Terms Beginning With 'a'

Augmented Reality

  • November 12, 2020
  • Team Kalkine

What is Augmented Reality?

Augmented Reality (AR) is the technology that overlays digital information on any object in the real world to provide an improved experience to the user. The most common example of Augmented Reality is Snapchat, where the user can click a picture and apply objects like eyes, ears, and nose of puppy and many more.

Augmented Reality has the capability to present possibilities that other technologies cannot. In present times, AR applications can be seen across multiple industries all over the world.

AR fulfils three basic features. These comprise of a combination of real and virtual world, real-time interaction, and accurate 3D registration of real and virtual objects.

Image Source: © Kalkine Group 2020

Types of Augmented Reality:

  • Marker-based AR: Marker-based AR is sometimes also known as image recognition. This type uses a special virtual object and a camera that can scan the object. These objects could be something like a printed QR code. In this case, the AR device evaluates the position of the marker to position the content. Thus, giving it a 3D touch.
  • Markerless AR: Markerless AR or we can say it as a position-based AR that uses GPS, compass, accelerometer, and a gyroscope to provide data based on the location of the user. This AR is beneficial as it identifies what content would be there in any particular location.
  • Projection-based AR: Projection-based AR projects artificial light on the physical surfaces. In some scenario, this type of AR also helps the user to interact with the object.
  • Superimposition-based AR: Superimposition-based AR uses object recognition. The augmented image then gets replaced by the original image either partially or wholly. An example of this is the IKEA catalog app.

How Augmented Reality differs from Virtual Reality?

While AR is a blend of the digital world and the physical elements to create an artificial environment, Virtual Reality (VR) is a computer-generated simulation of an alternate world. VR creates simulations that are similar to the real world. Through VR, the user can experience any event or let us say scenery while actually not available in that location.

So, the key difference between AR and VR are:

  • AR enhances real-world scenes. On the other hand, VR creates an immersive virtual environment.
  • In Augmented Reality, 25% of the things are virtual, and 75% is real. On the other side, Virtual Reality 75% of the things are virtual and the remaining 25% real.
  • In VR there is a need for a headset which is not needed in AR.
  • In AR, the user can stay in touch with the real world and can interact with the virtual objects. On the contrary, in VR, the user gets isolated from the real world and enters into an entirely fictitious world.

How does AR work?

After understanding Augmented Reality, it would be interesting to know how it actually works.

Let us understand step by step about the way AR work.

  • In the first step, the computer vision understands the world around the user based on the content that is in-built in the camera. This enables the digital content which the user is looking at.
  • In the next step, the digital content is displayed in a realistic way, which gives digital content a look that it is a part of the real world.

An example of this is the Pokémon Go, which is a popular AR game. The game allows users to catch virtual Pokémon that is hidden across the map of the real world.

Why does AR need a computer vision?

We, as human beings, are efficient enough to recognize the image and accordingly categories them. However, it is not the case with computers. To make the computers understand the images or the surrounding environment, AR needs an understanding of the world in terms of semantics as well as 3D geometry. Semantics helps to identify the object and 3D geometry helps in discovering the way the object is facing. In the absence of 3D geometry, AR content cannot be displayed at the right place and angle. It is significant as 3D geometry enable the user to feel that the object is part of the real world.

How does AR display digital content?

To experience AR, there is a need for logic which is to be decided beforehand. It helps in identifying the particular digital content which would be triggered once the system recognized the surrounding. In the live AR system, once the camera recognizes the surrounding, the rendering module displays the appropriate content to the camera feed.

Augmented Reality Devices:

  • Mobile devices
  • Special AR Devices
  • AR glasses
  • AR contact lenses
  • Virtual Retinal Displays

Applications of AR:

AR has gained immense popularity of late and is being implement across sectors. Some of the real-world applications of AR are highlighted below:

  • Explaining an interactive model to students or employee attending training conducted by the business.
  • AR enables the broadcasters to understand any strategy on-field games like cricket by drawing lines of pattern for better understanding.
  • IKEA provides AR application to allow the user to understand how a piece of particular furniture would look at any location of the house.
  • Plays an essential role in the medical field. An example to explain this is that some neuro-surgeon use AR projection of 3D brain to support them during surgeries.

