IES Management College And Research Centre Bandra Reclamation Mumbai

QUESTION BOOKLET
Finance

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This Question Bank is provided by IES Management College and Research Centre for limited purposes and on specific basis. The contents of this document are intended to provide general advice on the subject matter contained in it. It should not be regarded as a substitute for text-books and reference books on the respective subject matter. Students are advised not to consult this document in isolation.

Q.1. What are Capital Expenditure (CAP-EX)?

Ans. Capital Expenditures are amounts spent to acquire or upgrade productive assets (such as buildings, machinery and equipment, vehicles) to increase the capacity or efficiency of a firm for more than one accounting period. A capital expenditure is always incurred with a view point of getting future benefits. These expenditures are termed as assets and always appear on asset side of balance sheet. Q.2. What is contribution margin? Ans. Contribution margin is the fraction of sales that contributes to offsetting fixed costs. Alternatively, unit contribution margin is the amount each unit sale adds to profit: it's the slope of the Profit line.Contribution margin is the marginal profit per unit sale. The Total Contribution Margin (TCM) is Total Revenue (TR, or Sales) minus Total Variable Cost (TVC): TCM = TR TVC . Q.3. What is Depreciation? Ans. Depreciation is the reduction in the value of an asset due to usage, passage of time, wear and tear, technological outdating or obsolescence, depletion or other such factors. It is also classified as the allocation of the original cost of the asset over its useful life. It is a non cash expenditure that is tax deductible. It appears on the debit side of the profit and loss A/c Q.4. What are Futures? Ans. A futures contract is an agreement between two parties to buy or sell an asset at a certain time in the future at a certain price. Futures contracts are special types of forward contracts in the sense that the former are standardized exchange-traded contracts and can not be customized. Futures price is derived from the price of underlying. Underlying could be commodity, share, interest rate, currency etc Q.5. What is a Cost Unit? Ans. A Cost Unit is a unit of quantity of product , service or time ( or combinations of these) in relation to which costs are ascertained or expressed. Q.6. What are Capital Markets? Ans. The capital market is the market for securities, where companies and governments can raise long term funds. The capital market includes the stock market and the bond market. Financial regulators, such as the U.S. Securities and Exchange Commission, { In India SEBI ( Securities Exchange Board of India )}oversee the capital markets in their designated countries to ensure that investors are protected against fraud. The capital markets consist of the primary market, where new issues are distributed to investors, and the secondary market, where existing securities are traded Q.7. What is Market Capitalization or capitalized value? Ans. Market capitalization/capitalisation (capitalized/capitalized value) is a measurement of corporate or economic size equal to the current market price times the number of shares outstanding of a public company. Likewise, the capitalization of stock markets or economic regions may be compared to other economic indicators. The total market capitalization of all publicly traded companies in the world was US$51.2 trillion in July 2008. Q.8. What is Free-Float Cap? Ans. The open market shares that are free for trading by anyone, are called the free-float shares. When we are calculating the Sensex, we are interested in these free-float shares!

A particular company, may have certain shares in the open market and certain shares that are not available for trading in the open market. Q.9. What is Deferred tax? Ans. Deferred tax is an accounting concept, meaning a future tax liability or asset, resulting from temporary differences between book (accounting) value of assets and liabilities and their tax value, or timing differences between the recognition of gains and losses in financial statements and their recognition in a tax computation Q.10. What is deferred tax liability? Ans. Deferred tax liabilities generally arise where tax relief is provided in advance of an accounting expense, or income is accrued but not taxed until received. Examples of such situations include: a company claims tax depreciation at an accelerated rate relative to accounting depreciation a company makes pension contributions for which tax relief is provided on a paid basis, whereas accounting entries are determined in accordance with actuarial valuations Q.11. What is deferred tax Asset? Ans. Deferred tax assets generally arise where tax relief is provided after an expense is deducted for accounting purposes. Examples of such situations include: a company may accrue an accounting expense in relation to a provision such as bad debts, but tax relief may not be obtained until the provision is utilised a company may incur tax losses and be able to "carry forward" losses to reduce taxable income in future years Q.12. What is a Scrip Issue? And what are its other names? Ans. Scrip issue is a form of secondary issue. A scrip issue is the process of creating new shares which are given free of charge to existing shareholders. To the individual investor, this is known as a scrip dividend. This would normally be done in place of paying a dividend. A Scrip issue is thus an issue where new shares are issued free of cost to the existing shareholders in proportion to their holdings. It is also known as "Capitalization issue" or "Bonus issue". Q.13. What is Direct cost and Indirect cost (overheads)? Ans. Direct Costs, however, are costs that can be associated with a particular cost object. They are cost that can be directly traced to producing specific goods or services. Indirect cost : Indirect costs are costs that are not directly accountable to a particular function or product; these are fixed costs. Indirect costs include taxes, administration, personnel and security costs. Q.14. What is a Balance Sheet? Ans. A balance sheet is often described as a snapshot of a company's financial condition. The balance sheet is a statement which applies to a single point in time. Balance sheet or statement of financial position is a summary of an organization's State of affairs as at a particular date as the end of its financial year. Q.15. What is the difference between cost accounting and financial accounting? Ans. Cost accounting is that part of management accounting which establishes budget and actual cost of operations, processes, departments or product and the analysis of variances, profitability or social use of funds. Managers use cost accounting to support decision making to reduce a company's costs and improve its profitability. Financial accountancy (or financial accounting) is the field of accountancy concerned with the preparation of financial statements for decision makers, such as

stockholders, suppliers, banks, employees, government agencies, owners, and other stakeholders. Financial Accounting is the process of summarizing financial data taken from an organization's accounting records and publishing in the form of annual (or more frequent) reports for the benefit of people outside the organization. Q.16. What is CRR? Ans. A cash reserve ratio (or CRR) is the percentage of bank reserves to deposits and notes. The cash reserve ratio is also known as the cash asset ratio or liquidity ratio. CRR is Cash Reserve Ratio is a mandatory requirement for each and every bank. Every Bank has to mantain a cash reserve as per Reserve Bank of India guideline. The reserve requirement (or required reserve ratio) is a bank regulation that sets the minimum reserves each bank must hold to customer deposits and notes. These reserves are designed to satisfy withdrawal demands, and would normally be in the form of fiat currency stored in a bank vault (vault cash), or with a central bank.The reserve ratio is sometimes used as a tool in monetary policy, influencing the country's economy, borrowing, and interest rates. The current Cash Reserve Ratio is 8.75%. Q.17. What is venture capital? Ans. Venture capital (also known as VC or Venture) is a type of private equity capital provided to immature, high-potential, growth companies in the interest of generating a return through an eventual realization event such as an IPO or trade sale of the company. Venture capital investments are generally made as cash in exchange for shares in the invested company . A venture capital fund refers to a pooled investment vehicle that primarily invests the financial capital of third-party investors in enterprises that are too risky for the standard capital markets or bank loans. Venture capital typically comes from institutional investors and high net worth individuals and is pooled together by dedicated investment firms. Q.18. What is the meaning of Net Asset Value? Ans. Net Asset Value (NAV) is a term used to describe the value of an entity's assets less the value of its liabilities. The term is commonly used in relation to collective investment schemes. It may also be used as a synonym for the book value of a firm. For collective investment schemes, the NAV is the total value of the fund's portfolio less its liabilities. Its liabilities may be money owed to lending banks or fees owed to investment managers. Q.19. What is the meaning of Price Earning Ratio (PE Ratio)? Ans. Price earning Ratio is A valuation ratio of a company's current share price compared to its per-share earnings. The P/E ratio (price-to-earnings ratio) of a stock (also called its "earnings multiple", or simply "multiple", "P/E", or "PE") is a measure of the price paid for a share relative to the annual income or profit earned by the firm per share. A higher P/E ratio means that investors are paying more for each unit of income.The reciprocal of the PE ratio is known as the earnings yield. A variant of the P/E - called the forward P/E - has also been developed wherein the current market price of the stock is divided by the expected future EPS. The attempt to study P/E ratios in this manner reflects the effort to factor in the expected growth of a company. Q.20. What is a Mutual Fund? Ans. An investment vehicle that is made up of a pool of funds collected from many investors for the purpose of investing in securities such as stocks, bonds, money market instruments and similar assets. Mutual funds are operated by money mangers, who invest the fund's capital and attempt to produce capital gains and income for the fund's investors. A mutual fund's portfolio is structured and maintained to match the investment objectives stated in its prospectus. A mutual fund is an investment tool that

allows small investors access to a well diversified portfolio of equities, bonds and other securities each shareholder participates in the gain or loss of the fund. Units are issued and can be redeemed as needed. The fund's Net Asset Value (NAV) is determined each day. Q.21. What is ratio analysis? Ans. A ratio is a mathematical relationship which compares quantities relative to each other in the financial statements . Ratio analysis is a process by which relationship of items or group of items in financial statement are computed, determined, and presented . It is an important tool in Analysis of the Financial Statements of Companies which aids in decisions of the Financial Manager regarding raising of funds, Utilizing of funds and dividend policy decisions. Q.22. What is Money Market? Ans. The money market is the financial market for short-term borrowing and lending. It provides short-term liquid funding for the financial system. The money market is where short-term obligations such as Treasury bills, commercial paper and bankers' acceptances are bought and sold. The money market consists of financial institutions and dealers in money or credit who wish to either borrow or lend. Participants borrow and lend for short periods of time, typically up to thirteen months. Money market trades in short term financial instruments commonly called "paper." This contrasts with the capital market for longer-term funding, which is supplied by bonds and equity. Q.23. What is Sales Tax? Ans. A Sales tax is a consumption tax charged at the point of purchase for certain goods and services. The tax is usually set as a percentage by the government charging the tax. There is usually a list of exemptions. The tax can be included in the price (tax-inclusive) or added at the point of sale (tax-exclusive). Ideally, a sales tax is fair, has a high compliance rate, is difficult to avoid, is charged exactly once on any one item, and is simple to calculate and simple to collect. A conventional or retail sales tax attempts to achieve this by charging the tax only on the final end user. Q.24. What is gross block and net block? Ans. Gross block is the sum total of all assets of the company valued at their cost of acquisition. Net block is the gross block less accumulated depreciation on assets. Net block is actually what the asset are worth to the company Q.25. What is the difference between accounts payable and accounts receivable? Ans. Accounts payable are amounts company owes when it has purchases goods or services on credit from supplier or vendor. Accouts receivable are Amounts Company has to collect when it has sells goods or srvices on credit to customers. Accounts payable are liabilities and Accounts receivable are assets. Q.26. What is the difference between the CURRENCY FUTURE TRADING and FUTURE TRADING? And how would it help investors to hedge their losses? Ans.

A currency future is a forex derivative contract to buy or sell one currency against other on a specified future date, at a price decided in the contract .Future trading is nothing but, trading in derivative market using Futures as an instrument. Futures instrument available on NSE earlier were only for Stocks & Index future , recently we have Currency futures also on stock exchange. Before this Currency futures market was OTC (over the Counter market , now it is exchange traded) NSE has introduced the currency futures trading on 29th Augus 2008. Q.27. What information is provided by Balance Sheet and Profit and Loss Account? Ans. Balance Sheet is the snapshot of what a company owes and owns at a particular point in time. Profit and Loss Accounts shows how much Revenue and Profit (or Expense and Losses) is incurred by a Company. Q.28 When did exchange-based currency futures trading started in India ? Ans. Started on 29th August 2008. Q.29. What is GAAP? Ans. GAAP means generally accepted accounting principles is a set of conventions, rules and procedure necessary to define accepted accounting practice at a particular time. Q.30. What is Trial Balance? Ans. In accounting, the trial balance is a worksheet listing the balance of each ledger in two columns, namely debit and credit. The Trial balance is prepared in each financial period as a summary of the closing of the previous ledger. The total of the debit side should always be equal to the total of the credit side. The trial balance thus serves as a tool to detect arithmatical errors, which may have occurred during the double-entry system of the ledger. Trial Balance can be prepared in two waysStatement or Journal form. Account or Ledger form. Q.31. What do you mean by Capital Gains? Ans. Capital gains are the profits that an investor realizes when he or she sells the capital asset for a price that is higher than the purchase price. It is taxable under Chapter V of the Income Tax Act-1961 Q.32. Why is current ratio calculated? Ans. The Current ratio is calculated to know the short term Solvency position of the company. It measures whether or not a firm has enough resources to pay its debts over the next 12 months. Q.33. What is an IPO? Ans. Initial Public Offering is the First Issue of the Companys Equity Stock to the public whereas the FPO is the subsequent Issue of Equity Stock to the public. Q.34. What are ABS (Asset Backed Securities) ? Ans. An Asset Backed Security is a financial security backed by a loan, lease or receivables against assets other than real estate and mortgage-backed securities. For investors, asset-backed securities are an alternative to investing in corporate debt. Q.35. What is Hedge Fund?

