Cash flow statement

The cash flow statement was previously known as the flow of Cash statement. The cash flow statement reflects a firm's liquidity.The balance sheet is a snapshot of a firm's financial resources and obligations at a single point in time, and the income statement summarizes a firm's financial transactions over an interval of time. These two financial statements reflect the accrual basis accounting used by firms to match revenues with the expenses associated with generating those revenues. The cash flow statement includes only inflows and outflows of cash and cash equivalents; it excludes transactions that do not directly affect cash receipts and payments. These [3] non-cash transactions include depreciation or write-offs on bad debts or credit losses to name a few. The cash flow statement is a cash basis report on three types of financial activities: operating activities, investing activities, and financing activities. Non-cash activities are usually reported in footnotes. The cash flow statement is intended to
[4] [2]

1. provide information on a firm's liquidity and solvency and its ability to change cash flows in future circumstances 2. provide additional information for evaluating changes in assets, liabilities and equity 3. improve the comparability of different firms' operating performance by eliminating the effects of different accounting methods 4. indicate the amount, timing and probability of future cash flows

Operating activities
Operating activities include the production, sales and delivery of the company's product as well as collecting payment from its customers. This could include purchasing raw materials, building inventory, advertising, and shipping the product. Under IAS 7, operating cash flows include:[11]

       

Receipts from the sale of goods or services Receipts for the sale of loans, debt or equity instruments in a trading portfolio Interest received on loans Dividends received on equity securities Payments to suppliers for goods and services Payments to employees or on behalf of employees Interest payments (alternatively, this can be reported under financing activities in IAS 7, and US GAAP) buying Merchandise

Investing activities
Examples of Investing activities are

Purchase or Sale of an asset (assets can be land, building, equipment, marketable securities, etc.)
 
Loans made to suppliers or received from customers Payments related to mergers and acquisitions

[edit]Financing

activities

Financing activities include the inflow of cash from investors such as banks and shareholders, as well as the outflow of cash to shareholders asdividends as the company generates income. Other activities which impact the long-term liabilities and equity of the company are also listed in the financing activities section of the cash flow statement.

Under IAS 7,

    

Proceeds from issuing short-term or long-term debt Payments of dividends Payments for repurchase of company shares Repayment of debt principal, including capital leases For non-profit organizations, receipts of donor-restricted cash that is limited to long-term purposes

Items under the financing activities section include:

   

Dividends paid Sale or repurchase of the company's stock Net borrowings Payment of dividend tax

Definition of 'Window Dressing'

A strategy used by mutual fund and portfolio managers near the year or quarter end to improve the appearance of the portfolio/fund performance before presenting it to clients or shareholders. To window dress, the fund manager will sell stocks with large losses and purchase high flying stocks near the end of the quarter. These securities are then reported as part of the fund's holdings.

Definition of 'Blue Chip'

A nationally recognized, well-established and financially sound company. Blue chips generally sell high-quality, widely accepted products and services. Blue chip companies are known to weather downturns and operate profitably in the face of adverse economic conditions, which helps to contribute to their long record of stable and reliable growth.

Splits
A corporation whose stock is performing well may opt to split its shares, distributing additional shares to existing shareholders. The most common split is two-for-one, in which each share becomes two shares. The price per share immediately adjusts to reflect the change, since buyers and sellers of the stock all know about the split (in this case, it would be cut in half). A company will usually decide to split its stock if the price of the stock gets very high. High stock prices are problematic for companies because they make it seem as though the stock is too expensive. By splitting a stock, companies hope to make their equity more attractive, especially to those investors that could not afford the high price. Stocks can be split two-for-one, ten-for-one, or in any ratio the company wants. (The less common "reverse split" is when the number of shares decreases, for example one-for-two.) To illustrate what happens when a stock splits, let's look at a simple example. Say you own 100 shares of stock in XYZ Corp. that are priced at $100 per share. XYZ decides that $100 per share is too high of a price for its stock, so it issues a two-for-one stock split. This means that for every share that you previously owned, you now own two shares, giving you 200 shares. When the stock splits, the price will be cut in proportion to the split ratio that was chosen by the corporation (in this case, to $50 a share). If you compare the amount of your investment before the split and the amount after the split you will notice that they are equal (100 shares x $100/share = $10,000; which is the same as 200 shares x $50/share = $10,000). So, in effect, nothing has changed from your perspective.

