Monthly Archives: October, 2012

Rural Marketing – An Introduction

The concept ‘Rural’ and ‘Marketing’, though used very frequently in various forums, have eluded any precise and non- controversial definitions. When we join them, the resulting concept ‘Rural Marketing’ means different things to different persons. This confusion leads to distorted understanding of the problems of rural marketing poor diagnosis and, more often than not, poor prescriptions.

The rural market in India is not a separate entity in itself and it is highly influenced by the sociological and behavioral factors operating in the country. The rural population in India accounts for around 627 million, which is exactly 74.3 percent of the total population.

The rural markets in India are undergoing a silent but definite revolution in terms of vastly enhanced purchasing power, consumption priorities and overall volume of consumption of goods and services. The sheer size of the market, as large sections of rural population get converted into consumers, is enough to demand focused attention from both marketing practitioners and academics, to convert the emergent opportunity into realizable market shares and growth targets.

The underlying reasons for undertaking specific efforts to understand marketing practices and to evolve a suitable framework for developing appropriate marketing strategy for the rural India have their basis in two major developments.

The first is that on account of rising purchasing power in the rural India, corporate sector is discovering the huge potential that must be realized by creating access and focusing marketing efforts in the rural segment.

The second reason is that rural markets and the rural consumers are different enough to demand differential marketing effort and it is important for you to be able to understand these differences as well as the marketing implications that flow from them.

The government of India only defines a non-urban market. If we go by statistics, roughly around 70% of the Indian population lives in the rural areas. That’s almost 12% of the world population. The Census defines urban India as – “All the places that fall within the administrative limits of a municipal corporation, municipality, cantonment board etc or have a population of at least 5,000 and have at least 75 per cent male working population in outside the primary sector and have a population density of at least 400 per square kilometer. Rural India, on the other hand, comprises all places that are not urban!”

The Indian rural market with its vast size and heterogeneous demand base offers great lucrative opportunities to marketers. After all, two thirds of countries consumers live in rural areas and almost half of the national income is generated in the rural hinterland. India is classified into around 450 districts, and approximately 6,30,000 villages, which can be segmented in different parameters such as literacy levels, accessibility, distribution networks, income levels, market penetration, distances from nearest towns, etc. Recent developments, which has taken place in the rural areas under the five- year plans and other such special programs, are phenomenal. The overall growth of the economy has resulted into substantial increase in the purchasing power of the rural communities.

Some simple facts to support this: In 2010, LIC sold 55% of its policies to rural areas; of over two billion BSNL mobile connections 50% are in small towns or villages; 41 million Kisan Credit cards have been issued as against 22 million credit cum debit cards in urban areas. With the growing market and the growing purchasing power it is therefore natural that rural markets form an important part of the total market of India.

There is an immense opportunity for the marketer to create innovative and creative solutions to tap the rural potential. As per CK Prahlad ‘Improving the lives of billions at the bottom of economic pyramid is a noble endeavor. It can also be a lucrative one.’

Rural Marketing – Definition

Rural marketing can be defined in terms of the location (villages) and occupation (mainly farming). A large variety of transactions are considered a part of rural marketing. These are marketing of:

  1. Agricultural inputs like fertilizers. Pesticides, farm equipment.
  2. Products made in urban centers and sold to rural areas like soaps, toothpastes, TVs etc.
  3. Products made in rural areas sold to urban centers like khadi cloth, handcrafted products etc.
  4. Products made and sold in rural areas like milk and milk products. Locally manufactured toothpowder, cloth etc.

Characteristics of Management

An analysis of the various definitions of management indicates that management has certain characteristics. The following are the salient characteristics of management.

1. Management aims at reaping rich results in economic terms

Manager’s primary task is to secure the productive performance through planning, direction and control. It is expected of the management to bring into being the desired results. Rational utilization of available resources to maximize the profit is the economic function of a manager. Professional manager can prove his administrative talent only by economizing the resources and enhancing profit. According to Kimball – “management is the art of applying the economic principles that underlie the control of men and materials in the enterprise under consideration”

2. Management also implies skill and experience in getting things done through people

Management involves doing the job through people. The economic function of earning profitable return cannot be performed without enlisting co-operation and securing positive response from “people”. Getting the suitable type of people to execute the operations is the significant aspect of management. In the words of Koontz and O’Donnell – “Management is the art of getting things done through people in formally organized groups”.

