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some basic concepts in a simple manner

some basic concepts in a simple manner

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Accouting basics Document Transcript

  • 1. 1 Dematerialization vs. RematerializationDematerialization----The move from physical certificates to electronic book keeping. Actual stockcertificates are slowly being removed and retired from circulation in exchange for electronic recording.Rematerialization is a compiler optimization which saves time by recomputing a value instead of loadingit from memory. It is typically tightly integrated with register allocation, where it is used as an alternativeto spilling registers to memory.2 Venture Capital-seed companies?Venture CapitalMoney made available for investment in innovative enterprises or research, especially in high technology,in which both the risk of loss and the potential for profit may be considerable. Also called risk capital.3 Institutional investorInstitutional investor----A non-bank person or organization that trades securities in large enough sharequantities or dollar amounts that they qualify for preferential treatment and lower commissions.Institutional investors face less protective regulations because it is assumed that they are moreknowledgeable and better able to protect themselves.Foreign Institutional investorAn investor or investment fund that is from or registered in a country outside of the one in which it iscurrently investing. Institutional investors include hedge funds, insurance companies, pension funds andmutual funds.4 Insider tradingInsider trading----The illegal buying or selling of securities on the basis of information that is unavailableto the public.5 P/E ratioP/E ratio----In finance, the P/E ratio of a stock (also called its "earnings multiple", or simply "multiple" or"PE") is used to measure how cheap or expensive share prices are. It is probably the single mostconsistent red flag to excessive optimism and over-investment. It also serves, regularly, as a marker ofbusiness problems and opportunities. By relating price and earnings per share for a company, one cananalyze the markets valuation of a companys shares relative to the wealth the company is actuallycreating. A P/E ratio is calculated as:Price per share/Earnings per share6 Reverse merger or Reverse TakeoverA Reverse Takeover (RTO), also known as a back door listing, or a reverse merger, is a financialtransaction that results in a privately-held company becoming a publicly-held company without going thetraditional route of filing a prospectus and undertaking an initial public offering (IPO). Rather, it is
  • 2. accomplished by the shareholders of the private company selling all of their shares in the private companyto the public company in exchange for shares of the public company.A Reverse Merger is a transaction where by the private company shareholders may gain control of apublic company by merging it in with their private company. The private company shareholders receive asubstantial majority of the shares of the public company (normally 85% to 90% or more) and the controlof the board of directors. The transaction can be accomplished in as little as two weeks, resulting in theprivate company becoming a public company. The transaction does not go through a review process withstate and federal regulators because the public company has already completed the process. Thetransaction involves the private and shell company exchanging information on each other, negotiating themerger terms, and signing a share exchange agreement. At the closing the public shell company issues asubstantial majority of its shares and the board control to the shareholders of the private company. Theprivate company shareholders pay for the shell and contribute their private company shares to the shellcompany and the private company is now public.7 Stock splitStock split----The dividing of a companys existing stock into multiple shares. In a 2-for-1 split, eachstockholder receives an additional share for each share he or she holds.Stock split refers to a corporate action that increases the shares in a public company. The price of theshares are adjusted such that the before and after market capitalization of the company remains the sameand dilution does not occur. Options and warrants are included.For example, a company has 100 shares of stock each with a price of $50. The market capitalization is100 × $50 = $5000. The company splits its stock "2-for-1". There are now 200 shares of stock and eachshareholder holds twice as many shares. The price of each share has been adjusted to $25. The marketcapitalization is 200 × $25 = $5000, the same as before the split.Reverse stock split, or reverse split, is just the same but in reverse: a reduction in number of sharesand an accompanying increase in the share price. The ratio is also reversed: 1-for-2, or 1-for-3.8 Contingent liabilities-accounting treatment?Contingent liabilities----Liabilities that may or may not be incurred by a company and which depend onthe outcome of say a forthcoming event such as a court case. These are recorded in a companys accountsas contingent liabilities.9 Merchant bankingMerchant banking----A bank that deals mostly in (but is not limited to) international finance, long-termloans for companies and underwriting. Merchant banks do not provide regular banking services to thegeneral public.10 Can share holders offer its share price at premium during the IPO?11 Who regulates/controls the price of the shares?12 Form filed for Prospectus in SEC?13 Share warrant
