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D1: navya

A bank failure is the ending of an insolvent bank by a state or federal regulator. So the only power that closes the national banks is the comptroller who has a higher power in maintaining the currency. It mainly happens when a bank fails where it is assumed by the federal deposit insurance corporation in the insures of deposits. They find a different bank to take it over because various customers will specifically like the continuation using their debit cards, online banking tools, and accounts. So bank failures are mainly often to predict because the federal deposit insurance commission will not announce a particular bank to set go under the profits. Then bank diversification is the procedure that allocates the capital in a specific way because it reduces the exposure to a particular asset or risk. Therefore, the main reason for this bank diversification is to decrease the volatility or risk by investing in various assets (Goetz, 2012).

So considering both of those banking systems can easily relate to the country's economic health by determining the better quality of the loan book of different individual books. Then for maintaining the better quality of advance bank portfolio, there is only one crucial tool where it is credit monitoring. Credit monitoring plays a vital role in protecting the bank's exposures, but it also ensures the various funds that are channeled by maintaining the right purpose. It mainly acts as the guardrail for ensuring the health of banks and countries economically to stay in the right trajectory. Then various technology solutions will be readily available in the market for helping the automated process of credit monitoring to a large extent. They can ensure the functions of credit monitoring to keep the process and objective in the method oriented (Brownbridge, 2002).

References

Brownbridge, M. (2002). Resolving Bank Failures in Uganda: Policy Lessons from Recent Bank Failures. Development Policy Review, 20(3), 279-291. doi: 10.1111/1467-7679.00171

Goetz, M. (2012). Bank Diversification, Market Structure and Bank Risk Taking: Theory and Evidence from U.S. Commercial Banks. SSRN Electronic Journal. doi: 10.2139/ssrn.2651161

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D2: pavani

Diversification helps individual institutions and makes them be benefited. But Wagner says that the systematic risk increases by the degree of diversification. Raffestin also said something about the diversification that diversification can cause risks and any number of failures also. By the above words, we can know the negative aspects or negative effects of diversification. Systematic risks are very broad and complex term. This diversification process has some of the diversification measures. The indicator of diversification is calculated from the bank’s profitability. There are various methods of diversification. Commonly Alas et al proposed method is used (Mirzaei & Kutan, 2016).

And also the weight average diversification of banks ( AWDIV) and unweighted average diversification of banks ( ADIV) is used in order to measure the diversification. Systematic risks also have some of the measures. And we measure the systematic risks on the basis of CCA ( Contingent claims of analysis). In this analysis, the combination of balance sheet information and market based is used to obtain the indicators of financial risks. Based on the aggregated distance to default series or DD series we adopt the analysis like CCA analysis which means Contingent Claims of Analysis. So by adopting Contingent Claims Analysis or CCA analysis we have to use an unweighted average diversification of banks (ADIV) and also the weighted average diversification of banks ( AWDIV). To measure the banking systematic risk. In the CCA process or the Contingent Claims Analysis gives the causal relationship between the banking systematic risk and the diversification of banking (Subramanian & Yadav, 2013).

References

Mirzaei, A., & Kutan, A. (2016). Does Bank Diversification Improve Output Growth? Evidence from the Recent Global Crisis. International Review Of Finance, 16(3), 467-481. doi: 10.1111/irfi.12078

Subramanian, K., & Yadav, A. (2013). Deregulation of Bank Entry and Bank Failures. SSRN Electronic Journal. doi: 10.2139/ssrn.2242451

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D:3 sandhya

Bank failures and bank diversification are some of the most crucial subjects to review in order to understand the economy od a country. Bank diversification refers to successfully investing in a diverse variety of assets and maintaining their long term return in order to reduce exposure to any kind of bank failure risk. On the other hand, bank failure refers to the point when the value of  the banks asset falls below the market value of bank’s liabilities which leads to closure of the bank. The bank holds investments of creditors and depositors, so it has an obligation to creditors and depositors to return that investment to them with a return of interest. But if the bank takes too much loses on its investments then this can lead to foreclosure of the bank and FDIC steps in to collect and sell all the assets of the bank in order to settle its debts. In order to understand this we look at the following two journal articles. In the first article Explaining Bank Failures: Deposit Insurance, Regulation and Efficiency by David C. Wheelock and Paul W. Wilson the authors study the relationships between deposit insurance, regulation & efficiency and how this impacts the bank’s rate of success or failure. The article uses historical data to examine the causes of bank failures and also employs some hazard frameworks to smoothen out the inconsistencies in the data. The authors conclude that the deposit insurance system membership increased the probability of the failure (Wheelock DC, Wilson PW, 1995 ). And along with that the the authors also found that the technically non efficient banks were much more susceptible to failure than the ones who had latest up to date technology helping them being more efficient in their processes.

