Capital Market: Capital market is a market for long-term debt and equity shares.

In this market, the capital funds comprising of both equity and debt are issued and traded. Capital market is of two types : I. Primary market ; ii. Secondary market The primary market deals with the issuance of new securities. Methods of issuing securities in the primary market are: Initial public offering; Rights issue (for existing companies); Preferential issue Secondary market is a market where investors purchase securities or assets from other investors, rather than from issuing companies themselves. The national exchanges - such as the NSE and the BSE are secondary markets. The 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 stock or bond issue. This is typically done through a syndicate of securities dealers. The process of selling new issues to investors is called underwriting. The secondary market, also known as the aftermarket, is the financial market where previously issued securities and financial instruments such as stock, bonds, options, and futures are bought and sold Net Asset Value (NAV) Net Asset Value is the market value of the assets of the scheme minus its liabilities. The per unit NAV is the net asset value of the scheme divided by the number of units outstanding on the Valuation Date. Inflation : The overall general upward price movement of goods and services in an economy, usually as measured by the Consumer Price Index and the Producer Price Index. Over time, as the cost of goods and services increase, the value of a rupee is going to fall because a person won't be able to purchase as much with that rupee as he/she previously could. Mutual Fund : A mutual fund is made up of money that is pooled together by a large number of investors who give their money to a fund manager to invest in a large portfolio of stocks and / or bonds We have already mentioned that like all other investments in equities and debts, the investments in Mutual funds also carry risk. However, investments through Mutual Funds is considered better due to the following reasons :Your investments will be managed by professional finance managers who are in a better position to assess the risk profile of the investments; Your small investment cannot be spread into equity shares of various good companies due to high price of such shares. Mutual Funds are in a much better position to effectively

spread your investments across various sectors and among several products available in the market. This is called risk diversification and can effectively shield the steep slide in the value of your investments. TYPES OF MUTUAL FUNDS (a) EQUITY FUNDS / SCHEMES (b) DEBT FUNDS / SCHEMES (also called Income Funds) (c ) DIVERSIFIED FUNDS / SCHEMES (Also called Balanced Funds) (d) GILT FUNDS / SCHEMES (e) MONEY MARKET FUNDS / SCHEMES (f) SECTOR SPECIFIC FUNDS (g) INDEX FUNDS Negotiable Instruments: A transferable, signed document that promises to pay the bearer a sum of money at a future date or on demand. Examples include checks, bills of exchange, and promissory notes. Sensex It is an index that represents the direction of the companies that are traded on the Bombay Stock Exchange [ Images ], BSE. The word Sensex comes from sensitive index. The Sensex captures the increase or decrease in prices of stocks of companies that it comprises. A number represents this movement. Currently, all the 30 stocks that make up the Sensex have reached a value of 14,355 points. Nifty It is the Sensex's counterpart on the National Stock Exchnage, NSE. The only difference between the two indices (the Sensex and Nifty) is that the Nifty comprises of 50 companies and hence is more broad-based than the Sensex.Having said that one must remember that the Sensex is the benchmark that represents Indian equity markets globally.The Nifty 50 or the S&P CNX Nifty as the index is officially called has all the 30 Sensex stocks. The charge of depreciation can impact the net profit in the income statement, so the methods of calculating depreciation is very important. Adopting different methods of calculation, the result will be different. And it'll refer to the expense and tax in the income statement. Choosing the fit methods of calculating depreciation, it need to be faced by the finance staff.