  • 3. Share warrant----A certificate, usually issued along with a bond or preferred stock, entitling the holderto buy a specific amount of securities at a specific price, usually above the current market price at thetime of issuance, for an extended period, anywhere from a few years to forever. In the case that the priceof the security rises to above that of the warrants exercise price, then the investor can buy the security atthe warrants exercise price and resell it for a profit. Otherwise, the warrant will simply expire or remainunused. Warrants are listed on options exchanges and trade independently of the security with which itwas issued. also called subscription warrant.Share certificate - legal document that certifies ownership of a specific number of stock shares (orfractions thereof) in a corporation.14 Share PremiumShare Premium----The market value of shares in excess of their par value.15 ProxyProxy----A representative; an agent; a document appointing a representative.A proxy is a person who is designated by another to represent that individual at a meeting or before apublic body. It also refers to the written authorization allowing one person to act on behalf of another.16 FI and FIIForeign Institutional Investor - FII----An investor or investment fund that is from or registered in acountry outside of the one in which it is currently investing. Institutional investors include hedge funds,insurance companies, pension funds and mutual funds.17 BEP (Break Even Point)18 What is Segmentation?19 Pooling of Interest?Pooling of Interest----An accounting method, used in mergers and acquisitions, where the balancesheet items of the two companies are simply added together.20 Joint Venture Vs Strategic Alliance Vs PartnershipJoint Venture----An association of two or more individuals or companies engaged in a solitary businessenterprise for profit without actual partnership or incorporation; also called a joint adventure.A joint venture is a contractual business undertaking between two or more parties. It is similar to abusiness partnership, with one key difference: a partnership generally involves an ongoing, long-termbusiness relationship, whereas a joint venture is based on a single business transaction.A Strategic Alliance is a mutually beneficial long-term formal relationship formed between two or moreparties to pursue a set of agreed upon goals or to meet a critical business need while remainingindependent organizations.
  • 4. Partnership----An association of two or more persons engaged in a business enterprise in which theprofits and losses are shared proportionally.Consignment----The delivery of goods to a carrier to be shipped to a designated person for sale. Abailment of goods for sale.A consignment is an arrangement resulting from a contract in which one person, the consignor, eitherships or entrusts goods to another, the consignee, for sale. If the goods are transported by a carrier to theconsignee, the name of the consignor appears on the bill of lading as the person from whom the goodshave been received for shipment. The consignees name appears on it as the person to whom delivery isto be made. The consignee acts as an agent on behalf of the consignor, a principal, in selling the goodsand must take reasonable care of them while in his or her possession. The consignor does not give upownership of the goods until their sale.21 shell companyShell Company is a company that is incorporated but has no significant assets or operations. Shellcorporations are not in themselves illegal, and they may have legitimate business purposes. However,they are a main component of underground economy, especially those based in tax havens.Blank check CompanyBlank check Company - A company in a developmental stage that either doesnt have an establishedbusiness plan or has a business plan that revolves around a merger or acquisition with another firm.22 Reorganization Vs RestructuringReorganization----A process designed to revive a financially troubled or bankrupt firm. A reorganizationinvolves the restatement of assets and liabilities, as well as holding talks with creditors in order to makearrangements for maintaining repayments.Restructuring----A significant modification made to the debt, operations or structure of a company. Thistype of corporate action is usually made when there are significant problems in a company, which arecausing some form of financial harm and putting the overall business in jeopardy. The hope is thatthrough restructuring, a company can eliminate financial harm and improve the business.23 Spin off Vs Split-OffSpin off----An independent company created from an existing part of another company through adivestiture, such as a sale or distribution of new shares.Split-off----The process whereby a parent corporation organizes a subsidiary corporation to which ittransfers part of its assets in exchange for all of the subsidiarys capital stock, which is subsequentlytransferred to the shareholders of the parent corporation in exchange for a portion of their parent stock.A split-off differs from a spin-off in that the shareholders in a split-off must relinquish their shares of stockin the parent corporation in order to receive shares of the subsidiary corporation whereas the shareholdersin a spin-off need not do so.
