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Selasa, 29 Juli 2008

Cash Flow

The Free Dictionary
by Farlex

The amount of cash a company generates and uses during a period, calculated by adding non-cash charges (such as depreciation) to the net income after taxes. Cash flow can be used as an indication of a company's financial strength.

Notes:
Cash flow is crucial to companies, having ample cash on hand will ensure that creditors, employees, and others can be paid on time.
The amount of net cash generated by an investment or a business during a specific period. One measure of cash flow is earnings before interest, taxes, depreciation, and amortization. Because cash is the fuel that drives a business, many analysts consider cash flow to be a company's most important financial statistic. Firms with big cash flows are frequently takeover targets because acquiring firms know that the cash can be used to help pay off the costs of the acquisitions. See also free cash flow.
Case Study Financial analysts generally consider cash flow to be the best measure of a company's financial health. Increased cash flow means more funds are available to pay dividends, service or reduce debt, and invest in new assets. On the other hand, reported net income is heavily influenced by a firm's accounting practices. Reduced income generally means lower taxes and more cash, thus the same accounting practices that reduce net income can actually increase cash flow. A firm with large amounts of new investments and corresponding high depreciation charges might report low or negative earnings at the same time it has large cash flows to service debt and to acquire additional assets. Cable companies have huge investment requirements and are typical of firms that may be quite healthy in spite of reporting net losses. In early 1996, TCI Communications, at the time the nation's largest cable operator, reported fourth-quarter results that included a net loss of $70 million, more than double the loss reported in the year-earlier quarter. At the same time, the firm added more than a million new customers and reported a 25% increase in revenues. It also reported a 5% increase in cash flow. Thus, although TCI reported an additional loss, the quarter was generally considered quite successful. Operating cash flow, calculated as cash flow (the sum of net income and noncash expenses such as depreciation, depletion, and amortization) plus interest expense plus income tax expense, is an important consideration in corporate acquisitions because it indicates the cash flow that is available to service a firm's debt.

Read More...... The Free Dictionary
by Farlex

The amount of cash a company generates and uses during a period, calculated by adding non-cash charges (such as depreciation) to the net income after taxes. Cash flow can be used as an indication of a company's financial strength.

Notes:
Cash flow is crucial to companies, having ample cash on hand will ensure that creditors, employees, and others can be paid on time.
The amount of net cash generated by an investment or a business during a specific period. One measure of cash flow is earnings before interest, taxes, depreciation, and amortization. Because cash is the fuel that drives a business, many analysts consider cash flow to be a company's most important financial statistic. Firms with big cash flows are frequently takeover targets because acquiring firms know that the cash can be used to help pay off the costs of the acquisitions. See also free cash flow.
Case Study Financial analysts generally consider cash flow to be the best measure of a company's financial health. Increased cash flow means more funds are available to pay dividends, service or reduce debt, and invest in new assets. On the other hand, reported net income is heavily influenced by a firm's accounting practices. Reduced income generally means lower taxes and more cash, thus the same accounting practices that reduce net income can actually increase cash flow. A firm with large amounts of new investments and corresponding high depreciation charges might report low or negative earnings at the same time it has large cash flows to service debt and to acquire additional assets. Cable companies have huge investment requirements and are typical of firms that may be quite healthy in spite of reporting net losses. In early 1996, TCI Communications, at the time the nation's largest cable operator, reported fourth-quarter results that included a net loss of $70 million, more than double the loss reported in the year-earlier quarter. At the same time, the firm added more than a million new customers and reported a 25% increase in revenues. It also reported a 5% increase in cash flow. Thus, although TCI reported an additional loss, the quarter was generally considered quite successful. Operating cash flow, calculated as cash flow (the sum of net income and noncash expenses such as depreciation, depletion, and amortization) plus interest expense plus income tax expense, is an important consideration in corporate acquisitions because it indicates the cash flow that is available to service a firm's debt.

Income tax

The Free Dictionary
by Farlex

A tax on any money earned during a fiscal year, usually filed on a yearly basis. All businesses except partnerships must file an annual income tax return. Partnerships file an information return.

Read More...... The Free Dictionary
by Farlex

A tax on any money earned during a fiscal year, usually filed on a yearly basis. All businesses except partnerships must file an annual income tax return. Partnerships file an information return.

Investment Advisor

The Free Dictionary
by Farlex

A person making investment recommendations in return for a flat fee or percentage of assets managed, known as a commission.
For mutual fund companies, it is the individual who has the day-to-day responsibility of investing and monitoring the cash and securities within the fund's portfolio in order to achieve the fund's objectives.


Read More...... The Free Dictionary
by Farlex

A person making investment recommendations in return for a flat fee or percentage of assets managed, known as a commission.
For mutual fund companies, it is the individual who has the day-to-day responsibility of investing and monitoring the cash and securities within the fund's portfolio in order to achieve the fund's objectives.


Senin, 28 Juli 2008

Advice industry seeks new talent

By Jim Robinson

Published: July 17 2008 03:00 | Last updated: July 17 2008 03:00




The UK is in desperate need of financial advice. To meet this surging demand, more than 10,000 independent financial advisers will need to be trained over the next 10 years, according to Chris Cummings, director-general at the Association of Independent Financial Advisers.

But the answer as to where all these advisers are meant to come from is unclear, for the recruitment of new IFAs is proving to be a very big challenge. If the industry has had difficulty in attracting the next generation of financial advisers, as far as Mr Cummings is concerned, it largely has itself to blame.

"The industry's reputation hasn't been all that we would wish," he said. "As an industry, we haven't been very good at putting forward the 'good-news' message. We haven't been very good at explaining the value of financial services. Millions have been spent in brand-building advertising campaigns but all that has done is to remind consumers they're not quite sure who to trust."

The problem, according to Mr Cummings, is one of image and reputation. The solution, he says, is the Retail Distribution Review, which is likely to draw a line between independent whole-of-market advisers and company representatives - clearly labelled as salesmen - who are able to offer products and services.

"Having an advice profession that's clearly labelled puts us in a unique position, on a par with solicitors, accountants, medics and other recognised professionals," he said. "Consumers will be able to understand why we are different, which will lead to a growing confidence in advice and bolster the profession because more people will want to join it when they leave university."

While the industry may have something of an image problem, many established IFAs believe the lack of any clear-cut inroads into the profession is of far greater concern. University graduates considering a career in financial services do not ultimately decide against it because of the industry's reputation. If they opt for other careers, it is chiefly because there is no obvious path to becoming an IFA.

Positive Solutions, an IFA in Newcastle upon Tyne, has taken a step towards reversing this trend. The company, owned by Aegon UK, last week launched an apprenticeship scheme that aims to train 500 IFAs over the next two years. "Nobody else does what we're doing," said Jim Reeve, chief executive. "No bank, no financial institution, no insurance company has an apprenticeship scheme such as ours."

Mr Cummings would be the first to admit that the lack of IFA training is a big problem in the UK.

"It's a fundamental weakness of the sector," he said. "It's very expensive to train someone to become an IFA and, far too often, companies headhunt qualified personnel from each other rather than invest in training programmes."

Aifa has worked to resolve this issue, collating best practices for IFA training, but it has had to suspend its efforts in order to focus its limited resources on the RDR.

Once the RDR is implemented next year, Mr Cummings said, Aifa will redouble its efforts to "galvanise the advice industry into investing in its own future".

Jim Robinson is news editor of Investment Adviser
Copyright The Financial Times Limited 2008



Read More...... By Jim Robinson

Published: July 17 2008 03:00 | Last updated: July 17 2008 03:00




The UK is in desperate need of financial advice. To meet this surging demand, more than 10,000 independent financial advisers will need to be trained over the next 10 years, according to Chris Cummings, director-general at the Association of Independent Financial Advisers.

But the answer as to where all these advisers are meant to come from is unclear, for the recruitment of new IFAs is proving to be a very big challenge. If the industry has had difficulty in attracting the next generation of financial advisers, as far as Mr Cummings is concerned, it largely has itself to blame.

"The industry's reputation hasn't been all that we would wish," he said. "As an industry, we haven't been very good at putting forward the 'good-news' message. We haven't been very good at explaining the value of financial services. Millions have been spent in brand-building advertising campaigns but all that has done is to remind consumers they're not quite sure who to trust."

The problem, according to Mr Cummings, is one of image and reputation. The solution, he says, is the Retail Distribution Review, which is likely to draw a line between independent whole-of-market advisers and company representatives - clearly labelled as salesmen - who are able to offer products and services.

"Having an advice profession that's clearly labelled puts us in a unique position, on a par with solicitors, accountants, medics and other recognised professionals," he said. "Consumers will be able to understand why we are different, which will lead to a growing confidence in advice and bolster the profession because more people will want to join it when they leave university."

While the industry may have something of an image problem, many established IFAs believe the lack of any clear-cut inroads into the profession is of far greater concern. University graduates considering a career in financial services do not ultimately decide against it because of the industry's reputation. If they opt for other careers, it is chiefly because there is no obvious path to becoming an IFA.

Positive Solutions, an IFA in Newcastle upon Tyne, has taken a step towards reversing this trend. The company, owned by Aegon UK, last week launched an apprenticeship scheme that aims to train 500 IFAs over the next two years. "Nobody else does what we're doing," said Jim Reeve, chief executive. "No bank, no financial institution, no insurance company has an apprenticeship scheme such as ours."

Mr Cummings would be the first to admit that the lack of IFA training is a big problem in the UK.

"It's a fundamental weakness of the sector," he said. "It's very expensive to train someone to become an IFA and, far too often, companies headhunt qualified personnel from each other rather than invest in training programmes."

Aifa has worked to resolve this issue, collating best practices for IFA training, but it has had to suspend its efforts in order to focus its limited resources on the RDR.

Once the RDR is implemented next year, Mr Cummings said, Aifa will redouble its efforts to "galvanise the advice industry into investing in its own future".

Jim Robinson is news editor of Investment Adviser
Copyright The Financial Times Limited 2008



World Diary: July 28 - August 3

Compiled by Nathalie Kilby
Last updated July 27 2008



Cambodia and Thailand seek to resolve border dispute; Liam Fox travels to the US; Somalia holds peace talks; Edinburgh hosts art and comedy festivals; Iran holds summit with South Africa; Ban Ki-moon opens AIDS 2008 conference


JULY 28

US-Pakistan talks
Yousaf Raza Gillani, the prime minister of Pakistan, meets George W. Bush, US president, at the White House (to July 30) to discuss economic development, counter-terrorism and regional co-operation.


Disarmament conference
The third part of the United Nations’ Conference on Disarmament takes place in Geneva (to September 12), where delegates seek to negotiate weapons control treaties and arms policy.


Border disagreement
Cambodian and Thai foreign ministers hold talks to resolve a border dispute over the 900-year-old Preah Vihear temple. UNESCO’s decision this month to list the temple as Cambodia’s second world heritage site triggered a nationalist backlash from groups in Thailand.


Human rights in China
Amnesty International holds a briefing to deliver its evaluation of Chinese authorities’ record in four areas related to the core values of the Olympics: persecution of human rights activists, detention without trial, censorship and the death penalty.