Ans. A Hedge Fund is an aggressively managed portfolio of investments that uses advanced investment strategies such as leveraged, long, short and derivative positions in both domestic and international markets with the goal of generating high returns (either in an absolute sense or over a specified market benchmark). Legally, hedge funds are most often set up as private investment partnerships that are open to a limited number of investors and require a very large initial minimum investment. Investments in hedge funds are illiquid as they often require investors keep their money in the fund for at least one year. Q.36. What is Cash Budgeting? Ans. The cash flow budget is a prediction of future cash receipts and expenditures for a particular time period. It usually covers a period in the short term future. The cash flow budget helps the business determine when income will be sufficient to cover expenses and when the company will need to seek outside financing. Q.37. What is leverage Finance? Ans. Financial leverage (FL) takes the form of a loan or other borrowings (debt), the proceeds of which are (re)invested with the intent to earn a greater rate of return than the cost of interest.Financial Leverage affects the EPS of the firm. Financial Leverage acts as a double-edged sword. If the economic conditions are favorable and EBIT is increasing, a higher financial leverage has a positive impact on the EPS. The FL captures this relationship between EBIT and EPS. Q.38. What is the difference between shareholders and stakeholders? Ans. Shareholders are the owners of the company who are interested in the well being and profitability of the company whereas stakeholders are not only the owners of the company but also include all parties that are equally interested in the profitability of the company and have some direct or indirect relationship with the company eg. Employees, Government, Debtors, creditors , loan providers etc. Q.39. What Is Bad Debts? Ans. When Debtors default to make the payment of credit sales done , it is known as bad debts. Q.40. What is cost? Ans. Cost is the amount of resources given up in exchange for some goods or services. Q.41. What is the full form of NCDEX? Ans. NATIONAL COMMODITIES AND DERIVATIVES EXCHANGE. Q.42. How will depreciation affect PAT? Ans. PAT is the result of the profit reduced by depreciation, interest and then tax. The depreciation saves the company's money in terms of tax shield on Depreciation. When the company shows the depreciation the profit reduces to that extent, and so when that remaining income is taxed, tax amount to the extent of depreciation gets saved. When depreciation is added back to PAT , we get the Cash Flows. Q.43. What is Time Value of Money ? Ans. Time Value of Money means money available at the present time is worth more than the same amount in the future, due to its potential earning capacity. This core principle of finance holds that, provided money can earn interest, any amount of money is worth more the sooner it is received. Q.44. What Is Derivatives? Ans.

A financial instrument whose characteristics and value depend upon the characteristics and value of an underlier, typically a commodity, bond, equity or currency. Examples of derivatives include futures and options. Advanced investors sometimes purchase or sell derivatives to manage the risk associated with the underlying security, to protect against fluctuations in value, or to profit from periods of inactivity or decline. These techniques can be quite complicated and quite risky. Q.45. What is book building ? Ans. The process of determining the price at which an Initial Public Offering will be offered. The book is filled with the prices that investors indicate they are willing to pay per share, and when the book is closed, the issue price is determined by an underwriter by analyzing these values. Q.46. What does Debt-Equity ratio indicates? At what ratio should investor invest in a company? Ans. Debt-Equity ratio indicates what proportion of equity and debt that the company is using to finance its assets. Equity is refered to own capital whereas the Debt refers to borrowed capital. Debtlong term debt Equity ratio= Shareholders Equity If the ratio is high (financed more with debt) then the company is in a risky position especially if interest rates are on the rise. Q.47. What do you mean by "Solvency"? Ans. Financial soundness of an entity that allows it to discharge its monetary obligations as they fall due. It is measured by solvency ratios. Q.48. What is Primary Market? Ans. Primary market is a market for new issues or new financial claims. Hence, it is also called New Issue market. The primary market deals with those securities which are issued to the public for the first time. Q.49. DEMAT-Dematerialization Ans. Conversion of Physical certificates into electronic form,this is termed as dematerialization & banks provide an account for this purpose which is called a DEMAT Account. Q.50. Why do we provide Depriciation? Ans. Depriciation is the part of cost of asset which is periodically shown as an expense into revenue statement to equate with the income that asset generates.That means if we buy an asset it gives revenue to the business. Q.51. What Is debenture capital? Ans. Debenture Capital is debt capital of the Company. It is a document, which either creates a debt or acknowledges the same under the seal of company. Thus debenture represents a liability & debenture-holder is creditors. Interest on debenture is a charge against profit. Q.52. What is contigent liability

Ans. Contingent liabilities are liabilities that may or may not be incurred by an entity depending on the outcome of a future event such as a court case. Written at foot note of Balance Sheet. Q.53. What is prospectus? Ans. A prospectus is a document inviting deposits from the public or inviting offers from the public for the subscriptions of shares or purchase of debentures. Q.54. What is the difference between Authorised and Issued share capital? Ans. Authorised share capital is the maximum limit that a company can issue in its life time whereas issued share capital is the capital that is already issued by the company which can be equal to or less than Authorised share capital. Q.55. What is a Working Capital? Ans. Working Capital is the amount of current assets that is in excess of current liabilities.It is amount of money a company has on hand, or will have, in a given year. Working capital is calculated by subtracting current liabilities from current assets. That is, one takes the value of all debts and obligations for the current year and subtracts that from the value of all cash and assets that might reasonably be converted into cash in the current year. This is a good measure of the short and medium-term financial health of a company, and may indicate by how much it can expand its operations without resorting to borrowing or another capital raising tactic. Q.56. What is an Operating Profit? Ans. A measure of a company's earning power from ongoing operations, equal to earnings before deduction of interest payments and income taxes also called EBIT (earnings before interest and taxes) or operating income. Q.57. What is Asset Allocation Fund in terms of mutual funds? Ans. A mutual fund that provides investors with a portfolio of a fixed or variable mix of the three main asset classes - stocks, bonds and cash equivalents - in a variety of securities. Some asset allocation funds maintain a specific proportion of asset classes over time, while others vary the proportional composition in response to changes in the economy and investment markets. Asset allocation mutual funds come in several varieties. Generally, a "balanced fund" implies a fixed mixed of stocks and bonds, such as 60% stocks and 40% bonds. Q.58. What is the difference between futures and forward contracts? Ans. Future contracts are exchange-traded and, therefore, are standardised contracts. Forward contracts, on the other hand, are private agreements between two parties and are not as rigid in their stated terms and conditions. Futures contracts are settled day by day until the end of the contract, whereas in case of forward contracts settlement of the contract occurs at the end of the contract. Q.59. What is SIN TAX Ans. A state-sponsored tax that is added to products or services that are seen as vices, such as alcohol, tobacco and gambling,levied by governments to discourage individuals from partaking in such activities without making the use of the products illegal.State governments favor sin taxes because they generate an enormous amount of revenue and are usually easily accepted by the general public because they are indirect taxes that only affect those who use the products. Q.60. What is Portfolio Management? Ans. In Portfolio Management assets are combined into a combination that fits the investor's preferences (e.g., level of risk) and requirements/expectations (e.g., regular dividends and interest).

Q.61. What is Hire purchase? Ans. In cases where a buyer cannot afford to pay the asked price for an item of property as a lump sum but can afford to pay a percentage as a deposit, a hire-purchase contract allows the buyer to hire the goods for a monthly rent. When a sum equal to the original full price plus interest has been paid in equal installments, the buyer can buy the goods at a predetermined price or return the goods to the owner. HP differs from a mortgage and the so-called buyer who has goods is not the legal owner during the term of the HP contract. HP is frequently advantageous to consumers because it spreads the cost of expensive items over an extended time period. Q.62. What is EVA ? Ans. EVA means Economic Value Added .It`s a financial measurement tool that determines if a business is earning more than it`s true cost.. Formula for calculating EVA EVA = Net Operating Profit After Tax (NOPAT) - Cost Of Capital. Q.63. What is WACC (weighted avearge cost of capital)?? Ans. A calculation of a firm's cost of capital in which each category of capital is proportionately weighted. All capital sources - common stock, preferred stock, bonds and any other long-term debt - are included in a WACC calculation. All else help equal, the WACC of a firm increases as the beta and rate of return on equity increases, as an increase in WACC notes a decrease in valuation and a higher risk. WACC = Kd * VD/ CE + Ke * VE/ CE Q.64. What Is Bottomline And What Is Topline? Ans. Bottom line refers to profit shown on the bottom of the income statement.Top line refers to sales shown on the top of the income statement Q.65. What is Secondary Market? Ans. Secondary market is a market for secondary sale of securities. Securities which have already passed through the new issue market are traded in this market. Q.66. What are capital markets and money markets? Ans. Capital market is a long term market and includes stock market and government bond market. Money market is a short term market and includes Treasury Bill market, Commercial Bill market and Call money market. Q.67. WHAT IS BRIDGE FINANCE? Ans. It refers to loans taken by a company normally from commercial banks for a short period, pending disbursement of loans sanctioned by financial institutions. Generally, the rate of interest on bridge finance is higher as compared with that on term loans. Q.68. What is Underwriting? Ans. The procedure by which an underwriter brings a new security issue to the investing public in an offering. In such a case, the underwriter will guarantee a certain price for a certain number of securities to the party that is issuing the security (in exchange for a fee). Thus, the issuer is secure that they will raise a certain minimum from the issue, while the underwriter bears the risk of the issue. Q.69. What is a Share Capital? Answer. Share capital or issued capital or capital stock refers to the portion of a company's equity that has been obtained (or will be obtained) by trading stock to a shareholder for cash or an equivalent item of capital value.

Q.70. What is amortisation of assests? Ans. When we writeoff any intangible assets it is known as "amortisation of assets" eg:writenoff of "goodwill" Q.71. What is forex? Ans. It is foreign exchange market where currencies are bought and sold against other currencies but with no brokerage charges unlike stock market. Q.72. Define what is meant by the terms "capital" and "revenue" items in connection with fixed assets. Ans. The amount invested to purchase a fixed asset and the benefits of the asset is used for more than 1 year then the amount spent is said to be of capital nature. The amount spent on repair and maintenance of fixed asset and the benefit for the expenditure is of less than 1 year then the amount spent is said to be of revenue in nature. Q.73. What is sub-prime? Ans. Sub-prime is any loan that does not meet "prime guidelines". Some people take subprime loans with higher rates (even if they ave a better credit scores ) for reduced documentation requirement, not having to pay off collection accounts etc. Q.74. What is Financial planning? Ans. The balance sheet showed what the investor owns and what he owes. The cash flow statement showed the money available for making investments. Together , these two statements tell the investor's financial circumstances and saving potential. Financial planning is the process of meeting as many of the investor's financial needs as possible with his saving potential. Q.75. What is paper profit? Ans. Profit which has been made but not yet realized through a transaction, such as a stock which has risen in value but is still being held. Also called unrealized gain or unrealized profit or paper gain or book profit. Q.76. What is Marketable Assets? Ans. Marketable assets are those which can be easily transferred from one person to another without much hindrance. Examples: Shares of Listed Companies, Government Securities, Bonds of Public Sector Undertakings, etc. Q.77. What is the meaning of Arbitrage Ans. The simultaneous buying and selling of a security at two different prices in two different markets, resulting in profits without risk. Q.78. What is Currency Trading? Ans. Currency trading, also know as "forex trading," . Currency trading involves the exchange of one currency for another; for example, US Dollars for Euros. Currencies trade in pairs and a trader buys the currency that he thinks will appreciate in value relative to the other. Q.79. What is the difference between IRR and NPV and How Companies determine IRR ? Ans. The IRR is the annualized effective compounded return rate which can be earned on the invested capital, i.e., the yield on the investment. NPV : Net present value (NPV) or net present worth (NPV) is defined as the total present value (PV) of a time series of cash flows.