  • 5. Reverse split24 TakeoverTakeover----Acquiring control of a corporation, called a target, by stock purchase or exchange, eitherhostile or friendly.Takeover----The act or an instance of assuming control or management of or responsibility for something,especially the seizure of power, as in a nation, political organization, or corporation.25 DivestitureDivestiture----The sale, liquidation, or spinoff of a corporate division or subsidiary.Disposition or sale of an asset by a company. A company will often divest an asset which is not performingwell, which is not vital to the companys core business, or which is worth more to a potential buyer or as aseparate entity than as part of the company26 Corporate GovernanceCorporate governance is the set of processes, customs, policies, laws and institutions affecting the waya corporation is directed, administered or controlled. Corporate governance also includes the relationshipsamong the many players involved (the stakeholders) and the goals for which the corporation is governed.The principal players are the shareholders, management and the board of directors. Other stakeholdersinclude employees, suppliers, customers, banks and other lenders, regulators, the environment and thecommunity at large.http://www.answers.com/corporate%20governance27 DividendA share of profits received by a stockholder or by a policyholder in a mutual insurance society.28 Prime Lending RatePrime rate----The lowest rate of interest on bank loans at a given time and place, offered to preferredborrowers. Also called prime interest rate.29 Convertible DebenturesAny type of debenture that can be converted into some other security.30 Certificate of Incorporation Vs Certificate of merger31 AGM Vs EGM
  • 6. AGM---- A mandatory yearly meeting of shareholders that allows stakeholders to stay informed andinvolved with company decisions and workings.EGM---- A meeting other than the annual general meeting between a companys shareholders, executivesand any other members. An EGM is usually called on short notice and deals with an urgent matter.Liquidation----When a business or firm is terminated or bankrupt, its assets are sold and the proceeds paycreditors. Any leftovers are distributed to shareholders.Dissolution---- Act or process of dissolving; termination; winding up. In this sense it is frequently used inthe phrase dissolution of a partnershipThe dissolution of a corporation is the termination of its existence as a legal entity. 35 BankruptcyBankruptcy is a legally declared inability or impairment of ability of an individual or organization to paytheir creditors. 36 Winding UpA process that entails selling all the assets of a business entity, paying off creditors, distributing anyremaining assets to the principals, and then dissolving the business. 37 Anti Dumping Vs DumpingDumping, selling goods at less than the normal price, usually as exports in international trade. It may bedone by a producer, a group of producers, or a nation. Dumping is usually done to drive competitors offthe market and secure a monopoly, or to hinder foreign competition. To counterbalance internationaldumping, nations often resort to flexible tariffs. In international trade, acute competition from foreignproducers often leads to charges of dumping. A policy of dumping depends for its effectiveness on thepossibility of maintaining separate domestic and foreign markets, on monopolistic influences maintaining ahigh price in the home market, on export bounties, or on low import duties in the foreign market.Dumping disturbs those markets that receive dumped goods, and it may drive local producers out ofbusiness. Governments may condone, or even sponsor, dumping in other markets for either politicalreasons or to achieve a more favorable balance of payments.Anti Dumping----Intended to discourage importation and sale of foreign-made goods at pricessubstantially below domestic prices for the same items. 38 CFO Vs CEOChief Financial Officer – CFO----This is the senior manager who is responsible for overseeing thefinancial activities of an entire company. This includes signing checks, monitoring cash flow, and financialplanning.Chief Executive Officer----The highest-ranking executive in a company or organization, responsible forcarrying out the policies of the board of directors on a day-to-day basis.