JULY 29

Disaster management
The French presidency of the European Union hosts a congress (to July 31) on disaster management in the bloc. Delegates at the event in Aix-en-Provence will debate “feedback and perspectives on training, transport, equipment and mutual assistance”.


Security mandates
The UN Security Council meets in New York to discuss adopting new mandates for its missions in Darfur, Georgia and the Ivory Coast (to July 30).


Trade rules
The World Trade Organisation’s general council meets (to July 30) to discuss regulations of trade between the world’s nations.


Economic challenges


Angel Gurría, the secretary-general of the Organisation for Economic Co-operation and Development, visits New Zealand to meet Helen Clark, the prime minister, for talks on economic challenges (to July 30).


Conservatives woo US

Liam Fox, Conservative MP and UK shadow defence secretary, addresses an event in Washington. He will focus on the theme, “What can the US expect from a future Conservative administration”?

MCain on tour
US Republican presidential candidate John McCain attends The Nevada McCain Victory 2008 Finance Leadership as part of his election campaign.

Focus on CSR
The International Corporate Social Responsibility conference takes place in Malaysia, with the theme “Where responsibility meets the bottom line”.

BoE figures
The Bank of England releases lending figures for the month to end of June, covering growth rates, amounts outstanding and changes in total lending to individuals, broken down into lending secured on dwellings and consumer credit. The release also includes data on the value and number of approvals secured on dwellings.




JULY 30

Somalia peace talks
Somalia’s transitional federal government and the opposition Alliance for the Re-liberation of Somalia meet in Mecca to discuss co-operation, justice and reconciliation. It follows a peace agreement in June.


Policymakers meet
Chicago hosts the American Legislative Exchange Council annual conference (to August 2). Legislators, businesspeople and public policy experts attend the conference, where speakers include Liam Fox.


Abeyi dispute
Sudan armed forces and the Sudan People’s Liberation Army complete the withdrawal of forces from Abeyi as part of a plan by the Sudanese government
of National Unity’s main parties to resolve their dispute over the region.




JULY 31

Withdrawal from Iraq
The deadline passes for the US and Iraqis to produce a “status of forces agreement” that would allow US troops to remain in Iraq beyond the UN security mandate, which expires in December.


Child labour deadline
The deadline for the Ivory Coast to end child labour on its cocoa farms passes. The country faces sanctions on exports to the US if the deadline set by US legislators is missed.


Festival city
The Edinburgh Art Festival takes place (to August 31) and coincides with the Edinburgh Comedy Festival and the Edinburgh Fringe Festival. The art and comedy events are held across multiple venues and include exhibitions, installations and live shows.


Eurozone confidence
The European Commission releases its monthly business and consumer survey and the business climate indicator for the euro area for July 2008.



AUGUST 1

Nuclear power in India
The International Atomic Energy Agency meets to consider an agreement with India for safeguarding civilian nuclear facilities. India’s civilian reactors must be subject to regular IAEA inspections as a condition for nuclear trade with the US and other states in the Nuclear Suppliers Group.

Revenue chief
The new chairman of the UK’s Revenue & Customs, Mike Clasper, takes up his position. He joins HMRC from Terra Firma Capital Partners where he was the operational managing director. He is a former chief executive of BAA.

US unemployment
The US Bureau of Labour Statistics releases employment figures for July 2008. The report includes the employment status of the civilian population broken down by various criteria, including race, sex, and age.



AUGUST 2

Iran bilateral relations
Tehran hosts the 10th South Africa-Iran – Joint Bilateral Commission (to August 3). The meeting is co-chaired by Nkosazana Dlamini-Zuma the South African foreign minister, and Hossein Samsani, the Iranian finance minister, who will discuss relations between the two nations.




AUGUST 3

Action on AIDS
Ban Ki-moon, the UN secretary-general, opens AIDS 2008, the international conference on the disease, in Mexico City. Delegates discuss new research and debate the global response to AIDS. Separately, Mr Ban meets Mexico’s President Felipe Calderón and Patricia Espinosa Cantellano, foreign secretary, to discuss climate change and meet business leaders via the UN Global Compact’s Mexico network (to August 5).


APEC talks
Ministers from the Asia-Pacific Economic Cooperation bloc meet in Melbourne to discuss structural reform ahead of the group’s main summit in Lima in November.


Constitutional reform
Latvia holds a referendum on proposed changes to the constitution to allow a vote on dismissing parliament.


Welsh roots
The National Eisteddfod of Wales is held in Cardiff (to August 9). The event, the largest and oldest festival of Welsh culture, promotes the language and arts.


TA celebration
The Prince of Wales marks the centenary of the UK’s volunteer Territorial Army at an event in Caithness.


preview@ft.com

Read More...... Compiled by Nathalie Kilby
Last updated July 27 2008



Cambodia and Thailand seek to resolve border dispute; Liam Fox travels to the US; Somalia holds peace talks; Edinburgh hosts art and comedy festivals; Iran holds summit with South Africa; Ban Ki-moon opens AIDS 2008 conference


JULY 28

US-Pakistan talks
Yousaf Raza Gillani, the prime minister of Pakistan, meets George W. Bush, US president, at the White House (to July 30) to discuss economic development, counter-terrorism and regional co-operation.


Disarmament conference
The third part of the United Nations’ Conference on Disarmament takes place in Geneva (to September 12), where delegates seek to negotiate weapons control treaties and arms policy.


Border disagreement
Cambodian and Thai foreign ministers hold talks to resolve a border dispute over the 900-year-old Preah Vihear temple. UNESCO’s decision this month to list the temple as Cambodia’s second world heritage site triggered a nationalist backlash from groups in Thailand.


Human rights in China
Amnesty International holds a briefing to deliver its evaluation of Chinese authorities’ record in four areas related to the core values of the Olympics: persecution of human rights activists, detention without trial, censorship and the death penalty.




JULY 29

Disaster management
The French presidency of the European Union hosts a congress (to July 31) on disaster management in the bloc. Delegates at the event in Aix-en-Provence will debate “feedback and perspectives on training, transport, equipment and mutual assistance”.


Security mandates
The UN Security Council meets in New York to discuss adopting new mandates for its missions in Darfur, Georgia and the Ivory Coast (to July 30).


Trade rules
The World Trade Organisation’s general council meets (to July 30) to discuss regulations of trade between the world’s nations.


Economic challenges


Angel Gurría, the secretary-general of the Organisation for Economic Co-operation and Development, visits New Zealand to meet Helen Clark, the prime minister, for talks on economic challenges (to July 30).


Conservatives woo US

Liam Fox, Conservative MP and UK shadow defence secretary, addresses an event in Washington. He will focus on the theme, “What can the US expect from a future Conservative administration”?

MCain on tour
US Republican presidential candidate John McCain attends The Nevada McCain Victory 2008 Finance Leadership as part of his election campaign.

Focus on CSR
The International Corporate Social Responsibility conference takes place in Malaysia, with the theme “Where responsibility meets the bottom line”.

BoE figures
The Bank of England releases lending figures for the month to end of June, covering growth rates, amounts outstanding and changes in total lending to individuals, broken down into lending secured on dwellings and consumer credit. The release also includes data on the value and number of approvals secured on dwellings.




JULY 30

Somalia peace talks
Somalia’s transitional federal government and the opposition Alliance for the Re-liberation of Somalia meet in Mecca to discuss co-operation, justice and reconciliation. It follows a peace agreement in June.


Policymakers meet
Chicago hosts the American Legislative Exchange Council annual conference (to August 2). Legislators, businesspeople and public policy experts attend the conference, where speakers include Liam Fox.


Abeyi dispute
Sudan armed forces and the Sudan People’s Liberation Army complete the withdrawal of forces from Abeyi as part of a plan by the Sudanese government
of National Unity’s main parties to resolve their dispute over the region.




JULY 31

Withdrawal from Iraq
The deadline passes for the US and Iraqis to produce a “status of forces agreement” that would allow US troops to remain in Iraq beyond the UN security mandate, which expires in December.


Child labour deadline
The deadline for the Ivory Coast to end child labour on its cocoa farms passes. The country faces sanctions on exports to the US if the deadline set by US legislators is missed.


Festival city
The Edinburgh Art Festival takes place (to August 31) and coincides with the Edinburgh Comedy Festival and the Edinburgh Fringe Festival. The art and comedy events are held across multiple venues and include exhibitions, installations and live shows.


Eurozone confidence
The European Commission releases its monthly business and consumer survey and the business climate indicator for the euro area for July 2008.



AUGUST 1

Nuclear power in India
The International Atomic Energy Agency meets to consider an agreement with India for safeguarding civilian nuclear facilities. India’s civilian reactors must be subject to regular IAEA inspections as a condition for nuclear trade with the US and other states in the Nuclear Suppliers Group.

Revenue chief
The new chairman of the UK’s Revenue & Customs, Mike Clasper, takes up his position. He joins HMRC from Terra Firma Capital Partners where he was the operational managing director. He is a former chief executive of BAA.

US unemployment
The US Bureau of Labour Statistics releases employment figures for July 2008. The report includes the employment status of the civilian population broken down by various criteria, including race, sex, and age.



AUGUST 2

Iran bilateral relations
Tehran hosts the 10th South Africa-Iran – Joint Bilateral Commission (to August 3). The meeting is co-chaired by Nkosazana Dlamini-Zuma the South African foreign minister, and Hossein Samsani, the Iranian finance minister, who will discuss relations between the two nations.




AUGUST 3

Action on AIDS
Ban Ki-moon, the UN secretary-general, opens AIDS 2008, the international conference on the disease, in Mexico City. Delegates discuss new research and debate the global response to AIDS. Separately, Mr Ban meets Mexico’s President Felipe Calderón and Patricia Espinosa Cantellano, foreign secretary, to discuss climate change and meet business leaders via the UN Global Compact’s Mexico network (to August 5).


APEC talks
Ministers from the Asia-Pacific Economic Cooperation bloc meet in Melbourne to discuss structural reform ahead of the group’s main summit in Lima in November.


Constitutional reform
Latvia holds a referendum on proposed changes to the constitution to allow a vote on dismissing parliament.


Welsh roots
The National Eisteddfod of Wales is held in Cardiff (to August 9). The event, the largest and oldest festival of Welsh culture, promotes the language and arts.


TA celebration
The Prince of Wales marks the centenary of the UK’s volunteer Territorial Army at an event in Caithness.


preview@ft.com

Asian antitrust laws ‘threaten deals’

By Sundeep Tucker and Patti Waldmeir in Shanghai

Published: July 27 2008 22:33 | Last updated: July 27 2008 22:33



Tough antitrust laws that take effect in China this week and India later this year could delay or thwart high-profile cross-border mergers and acquisitions, lawyers and business executives have warned.

From Friday, companies will have to notify Chinese enforcement agencies about any planned M&A that meets designated thresholds for filings – then await clearance before completing the deal.

China and India are implementing regimes based on the European Union model, covering anti-competitive agreements, abuses of dominance and merger control – with the potential effect on M&A causing concern among multinational companies.

Lawyers and business executives believe China and India’s thresholds for merger filings are too low, and likely to ensnare global deals that will have little effect on competition locally. They also fear enforcement agencies in each country will lack the resources and expertise to deal quickly with complex merger cases.

