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Venture capital provides capital to the started companies, which has high risk.
Generally venture capitalist holds some share in the company. Generally these
are high technology companies like softwares, IT, biotechnology.
Net profit (or) Income =Gross sales - Discounted sales - sales return
= Net sales - cost of goods sold
=Gross profits - Operating expenses
= operating income (EBIT) - interest
=profit before tax (EBT) Tax
= profit after tax - prefer dividend -minority interest
It is expenditure which is incurred in one year, but benefit of that will receive
from more years.
Ex: Heavy advertisements
The fictitious assets are not real assets, it is an expenditure, which is done by
owner before starting the business, its benefit is long term, so we say its asset.
Ex: preliminary expenses.
When two companies are agreed to form as new single company is called a
merger. Ex: company A + company B = will become company C.
Vijay Kumar Varigala
M.B.A.
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When one company takes over another company and clearly established it self
as the new owner then it is called as absorption.
Ex: A buys B and owner will be A & B no more exits.
The two or more persons who have agreed to carry out the business is called as
a partnership.
In this min 2 max 10 members. If it is banking company max 20 members.
Agreement between the 2 or more persons to carryout a business is called a
partnership deed.
i.
ii.
iii.
iv.
i.
It is an intangible asset. The value of any business is more than its vale
of assets is called.
ii. Good will = Business value asset value.
iii. Its value is paid for the repetition of the company.
iv. Good will is anticipated earning in the business.
Vijay Kumar Varigala
M.B.A.
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BRS statement of which shows the difference between the bank pass book and
cash book. It is basically prepared to know the errors occurred in during the
transactions.
The Bonus shares are issued to the already existing share holders in a
company. In bonus share change the face value is not change capital is
change. Market price is change proposanally.
The share divided into two. It is calledin the stock split the face value, market
price is change proposanally.
The market capital is doesnt change.
In the balance sheet, the share counting is increase but capital is same.
Ex: X company share value is 5000 and the face value is 50. The liquidity
position of in the market. The company has decided to split the share in to 1:5.
The face value of the share will be change proposanally Rs. 10/. The market
share value is Rs. 1000/-
The first issue of securities to the public it is called corporate may crises
capital in the primary market by way of an IPO.
Vijay Kumar Varigala
M.B.A.
Page: 4
Any non- USA company want list time the USA markets are called as ADRs.
Ex: Infosys is an Indian company which was listed in the USA exchanges with
a name ADRs.
If any company wants to list in other country except USA is called GDR.
A stock market index is a number which indicates the market moments based
on the increase & decreases the share value.
In India we have two stock exchanges
1. SENSEX (BSE) It is consisting of 30 shares from various sections.
2. NIFTY (NSE) It is consisting of 50 shares from various sections.
The primary market is a market where the securities are issued for public for
the first time.
Ex: Initial public offer (IPO)
Equity share holders are real owner of the company, they have voting rights.
Dividend is not fixed.
Equity share holders have right to get share the profit or loss.
At the time of liquidation position the equity share holder preference is last
preference.
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1.
2.
3.
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Swaps are private agreements between two companies to exchange cash flows
in the future according to a prearranged formula.
So this can be regarded as portfolios of forward contracts.
Types of swaps:
Interest rate Swaps
Currency Swaps.
1.
2.
Traditional Methods
Payback period method
Average Rate of Return (ARR)
Discounted Cash Flow Methods or Sophisticated methods
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The best method for the evaluation of an investment proposal is the NPV or
discounted cash flow technique. This method takes into account the time value
of money.
The sum of the present values of all the cash inflows less the sum of the present
value of all the cash outflows associated with the proposal.
NPV = Sum of present value of future cash flows Investment
: It is that rate at which the sum totals of cash inflows after discounting
equals to the discounted cash outflows. The internal rate of return of a project
is the discount rate which makes net present value of the project equal to zero.
One of the methods comparing such proposals is to workout
what is known as the Desirability Factor or Profitability Index.
In general terms a project is acceptable if its profitability index value is
greater than 1.
1. Provisions are created for some specific object & it must be utilized for
that object for which it is created.
2. Provision is making because of legal necessity.
3. Provisions must be charged to p & l account before calculating the net
profit or loss.
4. It is reduce the net profit and not invest out side securities.
Ex: audit fee.
Vijay Kumar Varigala
M.B.A.
Page: 8
The reserve which is transfer from the capital gains it is called a Capital
reserve.