  • 7. 39 HedgingHedging, in commerce, method by which traders use two counterbalancing investment strategies so as tominimize any losses caused by price fluctuations.It is generally used by traders on the commodities market. Typically, hedging involves a trader contractingto buy or sell one particular good at the time of the contract and also to buy or sell the same (or similar)commodity at a later date. In a simple example, a miller may buy wheat that is to be converted into flour.At the same time, the miller will contract to sell an equal amount of wheat, which the miller does notpresently own, to another trader. The miller agrees to deliver the second lot of wheat at the time the flouris ready for market and at the price current at the time of the agreement. If the price of wheat declinesduring the period between the millers purchase of the grain and the flours entrance onto the market,there will also be a resulting drop in the price of flour. That loss must be sustained by the miller. However,since the miller has a contract to sell wheat at the older, higher price, the miller makes up for this loss onthe flour sale by the gain on the wheat sale. Hedging is also employed by stock and bond traders, export-import traders, and some manufacturers. 40 IPOInitial Public Offering-IPOThe first sale of stock by a private company to the public. IPOs are often issued by smaller, youngercompanies seeking capital to expand, but can also be done by large privately-owned companies looking tobecome publicly traded.In an IPO, the issuer obtains the assistance of an underwriting firm, which helps it determine what type ofsecurity to issue (common or preferred), best offering price and time to bring it to market.IPOs generally involve one or more investment banks as "underwriters." The company offering its shares,called the "issuer," enters a contract with the underwriters to sell its shares to the public. Theunderwriters then approach investors with offers to sell these shares.Primary markets and secondary marketsPrimary markets----The market in which investors have the first opportunity to buy a newly issuedsecurityThe Primary Market is that part of the capital markets that deals with the issuance of new securities.Companies, governments or public sector institutions can obtain funding through the sale of a new stockor bond issue. This is typically done through a syndicate of securities dealers. The process of selling newissues to investors is called underwriting. In the case of a new stock issue, this sale is called an initialpublic offering (IPO). Dealers earn a commission that is built into the price of the security offering, thoughit can be found in the prospectus.secondary markets----A market on which an investor purchases an asset from another investor ratherthan an issuing corporation.
  • 8. The Secondary Market is the financial market for trading of securities that have already been issued inan initial private or public offering. Alternatively, secondary market can refer to the market for any kind ofused goods. The market that exists in a new security just after the new issue, is often referred to as theaftermarket. Once a newly issued stock is listed on a stock exchange, investors and speculators caneasily trade on the exchange, as market makers provide bids and offers in the new stock.Red herring prospectusThis is an initial prospectus to be submitted by a company which is planning to have an IPO. Thisprospectus has to be filed with SEC. It contains all the information about the company except for the offerprice and the effective date, which arent known at that time. There are several additions and edits to thisdocument before the final prospectus is released.The reason it is called a Red herring is due to a section of the document colored in red which explicitlystates that the issuing company is not attempting to sell its shares before it has been given officialapproval."Red Herring Prospectus" is a prospectus which does not have details of either price or number of sharesbeing offered or the amount of issue. This means that in case the price is not disclosed, the number ofshares and the upper and lower price bands are disclosed. On the other hand, an issuer can state theissue size and the number of shares are determined later. 41 Book BuildingThe process by which an underwriter attempts to determine at what price to offer an IPO based ondemand from institutional investors. 42 Shareholders and Stake Holders.Shareholders----Any person, company, or other institution that owns at least 1 share in a company. Ashareholder may also be referred to as a stockholder.stake holders---- 43 Capital BudgetingCapital budgeting is the planning process used to determine a firms long term investments such as newmachinery, replacement machinery, new plants, new products, and research and development projects.Net Present Value - NPV ----The difference between the present value of cash inflows and the presentvalue of cash outflows. NPV is used in capital budgeting to analyze the profitability of an investment orproject.The internal rate of return (IRR) is defined as the discount rate that gives a net present value (NPV) ofzero. The NPV is calculated from an annualized cash flow by discounting all future amounts to the present.The length of time required to recover the cost of an investment.
