When Should You Go for a Personal Loan?

The most advantageous factor of a personal loan is that it is very easily available. This is because the lender of a personal loan does not have many compliances to follow. The lender asks no questions and there is no criteria that has to be met by the borrower. However, there is a downside. This is very much unlike the loans taken for education and housing. The downside is that personal loans come with a very high rate of interest. Thus most of the financial experts advise against taking of these loans.

When to go for a personal loan?

There are a few circumstances in which you can easily go for this kind of loan. However these circumstances can also be termed as rare. These are as follows.

– You should not take a loan to purchase any expense that is consumption based. This includes buying a TV or a car. You should also not even think of funding a holiday by taking a personal loan.

– You can opt for this type of loan only during cases of emergency. You must however do this only if you are sure that you will be able to pay back the loan in time.

– In case you are buying a new house and the purchase price of the house is very much higher compared to the home loan, you can bridge this gap by taking a loan. This is an exceptional case and there is nothing much you can do. It can also be a safe investment decision if the value of your home appreciates.

– This loan is a very good choice if it can result in a significant amount of savings or if it is able to help you gain possession of any appreciating asset.

If you are going through a situation in which you are repaying a loan that has an extremely higher interest rate and while the interest rate of your loan is lower, it will be very much better for you to opt for the loan. This is because the latter can be used to settle or close out the higher interest debt.

Thus it must be understood that a personal loan can be a very easy way to go through in the short term, but in the long run it can have a significantly negative impact on your financial status. It is one of the important things to remember.

All About Money Transfer

Every year, billions of dollars are recorded as remittances worldwide. With the advent of technology, there are several ways to send money home. With so many options available, it is very important to make the right choice to avoid paying an exorbitant fee to transfer money. There are three basic factors to be considered while transferring money. Understanding each of them will help us in sending money in the most optimal method.

1. Mode of Transfer

There are a couple of aspects while choosing a mode of money transfer. They are:

location of the sender and the receiver
awareness levels of the technology and the availability of the same
time availability and affordability

Taking all of the above into consideration, one can select a medium that best suits him/her.

Cash Transfer

One of the oldest methods of sending money, a cash transfer is a simple process of sending cash through a money transferrer. The receiver can collect the money or have it delivered by the money transferrer.

Bank Transfer

Today, several money transferrers have tied up with many leading international banks to empower their customers to make a bank transfer. Through this service, one can transfer money to the recipient’s bank account.

Online Money Transfer

One can sit at the comfort of their home or work and send money through an online remittance portal. Most portals have the facility to remit the money to a bank account/ credit card /cash payout.

Mobile Money Transfer

This method of money transfer is ideal for those who have limited access to banks and transfer agents. Through this method, money can be sent to a recipient’s mobile phone or mobile wallet. This is widely used in many countries in the African continent. Some of the other countries that have this facility are Bangladesh, Kenya, India and Philippines.

2. Cost of Transfer

The cost of sending money will depend on the exchange rates, mode of transfer (cash, bank, online), the commission charges levied by the remittance house etc. And they will vary depending on the service provider’s network and the other value added services offered. Simply put, at the end of the transaction, calculating how much of money the recipient receives will give an idea of the cost of transaction. While availing a particular type of money transfer service, one should be well informed about the below:

Exchange Rate: This is the rate at which one currency is exchanged with another. This rate will vary from time to time, depending on the global financial scenario and other economic factors. It is always wise to wait until the receiver’s currency value is lesser than the sender’s currency value, so that more money can be sent. For instance, if someone living in the USA wants to send money to Mexico, they should ideally transfer money when the value of peso is lesser than dollar, so that, for each dollar more pesos can be sent.

Fees: This is the fees charged for transferring the money and will depend on the service provider and the mode of money transfer.

Tax: Some countries also levy a value added tax that is charged on the commission/ service fees. For more information speak to the customer care executive before you make a transaction.

3. Comparison

It is always good to weigh all the available options before transferring money. Comparing the exchange rates at various times will help in understanding the pattern. While one service provider might have a wide network, another might boast of having state-of-the-art technology. Hence understanding one’s needs and choosing accordingly is crucial.

Always ensure you ask for a record of the transaction (bill/e-receipt) at the end of the transaction. This will authenticate the transaction and act as a reference for future purposes. Sending money home can be overwhelming with so many avenues, but gets easy once the above factors have been well considered.