Q.80. What is Financial Statements? Ans. Financial Statements are prepared at the last stage of the accounting process.A third statement is prepared to know how the management or flow of cash is made during an accounting period. The Profit and Loss a/c and the Balance Sheet provide us with information reguarding the income and the expenses and the current assets and the liabilities i the organization respectively They also help in executing imporatnt manegerial functions of the management. Q.81. How many companies are listed in BSE SENSEX as of today? Ans. Currently there are 4700 companies listed (source :www.bseindia.com <in about us section>) in BSE SENSEX, from which the investors can choose their investments. Q.82. What is meant by net profit? Ans. It means the profit recorded in the income statement after deduction of taxes,depreciation and other indirect expenses from capital. Q.83. What are the types of ownership? Ans. There are 3 basis forms of ownership structures for business entities:Sole Proprietorships,Partnerships and Corporation. A Sole Propietorship is a business with a single owner.Sole Proprietorships tend to be a small retail establishments and individual professional business. A Partnership is an organisation which involves two or more individuals acting as coowners. A Corporation is otherwie known as a joint stock company.The shareholders are the owners of the organisation and it is managed by the Board of Directors. Q.84. What is Oppurtunity Cost? Ans. Opportunity cost is the cost of opportunity lost. Opportunity cost is the cost of selecting one course of action in terms of the opportunities which are given up to carry out that course of action. Opportunity cost is the benefit lost by rejecting the best competing alternative to the one chosen Q.85. What is the difference between NIFTY and SENSEX? Ans. The word Nifty is a combination of two words namely the "N" from national and "ifty" from fifty. It is an index of 50 companies listed on the National Stock Exchange in India. The 50 companies cover 22 different sectors of the Indian economy. The Sensex on the other hand refers to the sensitivity Index of the Bombay Stock Exchange. The Sensex comprises of the traded stock of the 30 most traded and active types. Q.86. What is insurance? Ans. A contract (policy) in which an individual or entity receives financial protection or reimbursement against losses from an insurance company. The company pools clients' risks to make payments more affordable for the insured. Q.87. What is Liquidation? Ans. The end of the company's life is known as the dissolution of the company.Before its dissolution, the company has to wind off its affairs. Assets have to be sold. Creditors have to be paid off. Surplus has to be distributed among the shareholders. This is a lenghty process and goes on for years. During this period the company is said to be in liquidation. Thus liquidation is the process of ending while discussion is the end itself. Q.88. What is Depreciation Recapture? Ans. Depreciation recapture is the Internal Revenue Service (IRS) procedure for collecting income tax on a gain realized by a taxpayer when the taxpayer disposes of an asset that

had previously provided an offset to ordinary income for the taxpayer through depreciation. In other words, because the IRS allows a taxpayer to deduct the depreciation of an asset from the taxpayers ordinary income, the taxpayer has to report any gain from the disposal of the asset (up to the recomputed basis) as ordinary income, not as a capital gain. Q.89. Who is a Merchant Banker? Ans. Any person who is engaged in the business of issue management either by making arrangements regarding selling, buying or subscribing to the securities as manager, consultant, adviser or rendering corporate advisory service in relation to such issue management is known as a merchant banker. Q.90. What is the other name for Annual Report? Ans. It is also called as Corporate Sustainability Report Q.91. What is the difference between commercial banking and investment banking? Ans. An investment banker arranges for financing a business by selling its stock to the public, arranging a merger, or taking a business public whereas Commercial banking can refer to a bank or a division of a bank that mostly deals with deposits and loans from corporations or large businesses, as opposed to normal individual members of the public (retail banking). Q.92. What Is Pilot Fishing? Ans. A type of pre-marketing of an initial public offering (IPO) that involves testing investor sentiment to receive feedback on how the market may respond to an issue. Pilot fishing has led to much controversy because it could undermine the role of investment bankers by providing advice to clients about the price the IPO is launched at. Q.93. What is mean by American Depository Shares? Ans. ADRs are dollar-denominated equity share of a foreign-based company available for purchase on an American stock exchange. American Depositary Shares (ADSs) are issued by depository banks in the U.S. under agreement with the issuing foreign company; the entire issuance is called an American Depositary Receipt (ADR) and the individual shares are referred to as ADSs. Q.94. Venture Capitalist Ans. An investor who either provides capital to startup ventures or supports small companies that wish to expand but do not have access to public funding.Venture capitalists usually expect higher returns for the additional risks taken. Q.95. What is insolvent company and solvent company? Ans. A Company is said to be insolvent if it is unable to pay its creditors in full.In other words , the amount available with the liquidator is not sufficient to pay the creditors in full. A Company is said to be a solvent company , if it is unable to pay its creditors in full. Q.96. What are options and futures? Ans. Futures and options represent two of the most common form of "Derivatives". Derivatives are financial instruments that derive their value from an 'underlying'. The underlying can be a stock issued by a company, a currency, Gold etc., The derivative instrument can be traded independently of the underlying asset. Futures A 'Future' is a contract to buy or sell the underlying asset for a specific price at a predetermined time. If you buy a futures contract, it means that you promise to pay the

price of the asset at a specified time. If you sell a future, you effectively make a promise to transfer the asset to the buyer of the future at a specified price at a particular time. Options Options contracts are instruments that give the holder of the instrument the right to buy or sell the underlying asset at a predetermined price. An option can be a 'call' option or a 'put' option. Q.97. What is securitisation? Ans. It is a process through which business organisations transfer their assets or bills receivables, loans etc. to other some other organisation against liquidity. A trust/ SPV may be appointed for this purpose and also to protect the interest of investors. Q.98. What are the different types of financial risks? Ans: Credit Risk- A party to a contract may default Market Risk- Arises from unfavourable market conditions Interest Rate Risk- Adverse movement in interest rates Liquidity Risk- Inability to sell in the secondary market Q.99. What is a Debt/Equity Ratio ? Ans. A measure of a company's financial leverage calculated by dividing its total liabilities by stockholders' equity. It indicates what proportion of equity and debt the company is using to finance its assets. Q.100. What is Currency Risk? Ans. The risk that a business' operations or an investment's value will be affected by changes in exchange rates. For example, if money must be converted into a different currency to make a certain investment, changes in the value of the currency relative to the American dollar will affect the total loss or gain on the investment when the money is converted back. This risk usually affects businesses, but it can also affect individual investors who make international investments, also called exchange rate risk. Q.101. Circulating Capital: Ans. The portion of an organization's investment that is continually used and replenished in ongoing operations. Circulating capital can consist of operating expenses, raw material stock, inventories of finished goods or physical capital on hand. Circulating capital is the opposite of constant (fixed) capital. Q.102. What is mean by participatory notes? Ans. Participatory notes means Financial instruments used by investors or hedge funds that are not registered with the Securities and Exchange Board of India to invest in Indian securities. Indian-based brokerages buy India-based securities and then issue participatory notes to foreign investors. Any dividends or capital gains collected from the underlying securities go back to the investors. Q.103. What Is Credit Default Swaps? Ans. Credit default swaps (CDS) are insurance-like contracts where one party can buy protection against default on a loan from a seller of this protection, for a premium/fee. In concept, its similar to you buying a fire protection policy from an insurance company to cover the house you own. In its simplest form, a bank which has lent money to a company, can buy a CDS from a seller (could be an insurance company or any other willing seller of this protection) to protect itself against default by the borrower for a fee that the CDS seller will charge Q.104. What is Subprime Credit Ans. It is a general term for borrowings of subprime loans or debt made to people.Subprime credit includes the original borrowing itself, as well as any derivative products such as

securitizations that are based on subprime loans and then sold to investors in the secondary markets.A big portion of the total market for subprime credit is based on subprime mortgages, or home loans to borrowers of questionable creditworthiness. Q.105. What does corporate refinancing mean? Ans. The process through which a company reorganizes its debt obligations by replacing or restructuring existing debts is called corporate refinancing. Refinancing may also involve issuing equity to pay off a percentage of debt. Q.106. Who regulates the securities market? Ans. The responsibility for regulating the securities market is shared by Department Of Economic Affairs (DEA), Department Of Company Affairs (DCA), Reserve Bank Of India (RBI), and Securities and Exchange Board Of India (SEBI). Q.107. What is initial public offering (ipo)? Ans. An Initial Public Offering is the first sale of privately owned equity (stock or shares) in a company via the issue of shares to the public and other investing institutions. In other words an IPO is the first sale of stock by a private company to the public. IPOs typically involve small, young companies raising capital to finance growth. For investors IPO's can risky as it is difficult to predict the value of the stock (shares) when they open for trading. An IPO is effectively 'going public' or 'taking a company public'. Generally, the company offers primary shares this way, although sometimes secondary shares are also sold as IPOs. For a company to offer IPOs, they need to hire a corporate lawyer as well as an investment banker to underwrite the offer. The actual sale of the shares is generally offered by stock exchange or by regulators. When the company starts to offer IPOs, they are usually required to reveal financial information about the company so that investors know whether the companies a good investment or not. Q.108. What is an Investment Bank? Ans. A financial intermediary that performs a variety of services. This includes underwriting, acting as an intermediary between an issuer of securities and the investing public, facilitating mergers and other corporate reorganizations, and also acting as a broker for institutional clients.The role of the investment bank begins with pre-underwriting counseling and continues after the distribution of securities in the form of advice. Q.109. What is Management Buyout? Ans. When the managers and/or executives of a company purchase controlling interest in a company from existing shareholders.Usually management buys out all the outstanding shareholders and then take the company private because it feels it has the expertise to grow the business better if it controls the ownership. Quite often, management teams up with a venture capitalist to acquire the business because it's a complicated process that requires significant capital. Q.110. What is a 'Debt instrument'? Ans. Debt instrument represents a contract whereby one party lends money to another on pre-determined terms related to rate and period of interest, repayment of principal amount, etc Q.111. What is Foreign Exchange? Ans. The mechanism through which payments are effected between two countries having different currency systems is called foreign exchange. It is a collective term including all kinds of negotiable claims expressed in foreign money. Q.112. What is Sensex Indices ? Ans. An index is basically an indicator. It gives you a general idea about whether most of the stocks have gone up or most of the stocks have gone down. The Sensex is an indicator

of all the major companies of the BSE. The Nifty is an indicator of all the major companies of the NSE. If the Sensex goes up, it means that the prices of the stocks of most of the major companies on the BSE have gone up. If the Sensex goes down, this tells you that the stock price of most of the major stocks on the BSE have gone down. Just like the Sensex represents the top stocks of the BSE, the Nifty represents the top stocks of the NSE. Q.113. What is Red Herring Ans. A preliminary registration statement that must be filed with the SEC describing a new issue of stock and the prospects of the issuing company.It is known as a red herring because it contains a passage in red that states the company is not attempting to sell its shares before the registration is approved by the SEC. Q.114. What is Stock Split? Ans. A stock split is a corporate action which splits the existing shares of a particular face value into smaller denominations so that the number of shares increase ,but , the market capitalization or the value of shares held by the investors post split remains the same as that before the split.Splitting a stock may increase its liquidity,since more investors are able to afford the share and the toatl outstanding shares of the company also increase in the market. Q.115. What are Debt/Income Funds? Ans. These funds invest predominantly in high rated fixed-income-bearing instruments like bonds,debentures,government securities,commercial paper and other money market instruments.They provide a regular income to the investor. Q.116. What is Mark to Market (MTM)? Ans. The act of recording the price or value of a security, portfolio or account to reflect its current market value rather than its book value. Q.117. What is Debt Consolidation Ans. Debt Consolidation is replacing multiple loans with a single loan that is normally secured on property. This can often reduce your (the borrowers) monthly outgoing interest payments by paying only one loan which is secured on the property sometimes over a longer term. Because the loan is secured, the interest rate will generally be considerably lower. Q.118. What is Bank Spread ? Ans. The difference between the interest rate a bank charges a borrower and the interest rate a bank pays a depositor. Q.119. What is Retained Earnings? Ans. The percentage of net earnings not paid out as dividends, but retained by the company to be reinvested in its core business or to pay debt is known as retained earnings. It is recorded under shareholders' equity on the balance sheet and is calculated by adding net income to (or subtracting any net losses from) beginning retained earnings and subtracting any dividends paid to shareholders. Q.120. What is Leverage? Ans. The amount of debt used to finance a firm's assets. A firm with significantly more debt than equity is considered to be highly leveraged or The use of various financial instruments or borrowed capital, such as margin, to increase the potential return of an investment.

