This chapter discusses measuring and evaluating the performance of banks and their competitors. It covers key profitability and risk ratios used to analyze performance, including return on equity, return on assets, net interest margin, and risk measures. The chapter also discusses how size and location can impact performance metrics and ratios. Regulatory reports like the UBPR and BHCPR provide detailed financial data and ratios to analyze bank and holding company performance over time.
This document discusses asset-liability management and interest rate risk management techniques used by financial institutions. It covers topics such as interest rate risk, yield curves, and strategies to protect a bank's net interest margin from changes in interest rates. Specifically, it describes interest-sensitive gap management, which aims to match the volume of repricing assets with repricing liabilities during different time periods in order to hedge against interest rate movements.
The document discusses the key components of balance sheets and income statements for banks and other financial firms. It explains that balance sheets show the sources of funds and how they are allocated as assets, while income statements show revenues, costs, and earnings. Specific asset, liability, and capital items on bank balance sheets are also outlined, including cash, securities, loans, deposits, and equity. Factors like loan losses and reserves are additionally covered.
This document contains lecture slides about interest rates and security valuation. It defines various interest rate measures like coupon rate, required rate of return, expected rate of return, and realized rate of return. It also discusses how to calculate the present value of bonds and stocks using these different rates. Additional topics covered include duration, which measures a bond's price sensitivity to interest rates, and convexity, which diminishes errors in duration estimates. Worked examples are provided to illustrate bond valuation and predicting price changes using duration.
This document discusses various risks faced by banks such as credit risk, liquidity risk, market risk, and operational risk. It summarizes Basel I, Basel II, and Basel III capital adequacy frameworks which establish minimum capital requirements for banks. It outlines the key components of Tier 1 and Tier 2 capital and how risk weighted assets are calculated to determine the capital adequacy ratio. The Reserve Bank of India requires banks to maintain a minimum capital to risk-weighted assets ratio of 9% under Basel II norms.
The document discusses managing interest rate risk in banks, including defining interest rate risk, describing the types of interest rate risks such as repricing risk and basis risk, and strategies for measuring and controlling interest rate risk such as following Basel Committee recommendations and sound risk management practices.
Basel II is an international standard that aims to strengthen the regulation, supervision and risk management within the banking sector. It improves upon Basel I by making capital requirements more risk sensitive and aligning regulatory capital more closely with underlying bank risks. Basel II consists of three pillars that cover minimum capital requirements, supervisory review, and market discipline. Implementation of Basel II varies across countries and regulators but aims to modernize capital adequacy standards to be more comprehensive and risk sensitive.
The CAMELS rating system is used by US regulators to evaluate the overall condition of banks based on their Capital adequacy, Asset quality, Management, Earnings, Liquidity, and Sensitivity to market risk. It rates banks on a scale of 1 to 5 based on an analysis of their financial statements and on-site examinations, with 1 being the strongest. The ratings are used to determine a bank's stability and identify weaknesses as well as allocate supervisory resources.
Short presentation on fall of the 4th biggest investment bank firm in United States during the period of financial crisis in 2008 which ultimately started recession in Unites States Of America and subsequent impact on whole world of economy.
This document discusses asset-liability management and interest rate risk management techniques used by financial institutions. It covers topics such as interest rate risk, yield curves, and strategies to protect a bank's net interest margin from changes in interest rates. Specifically, it describes interest-sensitive gap management, which aims to match the volume of repricing assets with repricing liabilities during different time periods in order to hedge against interest rate movements.
The document discusses the key components of balance sheets and income statements for banks and other financial firms. It explains that balance sheets show the sources of funds and how they are allocated as assets, while income statements show revenues, costs, and earnings. Specific asset, liability, and capital items on bank balance sheets are also outlined, including cash, securities, loans, deposits, and equity. Factors like loan losses and reserves are additionally covered.
This document contains lecture slides about interest rates and security valuation. It defines various interest rate measures like coupon rate, required rate of return, expected rate of return, and realized rate of return. It also discusses how to calculate the present value of bonds and stocks using these different rates. Additional topics covered include duration, which measures a bond's price sensitivity to interest rates, and convexity, which diminishes errors in duration estimates. Worked examples are provided to illustrate bond valuation and predicting price changes using duration.
This document discusses various risks faced by banks such as credit risk, liquidity risk, market risk, and operational risk. It summarizes Basel I, Basel II, and Basel III capital adequacy frameworks which establish minimum capital requirements for banks. It outlines the key components of Tier 1 and Tier 2 capital and how risk weighted assets are calculated to determine the capital adequacy ratio. The Reserve Bank of India requires banks to maintain a minimum capital to risk-weighted assets ratio of 9% under Basel II norms.
The document discusses managing interest rate risk in banks, including defining interest rate risk, describing the types of interest rate risks such as repricing risk and basis risk, and strategies for measuring and controlling interest rate risk such as following Basel Committee recommendations and sound risk management practices.
Basel II is an international standard that aims to strengthen the regulation, supervision and risk management within the banking sector. It improves upon Basel I by making capital requirements more risk sensitive and aligning regulatory capital more closely with underlying bank risks. Basel II consists of three pillars that cover minimum capital requirements, supervisory review, and market discipline. Implementation of Basel II varies across countries and regulators but aims to modernize capital adequacy standards to be more comprehensive and risk sensitive.