There are several possible methods of calculating depreciation: Straight line method It's the simplest amd most popular methods of calcuating depreciation. Under this method the depreciation charge is constant over the life of the asset. And we need know three pieces of information: the original (historical) cost of the asset an estimate of its useful life to the business an estimate of its residual value at the end of its useful life. Annual depreciation charge = (Orginal - Residual value)/Estimated useful value Reducing balance method Under this method the depreciation charge will be higher in the earlier years of the life of the asset. Here needs a percentage to apply. And in the first year the percentage is applied to cost but in subsequent years it's applied to the asset's net book value (alternatively known as written down value). Sum of the digits method The aim of this method is to show a higher depreciation charge in the early years of the life of an asset. Revaluation method When a non-current asset has been revalues, the charge fro depreciation should be based on the revalued amount and the remaining useful economic life of the asset. The accounting cycle is the series of steps that take place in order for financial statements to be accurately and uniformly produced at the end of an accounting period which is typically the length of one month, quarter of a year, or a whole year. Below is a list of the steps you would take to complete the accounting cycle, listed in the order that you would perform them, and with a brief summary of each step. 1. Identify the transaction. This transaction could be the revenue from the sale of a product or a payment to another business for services. 2. Analyze the transaction and how it related to the accounting balance sheet. For example, determine which accounts are affected by the transaction and how they are affected. 3. Record the transaction to a journal such as a sales journal. Journals are kept in chronological order and may be updated continuously, daily, or however often it is necessary. 4. Record the transaction to the general ledger. Take all of your entries and categorize them by the account. 5. Perform a trial balance. Debits and credits need to be equal at the end of an accounting cycle, so calculate the entries to ensure they match.

6. Prepare adjustments. Just because entries are recognized, does not mean the work has been performed. Revenue can only be recognized when the work has been completed, so adjust the entries accordingly. 7. Perform trial balance with adjustments. Take the adjustments from Step 6 and prepare a trial balance. If the debits and credits do not match, then you need to adjust them to make sure they do match. 8. Prepare financial statements. From the adjusted trial balance, these corrected balances are used to prepare the financial statements. 9. Close the accounts in preparation of the next accounting cycle. Revenues and expenses need to be closed out, which means they need to have zero balances. Balances are moved to the next cycle. Types of financial ratios: 1. Liquidity 2. Activity 3. Leverage 4. Profitability 1 liquidity ratio: measures the short term solvency or financial position of a firm. short term paying capacity of and ability to meet its current obligations.like current ratio,liquid ratio etc. Types of ratios used for analyzing liquidity 1. Net working capital (not a ratio) 2. Current ratio 3. Quick ratio (acid test) 2 leaverage ratio: Definition: Amount of debt used in an attempt to maximize shareholders wealth Two types: Capitalization ratios: How a firm has financed its investment Debt ratio Debt/Equity ratio Coverage ratios: Assess the firms ability to service the source of financing (payment debt, interest, leases, dividend payments i.e., fixed financial charges) Times interest earned ratio Fixed-charge coverage ratio 3. activity ratio: Definition: Activity ratios measure the firms effectiveness at managing accounts receivable, inventory, accounts payable, fixed assets, and total assets Supplement to liquidity ratios: focus on the composition of current assets Four ratios: 1. Average age of inventory

2. Average collection period 3. Average payment period 4. Fixed and total asset turnover. 4. profitability ratio: Concerned with evaluating a firms earnings with respect to a given level of sales / assets / owners investment or share value 1. Common-size income statements 2. Return on total assets (ROA) 3. Return on equity (ROE) 4. Earnings per share (EPS) 5. Price/Earning (P/E) ratio Banks: An organization, usually a corporation, chartered by a state or federal government, which does most or all of the following: receives demand deposits and time deposits, honors instruments drawn on them, and pays interest on them; discounts notes, makes loans, and invests in securities; collects checks, drafts, and notes; certifies depositor's checks; and issues drafts and cashier's checks. A cheque is a written instruction you give to your banker to make payment by debit to your account on demand. Types of Cheque Broadly speaking, cheques are of four types. a) Open cheque, and b) Crossed cheque. c) Bearer cheque d) Order cheque a) Open cheque: A cheque is called Open when it is possible to get cash over the counter at the bank. The holder of an open cheque can do the following: i. Receive its payment over the counter at the bank, ii. Deposit the cheque in his own account iii. Pass it to some one else by signing on the back of a cheque. b) Crossed cheque: Since open cheque is subject to risk of theft, it is dangerous to issue such cheques. This risk can be avoided by issuing another types of cheque called Crossed cheque. The payment of such cheque is not made over the counter at the bank. It is only credited to the bank account of the payee. A cheque can be crossed by drawing two transverse parallel lines across the cheque, with or without the writing Account payee or Not Negotiable. c) Bearer cheque: A cheque which is payable to any person who presents it for payment at the bank counter is called Bearer cheque. A bearer cheque can be transferred by mere delivery and requires no endorsement.

