses associated with enrolling in college programs. Despite these education costs and expenses, there are ways to lower both the opportunity cost and the expenses of college education significantly. This article will outline some of those methods.

College savings plans

Depending on how far into the game you are, your parents may have set up a college savings plan such as the 529 college savings plan for you when you were a child. If you don't plan on attending college for several more years it may be a good idea to look into this type of plan as they are completely tax free in terms of deductions and withdrawal so long as the money is used for designated college expenses.

Living with family

Residence is one of the biggest expenses at college. A typical college year can last 8 months and include room and board and dining expenses in excess of $8000/yr. After 4 years that's a lot of money. While living at home doesn't include the complete college experience, it might be worth  not incurring tens of thousands of dollars of student loan debt to miss out on dorm and near campus life depending on how intent you are on paying for college.

Transfer credit from community college

Some community colleges offer courses that can be transferred with relative ease into a University program. If you are planning on enrolling in a university program, looking into the local community college courses and transferability to universities may well be worth it. Additionally, depending on the community college, one may not want to or have to attend university if the program one is interested in can be achieved through community college.

Corporate tuition assistance

If you are lucky, you might be able to land a job with a company that has tuition assistance. Even if it isn't 100 percent assistance or grade based assistance it is worth the time spent filling out the application to try and redeem such valuable job benefits. Additionally, one doesn't always have to be employed by a savvy large corporation to receive such benefits, a small business owner may see such assistance as the perfect tax deduction and might be worth asking for instead of a raise.

Consortium universities

Some universities may be members in a regional tuition consortium allowing students from one state to attend universities in another state at a discount to the normal out of state tuition. After establishing residency which is usually a period of 1 year, those students may qualify for instate tuition. Calling different universities admissions offices is a good place to start in researching this possibility.

Register as in-state not out of state/attend state vs private school

The difference between instate and out of state tuition can be enormous. It might be worth establishing residency before hand in order to qualify for the lower tuition at State schools. Private schools may not honor the in state and out of state guidelines since they are private institutions. Additionally private schools tend to charge much steeper tuition costs. There are many credible state universities that's education program is considered at par with if not better than some top tier private schools.

Buy used text books

Many college and university bookstores offer resale programs for books that are used in consecutive or repeated semesters. This allows new students to buy books from previous students who have resold their books back to the college or university bookstore. After 40 classes of course work, some with 2 or 3 textbooks each the savings on used books can add up. The price of used textbooks can be marked down by 10% or more depending on the condition.

Sell text books online

If the textbooks your class uses are new editions they could be worth something through online retailers. To optimize on this technique, purchase used text books through the book store or online and then resell them to minimize costs. Since textbooks can cost up to and sometimes over $500.00/semester, the potential savings are in the thousands of dollars over a traditional 4 year university program.

Employment during enrollment

Working during school can help pay for costs in addition to making graduating on time a lot tougher. Depending on whether you work full or part time will make a difference on how much you can earn versus how many credits to enroll in. Burn out is possible when working full time and attending a rigorous academic program so be realistic with yourself as well.

Avoid student loans and credit card expenses

Student loans may seem like the easy option at first but depending on the interest rate upon graduation and thereafter, the interest on the loans can multiply the real cost of attending college or university. Avoiding these methods of payment may be impossible, but keeping the future cost in mind is prudent.

Apply for scholarships and grants

Good grades and standardized test scores can mean one very good word, scholarship. While test scores alone don't translate to scholarship they can be a big help. Researching the different types of scholarships and grants available and applying for them properly is key to qualifying for this type of free education. It is worth the time to work for and try for these types of funding.

Paying for college may seem daunting at first and the prospect of debt may not seem appealing at all and that is because it isn't. However, if you decided the opportunity cost of an education is worth it and will pay back more in the future, then the next step is to find ways to minimize these costs and expenses. The tips and methods in this article can help with just that. The more of the tips that are utilized and the more consistently they are applied, the greater the potential savings, affordability and practicality of paying for school can be.