  • 9. Cost of the project/Annual cash flows 44 Gross Working Capital Vs Net WC 45 Ratios 46 Leverage Financing50 Franchise, Examples of Franchise Vs AffiliateFranchise----A privilege granted or sold, such as to use a name or to sell products or services. In itssimplest terms, a franchise is a license from the owner of a trademark or trade name permitting anotherto sell a product or service under that name or mark. More broadly stated, a franchise has evolved into anelaborate agreement under which the franchisee undertakes to conduct a business or sell a product orservice in accordance with methods and procedures prescribed by the franchisor, and the franchisorundertakes to assist the franchisee through advertising, promotion, and other advisory services.51 RoyaltyRoyalty----A payment to an owner for the use of property, especially patents, copyrighted works,franchises or natural resources.52 Leasing Vs Hire PurchaseA lease or tenancy is an interest in personal property or real property given by a lessor to another person(usually called the lessee or tenant) for a fixed period of time, and the lessee obtains exclusive possessionof the property in return for paying the lessor a fixed or determinable consideration.Hire Purchase----Purchase of a commodity on an installment plan.53 Chapter 7A bankruptcy proceeding where a company stops all operations and goes completely out of business. Atrustee is appointed to liquidate (sell) the companys assets, and the money is used to pay off debt.54 Debtors in PossessionA company that continues to operate while under the Chapter 11 bankruptcy process.55 Financial Value of a company56 Mutual Funds (open ended Vs closed ended)
  • 10. A fund, in the form of an investment company, in which shareholders combine their money to invest in avariety of stocks, bonds, and money-market investments such as U.S. Treasury bills and bank certificatesof deposit.57 Intellectual PropertyIntellectual property describes a wide variety of property created by musicians, authors, artists, andinventors. The law of intellectual property typically encompasses the areas of copyright, patent, andtrademark law. It is designed to encourage the development of art, science, and information by grantingcertainproperty rights to all artists, which include inventors in both the arts and the sciences. These rightsallow artists to protect themselves from infringement, or the unauthorized use and misuse of theircreations.Copyright The legal right granted to an author, composer, playwright, publisher, or distributor toexclusive publication, production, sale, or distribution of a literary, musical, dramatic, or artistic work.Patent A government license that gives the holder exclusive rights to a process, design, or new inventionfor a designated period of time.Trade mark - A name, symbol, or other device identifying a product, officially registered and legallyrestricted to the use of the owner or manufacturer. 58 Independent DirectorIndependent Director: In order for a director to qualify as an "independent director," the Board mustaffirmatively determine that the director has no material relationship with Occidental (either as a partner,stockholder or officer of an organization that has a relationship with Occidental) that would preclude thatnominee from being an independent director. For the purpose of such determination, an "independentdirector" is a director who:--Has not been employed by Occidental within the last five years;--Has not been an employee or affiliate of any present or former internal or external auditor of Occidentalwithin the last three years;--Has not received more than $60,000 in direct compensation from Occidental, other than director andcommittee fees, during the current fiscal year or any of the last three completed fiscal years;--Has not been an executive officer or employee of a company that made payments to, or receivedpayments from, Occidental for property or services in an amount exceeding the greater of $1 million or 2percent of such other companys consolidated gross revenues during the current fiscal year or any of thelast three completed fiscal years;--Has not been employed by a company of which an executive officer of Occidental has been a directorwithin the last three years;--Is not affiliated with a not-for-profit entity that received contributions from Occidental exceeding thegreater of $1 million or 2 percent of such charitable organizations consolidated gross revenues during thecurrent fiscal year or any of the last three completed fiscal years;--Has not had any of the relationships described above with an affiliate of Occidental; and--Is not a member of the immediate family of any person described above. An "immediate familymember" includes a persons spouse, parents, children, siblings, mothers and fathers-in-law, sons anddaughters-in-law, brothers and sisters-in-law and anyone (other than domestic employees) who sharessuch persons home.
