1.What are different types of Dividends?1.Regular Dividend. By dividend we mean regular dividend paid annually,proposed by...
form of cash or bonus shares only. Distribution of dividend in anyother form is not allowed.2. What is Stock Dividends?Sto...
electronic screen based equity securities trading market in the unitedstates.11. What is meant by OTC? Over-the-counter (O...
The amount of capital that a company has been authorized toraise by way of equity and preference shares through the Articl...
27. What Does Warrant Mean?A derivative security that gives the holder the right to purchasesecurities (usually equity) fr...
BSE Stand for Bombay Stock Exchange. It is Indias Oldest StockExchange with listing of over 4000 scripts with it. This not...
Equity is an ordinary share of any company which invested or holdedby companys share holders and dividend or interest on t...
41. what Are Hedge Funds?   Hedge funds are risk free funds. Hedge is using for risk avoiders.so these hedging is give hig...
46. full form of sensex?        IT IS A SENSITIVITY INDEX OF BSE47. What do you mean by favorable balance of trade        ...
hey differ in the target investors. Mutual funds target investors areretail while those of PMS are High net-worth individu...
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MBA Finance Interview questions (share Trading)

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MBA Finance Interview questions (share Trading)

  1. 1. 1.What are different types of Dividends?1.Regular Dividend. By dividend we mean regular dividend paid annually,proposed by the board of directors and approved by the shareholders ingeneral meeting. It is also known as final dividend because it isusually paid after the finalization of accounts. It sis generally paidin cash as a percentage of paid up capital, say 10 % or 15 % of thecapital. Sometimes, it is paid per share. No dividend is paid on callsin advance or calls in arrears. The company is, however, authorised tomake provisions in the Articles prohibiting the payment of dividend onshares having calls in arrears.(2) Interim Dividend. If Articles so permit, the directors may decideto pay dividend at any time between the two Annual General Meetingbefore finalizing the accounts. It is generally declared and paid whencompany has earned heavy profits or abnormal profits during the yearand directors which to pay the profits to shareholders. Such payment ofdividend in between the two Annual General meetings before finalizingthe accounts is called Interim Dividend. No Interim Dividend can bedeclared or paid unless depreciation for the full year (notproportionately) has been provided for. It is, thus,, an extra dividendpaid during the year requiring no need of approval of the AnnualGeneral Meeting. It is paid in cash.(3) Stock-Dividend. Companies, not having good cash position, generallypay dividend in the form of shares by capitalizing the profits ofcurrent year and of past years. Such shares are issued instead ofpaying dividend in cash and called Bonus Shares. Basically there isno change in the equity of shareholders. Certain guidelines have beenused by the company Law Board in respect of Bonus Shares.(4) Scrip Dividend. Scrip dividends are used when earnings justify adividend, but the cash position of the company is temporarily weak. So,shareholders are issued shares and debentures of other companies. Suchpayment of dividend is called Scrip Dividend. Shareholders generally donot like such dividend because the shares or debentures, so paid areworthless for the shareholders as directors would use only suchinvestment is which were not . Such dividend was allowed before passingof the Companies (Amendment) Act 1960, but thereafter this unhealthypractice was stopped.(5) Bond Dividends. In rare instances, dividends are paidin the form of debentures or bounds or notes for a long-term period. The effect of such dividend is the same asthat of paying dividend in scrips. The shareholders becomethe secured creditors is the bonds has a lien on assets.(6) Property Dividend. Sometimes, dividend is paid in the form of assetinstead of payment of dividend in cash. The distribution of dividend ismade whenever the asset is no longer required in the business such asinvestment or stock of finished goods. But, it is, however, importantto note that in India, distribution of dividend is permissible in the
  2. 2. form of cash or bonus shares only. Distribution of dividend in anyother form is not allowed.2. What is Stock Dividends?Stock dividend is the shares offered by the company instead of dividendto its shareholders. This is one way to retain dividens with thecomapny itself. Investors will get shares without paying anything extra.3. What is Bonus Dividends? If the companey reserves gradually incresing, the directoresDecided to issuig a bonus by a dividend nothing but a Reserves andsurplus4. What is Interium Dividend? interim divident are paid in between the two fiscal years.This means it is paid in middle of the financial yearA dividend whichis declared and distributed before the companys annual earnings havebeen calculated; often distributed quarterly.5. What is Right Issue? when the company goes for the further issue, then it give