5 Interesting Facts About Google’s Treasury Operations

Google marked the 10 year anniversary of its stock market debut in August of last year. Since IPO Google has achieved almost unmatched business and commercial success and it now ranks amongst the largest and most respected companies in the world. Investors in the IPO haven’t fared badly either – one dollar invested then is now worth around 12 dollars. At the time, however, the IPO was considered a failure on a number of fronts as Google sold a lower number of shares than originally expected at a price towards the bottom of its guided range. The Dutch auction mechanism used for allotting shares to investors caused a great deal of confusion and has been rarely used since.

It wasn’t all Google’s fault; market conditions in 2004 weren’t exactly ideal (dot com scar tissue) and Google had an unproven business model. Looking back over the 10 years since August 2004 the IPO could be considered a low point from a financing and treasury perspective in what has since been a spectacular performance. This article looks at Google’s growth and commercial success through a “treasury lens” to better understand some of the key metrics behind what has grown to be one the largest corporate treasury and investment operations in the world.

To put the Google numbers in context we use comparative figures for two other ICT heavyweights, IBM and Microsoft. IBM IPO’d over 100 years ago and Microsoft went public in the mid-eighties.

Fact 1: Google’s Asset Base has grown by 1,200% to $130bn in 10 years

Google’s asset base has grown by close to 1,200% over the last 10 years and by 3,800% since IPO. In contrast IBM’s assets have increased by 11% and Microsoft’s by 140% over the same period. Some assets require more active management than others. For example goodwill and intangibles are passive from a treasury perspective but cash, on the other hand, requires management on a day to day basis.

Fact 2: Google currently has a $60bn Cash Pile

Every organisation manages cash flow and in some cases surplus cash. Few manage a cash mountain. Google’s latest 10-K showed cash plus cash equivalents totalling close to $60bn which has grown by close to 3,000% since IPO. While Microsoft hasn’t experienced the same growth in cash reserves as Google it remains massively cash rich – ranking second only to Apple in the corporate cash reserve league table.

Cash comprises approximately 50% of Google’s asset base. This is roughly equivalent to Microsoft’s cash to assets ratio but about five times larger than that of IBM. While both Google and Microsoft operate in different fields (advertising and business software) the one thing they share in common is their remarkable ability to consistently turn revenue and profits into cash. This has led to a situation in both companies where the underlying business has generated more cash than it can re-invest in business activities.

Fact 3: Google Traded over $100bn of Securities Last Year

We’ve defined trading volumes as the sum of the investment purchases and sales shown on each company’s cash flow statement. While it may not give an entirely true picture of the work involved in managing investments it does give a good sense of the scale of investment activity undertaken by each company. Most large organisations now operate “bank” like structures involving front, middle and back office activities as well as compliance and risk. Google buys and sells almost one hundred billion dollars’ worth of securities on an annual basis – more than their revenue from business activities.

Fact 4: Google Invests Heavily in Property, Plant and Equipment

Google’s spending on Property, Plant and Equipment (PPE) has increased dramatically in recent years with the treasury team directing over ten billion dollars towards such investments in 2014. Google has ramped up investment in data centres and other cloud related fixed assets as it competes aggressively with the likes of Microsoft, Amazon and Salesforce to gain the upper hand in what is still a fledgling market. This trend is set to continue into the future. Google’s Q4 2014 earnings release stated that “we expect to continue to make significant capital expenditures.”

Fact 5: Despite being Cash Rich Google Still has some Debt

It may seem unusual for a company with such vast cash reserves to have any debt on its balance sheet but the international nature of Google’s business has meant that a large portion of this cash is actually held overseas, out of reach of the head office treasury team due to the tax implications of bringing it home. At the moment, total debt levels are very low at approximately 5% of equity.

This high level glance at Google’s financial statements gives a telling insight into the scale of the company’s treasury operations. It now ranks on a par with mid-scale financial institutions from a treasury activity point of view. Perhaps the most impressive aspect of the Google treasury story has been the speed of growth since IPO and the positive challenges this has presented. Google is truly a world class organisation, no doubt supported by a world class treasury team.

Top 10 Largest Banks in The World

In total assets, the largest banks all over the world start from three billion dollars as of number one in the list, and end with two billions and a half. Chinese banks take a big bite of the world finance, Japan and America follows next. Let us have a look at the largest banks in the world as estimated by relbanks.

10 Barclays PLC

Barclays is one of the big names in Britain. It was founded in London in the beginning of the 17th century. Still, the bank has branched all over the world. Nearly there is no one type of transactions Barclays are not working in from investment to wholesale and retail.