GOOD READ: Will Augmented Reality Bolster in 2020?        

What are GAFAM Stocks? GAFAM Stocks are perhaps the most famous and sought-after stocks of the last decade. The dominance of these companies during the 2010s in the stock market will be remembered in the books and adages.  It is the creation of market participants that develop acronyms like GAFAM, which include five large American companies having dominance across most jurisdictions. GAFAM stands for Google, Apple, Facebook, Amazon, and Microsoft.  Over time these companies have gained dominance in their primary business. In addition, GAFAM stocks have been aggressive in expansion and entering new verticals.  Although there have been considerable acquisitions along the way, the investments in research & development and innovation have been at the forefront of the capital expenditure plans.  Google Officially known as Alphabet Inc., ‘Google is not a conventional company’ is a statement made by its founders in their early letters. It has not been a conventional company, indeed. Google has developed significant networking within its products.  As a dominant search engine of the world, Alphabet reaps large revenue through advertisements through its flagship search engine and other products. Over the years, the company has been able to expand in other verticals such as mobile phone operating system – Android, web browser through Google Chrome.  Alphabet has two operating segments. Under Google, the company houses Search engine, YouTube, Search, Google Play, Google Maps, Android, Chrome, hardware, Google Cloud.  In other bets, the company includes businesses that are not material individually. These businesses include Calico, Verily, Waymo, CapitalG, GV, X and more. Almost all revenue of Alphabet is derived by Google segment.  In 2019, Alphabet recorded revenue of $162 billion, and around $161 billion was derived from Google segment. Operating income of the company was $34.2 billion, while net income of the company was $34.3 billion.  Read: Unboxing Revenue Growth Streak of Google and Microsoft Apple  Established in 1977, Apple Inc. is a consumer electronic company engaged in manufacturing of various consumer products. Apple mobile phones are renowned across the world, and it also makes personal computers, wearables, tablets, and accessories.  iPhone is the flagship mobile operates on an in-house developed iOS operating system. Mac is a brand for its personal computers that are also used extensively across the professional domain. iPad is a line of tablets, which run on iPadOS.  Apple also sells other wearables and accessories that include Apple Watch, Apple TV, Beats products, iPod Touch, Airpods. The core strength of the company has been its capability to innovate and launch products continuously.  iCloud is its cloud service, and data of its products can be stored in the cloud. As a consumer business, it markets are focused small individual customers that do not constitute a material portion of revenue individually.  In 2019, Apple recorded revenue of $260.2 billion. Its operating income for the period was $64 billion, while net income was $55.25 billion.  Facebook  Facebook Inc. was established as a social networking website and has grown tremendously due to its strong networking effects. It enables people to connect with each other or in groups. Facebook is used in mobile phones, personal computers, handsets etc. It has been a great place to share opinion, ideas, videos and photos. With its large user base, Facebook and its products are used for advertisements. The traditional modes of advertisements have lost significant market share to companies like Facebook.  Instagram is also a part of Facebook. It is used by people across the world to share photos and videos. It also offers a similar type of services like Facebook and has emerged as a networking platform for digital creators and influencers.  WhatsApp is a messaging mobile phone application. It allows people to connect privately and is extensively used by people. Messenger is another application by Facebook that enables people to connect with family, friends, groups and businesses.  Oculus is the hardware business of Facebook that helps to connect people through its virtual reality products. A major portion of revenue is generated by marketing and advertisement through its products that are used by large scale potential consumers.  Watch: Facebook launching 'Shops' on its social Media Platform | Market Update Amazon Amazon.com, Inc. was established as e-commerce in 1994. The company serves consumers, sellers, developers, enterprises, and content creators. Amazon also provides advertising services to publishers, sellers, vendors, publishers, and authors.  It serves consumers through its online and physical stores. Amazon offers a range of categories and is has a strong online retail presence. It has been engaged in manufacturing consumer electronics such as Kindle, Fire TV, Fire Echo, Alexa, Ring etc.  Amazon Prime is a membership of the company that provides shopping benefits, streaming of entertainment content, including movies, original content. It intends to provide customers with low prices and home delivery of goods.  It also enables sellers to access Amazon marketplace, which includes stores and online website. Amazon earns through a percentage of sales, fixed fee, combinations etc. Amazon Web Services offers cloud service to a range of public and private enterprises to store data.  Kindle allows content creators to publish and sell content/books on Kindle and earn a royalty on sales. In 2019, the company recorded net sales of $280.5 billion. Operating income for the year was $14.54 billion, and net income was $11.59 billion.  Microsoft  Microsoft Corporation is a technology company that develops software, services, devices and solutions. Its products are extensively used by businesses and individual customers to operate personal computers.  Microsoft’s platforms allow improving small-businesses productivity, educational outcomes, driving competitiveness of large businesses. As a platform and tools provider, the company empowers enterprise and organisations of all sizes.  Now it is emphasising on innovation for the next phase of computing stage. Other than its legacy operating system, Microsoft provides cloud-based solutions, services, software, platforms, content, server applications, desktop management tools, software development tools etc.  It also designs and manufactures and sell devices, including gaming consoles, PCs, tablets, entertainment consoles, and related accessories. In 2020, the company recorded revenue of $143 billion. Operating income for the year was $53 billion, and net income was $44.3 billion. 