Image license: Tax Credit, CC BY 2.0

Wednesday, April 27, 2011

How to create a sales forecast

There are many ways to create a sales forecast, and how a sales forecast is made is not the same as what a sales forecast is. Some sales forecasts are more accurate than others, but the information used in making the sales forecast also contributes to its validity and largely pertains to existing and pre-existing selling activities. Sales forecasts can be made by hand on paper with a calculator, using Microsoft Excel, or with a specialized sales forecast software. Essentially one or more of the following are needed to make a sales forecast:

1. Past sales numbers
2. Sales and marketing budget numbers
3. Intervals at which the numbers are attributable to
4. Other dependent variables ex. Changes in sales force
5. Calculator, or Forecasting software

Determining which sales forecast to use for your business depends on market consistency, historical sales, changes to marketing, project management or product and service line, economic conditions and  forecast objective. This article will illustrate how to make different sales forecasts with different tools and methods, and then discuss the importance, relevance, pros and cons of sales forecasts. The instructional presentation below illustrates the first method of creating a sales forecast.

Simple sales forecast using moving average

The moving average is a trend line that calculates an average number based on historical data. For example, if sales for the last two years averaged $120K per month and rose an average of 3% per month, a sales forecast that uses both moving average and the percentage rise in the moving average will give a sales prediction based on past sales patterns.

1. List historical sales on a piece of paper or spread sheet
2. Calculate moving average
3. Determine periodic percentage increase in sales
4. Create trend line by applying percentage increase to moving average

Sales forecasts using Microsoft Excel

A few types of sales forecasts can be made using Microsoft Excel. These different forecasts use data differently or adjust data to arrive at more accurate predictions. All forecasts are predictions unless the variables are 100% constant into the future. The sales forecasts below use moving average, dependent variable i.e. causal relationships, and independent variables i.e. sales values. (Microsoft.com)

1. Create three or more columns in a Microsoft Excel Spreadsheet
2. One column for sales and another for time period
3. Click on the chart wizard
4. Highlight data box, proceed through wizard steps
5. Click on Chart tab and add trend line

For more detailed analysis of the above sales forecasting method using Microsoft Excel, regression analysis can be used to calculate accuracy of the sales forecast, and correlations. The following Microsoft website illustrates how to do this and create a forecast in excel with more detail.

Sales forecast using statistical or specialized software

Software that is designed just for creating sales forecasts can provide easier to you applications that save precious time and energy. Additionally, specialized sales forecasting software may offer a variety of forecasting options such as multiple dependent variables, easier data input templates, more dynamic presentation, and greater analytical capacity. Sales forecasting software can be found for free online via sites such as http://www.freedownloadscenter.com

Advantages and disadvantages of sales forecasts

Sales forecasts are useful tools in business management because they help refine the business process and improve the accuracy of business financial planning. Sales forecasts can also be helpful in training teams, illustrating sales performance and planning future sales efforts. Additionally, sales forecasts may assist a business obtain financing for new projects or demonstrate the need for sales related changes.

• Reduce excess inventory and storage costs
• Allow management to gauge effectiveness of sales force
• Improve strategic planning and product testing 
• Assist sales force assess their efforts and market
• Creates records for budget considerations and analysis

Sales forecasts are only as good as the variables and factors put into the equation, software or calculation. Some forecasts may be mere estimates or ball park figures of what sales might be like given non measured past patterns. Other forecasts may fail to take into account significant changes in sales staff, budgets or product line(s). Thus, knowing the business in detail can help improve the accuracy of a sales forecast.

• May not account for changes in economic conditions
• Requires business conditions to remain constant
• Does not necessarily incorporate future projects
• Numbers affected from

In summary, sales forecasts are made relatively easily but do require a record of past sales and business variables to more accurately create a forecast using a moving average trend line. Sales forecasts can compare multiple variables on a graph, in addition to being displayed on data tables. The forecast accuracy can be measured with statistical analysis and multiple methods of creating sales forecasts exist including by hand, Microsoft Excel or specialized sales forecasting software downloads. Sales forecasts are generally not 100% accurate but do assist a sales team, business management and business ownership plan for and project future business situations and revenue which helps in inventory control, assessing human resources, budget and strategic decisions.

Benefits of listing a company on the stock exchange

Public stock increases business market exposure
"Going public" allows businesses to access greater amounts of capital

Registering a business to be listed on a stock exchange does not necessarily require the business to be a huge billion dollar equity company. This is so as laws that enable smaller businesses to offer stocks on secondary exchanges such as the Chicago Stock Exchange or Arca Exchange allow those companies to remain private. 