Buybacks

A buyback is a corporation's repurchase of stocks or bonds that it has previously issued. In the case of stocks, this reduces the number of shares outstanding, giving each remaining shareholder a larger percentage ownership of the company. This is usually considered a sign that the company's management is optimistic about the future and believes that the current share price is undervalued. Companies may decide to repurchase stock for many reasons. They may be attempting to improve the price to earnings ratio by reducing market capitalization, or they may want to offer the stock as an incentive to employees . It's important to note that when a company's shareholders vote to authorize a buyback, they aren't obliged to actually undertake the buyback. Some companies announce buyback plans as a sign of confidence, but it's meaningless unless they actually go through with the repurchase.

Definition of 'Corporate Action'

Any event that brings material change to a company and affects its stakeholders. This includes shareholders, both common and preferred, as well as bondholders. These events are generally approved by the company's board of directors; shareholders are permitted to vote on some events as wel

Corporate restructuring :
Restructuring is the corporate management term for the act of partially dismantling and reorganizing a company for the purpose of making it more efficient and therefore more profitable. It generally involves selling off portions of the company and making severe staff reductions. Restructuring is often done as part of a bankruptcy or of a takeover by another firm, particularly a leveraged buyout by a private equity firm. It may also be done by a new CEO hired specifically to make the difficult and controversial decisions required to save or reposition the company. Characteristics The selling of portions of the company, such as a division that is no longer profitable or which has distracted management from its core business, can greatly improve the company's balance sheet. Staff reductions are often accomplished partly through the selling or closing of unprofitable portions of the company and partly by consolidating or outsourcing parts of the company that perform redundant functions (such as payroll, human resources, and training) left over from old acquisitions that were never fully integrated into the parent organization.

Dematerialisation

is the process of converting the physical form of shares

into electronic form. Prior to dematerialisation the Indian stock markets have faced several problems like delay in the transfer of certificates, forgery of certificates etc. Dematerialisation helps to overcome these problems as well as reduces the

Advantages of dematerialisation * There is no risk due to loss on account of fire, theft or mutilation. * There is no chance of bad delivery at the time of selling shares as there is no signature mismatch. * Transaction costs are usually lower than that in the physical segment. * The bonus /rights shares allotted to the investor will be immediately credited into his account. * Share transactions like sale or purchase and transfer/transmission etc. can be effected in a much simpler and faster way.transaction time as compared to the physical segment. The article discusses the procedures, advantages and problems of dematerialisation.

Basics of Depository
Depository is an institution or a kind of organization which holds securities with it, in which trading is done among shares, debentures, mutual funds, derivatives, F&O and commodities. The intermediatories perform their actions in variety of securities at Depository on the behalf of their clients. These intermediatories are known as Depositories Participants. Fundamentally, There are two sorts of depositories in India. One is the National Securities Depository Limited(NSDL) and the other is the Central Depository Service (India) Limited(CDSL). Every Depository Participant(DP) needs to be registered under this Depository before it begins its operation or trade in the market.

In India, a Depository Participant (DP) is described as an agent of the depository. They are the intermediaries between the depository and the investors. The relationship between the DPs and the depository is governed by an agreement made between the two under the Depositories Act. In a strictly legal sense, a DP is an entity who is registered as such with SEBI under the subsecton 1A of Section 12 of the SEBI Act. As per the provisions of this Act, a DP can offer depository-related services only after obtaining a certificate of registration from SEBI. SEBI (D&P) Regulations, 1996 prescribe a minimum net worth of Rs. 50 lakh for stockbrokers, R&T agents and nonbanking finance companies (NBFC), for granting them a certificate of registration to act as DPs. If a stockbroker seeks to act as a DP in more than one depository, he should comply with the specified net worth criterion separately for each such depository. No minimum net worth criterion has been prescribed for other categories of DPs; however, depositories can fix a higher net worth criterion for their DPs.

A fund's NAV fluctuates along with the value of its underlying investments. The formula for NAV is:

NAV = (Market Value of All Securities Held by Fund + Cash and Equivalent Holdings - Fund Liabilities) / Total FundShares Outstanding
Let's assume at the close of trading yesterday that a particular mutual fund held $10,500,000 worth of securities, $2,000,000 of cash, and $500,000 of liabilities. If the fund had 1,000,000 shares outstanding, then yesterday's NAV would be: NAV = ($10,500,000 + $2,000,000 - $500,000) / 1,000,000 = $12.00 A fund's NAV will change daily as the value of a fund's securities, cash held, liabilities, and the number of shares outstanding fluctuate.