  • 11. 59 Audit CommitteeAn Audit Committee is an operating committee of a publicly-held company. Committee members arenormally drawn from members of the Companys board of directors. An audit committee of a publiclytraded company in the United States is composed of independent or outside directors.60 QuorumIn law, a quorum is the minimum number of members of a deliberative body necessary to conduct thebusiness of that group. 61 EPSThe portion of a companys profit allocated to each outstanding share of common stock. EPS serves as anindicator of a companys profitability.Net income-Dividends on preferred stocks/Average outstanding stocks62 what are Liquid assetsCash, or property immediately convertible to cash, such as securities, notes, life insurance policies withcash surrender values, U.S. savings bonds, or an account receivable.63 Treasury Stock (shares buy back)Corporate stock that is issued, completely paid for, and reacquired by the corporation at a later point intime.Treasury stock or shares may be purchased by the corporation, or reacquired through donation, forfeiture,or some other method. It is then regarded as the personal property of the corporation and part of itsassets. The corporation can sell the stock for cash or credit, for par value or market value, or upon anyterms that it could be sold by a stockholder. Shares that the corporation has not issued in spite of itsauthority to do so are ordinarily not regarded as treasury shares but are merely unissued shares.64 Listed and Unlisted Company65 Public Company Vs Private CompanyA company that has issued securities through an initial public offering and which are traded on at leastone stock exchange or over-the-counter market.66 Index (Stock index)
  • 12. A statistical indicator providing a representation of the value of the securities which constitute it. Indicesoften serve as barometers for a given market or industry and benchmarks against which financial oreconomic performance is measured.67 SensexAn abbreviation of the Bombay Exchange Sensitive Index (Sensex) - the benchmark index of the BombayStock Exchange (BSE). It is composed of 30 of the largest and most actively-traded stocks on the BSE.Initially compiled in 1986, the Sensex is the oldest stock index in India.68 Nifty69 BSEThe BSE SENSEX (also known as the BSE 30) is a value-weighted index composed of 30 scrips, withthe base April 1979=100. The set of companies which make up the index has been changed only a fewtimes in the last 20 years. These companies account for around one-fifth of the market capitalization ofthe BSE.70 Joint Stock Company Vs Joint ventureJoint Stock Company----A company which has some features of a corporation and some features of apartnership. The company sells fully transferable stock, but all shareholders have unlimited liability.Joint Stock Company----A business whose capital is held in transferable shares of stock by its jointowners.Joint venture----A contractual agreement joining together two or more parties for the purpose ofexecuting a particular business undertaking. All parties agree to share in the profits and losses of theenterprise.Joint venture----An association of two or more individuals or companies engaged in a solitary businessenterprise for profit without actual partnership or incorporation; also called a joint adventure.71 Going concernGoing concern A going concern describes a business that functions without the intention or threat ofliquidation for the foreseeable future.71 Form S-1 (A registration statement used in the IPO of securities.)72 RestructuringA significant modification made to the debt, operations or structure of a company. This type of corporateaction is usually made when there are significant problems in a company, which are causing some form of
  • 13. financial harm and putting the overall business in jeopardy. The hope is that through restructuring, acompany can eliminate financial harm and improve the business.73 Disinvestment1. The action of an organization or government selling or liquidating an asset or subsidiary. Also known as"divestiture".2. A reduction in capital expenditure, or the decision of a company not to replenish depleted capital goods74 Underwriter1. A person or firm engaged in the insurance business.2. An insurance agent who assesses the risk of enrolling an applicant for coverage or a policy.3. One that guarantees the purchase of a full issue of stocks or bonds.A company or other entity that administers the public issuance and distribution of securities from acorporation or other issuing body. An underwriter works closely with the issuing body to determine theoffering price of the securities, buys them from the issuer and sells them to investors via the underwritersdistribution network.75 Insurance Vs ReinsuranceInsurance----A contract whereby, for a specified consideration, one party undertakes to compensate theother for a loss relating to a particular subject as a result of the occurrence of designated hazards.Reinsurance----The contract made between an insurance company and a third party to protect theinsurance company from losses. The contract provides for the third party to pay for the loss sustained bythe insurance company when the company makes a payment on the original contract.76 Preferred StockPreferred stockA preferred stock, also known as a preferred share or simply a preferred, is a share of stock carryingadditional rights above and beyond those conferred by common stock.RightsUnlike common stock, preferred stock usually has several rights attached to it.----The core right is that of preference in dividends. Before a dividend can be declared on the commonshares, any dividend obligation to the preferred shares must be satisfied.----The dividend rights are often cumulative, such that if the dividend is not paid it accumulates in arrears.----Preferred stock has a par value or liquidation value associated with it. This represents the amount ofcapital that was contributed to the corporation when the shares were first issued.----Preferred stock has a claim on liquidation proceeds of a stock corporation, equivalent to its par orliquidation value. This claim is senior to that of common stock, which has only a residual claim.