The next journal article we study for understanding the bank failure and economic recession is Great recession versus great depression: monetary fiscal and bank policies. This article is written by Cinzia Alcidi and Daniel Gros. In this article the authors explore the monetary policy, fiscal policy and systemic stability of the banks. The authors use statistical economic analysis to study the relationships. The authors conclude that when making a monetary policy deflation and bank failures must be avoided  at all costs (Alcidi C, Gros D, 2011). The fiscal policy was not able to be determined properly as its use during the great depression was not widespread. Lastly, the analysis showed that even during the worst years of recession the commercial banks were surprisingly resilient and remained profitable (Alcidi C, Gros D, 2011).

References

Alcidi, C., & Gros, D. (2011). Great recession versus great depression: monetary, fiscal and banking policies. Journal of Economic Studies.

Wheelock, D. C., & Wilson, P. W. (1995). Explaining bank failures: Deposit insurance, regulation, and efficiency. The review of economics and statistics, 689-700.

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D: 4 Rathna

Advantage Cost-Volume Relationship CVP is a procedure that used to choose the impact that various degrees of volume and costs have on the progressive advantage. CVP assessment is consistently used by associations to "conclude how may units of a thing ought to be offered to deal with the significant number of costs of creation and achieve a perfect net income" (Iseni, 2018). Centrality of CVP Analysis This thought is critical in masterminding since it makes chiefs "choose insightful and sagacious decisions" concerning the association's advantage. It enables a business to choose whether to fabricate the expenses of their units or abatement the variable costs in order to be progressively gainful. The executive will understand the proportion of things to sell so as to deal with for the costs spent in progress (Ihemeje et al., 2015). For instance, in case the association sells things worth $400,000 and variable costs are $200,000, by then duty edge is $200,000. In case the units sold are 40,000; Arrangements per unit =$400,000/40,000= $10 VC per unit =$200,000/40,000=$5 This infers the dedication edge =$10-$5=$5 To manufacture the advantages, the association executive can either cut down the variable costs or addition the cost for every unit sold. Variable Costing This is a strategy in accounting that hopes to disallow fixed costs of creation from the general costs spent in conveying things. Variable costing in a procedure that is exceptionally astounding from osmosis costing which fixed amassing costs are added to conclusive outcomes conveyed. Under the variable costing, the going with goes to the general cost of the thing: direct work, direct rough materials, and variable costs (Dyhdalewicz, 2015). Essentialness of Variable Costing This makes chairmen choose decisions as for costs of explicit things and whether to recognize orders certain solicitations for the thing or not (Hasan, 2015). For example, an executive in phones cases conveying association can use variable costing approach in a circumstance underneath: The association produces 1 million cases and at complete cost of $600,000. Along these lines, the cost per unit is $600,000/1,000,000 =$0.6 per each case. In case the association got a solicitation to sell those 1 million cases at $400,000, the association likely won't be anxious to sell since that doesn't meet the creation cost. Regardless, as an accountant, fathom that the fundamental cost of creation included fixed expenses, for instance, building, equipment, insurance, and utilities. By ousting these fixed costs, it is reasonable to recognize the solicitation since the cost of creation would have gone down – inferring that the solicitation put gives the association some advantage. References Dyhdalewicz, A. (2015). The Implementation of Variable Costing in The Management of Profitability of Sales in Trade Countries. e-Finanse” 2015, vol. 11 / nr 3. Hasan, S. (2015). Variable Costing and Its Applications in Manufacturing Company. International Scholar Journal of Accounting and Finance, 1(1), 2015, 1-10. Ihemeje, J. C., Okereafor, G., & Ogungbangbe, B. M. (2015). Cost-volume-profit analysis and decision making in the manufacturing industries of Nigeria. Journal of International Business Research and Marketing, 1(1), 7-15. Iseni, E. (2018). Role of Analysis CVP (Cost-Volume-Profit) as Important Indicator for Planning and Making Decisions in the Business Environment. International Advisory Board, 343.

Reply:

D:5. mahitha

Generally, break-even analysis is beneficial to understand the relationship between cost, volume, and profit. It is relevant to understand some of the tenets of cost volume profit analysis to understand the cost volume relationship. Moreover, CVP is mainly used to calculate the break-even point of the company. Initially, managers would calculate the contribution margin before calculating the break-even point. By focusing on the fixed costs of the company with the contribution gives the break-even point.

Further, replacing the contribution margin with the contribution margin per unit conveys the break-even points in units sold. The margin of safety is about expressing the percentage of sales. Like the break-even, to calculate the margin of safety, the break-even point in sales dollars should be calculated initially. Furthermore, by subtracting the break-even point from actual sales in dollars result in a margin of safety (Ghandour, 2017).