3. Management is a process

Management is a process, function or activity. This process continues till the objectives set by administration are actually achieved. “Management is a social process involving co-ordination of human and material resources through the functions of planning, organizing, staffing, leading and controlling in order to accomplish stated objectives”.

4. Management is a universal activity

Management is not applicable to business undertakings only. It is applicable to political, social, religious and educational institutions also. Management is necessary when group effort is required.

5. Management is a Science as well as an Art

Management is an art because there are definite principles of management. It is also a science because by the application of these principles predetermined objectives can be achieved.

6. Management is a Profession

Management is gradually becoming a profession because there are established principles of management which are being applied in practice, and it involves specialized training and is governed by ethical code arising out of its social obligations.


7. Management is an endeavor to achieve pre-determined objectives

Management is concerned with directing and controlling of the various activities of the organization to attain the pre-determined objectives. Every managerial activity has certain objectives. In fact, management deals particularly with the actual directing of human efforts.

8. Management is a group activity

Management comes into existence only when there is an group activity towards a common objective. Management is always concerned with group efforts and not individual efforts. To achieve the goals of an organization management plans, organizes, co-ordinates, directs and controls the group effort.

9. Management is a system of authority

Authority means power to make others act in a predetermined manner. Management formalizes a standard set of rules and procedure to be followed by the subordinates and ensures their compliance with the rules and regulations. Since management is a process of directing men to perform a task, authority to extract the work from others is implied in the very concept of management.

10. Management involves decision-making

Management implies making decisions regarding the organization and operation of business in its different dimensions. The success or failure of an organization can be judged by the quality of decisions taken by the managers. Therefore, decisions are the key to the performance of a manager.

11. Management implies good leadership

A manager must have the ability to lead and get the desired course of action from the subordinates. According to R. C. Davis – “management is the function of executive leadership everywhere”. Management of the high order implies the capacity of managers to influence the behavior of their subordinates.

12. Management is dynamic and not static

The principles of management are dynamic and not static. It has to adopt itself according to social changes.

13. Management draws ideas and concepts from various disciplines

Management is an interdisciplinary study. It draws ideas and concepts from various disciplines like economics, statistics, mathematics, psychology, sociology, anthropology etc.

14. Management is Goal Oriented

Management is a purposeful activity. It is concerned with the achievement of pre-determined objectives of an organization.

15. Different Levels of Management

Management is needed at different levels of an organization namely top level, middle level and lower level.

16. Need of organization

There is the need of an organization for the success of management. Management uses the organization for achieving pre-determined objectives.

17. Management need not be owners

It is not necessary that managers are owners of the enterprise. In joint stock companies, management and owners (capital) are different entities.

18. Management is intangible

It cannot be seen with the eyes. It is evidenced only by the quality of the organization and the results i.e., profits, increased productivity etc.

Price Control

A form of government intervention in the economy in which a government agency uses its law-making power to regulate the prices at which otherwise voluntary private exchanges may take place. The government agency may attempt to fix and enforce the exact prices at which a particular good or service may be sold (as for example when state regulatory commissions fix the rates for electricity, gas or water to be sold by monopoly utility companies in particular geographic areas).

 Price control refers to a direct measure on the part of the Government in fixing the prices for achieving certain macro economic goals like social welfare, efficient resource allocation, prevention of exploitation of the consumers etc.

The Price Control may be informal or formal. In case of informal price control the producers voluntarily agree to regulate the prices which are within limits suggested by the Government whereas under formal price control, the prices are statutorily fixed by the Government and have to be accepted by the producers.

The Price Control may be total or partial. In case of total price control the price of the entire stock of output is enforced and administered by the Government through a Public Distribution System. For example: In case of any particular drug produced by a private sector the price control is total. This is also referred to as mono-pricing of the commodity. In case of partial price control, the Government directly fixes the price of a part of the production of a commodity and arranges for its distribution may be through fair price shops or via the systems of rationing. The rest of the stock is allowed to be sold in open market at any price which is determined by the free play of market mechanism. Partial control therefore acquires the form of dual pricing.

Alternatively, the government agency may be content to set “ceiling prices” or “floor prices” for particular goods or services. Ceiling price controls set a maximum price that may be charged but do not prohibit transactions at lower prices below the ceiling price (for example, rent control). Floor price controls set a minimum price that may legally be charged but do not prohibit transactions at higher prices above the floor price (for example, minimum wage laws).