d) Order cheque: An order cheque is one which is payable to a particular person. In such a cheque the word bearer may be cut out or cancelled and the word order may be written. The payee can transfer an order cheque to someone else by signing his or her name on the back of it. Cashers Cheque is a check guaranteed by a bank. They are usually treated as cash since most banks clear them instantly. However, banks are permitted to take back money from a "cleared" check one or two weeks later if subsequent processing finds it to be fraudulent. A money order is a payment order for a pre-specified amount of money. Because it is required that the funds be prepaid for the amount shown on it, it is a more trusted method of payment than a personal check. Merchants welcome the extra security of a pre-paid money order instead of a personal check, which can bounce A certified check is a form of check for which the bank verifies that sufficient funds exist in the account to cover the check, and so certifies, at the time the check is written. Those funds are then set aside in the bank's internal account until the check is cashed or returned by the payee. Thus, a certified check cannot "bounce", and, in this manner, its liquidity is similar to cash traveler's cheque : is a preprinted, fixed-amount cheque designed to allow the person signing it to make an unconditional payment to someone else as a result of having paid the issuer for that privilege. As traveler's cheques can usually be replaced if lost or stolen (if the owner still has the receipt issued with the purchase of the cheques showing the serial numbers allocated), they are often used by people on vacation in place of cash. A credit card is part of a system of payments named after the small plastic card issued to users of the system. It is a card entitling its holder to buy goods and services based on the holder's promise to pay for these goods and services. The issuer of the card grants a line of credit to the consumer (or the user) from which the user can borrow money for payment to a merchant or as a cash advance to the user. A debit card (also known as a bank card or check card) is a plastic card that provides an alternative payment method to cash when making purchases. Functionally, it can be called an electronic cheque, as the funds are withdrawn directly from either the bank account, or from the remaining balance on the card. In some cases, the cards are designed exclusively for use on the Internet, and so there is no physical card An overdraft occurs when withdrawals from a bank account exceed the available balance. In this situation a person is said to be "overdrawn". If there is a prior agreement with the account provider for an overdraft protection plan, and the amount overdrawn is within this authorised overdraft limit, then interest is normally charged at the agreed rate. If the balance exceeds the agreed terms, then fees may be charged and higher interest rate might apply. Wire transfer or credit transfer is a method of transferring money from one person or institution (entity) to another. A wire transfer can be made from one bank account to another bank account or through a transfer of cash at a cash office.