What are Loan Against Shares?

Every bank has its individual list of approved securities (a list of companies) against which the bank provides a loan. Both, resident and non-resident Indians can take a loan against the shares. Shares must be held in the physical form or in the demat form. So, one can get a loan only if the borrower possess shares which are as per the bank's list. But every lender has a different list so if one lender does not offer the loan for your shares then you could try another lender. However you can also take a loan against units of mutual funds, bonds and other securities (as specified by the bank) held by you. The main advantage of a loan against shares is that one can keep his carefully built portfolio intact and get the benefit of getting cash against it for any purpose.

Market Trades

The Participant shall effect a debit or credit to the accounts of its Clients only on receipt of proper authorisation from the Clients in the forms laid out in Annexures L and M. Alternatively, a Client may give standing instructions to its Participant to credit its account. The aforementioned forms submitted by the Clients and Clearing Members shall be checked by the Participant to ensure the completeness of the form and validity of the signature of the Client and the Clearing Member before the requests on these forms are executed.

Off - Market Trades

Transfer of securities in respect of off market trades shall be effected on receipt of a duly filled in securities transfer instruction form from the Clients for delivery as well as a securities transfer instruction form from the Clients for receipt. The specimen of these forms have been laid out in Annexure L and M respectively as specified in Rule 12.2.1 above. Alternatively, a Client may give standing instructions to its Participant to credit its account. The Participant should check for the completeness of the form and validity of the signature of the Client before effecting such transfers.

What is an Auction?
An auction is an event in which goods or property are sold to the highest bidder. By being open to the public, an auction ensures a wide range of bids, and sometimes items at auctioncan fetch surprisingly high prices. The bidders, in turn, create their own market, determining on an individual basis how much they want to pay for an

item, rather than having prices dictated by the seller. There are a number of types of auctions performed around the world.

Custodian
Definition
An agent, bank, trust company, or other organization which holds and safeguards an individual's, mutual fund's, orinvestment company's assets for them.

Definition of 'Ratio Analysis'

A tool used by individuals to conduct a quantitative analysis of information in a company's financial statements. Ratios are calculated from current year numbers and are then compared to previous years, other companies, the industry, or even the economy to judge the performance of the company. Ratio analysis is predominately used by proponents of fundamental analysis.

Investopedia explains 'Ratio Analysis'

There are many ratios that can be calculated from the financial statements pertaining to a company's performance, activity, financing and liquidity. Some common ratios include the price-earnings ratio, debt-equity ratio, earnings per share, asset turnover and working capital.

Diversification
A portfolio strategy designed to reduce exposure to risk by combining a variety of investments, such as stocks, bonds, and real estate, which are unlikely to all move in the samedirection. The goal of diversification is to reduce the risk in a portfolio. Volatility is limited by the fact that not all asset classes or industries or individual companies move up anddown in value at the same time or at the same rate. Diversification reduces both the upside and downsidepotential and allows for more consistent performance under a wide range of economic conditions.

Collateral management is the method of granting, verifying, and giving advice on collateral
transactions in order to reduce credit risk in unsecured financial transactions. The fundamental idea of collateral management is very simple, that is cash or securities are passed from one counterparty to another as security for a credit exposure.

Spin Offs
A spin off occurs when an existing publicly-traded company sells a part of its assets or distributes new shares in order to create a newly independent company. Often the new shares will be offered through a rights issue to existing shareholders before they are offered to new investors (if at all). Depending on the situation, a spin-off could be indicative of a company ready to take on a new challenge or one that is restructuring or refocusing the activities of the main business.

Pay in of funds - Transfer of money by broker to exchange towards settlement dues for that
particular day.

Pay out of securities - Transfer of stocks by broker from his pool account to client's demat
a/c.

Pay out of funds - Transfer of money from exchange to broker towards settlement dues for
that particular day.

Investment Manager
A person or, more often, a bank or business who controls an investment portfolio on behalf of a client. Investment managers make investment decisions on behalf of the client in accordance to the parameters set by the client. The goal is to make the most profit for the client as possibleA person or organization that makes investments in
portfolios of securities on behalf of clients, in accordance with the investment objectives and parameters defined by these clients

Rights Issues
A company implementing a rights issue is offering additional and/or new shares but only to already existing shareholders. The existing shareholders are given the right to purchase or receive these shares before they are offered to the public. A rights issue regularly takes place in the form of a stock split, and can indicate that existing shareholders are being offered a chance to take advantage of a promising new development.