Maximum Price

A price ceiling occurs when the government puts a legal limit on how high the price of a product can be. In order for a price ceiling to be effective, it must be set below the natural market equilibrium. It is also known as maximum price.

Maximum Price is where price can’t rise above a certain level. This can reduce prices below the market equilibrium price. The advantage is that it may lead to lower prices for consumers.

The disadvantage is that it will lead to lower supply. There will also be a shortage, demand will exceed supply; this leads to waiting lists and the emergence of black markets as people try to overcome the shortage of the good and pay well above market price.

Diagrammatic Representation of Maximum Price

For the price that the ceiling is set at, there is more demand (Q2) than there is at the equilibrium price. There is also less supply (Q1) than there is at the equilibrium price, thus there is more quantity demanded than quantity supplied i.e. shortage.

Impact of Price ceiling

Inefficiency: Inefficiency occurs since at the price ceiling quantity supplied the marginal benefit exceeds the marginal cost. This inefficiency is equal to the deadweight welfare loss.

Existence of black market: Due to demand exceeding the supply, there will be buyers who will be willing to purchase the good at a higher price. This will lead to existence of black market.


  1. During the second world war, price of goods was fixed and good rationed. However, this encouraged people to sell on the black market through inflated prices.
  2. Tickets for football prices and concerts are often set at a maximum price. (e.g. if left to the market, equilibrium prices would be much higher). e.g. at current prices F.A. Cup final could sell many more tickets than 80,000.
  3. The government may set a maximum price for renting to keep housing affordable.

Minimum Price

A minimum allowable price set above the equilibrium price is a price floor. With a price floor, the government forbids a price below the minimum Price Floors are minimum prices set by the government for certain commodities and services that it believes are being sold in an unfair market with too low of a price and thus their producers deserve some assistance.

Minimum prices are used to give producers a higher income. They are used to increase the income of farmers producing goods.

For example, the EU had a Common Agricultural Policy (CAP). This increased the income of farmers by setting minimum prices.

Diagrammatic Representation of Minimum Price

Government might set Minimum prices

  • To raise incomes for producers such a farmers and protect them from frequent fluctuations in the commodity market.
  • To protect workers and ensure that they get a enough wages to sustain a reasonable standard of living.

Examples of price floors

  • In many countries governments assist farmers by setting price floors in agricultural markets.
  • Setting Minimum wages for certain occupations is also an example of price floors.

The Disadvantage of Minimum Prices

  • Higher prices for consumers. We had to pay more for food
  • Higher tariffs necessary on imports. The EU put tariffs on food to keep prices artificially high.
  • May encourage oversupply and inefficient. The CAP encouraged farmers to produce food that no one actually wanted to eat.
  • We had over-supply (butter mountains, wine lakes)

Price controls take many different shapes – minimum wage, rent control, any control on production, subsidies, tariffs, and taxes, amongst others. The problem with all of these is that they in effect distort the profit and loss system of an economy. Whenever a price control is created, it has horrendous effects.

Quantitative Decision Making – An Introduction

You may be aware of the fact that prior to the industrial revolution individual business was small and production was carried out on a very small scale mainly to cater to the local needs. The management of such business enterprises was very different from the present management of large scale business. The information needed by the decision-maker (usually the owner) to make effective decisions was much less extensive than at present. Thus he used to make decisions based upon his past experience and intuition only. Some of the reasons for this were:

  1. The marketing of the product was not a problem because customers were, for the large part, personally known to the owner of the business. There was hardly any competition in the business.
  2. Test marketing of the product was not needed because the owner used to know the choice and requirement of the customers just by personal interaction.
  3. The manager (also the owner) also used to work with his workers at the shop floor. He knew all of them personally as the number was small. This reduced the need for keeping personal data.
  4. The progress of the work was being made daily at the work center itself. Thus production records were not needed.
  5. Any facts the owner needed could be learnt direct from observation and most of what he required was known to him

Now, in the face of increasing complexity in business and industry, intuition alone has no place in decision-making because basing a decision on intuition becomes highly questionable when the decision involves the choice among several courses of action each of which can achieve several management objectives simultaneously. Hence there is a need for training people who can manage a system both efficiently and creatively.