Planned or potential tie-ups, such as those involving BHP and Rio Tinto, or Microsoft and Yahoo, could become subject to the controls, some lawyers believe. However, it is unclear whether enforcement authorities will seek to apply the revised laws on current announced deals.

In China, deals involving companies with a combined global turnover of $1.5bn – and where at least two of the parties each have turnover in China of $60m – are likely to have to file for approval.

India’s thresholds are equally complicated, but draft guidance suggests that they could be set even lower in many cases.

An aggressive interpretation of China’s competition laws could potentially trigger a merger probe lasting up to six months.

Peter Wang with law firm Jones Day in Shanghai said: “Big offshore deals will get a close look in China as elsewhere, and it would be reasonable to expect some such deals . . . to raise issues requiring a closer look and thus some delay.”

India’s beefed-up monopoly laws allow the new Competition Commission of India up to 210 days to assess merger filings – far longer than in the EU or US.

Ranjit Shahani, a senior non-executive at the Bombay Chamber of Commerce and India country head for Novartis, said the laws would have prevented Tata Steel last year from edging aside Brazil’s CSN to clinch the £6.7bn takeover of Corus, the Anglo-Dutch steelmaker.


Read More...... By Sundeep Tucker and Patti Waldmeir in Shanghai

Published: July 27 2008 22:33 | Last updated: July 27 2008 22:33



Tough antitrust laws that take effect in China this week and India later this year could delay or thwart high-profile cross-border mergers and acquisitions, lawyers and business executives have warned.

From Friday, companies will have to notify Chinese enforcement agencies about any planned M&A that meets designated thresholds for filings – then await clearance before completing the deal.

China and India are implementing regimes based on the European Union model, covering anti-competitive agreements, abuses of dominance and merger control – with the potential effect on M&A causing concern among multinational companies.

Lawyers and business executives believe China and India’s thresholds for merger filings are too low, and likely to ensnare global deals that will have little effect on competition locally. They also fear enforcement agencies in each country will lack the resources and expertise to deal quickly with complex merger cases.

Planned or potential tie-ups, such as those involving BHP and Rio Tinto, or Microsoft and Yahoo, could become subject to the controls, some lawyers believe. However, it is unclear whether enforcement authorities will seek to apply the revised laws on current announced deals.

In China, deals involving companies with a combined global turnover of $1.5bn – and where at least two of the parties each have turnover in China of $60m – are likely to have to file for approval.

India’s thresholds are equally complicated, but draft guidance suggests that they could be set even lower in many cases.

An aggressive interpretation of China’s competition laws could potentially trigger a merger probe lasting up to six months.

Peter Wang with law firm Jones Day in Shanghai said: “Big offshore deals will get a close look in China as elsewhere, and it would be reasonable to expect some such deals . . . to raise issues requiring a closer look and thus some delay.”

India’s beefed-up monopoly laws allow the new Competition Commission of India up to 210 days to assess merger filings – far longer than in the EU or US.

Ranjit Shahani, a senior non-executive at the Bombay Chamber of Commerce and India country head for Novartis, said the laws would have prevented Tata Steel last year from edging aside Brazil’s CSN to clinch the £6.7bn takeover of Corus, the Anglo-Dutch steelmaker.


US says China, India put trade talks in jeopardy

By Alan Beattie, World Trade Editor

Published: July 28 2008 12:04 | Last updated: July 28 2008 12:04




A surge of optimism around the so-called “Doha round” of global trade talks was tempered on Monday by a war of words breaking out between the US, India and China over farm and industrial goods trade.

The US said of the big emerging-market countries: ”Their actions have thrown the entire Doha round... into the gravest jeopardy of its nearly seven-year life.” India and China said that the US accusations were unfair and that it was merely trying to push its own export interests.

EDITOR’S CHOICE
Ministers go shopping to escape Doha tedium - Jul-26Lamy plan spurs optimism at Doha talks - Jul-25US plans cut in farm subsidy - Jul-22Expectations low as Doha talks begin - Jul-21Video interview: Peter Mandelson - Jul-21Pressure mounts for global trade accord - Jul-20Officials said it was not clear whether the issues were genuine deal-breakers or whether countries were merely trying to squeeze out the maximum number of concessions before agreeing a deal.

The dispute centres on special protection that India and China want to retain for farmers, and the refusal of China to negotiate, opening up whole sectors of its manufacturing industry to foreign competition.

The draft text of an agreement on agricultural trade circulated by Pascal Lamy, the WTO director-general, at the end of last week envisaged a “special safeguard mechanism” allowing countries like India and China to raise their farm tariffs in the face of a surge of imports. But India complained that the trigger for using the mechanism was too high.

Meanwhile developing country exporters such as Brazil argued that for China - which has relatively low agricultural tariffs on crops like soybeans - raising its tariffs by 15 percentage points, as permitted by the text, would be a huge proportionate increase.

China also wants to protect three of the key markets targeted by agricultural exporters - rice, cotton and sugar - from big cuts in tariffs.

On industrial goods, Beijing is also refusing to commit to opening up entire sectors to competition, as demanded by the US.

The inner group of seven negotiating partners - the US, EU, India, China, Australia, Japan and Brazil - began another meeting on Monday to try to break the logjam, followed by a wider gathering of some 30-35 trade ministers later in the day.


Read More...... By Alan Beattie, World Trade Editor

Published: July 28 2008 12:04 | Last updated: July 28 2008 12:04




A surge of optimism around the so-called “Doha round” of global trade talks was tempered on Monday by a war of words breaking out between the US, India and China over farm and industrial goods trade.

The US said of the big emerging-market countries: ”Their actions have thrown the entire Doha round... into the gravest jeopardy of its nearly seven-year life.” India and China said that the US accusations were unfair and that it was merely trying to push its own export interests.

EDITOR’S CHOICE
Ministers go shopping to escape Doha tedium - Jul-26Lamy plan spurs optimism at Doha talks - Jul-25US plans cut in farm subsidy - Jul-22Expectations low as Doha talks begin - Jul-21Video interview: Peter Mandelson - Jul-21Pressure mounts for global trade accord - Jul-20Officials said it was not clear whether the issues were genuine deal-breakers or whether countries were merely trying to squeeze out the maximum number of concessions before agreeing a deal.

The dispute centres on special protection that India and China want to retain for farmers, and the refusal of China to negotiate, opening up whole sectors of its manufacturing industry to foreign competition.

The draft text of an agreement on agricultural trade circulated by Pascal Lamy, the WTO director-general, at the end of last week envisaged a “special safeguard mechanism” allowing countries like India and China to raise their farm tariffs in the face of a surge of imports. But India complained that the trigger for using the mechanism was too high.

Meanwhile developing country exporters such as Brazil argued that for China - which has relatively low agricultural tariffs on crops like soybeans - raising its tariffs by 15 percentage points, as permitted by the text, would be a huge proportionate increase.

China also wants to protect three of the key markets targeted by agricultural exporters - rice, cotton and sugar - from big cuts in tariffs.

On industrial goods, Beijing is also refusing to commit to opening up entire sectors to competition, as demanded by the US.

The inner group of seven negotiating partners - the US, EU, India, China, Australia, Japan and Brazil - began another meeting on Monday to try to break the logjam, followed by a wider gathering of some 30-35 trade ministers later in the day.


Asian antitrust laws ‘threaten deals’

By Sundeep Tucker and Patti Waldmeir in Shanghai
Published: July 27 2008 22:33 | Last updated: July 27 2008 22:33



Tough antitrust laws that take effect in China this week and India later this year could delay or thwart high-profile cross-border mergers and acquisitions, lawyers and business executives have warned.

From Friday, companies will have to notify Chinese enforcement agencies about any planned M&A that meets designated thresholds for filings – then await clearance before completing the deal.

EDITOR’S CHOICE
WTO rules against China over tariffs - Jul-19China’s economy slows in second quarter - Jul-17Lex: China and Fannie Mae - Jul-17State creeps into Wenzhou’s private party - Jul-16Comment: Hot money poses risks to China - Jul-13China’s trade surplus shrinks - Jul-10China and India are implementing regimes based on the European Union model, covering anti-competitive agreements, abuses of dominance and merger control – with the potential effect on M&A causing concern among multinational companies.

Lawyers and business executives believe China and India’s thresholds for merger filings are too low, and likely to ensnare global deals that will have little effect on competition locally. They also fear enforcement agencies in each country will lack the resources and expertise to deal quickly with complex merger cases.

Planned or potential tie-ups, such as those involving BHP and Rio Tinto, or Microsoft and Yahoo, could become subject to the controls, some lawyers believe. However, it is unclear whether enforcement authorities will seek to apply the revised laws on current announced deals.

In China, deals involving companies with a combined global turnover of $1.5bn – and where at least two of the parties each have turnover in China of $60m – are likely to have to file for approval.

India’s thresholds are equally complicated, but draft guidance suggests that they could be set even lower in many cases.

An aggressive interpretation of China’s competition laws could potentially trigger a merger probe lasting up to six months.

Peter Wang with law firm Jones Day in Shanghai said: “Big offshore deals will get a close look in China as elsewhere, and it would be reasonable to expect some such deals . . . to raise issues requiring a closer look and thus some delay.”

India’s beefed-up monopoly laws allow the new Competition Commission of India up to 210 days to assess merger filings – far longer than in the EU or US.

Ranjit Shahani, a senior non-executive at the Bombay Chamber of Commerce and India country head for Novartis, said the laws would have prevented Tata Steel last year from edging aside Brazil’s CSN to clinch the £6.7bn takeover of Corus, the Anglo-Dutch steelmaker.


Read More...... By Sundeep Tucker and Patti Waldmeir in Shanghai
Published: July 27 2008 22:33 | Last updated: July 27 2008 22:33



Tough antitrust laws that take effect in China this week and India later this year could delay or thwart high-profile cross-border mergers and acquisitions, lawyers and business executives have warned.

From Friday, companies will have to notify Chinese enforcement agencies about any planned M&A that meets designated thresholds for filings – then await clearance before completing the deal.

EDITOR’S CHOICE
WTO rules against China over tariffs - Jul-19China’s economy slows in second quarter - Jul-17Lex: China and Fannie Mae - Jul-17State creeps into Wenzhou’s private party - Jul-16Comment: Hot money poses risks to China - Jul-13China’s trade surplus shrinks - Jul-10China and India are implementing regimes based on the European Union model, covering anti-competitive agreements, abuses of dominance and merger control – with the potential effect on M&A causing concern among multinational companies.

Lawyers and business executives believe China and India’s thresholds for merger filings are too low, and likely to ensnare global deals that will have little effect on competition locally. They also fear enforcement agencies in each country will lack the resources and expertise to deal quickly with complex merger cases.

Planned or potential tie-ups, such as those involving BHP and Rio Tinto, or Microsoft and Yahoo, could become subject to the controls, some lawyers believe. However, it is unclear whether enforcement authorities will seek to apply the revised laws on current announced deals.

In China, deals involving companies with a combined global turnover of $1.5bn – and where at least two of the parties each have turnover in China of $60m – are likely to have to file for approval.

India’s thresholds are equally complicated, but draft guidance suggests that they could be set even lower in many cases.

An aggressive interpretation of China’s competition laws could potentially trigger a merger probe lasting up to six months.