The CAMELS rating system is used by US regulators to evaluate the overall condition of banks based on their Capital adequacy, Asset quality, Management, Earnings, Liquidity, and Sensitivity to market risk. It rates banks on a scale of 1 to 5 based on an analysis of their financial statements and on-site examinations, with 1 being the strongest. The ratings are used to determine a bank's stability and identify weaknesses as well as allocate supervisory resources.
Short presentation on fall of the 4th biggest investment bank firm in United States during the period of financial crisis in 2008 which ultimately started recession in Unites States Of America and subsequent impact on whole world of economy.
Interest rate risk management for banks under Basel II, presentation by Christine Brown, Department of Finance , The University of Melbourne, Shanghai, December 8-12, 2008
Term loans provided by Indian banks can be used to finance the acquisition of fixed assets and working capital. They typically have fixed interest rates and repayment schedules between 1 to 10 years. Banks consider various factors when evaluating term loan applications such as the creditworthiness, reputation, profitability, and financial ratios of the borrower. If approved, loans are disbursed after a thorough financial appraisal of the borrower's cash flows, credit needs, and ability to repay the loan. Syndicated loans involve a group of lenders organized by one or more arranging banks.
MODULE 3:
Credit Risks Credit Risk Management models - Introduction, Motivation, Funtionality of good credit. Risk Management models- Review of Markowitz’s Portfolio selection theory –Credit Risk Pricing Model – Capital and Rgulation. Risk management of Credit Derivatives.
Basel III is a global regulatory framework that aims to strengthen bank capital requirements and introduces new regulations on bank liquidity and leverage. It seeks to raise the quality of capital held by banks and strengthen their ability to absorb losses. The document outlines the key components of Basel III, including higher capital requirements, a new leverage ratio, and liquidity standards. It also discusses the potential macroeconomic impact and advantages of Basel III, as well as country-level implementations like in the US.
This document discusses credit risk economic capital modeling. It provides an overview of the role of bank capital in absorbing unexpected losses while maintaining solvency. It then interprets Basel 2's capital equation, which incorporates factors like the Vasicek model, correlation, expected loss (EL), and tenor adjustment. The document introduces a model that follows Basel's approach while also using simulation to measure economic capital (EC). It discusses key applications of EC in areas like risk governance, external communication, and internal management. EC reflects a bank's risk appetite by indicating how much unexpected loss the bank is willing to absorb with its capital reserves.
The document discusses various topics related to credit risk modeling based on Hull's book. It covers estimation of default probabilities from bond prices, credit ratings migration matrices, measures of credit default correlation, and techniques for reducing credit exposure such as collateralization and credit derivatives. Key points include how risk-neutral probabilities of default estimated from bond prices are higher than historical default rates, and how ratings migration matrices can be constructed to be consistent with default probabilities implied by bond prices.
This document discusses asset liability management (ALM) in banks. It begins with definitions of ALM and describes the objectives of ALM as including efficient capital allocation, product pricing, and profitability and risk management. It outlines the components of an ALM framework including strategic, organizational, operational, and other elements. It also describes the ALM process in banks including data collection, analysis, decision making, and monitoring. Key aspects covered include the ALM committee, models used like gap analysis and duration analysis, the role of ALM under Basel standards, and ALM software options.
Private equity funds are investment vehicles comprised of limited partners who invest capital and general partners who manage the funds. They have a limited lifetime of typically 10 years to make investments and then another 2 years to sell investments and return profits to investors. General partners receive management fees of around 1-2% of assets under management as well as carried interest, usually 20% of profits above an 8% hurdle rate. This structure allows for investors and managers to benefit from private equity returns without incurring multiple layers of taxation.
The Central Bank of Bangladesh was established in 1972 after the country gained independence. It formulates and implements monetary policy in Bangladesh and regulates banks and financial markets. As the country's central bank, it aims to manage currency issuance and payment systems, regulate foreign exchange, and advise the government on economic policies. It uses various monetary policy tools like open market operations, reserve requirements, and interest rates to influence money supply and achieve objectives like price stability.
The document provides an overview of the key components of a bank's balance sheet, including assets and liabilities. It discusses the various line items under assets (such as cash, investments, advances) and liabilities (such as capital, reserves, deposits, borrowings). It also summarizes the components of a bank's profit and loss statement and provides details on liquidity management, asset liability management and interest rate risk management. The document is intended as a presentation on managing a bank's assets, liabilities, liquidity and interest rate risk.
Credit risk modeling helps estimate potential credit losses and determine how much capital is needed to protect against such risks. It is more complex than market risk modeling due to factors like limited data on defaults, illiquidity in credit markets, non-normal distributions of losses, and correlations between obligors that increase in downturns. The main approaches are default mode, which considers losses from defaults, and mark-to-market, which also incorporates losses from credit quality deterioration. Structural models link default to a firm's asset value while reduced form models view default as a random event. Correlations between probability of default, exposure at default, and loss given default are also important to consider.
The document discusses the introduction and process of credit appraisal. It defines credit appraisal as evaluating a loan proposal to assess the borrower's repayment capacity by analyzing various factors like market, management, technical and financial. The key objectives are to ensure safety of funds and that money is given to borrowers who can repay. The process involves assessing the creditworthiness, willingness and capacity of the borrower to repay, along with risks that may impact repayment. A thorough appraisal justifies spending money on a project by considering technical, commercial, financial and other factors.