Accordingly, add the target profit to the company's total fixed cost, then, after dividing it by the contribution margin, gives the output of the target profit. One of the immediate calculations In the CVP analysis is the contribution margin analysis. Contribution margin analysis includes the contribution margin ratio, contribution margin divided by sales, and covering the fixed expenses until it reaches the break-even point. It is beneficial for the managers to assess the financial implications of product mix, pricing, and product. Moreover, it facilitates the sensitivity of the profitability of the product to the variations. CVP analysis provides the trade-offs in profitability and risks from alternative product design; it might be useful for the manager while planning. The cost of capital of the operating profit generates the profit measures to its economic income.

Moreover, the relationship between the discounted economic income of the product and its sales incorporates the cost of capital by CVP analysis. Managers use this analysis along with the sophisticated approaches while planning financially. Social and economic factors related to the competition affect supply and demand (Tse, 1962).

Variable costing is related to managerial and costs accounting. In other words, variable costing is about allocating the production costs to the current product. Moreover, the product cost of production excludes the foxes manufacturing overhead. Besides, financial reporting prohibits the use of variable costing. Direct material, direct labor, and variable manufacturing overhead are the costs under the variable costing. However, variable costing poorly upholds the matching principle. Hence it is not permitted in external reporting. Since the cost of inventory must include all fees to prepare a list, it does not apply to financial reporting. There exits failure in sales in that particular year due to poor matching between the revenue and expenses on the income statement. It is generally beneficial in managerial accounting and for internal decision making. In this method, product cost is defined as the production cost that varies directly with the output. Accordingly, while selling and administrative expenses, it would charge against revenue in the period; hence it is treated as a period cost. In this costing, product cost is based on the variable manufacturing cost. One of the significant characteristics of the variable costing is excluding the fixed factory overhead.

Additionally, production has no impact on the variable costing operating income; rather, it depends on sales. As a manager, it is crucial to use variable costing while making managerial decisions. It enables the managers to analyze the data based on the actual cost of production. As it simplifies the estimation of the product and customer profitability, it might be helpful for the managers to attain the loss of control. Based on the sales fluctuations, the managers must make appropriate decisions. Consequently, variable costing in that particular case plays a crucial role, as it provides irregular sales patterns more accurately. It also enables the managers to make the decisions approximately for future costs of production (Dyhdalewicz, 2015).

 

 

References

Ghandour, D. (2017). The Relationship between Cost-Volume Profit Management and Profitability in Private Organizations. International Journal Of Advanced Engineering Research And Science, 4(4), 281-288. https://doi.org/10.22161/ijaers.4.4.43

Tse, J. (1962). Profit Planning Through Volume-Cost Analysis. Economica, 29(114), 227. https://doi.org/10.2307/2551577

Dyhdalewicz, A. (2015). The Implementation of Variable Costing in the Management of Profitability of Sales in trade Companies. E-Finanse, 11(3), 116-127. https://doi.org/10.1515/fiqf-2016-0123

Reply:

D:6

A. The profit-cost-volume analysis is useful to determine the changes in the cost and the volume that affects the organization income and the net income. The assumptions made in this analysis are the sales price per unit is kept constant, total fixed costs are kept constant, the variable cost per unit are kept constant, everything produced is to be sold and the costs will be affected only when the activity changes. It requires all the organization cost including the manufacture, administrative cost and selling.

B. The managers use the CVP to determine the sales which allows the organization to get the profits known as targeted income. Managers can display CVP using a chart, graph or any equation. Forming a graph allows the managers to easily give the information. Managers should also conduct a full pledged analysis that seems to be better because it turns the business into simplified environment.

C. The variable costing is the managerial accounting type of concept. This is a costing method which includes the variable manufacturing cost such as the direct materials and the direct labor, the variable manufacturing overhead is the unit product price.  To control the costs two types of costing should be used mainly the standard costing and the flexible budgeting. It provides an understanding on the effect of the fixed cost on the profits.

D. Variable costing method allows the managers to analyze the data based on cost of production. Managers will be able to understand the difference between the actual and the budgeted amounts. The company’s do not produce the same number of units every time because the sales differ; managers have the chances to make poor decisions based on the data.

For example, sales may increase during the winter and reduce during the summer. Managers use variable costing method to estimate the future cost of production.

References

Ijiri, Y., & Itami, H. (1973). Quadratic Cost-Volume Relationship and Timing of Demand Information. Accounting Review, 48(4), 724–737.

Stoenoiu Carmen-Elena. (2018). Sensitivity of indicators used in cost-volume-profit analysis. MATEC Web of Conferences, 184, 04003. https://doi.org/10.1051/matecconf/201818404003

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