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Corporate finance ibs
 

Corporate finance ibs

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    Corporate finance ibs Corporate finance ibs Presentation Transcript

    • Corporate Finance PIYOOSH BAJORIA
    • Time Value of Money - Compounding PIYOOSH BAJORIA
    • Time Value of Money - Discounting PIYOOSH BAJORIA
    • Time Value of Money - Annuity PIYOOSH BAJORIA
    • Bond Valuation – Yield to Maturity Yield to Maturity (YTM) refers to the expected rate of return a bondholder will receive if they hold a bond all the way until maturity while reinvesting all coupon payments at the bond yield. Another way of putting it is that the yield to maturity is the rate of return that makes the present value (PV) of the cash flow generated by the bond equal to the price. PIYOOSH BAJORIA
    • Bond Valuation – YTM Formula PIYOOSH BAJORIA
    • Ratio Analysis – Liquidity Ratios Current Ratio – Indicates the short term liquidity position of the firm Formula: Current Assets/Current Liabilities PIYOOSH BAJORIA
    • Ratio Analysis – Liquidity Ratios Quick Ratio – More stringent indicator of short term liquidity of the firm Formula:(Current Assets – Inventories)/Current Liabilties PIYOOSH BAJORIA
    • Ratio Analysis – Turnover Ratios Accounts Receivable Turnover Ratio – Indicates how many times receivables are generated and collected during the year Formula:Net Credit Sales/Average Accounts Receivable PIYOOSH BAJORIA
    • Ratio Analysis – Turnover Ratios Average Collection Period – Indicates the number of days it takes to collect the accounts receivable Formula:360/Average Accounts Receivable PIYOOSH BAJORIA
    • Ratio Analysis – Turnover Ratios Inventory Turnover Ratio – Indicates the efficiency of the firm in managing inventories Formula:Cost of Goods Sold/Average Inventory PIYOOSH BAJORIA
    • Ratio Analysis – Turnover Ratios Asset Turnover Ratio – Indicates the efficiency of the firm in using the assets for generating a volume of sales. Formula:Sales/Average Assets PIYOOSH BAJORIA
    • Ratio Analysis – Profitability Ratios Gross Profit Margin – Indicates the relation between production and selling price. It is also a measure of the efficiency of the production process of the firm. Formula:Gross Profit/Net Sales PIYOOSH BAJORIA
    • Ratio Analysis – Profitability Ratios Operating Profit Margin – Indicates the efficiency of the firm in managing its production costs as well as the overheads. Formula:Operating Profit/Net Sales PIYOOSH BAJORIA
    • Ratio Analysis – Profitability Ratios Net Profit Margin – Indicates the efficiency of the firm in managing its production expenses, overheads, financing costs and taxes. Formula:Net Profit/Net Sales PIYOOSH BAJORIA
    • Ratio Analysis – Leverage Ratios Debt-Equity Ratio – Is a measure of the capital structure of the firm and indicates the amount of debt raised for every rupee of equity. Formula:Debt/Equity PIYOOSH BAJORIA
    • Ratio Analysis – Leverage Ratios Debt/Assets Ratio – Indicates the percentage of assets of the firm financed by debt. Formula:Debt/Assets PIYOOSH BAJORIA
    • Ratio Analysis – Coverage Ratios Interest Coverage Ratio – Indicates the ability of the firm to service its interest obligations. Formula:EBIT/Interest Expense PIYOOSH BAJORIA
    • Ratio Analysis – Coverage Ratios Debt Service Coverage Ratio – Indicates the ability of the firm to meet its total obligations. Formula:(PAT + Depreciation + Non-cash Charges + Interest)/ (Interest + Repayment of term loan) PIYOOSH BAJORIA
    • Ratio Analysis – Dividend Ratios Dividend Pay-out Ratio – Is the percentage of the after tax profits which a firm pays out as dividend to its shareholders. Formula:Total Dividend Paid/PAT PIYOOSH BAJORIA
    • Ratio Analysis – Return on Assets Return on Assets (ROA) – Is the indicator of the earning ability of the firm on a given asset base. Formula:Net Profit/Assets PIYOOSH BAJORIA
    • Ratio Analysis – Return on Equity Return on Equity – Is the indicator of the earning ability of the firm on the shareholders funds. Formula:Net Income/Average Equity PIYOOSH BAJORIA
    • Ratio Analysis – Per Shares EPS = Net Profit/No of outstanding shares DPS = Total Dividend/No of outstanding shares BVPS = Total Equity/No of outstanding shares PIYOOSH BAJORIA
    • Ratio Analysis – Valuation Ratios P/E Ratio – Is the indicator of how many times the market is willing to pay with respect to the earnings Formula:Market Price per share/EPS PIYOOSH BAJORIA
    • Ratio Analysis – Valuation Ratios Price/Book Ratio – Is the indicator of how many times the market is willing to pay with respect to the intrinsic value of the firm Formula:Market Price per share/BVPS PIYOOSH BAJORIA
    • DuPont Chart PIYOOSH BAJORIA
    • Extended DuPont Chart PIYOOSH BAJORIA
    • Risk and Return Systematic Risk – Non-diversifiable Risk  Inflation  Interest Rate Risk  Political Risk  Natural Calamities  Scams  International Events Unsystematic Risk – Diversifiable Risk  Business Risk  Financial Risk  Default or Insolvency Risk PIYOOSH BAJORIA
    • Beta Beta measures the relative risk associated with any given stock or portfolio in relation to the market portfolio. The market portfolio represents the most diversified portfolio of risky assets an investor could buy as it includes all the risky assets. Beta = Non- diversifiable risk of an asset/ Risk of market portfolio The beta co-efficient is a measure of non-diversifiable or systematic risk PIYOOSH BAJORIA
    • Beta (cont.) A beta co-efficient of more than “1.00” indicates above average risk. Such stock are also called aggressive stocks. A beta co-efficient of less than “1.00” indicates below average risk. Such stocks are also called defensive stocks. PIYOOSH BAJORIA
    • CAPM and SML Ri = Rf + β (Rm – Rf) PIYOOSH BAJORIA