1.
Profit on sale of assets.
2.
Profit on issue of shares & debentures
3.
Profit on forfeiture of shares
4.
Not distinctive of the share holders
The reserve which is transfer from the normal profits it is called a Revenue
reserve.
1.
General reserve
2.
R & D fund
3.
Dividend equalization fund
Ex: Distribution of divided to the share holders
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Current assets: assts within year convert into cash it is called current asset.
Ex: closing stock, receivables, cash.
Quick assets: the quick asset means current assets closing stock prepaid
expenses.
Vijay Kumar Varigala
M.B.A.
Page: 10
Tangible: tangible is fixed asset include items such as plant, building, land,
machinery. Which is having the physical appearance. It is shown by assets side
of the balance sheet.
Intangible: which is not having physical appearance and is not show &
touchable such as copy rights, good will.
The amount of capital that a company can potentially issue as per its
memorandum is called as an authorized capital.
It is part of the authorized capital, which has offered by the company to the
investors.
The part of issued capital which have been subscribed by the investor's.
A mutual fund is a pool of money collected from investors and to achieve the
common objective (or) goal of investors.
Open ended
closed ended
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Working capital is blood of the organization. It can be used to meet the day to
day requirement of the organization.
Working Capital = Current Assets Current Liabilities.
Cash flow statement is a statement which records all the cash transactions
such as cash inflows and outflows of a particular period.
It deals with only cash transactions
It consists of 3 activities:
1. Operating activity
2. Investing activity
3. Financing activity
Investing activity is an activity which generally deals with long term assets
such as purchases (or) sales land & plant & machinery and etc.
Financing activity is an activity which deals with all the activityrd related to
liability and stock holders such as issue of shares, issue of debentures sales of
equity securities.
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i. Current Ratio: It is also called as working capital ratio. The current ratio
measures the ability of the firm to meet its current liabilities-current assets get
converted into cash during the operating cycle of the firm and provide the
funds needed to pay current liabilities. i.e
Current assets
Current liabilities
Ideal ratio is 2:1
ii. Quick or Acid test Ratio: It tells about the firms liquidity position. It is
a fairly stringent measure of liquidity.
=Quick assets/Current Liabilities
Ideal ratio is 1:1
Quick Assets =Current Assets Stock - Prepaid Expenses
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Fixed Assets Turnover Ratio: A high fixed asset turn over ratio indicates
better utilization of the firm fixed assets. A ratio of around 5 is considered
ideal.
= Net Sales / Fixed Assets
Working Capital Turnover Ratio: A high working capital turn over ratio
indicates efficiency utilization of the firms funds.
=CGS/Working Capital
=W.C=C.A C.L.
3. Leverage Ratio: These ratios are mainly calculated to know the long term
solvency position of the company.
Debt Equity Ratio: The debt-equity ratio shows the relative contributions
of creditors and owners.
= outsiders fund/Share holders fund
Ideal ratios 2:1
Fixed Assets to net worth Ratio: This ratio indicates the mode of
financing the fixed assets. The ideal ratio is 0.67
=Fixed Assets (After Depreciation.)/Shareholder Fund
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EPS= Net Profit (After tax and Interest) / No. Of Outstanding Shares.
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Accounting concepts:
In this concept the business is traded as a separate
entity from its owner while recording the transaction in books. It should be
noted that the business & owners are separate entities from the transfer of the
business.
The personal transaction of the owner, It should not be mixed.
Ex: Insurance premium of the owner.
Example:
Suppose Mr. Ganesh started a business investing Rs. 1,00,000/He purchased good of 40,000/-, furniture 20,000/-, and plant & machinery
30,000/-, 10,000/- remains in hand.
These are the assets of the business & not of the owner.
According to this concept Rs. 1,00,000/- will be transferred by business as
capital.
In this concept the accounts are recorded and assumed that the business will
continuous for a long time. It is useful for assessment of good will.
In this concept all the transactions are recorded in books of accounts for a
specified period of time.
The concept of realization states that revenue is realized at the time when
goods (or) services are actually delivered.
or
The revenue is recognized as income as income when it is realized.
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Its this concept end of the financial year matching the all revenue and all
expenses.
In this concept the profit is arises only, when there an increasing the an
owners capital. Which there result of excess of revenue over expenses and loss.
In this concept the same accounting policies are followed from one period to
another.
M.B.A.
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