NISM-Series XV: Research Analyst 'Last Day Revision' Test 1

Explanation:

Other comprehensive income (OCI): Other comprehensive income refers to income or expense that are required or permitted to by-pass profit and loss account. It mostly comprises of change in value of assets and liabilities on account of non-operating factors.

They include the following: – Changes in revaluation surplus – Re-measurement gain/(loss) on defined benefit plans – Gain/(losses) arises on account of translation of financial statement of foreign operations – Changes in fair value of financial assets or liabilities that are accounted through OCI – Gain/(loss) on account of derivative contracts that effectively hedge risk.

Explanation:

Each sector has its own unique parameters for evaluation. For the retail sector, footfalls and same-store sales (SSS) are important parameters, whereas for banking it is Net Interest Income (NII)/ Net Interest Margin (NIM). For telecom, it is Average Revenue Per User (ARPU), and for hotels, it is average room tariffs, etc.

Explanation:

If a property is transferred to a spouse, minor child etc., without adequate compensation, it is not valid. The transferor is the deemed owner and income from property is taxable in his hands.

As per section 64(1)(vi) of Income Tax Act, if an individual transfers his/her asset to his/ her son’s wife otherwise than for adequate consideration, then income from such asset will be clubbed with the income of the individual (i.e., transferor being father-in-law/mother-in-law).

Explanation:

The term “securities” has been defined in the Section 2(h) of Securities Contracts (Regulation) Act, 1956(SCRA).

‘Securities’ include: Shares, scrips, stocks, bonds, debentures, Government securities, derivatives etc.

Explanation:

Analysis and decision making process is a combination of understanding qualitative factors that affect operational performance, such as efficiency of operations, competitiveness, business plans and work ethics of the management among others and quantitative factors such as revenues, costs, profitability and risks to these financials.

Therefore, Research Analyst’s spend lot of time interacting with companies and others, accumulating data, analysing it and arriving at a decision on whether to buy, hold or sell a particular security/stock

Explanation:

Re-investment risk arises from the probability that income flows received from an investment may not be able to earn the same interest as the original interest rate. The risk is that intermediate cash flows may be reinvested at a lower return as compared to the original investment.

The rate at which the re-investment of these periodic cash flows is made will affect the total returns from the investment. The reinvestment rates can be high or low, depending on the levels of interest rate at the time when the coupon income is received.

Explanation:

EPS = Net Profit / No. of Shares

First let’s calculate the number of shares.

Number of Shares = Equity Capital / Face Value

= 3,44,81,540 / 10

= 34,48,154

EPS = Net Profit / No. of Shares

= 20,00,00,000 / 34,48,154

= 58.00

Explanation:

Substantial Increase in foreign exchange reserves will influence the monetary policy by increase money supply and increase in money supply leads to inflation. This excess liquidity creates some inflationary pressure

(Increase in international reserves also had a profound effect on the structure of world inflation. The increase in demand expansion triggered by the monetary expansion results in a sharp increase in the demand for traded commodities because the increase in international reserves had eliminated or substantially reduced the foreign exchange constraint in many countries. Consequently, the foreign trade sector became the leading sector in inflation)

Explanation:

The Preamble of the SEBI Act describes the basic functions of SEBI : “…..to protect the interests of investors in securities and to promote the development of, and to regulate the securities market and for matters connected therewith or incidental thereto”

Thus, SEBI’s primary role is to protect the interest of the investors in securities and to promote the development of and to regulate the securities market.

Explanation:

While analysing a company, the analyst has to check its Corporate governance standards.

Related party transactions form a part of corporate governance standards. It is important to prevent unscrupulous related party transaction that can enrich promoter group or other majority shareholders at the cost of minority shareholders. Ideally all material related party transactions should be presented to the audit committee for pre-approval.

Explanation:

A company’s annual report may be a treasure trove of information about a company. However, given that annual reports are published once every year, the information contained in an annual report starts becoming dated with the passage of time.