Quantitative techniques have made valuable contribution towards arriving at an effective decision in various functional areas of management-marketing, finance, production and personnel. Today, these techniques are also widely used in regional planning, transportation, public health, communication, military, agriculture, etc.

Quantitative techniques are being used extensively as an aid in business decision-making due to following reasons:

  1. Complexity of today’s managerial activities which involve constant analysis of existing situation, setting objectives, seeking alternatives, implementing, coordinating, controlling and evaluating the decision made.
  2. Availability of different types of tools for quantitative analysis of complex managerial problems.
  3. Availability of high speed computers to apply quantitative techniques (or models) to real life problems in all types of organizations such as business, industry, military, health, and so on. Computers have played an important role in arriving at the optimal solution of complex managerial problems both in terms of time and cost.

In spite of these reasons, the quantitative approach, however, does not totally eliminate the scope of qualitative or judgment ability of the decision-maker. Of course, these techniques complement the experience and knowledge of decision-maker in decision-making.

Meaning of Quantitative Techniques

Quantitative techniques refer to the group of statistical, and operations research (or programming) techniques as shown in the below diagram.

The quantitative approach in decision-making requires that, problems be defined, analyzed and solved in a conscious, rational, systematic and scientific manner based on data, facts, information, and logic and not on mere whims and guesses. In other words, quantitative techniques (tools or methods) provide the decision-maker a scientific method based on quantitative data in identifying a course of action among the given list of courses of action to achieve the optimal value of the predetermined objective or goal. One common characteristic of all types of quantitative techniques is that numbers, symbols or mathematical formulae (or expressions) are used to represent the models of reality.

Opportunity Cost

When a firm uses resources, it bids against alternative users. To be efficient, a resource’s value in use must be at least as much as its value in alternative opportunities. The role played by choice alternatives in cost analysis is formalized by the opportunity cost concept.

There is a famous saying in economics that “there is no such thing as a free lunch”. Even if we are not asked to pay for consuming a good or a service, scarce resources are used up in the production of it and there must be some opportunity cost involved – the next best alternative that might have been produced using those resources.

Opportunity cost is the foregone value associated with the current rather than next-best use of an asset. In other words, cost is determined by the highest-valued opportunity that must be foregone to allow current use. The cost of aluminum used in the manufacture of soft drink containers, for example, is determined by its value in alternative uses. Soft drink bottlers must pay an aluminum price equal to this value, or the aluminum will be used in the production of alternative goods, such as airplanes, building materials, cookware, and so on. Similarly, if a firm owns capital equipment that can be used to produce either product A or product B, the relevant cost of product A includes the profit of the alternative product B that cannot be produced because the equipment is tied up in manufacturing product A.

The opportunity cost concept explains asset use in a wide variety of circumstances. Gold and silver are pliable yet strong precious metals. As such, they make excellent material for dental fillings. However, when speculation drove precious metals prices skyrocketing during the 1970s, plastic and ceramic materials became a common substitute for dental gold and silver. More recently, lower market prices have again allowed widespread dental use of both metals. Still, dental customers must be willing to pay a price for dental gold and silver that is competitive with the price paid by jewelry customers and industrial users.

Typically, the costs of using resources in production involve both out-of-pocket costs, or explicit costs, and other noncash costs, called implicit costs. Explicit costs are also known as out of pocket costs. They involve cash payments and are clearly reflected by the usual accounting process. Implicit costs are also known as book cost and they do not involve cash payments.

Wages, utility expenses, payment for raw materials, interest paid to the holders of the firm’s bonds, and rent on a building is an example of explicit expenses. The implicit costs associated with any decision are much more difficult to compute. These costs do not involve cash expenditures and are therefore often overlooked in decision analysis. Because cash payments are not made for implicit costs, the opportunity cost concept must be used to measure them. The rent that a shop owner could receive on buildings and equipment if they were not used in the business is an implicit cost of the owner’s own retailing activity, as is the salary that an individual could receive by working for someone else instead of operating his or her own establishment.

Although opportunity cost can be hard to quantify, the effect of opportunity cost is universal and very real on the individual level. In fact, this principle applies to all decisions, not just economic ones. Since the work of the Austrian economist Friedrich von Wieser, opportunity cost has been seen as the foundation of the marginal theory of value.

Opportunity cost is one way to measure the cost of something. Rather than merely identifying and adding the costs of a project, one may also identify the next best alternative way to spend the same amount of money.