thefirst preference to the employees and the existing share holders. it iscalled right issue. not to the employees.. only existing shareholders.. the new issue is made to the existing share holders is calledas right issue.. generally the issue price is lower than the marketprice of the companys stock.6. What is Capital Budgeting? capital budgting refers to the a long term funds invest inassets.7. difference between Funds Flow and Cash Flow statements?In fund flow statement all the current assets and current liabilitiesalso included with cash. In cash flow statement only cash flow isincluded.8. What is the difference between Long term Loan and Debt? long term loans are taken for the purpose of long term investmentsor capital investments but debt are taken for the purpose of maintainthe shot term financial needs of the company.9. What are cash Resources? The cash resources for a firm are: Returns oninvestment,IPOs, Loan from other FIs,Returns on equity stak, etc.10. What is NASDAQ? nasdaqs stands for national assocaation of securities dealersautomated quotations.it is an american stock exchange.it is the largest
  3. 3. electronic screen based equity securities trading market in the unitedstates.11. What is meant by OTC? Over-the-counter (OTC) trading is to trade financial instruments suchas stocks, bonds, or derivatives directly between two parties. It isthe opposite of exchange trading which occurs on futures exchanges orstock exchanges. An over-the-counter (OTC) contract is a bi-lateralcontract in which two parties agree on how a particular trade oragreement is to be settled in the future. For derivatives theseagreements are usually governed by an International Swaps andDerivatives Association agreement. An over-the-counter (OTC) market isa financial market where products are traded over-the-counter. overthe counter.this exchange is for small scale industry.12. What Are Hedge Funds? hedge funds is risk free funds.13. What is meant by Market Capitalization? Market Capitalization= Total no. of shares * share pricePutting in simple terms, Market price is the total amount that theinvestor has to pay if he decides to buy all the shares of a company(this is only a hypothetical situation)14 What is Technical Analysis?Technical analysis is method of predicting the share price movementswith the help of price graphs or charts (along with volume figures).Price movement is the only criteria to predict future prices of stocksin Technical Analysis15. DOW stock exchange belong to which country? Dow Jones from America16. What is Leverage Ratio? Debt-Equity Ratio = Total Debt / Total Equity D/E Ratio = Outsiders funds / Shareholders fundsAny ratio used to calculate the financial leverage of a company to getan idea of the companys methods of financing or to measure its abilityto meet financial obligations. There are several different ratios, butthe main factors looked at include debt, equity, assets and interestexpenses.17. What is Paid up Capital? paid up capital is flly paid by shareholder18. What is authorized Capital?
  4. 4. The amount of capital that a company has been authorized toraise by way of equity and preference shares through the Articles ofAssociation / Memorandum of Association of the company. This istypically the capital at the time it has been incorporated. The facevalue is also closely linked to the first issue of authorized capital….19. What is EPS? Earning per share means return earned per share. it is calculated as EPS= Profit after tax/No of outstanding shares20. What is Investment? in simple investment means employement of funds in order togenerate future returns or future income.21. What is Money Market? The market dealing in a short term funds is knowns as money market22. What is meant by company Deposits? Some times a Company may accept deposits from the public with thepermission of RBI. It should disclose the Redumption period andinterest rate23. What is Treasury Bills? it is short term money market instrument which is issued by the govtat discounted value .it means it will issue a 500 rs worth of bill at410 rs like that .after at the maturity date it will pay rs 500. toholder of bill.24. Who is a lame-duck? A person who has defaulted on his or her debts or has gone bankrupteddue to the stock market. The financial use of the term is most commonlyused in Europe. trader or investor who makes poor trades and ends upwith heavy losses over time would be considered a lame duck. Often, ifa trader goes bankrupt, it is not the result of one bad trade but a longstring of them - such a trader is called a lame duck because he or heris ineffective as a trader.25. What is Beta? It is a tool used to measure the systematic risk of the securities.26. What is Bear market? A market condition in which the prices of securities are falling, andwidespread pessimism causes the negative sentiment to be self-sustaining. As investors anticipate losses in a bear market and sellingcontinues, pessimism only grows. Although figures can vary, for many, adownturn of 20% or more in multiple broad market indexes, such as theDow Jones Industrial Average (DJIA) or Standard & Poors 500 Index (S&P500), over at least a two-month period, is considered an entry into abear market.