  • 14. ----Almost all preferred shares have a fixed dividend amount. The dividend is usually specified as apercentage of the par value or as a fixed amount. For example Pacific Gas & Electric 6% Series Apreferred.----Variable preferreds are rare exceptions: their changing dividends depend on prevailing interest rates,or varying as a percentage of net income.----Some preferred shares have special voting rights to approve certain extraordinary events (such as theissuance of new shares or the approval of the acquisition of the company) or to elect directors, but mostpreferred shares provide no voting rights associated with them.----Usually preferred shares contain protective provisions which prevent the issuance of new preferredshares with a senior claim. This results in corporations often having several series of preferred shares thathave a subordinate relationship.77 VATValue added Tax78 GDPGDP----The total market value of all the goods and services produced within the borders of a nation duringa specified period.79 Option and its TypesOption----A privilege, for which a person has paid money that grants that person the right to purchase orsell certain commodities or certain specified securities at any time within an agreed period for a fixedprice.80 OTC Over-the-CounterOver-The-Counter, method of buying and selling securities outside the organized stock exchange.81 NASDAQ (National Association of securities Dealers Automated Quotation system)Nasdaq Stock Market, Inc. (Nasdaq) is a provider of securities listing, trading and information productsand services.82 Negotiable InstrumentA commercial paper, such as a check or promissory note, that contains the signature of the maker ordrawer; an unconditional promise or order to pay a certain sum in cash that is payable either upondemand or at a specifically designated time to the order of a designated person or to its bearer.Negotiable instrument, bill of exchange, check, promissory note, or other written contract for paymentthat may serve as a substitute for money.1. The promise or order to pay must be unconditional;
  • 15. 2. The payment must be in a specific sum of money, although interest may be added to the sum;3. The payment must be made on demand or at a definite time;4. The instrument must be payable to bearer or to order.83 NOW (Negotiable Order of Withdrawal)In the United States, a Negotiable Order of Withdrawal account (NOW account) is a deposit account thatpays interest, on which checks may be written. Authorized on a national scale in 1981, these accountstypically pay a relatively small return, although some banks offer high-interest NOW accounts in order toattract depositors. Unless your interest rate is high, the balances in NOW accounts should be kept at theminimum necessary to provide needed funds without incurring service charges.84 Merchant bankMerchant bank----A bank that deals mostly in (but is not limited to) international finance, long-term loansfor companies and underwriting. Merchant banks do not provide regular banking services to the generalpublic.85 Going privateGoing PrivateA company "goes private" when it reduces the number of its shareholders to fewer than 300 and is nolonger required to file reports with the SEC.A number of transactions can result in a company going private, including:  Another company or individual makes a tender offer to buy all or most of the company’s publicly held shares;  The company merges with or sells the company’s assets to another company; or  The company can declare a reverse stock split that not only reduces the number of shares but also reduces the number of shareholders. In this type of reverse stock split, the company typically gives shareholders a single new share in exchange for a block—10, 100, or even 1,000 shares—of the old shares. If a shareholder does not have a sufficient number of old shares to exchange for new shares, the company will usually pay the shareholder cash based on the current market price of the company’s stock.While SEC rules dont prevent companies from going private, they do require companies to provideinformation to shareholders about the transaction that caused the company to go private. The companymay have to file a merger proxy statement or a tender offer document with the SEC. In addition, if thetransaction is initiated by an affiliate (an insider) of the company, Rule 13e-3 of the Securities ExchangeAct of 1934 requires the affiliate to file a Schedule 13E-3 with the SEC.The filing of a Schedule 13E-3 is also required when affiliated transactions result in a company’s publiclyheld securities no longer being traded on a national securities exchange or an inter-dealer quotationsystem, such as Nasdaq.The Schedule 13E-3 requires a discussion of the purposes of the transaction, any alternatives that thecompany considered, and whether the transaction is fair to all shareholders. The Schedule also discloses
  • 16. whether and why any of its directors disagreed with the transaction or abstained from voting on thetransaction and whether a majority of directors who are not company employees approved thetransaction.Going private transactions require shareholders to make difficult decisions. To protect shareholders, somestates have adopted corporate takeover statutes that provide shareholders with dissenters rights. Thesestatutes provide shareholders the opportunity to sell their shares on the terms offered, to challenge thetransaction in court, or to hold on to the shares. Once the transaction is concluded, remainingshareholders may find it very difficult to sell their retained shares because of a limited trading market.http://www.sec.gov/answers/gopriv.htm86 FuturesFutures----Contracts that promise to purchase or sell standard commodities at a forthcoming date and ata fixed price.This type of contract is an extremely speculative transaction and ordinarily involves such standard goodsas rice or soybeans. Profit and loss are based upon promises to deliver—as opposed to possession of—theactual commodities.87 Exit strategyExit Strategy1. The method by which a venture capitalist or business owner intends to get out of an investment that heor she has made in the past. In other words, the exit strategy is a way of "cashing out" an investment.Examples include an initial public offering (IPO) or being bought out by a larger player in the industry.Also referred to as a "harvest strategy" or "liquidity event".2. In the context of an active trader, a plan as to when a trade will be closed out.88 EOQ (Economic Order Quantity)89 MonopolyExclusive control by one group of the means of producing or selling a commodity or service90 MRTP Monopoly & Restrictive Trade Practices Act91 Inflation Vs DeflationInflationA persistent increase in the level of consumer prices or a persistent decline in the purchasing power ofmoney, caused by an increase in available currency and credit beyond the proportion of available goodsand services.