Behavioural Economics According to the school of classical economics, people are intrinsically rational, looking to maximise their utility, and make decisions that are best for oneself. A behaviourist is likely to challenge this school of thought, opining that people often times work irrationally, whether on purpose or not. How should the best parts of psychology and economics interrelate in an enlightened economist's mind? One of the greatest minds of the 20th century, Mr Charlie Munger stated that- “I don't think it's going to be that hard to bend economics a little to accommodate what's right in psychology.” Humans are emotional and easily distracted beings. Consequently, decision making may or may not be made in their self-interest always. Every day, humans make decisions as basic as what amount should one pay for lunch, whether one should pursue a course, invest in gym equipment or how much should be kept aside as monthly savings to making personal finance decisions. There is a dedicated branch of economics that seeks to explain why people decide, what they decide. This branch is called behavioral economics. Your brain effects your thinking- Making Wrong Investment Decision? Blame Your Amygdala! Let us deep dive- What Is Behavioural Economics? Behavioral economics combines understandings from psychology, judgment, decision making and economics with an intent to produce an accurate understanding of human behaviour. It relates to the economic decision-making processes of individuals and institutions. The concept explores reasons as to why people sometimes tend to make irrational decisions, why and how their behaviour does not follow predictions of economic models. It should be noted that behavioural economics focuses on the observable behaviour of humans and does not have strong theoretical or normative assumptions about how an economic system/ business sector or stock market works or should work. Read: Understanding Behavioural Finance & Investment Decisions Let us further break this down with an example: Unlike the field of classical economics, in which decision-making is entirely based on logic, behavioural economics gives room to irrational behaviour and further attempts to understand reasons behind the same. Brexit, for instance is a classic example of how behavioural economics can be useful because behavioural economics can help illuminate how the narrow vote to leave the European Union (EU referendum) was influenced majorly by gut choices, as some experts suggest, as opposed to rational decision-making. The Origin Of Behavioural Economics A keen observer of human behaviour, American economist Richard H. Thaler is broadly believed to be the founder of behavioural economics. He was awarded the 2017 Nobel Memorial Prize in Economic Sciences for his significant contributions to behavioural economics. Thaler’s opinions on the branch is believed to have been inspired by notable works of Israeli psychologist and economist Daniel Kahneman and cognitive and mathematical psychologist Amos Nathan Tversky. Daniel Kahneman also won a Nobel Memorial Prize in Economic Sciences in 2002 for his brilliant work on prospect theory, which he developed along with Tversky. Thaler is best known for incorporating psychological assumptions into analyses of economic decision-making. One of Thaler’s popular ideas – Nudge: Why Move the Earth When A Nudge Can Do! Simple Solutions to Complicated Problems What Are Various Themes Of Behavioural Economics? Three prevalent themes in behavioural economics comprise heuristics, framing and market efficiencies. Why Is Behavioural Economics Important? Behavioural economics provides new ways to think about barriers and drivers to a range of behaviours. This makes it significant, as traditional economic theory does not use insights from psychology, sociology and neuroscience to explain people’s decisions. So much so, behavioural economics seems to have the power to change the way economists and policymakers think about real world problems. Must read: How To Use Psychology To Aptly React To The Coronavirus Pandemic The field also builds a bridge between economic theory and reality- a bridge based on scientific evidence coming from disciplines in behavioural science. Some experts even regard behavioural economics as a counter-revolution, which takes economics closer to its roots, based on psychological intuition and introspection wherein psychology enacts a scientific discipline that can offer much more than merely intuitions and introspection. Besides, understanding basic concepts from behavioural economics can be very useful. It can help people be better negotiators.  