Q.121. What are the three important decision taken in financial management? Ans. 1. Investing: In investing we decide about the purchasing of asset,or any long term or short term investment,etc 2. Financial Decisions: Financial decision regarding long term and short term. 3. Dividend Policy: In dividend policy we have to decide about match between fund taking and fund investing. These are three important decisions taken in financial management. Q.122. What is Ratio? What is Financial Ratio? Ans. A ratio is an arithmetical relationship between two figures. In finance, a financial ratio or accounting ratio is a ratio of two selected numerical values taken from an enterprise's financial statements . Financial ratio analysis is a study of ratio between various groups of items in financial statement. Q.123. What is difference between FII & FDI ? Ans. FII invest directly in stock exchange market. FDI invest in different sectors in business. Q.124. What is mean by External commercial borrowings? Ans. External Commercial Borrowings (ECBs) include bank loans, suppliers' and buyers' credits, fixed and floating rate bonds (without convertibility) and borrowings from private sector windows of multilateral Financial Institutions such as International Finance Corporation. Euro-issues include Euro-convertible bonds and GDRs. In India, External Commercial Borrowings are being permitted by the Government for providing an additional source of funds toIndian corporates and PSUs for financing expansion of existing capacity and as well as for fresh investment, to augment theresources available domestically. ECBs can be used for any purpose (rupee-related expenditure as well as imports) except for investment in stock market and speculation in real estate. Q.125. What is financial management? Ans. Financial management seeks to plan for the future such that a personal or business entity has a positive flow of cash. The term 'financial management' has a number of meanings including the administration and maintenance of financial assets. The process of financial management may also include identifying and trying to work around the various risks to which a particular project may be exposed. Some experts refer to financial management as the science of money management the primary usage of the term being in the world of financing business activities. However, the process of financial management is important at all levels of human existence, because every entity needs to look after its finances. From an organizational standpoint, the process of financial management is the process associated with financial planning and financial control. Financial planning seeks to quantify various financial resources available and plan the size and timing of expenditures. In the business world, this means closely monitoring cash flow. The inflow is the amount of money coming into a particular company, while outflow is the record of the

expenditure being made by the company in various sources. Q.126. What is Institutional Investors? Ans. Institutional investors are organizations which pool large sums of money and invest those sums in companies. They include banks, insurance companies, retirement or

pension funds, hedge funds and mutual funds. Their role in the economy is to act as highly specialized investors on behalf of others. Q.127. Fundamental analysis Ans. A method of security valuation which involves examining the company's financials and operations, especially sales, earnings, growth potential, assets, debt, management, products, and competition. Fundamental analysis takes into consideration only those variables that are directly related to the company itself, rather than the overall state of the market or technical analysis data. Q.128. What is Corporate Governance? Ans. The system by which business corporations are directed and controlled. The corporate governance structure specifies the distribution of rights and responsibilities among different participants in the organization, such as the Board, managers, shareholders and other stakeholders, and spells out the rules and procedures for making decisions on corporate affairs. In the broadest sense, which is increasingly widespread today, corporate governance is concerned with holding the balance between economic and social goals and between individual and communal goals. The governance framework is there to encourage the efficient use of resources and equally to require accountability for the stewardship of those resources. The aim is to align as nearly as possible the interests of individuals, corporations and society. Q.129. What is SPACE MODEL? How it is helpful? Ans. The SPACE matrix is a management tool used to analyze a company. It is used to determine what type of a streategy a company should undertake. Q.130. What do you mean by mortgage? Ans. Mortgage is the security for the loan that the lender makes to the borrower. Security here means one unit of commodity can be exchanged for the another or a negotiable instrument representing financial value.Mortgage thus means the transfer of an interest in property (or in law the equivalent - a charge) to a lender as a security for a debt usually a loan of money. Q.131. What are open market operations? Ans. Open market operations are the means of implementing monetary policy by which a central bank controls its national money supply by buying and selling government securities, or other financial institutions. Monetary targets, such as interest rates or exchange rates, are used to guide this implementation. Q.132. What is a bank rate? Ans. Bank rate, also referred to as the discount rate, is the rate of interest which a charges on the loans and advances that it extends to central bank commercial bank and other financial intermediaries. Changes in the bank rate are often used by central banks to control the money supply. Q.133. What is negative equity? Ans. Negative equity often occurs when a homeowner purchases a house using a mortgage and then the economy starts to slow or home prices start to drop. After the house purchase, the value of the home decreases below the value of the amount owed on the mortgage, causing negative equity. Negative equity is calculated simply by taking the value of the asset less the balance on the outstanding loan. Q.134. What are GDRs

Ans. A depository receipt(DR) is any negotiable instrument in the form of a certificate denominated in US dollars.The certificates are issued by an overseas depository bank against certain underlying stock/shares.A DR represents a particular bunch of shares on which the receipt holder has the right to receive dividend, other payments and benefits which company announces from time to time for the share holders. Q.135. Securities Transaction Tax Ans. Chapter VII of Finance(No.2) Act, 2004 has introduced a tax on taxable securities transactions of purchase or sale of an equity share in a company or a derivative or a unit of an equity oriented fund, entered into a recognised stock exchange or a sale of a unit of an equity oriented fund to the Mutual Fund. Q.136. What Does Working Capital Mean? Ans. It is a measure of both a company's efficiency and its short-term financial health. The working capital ratio is calculated as: working capital= current assets- current liabilities Positive working capital means that the company is able to pay off its short-term liabilities. Negative working capital means that a company currently is unable to meet its short-term liabilities with its current assets (cash, accounts receivable and inventory). it is also known as "net working capital" Q.137. What Does Accrued Interest Mean? Ans. Accrued Interest is the interest due on a bond or other fixed income security since the last interest payment was made. Accrued interest is added to the contract price of a bond transaction. It's a term used to describe an accrual accounting method when interest that is either payable or receivable has been recognized, but not yet paid or received. Accrued interest receivable occurs when interest on an outstanding receivable has been earned by the company, but has not yet been received. Q.138. What is an American Depositary Receipt (ADR)? Ans. A receipt for the shares of a foreign-based company held by a U.S. bank that entitles the shareholder to all dividends and capital gains of the underlying stock. ADRs trade similar to stocks on U.S. exchanges, and provide a way for Americans to invest in foreign-based companies by buying their shares in the U.S. instead of through an overseas exchange. Q.139. What is Amortization? Ans. Amortization is the periodical payment of debt. The gradual elimination of a liability such as a mortgage, in regular payments over a specified period of time. Such payments must be sufficient to cover both principal and interest. More specifically, this method measures the consumption of the value of intangible assets, such as a patent or a copyright. While amortization and depreciation are often used interchangeably, technically this is an incorrect practice because amortization refers to intangible assets and depreciation refers to tangible assets. Q.140. What is cost accounting? Ans. Cost Accounting is that part of management accounting which establishes budget and actual cost of operations, processes, departments or product and the analysis of variances, profitability or social use of funds. Managers use cost accounting to support decision making to reduce a company's costs and improve its profitability. As a form of management accounting, cost accounting need not follow standards such as GAAP, because its primary use is for internal managers, rather than external users, and what to compute is instead decided pragmatically. Q.141. What do you understand by the term liquidity ratio? Ans.

Liquidity mean ability to clear the current liabilities. The arithmatical expression between the current liabilities and current assets is called liquidity ratio. the ideal ratio is 2:1 Q.142. Explain the term EPS Ans. The portion of a company's profit allocated to each outstanding share of common stock. Earnings per share serves as an indicator of a company's profitability. Calculated as: = (net income - dividend on preferred stock)/average outstanding shares Q.143. What is convertible bond? Ans. A bond (long term note) that can be exchanged by the holder for a specified number of shares of stock in the company. The convertibility feature usually allows for the bond to have a lower interest rate when it is issued. The holder of the bond enjoys the potential for a gain if the stock price increases. Q.144. What do you mean by corporate governance? Ans. Corporate governance is the set of processes customs, policies, laws and institutions affecting the way a corporation is directed, administered or controlled. Corporate governance also includes the relationships among the many stakeholders involved and the goals for which the corporation is governed. The principal stakeholders are the shareholders, management and the board of directors. Other stakeholders include customers, creditors (e.g., banks, bond holders), employees, suppliers, regulators, and the community at large. Ethical companies are said to have excellent corporate governance. Q.145. What is Diluted Earnings Per Share? Ans. Earnings per share, including common stock, preferred stock, unexercised stock options, unexercised warrants, and some convertible debt. In companies with a large amount of convertibles, warrants and stock options, diluted earnings per share are usually a more accurate measure of the company's real earning power than earnings per share. Q.146. What is secondary market? Ans. The secondary market is the financial market where previously issued securities and financial instruments such as stocks, bonds, options and futures are bought and sold. With primary issuances, or the primary market, investors purchase these securities directly from issuers such as corporations issuing shares in an IPO or private placement, or directly from the government in the case of treasuries. After the initial issuance, investors can purchase from other investors in the secondary market, sometimes called the after market. Q.147. What is meant by Leverage? Ans. The use of various financial instruments or borrowed capital, such as margin, to increase the potential return of an investment is known as leverage. Q.148. What is debt equity ratio? Ans.

This ratio is used to analyze FINANCIAL LEVERAGE. It is a structural ratio that gauges the level of debt financing, and is worked out by dividing total debt, short-term and long-term, by NET WORTH. The denominator would comprise total equity of common stockholders and PREFERENCE capital. Q.149. What is Deficit Financing? Ans. It is a practice in which a government spends more money than it receives as revenue, the difference being made up by borrowing or minting new funds. Although budget deficits may occur for numerous reasons, the term usually refers to a conscious attempt to stimulate the economy by lowering tax rates or increasing government expenditures. The influence of government deficits upon a national economy may be very great. It is widely believed that a budget balanced over the span of a business cycle should replace the old ideal of an annually balanced budget. Some economists have abandoned the balanced budget concept entirely, considering it inadequate as a criterion of public policy. Q.150. What is Commercial paper? Ans. Promissory note (issued by financial institutions or large firms) with very-short to short maturity period (usually, 2 to 30 days, and not more than 270 days), and secured only by the reputation of the issuer. Rated, bought, sold, and traded like other negotiable instruments, commercial paper is a popular means of raising cash, and is offered generally at a discount instead of on interest bearing basis. Q.151. What is financial analysis? Ans. Financial analysis refers to an assessment of the viability, stability and profitability of a business, sub-business or project. It is performed by professionals who prepare reports using ratios that make use of information taken from financial statements and other reports. These reports are usually presented to top management as one of their bases in making business decisions. Based on these reports, management may: Continue or discontinue its main operation or part of its business; Make or purchase certain materials in the manufacture of its product; Acquire or rent/lease certain machineries and equipments in the production of its goods; Issue stocks or negotiate for a bank loan to increase its working capital. Make decisions regarding investing or lending capital other decisions that allow management to make an informed selection on various alternatives in the conduct of its business.

Q.152. What is Working Capital Management Ans. Working capital, also known as net working capital, is a financial metric which represents operating liquidity available to a business. Along with fixed assets such as plant and equipment, working capital is considered a part of operating capital. It is calculated as current assets minus current liabilities. If current assets are less than current liabilities, an entity has a working capital deficiency, also called a working capital deficit. A company can be endowed with assets and profitability but short of liquidity if its assets cannot readily be converted into cash. Positive working capital is required to ensure that a firm is able to continue its operations and that it has sufficient funds to satisfy both maturing short-term debt and upcoming operational expenses. The management of working capital involves managing inventories, accounts receivable and payable and cash. Q.153. What are Corporate Bonds? Ans. A Corporate Bond is a bond issued by a corporation. The term is usually applied to

longer-term debt instruments, generally with a maturity date falling at least a year after their issue date. (The term "commercial paper" is sometimes used for instruments with a shorter maturity.) Q.154. What are Treasury Bills? Ans. Treasury Bills are money market instruments to finance the short term requirements of the Government of India. These are discounted securities and thus are issued at a discount to face value. The return to the investor is the difference between the maturity value and issue price. Q.155. What is inflation Accounting Ans. Inflation accounting is a term describing a range of accounting systems designed to correct problems arising from historical cost accounting in the presence of inflation. Inflation accounting is used in countries experiencing high inflation or hyperinflation. For example, in countries experiencing hyperinflation the International Accounting Standards Board requires corporate financial statements to be adjusted for changes in purchasing power using a price index. Under a historical cost-based system of accounting, inflation leads to two basic problems. First, many of the historical numbers appearing on financial statements are not economically relevant because prices have changed since they were incurred.... Second, since the numbers on financial statements represent dollars expended at different points of time and, in turn, embody different amounts of purchasing power, they are simply not additive Q.156. What is Interest Coverage Ratio? Ans. The interest coverage ratio is a measurement of the number of times a company could make its interest payments with its earnings before interest and taxes. Q.157. What is money market and capital market? Ans. The market for short term financial claims is referred to as the money market and the market for the long term financial claims is called as capital market. Q.158. What Does Operating Leverage Mean? Ans. A measurement of the degree to which a firm or project incurs a combination of fixed and variable costs. A business that makes few sales, with each sale providing a very high gross margin, is said to be highly leveraged. A business that makes many sales, with each sale contributing a very slight margin, is said to be less leveraged. As the volume of sales in a business increases, each new sale contributes less to fixed costs and more to profitability. The higher the degree of operating leverage, the greater the potential danger from forecasting risk. That is, if a relatively small error is made in forecasting sales, it can be magnified into large errors in cash flow projections. The opposite is true for businesses that are less leveraged. Q.159. What Does Bond Mean? Ans. A debt investment in which an investor loans money to an entity (corporate or governmental) that borrows the funds for a defined period of time at a fixed interest rate. Bonds are used by companies, municipalities, states to finance a variety of projects and activities. Q.160. What Is Hedging? Ans. Hedging means reducing or controlling risk. This is done by taking a position in the futures market that is opposite to the one in the physical market with the objective of reducing or limiting risks associated with price changes.