Mergers and Acquisitions

A merger occurs when two or more companies combine into one while all parties involved mutually agree to the terms of the merge. The merge usually occurs when one company surrenders its stock to the other. If a company undergoes a merger, it may indicate to shareholders that the company has confidence in its ability to take on more responsibilities. On the other hand, a merger could also indicate a shrinking industry in which smaller companies are being combined with larger corporations. For more information, see "What happens to the stock price of companies that are merging together?" In the case of an acquisition, however, a company seeks out and buys a majority stake of a target company's shares; the shares are not swapped or merged. Acquisitions can often be friendly but also hostile, meaning that the acquired company does not find it favorable that a majority of its shares was bought by another entity.

A reverse merger can also occur. This happens when a private company acquires an already publicly-listed company (albeit one that is not successful). The private company in essence turns into the publicly-traded company to gain trading status without having to go through the tedious process of the initial public offering.Thus, the private company merges with the public company, which is usually a shell at the time of the merger, and usually changes its name and issues new shares.

Spin Offs
A spin off occurs when an existing publicly-traded company sells a part of its assets or distributes new shares in order to create a newly independent company. Often the new shares will be offered through a rights issue to existing shareholders before they are offered to new investors (if at all). Depending on the situation, a spin-off could be indicative of a company ready to take on a new challenge or one that is restructuring or refocusing the activities of the main business. Types of Cash Flow Statement

There are two types of Cash Flow Statement which you will come across, these are: Actual Cash Flow Statements, these show an historic view, showing the actual flows of cash into and out of a business that have occurred over a previous trading period, e.g. 6 months, or 1 year. Or a Forecast Cash Flow Statement showing the expected flows of cash into and out of a business over a trading period in the immediate future, e.g. next 6 months or year.

y y

What would we use them for ?- We would use a Pivot Table to produce meaningful information from a table of information. Imagine you have a table of data that contains names, addresses, ages, occupations, phone

numbers, postcodes etc. With a Pivot Table we could very easily and quickly find out:

y y y y y

How Many People Have The Same Names. How Many Postcodes Are The Same. A Count Of A Particular Occupation. See Only People That Match A Particular Occupation. Find Out The Addresses Of People That Match A Postcode

In fact the list can go on and on!

What is the advantage ?

- Perhaps

the biggest advantage to using Pivot Tables is the fact that we can generate

and extract meaningful information from a large table of information within a matter of minutes. Or perhaps it is because they will not use up a lot of memory from your PC. In a lot of cases we could get the same results from a table of data by using Excels built in functions, but this would take more time and use far more memory. On top of this, if we wanted some new information we can simply drag-and-drop (pivot). We can also opt to have our information update each time we open the Workbook and/or by clicking refresh.

Bonds are specific types of loans to Government(s) be they foreign, federal or municipal, or Corporations. The interest for these loans can either be fixed i.e. unchanging or floating (changing) and is paid on specific time intervals. Bonds can also be convertible to other financial instruments, have the face value paid along with interest or not, and are exchanged in secondary markets such as the Chicago Board of Trade. Two important features of bonds are their maturity dates and duration. This article will discuss the difference between bond maturity and duration. BOND MATURITY: Bond maturity is fairly simple to understand in comparison to duration. Since bonds are like loans, at some point the principle of the loan has to be paid back. For example, if a bond had a 30 year life in which "coupons" i.e. the interest rate on the face value of the loan were paid, the face value of that bond could either be paid along with the coupons or bought back early as in the case with "call bonds". However, other bonds do not pay back the face value until the end of the established term of the loan. This end of bond life is known as "maturity" and is the point by which the face value of the bond must be paid back. BOND DURATION: Duration is an important financial equation that measures risk of return due to fluctuations in market interest rates. For example, since bonds are loans made from companies or governments to individuals or other companies or governments and new bonds are issued frequently, the benefits of older bonds may rise or decline in relation to new bonds. In other words, if interest rates rise on new bonds, the old bonds won't be as valuable in secondary exchanges because the new bonds are a better deal. The risk of this happening is termed interest rate risk and is measurable by the duration equation. Duration is a very useful equation to investors because of its ability to quantify interest rate risk. This quantification assists in the investmentdecision making process and does so by expressing the relation between interest, time, and price variables of the bond. The result becomes an "interest rate sensitivity" i.e. risk level. Logically speaking, duration is a time value that either equals, is lower or greater than the original interest

payments. In other words, when interest rates fluctuate old bond prices change, causing the duration value to also change. Since duration is a weighted average function of time, the greater the difference between original

The difference between duration and maturity in bonds

Bonds are specific types of loans to Government(s) be they foreign, federal or municipal, or Corporations. The interest

Most investors in bonds are familar with the bonds' maturity. The maturity of a bonds is the point in time when you receive

Definition of 'Callable Bond'

A bond that can be redeemed by the issuer prior to its maturity. Usually a premium is paid to the bond owner when the bond is called. Also known as a "redeemable bond".