Note that opportunity cost is not the sum of the available alternatives, but rather the benefit of the single, best alternative. Possible opportunity costs of the city’s decision to build the hospital on its vacant land are the loss of the land for a sporting center, or the inability to use the land for a parking lot, or the money that could have been made from selling the land, or the loss of any of the various other possible uses—but not all of these in aggregate. The true opportunity cost would be the forgone profit of the most lucrative of those listed.

Applications of Opportunity Cost

  1. Consumer Choices
  2. Production Possibilities
  3. Cost of Capital
  4. Time Management
  5. Career Choice
  6. Analysis of comparative advantage

On a lighter side, you can check this pictorial representation of Opportunity cost on Abstruse Goose. (

360 Degree Feedback Methodology

360-degree feedback processes usually obtain data from questionnaires, which measure from different perspectives the behaviors of individuals against a list of competencies. In effect, they ask for an evaluation: ‘how well does… do…?’ The competency model may be one developed within the organization or the competency headings may be provided by the supplier of a questionnaire.

The dimensions may broadly refer to leadership, management and approaches to work. The headings used in the Performance Management Group’s Orbit 360-degree questionnaire are:

  • leadership
  • team player/manage people;
  • self-management;
  • communication;
  • vision;
  • organizational skills;
  • decision making;
  • expertise;
  • drive;
  • adaptability

The leadership heading, for example, is defined as ‘Shares a clear vision and focuses on achieving it. Demonstrates commitment to the organization’s mission. Provides a coherent sense of purpose and direction, both internally and externally, harnessing energy and enthusiasm of staff.’


Ratings are given by the generators of the feedback on a scale against each heading. This may refer both to importance and performance, as in the PILAT questionnaire which asks those completing it to rate the importance of each item on a scale of 1 (not important) to 6 (essential), and performance on a scale of 1 (weak in this area) to 6 (outstanding).

Data processing

Questionnaires are normally processed with the help of software developed within the organization or, most commonly, provided by external suppliers. This enables the data collection and analysis to be completed swiftly, with the minimum of effort and in a way that facilitates graphical as well as numerical presentation. Graphical presentation is preferable as a means of easing the process of assimilating the data. The simplest method is to produce a profile as shown below

Some of the proprietary software presents feedback data in a much more elaborate form.


The feedback is often anonymous and may be presented to the individual (most commonly), to the individual’s manager (less common) or to both the individual and the manager. Some organizations do not arrange for feedback to be anonymous. Whether or not feedback is anonymous depends on the organization’s culture – the more open the culture, the more likely is the source of feedback to be revealed.


The action generated by the feedback will depend on the purposes of the process, i.e. development, appraisal or pay. If the purpose is primarily developmental, the action may be left to individuals as part of their personal development plans, but the planning process may be shared between individuals and their managers if they both have access to the information. Even if the data only goes to the individual, it can be discussed in a performance review meeting so that joint plans can be made, and there is much to be said for adopting this approach.


A Handbook of Human Resource Management Practice (Michael Armstrong)

Margin Turnover Model

Ronald R. Gistl “Suggested a conceptual frame work, using margin and turnover, for understanding the retail structure and evolving a retail strategy.”

Successful retail operations depend largely on two main dimensions: margin and turnover. How far a retail enterprise can reach in margin and turnover depends essentially on the type of business (product lines) and the style and scale of the operations.

Margin is defined as the percentage mark tip at which the inventory in the store is sold and turnover is the number of times the average inventory is sold in a year. Below is a diagrammatic representation of the frame work and can be applied to almost any type of retail business.

Depending upon the, combination of the two parameters, a retail business will fall into one of the four quadrants. For instance L-L signifies a position which is low on both margin and turnover; whereas, H-L indicates high margin and low turnover.

Low Margin High Turnover Stores

Such an operation assumes that low price is the most significant determinant of customer patronage. The stores in this category price their products below the market level. Marketing communication focuses mainly on price. They provide very few services; if any, and they normally entail an extra charge whenever they do. The merchandise in these stores are generally pre-sold or self-sold. This means that the customers buy the product, rather than the store selling them.

These stores are typically located in isolated locations and usually stock a wide range of fast moving goods in several merchandise lines. The inventory consists of well-known brands for which a consumer pull is created by the manufacturer through national advertising. Local promotion focuses on low price. Wal-Mart in the United States is an example and Pantaloon Chain in India is examples of such stores.

