Merchant banks are one of the two types of investment banks like CL King and Associates. Merchant banking is quiet important in today's world. With Governments continually changing and modifying rules and regulations and imposing statutory obligations on companies, merchant banks help business units by keeping them up-to-date with the various changes and also advising them on various financial decisions, in addition to providing insight on managerial decisions. These merchant banking services help corporate companies, especially small and medium size companies, with various decisions to help them make the best use of surplus funds to meet both short-term and long-term obligations. This includes helping companies and business units invest in the best available instruments that will give the best returns.
Merchant banks have crucial roles to play. They help companies in a number of ways. Every company needs to make the most of the funds it has, so merchant banking services help the company use its funds to make these funds grow. This can include everything from investing the funds of the company in the stock market and managing these funds to deciding when to sell the funds and book profits. These services will also advise larger companies on whether they should raise finance by issuing shares, when to issue shares, how many shares to issue and what price the shares should be issued at. The merchant banker will also give a company advice on expansion and modernization. It decide whether a company should expand and the possible expansion options. This could be mergers, takeovers, amalgamations, acquisitions, joint ventures or various business diversification activities. The bank will help a company with all the formalities and procedures involved in carrying these possible options through to their completion. Other merchant banking services include helping smaller business units. It will help units raise capital and guide them on how and where to raise the capital. It may also take on the entire investment portfolio management of the company. It is important for companies to have a specialist to do this so the management of the company can concentrate on running the day-to-day activities. The merchant bank will take the entire onus of maximizing the profitability of a company and devising various strategies to help grow the financial portfolio of the company. It helps to have a dedicated professional to take care of the investment portfolio management of the company. In fact, it will also help sick or bleeding companies get back on track by providing advice on how to improve their financial position and what can be done to turn losses into profits. So, as you can see, the merchant bankers really have their jobs cut out for them. In a fast paced world like today, it is not only an advantage but a necessity for any company, big or small, to have a professional take care of its investment portfolio management with investment banks such as CL King and Associates.
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Financial investments are measured through metrics for investment banking performance. This is a way of gagging if a financial undertaking is worth the risk and the effort. There is no point of providing inputs if the output is not satisfactory and if it does not meet certain specifications of what needs to be achieved.
Depending on the investment, there are several Key Performance Indicators that one may look at before arriving to a conclusion whether the financial investment is earning or losing money. One of these things is the return of investment of ROI. To compute this, the total amount of investment should be subtracted from the incremental earnings or profits. The difference will then be divided by the investment to get the percentage. To be more accurate in the calculation, data analysis must also be used. Numbers that will show sales, outgoing funds, expenses, and such will give an analyst a clearer view on whether there is substantial return on investment or not. Another metric used is the years the investment was active. This will help individuals or businesses know what return they want to calculate. It is not wise to make judgment for the feasibility of an investment if it was just active for one month. Therefore, there should be a substantial amount of data to be studied. The ideal number of data points to be compared or used in an analysis is 20 data points. This means that the results of an investment should be measure for a minimum of 20 weeks, or 20 months, or even 20 years. Only then will an analyst see the causal effects of actions taken and how these things can be corrected in an objective way. Always take note that measuring the financial performance of a company should be data driven. Just because the company did not earn does not mean it should be closed. Action plans and decisions should never be based on assumptions. All of them should be backed up by numbers and data since numbers do not lie. With this, people will not be fired or blamed because of poor logic and unwarranted assumptions and politically motivated intentions. Another performance indicator of an investment is yield. The yield should be calculated in percentage and this will show an investor how much his investment has made in profit. If the investor has a certain target in mind, what he has to do is to divide target by the yield percentage, to find out how much he needs to add to his investment. For example, an investor has $1,000,000 in investment to the bank and he wants to measure its performance. After a month, he received a profit of $100,000. His yield percentage is 10%. If his target profit is $150,000, this means he is short of $50,000. To determine how much investment should be added, he should divide by $150,000 by 10. The result is $150,000. This means he has to invest $150,000 to get the profit he wants, in order to get a substantial result of his metrics for investment banking performance. CL King and Associates is a full-service investment bank and self-clearing broker-dealer founded in 1972. The company has worked as a Co-Manager for Bond Offering, Subordinated Notes Offering, Notes Offering and many more for the reputed firms such as Citigroup, Walmart, AT&T’s etc. Also read: The Two Sides to Investment Banking You have heard the term "investment bank". These banks are vilified for their role in the financial crisis and criticized for the profits they reap and the large compensation packages for their employees. But many people have no idea what they are or what they do. Let's take a look at the role i-banks like CL King and Associates play in the financial services industry and the economy at large. First of all, investment banks are very different than the commercial banks we are all familiar with. They do not take deposits like the retail bank on the corner. Instead, they primarily assist in the