This document provides an overview of fixed income markets and bond fundamentals. It defines key terms like principal, coupon rate, maturity date, and bond ratings. Various types of fixed income instruments are discussed, including treasury securities, municipal bonds, and money market products. The roles of major market participants like issuers, investors, and dealers are outlined. Bond valuation metrics like yield, price, and quotes are also introduced.
This document provides an introduction to credit risk factors and measures. It discusses key concepts like exposure at default, loss given default, probability of default, expected loss, and one-year expected loss. It also provides an example of calculating these measures for a simple loan with a principal of $10,000, loss given default of 90%, probability of default of 3%, and residual maturity of 3 years. The expected loss is calculated as $786 and one-year expected loss is $270 for this loan.
CAMELS MODEL Analysis on Banking Sector.Ranga Nathan
The document discusses CAMELS ratings which are used to assess the overall condition of banks. The CAMELS acronym refers to six components evaluated: Capital adequacy, Asset quality, Management, Earnings, Liquidity, and Sensitivity to market risk. Ratings are assigned on a scale of 1 to 5 with 1-2 indicating few supervisory concerns and 3-5 indicating increasing supervisory concerns. The document then provides details on the components of CAMELS ratings and analyzes four Indian banks based on their capital adequacy ratios.
The document discusses financial statements for banks. It notes that banks face unique risks like interest rate risk and credit risk that require a distinct analytical approach. It introduces the balance sheet and income statement. The balance sheet provides a snapshot of assets, liabilities, and equity, with assets always equaling liabilities plus equity. For banks, the main assets are loans while deposits are the largest liability. The income statement shows revenues and expenses over time, with the difference being profit or loss. It also discusses some key aspects of how banks report items on and off their balance sheets.
Hedge funds and mutual funds both pool money from investors to be professionally managed. However, there are key differences in their investment approaches, investor requirements, and regulations. Hedge funds focus on absolute returns, can invest in any asset class including risky investments, use leverage to enhance returns, run concentrated portfolios, and charge high fees to accredited investors. Mutual funds focus on relative returns, have diversification and compliance requirements, charge lower fees to retail investors, and are highly regulated for investor protection.
Identifying and Accessing the scenario to minimize, monitor, and control the probability and/or impact of unfortunate events[ is the goal behind understanding Risk Management, Prof. Gangadharan Mani here teaches how to identify, Measure, and Mitigate the risks evolved in respective Business Environment.
For more such innovative content on management studies, join WeSchool PGDM-DLP Program: http://bit.ly/ZEcPAc
This chapter provides an overview of the banking industry and financial services sector. It discusses the many types of banks, the financial service competitors of banks, the traditional and recent services offered by banks, the roles of commercial banks and their closest competitors, and the trends affecting banks and other financial service firms today such as increased competition, technological change, and globalization.
The document discusses the key financial statements - balance sheets and income statements - of banks and other financial firms. It explains that balance sheets show the composition of funds sources and how they are allocated as assets, while income statements show revenues and expenses over a period of time. The document then provides detailed explanations of line items on both statements, such as different types of assets, liabilities, equity, interest and noninterest income/expenses. Tables are included comparing financial data across banks.
Interest rate risk management for banks under Basel II, presentation by Christine Brown, Department of Finance , The University of Melbourne, Shanghai, December 8-12, 2008
Term loans provided by Indian banks can be used to finance the acquisition of fixed assets and working capital. They typically have fixed interest rates and repayment schedules between 1 to 10 years. Banks consider various factors when evaluating term loan applications such as the creditworthiness, reputation, profitability, and financial ratios of the borrower. If approved, loans are disbursed after a thorough financial appraisal of the borrower's cash flows, credit needs, and ability to repay the loan. Syndicated loans involve a group of lenders organized by one or more arranging banks.
MODULE 3:
Credit Risks Credit Risk Management models - Introduction, Motivation, Funtionality of good credit. Risk Management models- Review of Markowitz’s Portfolio selection theory –Credit Risk Pricing Model – Capital and Rgulation. Risk management of Credit Derivatives.
Basel III is a global regulatory framework that aims to strengthen bank capital requirements and introduces new regulations on bank liquidity and leverage. It seeks to raise the quality of capital held by banks and strengthen their ability to absorb losses. The document outlines the key components of Basel III, including higher capital requirements, a new leverage ratio, and liquidity standards. It also discusses the potential macroeconomic impact and advantages of Basel III, as well as country-level implementations like in the US.
This document discusses credit risk economic capital modeling. It provides an overview of the role of bank capital in absorbing unexpected losses while maintaining solvency. It then interprets Basel 2's capital equation, which incorporates factors like the Vasicek model, correlation, expected loss (EL), and tenor adjustment. The document introduces a model that follows Basel's approach while also using simulation to measure economic capital (EC). It discusses key applications of EC in areas like risk governance, external communication, and internal management. EC reflects a bank's risk appetite by indicating how much unexpected loss the bank is willing to absorb with its capital reserves.
The document discusses various topics related to credit risk modeling based on Hull's book. It covers estimation of default probabilities from bond prices, credit ratings migration matrices, measures of credit default correlation, and techniques for reducing credit exposure such as collateralization and credit derivatives. Key points include how risk-neutral probabilities of default estimated from bond prices are higher than historical default rates, and how ratings migration matrices can be constructed to be consistent with default probabilities implied by bond prices.