High Margin Low Turnover

This operation is based on the premise that distinctive merchandise, service and sales approach are the most important factors for attracting customers. Stores in this category price their products higher than those in the market, but not necessarily higher than those in similar outlets. The focus in marketing communication is on product quality and uniqueness.

Merchandise is primarily sold in store and not pre-sold. These stores provide a large number of services and sell select, categories of products. They do not stock national brands which are nationally advertised. Typically, a store in this category is located in a down town area or a major shopping center. Sales depend largely on salesmanship and image of the outlet.

High Margin High Turnover Stores

These stores generally stock a narrow line of products with turnover of reasonably high frequency. They could be situated in a noncommercial area but not too far from a major thoroughfare. Their locational advantage allows them to charge a higher price. High overhead costs and, low volumes also necessitate a higher price.

Low Margin-Low Turnover Stores

Retail enterprises in this category are pushed to maintain low margins because of price wars. Compounding this problem is the low volume of sales, which is probably a result of poor management, unsuitable location etc. such businesses, normally get wiped out over a period of time.

Concept of Investment

Before starting with the deep discussion on investing, we must know in a broad sense about investment. Investing in various types of assets is an interesting activity that attracts people from all walks of life irrespective of their occupation, economic status, education and family background. When a person has more money than he requires for current consumption, he would be coined as a potential investor. The investor who is having extra cash could invest it in securities or in any other assets like or gold or real estate or could simply deposit it in his bank account. The companies that have extra income may like to invest their money in the extension of the existing firm or undertake new venture. All of these activities in a broader sense mean investment. Now, lets define investment.

How do you define investment?

We can define investment as the process of, “sacrificing something now for the prospect of gaining something later”. So, the definition implies that we have four dimensions to an investment time, today’s sacrifice and prospective gain.

Can we think of Some Transactions, which will Qualify as “Investments” as per Our Definition!

  1. In order to settle down, a young couple buys a house for Rs.3 lakhs in Bangalore.
  2. A wealthy farmer pays Rs l lakh for a piece of land in his village.
  3. A cricket fan bets Rs..100 on the outcome of a test match in England.
  4. A government officer buys ‘units’ of Unit Trust of India worth Rs 4,000.
  5. A college professor buys, in anticipation of good return, 100 shares of Reliance Industries Ltd. for Rs.24, 000
  6. A lady clerk deposits Rs.5, 000 in a Post Office Savings Account.
  7. Based on the rumor that it would be a. hot issue in the market in no distant future, our friend John invests all his savings in the newly floated share issue of Fraternity Electronics Ltd., a company intending to manufacture audio and video magnetic tapes to start with, and cine sound tapes at a later stage.

Is there any Common Feature to all these Investments?

A common feature of all these transactions is that something is sacrificed now for the prospects of gaining something later. For example, the wealthy farmer in transaction 2 sacrifices Rs1 lakh now for the prospects of crop income later. The lady clerk in transaction 6 sacrifices Rs.5,000 now for the prospect of getting a larger amount later due to interest earned on the savings account. Thus, in a broad sense, all these seven transactions qualify as investment.

How is Investment Different from Speculation?

We know that investment means sacrificing or committing some money today in anticipation of a financial return later. The investor indulges in a bit of speculation involved in all investment decisions. It does not follow through that all investments are all speculative by nature. Genuine investments are carefully thought out decisions. They involve only calculated risks. The expected return is consistent with the underlying risk of the investment.

A genuine investor is risk averse and usually has a long-term prospective in mind. The government officer’s investment in the units of UTI, the college professor’s Reliance stockholding , the lady clerk’s Post Office Savings Deposit, all may be regarded as genuine investments. Each person seems to have made carefully thought out decision and each has only calculated risk. Speculative investments on the other hand are not carefully thought out decisions. They are based on rumors, hot tips, inside dopes and often simply on hunches. The risk assumed is disproportionate to the return expected from speculation. The intention is to profit from short-term market fluctuations. In other words, a speculator is relatively less risk averse and has a short-term perspective for investment.

A genuine investor is interested in a good rate of return, earned on a rather consistent basis for a relatively long period of time. The speculator, on the other hand, seeks opportunities promising very large returns, earned rather quickly. In this process, he assumes a risk that is disproportionate to the anticipated return.