Hedging is a two-step process. A gain or loss in the cash position due to changes in price levels will be countered by changes in the value of a futures position. For instance, a wheat farmer can sell wheat futures to protect the value of his crop prior to harvest. If there is a fall in price, the loss in the cash market position will be countered by a gain in futures position. Q.161. What Are Derivatives? Ans. The term "Derivative" indicates that it has no independent value, i.e. its value is entirely "derived" from the value of the underlying asset. The underlying asset can be securities, commodities, bullion, currency, livestock or anything else. In other words, Derivative means a forward, future, option or any other hybrid contract of pre determined fixed duration, linked for the purpose of contract fulfillment to the value of a specified real or financial asset or to an index of securities. Q.162. What is a futures contract? Ans. Futures contract means a legally binding agreement to buy or sell the underlying security on a future date. Future contracts are the organized/standardized contracts in terms of quantity, quality (in case of commodities), delivery time and place for settlement on any date in future. The contract expires on a pre-specified date which is called the expiry date of the contract. On expiry, futures can be settled by delivery of the underlying asset or cash. Cash settlement entails paying/receiving the difference between the price at which the contract was entered and the price of the underlying asset at the time of expiry of the contract. Q.163. What is Statutory Liquidity Ratio? Ans. Statutory Liquidity Ratio (SLR) is a term used in the regulation of banking in India. It is the amount which a bank has to maintain in the form of cash, gold or approved securities. The objectives of SLR are: 1. To restrict the expansion of bank credit. 2. To augment the investment of the banks in Government securities. 3. To ensure solvency of banks. A reduction of SLR rates looks eminent to support the credit growth in India. Q.164. What is meant by Dividend Yield? Ans. Dividend Yield gives a relationship between the current price of a stock and the dividend paid by its issuing company during the last 12 months. Q.165. What do you mean by core competency? Ans. Core competency is something that a firm can do well and that meets the following three conditions: 1. It provides consumer benefits 2. It is not easy for competitors to imitate 3. It can be leveraged widely to many products and markets. Q.166. What is Cash Reserve Ratio? Ans. The reserve requirement (or required reserve ratio) is a bank regulation that sets the minimum reserves each bank must hold to customer deposits and notes. These reserves are designed to satisfy withdrawal demands, and would normally be in the form of fiat currency stored in a bank vault (vault cash), or with a central bank. Q.167. What is arbitrage? Ans.

Arbitrage is a kind of hedged investment meant to capture slight differences in price; when there is a difference in the price of something on two different markets the arbitrageur simultaneously buys at the lower price in 1 market and sells at the higher price in another market. Q.168. What is Structured Finance Ans. A service offered by many large financial institutions for companies with very unique financing needs. These financing needs usually don't match conventional financial products such as a loan. Structured finance generally involves highly complex financial transactions. Eg :CBOs and syndicated loans. Q.169. What is Collateralized Debt Obligation (CDO) ? Ans. An investment-grade security backed by a pool of bonds, loans and other assets. CDOs do not specialize in one type of debt but are often non-mortgage loans or bonds. CDOs are unique in the sense they represent different types of debt and credit risk. In the case of CDOs, these different types of debt are often referred to as 'tranches' or 'slices'. Each slice has a different maturity and risk associated with it. The higher the risk, the more the CDO pays. Q.170. What is a Hybrid Security? Ans. A security that combines two or more different financial instruments. Hybrid securities generally combine both debt and equity characteristics. Eg :Convertible Bond, that has features of an ordinary bond, but is heavily influenced by the price movements of the stock into which it is convertible. Q.171. What Is Bull Market? Ans. The prolonged period for which investment prices rise faster than their historical average. Bull market is result of an economic recovery in economic boom, or investor psychology. The longest and most famous bull market is the one that began in the early 1990s in which the U.S. equity markets grew at their fastest pace ever. (opposite : bear market.) Q.172. Insider trading Ans. Insider trading is the trading of a corporation's stock or other securities (e.g. bonds or stock options) by individuals with potential access to non-public information about the company, The Securities and Exchange Board of India's (SEBI) regulation for prohibiting insidertrading states that in its illegal form this happens when an insider buys or sells the shares of a listed company when in possession of any unpublished price-sensitive information. Q.173. What is the difference between reverse Takeover? Ans. Reverse takeover, is the acquisition of a public company by a private company to bypass the lengthy and complex process of going public. Shareholders of the private company purchase control of the public Shell company and then merge it with the private company. The publicly traded corporation is called a "shell" since all that exists of the original company is its organizational structure. The private company shareholders receive a substantial majority of the shares of the public company and control of its board of directors. Q.174. What is the difference between Closing price and Settlement price

Ans. Closing price is the last traded price of a security before the closure of trading hours. Settlement price is the weighted average price of a security in the last half an hour of trading before closure time. Q.175. What is Debt Syndication? Ans. Debt Syndication is a process involving arrangement of various fund needs. The need could be short, medium or long term. The method that can be used for this can be securitization, private equity placement, banks, etc. Q.176. What Does Credit Crisis Mean? Ans. A crisis that occurs when several financial institutions issue or are sold high-risk loans that start to default. As borrowers default on their loans, the financial institutions that issued the loans stop receiving payments. This is followed by a period in which financial institutions redefine the riskiness of borrowers, making it difficult for debtors to find creditors. Q.177. What Does Exit Fee Mean? Ans. A fee or charge assessed to an investor for withdrawing money prior to a previously stipulated date. This is almost always expressed and charged as a percentage of assets rather than a flat fee. Q.178. What is Du Pont analysis? Ans. The Du Pont Analysis, also known as the Du Pont Identity or Dupont Analysis, is a representation that splits Return On Equity (ROE) into three segments: Financial Leverage (calculated using an equity multiplier) Asset use efficiency (calculated using asset turnover) Operating efficiency (calculated using the profit margin) Return On Equity or ROE is calculated with the help of the following formula: ROE = (Net profit/Sales) (Sales/Assets) (Assets/Equity) = (Profit margin) (Asset turnover) (Equity multiplier) This assessment permits the financial analyst to comprehend where greater or lower return is coming from in relation to other firms in similar industries. The Du Pont Analysis is not useful in some industries, including the banking sector. Q.179. What is carbon credit trading? Ans. Trading in carbon credits is an emerging business globally as the cost of purchasing carbon credits from developing countries like India or China is much less than earning the credit through emission reduction in the developed countries. Carbon credits are earned by reducing carbon emissions from plants etc. Indian companies can also profit by selling their carbon credits in dedicated exchanges in Europe and the US at a much higher price Q.180. What is the difference between Reserves and Provisions? Ans. Provisions are those where the liability existence is certain, but the amount of liability cannot be determined with substantial accuracy. In case of reserves, the liability is not known. but some amount of profits are kept aside for meeting the contingencies that might become actual liabilities. Q.181. What is the difference between Bonds & Stocks?

Ans. Stocks give investors part ownership of a company, bonds are loans made by investors to corporations or governments. Q.182. Real Interest Rate Ans. An interest rate that has been adjusted to remove the effects of inflation to reflect the real cost of funds to the borrower, and the real yield to the lender. The real interest rate of an investment is calculated as the amount by which the nominal interest rate is higher than the inflation rate. Real Interest Rate = Nominal Interest Rate - Inflation (Expected or Actual) For example, if you are earning 4% interest per year on the savings in your bank account, and inflation is currently 3% per year, then the real interest rate you are receiving is 1% (4% - 3% = 1%). The real value of your savings will only increase by 1% per year, when purchasing power is taken into consideration Q.183. Is Balanced Scorecard a good strategy in accounting terms ? Ans. The Balanced Scorecard is a management system that maps an organization's strategic objectives into performance metrics in four perspectives: financial, internal processes customers, and learning and growth. These perspectives provide relevant feedback as to how well the strategic plan is executing so that adjustments can be made as necessary. Some of the benefits of the Balanced Scorecard system include: Translation of strategy into measurable parameters. Communication of the strategy to everybody in the firm. Feedback of implementation results to the strategic planning process.

Q.184. What is Reverse Mortgage? Ans. In a conventional mortgage the homeowner makes a monthly amortized payment to the lender; after each payment the equity increases within his or her property, and typically after the end of the term (e.g., 30 years) the mortgage has been paid in full and the property is released from the lender. In a reverse mortgage, the home owner makes no payments and all interest is added to the lien on the property. If the owner receives monthly payments, or a bulk payment of the available equity percentage for their age, then the debt on the property increases each month. If a property has increased in value after a reverse mortgage is taken out, it is possible to acquire a second (or third) reverse mortgage over the increased equity in the home. Q.185. What Does All-Cap Fund Mean? Ans. A stock mutual fund that invests in equity securities without regard to whether a company is characterized as small, medium or large. The term "cap" is shorthand for capitalization. The investment community measures a company's size by its market capitalization, which is calculated by multiplying the number of a company's outstanding shares by its current stock price. Q.186. What Does Auction Market Mean? Ans. A market in which buyers enter competitive bids and sellers enter competitive offers at the same time. The price a stock is traded represents the highest price that a buyer is willing to pay and the lowest price that a seller is willing to sell at. Matching bids and offers are then paired together and the orders are executed

Q.187. What are Forex Reserves Ans. Foreign exchange reserves (also called Forex reserves) in a strict sense are only the foreign currency deposits and bonds held by central banks and monetary authorities. These are assets of the central bank held in different reserve currencies, such as the dollar, euro and yen, and used to back its liabilities, e.g. the local currency issued, and the various bank reserves deposited with the central bank, by the government or financial institutions Q.188. What is Currency Depreciation? Ans. Currency depreciation is the loss of value of a country's currency with respect to one or more foreign reference currencies, typically in a floating exchange rate system. The depreciation of a country's currency refers to a decrease in the value of that country's currency. For instance, if the Canadian dollar depreciates relative to the euro, the exchange rate (the Canadian dollar price of euros) rises - it takes more Canadian dollars to purchase 1 euro (1 EUR/CAD=1.5 1 EUR/CAD=1.7). Q.189. What is dumping? Ans. The practice of discriminating monopoly pricing in the area of foreign trade is described as DUMPING It implies different prices in the domestic and foreign markets. Haberler defines dumping as the sale of a good at a price which is lower than the selling price of the same good at the same time circumstances at home, taking account of differences in transport costs. Q.190. What Does Open-End Fund Mean? Ans. A type of mutual fund that does not have restrictions on the amount of shares the fund will issue. If demand is high enough, the fund will continue to issue shares no matter how many investors there are. Open-end funds also buy back shares when investors wish to sell. Q.191. What is Payout Ratio? Ans. Payout Ratio is the amount of earnings paid out in dividends to shareholders. Investors can use the payout ratio to determine what companies are doing with their earnings. Calculated as: Payout Ratio = Dividends per Share Earnings per Share Q.192. What is carbon Finance? Ans. Carbon finance is a new branch of Environmental finance. Carbon finance explores the financial implications of living in a carbon-constrained world, a world in which emissions of carbon dioxide and other greenhouse gases (GHGs) carry a price. Financial risks and opportunities impact corporate balance sheets, and market-based instruments are capable of transferring environmental risk and achieving environmental objectives. Issues regarding climate change and GHG emissions must be addressed as part of strategic management decision-making. The general term is applied to investments in GHG emission reduction projects and the creation (origination) of financial instruments that are tradeable on the carbon market. Q.193. What is Merchant Banking? Ans.