This document discusses asset liability management (ALM) in banks. It begins with definitions of ALM and describes the objectives of ALM as including efficient capital allocation, product pricing, and profitability and risk management. It outlines the components of an ALM framework including strategic, organizational, operational, and other elements. It also describes the ALM process in banks including data collection, analysis, decision making, and monitoring. Key aspects covered include the ALM committee, models used like gap analysis and duration analysis, the role of ALM under Basel standards, and ALM software options.
Private equity funds are investment vehicles comprised of limited partners who invest capital and general partners who manage the funds. They have a limited lifetime of typically 10 years to make investments and then another 2 years to sell investments and return profits to investors. General partners receive management fees of around 1-2% of assets under management as well as carried interest, usually 20% of profits above an 8% hurdle rate. This structure allows for investors and managers to benefit from private equity returns without incurring multiple layers of taxation.
The Central Bank of Bangladesh was established in 1972 after the country gained independence. It formulates and implements monetary policy in Bangladesh and regulates banks and financial markets. As the country's central bank, it aims to manage currency issuance and payment systems, regulate foreign exchange, and advise the government on economic policies. It uses various monetary policy tools like open market operations, reserve requirements, and interest rates to influence money supply and achieve objectives like price stability.
The document provides an overview of the key components of a bank's balance sheet, including assets and liabilities. It discusses the various line items under assets (such as cash, investments, advances) and liabilities (such as capital, reserves, deposits, borrowings). It also summarizes the components of a bank's profit and loss statement and provides details on liquidity management, asset liability management and interest rate risk management. The document is intended as a presentation on managing a bank's assets, liabilities, liquidity and interest rate risk.
Credit risk modeling helps estimate potential credit losses and determine how much capital is needed to protect against such risks. It is more complex than market risk modeling due to factors like limited data on defaults, illiquidity in credit markets, non-normal distributions of losses, and correlations between obligors that increase in downturns. The main approaches are default mode, which considers losses from defaults, and mark-to-market, which also incorporates losses from credit quality deterioration. Structural models link default to a firm's asset value while reduced form models view default as a random event. Correlations between probability of default, exposure at default, and loss given default are also important to consider.
The document discusses the introduction and process of credit appraisal. It defines credit appraisal as evaluating a loan proposal to assess the borrower's repayment capacity by analyzing various factors like market, management, technical and financial. The key objectives are to ensure safety of funds and that money is given to borrowers who can repay. The process involves assessing the creditworthiness, willingness and capacity of the borrower to repay, along with risks that may impact repayment. A thorough appraisal justifies spending money on a project by considering technical, commercial, financial and other factors.
This document provides an overview of fixed income markets and bond fundamentals. It defines key terms like principal, coupon rate, maturity date, and bond ratings. Various types of fixed income instruments are discussed, including treasury securities, municipal bonds, and money market products. The roles of major market participants like issuers, investors, and dealers are outlined. Bond valuation metrics like yield, price, and quotes are also introduced.
This document provides an introduction to credit risk factors and measures. It discusses key concepts like exposure at default, loss given default, probability of default, expected loss, and one-year expected loss. It also provides an example of calculating these measures for a simple loan with a principal of $10,000, loss given default of 90%, probability of default of 3%, and residual maturity of 3 years. The expected loss is calculated as $786 and one-year expected loss is $270 for this loan.
CAMELS MODEL Analysis on Banking Sector.Ranga Nathan
The document discusses CAMELS ratings which are used to assess the overall condition of banks. The CAMELS acronym refers to six components evaluated: Capital adequacy, Asset quality, Management, Earnings, Liquidity, and Sensitivity to market risk. Ratings are assigned on a scale of 1 to 5 with 1-2 indicating few supervisory concerns and 3-5 indicating increasing supervisory concerns. The document then provides details on the components of CAMELS ratings and analyzes four Indian banks based on their capital adequacy ratios.
The document discusses financial statements for banks. It notes that banks face unique risks like interest rate risk and credit risk that require a distinct analytical approach. It introduces the balance sheet and income statement. The balance sheet provides a snapshot of assets, liabilities, and equity, with assets always equaling liabilities plus equity. For banks, the main assets are loans while deposits are the largest liability. The income statement shows revenues and expenses over time, with the difference being profit or loss. It also discusses some key aspects of how banks report items on and off their balance sheets.
Hedge funds and mutual funds both pool money from investors to be professionally managed. However, there are key differences in their investment approaches, investor requirements, and regulations. Hedge funds focus on absolute returns, can invest in any asset class including risky investments, use leverage to enhance returns, run concentrated portfolios, and charge high fees to accredited investors. Mutual funds focus on relative returns, have diversification and compliance requirements, charge lower fees to retail investors, and are highly regulated for investor protection.
Identifying and Accessing the scenario to minimize, monitor, and control the probability and/or impact of unfortunate events[ is the goal behind understanding Risk Management, Prof. Gangadharan Mani here teaches how to identify, Measure, and Mitigate the risks evolved in respective Business Environment.
For more such innovative content on management studies, join WeSchool PGDM-DLP Program: http://bit.ly/ZEcPAc
This chapter provides an overview of the banking industry and financial services sector. It discusses the many types of banks, the financial service competitors of banks, the traditional and recent services offered by banks, the roles of commercial banks and their closest competitors, and the trends affecting banks and other financial service firms today such as increased competition, technological change, and globalization.