Thus, from the discussion we cannot infer that there exists a demarcation between stocks and speculative stocks. The same stock can be purchased as a speculation or as investment, depending on the motive of the purchaser. For example, the decision of the professor to invest in the stock of Reliance industries is considered as a genuine investment because he seems to be interested in a regular dividend income and prospects of long-term capital appreciation. However, if another person buys the same stock with the anticipation that the share price is likely to rise, his decision will be characterized as speculation.

Price to Cash Ratio

Instead of Price Earning (P/E) Ratio many investment analysts prefer to look at price cash flow ratio. A Price to Cash Flow Ratio is measured as the company’s current stock price divided by its current annual cash flow per share.

Price/Cash Flow Ratio = Price Per Share / (Cash Flow / Shares Outstanding)

There are varieties of definitions of cash flow. In this context, the most famous measure is simply calculated as net income plus depreciation. Cash flow is usually reported in firm’s financial statement and labelled as cash flow from operations.

According to Investopedia,

A measure of the market’s expectations of a firm’s future financial health. Because this measure deals with cash flow, the effects of depreciation and other non-cash factors are removed. Similar to the price-earnings ratio, this measures provides an indication of relative value.

The difference between cash and earnings is often confusing largely because the way standard accounting practice defines net income. Essentially net income is measured as incomes minus expenses. Obviously this is logical. However not all are actual cash expenses. The most important exception is depreciation.

When a firm acquires a long-lived asset such as new factor facility, standard accounting practice does not deduct the cost of the factory at all once, even though it is actually paid for all at once. Instead the cost is deducted over time. These deductions do not represent actual cash payments, however. The actual cash payments occurred when the factory was purchased. Most analysts agree that in examining a company’s financial performance, cash flow can be more informative than the net income.


The stock for Company ABC is selling at Rs. 25 a share.

The total number of shares issued for the period is 10,000.

The company’s operating cash flow for the four most-recent quarters are Rs 30,000, Rs 50,000, Rs 60,000 and Rs70,000

Let us calculate its Price to cash flow ratio

The operating cash flow for the past 12 months = 30,000 + 50,000 + 60,000 + 70,000 = Rs 210,000

Cash flow per share  = Rs 210,000 / 10,000 = Rs. 21

Price to Cash Flow    = 25 / 21

= 1.19

Styles of Writing

Writing is one of the many forms of communication; there are various styles of writing. It is essential that a person is able to communicate effectively through writing. It depends upon the author how to present his ideas, feelings, and attitudes to the problems he has undertaken explore.

Below are the four types of writing which are generally followed:

1. Narrative writing

This type of writing is one which we normally see in drama, fictional novels, plays, etc… A piece of narrative writing tells a story or a part of a story, either fictional or factual. To tell a story in a narrative style of writing, a writer uses the literary devices of plot, conflict, theme, setting, sequencing of events and transitions. Several different points of view may be used in conjunction with a narrative style: a first-person narrator tells the story from his or her perspective and an omniscient, third-person narrator reveals the thoughts and feelings of multiple characters.

2. Descriptive writing

Descriptive writing styles and techniques are used to portray something in such detail the reader can visualize it. A successful example of descriptive writing will set the mood with a dominant impression upon which the writer can build by adding sensory details. Descriptive writing hinges on the use of vivid versus vague language, varied sentence structure and the avoidance of cliches. When using a descriptive writing style, the writer strives to make the reader see, hear, feel, taste and smell the image the writer is creating. To draw a words cape, to give an account or describe an object process, situation, problem, etc

3. Explanatory writing

An expository style of writing is used to give information or to explain something to the reader in as clear a manner as possible. When using an expository writing style, the writer must assume the reader has no prior knowledge of the subject and must relay the information in a detailed and organized manner. Some of the literary devices used in expository writing include description, comparison, sequence, cause and effect, and problem and solution.

4. Persuasive Writing

A persuasive style of writing is used to present the facts of an issue and to argue a position for or against the issue, with the goal of persuading the reader to agree. This type of writing is frequently used in advertising and in other settings which involve trying to get a reader to accept a certain point of view. Persuasive writing utilizes the devices of detail, statements, quotations, anecdotes, statistics, facts and questions. The most effective uses of a persuasive style of writing conclude with a call to action that encourages the reader to not only accept the proposed point of view, but to act upon it.