How Does Behavioural Economics Influence Market Participants? Clearly, people don’t behave as rational, as traditional economists have assumed. They are affected by cognitive biases, are extremely influenced by other people and often practice herd mentality, have different perceptions about attitudes and behaviours. In context to the stock market, erroneous, irrational financial decisions are the result of different unpredictable reactions by market participants subject to losses and high market risks. Therefore, for decision-making, it is essential to consider all the factors in the market-which creates a place for behavioural economics besides accounting fundamentals, macro and micro-economic factors, economic projections, etc. Consider this- a sudden drop in the value of a few stocks followed by an equally rapid recovery, demonstrates that market participants did not cause such movements by rational choices but rather emotional reactions. Read: What does Fear Do to your Portfolio? Stocks that Scared Investors in 2019 No wonder Benjamin Graham, the father of value investing, and mentor of Warren Buffett the world’s best investor coined the term ‘Mr. Market.” Clearly, he understood there is more to market than numbers. Read: Are you a Growth Investor? Then You Must Wear the Hat of a Psychologist! Why Has Behavioural Economics Concept Risen Over The Years? Let us take cues from dramatic global events over the years- for instance the Great Financial Crisis of 2008 or the novel coronavirus crisis of 2020 (Global Virus Crisis, as some call it). Read: Things to Learn from Past Crises: Role of Financial Planners During Times of Crisis These could not be explained by traditional neoclassic economic models though the impact of these events has been beyond massive. Therefore, other schools of economic thought gained traction and behavioural economics was one such concept. Businesspersons seemed to make decisions based on their emotional state of mind while investors demonstrated nervousness that caused a massive sell off to an extent that circuit breakers had to be launched while. Acts of spontaneity, irrationality, impatience, and herd mentality amid incidents of recent years have paved the way for economists to believe that the human mind is a crucial key to understand economic patterns, financial decisions and eventually- market and economic stances. Do You Know Few Top Behavioural Economists? Besides the foundation setters Kahneman, Tversky and Thaler, a number of economists, and psychologists have emerged as prominent figures within the field of behavioural economics over the years- Behavioural economics enhances the explanatory power of economics as it provides it with a firm and more rational psychological basis. It surely is a way to make economics more accurate by incorporating more realistic assumptions about how humans behave. Besides, good understanding of human decision-making, its rational and irrational aspects, offers opportunities of influencing choices that take better account of how people actually respond to the context within which their decisions are made. There are various to help one not fall prey to behavioural traps, mind you, knowledge alone does not help, but an ability to look at bigger picture and through the eyes of various mental models would help one reduce the errors. Eliminating behavioural errors would not be possible or rather would one be flawless and loose the human touch? Read: All I want to know is where I am going to die so that I’ll never go there- Inversion a Power Tool

