matthew roddan

Matthew Roddan on the DIFC

DIFC ~ What it Means for PPP? By Matthew Roddan

DIFC

DIFC stands for Dubai International Financial Centre, a financial free zone established by the UAE. The late Sheikh Zayed wanted to diversify revenue avenues for UAE and move beyond oil and improve the country’s economy. Dubai has the lowest oil reserves across UAE and was picked as the headquarters for the plan. Now, only 6% of Dubai’s income comes from oil and gas. Back in 2012 Dubai’s GDP hit US$140 billion and catalyst that shot up the revenue was establishing economic free zones and offering state of the art infrastructure and a business-friendly atmosphere that attracts foreign investments in large numbers.

 

According to Matthew Roddan, the development was rapid once commercial banking was commenced in Dubai. In fact the 2015 Dubai Strategic Plan includes Financial Services as the key aspect of Dubai’s future and growth. While this sector is undoubtedly a fast growing sector globally, Dubai has been ranked average when to compared to international standards in this sector. Dubai ranks among the top few financial centers considered stable, globally. While UAE is considered as a volatile region, it has not dented the reputation of Dubai, which is still strong in spite of a real estate collapse in UAE few months back. Do you know PPPs are encouraged in Dubai?

 

PPPs have been discussed and debated in and around Dubai, with many projects even rolling out generating funds through PPP. With oil prices slumping, PPPs have gained popularity in Dubai, though there are other reasons for failed popularity of PPP in other Middle East regions. It is important to understand that Dubai is a different entity with a different government and legal system, and the government is interested in mobilizing funds through PPP. While there hasn’t been any major PPP development, the newly enacted law encouraging and regulating PPP is expected to be a game changer says Matthew Roddan of Project Ninety Nine. The law defines PPP clearly and lists the features that should be included to ensure quality, income or other advantages.

 

Up until now, the only hurdle in running PPP in Dubai was related to Procurement Law and the new law has ensured the former law can’t be applied and offering a clear and broad scope for PPP. Unlike other Middle Eastern Countries, Dubai PPP law is liberal and promotes PPP projects. For those looking for suitable and regulated PPP options, this is surely good news and an improvement says Matthew Roddan of Project Ninety Nine.

 

Leverage by Matthew Roddan

What You Must Know About Leverage by Matthew Roddan

 

According to Matthew Roddan of Project Ninenty Nine, there are different types of leverage and understanding it is very important for an investor and entrepreneur.

 

Financial leverage is the level a company is ready to use its fixed-income securities like preferred equity and debt. The higher the debt financing a company deploys, the higher the financial leverage, which also means more interest payment that could affect a company’s profits negatively.

 

Leverage is often deployed in trading of financial instruments and for purchasing of assets in real estate. As for a business, leverage is when a firm borrows funds for buying company’s assets for improving returns. On the other hand, investors who invest in a business wouldn’t opt for leveraging beyond a certain point, as it can hike a firm’s default risk.

 

When a companies break-even analysis is done two costs are taken into account – variable and fixed costs. Operational leverage is the fixed cost percentage a firm has, or the ratio of fixed to variable costs. When a firm has more fixed costs than variable costs, the operating leverage is high. This means, these firms are capital intensive.

 

Examples are automobile firms and even if the sales plunge, they would still have to shell out the fixed costs, which can hurt a firm when there’s an economic slowdown. On the other hand, if the firm’s labor or other costs are higher, the costs would be equivalent to the work done and it is called labor-intensive firm. A good example would be mining or service industry. Firms with high operating leverage would be influenced by miniscule changes in sales and it could affect their profits real quick.

 

So, for a business, financial leverage is the debt in capital structure and financial leverage deals with financing of the operational leverage. In a balance sheet, the financial leverage is the right-hand side and operational leverage is the left-hand side. As explained earlier, financial leverage can improve the return on equity and income per share for a firm, without reducing an owner’s income. However, more than required financial leverage could lead to bankruptcy or defaults. Debt/equity ratio helps determine a firm’s financial leverage, says Matthew Roddan of Project Ninety Nine.

 

Total or combined leverage is the amount of risk a business firm faces. In other words, it is the total leverage amount that could be used to improve a firm’s returns. Operating leverage improves the ROI for fixed assets and machinery, whereas, financial leverage improves the ROI on debt financing and when both are combined, it is combined leverage and the resulting profit maximization for a firm in entirety.