Peter Wang with law firm Jones Day in Shanghai said: “Big offshore deals will get a close look in China as elsewhere, and it would be reasonable to expect some such deals . . . to raise issues requiring a closer look and thus some delay.”

India’s beefed-up monopoly laws allow the new Competition Commission of India up to 210 days to assess merger filings – far longer than in the EU or US.

Ranjit Shahani, a senior non-executive at the Bombay Chamber of Commerce and India country head for Novartis, said the laws would have prevented Tata Steel last year from edging aside Brazil’s CSN to clinch the £6.7bn takeover of Corus, the Anglo-Dutch steelmaker.


Minggu, 27 Juli 2008

Finance of states

From Wikipedia, the free encyclopedia

Country, state, county, city or municipality finance is called public finance. It is concerned with

Identification of required expenditure of a public sector entity
Source(s) of that entity's revenue
The budgeting process
Debt issuance (municipal bonds) for public works projects


Read More...... From Wikipedia, the free encyclopedia

Country, state, county, city or municipality finance is called public finance. It is concerned with

Identification of required expenditure of a public sector entity
Source(s) of that entity's revenue
The budgeting process
Debt issuance (municipal bonds) for public works projects


Shared Services

From Wikipedia, the free encyclopedia

There is currently a move towards converging and consolidating Finance provisions into shared services within an organization. Rather than an organization having a number of separate Finance departments performing the same tasks from different locations a more centralized version can be created.



Read More...... From Wikipedia, the free encyclopedia

There is currently a move towards converging and consolidating Finance provisions into shared services within an organization. Rather than an organization having a number of separate Finance departments performing the same tasks from different locations a more centralized version can be created.



Corporate finance

From Wikipedia, the free encyclopedia

Managerial or corporate finance is the task of providing the funds for a corporation's activities. For small business, this is referred to as SME finance. It generally involves balancing risk and profitability, while attempting to maximize an entity's wealth and the value of its stock.

Long term funds are provided by ownership equity and long-term credit, often in the form of bonds. The balance between these forms the company's capital structure. Short-term funding or working capital is mostly provided by banks extending a line of credit.

Another business decision concerning finance is investment, or fund management. An investment is an acquisition of an asset in the hope that it will maintain or increase its value. In investment management -- in choosing a portfolio -- one has to decide what, how much and when to invest. To do this, a company must:

Identify relevant objectives and constraints: institution or individual goals, time horizon, risk aversion and tax considerations;
Identify the appropriate strategy: active v. passive -- hedging strategy
Measure the portfolio performance
Financial management is duplicate with the financial function of the Accounting profession. However, financial accounting is more concerned with the reporting of historical financial information, while the financial decision is directed toward the future of the firm.


[edit] Capital
Main article: Financial capital
Capital, in the financial sense, is the money which gives the business the power to buy goods to be used in the production of other goods or the offering of a service.


[edit] The desirability of budgeting

[edit] Capital budget
This concerns fixed asset requirements for the next five years and how these will be financed.


[edit] Cash budget
Working capital requirements of a business should be monitored at all times to ensure that there are sufficient funds available to meet short-term expenses.

The cash budget is basically a detailed plan that shows all expected sources and uses of cash. The cash budget has the following six main sections:

1. Beginning Cash Balance - contains the last period's closing cash balance.

2. Cash collections - includes all expected cash receipts (all sources of cash for the period considered, mainly sales)

3. Cash disbursements - lists all planned cash outflows for the period, excluding interest payments on short-term loans, which appear in the financing section. All expenses that do not affect cash flow are excluded from this list (e.g. depreciation, amortisation, etc)

4. Cash excess or deficiency - a function of the cash needs and cash available. Cash needs are determined by the total cash disbursements plus the minimum cash balance required by company policy. If total cash available is less than cash needs, a deficiency exists.

5. Financing - discloses the planned borrowings and repayments, including interest.

6. Ending Cash balance - simply reveals the planned ending cash balance.


[edit] Management of current assets

[edit] Credit policy
Credit gives the customer the opportunity to buy goods and services, and pay for them at a later date.


[edit] Advantages of credit trade
Usually results in more customers than cash trade.
Can charge more for goods to cover the risk of bad debt.
Gain goodwill and loyalty of customers.
People can buy goods and pay for them at a later date.
Farmers can buy seeds and implements, and pay for them only after the harvest.
Stimulates agricultural and industrial production and commerce.
Can be used as a promotional tool.
Increase the sales.

[edit] Disadvantages of credit trade
Risk of bad debt.
High administration expenses.
People can buy more than they can afford.
More working capital needed.
Risk of Bankruptcy.

[edit] Forms of credit
Suppliers credit:
Credit on ordinary open account
Instalment sales
Bills of exchange
Credit cards
Contractor's credit
Factoring of debtors

[edit] Factors which influence credit conditions
Nature of the business's activities
Financial position
Product durability
Length of production process
Competition and competitors' credit conditions
Country's economic position
Conditions at financial institutions
Discount for early payment
Debtor's type of business and financial position

[edit] Credit collection

[edit] Overdue accounts
Cards arranged alphabetically in card index system
Attach a notice of overdue account to statement.
Send a letter asking for settlement of debt.
Send a second or third letter if first is ineffectual.
Threaten legal action.

[edit] Effective credit control
Increases sales
Reduces bad debts
Increases profits
Builds customer loyalty

[edit] Sources of information on creditworthiness
Business references
Bank references
Credit agencies
Chambers of commerce
Employers
Credit application forms

[edit] Duties of the credit department
Legal action
Taking necessary steps to ensure settlement of account
Knowing the credit policy and procedures for credit control
Setting credit limits
Ensuring that statements of account are sent out
Ensuring that thorough checks are carried out on credit customers
Keeping records of all amounts owing
Ensuring that debts are settled promptly
Timely reporting to the upper level of management for better management.

[edit] Stock
Purpose of stock control
Ensures that enough stock is on hand to satisfy demand.
Protects and monitors theft.
Safeguards against having to stockpile.
Allows for control over selling and cost price.
Stockpiling
Main article: Cornering the market
This refers to the purchase of stock at the right time, at the right price and in the right quantities.

There are several advantages to the stockpiling, the following are some of the examples:

Losses due to price fluctuations and stock loss kept to a minimum
Ensures that goods reach customers timeously; better service
Saves space and storage cost
Investment of working capital kept to minimum
No loss in production due to delays
There are several disadvantages to the stockpiling, the following are some of the examples:

Obsolescence
Danger of fire and theft
Initial working capital investment is very large
Losses due to price fluctuation
Rate of stock turnover
This refers to the number of times per year that the average level of stock is sold. It may be worked out by dividing the cost price of goods sold by the cost price of the average stock level.

Determining optimum stock levels
Maximum stock level refers to the maximum stock level that may be maintained to ensure cost effectiveness.
Minimum stock level refers to the point below which the stock level may not go.
Standard order refers to the amount of stock generally ordered.
Order level refers to the stock level which calls for an order to be made.

[edit] Cash

[edit] Reasons for keeping cash
The transaction motive refers to the money kept available to pay expenses.
The precautionary motive refers to the money kept aside for unforeseen expenses.
The speculative motive refers to the money kept aside to take advantage of suddenly arising opportunities.

[edit] Advantages of sufficient cash
Current liabilities may be catered for.
Cash discounts are given for cash payments.
Production is kept moving.
Surplus cash may be invested on a short-term basis.
The business is able to pay its accounts timeously, allowing for easily-obtained credit.
Liquidity

[edit] Management of fixed assets

[edit] Depreciation
Depreciation is the decrease in the value of an asset due to wear and tear or obsolescence. It is calculated yearly to ensure realistic book values for assets.


[edit] Insurance
Main article: Insurance
Insurance is the undertaking of one party to indemnify another, in exchange for a premium, against a certain eventuality.

Uninsurable risks
Bad debt
Changes in fashion
Time lapses between ordering and delivery
New machinery or technology
Different prices at different places
Requirements of an insurance contract
Insurable interest
The insured must derive a real financial gain from that which he is insuring, or stand to lose if it is destroyed or lost.
The item must belong to the insured.
One person may take out insurance on the life of another if the second party owes the first money.
Must be some person or item which can, legally, be insured.
The insured must have a legal claim to that which he is insuring.
Good faith
Uberrimae fidei refers to absolute honesty and must characterise the dealings of both the insurer and the insured.

Read More...... From Wikipedia, the free encyclopedia

Managerial or corporate finance is the task of providing the funds for a corporation's activities. For small business, this is referred to as SME finance. It generally involves balancing risk and profitability, while attempting to maximize an entity's wealth and the value of its stock.

Long term funds are provided by ownership equity and long-term credit, often in the form of bonds. The balance between these forms the company's capital structure. Short-term funding or working capital is mostly provided by banks extending a line of credit.

Another business decision concerning finance is investment, or fund management. An investment is an acquisition of an asset in the hope that it will maintain or increase its value. In investment management -- in choosing a portfolio -- one has to decide what, how much and when to invest. To do this, a company must:

Identify relevant objectives and constraints: institution or individual goals, time horizon, risk aversion and tax considerations;
Identify the appropriate strategy: active v. passive -- hedging strategy
Measure the portfolio performance
Financial management is duplicate with the financial function of the Accounting profession. However, financial accounting is more concerned with the reporting of historical financial information, while the financial decision is directed toward the future of the firm.


[edit] Capital
Main article: Financial capital
Capital, in the financial sense, is the money which gives the business the power to buy goods to be used in the production of other goods or the offering of a service.


[edit] The desirability of budgeting

[edit] Capital budget
This concerns fixed asset requirements for the next five years and how these will be financed.


[edit] Cash budget
Working capital requirements of a business should be monitored at all times to ensure that there are sufficient funds available to meet short-term expenses.

The cash budget is basically a detailed plan that shows all expected sources and uses of cash. The cash budget has the following six main sections:

1. Beginning Cash Balance - contains the last period's closing cash balance.

2. Cash collections - includes all expected cash receipts (all sources of cash for the period considered, mainly sales)

3. Cash disbursements - lists all planned cash outflows for the period, excluding interest payments on short-term loans, which appear in the financing section. All expenses that do not affect cash flow are excluded from this list (e.g. depreciation, amortisation, etc)

4. Cash excess or deficiency - a function of the cash needs and cash available. Cash needs are determined by the total cash disbursements plus the minimum cash balance required by company policy. If total cash available is less than cash needs, a deficiency exists.

5. Financing - discloses the planned borrowings and repayments, including interest.

6. Ending Cash balance - simply reveals the planned ending cash balance.


[edit] Management of current assets

[edit] Credit policy
Credit gives the customer the opportunity to buy goods and services, and pay for them at a later date.


[edit] Advantages of credit trade
Usually results in more customers than cash trade.
Can charge more for goods to cover the risk of bad debt.
Gain goodwill and loyalty of customers.
People can buy goods and pay for them at a later date.
Farmers can buy seeds and implements, and pay for them only after the harvest.
Stimulates agricultural and industrial production and commerce.
Can be used as a promotional tool.
Increase the sales.

[edit] Disadvantages of credit trade
Risk of bad debt.
High administration expenses.
People can buy more than they can afford.
More working capital needed.
Risk of Bankruptcy.