9 Credit Agricole

The bank’s headquarter is located in France and was founded in 1885. Credit Agricole service is friendly as they have founded the Point Passerelle in which customers suffering from any problem like threatened with getting their accounts suspended can find solutions and a helping hand.

8 Bank of China

Founded in 1912 in the Chinese capital Beijing, the Bank of China has different branches around the world.

7 Agricultural Bank of China

Built in 1951 in Beijing, the bank branched out in Japan, U.S, Australia, German, Korea and Singapore. It has around hundred million customers across these branches. It has an advanced rank among the top ten in the world, in number of transactions. The bank witnessed a number of bad circumstances that affected its presence, however it continued to be.

6 JPMorgan Chase & Co

Known as Chase, JPMorgan Chase is a public bank that was founded in 2000 in the United States of America. Chase is the largest bank in the States. Its total assets are estimated to be around above $2 trillion.

5 MUFG

The Mitsubishi UF J Financial Group is based in the Japanese headquarter, Tokyo. It was founded in 2005 and has an average of $2.5 trillion in assets. Although it was founded only 20 years ago, it was able to precede other banks in number of transactions. As usual, this big bank merged with other important bank in Japan; Bank of Tokyo-Mitsubishi and. Such merging always increases the bank’s scope and power and adds to its security.

4 BNP Paribas

Founded in France in 1848, BNP Paribas had enough time to spread its branches worldwide. Like Barclays, Paribas is stretching a hand in every transactional sector like retail, investment and wholesale.

3 China Construction Bank

Founded in Beijing in 1954, is one of the four biggest banks in China as a whole. In addition to the various branches around the world, the Bank of America staked around $3 billion in 2005 and holds above %10 of its shares as well. However it decided that it would sell half of those shares.

2 HSBC

The world known bank HSBC is mainly British with its headquarter in London, the bank was founded in 1865. The bank’s total assets are above $2.6 trillion and big revenue of $68 billion. This is mainly because of its wide scope that covers many countries in America, Asia, Africa, and Europe.

1 ICBC

Founded in 1984, the Industrial & Commercial Bank of China is the major bank in the country. Take into consideration the amount of transactions made with China, now all this money comes here! The ICBC as a company ranked first in Forbes list of biggest companies in the year 2000. Unlike the widespread of HSBC branches all over the world, ICBC is doing it timidly. Only four of its banks are built in the Middle East in Dubai, Abu Dhabi, Doha, and Kuwait.

Is your company a home for one of those banks above? It could be a yes if we speak about multinational banks. Let me hear from you in the comments’ section below!

An Introductory Look Into Transfer Pricing and Arm’s Length Doctrine

Background & Arm’s Length

Transfer pricing happens when two related companies, that occupy a similar industry, trade with each other. When a US-based subsidiary of Company A decides to buy something from its UK-based subsidiary and the two entities agree on a price for the transaction, transfer pricing occurs. A principle comparable to transfer pricing is the “arm’s length” doctrine. The arm’s length doctrine states that the amount charged between two related parties for a given transaction must be the same as if the parties were not actually related. In essence pricing between two related companies must be consistent with pricing either entity would charge a third party. The doctrine also states that two companies must act as though they are negotiating in a normal market since the market would provide a guideline for the ‘fair’ price of a particular transaction.

Limitation of Arm’s Length

Since transfer pricing occurs between two related companies there is potential for price distortion to occur. Two companies may wish to distort or manipulate the price of the transaction that occurred to minimize overall tax liability if one or both of the companies is subject to a substantial corporate tax. Price distortion is especially appealing in ‘tax havens’ or countries with low or zero corporate tax rates. Transfer pricing has been under the microscope in recent years for this reason.

Government appointed agencies work to ensure that companies are not abusing it to avoid taxation. In theory, the ‘arm’s length’ approach is supposed to stop misuse by ensuring that transactions between related companies are treated as if the two entities are not related and priced accordingly. However, in practice, implementing ‘arm’s length’ proves to be bothersome if not impossible for highly specialized companies. Imagine, for a moment, that two related companies are trading a tiny component for an MRI machine that is only made for that particular machine and is not manufactured by any other company.

Hardly any market comparison would exist for this transaction, so the appropriate price is not obvious. The problem with this is two-fold. This situation could provide leeway for abuse because with no market comparison the companies could simply set their own price. It could also create undue burden on companies that are law-abiding and follow ‘arm’s length’ but are lacking a market-based guideline. Currently, ‘arm’s length’ is a favored approach to determining transfer prices; however in this case it is problematic. Perhaps other ways of determining transfer prices need to be developed and implemented.