The formation of NSE changed the way in which the stock exchanges were functioning. Modern infrastructure, technology, transparency and corporate governance are now becoming the features in the corporate the world. It also forced BSE to adopt the new technology and with this, NSE and BSE crossed boundaries and started functioning, operating throughout India. This affected the functioning of small and regional exchanges. This led to the birth of the Inter-connected Stock Exchange of India Ltd. (ISE). Federation of Indian stock exchanges, in a meeting held in 1996, constituted a steering committee to evolve an interconnected market system. In 1997, the market governing body of India, Securities and Exchange Board of India (SEBI) granted approval to the proposal of the ISE to set up a national level stock exchange promoted by 14 regional stock exchanges. ISE was launched with an objective of converting small, fragmented and illiquid markets into Continue reading
Financial Management
Financial management entails planning for the future of a person or a business enterprise to ensure a positive cash flow, including the administration and maintenance of financial assets. The primary concern of financial management is the assessment rather than the techniques of financial quantification. Some experts refer to financial management as the science of money management. The five basic components of the Financial Management Framework are: Planning and Analysis, Asset and Liability Management, Reporting, Transaction Processing and Control.
What is Cost Of Money?
The cost of money refers to the price paid for using the money, whether borrowed or owned. Every sum of money used by corporations bears cost. The interest paid on debt capital and the dividends paid on ownership capital are examples of the cost of money. The supply of and demand for capital is the factor that affects the cost of money. In addition, the cost of money is affected by the following factors as below: Production Opportunities – Production opportunities refer to the profitable opportunities for investment in productive assets. Increase in production opportunities in an economy increases the cost of money. Higher the production opportunities more will be the demand for money which leads to higher cost of money. Time Preference For Consumption – Time preference for consumption refers to the preference of consumers for current consumption as opposed to future consumption. The cost of money also depends Continue reading
Factors Influencing Dividend Payouts of a Company
Dividend is a form of payment made to shareholders by an organization; It’s a profit which is paid out to the company shareholders. When a profit is earned by the company, the profits are used again to invest for a better growth of the company for its future, or it can also be paid to the company shareholders in the form of dividends. Dividends are also paid to the shareholders in the form of cash or shares. The company must have sufficient funds in order to pay dividends to its shareholders. Dividends are generally paid out by a company only when the company make good profit and it’s been paid form its earnings. Dividend policy is of great interest n today’s financial industries when the joint stock companies came into existences. Dividends can also be defined as “a distribution of company’s earnings which is decided by the board of directors Continue reading
Concept of Economic Value Added (EVA)
The onset of liberalization and globalization of the Indian economy over the ten years has resulted in shift of the corporate goals from socio-economic focus to an increasing shareholders value. Therefore, the present day need is to choose the right metrics that would help to measure organizational progress in meeting the above mentioned strategic goal. Although there are few traditional performance metrics like balance sheet measures (namely, rate of return, shareholders’ profit, earning per share) and market driven measures (namely, market capitalization, price earning ratio), these are subject to certain deficiencies. Balance Sheet based measures are veiled in accounting anomalies that generally measure notional profit, not real ones and market driven measures are prone to volatility of the bourses. The need is for a mix and match measure that factor in a market’s assessment of a company’s value. At the same time, it should be a real measure of its Continue reading
General Obligations and Responsibilities of Portfolio Managers
Recommended reading: Definition of Portfolio Managers General obligations and responsibilities of portfolio managers are: 1. Code of Conduct:- A portfolio manger has to, in the conduct of business; observe high standards of integrity and fairness in all his dealing with his clients and other portfolio managers. The money received by him from a client for an investment purpose should be deployed as soon as possible and money due and payable to a client should be paid forthwith. A portfolio manager has to render at all times high standards of services, exercise due diligence, ensure proper-care and exercise independent professional judgment. He should either avoid any conflict of interest in his investment or disinvestment decision, or where any conflict of interest arises; ensure fair treatment of all his customers. He must disclose to the client, possible sources of conflict of duties and interest, while providing unbiased services. A portfolio manger Continue reading
4 Important Profitability Ratios Every Business Must Calculate
While profitability ratios evaluate a business overall financial performance through appraising its capability to produce revenues in surplus of service costs as well as other expenses. There are at least four profitability ratios, which they are gross profit margin, as well net profit margin, besides return on assets, in addition to return on equity. These ratios are used to assess performance and, with other data, forecast prospect profitability. Along with that is the future viability in addition to the soundness, which will repay loans as well as credit, additionally pay interest along with dividends. Since profits are divided amongst shares, the profit per share indicates possible dividend. 1. Gross Profit Margin It demonstrates how well the business is efficiently producing or else providing products as well as services. It shows how well products are priced given the proper otherwise variable costs it takes to create or even give them. The Continue reading