Bank wire transfers are often the most expedient method for transferring funds between bank accounts. A bank wire transfer is effected as follows: 1. The person wishing to do a transfer (or someone they have appointed and empowered financially to act on their behalf) approaches a bank and gives the bank the order to transfer a certain amount of money. IBAN and BIC code are given as well so the bank knows where the money needs to be sent to. 2. The sending bank transmits a message, via a secure system (such as SWIFT or Fedwire), to the receiving bank, requesting that it affect payment according to the instructions given. 3. The message also includes settlement instructions. The actual transfer is not instantaneous: funds may take several hours or even days to move from the sender's account to the receiver's account. 4. Either the banks involved must hold a reciprocal account with each other, or the payment must be sent to a bank with such an account, a correspondent bank, for further benefit to the ultimate recipient. A Savings bank account is the most common operating account for individuals and others for non-commercial transactions. A Savings account helps people to put through day-today banking transactions besides earning some return on the savings made. Banks generally put some ceilings on the total number of withdrawals permitted during specific time periods. Banks also stipulate certain minimum balance to be maintained in savings accounts. Current accounts are cheque operated accounts maintained for mainly business purposes. Unlike savings bank account no limits are fixed by banks on the number of transactions permitted in the Account. Banks generally insist on a higher minimum balance to be maintained in current account. Fixed Deposits or Term Deposits : Time deposits are deposits accepted by banks for a specified period of time. In terms of RBI directives the minimum period for which term deposits can be accepted is 15 days. The banks generally do not accept deposits for periods longer than 10 years. Banks pay interest on term deposits based on the period of deposits and normally pay higher interest for longer term deposits. A promissory note, referred to as a note payable in accounting, or commonly as just a "note", is a contract where one party (the maker or issuer) makes an unconditional promise in writing to pay a sum of money to the other (the payee), either at a fixed or determinable future time or on demand of the payee, under specific terms A bill of exchange or "draft" is a written order by the drawer to the drawee to pay money to the payee. A common type of bill of exchange is the cheque, defined as a bill of exchange drawn on a banker and payable on demand. Bills of exchange are used primarily in international trade, and are written orders by one person to his bank to pay the bearer a specific sum on a specific date. Hundis A Hundi is a negotiable instrument by usage. It is often in the form of a bill of exchange drawn in any local language in accordance with the custom of the place. Some times it can also be in the form of a promissory note. A hundi is the oldest known instrument used for the purpose of transfer of money without its actual physical movement.

The stock or capital stock of a business entity represents the original capital paid into or invested in the business by its founders. It serves as a security for the creditors of a business since it cannot be withdrawn to the detriment of the creditors. A voting share (also called common stock or ordinary share) is a share of stock giving the stockholder the right to vote on matters of corporate policy and the composition of the members of the board of directors. Preferred stock differs from common stock in that it typically does not carry voting rights but is legally entitled to receive a certain level of dividend payments before any dividends can be issued to other shareholders. Convertible preferred stock is preferred stock that includes an option for the holder to convert the preferred shares into a fixed number of common shares, usually anytime after a predetermined date. Shares of such stock are called "convertible preferred shares" In finance, a bond is a debt security, in which the authorized issuer owes the holders a debt and, depending on the terms of the bond, is obliged to pay interest (the coupon) and/or to

repay the principal at a later date, termed maturity. A bond is a formal contract to repay borrowed money with interest at fixed intervals.[1] Thus a bond is like a loan: the issuer is the borrower (debtor), the holder is the lender (creditor), and the coupon is the interest. Bonds provide the borrower with external funds to finance long-term investments, or, in the case of government bonds, to finance current expenditure. a derivative is a financial instrument - or more simply, an agreement between two people or two parties - that has a value determined by the price of something else (called the underlying). It is a financial contract with a value linked to the expected future price movements of the asset it is linked to - such as a share or a currency. There are many kinds of derivatives, with the most notable being swaps, futures, and options. However, since a derivative can be placed on any sort of security, the scope of all derivatives possible is near endless. Derivatives are financial instruments whose value changes in response to the changes in underlying variables. The main types of derivatives are futures, forwards, options, and swaps. The Derivatives Market is meant as the market where exchange of derivatives takes place. Derivatives are one type of securities whose price is derived from the underlying assets. And value of these derivatives is determined by the fluctuations in the underlying assets. These underlying assets are most commonly stocks, bonds, currencies, interest rates, commodities and market indices. As Derivatives are merely contracts between two or more parties, anything like weather data or amount of rain can be used as underlying assets. The Derivatives can be classified as Future Contracts, Forward Contracts, Options, Swaps and Credit Derivatives. The Types of Derivative Market The Derivative Market can be classified as Exchange Traded Derivatives Market and Over the Counter Derivative Market. Exchange Traded Derivatives are those derivatives which are traded through specialized derivative exchanges whereas Over the Counter Derivatives are those which are privately traded between two parties and involves no exchange or intermediary. Swaps, Options and Forward Contracts are traded in Over the Counter Derivatives Market or OTC market. The main participants of OTC market are the Investment Banks, Commercial Banks, Govt. Sponsored Enterprises and Hedge Funds. The investment banks markets the derivatives through traders to the clients like hedge funds and the rest. In the Exchange Traded Derivatives Market or Future Market, exchange acts as the main party and by trading of derivatives actually risk is traded between two parties. One party who purchases future contract is said to go long and the person who sells the future contract is said to go short. The holder of the long position owns the future contract and earns profit from it if the price of the underlying security goes up in the future. On the contrary, holder of the short position is in a profitable position if the price of the underlying security goes down, as he has already sold the future contract. So, when a new future contract is introduced, the total position in the contract is zero as no one is holding that for short or long.