buying, selling and issuing of securities - that is stocks, bonds and similar financial instruments. They assist companies and institutions on "buy side" and "sell side" activities. The buy side refers to the advising of institutions concerned with buying assets and securities. Entities that engage in buy side activities include private equity funds, mutual funds, hedge funds, pension funds and proprietary trading desks. The sell side refers to a broad range of activities, including broking and dealing securities, investment banking, advisory functions and investment research. The core functions of an investment bank include investment banking - otherwise known as corporate finance - sales and trading and research. Some larger investment banks like CL King and Associates also perform other services like investment management or merchant banking, but let's take a closer look at the core three. Investment Banking (Corporate Finance) Investment banking can be a confusing term because many people use it to refer to any activities performed by an investment bank. More specifically, though, investment banking refers to assisting companies with raising capital and giving advice on mergers and acquisitions. The corporate finance department of a bank is the group that works with a company to put together an initial public offering (IPO). Or, if a company already has public stock outstanding, they might put together a follow-on offering, which is simply an additional issuance of stock shares. The corporate finance department can also help companies raise capital through private placements, which often involve securing capital from private equity groups. Should the ownership of a company seek to sell the entire enterprise, the corporate finance department can also advice on M&A transactions. They can help identify potential buyers and negotiate a sale of the entire company. Likewise, if a company is in the market for acquiring other enterprises, this group can advise on acquisitions. Another service that the corporate finance department might offer is the delivery of fairness opinions. In a fairness opinion, an investment bank will perform an analysis of a potential acquisition and render an opinion as to whether a reasonable price is being offered for the target company. Sales and Trading Sales and trading is perhaps the primary service that an i-bank can offer. There are often two major divisions within sales and trading - institutional and retail. The institutional division buys and sells financial products for institutional clients such as mutual funds, pension funds, etc. The retail division buys and sells financial products for retail investors. Stock brokers fall into this area. The sales and trading department engages in market making. Market making involves buying and selling financial instruments in order to make an incremental profit on each trade. Sales and trading can also engage in proprietary trading. Proprietary trading involves a special group of traders who do not work with clients. These traders take on "principal risk", which involves buying or selling a product and does not hedge his total exposure. By managing the amount of risk on its balance sheet, an investment bank can maximize its profitability. The sales and trading department also interacts with the corporate finance department on the issuance of IPOs and follow-on offerings. It is the sales and trading department that builds a book for a particular stock by calling up institutional and retail investors to judge the interest for the offering. They then price the initial sales value on the day of the offering and begin selling the new shares to their clients. Depending on the size of an offering or the desired mix of investors for the offering, several investment banks may be involved in issuing shares to the public. This group of banks constitute the syndicate and are responsible for selling the shares involved in the offering. Research The research department is staffed by research analysts. These are the people who often appear on business news programs and talk about the performance of a particular company or stock. The role of the research department is to analyze companies and writes research reports that discuss their performance potential. These reports often include a "buy" or "sell" recommendation. The research department on its own does not generate a lot of income. What it does do is influence trading volume, which results in more fees for sales and trading. When a research analyst changes his or her recommendation on a stock, many investors will then act on that recommendation and the sales and trading team earns more in trading fees. There exists, however, a conflict of interest between research and other parts on the investment bank. If an investment bank were about to issue new shares of stock for a company, for example, the research analyst could put out a strong recommendation for the stock just prior to the offering, and the bank could get a better price and potential earn more fees. Likewise, if the proprietary trading division wanted to boost the return on their holdings, they could have research analysts recommend some of the stock they held as a buy. There are a number of areas where the research department could be used to mislead investors and earn more profit for the investment bank. To circumvent these conflicts of interests, regulators have insisted that investment banks implement a "Chinese wall" in their firms. The Chinese wall keeps information about the investment bank's corporate finance and sales and trading activities from passing through to the research department. A Chinese wall also exists between the corporate finance and sales and trading divisions because many corporate finance activities involve non-public information that could be used to profitably execute trading strategies. A World without Investment Banks Without investment banks, companies would have a much more difficult time with raising capital. Likewise, the general public would have a hard time investing their money in anything other than a savings deposit. Without investment banks, only very large institutions or very wealthy individuals would be able to structure the same financial transactions that occur every day with an i-bank. In short, these banks drastically speed up the flow of capital throughout the economy and allow businesses - and our savings - to grow more quickly. As complicated as all these activities may seem, they only scratch the surface of all the intricacies of these banks. But the next time you hear that some investment bank advised on the sale of a company or generated several billing dollars in trading fees, at least you'll have an idea of what they're talking about. If you're still doubtful about how to proceed with your investment goals then contact at 518.447.8050. |
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