 

Understanding these key concepts is important for an investor or sponsor to pick and choose the right businesses for investment.

Money by Matthew Roddan

Money ~ An Introduction

 

by Matthew Roddan

 

Money is a verifiable record or item that is usually accepted services, goods or debt repayment in a specific country or socio-economic setting and can be converted into such form easily. The main purposes of money are as an accounting unit, exchange medium, store of value, or even as a mode of deferred payment. In other words, a tangible record or item that can meet these requirements is money.

 

Currency or money supply of any country is usually coins and banknotes and varies with the definition deployed, includes various types of bank money (account balance in savings, checking or other accounts) and is typically a compilation of digital records and is a major share of money worldwide. Though there’s no clear origin details for the word “money” it is assumed to have evolved from the Roman word “Juno” that stands for “unit or “Moneta” a Latin word that means “instruct”, “warn” or “remind” or Greek word “moneres” that means “unique” or “alone”.

 

According to William Stanley Jevons, money can be defined in terms of purpose, as a measure of value, as a medium of exchange, store of value or a standard of value in Money and the Mechanism of Exchange. This definition was widely used in Economics and financial experts often stick with this definition. Since “store of value” function contradicts with “medium of exchange” function, “financial capital” a broader term is used in financial sectors.

 

Financial capital is very important for any business or investment, says Matthew Roddan of Project Ninety Nine. Now, monetary systems rely on fiat money, where the governments decide the value of currency notes or coins. Earlier, money was commodity money like silver and gold coins. It became difficult to transport and fiat currencies became popular. There were other types of money including bank notes, though fiat currency remains sought after. With everything going digital, why should be money be left out? Digital currencies are the current trend where cryptocurrencies rule the roost. Bitcoin is one example of cryptocurrency and their future though looks ambiguous, digital coins would trump any day, owing to digitization in every walk of life.

 

by Matthew Roddan

Matthew Roddan – Leveraging

Leverage ~ An Introduction

 

Leverage is a technique that’s deployed to multiply one’s losses or profits, typically through buying assets using borrowed funds hoping for more income through asset appreciation, which would eventually trump the interest borrowing entails. However, there could be a risk of borrowing cost trumping the income that asset appreciation could generate, which means the losses would multiply further. Leverage can multiply the profits when the asset bought through borrowing is sold and the returns exceed the costs, though when it goes the other way round, it could multiply the losses. Originally called levering, it is now known as “leveraging” by finance experts. “Leverage” is quite tricky to understand and confusion is partly because of the broad-spectrum use for the word.

 

Let us understand this in more practical terms with an example. As Matthew Roddan would put it, understanding the nuances of investment and financing is important in the realm of business. That’s one reason why Project Ninety Nine offers a platform to share and discuss the nuances of investing and business. Mortgaging a home is a common scenario. When homeowners mortgage their homes to deal with a financial crisis and keep up the repayments until they’re able to flip it for profits, or redeem themselves from their issues, it is called leveraging.

 

Not many of us want to get into more debt to come out of a problem, but leveraging is all about taking a calculated risk. Generally, the borrowing and buying of asset is done during a downtime, and the selling of the asset obtained through leveraging is sold when the market is good for a profit. This is done quite often and there are times when it could go wrong, like during the recent economic depression. However, the key to succeed with leverage is making practical assumptions and understanding the risks involved, while making key decisions.

 

Leverage is not a new concept and has been around for a while, which can be vouched by numerous businesses and individuals who have taken this route. Leveraging usually works when done right and is backed by thorough analysis of possibilities. Investments also work likewise, a reason why investors always ask for a business proposal and financial statement. It is important to understand that businesses are calculated risks and investors often lend or investors after analyzing the possibilities – leveraging profits or managing losses. Understanding the risks involved in investing, Project Ninety Nine started by Matthew Roddan intends to give a platform where investors can discuss, strategize, plan and share knowledge. This way, profitable ventures could be identified, potential entrepreneurs identified and groomed, etc. In short, leveraging is an investment strategy that can propel one’s finances or doom them further, depending on how it is done!

Matthew Roddan – Project Funding – An introduction

Matthew Roddan writes

Project Funding ~ An Introduction by Matthew Roddan

matthew roddan

Project funding is financing projects based on projections and a business proposal. In other words, these are more like non-recourse loans, based on projections for a project and repaid in the form of profits from the business. Money is raised from investor(s) or sponsor(s) and they’re promised control of the company in case the business doesn’t turn out as projected or expected.

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