  5. 5. 27. What Does Warrant Mean?A derivative security that gives the holder the right to purchasesecurities (usually equity) from the issuer at a specific price withina certain time frame. Warrants are often included in a new debt issueas a "sweetener" to entice investors. these are long term options(wherethe writer grants the buyer to purchase the asset in specifictime)these are being issued by companies and financial institutions.itdoes not have any initial service cost and dividend payment. it has alife of more than five years..28. What is net present value?.NPV = Present Value of cash inflows - Present Value of cash outflows.Net present value (NPV) is a standard method for the financialappraisal of long-term projects. Used for capital budgeting, and widelythroughout economics, it measures the excess or shortfall of cashflows, in present value (PV) terms, once financing charges are met. Bydefinition,29. what is stock? stock means fully paid up shares.30. What is EBIDTA?EBIDTA - Earnings before Interest, Depreciation Tax and Amortization.EBITDA = Revenue - Total cost of sales = Operating profit - OtherOverheads.31. Arbitragein simple terms arbitrage is nothing but the usage of securities riskfreely in different markets to earn profits. for e.g, buying of someshares in the market where the price is low and selling in the marketwhere there is a higher price.31. Who first launched floating interest rate bonds in the capital marketin India?Franklin Templeton is the first firm to introduce floating rateinterest bond in Indian market in 2001.32. Difference between the BSE and NSE not their expansion NSE Stands for National Stock Exchange. It has more than 2000stocks from different sectors listed with it. It is fully automatedelectronic order processing exchange. Nifty is major index of NSE andit comprise of 50 scripts from different sectors.
  6. 6. BSE Stand for Bombay Stock Exchange. It is Indias Oldest StockExchange with listing of over 4000 scripts with it. This not fullyautomated yet but progress towards full automation is underway. SENSEXis major index of BSE and it comprise of 30 scripts from differentsectors.33. How is an investment decision different from a financingdecision?The financing decision involves the sources of funds which are neededfor the business investment. we choose among different resources toacquire funds from them.For example, we should sale out our new shares, borrowing from a bankor taking credit from the suppliers. while in the investment decisionthe funds acquired are invested or we may say the comapnays capital isinvested in purchasing the assets(fixed assets and current assets).34. what is mean by Due Diligence due diligence means investigation or audit in the companies, that toreasonable person should take before entering into an agreement or atransaction of another party.35. what is exotic option?? and what do you mean by plain vanillaoption? Exotic options are derivatives that have features which aredifferent and compex then commonly traded products these are notexchange traded but are traded OTC due to their built to order nature.On the other hand plain vanilla options are simple options like callsand puts which are Exchange traded as well as OTC traded.36. 5. Differences between Debentures and shares1. debenture are the creditors to the company. share hodlders are the owners to the company2. debenture holders they dont have voting power. Share holders have voting rights.3. Debebture interest rate is paid at predetermined fixed rate. Dividend on share depends on profits of the company;37.wht u mean by equity share
  7. 7. Equity is an ordinary share of any company which invested or holdedby companys share holders and dividend or interest on those sharesare given to the shareholders based on the companys profit. If thecompany not earning profit then the shareholders will not receive anydividend or interest untill the company not start making profitEquity is the ordinary share which is invested in the company by theshareholders. it includes risk as well as return based on the companysprofit.38 what is float discuss? when the rate & prices are not stable that is floatFloat in stock market: Float is the total number of equity shares thatare ready for free trade in secondary market.Float is the period between opening and closing of a transactionFloat in Companies Act 1956: Float is the amount of money to be raisedfor the company39.Company why should issue Debentures and shares, Which one shouldissue better for company and why? to raise capital it issue debentures and shares but ifinterest is low, company should go for issuing debentures because if itissue shares ownership dilutes it results decrease in EPS The company raises capital/finance using 2 methods.1)Internally.2)Externally.Internally the finance is raised by the issue of the debentures that israising the money on intrest from the borrowers.Externally the finance is raised by the issue of the shares,preferenceshares and equity shares. if the rate of interst is less than tha company should issue adebenture beacuse there is a low risk .but if interst is to much highthan company should issue share40.what is difference between primary market & secondary market?PRIMARY MARKET: IT IS ALSO CALLED NEW ISSUE MARKET.HERE INVESTOR WILLBUY SECURITIES BUT CANT SELL THERE.SECONDARY MARKET: IT IS ALSO CALLED STOCK MARKET OR STOCK EXCHANGE. ITIS AN ORGANIZED MARKET WHERE SECURITIES ARE TRADED I.E BOTH BUYING ANDSELLING ACTIVITIES TAKEN PLACE.
