FINANCE TERMS IV

CAPITAL EXPENDITURE:
All expenditure which results in the acquisition of permanent assets which are intended to continually use in the business for the purpose of earning revenue is capital expenditure.
All the capital expenditure receipts and payments are taken into balance sheet.

REVENUE EXPENDITURE:
An amount spent for earning or providing revenue is called revenue expenditure.
All the revenue expenditures and receipts are taken to trading and profit & loss account.

DOCK CHARGES:
These charges are levied on ship and their cargo when entering or leaving docks. If dock charges are paid on goods they are taken to the debit side of trading account.
{DOCK: a part of a port where ships are repaired or where goods are put onto or taken off them}

MARSHALLING OF BALANCE SHEET:
The arrangement of items in balance sheet in a proper way is known as marshalling of balance sheet.
They are of two types:
1) Liquidity Order
2) Permanence Order

EXTERNAL RECONSTRUCTION:
When one existing company goes into liquidation and a new company is formed for the purpose of buying its business is known as external reconstruction.

PECULIAR FINANCIAL WORD

USANCE BILLS: The bills drawn and accepted payable after three months is called usance bills.

QUIZ No. 4

1. …………ratios measure the firm’s ability to meet current obligations. (Activity, Liquidity, Profitability, Leverage)

2. …………ratios show the proportions of debt and equity in financing the firm’s assets. (Activity, Liquidity, Profitability, Leverage)

3. …………ratios reflect the firm’s efficiency in utilizing its assets. (Activity, Liquidity, Profitability, Leverage)

4. …………ratios measure overall performance and effectiveness of the firm. (Activity, Liquidity, Profitability, Leverage)

5. Expand following:

WDM………………………………………..
SRO...………………………………………..
FIPB…………………………………………
AMC………………………………………...
FCAC……………………………………….

6. Which is India’s first credit rating agency set up jointly by LIC, GIC, UTI, ICICI and Asian development bank in Jan 1988?

……………………………………………………

7. Word’s first patented product…………………..

8. Cricketer Farokh Engineer was the first Indian sportsperson to endorse a brand in the 1960……………………….


Answers:1-liquidity, 2-Leverage, 3-Activity, 4-Profitability, 5-Wholesale debt Market, Self Regulatory organisation, Foreign Investment Promotion Board, Asset Management company, Fuller capital account convertibilty; 6-CRISIL, 7-Epsom Salt, 8-Brylcream

FINANCE TERMS III

Return on capital employed

A fundamental financial performance measure. A percentage figure representing profit before interest against the money that is invested in the business. (profit before interest and tax/capital employed x 100)

Zero-coupon bond

A bond where no periodic interest payments are made, it issued at discount. The investor receives one payment, which includes principal and interest, at redemption (call or maturity)

Market Capitalization

Value of a corporation as determined by the market price of its issued and outstanding common stock. It is calculated by multiplying the number of outstanding shares by the current market price.

Mark to the Market

Adjust the valuation of a security or portfolio to reflect current market values.

Oversubscribed

Underwriting term describing a new stock issue where there are more buyers than available shares.

Amalgamation

When two or more existing companies go into liquidation and a new company is formed to take over the business is known as amalgamation.

Absorption

When one or more existing companies go into liquidation and some existing company buys the business is known as absorption.

Arbitrage

Buying a currency or securities in one market and selling it another to make profit is known as arbitrage.

Peculiar Word

Credit Crunch: Supply of Credit falls though there is sufficient demand

FINANCE QUIZ No.3

1. Working Capital Turnover=

a. Sales/ Net working Capital b. EBIT/Net working Capital
c. EBIT/ Capital Employed d. Net worth / Net working Capital

2. ROI (before tax) =

a. EBIDTA/Total assets b. EBIT (1- Tax rate)/ Capital employed
c. EBIT/ Capital employed d. PAT/Net assets

3. ROI (after tax) =

a. EBIDTA/Total assets b. EBIT (1- Tax rate)/ Capital employed
c. EBIT/ Capital employed d. PAT/Net assets

4. ROI (before tax & depreciation) =

a. EBIDTA/Total assets b. EBIT (1- Tax rate)/ Capital employed
c. EBIT/ Capital employed d. PAT/Net assets

5. P/E Ratio=_____________


6. EPS= _________________


7. Expand the following:

CRISIL ………………………………
ROCE ……………………………….
MFIs …………………………………
ICICI…………………………………
MCX………………………………..
NCDEX……………………………..


8. True/False

a. Profitability of the shareholders can be measured by EPS …………..
b. NPV of a financial decision is the sum of present value of cash inflows and
cash outflows…………..
c. Amortization is the measurement of depreciation of tangible goods……….
d. The change in profit due to change in sales is referred as operating leverage…

Answers: 1-a, 2-c, 3-b, 4-a, 5-Market price of share/EPS, 6-PAT/No. of shares, 7-Credit rating Information services of India Ltd., Return on capital employed, Micro finance Institutions, Industrial credit and Investment Corporation of India, Multi commodity Exchange, National commodities and derivatives Exchange, 8- T,F,F,T