Tuesday January 21, 2020
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Tax Policy Changes to Allow for Freeing Up Cash-Flows that Companies can Utilise

A perspicuous manner of looking at the expenditure-revenue play would be to look at the cash flowing into the economy

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Finance, Ministers, Corporate
Essentially, the tax policy changes will allow for freeing up cash-flows that companies can utilise to make capital allocation decisions ranging from capital expenditure, talent acquisition. IANS

The Finance Ministers announcement to bring down corporate tax rates in India will surely provide a substantial boost to the economy. Essentially, the tax policy changes will allow for freeing up cash-flows that companies can utilise to make capital allocation decisions ranging from capital expenditure, talent acquisition, or strengthening the balance sheets.

A perspicuous manner of looking at the expenditure-revenue play would be to look at the cash flowing into the economy due to the policy changes. The taxation policy changes that allow for lower corporate taxes will allow more cash in hand for corporates. It is expected that additional cash in the hands of the companies will allow for a slew of opportunities to be tapped into by the corporate sector. Most importantly, the fiscal boost will benefit the industry supply chains as the excess cash will boost corporates and their suppliers, thereby having a positive ripple effect.

Firstly, for cash-strapped corporates, this is an opportunity to get their capital structure in order. In an economy where companies have faced issues with excessive debt, this is an opportunity for the cash to be utilised to pare back debt and repay lenders thereby both improving corporate balance sheets and pumping credit into the system. Secondly, excess liquidity that will be available will allow Indian companies to gradually start competing better on a global level through capital expenditure in areas they deem necessary. Thirdly, cash in hand also makes Indian companies a more attractive destination for both domestic and international capital (which of late has been going out).

Whichever way one looks at the tax changes, the excess money will help whether corporates decide to invest the money, pay back loans, buyback debt, pay shareholders, or boost salaries. Primarily, the cash flow positive nature of the policy changes by the government will provide a significant fillip to economic growth. More importantly, if the policy implementation is done well, then the positive multipliers for the economy will be much beyond this financial year. Structurally, low tax rates can have significant positive multiplier effects in the years to come.

Finance, Ministers, Corporate
The Finance Ministers announcement to bring down corporate tax rates in India will surely provide a substantial boost to the economy. Pixabay

Now with robust tax policy moves to boost the economy through “expenditure”, the government must focus extensively on the “revenue” generation side. As with all policy changes, especially expansionary fiscal policy, there is now the need to generate the excess cash by the government that will be ploughed back into the economy. In layman terms, how can the government generate more money despite the substantial cut in tax rates that will be effectively used for boosting the economy?

Therefore, now is the time also to start focusing on effective “revenue” generation to fund the expansionary fiscal policy. The revenue foregone to fund the corporate tax cuts, as stated by the government, is Rs 1,45,000 crore. More effective revenue generation policies are therefore the need of the hour. Non-tax revenue sources such as asset monetisations must be focused upon to ensure a steady flow of cash that can help finance the revenue foregone.

While asset monetisation from the government saw some action in terms of the NHAI TOT auctions last year, given the moves on the “expenditure” side, this is the time to ensure that the “revenue” generation side picks up in speed, efficiency and clarity. Monetising assets ranging from land banks sitting with government institutions, cash-generating infrastructure assets, and inefficient companies has been debated upon for long. Now is the time to implement a clear roadmap to generating revenues through such monetisation schemes. Because the advantages of such non-tax revenue generation schemes are multi-fold, for one, such schemes will assist in providing revenues that are needed to fund fiscal policy. For the other, markets and investors will have greater confidence seeing a smoothening in the policy frameworks that help cash to flow into productive uses within the economy � thereby generating greater investor confidence in Indian investments.

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The issues that corporate balance sheets and the broader Indian economy have faced over the last few years at a core level are cash-flow related, or rather a shortage in liquidity. Policy moves such as the present cut of tax rates for the corporate world, aimed at freeing up cash-flows on corporate balance sheets, and policies aimed at effectively generating the cash-flows as mentioned above will provide a significant boost to the Indian economy. Going forward, the ability to balance the effective policy framing and implementation on both the “expenditure” and “revenue” side will be the real gamechanger. (IANS)

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Ways to Make Money in the Stock Market

Adopt a suitable trading strategy to earn more money in the stock market

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Stock Market
Know about how to make profit in the stock market. Pixabay

Individuals who want to earn money in the stock market have plenty of choices to make. In addition to picking and choosing specific securities to trade, they first need to select a general trading strategy. Too many enthusiastic people jump into the market without a plan of attack, which can mean financial suicide.

The smart thing is to decide on an approach that makes sense for your level of risk tolerance, your financial resources and the amount of time you can give to the pursuit. Day traders, for example, often make the market their career, devoting every weekday morning and afternoon to the pursuit of profit. For the grand majority of us, however, other methods make more sense.

Peruse the list below and decide which one is the best fit for your personality, budget and schedule:

Long-Term Trading

Whether you have a little or a lot of money to invest, the long-term strategy can be a good fit for anyone. More than half of all people who buy and sell stocks online fall into this category. The beauty of working this way is that you can choose stocks that move slowly and build value over the long-haul. As long as you are patient and not worried about making a kill, this approach makes sense. Those who have self-directed retirement accounts often spend just a few hours each year re-balancing their portfolios. The drop shares that haven’t moved at all, add one or two new companies to the mix and leave it at that, until next year’s readjustment.

Stock market
In order to make more money in the stock market, individuals need to adopt a suitable trading strategy. Pixabay

Day Trading

If you have a strong stomach, at least $25,000 to put into a brokerage account and a lot of time on your hands, day trading could be your calling. Be ready for a few months of training, many sessions on a simulated platform and about a year of ramping up to full-time activity. Day traders usually hold no positions overnight but take their profits by scalping small price changes on large buys. If XYZ company, for example, is selling for $89.50 per share and suddenly goes up to $89.60, a day trader might buy 100 shares if the market indicates that the price will continue to rise to $90. That would mean a profit of $40 in the span of a few minutes, but 100 shares would cost close to $9,000.

Specializing in One or Two Securities

It’s becoming more common to specialize in just one or two companies. A big advantage to this style is the knowledge that comes with specialization. If you decide to only buy and sell shares of Microsoft and Walmart, for example, you’ll be pretty adept at spotting price changes before they occur.

Also Read- Traders Protest Government Collusion with Amazon, Flipkart: Report

Profiting from Precious Metal Stocks

Even people who are not keen on Wall Street in general often trade stocks based on the precious metals. This group includes companies that operate in the mining industry, which is a sector unto itself. Additionally, metals enthusiasts can buy and sell exchange traded funds (ETFs) that hold massive amounts of bullion. Silver and gold traders have been using ETFs and mining stocks to play the market for decades.