  8. 8. 41. what Are Hedge Funds? Hedge funds are risk free funds. Hedge is using for risk avoiders.so these hedging is give higher protection with minimum gain for EX;LAND INVESTMENT, GOLD INVESTMENT42. what is meant by index in stock marketing Index in stock marketing means that shows current marketposition related to companies.43.wht is preference share capital..?Preference capital means the shareholders of a company holdingpreference share are not the owners of the co.The preference shareholders get fixed percentage of dividend from the profit earned by thecompany.Also they get preference over equity share holdrs during thetime of payment of dividend and during the time of winding up of thecompany.44. What Is A Mutual founds mutual fund means collect the fund from the small investor andthis fund is mobilized from the different securities.mutual fund arealso financial securities.45. Why the company prefering prefence capital rather than debenturecapital? with an object of diversifying the risk during the lossyears of the company preference shares are issued. but in case ofdebentures even during the times of loss years also interest should bepaid along with fixed interest. and more over preference dividendspayments can also be paid during next years profit of the companies incase of cumulative preference shares. so for all this reasons companyissue preference shares instead of debentures.46. WHAT IS THE DIFFERENCE BETWEEN Speculation and Investment?investment:1.the investor invest for long term gain purpose2. the investor hold securities for long period.3.risk is less as compare to speculation4.the rate of return is less as compare to speculationspeculation:1.the investor invest for short term gainpurpose2.the investor hold securities very short period say 1 or 2days3.risk is high4.rate of return is more5.it invole buying and silling of securities45. nikkie stock exchange belongs to which country japan stock exchange
  9. 9. 46. full form of sensex? IT IS A SENSITIVITY INDEX OF BSE47. What do you mean by favorable balance of trade Having exports which exceed imports48. whats Dollex 30? DOLLEX-30 is the dollar version of BSE Sensex,49. whats Derivative? In finance, a derivative is a financial instrument (or, moresimply, an agreement between two parties) that has a value, based onthe expected future price movements of the asset to which it is linked—called the underlying asset—[1] such as a share or a currency. There aremany kinds of derivatives, with the most common being swaps, futures,and options. Derivatives are a form of alternative investment50. what is the green shoe option referred to in stock market if a stock is over subscribed then it is referred as greenshoe subscription51. how can i invest in bse? Open a demat account and DP account. Then you can select thestock you want.52. why is forex market and gold market are in inverse action? basically forex market is related to equity and gold relatedto treasury. according to finacial term there are two types ofinvestment equity sector and trasury sectot,when there is lot of riskinmarket golg goes up and forex goes down because people move towardssafe investment.dude to this it relate to inverse in action.53. What is the Mutual Funds? What is the Portfolio ManagementServices (PMS)? What is the difference between Mutual fundsand Portfolio Management services? Give me detailexplanation??mutual fund is a one of the financial service. collectingsaving from the public and the savings will be investmentin different companies stocks, bonds and debenchers.thisfunction done by fund manager.port folio means collection of investment allowed by companyor individual person .or combination of various investments.the combination may be equity shares and prefrencce sharesand bonds and mutual funds,
  10. 10. hey differ in the target investors. Mutual funds target investors areretail while those of PMS are High net-worth individuals..54. when will establish first stock exchange? 1460 in antwarp,belgium.55.

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