A merchant bank is a financial institution primarily engaged in offering financial services and advice to corporations and wealthy individuals on how to use their money. The term can also be used to describe the private equity activities of banking. A bank that deals mostly in (but is not limited to) international finance, long-term loans for companies and underwriting. Merchant banks do not provide regular banking services to the general public. Q.194. What Does Gilt Fund Mean? Ans. A mutual fund that invests in several different types of medium and long-term government securities in addition to top quality corporate debt. Q.195. What is 'Stamp duty'? Ans. Stamp duty refers to a form of tax levied on documents. It is necessary to make documents legally effective. Q.196. Explain cash flow Ans. In financial accounting is a cash flow statement or statement of cash flows is a financial statement that shows a company's flow of cash. The money coming into the business is called cash inflow, and money going out from the business is called cash outflow. The statement shows how changes in balance sheet and income accounts affect cash and cash equivalents and breaks the analysis down to operating, investing, and financing activities. Q.197. What does Exotic Currency mean?? Ans. A foreign exchange term for a thinly traded currency. Exotic currencies are illiquid, lack market depth and trade at low volumes. Trading an exotic currency can be expensive, as the bid-ask spread is usually large. Q.198. What do you mean by Exotic Currency? Ans. A foreign exchange term for a thinly traded currency. Exotic currencies are illiquid, lack market depth and trade at low volumes. Trading an exotic currency can be expensive, as the bid-ask spread is usually large. Q.199. What is Discretionary Cost? Ans. Cost such as that of advertising, preventive maintenance, research and development, that a manager may eliminate or postpone without disrupting the firm's operations or affecting its productive capacity in the short run. A discretionary cost is usually specific in amount, or is determined by a formula such as a certain percentage of sales revenue. Q.200. What is a bond Ans. A Bond represents a contract under which a borrower promises to pay interest and principal an specific dates to holder of the bonds.Bonds issued by the central government are called Treasury bonds.(maturity ranging from 3 to 20 years).State Government Bonds are issued by the State Government..( Maturity ranging from 3 to 20 years.) A debt instrument issued for a period of more than one year with the purpose of raising capital by borrowing. The Federal government, states, cities, corporations, and many other types of institutions sell bonds. Generally, a bond is a promise to repay the principal along with interest (coupons) on a specified date (maturity). Some bonds do not pay interest, but all bonds require a repayment of principal. When an investor buys a bond, he/she becomes a creditor of the issuer. However, the buyer does not gain any kind of ownership rights to the issuer, unlike in the case of equities. On the hand, a bond holder has a greater claim on an issuer's income than a shareholder in the case of financial distress (this is true for all creditors). Q.201. What Does Equity Mean?

Ans. 1. A stock or any other security representing an ownership interest. 2. On a company's balance sheet, the amount of the funds contributed by the owners (the stockholders) plus the retained earnings (or losses). Also referred to as "shareholders' equity". 3. In terms of investment strategies, equity (stocks) is one of the principal asset classes. The other two are fixed-income (bonds) and cash/cash-equivalents. These are used in asset allocation planning to structure a desired risk and return profile for an investor's portfolio. Q.202. What is Internal Audit? Ans. Internal auditing is a profession and activity involved in helping organisations achieve their stated objectives. It does this by utilizing a systematic methodology for analyzing business processes, procedures and activities with the goal of highlighting organizational problems and recommending solutions. Internal auditing frequently involves measuring compliance with the entity's policies and procedures. Q.203. What is liquidation value? Ans. The estimated amount of money that an asset or company could quickly be sold for, such as if it were to go out of business. If the liquidation value per share for a company is greater than the current share price, then it usually means that the company should go out of business (or that the market is misvaluing the stock), although this is uncommon. Q.204. What is Going Concern Value? Ans. Going Concern Value represents the amount that can be realised if the firm is sold as a continuing operating entity. The value of a company as an ongoing entity. This value differs from the value of a liquidated company's assets, because an ongoing operation has the ability to continue to earn profit, while a liquidated company does not. Q.205. What is intrinsic value? Ans. In finance, intrinsic value refers to the value of a security which is intrinsic to or contained in the security itself. It is also frequently called fundamental value. It is ordinarily calculated by summing the future income generated by the asset, and discounting it to the present value. The intrinsic value of a security is the present value of the cash flow stream expected from the security, discounted at a rate of the return appropriate for the risk associated with the security. Q.206. What Does Blend Fund Mean? Ans. A category of equity mutual funds with portfolios that are made up of a mix of value and growth stocks. This is also referred to as a "hybrid fund". Q.207. What is the sustainable growth rate? Ans. It is the maximum growth rate that a firm can achieve without restoring to external equity finance. The sustainable growth rate is a measure of how much a firm can grow without borrowing more money. After the firm has passed this rate, it must borrow funds from another source to facilitate growth. Q.208. What is free cash flow? Ans. A measure of financial performance calculated as operating cash flow minus capital expenditures. Free cash flow (FCF) represents the cash that a company is able to generate after laying out the money required to maintain or expand its asset base. Free cash flow is important because it allows a company to pursue opportunities that enhance shareholder value. Without cash, it's tough to develop new products, make

acquisitions, pay dividends and reduce debt. FCF is calculated as:

It can also be calculated by taking operating cash flow and subtracting capital expenditures Q.209. What is Technical Analysis? Ans. Technical analysis is a method of investing which focuses on past price movements and attempts to identify trends that indicate future price movement. Underpinning technical analysis are three core principles which are central to the TA faith: 1. Share prices move in patterns 2. Patterns repeat themselves 3. If you anticipate a pattern correctly, you can profit from it Different technical analysts use different techniques, but for the most part they rely on the same raw data: Price (whether share prices, commodity prices or option prices) Volume (the number of shares or other instrument traded per day)

Using historical data of these two variables, the analyst creates a chart (usually on a computer using special software), identifies patterns, and trades on the basis of what they tell him. If a trend indicates that the price of a share is due to go up, he buys shares or call options. If a trend indicates that the price of a share is due to go down, be sells shares or buys put options.

Q.210. What is IPO (Initial Public Offering)? Ans. An Initial Public Offering (IPO being the Stock Exchange and corporate acronym) is the first sale of privately owned equity (stock or shares) in a company via the issue of shares to the public and other investing institutions. In other words an IPO is the first sale of stock by a private company to the public. IPOs typically involve small, young companies raising capital to finance growth. For investors IPO's can risky as it is difficult to predict the value of the stock (shares) when they open for trading. An IPO is effectively 'going public' or 'taking a company public'. Q.211. WHAT IS NET PROFIT VALUE (NPV)? Ans. NPV is a significant measurement in business investment decisions. NPV is essentially a measurement of all future cashflow (revenues minus costs, also referred to as net benefits) that will be derived from a particular investment (whether in the form of a project, a new product line, a proposition, or an entire business), minus the cost of the investment. Logically if a proposition has a positive NPV then it is profitable and is worthy of consideration. If negative then it's unprofitable and should not be pursued. While there are many other factors besides a positive NPV which influence investment decisions; NPV provides a consistent method of comparing propositions and investment opportunities from a simple capital/investment/profit perspective. There are different

and complex ways to construct NPV formulae, largely due to the interpretation of the 'discount rate' used in the calculations to enable future values to be shown as a present value. Corporations generally develop their own rules for NPV calculations, including discount rate. NPV is not easy to understand for non-financial people. Q.212. What do you mean by ratio analysis? Ans. Ratio analysis is one of the techniques of financial analysis to evaluate the financial condition and performance of a business concern. Simply, ratio means the comparison of one figure to other relevant figure or figures. According to Myers, " Ratio analysis of financial statements is a study of relationship among various financial factors in a business as disclosed by a single set of statements and a study of trend of these factors as shown in a series of statements." Q.213. What is demutualization ? Ans. When a mutual company owned by its users/members converts into a company owned by shareholders. In effect, the users/members exchange their rights of use for shares in the demutualized company. A mutual company (not to be confused with a mutual fund) is a company created to provide specific services at the lowest possible price to benefit its users/members. In demutualization, ownership of the mutual company is separated from the exclusive right to use the services provided by the company. Demutualization is the process by which a customer-owned mutual organisation or cooperative changes legal form to a joint stock company. Q.214. What is Venture Capital Funds? Ans. Venture capital is a type of private equity capital typically provided to early-stage, highpotential, growth companies in the interest of generating a return through an eventual realization event such as an IPO or trade sale of the company. Q.215. What is active fund management? Ans. It refers to a portfolio management strategy wherein the manager makes specific investments with the goal of outperforming an investment benchmark index. Q.216. What is entry/exit load? Ans. Entry load are those charges which are levied on the investor when he buys any mutual fund from distributor companys and exit load charges are those when investor surrender their mutual fund to distributor companies Q.217. What is stock split? Ans. Stock split or stock divide increases the number of shares in a public company. The price is adjusted such that the before and after market capitalization of the company remains the same and dilution does not occur. Q.218. What is NAV? Ans. Net Asset Value (NAV) is the cumulative market value of the assets of the funds net of its liabilities. An open end Scheme NAV should be disclosed on daily basis where as an close ended NAV should be disclosed on weekly basis. Q.219. What is ADR? Ans. ADR is an acronym for American Depository Receipt. It is an instrument traded at U.S. exchanges representing a fixed number of shares of a foreign company that is traded in the foreign country. By trading in ADRs, U.S. investors manage to avoid some of the problems of dealing in foreign securities markets. The ADR route enables companies to

raise funds in the U.S. financial markets, provided they meet the stringent regulatory norms for disclosure and accounting. Introduced to the financial markets in 1927, an American depositary receipt (ADR) is a stock that trades in the United States but represents a specified number of shares in a foreign corporation. ADRs are bought and sold on American markets just like regular stocks, and are issued/sponsored in the U.S. by a bank or brokerage. ADRs were introduced as a result of the complexities involved in buying shares in foreign countries and the difficulties associated with trading at different prices and currency values. For this reason, U.S. banks simply purchase a bulk lot of shares from the company, bundle the shares into groups, and reissues them on either the New York Stock Exchange (NYSE), American Stock Exchange (AMEX) or the Nasdaq. Q.220. What does Deferred Tax Asset mean?? Ans. An asset on a company's balance sheet that may be used to reduce any subsequent period's income tax expense. Deferred tax assets can arise due to net loss carryovers, which are only recorded as assets if it is deemed more likely than not that the asset will be used in future fiscal periods. Q.221. What Does Diluted Earnings Per Share - Diluted EPS Mean? Ans. A performance metric used to gauge the quality of a company's earnings per share (EPS) if all convertible securities were exercised. Convertible securities refers to all outstanding convertible preferred shares, convertible debentures, stock options (primarily employee based) and warrants. Unless the company has no additional potential shares outstanding (a relatively rare circumstance) the diluted EPS will always be lower than the simple EPS. Remember that earnings per share is calculated by dividing the company's profit by the number of shares outstanding. Warrants, stock options, convertible preferred shares, etc. all serve to increasing the number of shares outstanding. As a shareholder, this is a bad thing. If the denominator in the equation (shares outstanding) is larger, the earnings per share is reduced (the same profit figure is used in the numerator). Q.222. What is NEAT? Ans. National Exchange for Automated Trading is the trading system of the NSE. It is the state of the art client server based application. Q.223. What is the commodity derivatives market? Ans. Commodity derivatives market trade contracts for which the underlying asset is commodity. Q.224. What is an ISIN? Ans. International Securities Identification Number (ISIN) is a unique identification number for a security. Q.225. What are hedge funds? Ans. A hedge fund is an investment fund open to a limited range of investors that is permitted by regulators to undertake a wider range of activities than other investment funds and also pays a performance fee to its investment manager. Each fund will have its own strategy which determines the type of investments and the methods of investment it undertakes. Hedge funds as a class invest in a broad range of investments extending over shares, debt, commodities and so forth. Q.226. What is Capital Gains Tax? Ans.

A type of tax levied on capital gains incurred by individuals and corporations. Capital gains are the profits that an investor realizes when he or she sells the capital asset for a price that is higher than the purchase price. Q.227. What is Gross Profit Margin ratio and what is its importance? Ans. A.Gross Profit Margin = Gross Profit * 100 Sales Gross Profit =Sales - Cost of Sales The gross profit margin ratio tells us the profit a business makes on its cost of sales, or cost of goods sold. It is a very simple idea and it tells us how much gross profit per Re.1 of turnover our business is earning. Gross profit is the profit we earn before we take off any administrative costs, selling costs and so on. So we should have a much higher gross profit margin than net profit margin. Q.228. What is OTC Options? Ans. Exotic options traded on the over-the-counter market, where participants can choose the characteristics of the options traded. Q.229. What does Tax Liability mean?? Ans. The total amount of tax that an entity is legally obligated to pay to an authority as the result of the occurrence of a taxable event. Tax liability can be calculated by applying the appropriate tax rate to the taxable event's tax base. Taxable events include, but are not limited to, annual income, the sale of an asset, a fiscal year-end or an inheritance. Q.230. What is screen based trading? Ans. When buying/selling of securities is done using computers and matching of trades is done by a stock exchange computer. Q.231. What is Securitization? Ans. The process through which an issuer creates a financial instrument by combining other financial assets and then marketing different tiers of the repackaged instruments to the investors. The process can encompass any type of financial asset and promotes liquidity. Q.232. What does Short selling mean? Ans. The selling of a security that the seller does not own, or any sale that is completed by the delivery of a security borrowed by the seller. Short sellers assume that they will be able to buy the stock at a lower amount than the price at which they sold short. Q.233. What is a Sovereign Bond? Ans. A debt security issued by a national government within a given country and denominated in a foreign currency. The foreign currency used will most likely be a hard currency, and may represent significantly more risk to the bondholder. The government of a country with an unstable economy will tend to denominate its bonds in the currency of a country with a stable economy. Because of default risk, sovereign bonds tend to be offered at a discount. Q.234. What does Subprime mean ? Ans.

