FINANCIAL SERVICES

1. Define free cash flow. 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. Define EVA (Economic Value Added) A measure of a company's financial performance based on the residual wealth calculated by deducting cost of capital from its operating profit (adjusted for taxes on a cash basis). How do you measure Return on Invested Capital? On the basis of certain factors i.e. Profit Margin, Return on Assets or Return on Equity. Formula to calculate Return on Invested Capital (ROIC): ROIC = ((Net Operating Profit Income Tax)/ (Long term debt + Equity)) Tell me about some investment books youve read lately. Investment Management Dr. Preeti Singh Investment Management B. Hiriyappa Fundamentals of Investment Gordon j. Alexander William F. Sharpe What is Convexity? The first and fourth bond pricing theorems have held to the concept in bond valuation known as Convexity. It shows the relationship between bond prices and bond yield over the period of time. How would you explain credit spread? 1. The spread between Treasury securities and non-Treasury securities that is identical in all respects except for quality rating. 2. An options strategy where a high premium option is sold and a low premium option is bought on the same underlying security.

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What are Mutual Funds? Mutual Fund is a mechanism of pooling resources by issuing units to investors and investing their funds in securities to get a good return. Unit Trust of India was the first Mutual Fund which was started in India in the year 1964. Mutual Fund is nothing but a form of collective investment. Are Mutual Funds risk free and what are the advantages? Mutual Funds are not free from risks. It is because, basically the mutual fund also invest their funds in the stock market on shares which are volatile in nature and are not risk free. Advantages 1. It offers economies of scale of operations 2. It spreads the risk 3. It provides expert & professional management. 4. Diversification of portfolio is possible 5. Low brokerage & transaction cost 6. It offers good portfolio performance 7. High return potential 8. Convenient administration 9. Liquidity 10.Flexibility 11.Wide choice of schemes 12.Tax benefit What is financial management? Financial Management is concerned with the managerial decisions which will result in acquisition & financing the long term as well as short term credit for the firm. It is concerned with procurement of funds & their effective utilization in the business. What is debt market? Debt Market refers to the financial market where the investor buys & sells debt securities, mostly in the form of bonds.

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Debt Market is the market in debt instrument and it has many segments which can be classified into various categories on the basis instruments, their tenor, marketability, ownership etc. 11. Classification of Indian Debt Market. Indian debt market can be classified into two categories: Government Securities Market (G-Sec Market): It consists of central and state government securities. It means that, loans are being taken by the central and state government. It is also the most dominant category in the India debt market. Bond Market: It consists of Financial Institutions bonds, Corporate bonds and debentures and Public Sector Units bonds. These bonds are issued to meet financial requirements at a fixed cost and hence remove uncertainty in financial costs.