[edit] Forms of credit
Suppliers credit:
Credit on ordinary open account
Instalment sales
Bills of exchange
Credit cards
Contractor's credit
Factoring of debtors

[edit] Factors which influence credit conditions
Nature of the business's activities
Financial position
Product durability
Length of production process
Competition and competitors' credit conditions
Country's economic position
Conditions at financial institutions
Discount for early payment
Debtor's type of business and financial position

[edit] Credit collection

[edit] Overdue accounts
Cards arranged alphabetically in card index system
Attach a notice of overdue account to statement.
Send a letter asking for settlement of debt.
Send a second or third letter if first is ineffectual.
Threaten legal action.

[edit] Effective credit control
Increases sales
Reduces bad debts
Increases profits
Builds customer loyalty

[edit] Sources of information on creditworthiness
Business references
Bank references
Credit agencies
Chambers of commerce
Employers
Credit application forms

[edit] Duties of the credit department
Legal action
Taking necessary steps to ensure settlement of account
Knowing the credit policy and procedures for credit control
Setting credit limits
Ensuring that statements of account are sent out
Ensuring that thorough checks are carried out on credit customers
Keeping records of all amounts owing
Ensuring that debts are settled promptly
Timely reporting to the upper level of management for better management.

[edit] Stock
Purpose of stock control
Ensures that enough stock is on hand to satisfy demand.
Protects and monitors theft.
Safeguards against having to stockpile.
Allows for control over selling and cost price.
Stockpiling
Main article: Cornering the market
This refers to the purchase of stock at the right time, at the right price and in the right quantities.

There are several advantages to the stockpiling, the following are some of the examples:

Losses due to price fluctuations and stock loss kept to a minimum
Ensures that goods reach customers timeously; better service
Saves space and storage cost
Investment of working capital kept to minimum
No loss in production due to delays
There are several disadvantages to the stockpiling, the following are some of the examples:

Obsolescence
Danger of fire and theft
Initial working capital investment is very large
Losses due to price fluctuation
Rate of stock turnover
This refers to the number of times per year that the average level of stock is sold. It may be worked out by dividing the cost price of goods sold by the cost price of the average stock level.

Determining optimum stock levels
Maximum stock level refers to the maximum stock level that may be maintained to ensure cost effectiveness.
Minimum stock level refers to the point below which the stock level may not go.
Standard order refers to the amount of stock generally ordered.
Order level refers to the stock level which calls for an order to be made.

[edit] Cash

[edit] Reasons for keeping cash
The transaction motive refers to the money kept available to pay expenses.
The precautionary motive refers to the money kept aside for unforeseen expenses.
The speculative motive refers to the money kept aside to take advantage of suddenly arising opportunities.

[edit] Advantages of sufficient cash
Current liabilities may be catered for.
Cash discounts are given for cash payments.
Production is kept moving.
Surplus cash may be invested on a short-term basis.
The business is able to pay its accounts timeously, allowing for easily-obtained credit.
Liquidity

[edit] Management of fixed assets

[edit] Depreciation
Depreciation is the decrease in the value of an asset due to wear and tear or obsolescence. It is calculated yearly to ensure realistic book values for assets.


[edit] Insurance
Main article: Insurance
Insurance is the undertaking of one party to indemnify another, in exchange for a premium, against a certain eventuality.

Uninsurable risks
Bad debt
Changes in fashion
Time lapses between ordering and delivery
New machinery or technology
Different prices at different places
Requirements of an insurance contract
Insurable interest
The insured must derive a real financial gain from that which he is insuring, or stand to lose if it is destroyed or lost.
The item must belong to the insured.
One person may take out insurance on the life of another if the second party owes the first money.
Must be some person or item which can, legally, be insured.
The insured must have a legal claim to that which he is insuring.
Good faith
Uberrimae fidei refers to absolute honesty and must characterise the dealings of both the insurer and the insured.

Personal finance

From Wikipedia, the free encyclopedia
Jump to: navigation, search



Questions in personal finance revolve around

How much money will be needed by an individual (or by a family) at various points in the future?
Where will this money come from (e.g. savings or borrowing)?
How can people protect themselves against unforeseen events in their lives, and risk in financial markets?
How can family assets be best transferred across generations (bequests and inheritance)?
How do taxes (tax subsidies or penalties) affect personal financial decisions?
How does credit affect an individual's financial standing?
How can one plan for a secure financial future in an environment of economic instability?
Personal financial decisions may involve paying for education,financing durable goods such as real estate and cars, buying insurance, e.g. health and property insurance, investing and saving for retirement.

Personal financial decisions may also involve paying for a loan.


Read More...... From Wikipedia, the free encyclopedia
Jump to: navigation, search



Questions in personal finance revolve around

How much money will be needed by an individual (or by a family) at various points in the future?
Where will this money come from (e.g. savings or borrowing)?
How can people protect themselves against unforeseen events in their lives, and risk in financial markets?
How can family assets be best transferred across generations (bequests and inheritance)?
How do taxes (tax subsidies or penalties) affect personal financial decisions?
How does credit affect an individual's financial standing?
How can one plan for a secure financial future in an environment of economic instability?
Personal financial decisions may involve paying for education,financing durable goods such as real estate and cars, buying insurance, e.g. health and property insurance, investing and saving for retirement.

Personal financial decisions may also involve paying for a loan.


Financial reinsurance

From Wikipedia, the free encyclopedia

Financial Reinsurance, also known as 'fin re', is a form of reinsurance which is focused more on capital management than on risk transfer. In the non-life segment of the insurance industry this class of transactions is often referred to as finite reinsurance.

One of the particular difficulties of running an insurance company is that its financial results - and hence its profitability - tend to be uneven from one year to the next. Since insurance companies generally want to produce consistent results, they may be attracted to ways of hoarding this year's profit to pay for next year's possible losses (within the constraints of the applicable standards for financial reporting). Financial reinsurance is one means by which insurance companies can "smooth" their results.

A pure 'fin re' contract for a non-life insurer tends to cover a multi-year period, during which the premium is held and invested by the reinsurer. It is returned to the ceding company - minus a pre-determined profit-margin for the reinsurer - either when the period has elapsed, or when the ceding company suffers a loss. 'Fin re' therefore differs from conventional reinsurance because most of the premium is returned whether there is a loss or not: little or no risk-transfer has taken place.

In the life insurance segment, fin re is more usually used as a way for the reinsurer to provide financing to a life company, much like a loan except that the reinsurer accepts some risk on the portfolio of business reinsured under the fin re contract. Repayment of the fin re is usually linked to the profit profile of the business reinsured and therefore typically takes a number of years. Fin re is used in preference to a plain loan because repayment is conditional on the future profitable performance of the business reinsured such that, in some regimes, it does not need to be recognised as a liability for published solvency reporting.

Contents [hide]
1 History
2 Fin Re for Life Insurers
2.1 The regulator's perspective
2.2 A banker's perspective
2.3 The reinsurer's perspective
3 Different accounting regimes
4 Outside Sources
5 See also



[edit] History
'Fin re' has been around since at least the 1960s, when Lloyd's syndicates started sending money overseas as reinsurance premium for what were then called 'roll-overs' - multi-year contracts with specially-established vehicles in tax-light jurisdictions such as the Cayman Islands. These deals were legal and approved by the UK tax-authorities. However they fell into disrepute after some years, partly because their tax-avoiding motivation became obvious, and partly because of a few cases where the overseas funds were siphoned-off or simply stolen.

More recently, the high-profile bankruptcy of the HIH group of insurance companies in Australia revealed that highly questionable transactions had been propping-up the balance-sheet for some years prior to failure. To be clear, although fin re contracts were involved, it was the fraudulent accounting for those contracts - and not the actual use of fin re - which was the problem. As of June 2006, General Re and others are being sued by the HIH liquidator in connection with the fraudulent practices.

In the life segment, fin re has been widely used in Europe.


[edit] Fin Re for Life Insurers

[edit] The regulator's perspective
When looking at the financial position of a Life insurer, the company's assets and liabilities are measured. The difference is called the 'free assets' of the company. The greater the free assets relative to the liabilities, the more 'solvent' the company is deemed to be.

There are different ways of measuring assets and liabilities - it depends on who is looking. The regulator, who is interested in ensuring that insurance companies remain solvent so that they can meet their liabilities to policyholders, tends to under-estimate assets and over-estimate liabilities.

In taking this conservative perspective, one of the steps taken is to effectively ignore future profits. On the one hand this makes sense - it's not prudent to anticipate future profits. On the other hand, for an entire portfolio of policies, although some may lapse - statistically we can rely on a number to still be around to contribute to the company's future profits.

Future profits can thus be seen to be an inadmissible asset - an asset which may not (from the regulator's point of view, anyway) be taken into account. (Current developments, particularly Solvency 2 in Europe, will likely base solvency tests on market to market assets and liabilities, thereby including some value for future profits. Solvency 2 looks more like banks' Value at risk.)


[edit] A banker's perspective
If a bank were to give the insurer a loan, the insurer's assets would increase by the amount of the loan, but their liabilities would increase by the same amount too - because they owe that money back to the bank.

With both assets and liabilities increasing by the same amount, the free assets remain unchanged. This is generally a sensible thing, but it's not what financial reinsurance is aiming for.


[edit] The reinsurer's perspective
In setting up a financial reinsurance treaty, the reinsurer will provide capital (there are a number of ways of doing this, discussed below). In return, the insurer will pay the capital back over time. The key here is to ensure that repayments only come out of surplus emerging from the reinsured block of business. The benefit of this surplus-limitation comes from the fact that in the regulatory accounts there is no value ascribed to future profits - which means the liability to repay the reinsurer is made from a series of payments which are deemed to be zero.

The impact is that there is an increase in assets (from the financing), but no increase in liabilities. In other words, financial reinsurance increases the company's free assets.


[edit] Different accounting regimes
Financial reinsurance is generally intended to impact the regulatory balance sheet on the premise that that balance sheet provides a distorted view of a company's solvency otherwise. Many financial reinsurance transactions, particularly for life insurers, have little impact on GAAP accounts and shareholder-reported profits.

Over the 2004-2006 period a number of financial or finite reinsurance transactions attracted regulatory scrutiny, notably from New York Attorney General Eliot Spitzer, due to the concern that their primary result was to distort and manage accounting presentation rather than to transfer risk. In particular, a transaction between AIG and General Re through which the former buttressed its reserves was identified as transferring insufficient risk, and this review led to management changes at both companies. Accountants, regulators and other constituencies proposed a variety of tests for such transactions.


Read More...... From Wikipedia, the free encyclopedia

Financial Reinsurance, also known as 'fin re', is a form of reinsurance which is focused more on capital management than on risk transfer. In the non-life segment of the insurance industry this class of transactions is often referred to as finite reinsurance.

One of the particular difficulties of running an insurance company is that its financial results - and hence its profitability - tend to be uneven from one year to the next. Since insurance companies generally want to produce consistent results, they may be attracted to ways of hoarding this year's profit to pay for next year's possible losses (within the constraints of the applicable standards for financial reporting). Financial reinsurance is one means by which insurance companies can "smooth" their results.