A classification of borrowers with a tarnished or limited credit history. Lenders will use a credit scoring system to determine which loans a borrower may qualify for. Subprime loans carry more credit risk, and as such, will carry higher interest rates as well. . Q.235. What is WACC? How is it calculated? Ans. The weighted average cost of capital (WACC) is the rate that a company is expected to pay to finance its assets. WACC is the minimum return that a company must earn on existing asset base to satisfy its creditors, owners, and other providers of capital. Calculation of WACC. WACC= W*C W=Weight of debt and equity C=Cost of debt and equity... Q.236. What are Debentures? Ans. A debenture is defined as a certificate of agreement of loan which is given under the company's stamp and carries an undertaking that the debenture holder will get a Fixed return and the principal amount whenever the debenture matures. A debenture is a long-term debt instrument used by governments and large companies to obtain funds. It is defined as "a debt secured only by the debtors earning power, not by a lien on any specific asset." It is similar to a bond except the securitization conditions are different. A debenture is usually unsecured in the sense that there are no liens or pledges on specific assets. It is, however, secured by all properties not otherwise pledged. In the case of bankruptcy, debenture holders are considered general creditors. The advantage of debentures to the issuer is they leave specific assets burden free, and thereby leave them open for subsequent financing. Debentures are generally freely transferrable by the debenture holder. Debenture holders have no voting rights and the interest given to them is a charge against profit Q.237. What is GDR? Ans. Global Depository Receipt means any instrument in the form of a depository receipt or certificate created by the overseas depository bank outside India and issued to nonresident investors against the issue of ordinary shares or Foreign Currency Convertible Bonds of issuing company. A bank certificate issued in more than one country for shares in a foreign company. The shares are held by a foreign branch of an international bank. The shares trade as domestic shares, but are offered for sale globally through the various bank branches. Q.238. What is Net Operating Loss? Ans. A period in which a company's allowable tax deductions are greater than its taxable income, resulting in a negative taxable income. This generally occurs when a company has incurred more expenses than revenues during the period. The net operating loss for the company can generally be used to recover past tax payments or reduce future tax payments. The reasoning behind this is that because corporations are required to pay taxes when it earns money, it deserves some form of tax relief when it loses money. Q.239. WHAT IS CRR? AND WHAT IS ITS SIGNIFICANCE? Ans. CRR is CASH RESERVE RATIO. SIGNIFICANCE: It is the amount of funds that the banks have to keep with RBI. If RBI decides to increase the percent of this, the available amount with the banks comes down. RBI is using this method (increase of CRR rate), to drain out the excessive money from the banks.

And when the CRR rates are slashed it implies that the RBI is trying to inject liquidity (capital) into the markets. This is generally done during the economic slowdown.

Q.240. What Does Working Capital Mean? Ans. A measure of both a company's efficiency and its short-term financial health. The working capital is calculated as: Working Capital = Current Asset - Current Liabilities Positive working capital means that the company is able to pay off its short-term liabilities. Negative working capital means that a company currently is unable to meet its short-term liabilities with its current assets (cash, accounts receivable and inventory). Also known as "net working capital", or the "working capital ratio". If a company's current assets do not exceed its current liabilities, then it may run into trouble paying back creditors in the short term. The worst-case scenario is bankruptcy. A declining working capital ratio over a longer time period could also be a red flag that warrants further analysis. For example, it could be that the company's sales volumes are decreasing and, as a result, its accounts receivables number continues to get smaller and smaller. Q.241. What is P/E ratio? Ans. The P/E ratio (price-to-earnings ratio) of a stock is a measure of the price paid for a share relative to the annual income or profit earned by the firm per share. It is a financial ratio used for valuation: a higher P/E ratio means that investors are paying more for each unit of income, so the stock is more expensive compared to one with lower P/E ratio. For example: For example, if a stock is trading at RS 24 and the earnings per share for the most recent 12 month period is RS 3, then stock A has a P/E ratio of 24/3 or 8. Put another way, the purchaser of the stock is paying RS 8 for every Rupee of earnings The formula to calculated P/E ratios is: P/E Ratio = Price per earning ratio/Annual earnings per share Q.242. What is a syndicated loan? Ans. A syndicated loan is a loan that is granted to companies that wish to borrow more money than any single lender is prepared to risk in a single loan, usually many millions of dollars. In such a case, a syndicate of banks can each agree to put forward a portion of the principal sum. Q.243. What is the difference between SENSEX and NIFTY? Ans. SENSEX is the index of Bombay stock Exchange(BSE)& NIFTY is the index of National Stock Exchange(NSE). Q.244. How can a firm handle the situation of negative working capital? Ans. To remedy a negative working capital position, a firm has these alternatives: 1) it can convert a long-term asset into a current asset-for example, by selling a piece of equipment or a building, by liquidating a long-term investment, or by renegotiating a long-term loan receivable; (2) it can convert short-term liabilities into long-term liabilities-for example, by negotiating the substitution of a current account payable with a long-term note payable; (3) it can borrow long term; (4) it can obtain additional equity through a stock issue or other sources of paid-in capital. Q.245. What do you mean by earning per share and what is its significance?

Ans. A.Earning Per Share: Earning per share is calculated by dividing the net profit (after interest, tax and preference dividend) by the number of equity shares. Earning Per Share = Net Profit after Interest, Tax and Preference Dividend/No. Of Equity Shares Significance: Earning per share helps in determining the market price of the equity share of the company. It also helps to know whether the company is able to use its equity share capital effectively with compare to other companies. It also tells about the capacity of the company to pay dividends to its equity shareholders. Q.246. What is windfall tax? Ans. A tax levied by governments against certain industries when economic conditions allow those industries to experience above-average profits. Windfall taxes are primarily levied on the companies in the targeted industry that have benefited the most from the economic windfall, most often commodity-based businesses. Q.247. Exchange Traded Funds Ans. ETFs are just what their name implies: baskets of securities that are traded, like individual stocks, on an exchange. Unlike regular open-end mutual funds, ETFs can be bought and sold throughout the trading day like any stock. Most ETFs charge lower annual expenses than index mutual funds. However, as with stocks, one must pay a brokerage to buy and sell ETF units, which can be a significant drawback for those who trade frequently or invest regular sums of money. Q.248. What is Accounts Payable? Ans. Accounts payable are often referred to as "payables". An accounting entry that represents an entity's obligation to pay off a short-term debt to its creditors. The accounts payable entry is found on a balance sheet under the heading current liabilities. Accounts payable are debts that must be paid off within a given period of time in order to avoid default. Q.249. What is Budget? Ans. Budget generally refers to a list of all planned expenses and revenues. It is a plan for saving and spending. A budget is an important concept in microeconomics, which uses a budget line to illustrate the trade-offs between two or more goods. In other terms, a budget is an organizational plan stated in monetary terms. In summary, the purpose of budgeting is to: 1. Provide a forecast of revenues and expenditures i.e. construct a model of how our business might perform financially speaking if certain strategies, events and plans are carried out. 2. Enable the actual financial operation of the business to be measured against the forecast Q.250. What Does Circular Trading Mean? Ans. A fraudulent trading scheme where sell orders are entered by a broker who knows that offsetting buy orders, the same number of shares at the same time and at the same price, either have been or will be entered. Q.251. What are Hidden Taxes? Ans. Taxes that are indirectly assessed upon consumer goods without the consumer's knowledge. Hidden taxes are levied upon the goods at some point during the production process and therefore raise the cost of the goods sold. However, this tax is never revealed directly to the consumer, who simply pays a higher price for the good, not knowing that part of that price is due to this tax.

Q.252. What is Ad Valorem Tax? Ans. A tax based on the assessed value of real estate or personal property. Ad valorem taxes can be property tax or even duty on imported items. Property ad valorem taxes are the major source of revenue for state and municipal governments. Municipal property ad valorem taxes are also known as "property taxes". Q.253. What is Composite Cost of Capital? Ans. Weighted average of the component costs of common stock (ordinary shares), preferred stock (preference shares), and debt. Each component of capital is given a relative importance (weight) on the basis of its associated interest rate, management's loss of control, risk exposure, etc., to compute weighted average cost of capital. It shows the cost of each additional dollar of capital, as opposed to the average cost of the total capital raised. Q.254. What is amortisation? Ans. Amortization is the process of increasing or accounting for, an amount over a period of time. Particular instances of the term includes Amortization (business), the allocation of a lump sum amount to different time periods, particularly for loans and other forms of finance including related interest or other finance charges. Amortization schedule, a table detailing each periodic payment on a loan (typically a mortgage), as generated by an amortization calculator. Negative amortization, an amortization schedule where the loan amount actually increases through not paying the full interest Amortized analysis, analyzing the execution cost of algorithms over a sequence of operations. Amortization of capital expenditures of certain assets under accounting rules, particularly intangible assets, in a manner analogous to depreciation. Q.255. Sovereignity wealth fund (SWF) Ans. SWFs invest Government money in financial assets. They tend to be large and, unlike most money managers, they have minimal short-term risk of their funds being withdrawn. Hence, they typically seek stable, low risk returns over investment horizons that are typically much longer term than traditional fund managers. And they are typically not highly leveraged. Pools of money derived from a country's reserves, which are set aside for investment purposes that will benefit the country's economy and citizens. The funding for a Sovereign Wealth Fund (SWF) comes from from central bank reserves that accumulate as a result of budget and trade surpluses, and even from revenue generated from the exports of natural resources. Q.256. What is CAGR (Compound Annual Growth Rate ) Ans. The year-over-year growth rate of an investment over a specified period of time. CAGR = (ending value /starting value)1/(number of years) - 1 Interest rate at which a given present value would "grow" to a given future value in a given amount of time. Q.257. What is EVA(Economic Value Added)? Ans. EVA is financial performance method used to calculate the true economic profit of corporation. EVA is calculated as Net operating profit after TAX- Opportunity cost of capital

Q.258. What is meant by bridge loan? Ans. A short-term loan granted to a borrower to tide over a temporary funds shortage. Such an accommodation is usually arranged at the time of a PUBLIC ISSUE, when expenditures on a project lead to a DEFICIT, thereby necessitating a bridge loan. Q.259. What is privatisation? Ans. Privatization is the incidence or process of transferring ownership of business from the public sector (government) to the private sector (business). In a broader sense, privatization refers to transfer of any government function to the private sector including governmental functions like revenue collection and law enforcement Q.260. What is Foreign Exchange Market? Ans. The foreign exchange market (Currency, Forex, or FX) market is where currency trading takes place. It is where banks and other official institutions facilitate the buying and selling of foreign currencies. [1]FX transactions typically involve one party purchasing a quantity of one currency in exchange for paying a quantity of another. The foreign exchange market that we see today started evolving during the 1970s when worldover countries gradually switched to floating exchange rate from their erstwhile exchange rate regime, which remained fixed as per the Bretton Woods system till 1971. Today, the FX market is one of the largest and most liquid financial markets in the world, and includes trading between large banks, central banks, currency speculators, corporations, governments, and other institutions. The average daily volume in the global foreign exchange and related markets is continuously growing. Q.261. What do you mean by swap ratio? Ans. It indicates the ratio of number of shares of the merged comapny to be converted into shares of the parent company during a merger ... Q.262. What is the full form of CNX? Ans. It is Crisil Nse Index... Q.263. Explain Deferred Tax. Ans. Deferred tax is an accounting concept, meaning a future tax liability or asset, resulting from temporary differences between book (accounting) value of assets and liabilities and their tax value, or timing differences between the recognition of gains and losses in financial statements and their recognition in a tax computation. Q.264. What is Eurobond markets Ans. The Eurobond market is made up of investors, banks, borrowers, and trading agents that buy, sell, and transfer Eurobonds. Eurobonds are a special kind of bond issued by European governments and companies, but often denominated in non-European currencies such as dollars and yen. They are also issued by international bodies such as the World Bank. The creation of the unified European currency, the euro, has stimulated strong interest in euro-denominated bonds as well; however, some observers warn that new European Union tax harmonization policies may lessen the bonds' appeal. Q.265. What is HNWI? Ans. HNWI is a classification used by the financial services industry to denote an individual or a family with high net worth. Although there is no precise definition of how rich somebody must be to fit into this category, high net worth is generally quoted in terms of liquid assets over a certain figure. The exact amount differs by financial institution and region. The categorization is relevant because high net worth individuals generally qualify for separately managed investment accounts instead of regular mutual funds. High net worth individuals