  • 17. 92 Vertical market Vs Horizontal market93 Vertical merger Vs Horizontal merger94 Redemption95 Lead manager96 Depreciation Vs Obsolescence Vs Depletion97 Bull Vs Bear98 Spread99 ADR Vs GDR100 Primary Vs Secondary Listing101 supply chain management - SCM102 SEDAR Vs Edgar103 Real Estate Investment Trust - REIT104 Exchange-Traded Fund - ETF105 Reallowance106 ReflationAffiliate----A company in which another company has a minority interest.A Patent is a set of exclusive rights granted by a state to a person (the patentee, usually the inventor) fora fixed period of time in exchange for the regulated, public disclosure of certain details of a device,method, process or composition of matter (substance) (known as an invention) which is new, inventive,and useful or industrially applicable.A Copyright is a law that gives the creator of a document, musical piece, book, etc. the right to theircreation and the control of its distribution. This protects the creators ability to sell their work. Oncecopyrighted, a work can only be copied at the creators disposal. By having copyright laws, ourgovernment is encouraging the formation of new ideas and concepts by securing the creators reward fortheir hard work and great consumption of time.Red herring prospectusThis is an initial prospectus to be submitted by a company which is planning to have an IPO. It contains allthe information about the company except for the offer price and the effective date, which arent known atthat time. There are several additions and edits to this document before the final prospectus is released.The reason it is called a Red herring is due to a section of the document colored in red which explicitlystates that the issuing company is not attempting to sell its shares before it has been given officialapproval by the SEC.Book Building is a process of fixing the share price based on the demand at various price levels.CRISIL----Credit Rating Information Services of India LimitedPortfolio ManagementThe science of making decisions about investment mix and policy.SEDAR----System for Electronic Document Analysis and RetrievalEDGAR----Electronic Data Gathering Analysis and Retrieval
  • 18. Spread----difference between bid and offer prices; also, difference between high and low prices of aparticular security over a given period.BID----An offer or proposal made by an investor or broker to buy a security.Offer---- A proposal or offer made by an investor or broker to sell a security.Merchant BankA bank that deals mostly in (but is not limited to) international finance, long-term loans for companies andunderwriting. Merchant banks do not provide regular banking services to the general public.Write short notes on the following:1) Debentures2) Convertible debentures3) Difference between public company and private company4) Difference between director and promoter5) Difference between Authorized and issued Capital6) Debt equity ratio7) Margin of safety8) Break even point9) Put option10) Call option11) Redeemable shares12) Intangible assets/tangible assets13) Rights issue14) Employee stock option15) Articles of association16) Cash flow statement17) Memorandum of association18) Insider trading19) Venture Capital20) Seed Capital21) Bridge finance22) Mutual funds23) Contingent liabilities24) Stock split25) Reverse merger26) Discounted bonds27) Merger28) Fictitious assets29) Factoring30) Capital budgeting31) Underwriting32) Business diversification33) Annual report34) Annual general meeting
  • 19. 35) Subsidiary company36) Price Earning Ratio37) Return on Investments38) Debt to Equity Ratio39) Market Capitalization40) Bankruptcy41) Capital Reserves42) Share Premium43) Contingent liabilities44) Derivatives45) EPS and DPS46) Pledge and hypothecation47) Zero based budgetWrite essay on any one of the following1) Women reservation bill2) Globalization3) Effect of movies on youth4) Education system in India5) Role of the media in the society6) Can the film stars become good administrators?7) Importance of small states8) Impact of western culture on Indian culture9) Most unforgettable/favorite movement10) Role model11) Is Hyderabad a hi-tech city?12) BPO and KPO