What is the October Effect: a myth, or a reality? October effect refers to the theory that stock prices crash in the month of October. This happens without any methodical reason or any specific factor affecting the stock prices. However, the theory has come into existence because of repeated crashes observed in October over the years. October effect is more of a psychological concept than a real-stock market concept.  There have also been price crashes observed in September. However, the reasons for these crashes have been varied. How does October Effect impact the markets? The hysteria around the October effect might make investors scared in this month. The expectations of a price decrease might lead to many investors selling their stocks in early October. If too many investors end up selling stocks, that might inadvertently lead to more panic selling among the investors. Why do investors believe in the October Effect? Often investors let emotions get the best of them. People might lose out on their money because they let their emotions guide them, which may include fear, greed, or a herd mentality. Behavioural finance suggests that investors might be motivated by factors other than their rational decision making. Some of the biggest crashes in history have happened because of the poor decision-making of the investors. People might follow a crowd and put their money in stocks which are more popular among investors, without having any other reason for doing it. At times, the media accounts about the market and a general notion, which is framed without any rational explanation, end up misguiding investors into the wrong direction. These factors may lead to investors giving in to the mass hysteria prevailing during October, which may end up fuelling the October Effect. Therefore, investors must consider all the factors before putting their money in a particular stock. Why was the concept of October Effect formed? The following historic incidents led to the phenomenon of stock prices crashing during October: Panic of 1907: This occurred in the beginning of October. It started with the bankruptcy of two small brokerage firms. Two investors failed to buy shares of a copper mining firm, which led to a run on banks associated with them. This resulted in a domino effect. The crash started with New York city, but it eventually spread to other parts of America. As money was withdrawn from the economy, financial institutions faced the brunt. It also led to the shutdown of Knickerbocker Trust, which had been refused a loan by JP Morgan. The crash was ultimately resolved when the US government gave a fiscal credit of over $30 million, which led to the consumer confidence coming back. Stock Market crash of 1929: This is also referred to as Black Tuesday and it occurred on October 29, 1929. During the 1920s, the US economy was going through various expansions and peaked during a period of high speculation. This was referred to as the Roaring Twenties. As a result of this rise in speculation, there was overvaluation of the stocks, when their prices went way beyond their actual value. However, the bubble burst with reasons attributed to low wages, a downfall of the agricultural sector, and a multiplication of debt. Black Monday: This event occurred on 19th of October, 1987. There were many factors at play, which led to the stock market crash. These included a widening of the trade deficit, incoming of computerised trading and various other geopolitical reasons. The computerised models used for trading were programmed to give a positive feedback. This led to the model generating increased buy orders when prices were increasing, and more sell orders when the prices began to fall. International tensions between countries also led to the crash and loss of confidence in the market. Other events in September: There were historical events which led to a crash in September, like the Black Friday, Black Wednesday, the WTC attacks in 2001, and the housing market crash of 2008. Black Wednesday occurred on September 16, 1992. A collapse in the Pound Sterling led to the UK to opt out of the European Exchange Rate Mechanism. All these factors occurred because of different reasons, which were specific to that particular time period and set-up. Thus, it can be argued that the fact that these events occurred in October is a coincidence. Is the October Effect real or just a coincidence? It is safe to say that October Effect is nothing more than a mere coincidence. The events discussed above happened without any methodical linkage connecting them to the month of October. There has been further evidence proving that the October Effect failed to occur in the years when the market remained strong in this month. The historical crashes mentioned above occurred because of issues which had been specific to those times. Stock exchanges and trading platforms have incorporated the necessary changes to ensure that these events do not get repeated. Regardless of these regulations, it is safe to say that some of these crashes were Black Swan events and could not have been predicted under any circumstances. Therefore, it is difficult to say whether the current market is immune to phenomena like the October Effect or any other crash.