Smaller public companies that wish to be listed on a stock exchange, but do not meet larger exchange requirements may also have the option of listing on regional exchanges. If a company is private, the small corporate offering registration (SCOR) requirements within U.S. States is a specific form of stock offering that facilitates remaining a private company while still being able to gain access to stock exchange listing. The listing requirements and benefits vary form exchange to exchange, however finding and registering for an appropriate exchange may be well worth the cost for a number of reasons outlined in this article.

Listing requirements

Each stock exchange has different listing requirements such as historical earnings bars, share volume and stock capitalization value. These requirements may be determined by a Board of Directors and/or Executive group. Generally, the larger the exchange, the higher such bars are set but this does not necessarily exclude smaller businesses from being listed on an exchange. Rather, it determines which exchanges smaller businesses may have the opportunity to become listed on.

To illustrate, the Nasdaq stock exchange requires a minimum earnings of $11 million over three consecutive years prior to listing in addition to a minimum of one and a quarter million share float. By contrast, the Chicago Stock exchange has a tiered structure of requirements defined in part by business asset value. For example, a business with $4 million in assets must have net income of at least $400,000 in the last two years and share capitalization of $300 million for 500,000 shares with a minimum of 800 shareholders or 1 million shares with a minimum of 400 shareholders.

Benefits of listing on a stock exchange

Being listed on a stock exchange has many advantages that a business owner of any size might consider as part of a businesses strategic plan. Moreover, when expansion and leveraging are on the business agenda, stock exchange listing can cast a wider net into the capitalization pool i.e. the potential sources of equity funding. A few of the benefits of stock exchange listing are illustrated below.

Market exposure

Through listing on a stock exchange a company is gaining market exposure to a broader membership of the financial community including market makers, buyers, sellers, and institutional traders, mutual funds and possibly hedge funds. Consequently, if a business is worth investing in, the listing opportunity has the potential to greatly increase capital investments. In other words, as opposed to private negotiations and networking, a listing on an exchange facilitates exposure to a larger financial market and wider range of investors.

Advertising via market listings

Another benefit of listing a business on a stock exchange is the complimentary advertising that is included in the filing fee and registration. While this advertising may not be direct, the listing of a business on the exchange affords a business advertising through association. In other words being associated with the exchange and listed on it, a business is in effect advertising itself indirectly if not directly. What's more the cost of registration may be a good bargain because not only does it provide market exposure and advertising but the opportunity to generate capital investment.

Improved brand equity through listing

Being listed on a stock exchange means that a business has met qualification standards set by the exchange. This can add credibility to a business and therefore brad equity, i.e. customer and/or client perception of value in a company and/or its products. Furthermore, in addition to the credibility resulting from the indirect endorsement from the listing, financial information and investor public relations may also be enhanced through contact information made available through the exchange listing.

Potential for increased capitalization

A need for capital investment should be one of the main reasons a company lists on a stock exchange. Otherwise it might not be worth the time to be listed for the sake of advertising alone. Stock market listing is one of several sources of capital leveraging per the NYSE Euronext, but also happens to be one of the widest and most accessible forms of investment for both investors and businesses. It is largely in effect, a free market for buyers and sellers to meet, assess and trade capital for ownership and vice versa.

Lower reliance on venture capital firms and debt financing

The potential for increased capitalization through wider market exposure may also reduce the need and reliance upon alternative sources of funding such as venture capital firms. This lower reliance for alternative sources of financing may improve negotiating leverage when obtaining financing from venture capital firms whether it be through less liability protection as determined by the stock ownership terms or lower cost of capital. In other words, if the market exposure gained through listing is positive, the effects on financing can also be positive.

To summarize, listing a business on a stock exchange may be a good idea for a business seeking improved market awareness, greater potential for capital investment, enhancements to brand equity and negotiating influence etc. Listing on an exchange should probably be in line with or in accordance with business strategy, otherwise the listing may be premature or unnecessary. Nevertheless, for companies that do seek stock exchange listing, the opportunity is there through multiple regional and national stock exchanges and different choices regarding business status and registration requirements with the Securities and Exchange Commission.

Image attribution: Freedigitalphotos.net; standard royalty free license