On Management

Money Market Securities in India The money market includes instruments for raising and investing funds for periods ranging from one day up to one year. Money market securities consist of repos/reverse repos, CBLOs ( collateralized borrowing and lending obligations),certificates of deposits, treasury bills, and commercial paper. All these securities are issued at a discount and redeemed at par, and are zero coupon in structure.  Money markets also include inter-bank call markets that are overnight lending transactions between banks, inter- bank terms markets that  are long term deposits between banks, and interoperate deposits, which are short term lending between companies. These transactions do not involve creation of a debt security and are therefore not included here. The Participants in the money market include banks, primary dealers, financial institutions, mutual funds, provident and pension funds, companies and the government. The purpose of the money market is to enable ins

DEFINITION OF 'NET PRESENT VALUE - NPV' Net Present Value (NPV) is the difference between the present value of cash inflows and the present value of cash outflows. NPV is used in   capital budgeting   to analyze the profitability of a projected   investment   or project.  The following is the formula for calculating NPV:  where C t  = net cash inflow during the period t C o  = total initial investment costs r =   discount rate , and t = number of time periods  A positive net present value indicates that the projected   earnings   generated by a project or investment (in present dollars) exceeds the anticipated costs (also in present dollars). Generally, an investment with a positive NPV will be a profitable one and one with a negative NPV will result in a   net loss . This concept is the basis for the   Net Present Value Rule , which dictates that the only investments that should be made are those with positive NPV values. When the investment in questi

The central assumption of the traditional finance model is that people are rational. The behavioral finance model , however , argues that people suffer from cognitive and emotional biases and act in a seemingly irrational manner. The important heuristic-driven biases and cognitive errors that impair judgment are : representativeness, overconfidence, anchoring, aversion to ambiguity, and innumeracy. The form used to describe a problem has a bearing on decision making, Frame dependence stems from a mix of cognitive and emotional factors. The prospects theory describes how people frame and value a decision involving uncertainty. People feel more for a pain from a loss than the pleasure from an equal gain-about two and half times as strongly. This phenomenon is referred to as loss aversion . People tend to  separate their money into various mental accounts and treat a rupee in one account differently from a rupee in another because each account has a different significance to

Over capitalisation when the business had more funds invested in the business than can be profitably employed Risk management is the process of identifying and minimising the potential cost of unfavourable events. Insurance Is a service offering protection against future possible loss as a result of some unfavourable event in the future. Budget is an expression of management plans in financial terms Profitability is a financial objective of the business and is concerned with the adequacy of profit Liquidity is a financial objective of a business and is concerned with being able to meet all cash obligations when they are due Growth is a financial objective and is concerned with increasing the size of the business Cash budget is a plan for cash receipts, cash payments and the resultant cash balance at certain points in time Targeted profit level should provide a reasonable return on the owners' investment - this means that the retur

Financial Resources Resources which have a monetary value Financial Management is planning, organizing and controlling the acquisition and use of financial resources for the purposes of achieving organisational goals. Financing is the process of determining the appropriate forms and sources of finance Financing strategy is the determination of the type of finance used to purchase assets, and the resulting mix between equity, short term debt and long term debt Investment is the use of finance to acquire an asset which will yield a required return Investment strategy is the determination of the appropriate mix of a business's assets Asset Item of value which is owned by an organisation Accounts receivable (Short term/ current asset) - customer who owes the business money for buying goods/services on credit Inventory stock - Items manufactured or purchased by the business for sale to the customers Financial Intermedia

Total Risk= Unique Risk + Market Risk The unique risk of a security represents that portion of its total risk which stems from firm specific factors like the development of anew product , a labor strike, or the emergence of a new competitor. Events of this nature primarily affect the specific firm and not all firms in general. Hence the unique risk of a stock can be washed away by combining it with other stocks. In diversified portfolio, unique risks of different stocks tend to cancel each other- a favorable development in one firm may offset an adverse happening in another and vice versa. Hence, unique risk is also referred to as diversifiable risk or unsystematic risk. The market risk of a stock represents that portion of its risk which is attributable to economy wide factors like growth rate of GNP, the level of government spending, money supply, interest rate structure and inflation rate. Since these factors affect all firms to a greater or lesser degree, investors c

Context Adequate Resources Leadership and structure  Climate of trust Performance Evaluation and Reward Systems Composition Abilities of members Personality Allocating roles Diversity Size of teams Member flexibility Member preferences Work Design Autonomy Skill variety Task Identity Task significance Process Common Purpose Specific Goals Team efficacy Conflict Levels Social Loafing Courtesy Stephen P. Robbins

Debentures World over, a debenture is a debt security issued by a corporation that is not secured by specific assets, but rather by the general credit of the corporation. Stated assets secure a corporate bond, unlike a debenture. But in India these are used interchangeably. Bonds A bond is a promise in which the issuer agrees to pay a certain rate of interest, usually as a percentage of the bond's face value to the investor at specific periodicity over the life of the bond. Sometimes interest is also paid in the form of issuing the instrument at a discount to face value and subsequently redeeming it at par. Some bonds do not pay a fixed rate of interest but pay interest that is a mark-up on some benchmark rate . Typically bonds are issued by PSUs, Public Financial Institutions and Corporates. Another distinction is SLR (Statutory Liquidity Ratio) and non-SLR bonds. SLR bonds are those bonds which are approved securities by RBI which fall under the SLR limits of bank

A host of external and often largely uncontrolled factors influence a firm's choice of direction and action and ultimately its organizational  structure and internal processes. These factors which constitute the external environment can be divided into two interrelated subcategories those in the remote environment and those in immediate operating environment. Remote environment  The remote environment is composed of a set  of forces that originate  beyond and usually irrespective of any single firm 's operating situation-- Economic Political  Social Technological Industry Economic Consideration It refers to the nature and direction of the economy in which the business operates Social Consideration This involves the beliefs ,values, attitudes, opinions , and lifestyles of those in a firm's external environment, as developed from their cultural,ecological,demographic,religious,educational and ethnic conditioning. Political Conditioning The direction and

Comparison Between Bonus Issue and Stock Split Bonus Issue Stock Split The Par value of the stock remains constant The par value of the stock is reduced A part of the reserve is capitalised There is no capitalization of reserves The shareholders proportional ownership remains unchanged The shareholders proportional ownership remains unchanged The book  value per share, the earnings per share and the market price per share decline The book  value per share, the earnings per share and the market price per share decline The market price per share is brought within a more popular trading range The market price per share is brought within a more popular trading range

Technical analysis is concerned primarily with : Materials and inputs Production technology Plant capacity Location and site Machinery and Equipment Structures and civil works, project charts and layouts Work schedule An important aspect of technical analysis is concerned with defining the materials and inputs required,specifying their properties in some details and setting up their supply programmes.  Materials may be classified into four broad categories: Raw materials Processed industrial materials and components Auxiliary materials and factory supplies Utilities For manufacturing a product/service often two or more alternative technologies are available. The choice of technology is influenced by a vriety of considerations: plant capacity,principal inputs,investments outlay and production cost,use by other units,product mix,latest developments and ease of absorption. The acquisition of technology from some other enterprise may be by way of : Techn