A pure 'fin re' contract for a non-life insurer tends to cover a multi-year period, during which the premium is held and invested by the reinsurer. It is returned to the ceding company - minus a pre-determined profit-margin for the reinsurer - either when the period has elapsed, or when the ceding company suffers a loss. 'Fin re' therefore differs from conventional reinsurance because most of the premium is returned whether there is a loss or not: little or no risk-transfer has taken place.

In the life insurance segment, fin re is more usually used as a way for the reinsurer to provide financing to a life company, much like a loan except that the reinsurer accepts some risk on the portfolio of business reinsured under the fin re contract. Repayment of the fin re is usually linked to the profit profile of the business reinsured and therefore typically takes a number of years. Fin re is used in preference to a plain loan because repayment is conditional on the future profitable performance of the business reinsured such that, in some regimes, it does not need to be recognised as a liability for published solvency reporting.

Contents [hide]
1 History
2 Fin Re for Life Insurers
2.1 The regulator's perspective
2.2 A banker's perspective
2.3 The reinsurer's perspective
3 Different accounting regimes
4 Outside Sources
5 See also



[edit] History
'Fin re' has been around since at least the 1960s, when Lloyd's syndicates started sending money overseas as reinsurance premium for what were then called 'roll-overs' - multi-year contracts with specially-established vehicles in tax-light jurisdictions such as the Cayman Islands. These deals were legal and approved by the UK tax-authorities. However they fell into disrepute after some years, partly because their tax-avoiding motivation became obvious, and partly because of a few cases where the overseas funds were siphoned-off or simply stolen.

More recently, the high-profile bankruptcy of the HIH group of insurance companies in Australia revealed that highly questionable transactions had been propping-up the balance-sheet for some years prior to failure. To be clear, although fin re contracts were involved, it was the fraudulent accounting for those contracts - and not the actual use of fin re - which was the problem. As of June 2006, General Re and others are being sued by the HIH liquidator in connection with the fraudulent practices.

In the life segment, fin re has been widely used in Europe.


[edit] Fin Re for Life Insurers

[edit] The regulator's perspective
When looking at the financial position of a Life insurer, the company's assets and liabilities are measured. The difference is called the 'free assets' of the company. The greater the free assets relative to the liabilities, the more 'solvent' the company is deemed to be.

There are different ways of measuring assets and liabilities - it depends on who is looking. The regulator, who is interested in ensuring that insurance companies remain solvent so that they can meet their liabilities to policyholders, tends to under-estimate assets and over-estimate liabilities.

In taking this conservative perspective, one of the steps taken is to effectively ignore future profits. On the one hand this makes sense - it's not prudent to anticipate future profits. On the other hand, for an entire portfolio of policies, although some may lapse - statistically we can rely on a number to still be around to contribute to the company's future profits.

Future profits can thus be seen to be an inadmissible asset - an asset which may not (from the regulator's point of view, anyway) be taken into account. (Current developments, particularly Solvency 2 in Europe, will likely base solvency tests on market to market assets and liabilities, thereby including some value for future profits. Solvency 2 looks more like banks' Value at risk.)


[edit] A banker's perspective
If a bank were to give the insurer a loan, the insurer's assets would increase by the amount of the loan, but their liabilities would increase by the same amount too - because they owe that money back to the bank.

With both assets and liabilities increasing by the same amount, the free assets remain unchanged. This is generally a sensible thing, but it's not what financial reinsurance is aiming for.


[edit] The reinsurer's perspective
In setting up a financial reinsurance treaty, the reinsurer will provide capital (there are a number of ways of doing this, discussed below). In return, the insurer will pay the capital back over time. The key here is to ensure that repayments only come out of surplus emerging from the reinsured block of business. The benefit of this surplus-limitation comes from the fact that in the regulatory accounts there is no value ascribed to future profits - which means the liability to repay the reinsurer is made from a series of payments which are deemed to be zero.

The impact is that there is an increase in assets (from the financing), but no increase in liabilities. In other words, financial reinsurance increases the company's free assets.


[edit] Different accounting regimes
Financial reinsurance is generally intended to impact the regulatory balance sheet on the premise that that balance sheet provides a distorted view of a company's solvency otherwise. Many financial reinsurance transactions, particularly for life insurers, have little impact on GAAP accounts and shareholder-reported profits.

Over the 2004-2006 period a number of financial or finite reinsurance transactions attracted regulatory scrutiny, notably from New York Attorney General Eliot Spitzer, due to the concern that their primary result was to distort and manage accounting presentation rather than to transfer risk. In particular, a transaction between AIG and General Re through which the former buttressed its reserves was identified as transferring insufficient risk, and this review led to management changes at both companies. Accountants, regulators and other constituencies proposed a variety of tests for such transactions.


Computational finance

From Wikipedia, the free encyclopedia

Computational finance or financial engineering is a cross-disciplinary field which relies on mathematical finance, numerical methods and computer simulations to make trading, hedging and investment decisions, as well as facilitating the risk management of those decisions. Utilising various methods, practitioners of computational finance aim to precisely determine the financial risk that certain financial instruments create.

Contents [hide]
1 Areas of application
2 Major contributors
3 See also
4 External links



[edit] Areas of application
Areas where computational finance techniques are employed include:

Investment banking
Risk Management software
Corporate strategic planning
Securities trading and financial risk management
Derivatives trading and risk management
Investment management
Pension scheme
Insurance policy
Mortgage agreement
Lottery design
Currency peg
Gold and commodity valuation

[edit] Major contributors
Some major contributors to computational finance include:

Fischer Black
Phelim Boyle
Emanuel Derman
Robert Jarrow
Harry Markowitz
Robert C. Merton
Stephen Ross
Myron Scholes

Generally, individuals who fill positions in computational finance are known as “quants”, referring to the quantitative skills necessary to perform the job. Specifically, knowledge of the C++ programming language, as well as of the mathematical subfields of: stochastic calculus, multivariate calculus, linear algebra, differential equations , probability theory and statistical inference are often entry level requisites for such a position. C++ has become the dominant language for two main reasons: the computationally intensive nature of many algorithms, and the focus on libraries rather than applications.

Computational finance was traditionally populated by Ph.Ds in finance, physics and mathematics who moved into the field from more pure, academic backgrounds (either directly from graduate school, or after teaching or research). However, as the actual use of computers has become essential to rapidly carrying out computational finance decisions, a background in computer programming has become useful, and hence many computer programmers enter the field either from Ph.D. programs or from other fields of software engineering. Practitioners of computational finance have come from the fields of signal processing and computational fluid dynamics.

Masters level degree holders are also increasingly making their presence felt as more terminal programs become available at the leading schools. Today, all full service institutional finance firms employ computational finance professionals in their banking and finance operations (as opposed to being ancillary information technology specialists), while there are many other boutique firms ranging from 20 or fewer employees to several thousand that specialize in quantitative trading alone. JPMorgan Chase & Co. was one of the first firms to create a large derivatives business and employ computational finance (including through the formation of RiskMetrics), while D. E. Shaw & Co. is probably the oldest and largest quant fund (Citadel Investment Group is a major rival).



Read More...... From Wikipedia, the free encyclopedia

Computational finance or financial engineering is a cross-disciplinary field which relies on mathematical finance, numerical methods and computer simulations to make trading, hedging and investment decisions, as well as facilitating the risk management of those decisions. Utilising various methods, practitioners of computational finance aim to precisely determine the financial risk that certain financial instruments create.

Contents [hide]
1 Areas of application
2 Major contributors
3 See also
4 External links



[edit] Areas of application
Areas where computational finance techniques are employed include:

Investment banking
Risk Management software
Corporate strategic planning
Securities trading and financial risk management
Derivatives trading and risk management
Investment management
Pension scheme
Insurance policy
Mortgage agreement
Lottery design
Currency peg
Gold and commodity valuation

[edit] Major contributors
Some major contributors to computational finance include:

Fischer Black
Phelim Boyle
Emanuel Derman
Robert Jarrow
Harry Markowitz
Robert C. Merton
Stephen Ross
Myron Scholes

Generally, individuals who fill positions in computational finance are known as “quants”, referring to the quantitative skills necessary to perform the job. Specifically, knowledge of the C++ programming language, as well as of the mathematical subfields of: stochastic calculus, multivariate calculus, linear algebra, differential equations , probability theory and statistical inference are often entry level requisites for such a position. C++ has become the dominant language for two main reasons: the computationally intensive nature of many algorithms, and the focus on libraries rather than applications.

Computational finance was traditionally populated by Ph.Ds in finance, physics and mathematics who moved into the field from more pure, academic backgrounds (either directly from graduate school, or after teaching or research). However, as the actual use of computers has become essential to rapidly carrying out computational finance decisions, a background in computer programming has become useful, and hence many computer programmers enter the field either from Ph.D. programs or from other fields of software engineering. Practitioners of computational finance have come from the fields of signal processing and computational fluid dynamics.

Masters level degree holders are also increasingly making their presence felt as more terminal programs become available at the leading schools. Today, all full service institutional finance firms employ computational finance professionals in their banking and finance operations (as opposed to being ancillary information technology specialists), while there are many other boutique firms ranging from 20 or fewer employees to several thousand that specialize in quantitative trading alone. JPMorgan Chase & Co. was one of the first firms to create a large derivatives business and employ computational finance (including through the formation of RiskMetrics), while D. E. Shaw & Co. is probably the oldest and largest quant fund (Citadel Investment Group is a major rival).



The main techniques and sectors of the financial industry

From Wikipedia, the free encyclopedia

An entity whose income exceeds its expenditure can lend or invest the excess income. On the other hand, an entity whose income is less than its expenditure can raise capital by borrowing or selling equity claims, decreasing its expenses, or increasing its income. The lender can find a borrower, a financial intermediary such as a bank, or buy notes or bonds in the bond market. The lender receives interest, the borrower pays a higher interest than the lender receives, and the financial intermediary pockets the difference.

A bank aggregates the activities of many borrowers and lenders. A bank accepts deposits from lenders, on which it pays the interest. The bank then lends these deposits to borrowers. Banks allow borrowers and lenders, of different sizes, to coordinate their activity. Banks are thus compensators of money flows in space.

A specific example of corporate finance is the sale of stock by a company to institutional investors like investment banks, who in turn generally sell it to the public. The stock gives whoever owns it part ownership in that company. If you buy one share of XYZ Inc, and they have 100 shares outstanding (held by investors), you are 1/100 owner of that company. Of course, in return for the stock, the company receives cash, which it uses to expand its business in a process called "equity financing". Equity financing mixed with the sale of bonds (or any other debt financing) is called the company's capital structure.

Finance is used by individuals (personal finance), by governments (public finance), by businesses (corporate finance), as well as by a wide variety of organizations including schools and non-profit organizations. In general, the goals of each of the above activities are achieved through the use of appropriate financial instruments, with consideration to their institutional setting.

Finance is one of the most important aspects of business management. Without proper financial planning a new enterprise is unlikely to be successful. Managing money (a liquid asset) is essential to ensure a secure future, both for the individual and an organization.