Investopedia explains 'Callable Bond'

The main cause of a call is a decline in interest rates. If interest rates have declined since a company first issued the bonds, it will likely want to refinance this debt at a lower rate of interest. In this case, company will call its current bonds and reissue them at a lower rate of interest

bonus share
Definition

Free shares of stock given to current shareholders, based upon the number of shares that a shareholder owns. While this stock action increases the number of shares owned, it does not increase the total value. This is due to the fact that since the total number of shares increases, the ratio of number of shares held to number ofshares outstanding remains constant.

Structure Of Mutual Fund

Convertible debt securities are a type of hybrid investment instrument that can be exchanged for another type of security.

This exchange can be executed by either the investor or the issuer of the convertible debt security. The convertible debt security typically has features of both debt and equity instruments. One of the most frequently used forms of convertible debt securities involves the issuance of bonds by a company that can be exchanged for shares of common stock. The terms of the conversion between bonds to equities are determined at the time of the bond issuance. Investors and issuers are aware of the agreed upon price at which the debt securities can be swapped for stock at the time the convertible debt securities are issued.

Why invest in convertible debt securities? An investor in convertible debt securities has an unlimited upside potential if the stock of the company appreciates. The investor is able to convert their bonds to equities and participate in any upside of stock prices. The potential upside is a strong incentive to invest in convertible debt securities. Investors in convertible debt securities are able to collect interest payments, also called coupon payments, as long as the instrument is held in its bond form. These payments limit the downside risk of the investment by providing an investor with a flow of predetermined cash payments. Why issue convertible debt securities?

Corporations that issue convertible debt securities are using a relatively low cost means to raise capital. The coupon payments for convertible debt securities are relatively low, which is an upside for the corporation. The downside is the potential dilution in stock shares that the corporation faces if the investors in their convertible debt securities elect to convert the shares of convertible debt bonds to shares of the corporation's equity. What is the typical structure of a convertible debt security? Similar to standard bonds, the convertible debt security will have a face value, issue size, date, maturity date, value, and interest rate. Unlike typical bonds the convertible debt security will have a predetermined conversion price. When the value of a company's stock hits the conversion or predetermined share price either the issuer or the investor has the option to exercise the conversion. When the conversion is exercised, the convertible debt security is exchanged for securities at the conversion price at the predetermined conversion ratio. The conversion ratio is another factor that is determined at the issuance of the convertible debt security. For example, suppose a company issues a convertible bond at a par value of $10,000. According to the issuance documents, the investor in the convertible bond can convert it to common stock of the company at a price of $25 per share (i.e. conversion price). By dividing the par value of the bond by the conversion price, it's possible to determine that if converted, the bond will result in 400 shares of the company (i.e., $10,000 $25 = 400 shares).

Definition of 'Preemptive Right'

A privilege extended to select shareholders of a corporation that will give them the right to purchase additional shares in the company before the general public has the opportunity in the event there is a seasoned offering. A preemptive right is written in the contract between the purchaser and the company, but does not function like a put option. Also known as "preemption rights".

Investopedia explains 'Preemptive Right'

When shareholders, usually a majority shareholder or a shareholder committing large amounts of capital to a startup company, purchase shares, they want to ensure they have as much voting power in the future as they did when they initially invested in the company. By getting preemptive rights in its shareholder's agreement, the shareholder can ensure that any seasoned offerings will not dilute his/her ownership percentage.

Definition of 'Reverse Repurchase Agreement'

The purchase of securities with the agreement to sell them at a higher price at a specific future date. For the party selling the security (and agreeing to repurchase it in the future) it is a repo; for the party on the other end of the transaction (buying the security and agreeing to sell in the future) it is a reverse repurchase agreement.

Investopedia explains 'Reverse Repurchase Agreement'

Repos are classified as a money-market instrument. They are usually used to raise short-term capital.