The document discusses the key financial statements - balance sheets and income statements - of banks and other financial firms. It explains that balance sheets show the composition of funds sources and how they are allocated as assets, while income statements show revenues and expenses over a period of time. The document then provides detailed explanations of line items on both statements, such as different types of assets, liabilities, equity, interest and noninterest income/expenses. Tables are included comparing financial data across banks.
This chapter discusses measuring and evaluating the performance of banks and their competitors. It covers key profitability and risk ratios used to analyze performance, including return on equity, return on assets, net interest margin, and risk measures. The chapter also discusses how size and location can impact performance metrics and ratios. Regulatory reports like the UBPR and BHCPR provide detailed financial data and ratios to analyze bank and holding company performance over time.
This document discusses techniques for managing interest rate risk at banks, including asset-liability management and duration analysis. It covers topics like interest rate risk, yield curves, net interest margin, and the goals of hedging interest rate risk. Interest-sensitive gap analysis and duration gap analysis are presented as tools to measure a bank's interest rate sensitivity. The limitations of these techniques are also noted.
Jbl presentation 26.12.12“Identifying the Process and Measuring the Effective...Shahriar Rawshon
This document summarizes a study on the local bill procedure of the foreign exchange department at Jamuna Bank Limited's Uttara branch in Dhaka, Bangladesh. The study aims to identify the local bill process and measure its effectiveness by evaluating customer satisfaction and identifying areas for improvement. Jamuna Bank Ltd. was established in 2001 and has over 1,786 employees across 80 branches. The Uttara branch was established in 2008 and has 28 employees overseeing services like general banking, credits, and foreign exchange. The study analyzes the branch's organizational structure, current performance, policies, and external environment to evaluate the local bill process and identify recommendations.
Sample MCQ Practice Questions on International Marketing (April 2014)GMAdvisor
The document provides sample practice questions for an international marketing exam. It includes 4 sets of multiple choice questions (Sets A-D) covering topics like standardization strategy, disadvantages of overstandardization, cultural differences, international logistics, export strategies, and more. The questions are intended to help students practice for the exam without answers being provided.
An insightful view of ALM is that it simply combines portfolio management techniques into a coordinated process to manage risks arising from mismatches between bank assets and liabilities. ALM aims to balance profitability, liquidity, and stability by measuring risks like interest rate risk and managing the asset-liability gap. It uses techniques like duration matching, simulation analysis, and interest rate derivatives to hedge risk and enhance bank performance over the long run. While not risk-free, ALM provides a framework for banks to monitor and mitigate different risks on their balance sheets.
Gap analysis is a technique used to evaluate interest rate risk and liquidity risk. It involves comparing interest rate sensitive assets and liabilities within set time periods to identify gaps that could impact earnings if interest rates change. Gap analysis was widely adopted in the 1980s and uses simple maturity and repricing schedules to measure how changes in interest rates would affect a bank's current earnings and economic value. Limitations of gap analysis include that it does not account for variations in income from non-interest sources, differences in asset and liability pricing spreads, or changes in the overall interest rate environment.
The document outlines the key principles that banks follow when developing their credit policies. It discusses the importance of safety, liquidity, profitability, and risk diversification. It also describes the components that are typically included in a bank's credit policy such as lending guidelines, targeted portfolio mixes, risk ratings, loan pricing, and collateral requirements. The credit policy is developed by the bank's Credit Policy Committee and must comply with regulatory requirements set by the Reserve Bank of India.
This document provides an overview of the banking system in India. It defines banking and outlines the key laws and institutions that govern banking operations, including the Reserve Bank of India Act and the Banking Regulation Act. It describes the structure of banks in India, categorizing them as commercial banks, cooperative banks, and development banks. It provides details on the various types of commercial banks, cooperative banks, and development banks in India. It also summarizes the major functions and roles of the Reserve Bank of India in regulating the banking system.
The document discusses asset liability management (ALM) in banks. It describes the key components of a bank's balance sheet and profit and loss account. It then discusses the evolution of ALM from a focus on asset management to incorporating liability management and interest rate risk management. The document defines ALM and describes the tools used: information systems, organizational structure, and processes. It also outlines the main risks managed under ALM - liquidity risk, currency risk, and interest rate risk - and provides techniques to measure and manage these risks.
This document discusses key topics related to measuring bank performance, including stock values and profitability ratios, measuring risks, operating efficiency, and the effects of bank size and location. It emphasizes that profitability and risk are important dimensions of performance for banks, as they must attract capital from the public. Various profitability ratios are introduced, such as return on equity, return on assets, net interest margin, and net noninterest margin, which are used to evaluate performance. The document also discusses how the value of a bank's stock is determined by expected dividends, risks, interest rates, and earnings growth. It provides examples of calculating stock values and profitability ratios.
This document provides guidance on assessing a company's performance using financial statement analysis techniques. It discusses various types of ratios that can be used, including profitability, liquidity, management efficiency, solvency, and investment ratios. It also covers cash flow analysis. Key points include:
- Ratios and cash flows should be analyzed over time and compared to peers to evaluate a company's performance.
- Non-financial factors like the business environment must be considered when assessing performance.
- Multiple ratios across different categories should be examined together rather than in isolation to get a full picture of a company's financial health.