Read More...... From Wikipedia, the free encyclopedia

An entity whose income exceeds its expenditure can lend or invest the excess income. On the other hand, an entity whose income is less than its expenditure can raise capital by borrowing or selling equity claims, decreasing its expenses, or increasing its income. The lender can find a borrower, a financial intermediary such as a bank, or buy notes or bonds in the bond market. The lender receives interest, the borrower pays a higher interest than the lender receives, and the financial intermediary pockets the difference.

A bank aggregates the activities of many borrowers and lenders. A bank accepts deposits from lenders, on which it pays the interest. The bank then lends these deposits to borrowers. Banks allow borrowers and lenders, of different sizes, to coordinate their activity. Banks are thus compensators of money flows in space.

A specific example of corporate finance is the sale of stock by a company to institutional investors like investment banks, who in turn generally sell it to the public. The stock gives whoever owns it part ownership in that company. If you buy one share of XYZ Inc, and they have 100 shares outstanding (held by investors), you are 1/100 owner of that company. Of course, in return for the stock, the company receives cash, which it uses to expand its business in a process called "equity financing". Equity financing mixed with the sale of bonds (or any other debt financing) is called the company's capital structure.

Finance is used by individuals (personal finance), by governments (public finance), by businesses (corporate finance), as well as by a wide variety of organizations including schools and non-profit organizations. In general, the goals of each of the above activities are achieved through the use of appropriate financial instruments, with consideration to their institutional setting.

Finance is one of the most important aspects of business management. Without proper financial planning a new enterprise is unlikely to be successful. Managing money (a liquid asset) is essential to ensure a secure future, both for the individual and an organization.



Journal of Financial Economics

by, From Wikipedia, the free encyclopedia


The Journal of Financial Economics or JFE, is a publication in the theory of financial economics. Being a respected journal, it receives a lot of papers submitted and chooses the best ones based on relevance to its field of specialization, reputation of the author, and quality of work submitted. The Journal of Finance, the Review of Financial Studies and the Journal of Financial Economics are considered the three most prestigious finance journals in the world.[1] The submission fee of the Journal of Financial Economics, however, is substantially higher than that of the two other journals.


Read More...... by, From Wikipedia, the free encyclopedia


The Journal of Financial Economics or JFE, is a publication in the theory of financial economics. Being a respected journal, it receives a lot of papers submitted and chooses the best ones based on relevance to its field of specialization, reputation of the author, and quality of work submitted. The Journal of Finance, the Review of Financial Studies and the Journal of Financial Economics are considered the three most prestigious finance journals in the world.[1] The submission fee of the Journal of Financial Economics, however, is substantially higher than that of the two other journals.


Financial economics

From Wikipedia, the free encyclopedia

Financial economics is the branch of economics concerned with "the allocation and deployment of economic resources, both spatially and across time, in an uncertain environment" [1]. It is additionally characterised by its "concentration on monetary activities", in which "money of one type or another is likely to appear on both sides of a trade" [2]. The questions within Financial economics are typically framed in terms of "time, uncertainty, options and information" [3].

Time: money now is traded for money in the future.
Uncertainty (or risk): The amount of money to be transferred in the future is uncertain.
options: one party to the transaction can make a decision at a later time that will affect subsequent transfers of money.
Information: knowledge of the future can reduce, or possibly eliminate, the uncertainty associated with future monetary value (FMV).

Read More...... From Wikipedia, the free encyclopedia

Financial economics is the branch of economics concerned with "the allocation and deployment of economic resources, both spatially and across time, in an uncertain environment" [1]. It is additionally characterised by its "concentration on monetary activities", in which "money of one type or another is likely to appear on both sides of a trade" [2]. The questions within Financial economics are typically framed in terms of "time, uncertainty, options and information" [3].

Time: money now is traded for money in the future.
Uncertainty (or risk): The amount of money to be transferred in the future is uncertain.
options: one party to the transaction can make a decision at a later time that will affect subsequent transfers of money.
Information: knowledge of the future can reduce, or possibly eliminate, the uncertainty associated with future monetary value (FMV).

Funeral Rites in Tana Toraja

by, Return from Tana Toraja to Southeast Asia
Return from Tana Toraja to Adventure Travel Tales and Tips


From Makassar we move on to Rantepao, in the mountains of Tana Toraja. This is the area of the Toraja people, known for their funeral rituals and typical houses. Although they are converted to Christianity, their traditional animist beliefs are still part of everyday life.


To Rantepao
The first part of bus drive to Rantepao is in flat terrain, along the coast heading north. The views are nice, with simple yet typical malay houses in the rice fields with mountains in the backdrop. After the harbor city of Pare Pare, we move up into the mountains. This means heavy winding roads, roaring engines going up, and squeaking breakes going down. Sabine takes a pill against car sickness, which makes her very sleepy. After a while the first Tongkonan houses appear, and at the end of the afternoon we arrive in Rantepao.

Rantepao is a town grown out of proportions because of tourism. We decide to stay just outside the town, and are dropped off at Sella’s homestay. We are hardly checked in when a lot of information is poured over us, from someone who appears to be a guide. He tells us we are lucky, there is a funeral tomorrow in a village nearby, and we can take a look there. Although we assume there is a funeral somewhere every day, we decide to book the trip with him.


Tongkonan houses
We agreed to meet our guide in the city, where we first stop at a supermarket to buy cigarettes and other gifts for the family we will visit. Then we take a bemo, which brings us as far as the paved road goes. After that, it’s still a long walk to the village. Underway we admire the typical Tongkonan houses. They have a huge roof shaped like either buffalo horns or a boat, the experts aren’t sure which they represent. We also see a few megaliths, large upright stones into which a face is cut. And all in a landscape of rice fields and mountains.

When we nearly arrive we pass a few men carrying pieces of meat in between them. According to our guide, they come from the funeral. Every guest gets some of the meat from the sacrificed and slaughtered buffaloes.


Funeral rites
A funeral in Tana Toraja takes several days, depending on the importance of the deceased. The first day(s) is for the killing of the buffaloes. The more important the deceased, the more buffaloes are killed. The next day(s), the guests arrive. They often bring along pigs, who are also slaughtered. The last day, finally, is the actual funeral. At the funeral we are visiting, the killing of the buffaloes is on the same day as the arrival of the guests. This is not because of the importance of the deceased (8 buffaloes are killed, so he was important), but because of the guests from Irian Jaya, who have to return after a few days.

We are welcomed by the family in one of the specially made bamboo huts. Outside, on the compound, we can see a dead buffalo, skinned but otherwise intact. While we are offered tea and biscuits, we hear a lot of chopping noises outside, and we wonder what is going on. But a little later, we can see for ourselves. On a bed of leaves the dead buffaloes are slaughtered and divided into huge piles of meat. The chest and other parts are chopped with an axe, which was the sound we heard. Five men are working on it all day, and the rest is watching.

Then we are taken to take a look in the open air kitchen. Here the women are busy preparing food and drinks for the guests. We also get some rice, pork and hot peppers to eat. Meanwhile children are running around, some of them with a buffalo hoof they obtained from the slaughtering men. As a new group of guests arrive, the women line up to deliver food and drinks to them.


Pigs
The new guests are received in a central bamboo hut. The pigs they brought are lying next to it. After a while, when they finished their drinks and meal, the people are moved to one of the other bamboo huts on the terrain. The pigs are then transported to a small field behind the huts. And we can take a look there to see how they are slaughtered as well, nice….

The pigs are killed by a stab in the heart with a dagger, while a man holds them with his foot. After a scream, the pig shudders for a moment until it passes out. Immediately, the animal is cut open to remove the stomach and guts. Then the hair is burned off above a fire. Finally, the pig is cut into pieces and divided.

After this ritual we head back to the bamboo hut of the family. We pass the compounds, where the buffalo heads are staring at us, the bodies get thinner and the piles of meat higher. Not a pleasant sight, so we go quickly back inside, where we are offered a drink and some food. The palm wine tastes bad, however, and we don’t empty our glass. Later we learn from our guide that he needed to apologize for that.

On our walk back to the bemo, our guide leads us into the ricefields. Nice, but he doesn’t know the route, and we end up in the mud. We use some bamboo sticks to prevent being sucked into it. But the views are great and it’s nice to pass the harvesting people and the children playing in the water.


Kete Kesu
When we reach the paved road it doesn’t take long before a bemo picks us up, in order to drop us off at the traditional village of Kete Kesu. Here are the Tongkonan houses nicely lined up in a row, and we are allowed to take a look inside one of the houses. Nobody lives in this one anymore, but we get an idea of the small interior. Opposite to the houses is a similar row of rice storage houses. They are built in the same style, but are smaller and have an extra platform between the ground and the storage. This is where the population meets to drink tea, play cards, and socialize.

Behind the village a path leads to the rock façade, where the graves are located. Climbing up, we see a large variety of graves. Complete houses, hanging graves, nicely decorated coffins, and decayed ones, full of bones and skulls. Halfway is a locked cave with Tau Tau. These are effigies diseased. Old dolls are rigid and simple, newer are created more to resemble the diseased. The cave is locked to prevent robbery.

Back at our homestay we decide to go into Rantepao for a meal. We are offered a ride by someone from the homestay. A special service, or does he get commission from the restaurant? Either way, we’re fine with it. In the restaurant we meet Kris and Paulien again, who made a detour before they came to Rantepao. We chat and they decide to join us the next day to the actual funeral.


Back to the Funeral Rites
The next morning, the bemo brings us all the way to the village. We are just in time to see the coffin being carried to the church, under loud cheering. The people are catholic, so a church ceremony is part of the rituals. We are offered tea and biscuits in the meantime. The bamboo huts are still there, but the guests and all the meat is gone. The 8 horns of the buffaloes are still lined up, and a proud men shows us which 3 he killed. After tea, we take a look at the church.

The church is small and packed. We stay outside and hear the singing through the open door. A girl is walking around the church with a incensory, and there are several people taking pictures. Taking pictures of the coffin is a sign that the deceased is still part of the community, so we are also encouraged to take pictures. After the mass there is a complete session in which different groups are photographed with the coffin.


Procession
And then the coffin is carried in a procession to the burial site. Again, there is loud cheering and the many carriers stop regularly to jump up and down with the coffin. The coffin is also pushed to all sides, under loud laughter and cheering. It is all meant to scare away the bad ghosts and spirits. Eventually the coffin is pushed and pulled into the verge and uphill through the bush to a rocky cliff. Suddenly, on an open space, the coffin is put on the ground and several women are diving on top of it crying load. Apparently, this is the last goodbye and it seems as if actresses are hired to change the joy into grief. One of the women even faints from the emotion.

We follow the men to the rocky cliff. A long bamboo ladder is put against the rock façade and one of the graves cut into the rocks is made open. There is not much space down below, so we move as far to the side as we can, so we are in nobodies way. Kris is asked to climb the ladder and look into the grave. He reports that it’s full of coffins already, and that there is not much room to add one.


Grave pushing
After a while the coffin arrives. With 3 men it is pulled up the ladder and pushed into the grave. Put that is not easy, one man climbs into the grave first to make room, while the others push. It takes half an hour before both man and coffin are in the grave. It is amazing to see how the man crawls through the coffins to get out of the grave, but when he is out, the grave can finally be closed.