Q.266. EXPLAIN INVENTORY TURNOVER RATIO Ans. A ratio showing how many times a company's inventory is sold and replaced over a period. the The days in the period can then be divided by the inventory turnover formula to calculate the days it takes to sell the inventory on hand or "inventory turnover days". Q.267. EXPLAIN DEBTORS TURNOVER RATIO Ans. Debtors turnover ratio indicates the velocity of debt collection of a firm. In simple words it indicates the number of times average debtors (receivable) are turned over during a year. Q.268. What is Green Shoe Option Ans. Green Shoe option is a term used in public issue for the purpose of acting as a price stablising mechanism which gives the company right to issue extra 15% shares of initial stated amount in case post listing price is highly fluctuating in market. Q.269. What is Distinction between Mergers and Acquisitions? Ans. Although they are often uttered in the same breath and used as though they were synonymous, the terms merger and acquisition mean slightly different things. When one company takes over another and clearly established itself as the new owner, the purchase is called an acquisition. From a legal point of view, the target company ceases to exist, the buyer "swallows" the business and the buyer's stock continues to be traded. In the pure sense of the term, a merger happens when two firms, often of about the same size, agree to go forward as a single new company rather than remain separately owned and operated. This kind of action is more precisely referred to as a "merger of equals". Both companies' stocks are surrendered and new company stock is issued in its place. For example, both Daimler-Benz and Chrysler ceased to exist when the two firms merged, and a new company, DaimlerChrysler, was created. In practice, however, actual mergers of equals don't happen very often. Usually, one company will buy another and, as part of the deal's terms, simply allow the acquired firm to proclaim that the action is a merger of equals, even if it is technically an acquisition. Being bought out often carries negative connotations, therefore, by describing the deal euphemistically as a merger, deal makers and top managers try to make the takeover more palatable Q.270. What is Private Placement? Ans. Raising of capital via private rather than public placement. The result is the sale of securities to a relatively small number of investors. Investors involved in private placements are usually large banks, mutual funds, insurance companies, and pension funds. Q.271. What does coupon mean? Ans. The interest rate stated on a bond when it's issued. The coupon is typically paid semiannually. This is also referred to as the "coupon rate" or "coupon percent rate". Q.272. What does zero coupon bond means? Ans. Debt security that doesn't pay interest (a coupon) but is traded at a deep discount, rendering profit at maturity when the bond is redeemed for its full face value. Q.273. What is Venture Capital? Ans. A venture capital fund refers to a pooled investment vehicle that primarily invests the financial capital of third-party investors in enterprises that are too risky for the standard capitals market or bank loans.

Q.274. What Is An FCCB? Ans. A type of convertible bond issued in a currency different than the issuer's domestic currency. In other words, the money being raised by the issuing company is in the form of a foreign currency. A convertible bond is a mix between a debt and equity instrument. It acts like a bond by making regular coupon and principal payments, but these bonds also give the bondholder the option to convert the bond into stock. Q.275. What doesEuro Bond Means? Ans. A bond issued in a currency other than the currency of the country or market in which it is issued. Q.276. What does convertible preferred stock means ? Ans. 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. Q.277. What are Open Market Operation Ans. An important instrument of credit control, the Reserve Bank of India purchases and sells securities in open market operations. In times of inflation, RBI sells securities to mop up the excess money in the market. Similarly, to increase the supply of money, RBI purchases securities in OMO. Q.278. What is meant by Gold ETF? Ans. ETF stands for exchanged traded fund where an investor can invest in gold through these gold etf's. Q.279. What is liquidity risk? Ans. The risk that arises from difficulty of selling of an asset in secondary market is called liquidity risk. Q.280. What is SWAP? Ans. In finance, a swap is a derivative in which two counterparties agree to exchange one stream of cash flows against another stream. These streams are called the legs of the swap. The cash flows are calculated over a notional principal amount, which is usually not exchanged between counterparties. Consequently, swaps can be used to create unfunded exposures to an underlying asset, since counterparties can earn the profit or loss from movements in price without having to post the notional amount in cash or collateral. Swaps can be used to hedge certain risks such as interest rate risk, or to speculate on changes in the underlying prices. Q.281. What are leveraged loans? Ans. Leveraged loans are loans extended to companies or individuals that already have considerable amounts of debt. Lenders consider these loans to carry a higher risk of default and, as a result, a leveraged loan is more costly to the borrower. Q.282. Which are the two sources through which Indian Companies are permitted to raise foreign currencies? Ans. 1. Issue of Foreign Currency Convertible Bonds (FCCBs) more commonly known as Euro Issues

2. Issue of ordinary equity shares through depository receipts, namely Global Depository Receipts (GDR), American Depository Receipts (ADR) to foreign investors Q.283. What are the Different types of commodities traded ? Ans. World-over, one will find that a market exits for almost all the commodities known to us. These commodities can be broadly classified into the following: Precious Metals: Gold, Silver, Platinum etc Other Metals: Nickel, Aluminum, Copper etc Agro-Based Commodities: Wheat, Corn, Cotton, Oils, Oilseeds. Soft Commodities: Coffee, Cocoa, Sugar etc Live-Stock: Live Cattle, Pork Bellies etc Energy: Crude Oil, Natural Gas, Gasoline etc Q.284. What are the different segments in Commodities market? Ans. The commodities market exits in two distinct forms namely the Over the Counter (OTC) market and the Exchange based market. Also, as in equities, there exists the spot and the derivatives segment. The spot markets are essentially over the counter markets and the participation is restricted to people who are involved with that commodity say the farmer, processor, wholesaler etc. Derivative trading takes place through exchangebased markets with standardized contracts, settlements etc. Q.285. What Does Chameleon Option Mean? Ans. An option that has the ability to change its structure, should certain pre-determined terms of the contract be met. Q.286. What Does Maple Bond Mean? Ans. A Canadian dollar denominated bond that is sold in Canada by foreign financial institutions and companies. Similar to other foreign bonds, such as the bulldog bond, samurai bond and the matilda bond. The maple bond gives domestic investors the opportunity to invest in foreign companies without worrying about the effects of currency exchange fluctuations. Q.287. What Does Slush Fund Mean? Ans. A fund (or something similar) that does not have a designated purpose. These types of funds are often illegal. A good example would be a politician siphoning off money for side investments or to help friends. Q.288. What is Risk of Ruin? Ans. The probability of an individual losing sufficient trading or gambling money (known as capital base) to the point at which continuing on is no longer considered an option to recover losses. Risk of ruin is calculated by taking into account the probability of winning (or making money on a trade), the probability of incurring losses, and the portion of an individual's capital base that is in play or at risk. Also known as the "probability of ruin". Q.289. What does Derogatory Information mean? Ans. Information on a person's credit report that can be legally used to turn down a loan application; it includes late payments, charge-offs and bankruptcies. Q.290. What is Wealth Management? Ans. Wealth Management is an advanced investment advisory discipline that incorporates financial planning and specialist financial services. The key objectives are to provide high net worth individuals and families with tailored retail banking services, estate planning, legal resources, taxation advice and investment management, with the goal of sustaining and growing long-term wealth. Whereas financial planning can be helpful for individuals who have accumulated wealth or are just starting to accumulate wealth, one must already have accumulated a significant amount of wealth for the wealth management

process to be effective. Wealth management can be provided by independent financial advisers or large corporate entities whose services are designed to focus on high-net worth retail customers. Q.291. WHAT ARE OPTIONS? Ans. The holder of an option contract has the right but not the obligation to buy (call option) or sell (put option) a specific quantity of a given asset at a specified price at or before a specified date in the future. The purchaser pays a non-refundable, one time fee (option premium) to the seller (writer) to acquire this right. If the holder chooses to exercise the right to buy or sell the asset, the writer of the option has to deliver or take delivery of the asset. The potential loss to the option writer is therefore unlimited. Q.292. What Does FICO Score Mean? Ans. FICO is an acronym for the Fair Isaac Corporation, the creators of the FICO score A type of credit score that makes up a substantial portion of the credit report that lenders use to assess an applicant's credit risk and whether to extend a loan. Using mathematical models, the FICO score takes into account various factors in each of these five areas to determine credit risk: payment history, current level of indebtedness, types of credit used and length of credit history, and new credit. A person's FICO score will range between 300 and 850. In general, a FICO score above 650 indicates that the individual has a very good credit history. People with scores below 620 will often find it substantially more difficult to obtain financing at a favorable rate. Q.293. What is Money market? Ans. In finance, the money market is the global financial market for short-term borrowing and lending. It provides short-term liquidity funding for the global financial system. The money market is where short-term obligations such as Treasury bills, commercial paper and bankers' acceptances are bought and sold. The money market consists of financial institutions and dealers in money or credit who wish to either borrow or lend. Participants borrow and lend for short periods of time, typically up to thirteen months. Money market trades in short-term financial instruments commonly called "paper." This contrasts with the capital market for longer-term funding, which is supplied by bonds and equity. The core of the money market consists of banks borrowing and lending to each other, using commercial paper, repurchase agreements and similar instruments. These instruments are often benchmarked (to i.e. priced by reference to) the London Interbank Offered Rate (LIBOR) for the appropriate term and currency Q.294. What do you mean by SENSEX and NIFTY? Can you identify difference between them? Ans. The Sensex is an "index", basically an indicator. It gives you a general idea about whether most of the stocks have gone up or have gone down. The Sensex is an indicator of all the major companies of the BSE. While Nifty is an indicator of all the major companies of the NSE. Just like the Sensex represents the top stocks of the BSE, the Nifty represents the top stocks of the NSE. Q.295. What are Off shore derivatives instruments? Ans. In the context of the Indian market, offshore derivatives instruments (ODIs) are investment vehicles used by overseas investors for an exposure in Indian equities or

equity derivatives. These investors are not registered with SEBI, either because they do not want to, or due to regulatory restrictions. These investors approach a foreign institutional investor (FII), who is already registered with SEBI. The FII makes purchases on behalf of those investors and the FIIs affiliate issues them ODIs. The underlying asset for the ODI could be either stocks or equity derivatives like Nifty futures. Q.296. What Does Credit Cliff mean? Ans. A term referring to the compounding of a company's credit deterioration caused by provisions, such as financial covenants, or events that trigger a change in the company's credit rating. These can put pressure on the company's liquidity or its business to a material extent. Q.297. What Does Write-Off Mean? Ans. A reduction in the value of an asset or earnings by the amount of an expense or loss. Companies are able to write off certain expenses that are required to run the business, or have been incurred in the operation of the business and detract from retained revenues For example, if you spend money on dinner to take out a client, that meal is a possible write-off towards your income because you presumably discussed business opportunities during the dinner. Suppose, for another example, you made a sale on credit to a customer, but two weeks later the client's business declared bankruptcy and became completely unable to pay off the credit account with you. This uncollectible debt would then be written-off by your company and recorded as an expense by accountants. Q.298. What is Corporate Cannibalism? Ans. Corporate Cannibalism: Corporate cannibalism occurs when companies introduce new products into a market where these products are already established. In effect, the new products are competing against their own incumbent products. Q.299. What does Open-End Credit mean? Ans. A pre-approved loan between a financial institution and borrower that may be used repeatedly up to a certain limit and can subsequently be paid back prior to payments coming due. The pre-approved amount will be set out in the agreement between the lender and the borrower. Q.300. Meaning of Residual Income Ans. The amount of income that an individual has after all personal debts, including the mortgage, have been paid. This calculation is usually made on a monthly basis, after the monthly bills and debts are paid. Also, when a mortgage has been paid off in its entirety, the income that individual had been putting toward the mortgage becomes residual income. Q.301. Meaning of Return on Investment Ans. The most common form of performance evaluation in divisionalised companies is Return on Investment method. It is calculated as ratio of net divisional profit (before tax) to the net assets(at book values) employed in the division. This is calculated with the help of the following formula: ROI = Net Profit / Invested Capital * 100 In simple, calculate return on investment: % ROI = (benefits / costs) x 100