This document discusses asset-liability management (ALM) and interest rate risk management techniques used by financial institutions. It covers topics such as interest rate measurement, yield curves, gap management, and duration analysis. ALM aims to coordinate asset and liability decisions to manage risks and maintain profitability. Interest rate risk arises from changes in market rates that impact asset and liability values and income. Techniques like gap analysis and duration matching seek to balance repricing risks from assets and liabilities.
Slide 1
12-1
Cost of Capital
Slide 2
12-2
Key Concepts and Skills
• Know how to determine:
– A firm’s cost of equity capital
– A firm’s cost of debt
– A firm’s overall cost of capital
• Understand pitfalls of overall cost of
capital and how to manage them
From our modules on capital budgeting, we learn that the discount rate, or required return, on an investment
is a critical input. However, we haven’t discussed how to come up with that particular number. This module
brings together many of our earlier discussions dealing with stocks and bonds, capital budgeting, and risk
and return. Our goal is to illustrate how firms go about determining the required return on a proposed
investment. Understanding required returns is important to everyone because all proposed projects must
offer returns in excess of their required returns to be acceptable.
In this module, we learn how to compute a firm’s cost of capital and find out what it means to the firm and
its investors. We will also learn when to use the firm’s cost of capital and, perhaps more important, when
not to use it.
Why is it important? A good estimate is required for:
• good capital budgeting decisions—neither the NPV rule nor the IRR rule can be implemented without
knowledge of the appropriate discount rate
• financing decisions—the optimal/target capital structure minimizes the cost of capital
• operating decisions—cost of capital is used by regulatory agencies in order to determine the “fair”
return in some regulated industries (e.g. utilities)
Slide 3
12-3
Chapter Outline
• The Cost of Capital: Some Preliminaries
• The Cost of Equity (RE)
• The Costs of Debt (RD) and Preferred Stock (RP)
• The Weighted Average Cost of Capital (WACC)
• Divisional and Project Costs of Capital
Slide 4
12-4
Cost of Capital Basics
• The cost to a firm for capital funding = the
return to the providers of those funds
– The return earned on assets depends on the
risk of those assets
– A firm’s cost of capital indicates how the
market views the risk of the firm’s assets
– A firm must earn at least the required return to
compensate investors for the financing they
have provided
– The required return is the same as the
appropriate discount rate
Cost of capital, required return, and appropriate discount rate are different phrases that all refer to the
opportunity cost of using capital in one way as opposed to alternative financial market investments of the
same systematic risk.
• Required return is from an investor’s point of view.
• Cost of capital is the same return from the firm’s point of view.
• Appropriate discount rate is the same return used in a PV calculation.
Slide 5
12-5
Cost of Equity
• The cost of equity is the return required by
equity investors given the risk of the cash
flows from the firm
• Two major methods for determining the
cost of equity
▪Dividend growth model
▪SML .
This document presents a project work on ratio analysis as a tool for financial analysis. It discusses ratio analysis as a technique for evaluating a company's financial condition and performance by calculating and comparing various financial ratios. The document defines key terms related to ratio analysis and outlines its objectives and procedures. It also classifies common financial ratios into five main categories: leverage ratios, liquidity ratios, profitability ratios, turnover/asset utilization ratios, and valuation ratios. Examples of important ratios under each category are provided.
This document discusses liquidity management strategies and policies for financial institutions. It covers key topics like the demand and supply of liquidity, why firms face liquidity problems, and strategies to manage liquidity like maintaining liquid assets or borrowing funds. It also examines approaches to estimate liquidity needs, such as analyzing sources and uses of funds or the structure of a firm's liabilities. Legal reserve requirements and money position management are also briefly outlined. The overall goal is to ensure financial institutions have adequate liquidity available at all times.
The document discusses various approaches to measuring organizational performance, including firm survival, accounting measures, market-based measures, and economic value added (EVA). It provides definitions and formulas for key performance metrics like return on assets, market value added, EVA, and market-based measures. Both the strengths and weaknesses of different performance measurement approaches are outlined.
The functions of a financial manager include:
1. Estimating financial requirements, selecting sources of funds, allocating funds, analyzing financial performance, capital budgeting, working capital management, profit planning and control, providing fair returns to investors, and maintaining liquidity and maximizing wealth.
2. Selecting the right sources of funds at the right time and cost, such as equity, debt, or preferred shares.
3. Distributing funds between capital and operating expenditures and evaluating investment proposals.
This document summarizes Principal Financial Group's first quarter 2016 earnings call. Some key points:
- Outstanding investment performance with over 90% of investment options in the top two Morningstar quartiles.
- Record assets under management of $548 billion with $3.3 billion in net cash flows for the quarter.
- Deployed $196 million in capital through share repurchases and dividends. Announced an increase in the second quarter dividend.
- Underlying fundamentals remain strong despite macroeconomic headwinds.
Mercer Capital's Bank Watch | June 2021 | Community Bank Valuation Financial ...Mercer Capital
Brought to you by the Financial Institutions Team of Mercer Capital, this monthly newsletter is focused on bank activity in five U.S. regions. Bank Watch highlights various banking metrics, including public market indicators, M&A market indicators, and key indices of the top financial institutions, providing insight into financial institution valuation issues.