When we descend, people are eating in the open space. Here, a pig was killed this morning and traditionally prepared in bamboo. It needs to be eaten on the spot, and cannot be brought back to the village. We are offered some, but kindly decline and say goodbye to return to Rantepao.


Tau Tau skybox
Our last day in Tana Toraja we take the bemo and a long walk to the village of Londa. Here are rock graves as well, guarded by a skybox of Tau Tau. We are allowed to take a look into the caves, where many coffins are piled up in every corner. There are also many skulls and skeletons. One of the skulls still has hair, which is a scary sight. But there is no stench, which we would expect.

In Tana Toraja there is a difference in the classes. As mentioned before, the size of the funeral depends on the importance of the deceased. But there is also a division into a lower, middle and noble classes. People from the lower class are put in the caves. The middle class people get separate places, often as a hanging grave. And the noble class people get a grave high in the rocks, which we can see from a viewpoint. And those noble class people are the only ones for which Tau Tau are made.

Londa is a village where a lot of Tau Tau dolls are made. There are some souvenir stalls here, where they are offered for sale. We look around, but are not keen to buy one. Instead, we buy a cup of tea which we drink together with the family.

Back in Rantepao we have lunch at a fancy restaurant along the river. We have a mighty view on a few buffaloes swimming and being washed in the river, and an eagle circling above. The food is a bit more expensive, but still cheap. And there are little or no other tourists here either.


Riots
In the evening we eat in town with Kris and Paulien. Around 10 PM suddenly the jeep of our homestay arrives to pick us up. It appears that there are some riots on the road to the homestay. When we pass, we see two groups of youngsters with rocks in their hands. It doesn’t look like a serious fight, but still.

Tana Toraja left a huge impression on us. Despite advancing modernisation people hang on to their traditions here, especially the funeral rites. We were lucky especially to see the roch funeral, although we think all guides tell their clients they were lucky to attend a funeral. Yet, we hear from some others that they needed to wait half a week for a ceremony. Anyway, the funeral rites at Tana Toraja were an amazing experience.

Follow our World Journey!! Next Stop: Central Sulawesi

Read More...... by, Return from Tana Toraja to Southeast Asia
Return from Tana Toraja to Adventure Travel Tales and Tips


From Makassar we move on to Rantepao, in the mountains of Tana Toraja. This is the area of the Toraja people, known for their funeral rituals and typical houses. Although they are converted to Christianity, their traditional animist beliefs are still part of everyday life.


To Rantepao
The first part of bus drive to Rantepao is in flat terrain, along the coast heading north. The views are nice, with simple yet typical malay houses in the rice fields with mountains in the backdrop. After the harbor city of Pare Pare, we move up into the mountains. This means heavy winding roads, roaring engines going up, and squeaking breakes going down. Sabine takes a pill against car sickness, which makes her very sleepy. After a while the first Tongkonan houses appear, and at the end of the afternoon we arrive in Rantepao.

Rantepao is a town grown out of proportions because of tourism. We decide to stay just outside the town, and are dropped off at Sella’s homestay. We are hardly checked in when a lot of information is poured over us, from someone who appears to be a guide. He tells us we are lucky, there is a funeral tomorrow in a village nearby, and we can take a look there. Although we assume there is a funeral somewhere every day, we decide to book the trip with him.


Tongkonan houses
We agreed to meet our guide in the city, where we first stop at a supermarket to buy cigarettes and other gifts for the family we will visit. Then we take a bemo, which brings us as far as the paved road goes. After that, it’s still a long walk to the village. Underway we admire the typical Tongkonan houses. They have a huge roof shaped like either buffalo horns or a boat, the experts aren’t sure which they represent. We also see a few megaliths, large upright stones into which a face is cut. And all in a landscape of rice fields and mountains.

When we nearly arrive we pass a few men carrying pieces of meat in between them. According to our guide, they come from the funeral. Every guest gets some of the meat from the sacrificed and slaughtered buffaloes.


Funeral rites
A funeral in Tana Toraja takes several days, depending on the importance of the deceased. The first day(s) is for the killing of the buffaloes. The more important the deceased, the more buffaloes are killed. The next day(s), the guests arrive. They often bring along pigs, who are also slaughtered. The last day, finally, is the actual funeral. At the funeral we are visiting, the killing of the buffaloes is on the same day as the arrival of the guests. This is not because of the importance of the deceased (8 buffaloes are killed, so he was important), but because of the guests from Irian Jaya, who have to return after a few days.

We are welcomed by the family in one of the specially made bamboo huts. Outside, on the compound, we can see a dead buffalo, skinned but otherwise intact. While we are offered tea and biscuits, we hear a lot of chopping noises outside, and we wonder what is going on. But a little later, we can see for ourselves. On a bed of leaves the dead buffaloes are slaughtered and divided into huge piles of meat. The chest and other parts are chopped with an axe, which was the sound we heard. Five men are working on it all day, and the rest is watching.

Then we are taken to take a look in the open air kitchen. Here the women are busy preparing food and drinks for the guests. We also get some rice, pork and hot peppers to eat. Meanwhile children are running around, some of them with a buffalo hoof they obtained from the slaughtering men. As a new group of guests arrive, the women line up to deliver food and drinks to them.


Pigs
The new guests are received in a central bamboo hut. The pigs they brought are lying next to it. After a while, when they finished their drinks and meal, the people are moved to one of the other bamboo huts on the terrain. The pigs are then transported to a small field behind the huts. And we can take a look there to see how they are slaughtered as well, nice….

The pigs are killed by a stab in the heart with a dagger, while a man holds them with his foot. After a scream, the pig shudders for a moment until it passes out. Immediately, the animal is cut open to remove the stomach and guts. Then the hair is burned off above a fire. Finally, the pig is cut into pieces and divided.

After this ritual we head back to the bamboo hut of the family. We pass the compounds, where the buffalo heads are staring at us, the bodies get thinner and the piles of meat higher. Not a pleasant sight, so we go quickly back inside, where we are offered a drink and some food. The palm wine tastes bad, however, and we don’t empty our glass. Later we learn from our guide that he needed to apologize for that.

On our walk back to the bemo, our guide leads us into the ricefields. Nice, but he doesn’t know the route, and we end up in the mud. We use some bamboo sticks to prevent being sucked into it. But the views are great and it’s nice to pass the harvesting people and the children playing in the water.


Kete Kesu
When we reach the paved road it doesn’t take long before a bemo picks us up, in order to drop us off at the traditional village of Kete Kesu. Here are the Tongkonan houses nicely lined up in a row, and we are allowed to take a look inside one of the houses. Nobody lives in this one anymore, but we get an idea of the small interior. Opposite to the houses is a similar row of rice storage houses. They are built in the same style, but are smaller and have an extra platform between the ground and the storage. This is where the population meets to drink tea, play cards, and socialize.

Behind the village a path leads to the rock façade, where the graves are located. Climbing up, we see a large variety of graves. Complete houses, hanging graves, nicely decorated coffins, and decayed ones, full of bones and skulls. Halfway is a locked cave with Tau Tau. These are effigies diseased. Old dolls are rigid and simple, newer are created more to resemble the diseased. The cave is locked to prevent robbery.

Back at our homestay we decide to go into Rantepao for a meal. We are offered a ride by someone from the homestay. A special service, or does he get commission from the restaurant? Either way, we’re fine with it. In the restaurant we meet Kris and Paulien again, who made a detour before they came to Rantepao. We chat and they decide to join us the next day to the actual funeral.


Back to the Funeral Rites
The next morning, the bemo brings us all the way to the village. We are just in time to see the coffin being carried to the church, under loud cheering. The people are catholic, so a church ceremony is part of the rituals. We are offered tea and biscuits in the meantime. The bamboo huts are still there, but the guests and all the meat is gone. The 8 horns of the buffaloes are still lined up, and a proud men shows us which 3 he killed. After tea, we take a look at the church.

The church is small and packed. We stay outside and hear the singing through the open door. A girl is walking around the church with a incensory, and there are several people taking pictures. Taking pictures of the coffin is a sign that the deceased is still part of the community, so we are also encouraged to take pictures. After the mass there is a complete session in which different groups are photographed with the coffin.


Procession
And then the coffin is carried in a procession to the burial site. Again, there is loud cheering and the many carriers stop regularly to jump up and down with the coffin. The coffin is also pushed to all sides, under loud laughter and cheering. It is all meant to scare away the bad ghosts and spirits. Eventually the coffin is pushed and pulled into the verge and uphill through the bush to a rocky cliff. Suddenly, on an open space, the coffin is put on the ground and several women are diving on top of it crying load. Apparently, this is the last goodbye and it seems as if actresses are hired to change the joy into grief. One of the women even faints from the emotion.

We follow the men to the rocky cliff. A long bamboo ladder is put against the rock façade and one of the graves cut into the rocks is made open. There is not much space down below, so we move as far to the side as we can, so we are in nobodies way. Kris is asked to climb the ladder and look into the grave. He reports that it’s full of coffins already, and that there is not much room to add one.


Grave pushing
After a while the coffin arrives. With 3 men it is pulled up the ladder and pushed into the grave. Put that is not easy, one man climbs into the grave first to make room, while the others push. It takes half an hour before both man and coffin are in the grave. It is amazing to see how the man crawls through the coffins to get out of the grave, but when he is out, the grave can finally be closed.

When we descend, people are eating in the open space. Here, a pig was killed this morning and traditionally prepared in bamboo. It needs to be eaten on the spot, and cannot be brought back to the village. We are offered some, but kindly decline and say goodbye to return to Rantepao.


Tau Tau skybox
Our last day in Tana Toraja we take the bemo and a long walk to the village of Londa. Here are rock graves as well, guarded by a skybox of Tau Tau. We are allowed to take a look into the caves, where many coffins are piled up in every corner. There are also many skulls and skeletons. One of the skulls still has hair, which is a scary sight. But there is no stench, which we would expect.

In Tana Toraja there is a difference in the classes. As mentioned before, the size of the funeral depends on the importance of the deceased. But there is also a division into a lower, middle and noble classes. People from the lower class are put in the caves. The middle class people get separate places, often as a hanging grave. And the noble class people get a grave high in the rocks, which we can see from a viewpoint. And those noble class people are the only ones for which Tau Tau are made.

Londa is a village where a lot of Tau Tau dolls are made. There are some souvenir stalls here, where they are offered for sale. We look around, but are not keen to buy one. Instead, we buy a cup of tea which we drink together with the family.

Back in Rantepao we have lunch at a fancy restaurant along the river. We have a mighty view on a few buffaloes swimming and being washed in the river, and an eagle circling above. The food is a bit more expensive, but still cheap. And there are little or no other tourists here either.


Riots
In the evening we eat in town with Kris and Paulien. Around 10 PM suddenly the jeep of our homestay arrives to pick us up. It appears that there are some riots on the road to the homestay. When we pass, we see two groups of youngsters with rocks in their hands. It doesn’t look like a serious fight, but still.

Tana Toraja left a huge impression on us. Despite advancing modernisation people hang on to their traditions here, especially the funeral rites. We were lucky especially to see the roch funeral, although we think all guides tell their clients they were lucky to attend a funeral. Yet, we hear from some others that they needed to wait half a week for a ceremony. Anyway, the funeral rites at Tana Toraja were an amazing experience.

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