The trading of foreign exchange traded derivatives or the future contracts has emerged as very important financial activity all over the world just like trading of equity-linked contracts or commodity contracts. The derivatives whose underlying assets are credit, energy or metal, have shown a steady growth rate over the years around the world. Interest rate is the parameter which influences the global trading of derivatives, the most. Share: is Certificate representing one unit of ownership in a corporation, mutual fund, or limited partnership The income received from shares is called a dividend, and a person owning shares is called a shareholder. Equity investments generally refers to the buying and holding of shares of stock on a stock market by individuals and firms in anticipation of income from dividends and capital gain as the value of the stock rises. Debenture Is Unsecured debt backed only by the integrity of the borrower, not by collateral, and documented by an agreement called an indenture. One example is an unsecured bond.

Debenture holder is a creditor of the company and cannot take part in the management of the company while a shareholder is the owner of the company. It is the basic distinction between a debenture and a share. Debenture holders will get interest on debentures and will be paid in all circumstances, whether there is profit or loss will not affect the payment of interest on debentures. Shareholder will get a portion of the profits called dividend which is dependent on the profits of the company. It can be declared by the directors of the company out of profits only. Shares cannot be converted into debentures whereas debentures can be converted into shares.

Dividends are payments made by a corporation to its shareholder members. It is the portion of corporate profits paid out to stockholders. When a corporation earns a profit or surplus, that money can be put to two uses: it can either be re-invested in the business (called retained earnings), or it can be paid to the shareholders as a dividend Financial Statements In financial accounting, a cash flow statement, also known as statement of cash flows or funds flow statement, is a financial statement that shows how changes in balance sheet accounts and income affect cash and cash equivalents, and breaks the analysis down to operating, investing, and financing activities. Essentially, the cash flow statement is concerned with the flow of cash in and cash out of the business. The statement captures both the current operating results and the accompanying changes in the balance sheet. As an analytical tool, the statement of cash flows is useful in determining the short-term viability of a company, particularly its ability to pay bills. Income statement, also referred as profit and loss statement (P&L), earnings statement, operating statement or statement of operations, is a company's financial statement that indicates how the revenue (money received from the sale of products and services before

expenses are taken out, also known as the "top line" is transformed into the net income (the result after all revenues and expenses have been accounted for, also known as the "bottom line"). It displays the revenues recognized for a specific period, and the cost and expenses charged against these revenues, including write-offs (e.g., depreciation and amortization of various assets) and taxes. The purpose of the income statement is to show managers and investors whether the company made or lost money during the period being reported Statement of Retained Earnings (also known as Equity Statement, for a single proprietorship, Statement of Partner's Equity for partnership, and Statement of Retained Earnings and Stockholders' Equity for corporation) is one of the basic financial statements as per Generally Accepted Accounting Principles, and it explains the changes in a company's retained earnings over the reporting period. It breaks down changes affecting the account, such as profits or losses from operations, dividends paid, and any other items charged or credited to retained earnings Accrual (accumulation) of something is, in finance, the adding together of interest or different investments over a period of time. It holds specific meanings in accounting, where it can refer to accounts on a balance sheet that represent liabilities and non-cash-based assets used in accrual-based accounting. These types of accounts include, among others, accounts payable, accounts receivable, goodwill, deferred tax liability and future interest expense