Working Capital Running a business is not everyone’s cup of tea. This may be the only thing which no business owner can deny. Cruise control feature doesn’t exist in any business, i.e. regular evolvement of business is important and is neither dependent on the number of years of business existence, nor on the industry, the business belongs to such as Technology, Medical, Construction, Service Sectors etc. What is working capital/net working capital? In simple terms, capital refers to money. Working capital is the money that is available to fund the daily operations of a business.  Working capital is an indicator of near-term financial position of a business and a measure of its operational efficiency. It shows the ability of the business to meet its short-term obligations/current liabilities through its current assets. Dividing current assets by current liabilities gives the working capital ratio. If a company has $2 million of current assets and $1 million of current liabilities, the working capital ratio would be 2:1 ($2 million/$1 million), meaning that the business has $2 in hand for every $1 of obligation. Likewise, net working capital would give the amount of the funds that a business has in hand to meet current liabilities. In the above example, net working capital would be $1 million ($2 million - $1 million), indicating that business has $1 million of headroom to meet its near-term obligations. Is negative working capital good for business? A negative net working capital would mean that a business may need additional financing to meet its working capital. In simple words, current liabilities in the balance sheet are in excess of current assets. It is an indication of business having higher liabilities. But negative working capital is favourable for select business models at certain times. Consider businesses like Dominos, McDonald’s, Woolworths, Kogan.com, Amazon.com that realise revenue instantly at the point of sale before paying their suppliers. Such business models are high cash generative and fund sales through suppliers. An enterprise with a high reputation with its suppliers may have negative working capital due to their ability to bargain with the suppliers. When the supplier of the business finances parts of current assets, it will save the need for working capital financing and associated interest costs. But negative working capital could be favourable at certain times for some business models. It is because a long term negative working capital can raise questions on the liquidity management of the business.   For instance, if a company has large debt maturity over the next year, it will also add to negative working capital. Or, when an enterprise is building inventory in anticipation of a bumper demand over the near future, it would buy more from suppliers and may take short-term debt to support anticipated demand, thereby increasing current liabilities.  Moreover, it is imperative to scan financial statements for a period of a few years and find more answers since looking at just working capital of the business may not give a long-term picture What is the working capital cycle? Working capital cycle is the time taken by a business to convert net current assets less liabilities into cash. A shorter working capital cycle means that a business realises cash in a short period of time. It also indicates the operational efficiency of the business. “Turnover is vanity, profit is sanity, and cash is reality” Companies with shorter working capital cycle are relatively more efficient than the companies with longer working capital cycle or a greater number of working capital cycle days. In cases where companies have a longer working capital cycle, it would mean that the business payout period to suppliers is shorter than the period for receiving cash from customers. Receivable days indicates the number of days an enterprise takes to receive cash from its customers from the credit sales made earlier. Inventory days means the number of days it would take to clear inventory through sales. Payable days are the number of days an enterprise takes to pay its suppliers. Consider the below information: Inventory Days: 60 Receivable Days: 50 Payable Days: 100 Working capital cycle would be 10 days (60+50-100). The business takes 50 days to realise the cash made on sales, but it takes 100 days to pay its suppliers. It is understandable that the business takes, on average, 60 days between acquiring the product and delivering to the customer. It is also apparent that the company 100 days of the payable cycle is funded by suppliers, leaving the company with 10 days of a funding shortfall.  What causes changes to working capital? Although changes to working capital can be strategic at times, some basic ones include the following. Credit sale agreements: Any changes to the sales agreement would impact the working capital of the business. Usually, B2B businesses are run on credit, if a company reduces the number of days for payment due by debtors, it will improve the working capital cycle and increase cash, but customers could be discouraged to buy more. But when a company increases the credit days for its customers, it will further stretch cash conversion, and the customer could be inclined to buy more. Expansion and inventory build-up: Business expansion requires capital to invests in areas such as machinery, premises, marketing, hiring etc. When a business is expecting sales to be higher as a result of expansion, it may need to be build-up inventory to support the sales. How companies finance working capital needs? Short-term business loan: It is a popular credit facility, especially provided for working capital purposes, where the tenure could be as short as three months. Such financing meets the funding needs of the business during emergencies. Factoring: In this type of financing, the companies offer their account receivables to factoring service providers at a discount, realising cash instantly on an invoice which could be due after a few months. Line of credit: Business line of credit is similar to business credit cards, which can be used for working capital financing. Businesses/Borrowers can draw funds up to the maximum limit of credit provided to them, which depends on the creditability of the business and the track record of success, and pay interest thereafter. Once the repayment is made, the full limit is available again. Debt or equity: Many companies also use traditional sources of funding, especially large companies. While raising funds through capital markets, companies often make provision for working capital purposes out of the total raised money. Banking facilities are also a popular source of working capital financing.

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