This document summarizes key concepts from Chapter 1 of Corporate Finance, 7th edition. It discusses that corporate finance addresses long-term investment, financing, and working capital decisions. It also explains that securities represent contingent claims on firm value. The chapter outlines different business forms, noting that corporations allow raising large amounts of capital through issuing shares. It discusses debates around whether the goal of the firm is to maximize shareholder wealth or managerial interests. Finally, it provides an overview of primary and secondary financial markets.
Overview of Corporate Finance in India a presentationfootydigarse
Slide 1: Introduction
Welcome to the presentation on Corporate Finance in India.
Overview of the financial landscape and key aspects of corporate finance.
Slide 2: Importance of Corporate Finance
Explanation of why corporate finance is vital for businesses.
Role in maximizing shareholder value, strategic decision-making, and capital allocation.
Slide 3: Financial Markets in India
Overview of India's financial markets: stock exchanges, bond markets, money markets.
Regulatory bodies such as SEBI (Securities and Exchange Board of India).
Slide 4: Sources of Corporate Finance
Equity financing: IPOs, rights issues, private placements.
Debt financing: bank loans, corporate bonds, debentures.
Hybrid instruments: convertible bonds, preference shares.
Slide 5: Capital Structure Decisions
Explanation of capital structure and its importance.
Factors influencing capital structure decisions.
Trade-off between debt and equity financing.
Slide 6: Valuation Methods
Common valuation methods in India: Discounted Cash Flow (DCF), Comparable Company Analysis (CCA), Precedent Transactions Analysis.
Importance of accurate valuation for investment decisions.
Slide 7: Corporate Governance
Overview of corporate governance principles in India.
Role of the board of directors, transparency, and accountability.
Slide 8: Risk Management
Types of financial risks faced by Indian corporations: market risk, credit risk, operational risk.
Risk management strategies: hedging, diversification, insurance.
Slide 9: Mergers and Acquisitions (M&A)
Trends in M&A activity in India.
Motivations behind M&A transactions.
Regulatory framework and approval process.
Slide 10: Case Studies
Analysis of notable corporate finance transactions in India.
Learnings from successful and unsuccessful deals.
Slide 11: Future Outlook
Emerging trends and opportunities in Indian corporate finance.
Potential challenges and how to address them.
Slide 12: Conclusion
Recap of key points covered in the presentation.
Importance of effective corporate finance management for sustainable growth.
Slide 13: Questions and Discussion
Open the floor for questions and discussion.
Owens Corning presented at an investor roadshow on August 29, 2017. The presentation discussed Owens Corning's focus on shareholder value and provided an overview of the company's third quarter 2017 performance. It highlighted Owens Corning's three strong business segments and their market positions. The presentation also reviewed Owens Corning's financial performance in recent years, investment thesis, capital allocation strategy, and outlook for each business segment.
This document provides an overview of various financial analysis metrics for evaluating company performance, including return on equity (ROE), return on assets (ROA), DuPont analysis, operating profitability analysis, liquidity ratios, and other related topics. It includes definitions of key terms, examples of computations using company financial data, and interpretations of the results. The goal is to help readers understand how to compute and analyze these important profitability and performance metrics.
This presentation contains slides on the topic financial management where I have discussed about the meaning of financial management, various financial decisions involved in it like the capital budgeting, capital structure, working capital management, dividend decision. I hope these slides would be beneficial in understanding the basics of finance in a better way.Capital budgeting is the investment decision ,capital structure is related to financing,working capital is more about liquidity and dividend decision is concerned with the shareholders.
Owens Corning presented at investor events on September 15, 2017 and August 29, 2017. The presentation discusses Owens Corning's focus on shareholder value and provides an overview of the company's three business segments and their financial performance in recent years. Owens Corning has demonstrated improving earnings, margins, cash flow, and return on capital through portfolio improvements, cost reductions, and growth initiatives. The company pursues a disciplined capital allocation strategy of organic growth, acquisitions, and returning cash to shareholders.
Revenue is recognized when:
1) A sale is made or service is provided to a customer. For Indigo, this would be when a passenger boards a flight.
2) Collection of the amount is reasonably assured. For Indigo, payment is received at the time of booking.
3) Revenue and associated costs can be measured reliably. For Indigo, ticket prices and flight costs are known in advance.
The income statement provides a snapshot of the company's revenues, expenses and profits over a period of time, allowing shareholders and analysts to evaluate Indigo's performance and trends.
Abhay Bhutada, the Managing Director of Poonawalla Fincorp Limited, is an accomplished leader with over 15 years of experience in commercial and retail lending. A Qualified Chartered Accountant, he has been pivotal in leveraging technology to enhance financial services. Starting his career at Bank of India, he later founded TAB Capital Limited and co-founded Poonawalla Finance Private Limited, emphasizing digital lending. Under his leadership, Poonawalla Fincorp achieved a 'AAA' credit rating, integrating acquisitions and emphasizing corporate governance. Actively involved in industry forums and CSR initiatives, Abhay has been recognized with awards like "Young Entrepreneur of India 2017" and "40 under 40 Most Influential Leader for 2020-21." Personally, he values mindfulness, enjoys gardening, yoga, and sees every day as an opportunity for growth and improvement.
Vicinity Jobs’ data includes more than three million 2023 OJPs and thousands of skills. Most skills appear in less than 0.02% of job postings, so most postings rely on a small subset of commonly used terms, like teamwork.
Laura Adkins-Hackett, Economist, LMIC, and Sukriti Trehan, Data Scientist, LMIC, presented their research exploring trends in the skills listed in OJPs to develop a deeper understanding of in-demand skills. This research project uses pointwise mutual information and other methods to extract more information about common skills from the relationships between skills, occupations and regions.
Falcon stands out as a top-tier P2P Invoice Discounting platform in India, bridging esteemed blue-chip companies and eager investors. Our goal is to transform the investment landscape in India by establishing a comprehensive destination for borrowers and investors with diverse profiles and needs, all while minimizing risk. What sets Falcon apart is the elimination of intermediaries such as commercial banks and depository institutions, allowing investors to enjoy higher yields.
1. Elemental Economics - Introduction to mining.pdfNeal Brewster
After this first you should: Understand the nature of mining; have an awareness of the industry’s boundaries, corporate structure and size; appreciation the complex motivations and objectives of the industries’ various participants; know how mineral reserves are defined and estimated, and how they evolve over time.
In a tight labour market, job-seekers gain bargaining power and leverage it into greater job quality—at least, that’s the conventional wisdom.
Michael, LMIC Economist, presented findings that reveal a weakened relationship between labour market tightness and job quality indicators following the pandemic. Labour market tightness coincided with growth in real wages for only a portion of workers: those in low-wage jobs requiring little education. Several factors—including labour market composition, worker and employer behaviour, and labour market practices—have contributed to the absence of worker benefits. These will be investigated further in future work.
OJP data from firms like Vicinity Jobs have emerged as a complement to traditional sources of labour demand data, such as the Job Vacancy and Wages Survey (JVWS). Ibrahim Abuallail, PhD Candidate, University of Ottawa, presented research relating to bias in OJPs and a proposed approach to effectively adjust OJP data to complement existing official data (such as from the JVWS) and improve the measurement of labour demand.
5 Tips for Creating Standard Financial ReportsEasyReports
Well-crafted financial reports serve as vital tools for decision-making and transparency within an organization. By following the undermentioned tips, you can create standardized financial reports that effectively communicate your company's financial health and performance to stakeholders.
Independent Study - College of Wooster Research (2023-2024) FDI, Culture, Glo...AntoniaOwensDetwiler
"Does Foreign Direct Investment Negatively Affect Preservation of Culture in the Global South? Case Studies in Thailand and Cambodia."
Do elements of globalization, such as Foreign Direct Investment (FDI), negatively affect the ability of countries in the Global South to preserve their culture? This research aims to answer this question by employing a cross-sectional comparative case study analysis utilizing methods of difference. Thailand and Cambodia are compared as they are in the same region and have a similar culture. The metric of difference between Thailand and Cambodia is their ability to preserve their culture. This ability is operationalized by their respective attitudes towards FDI; Thailand imposes stringent regulations and limitations on FDI while Cambodia does not hesitate to accept most FDI and imposes fewer limitations. The evidence from this study suggests that FDI from globally influential countries with high gross domestic products (GDPs) (e.g. China, U.S.) challenges the ability of countries with lower GDPs (e.g. Cambodia) to protect their culture. Furthermore, the ability, or lack thereof, of the receiving countries to protect their culture is amplified by the existence and implementation of restrictive FDI policies imposed by their governments.
My study abroad in Bali, Indonesia, inspired this research topic as I noticed how globalization is changing the culture of its people. I learned their language and way of life which helped me understand the beauty and importance of cultural preservation. I believe we could all benefit from learning new perspectives as they could help us ideate solutions to contemporary issues and empathize with others.
How Does CRISIL Evaluate Lenders in India for Credit RatingsShaheen Kumar
CRISIL evaluates lenders in India by analyzing financial performance, loan portfolio quality, risk management practices, capital adequacy, market position, and adherence to regulatory requirements. This comprehensive assessment ensures a thorough evaluation of creditworthiness and financial strength. Each criterion is meticulously examined to provide credible and reliable ratings.
Falcon stands out as a top-tier P2P Invoice Discounting platform in India, bridging esteemed blue-chip companies and eager investors. Our goal is to transform the investment landscape in India by establishing a comprehensive destination for borrowers and investors with diverse profiles and needs, all while minimizing risk. What sets Falcon apart is the elimination of intermediaries such as commercial banks and depository institutions, allowing investors to enjoy higher yields.
Solution Manual For Financial Accounting, 8th Canadian Edition 2024, by Libby...Donc Test
Solution Manual For Financial Accounting, 8th Canadian Edition 2024, by Libby, Hodge, Verified Chapters 1 - 13, Complete Newest Version Solution Manual For Financial Accounting, 8th Canadian Edition by Libby, Hodge, Verified Chapters 1 - 13, Complete Newest Version Solution Manual For Financial Accounting 8th Canadian Edition Pdf Chapters Download Stuvia Solution Manual For Financial Accounting 8th Canadian Edition Ebook Download Stuvia Solution Manual For Financial Accounting 8th Canadian Edition Pdf Solution Manual For Financial Accounting 8th Canadian Edition Pdf Download Stuvia Financial Accounting 8th Canadian Edition Pdf Chapters Download Stuvia Financial Accounting 8th Canadian Edition Ebook Download Stuvia Financial Accounting 8th Canadian Edition Pdf Financial Accounting 8th Canadian Edition Pdf Download Stuvia