Explanation:

While purpose of carrying out valuation could vary from person to person, some of the reasons for carrying out valuations of assets/businesses/liabilities are as follows:
– Buying a business as part of investment exercise
– Selling a business as part of disinvestment exercise
– Mergers and Acquisitions
– General sense of value of business to owners
– Fair treatment to different set of stake holders in case of equity swap
– Accounting, taxation and other regulatory and legal requirements

Explanation:

Participatory Notes (P-Notes or PNs) are instruments issued by SEBI registered foreign portfolio investors to overseas investors, who wish to invest in the Indian stock markets without registering themselves with the market regulator SEBI. P-Notes provide access of Indian securities to these investors.

Explanation:

As per Regulation 26 of SEBI (Research Analyst) Regulations, 2014 :

Research analyst or research entity which is a body corporate or limited liability partnership firm shall appoint a compliance officer who shall be responsible for monitoring the compliance of the provisions of the Act, these regulations and circulars issued by the Board.

Explanation:

National income of an economy can be measured through three methods: (i) Product Method (ii) Income Method, and (iii) Expenditure Method.

In the Product Method – National income is measured as an aggregated flow of goods and services in the economy from the different sectors: agriculture, industry and services. Economists calculate money value of all final goods and services produced in the economy during a specified period. Final goods refer to only those goods which are consumed by economy participants and not the ones used in further production processes (intermediate goods).

Explanation:

SEBI issues registration certificates to Intermediaries under the Securities and Exchange Board of India (SEBI) Act, 1992, and the SEBI (Intermediaries) Regulations, 2008.

Explanation:

Under the SEBI (Prohibition of Insider Trading) Regulations, all the above entities have to have strict internal code of conduct as they deal with price sensitive information.

Explanation:

The fair value of a share can be calculated using various ratios etc. If the market price of this share is more than the fair value, its considered as over priced.

Explanation:

A connected person is defined by the act as anyone who has been associated with the company in the six months prior to the connected act and include any person who has been in frequent communication with the officers of the company in pursuit of contractual, fiduciary or employment relationship or as an officer, employee or director of the company or holds any position that provides access to such unpublished price sensitive information.

Explanation:

A research analyst who is body corporate or limited liability partnership firm (LLPs) required to have a minimum net worth of Rs. 25 lakh. Necessary certificates as applicable as per the legal structure of the applicant.

Explanation:

Sometimes a reseach analyst receives a lot of data which is irrelevant or contradicting. Going through this for getting the right information is a time consuming task and many a times unproductive.

On the other hand, sometimes, there can be a lack of available data which will delay the research work

Explanation:

Cost of Equity = Risk Free Rate + Beta (Expected Rate – Risk free rate)

‘Expected Rate – Risk Free rate’ is also known as Market Risk Premium

= 6 + 0.70 (8)

= 6 + 5.6 = 11.6%

Explanation:

Cost of Equity = Risk Free Rate + Beta (Risk free rate – Expected Rate)

‘Risk free rate – Expected Rate’ is also known as Market Risk Premium

= 7 + 0.60 (9)

= 7 + 5.4 = 12.4%

Explanation:

Resistance is like a barrier that prevents the price from going up more. The resistance level is a specific price on the chart where traders think there’s a lot of supply. If a stock breaks through this resistance level with strong trading activity, it’s likely to go up even more, possibly reaching the next higher resistance level.

Explanation:

Depositories are places that keep investors’ securities in electronic form. Investors create accounts with the depository through a registered Depository Participant (DP). A Depository Participant is like a representative of the depository that connects with investors and offers depository services.

Explanation:

A callable bond, or redeemable bond, is a type of bond that the issuer can pay back before its official maturity date. This gives the issuing company the option to settle their debt ahead of schedule.

Explanation:

70% of the market = Rs 2100 cr

So 100% of the market will be ?

100 x 2100 / 70 = Rs 3000 cr

Explanation:

A fundamental research analyst researches the economy, the industry and the company.

A technical research analyst focuses on forecasting the direction of prices through the study of patterns in historical prices and volume.

Macroeconomic fundamentals are topics that affect an economy at-large, including statistics regarding unemployment, supply and demand, growth, and inflation, as well as considerations for monetary or fiscal policy and international trade. These will be studied by the fundamental analysts.

Explanation:

A qualified report is given when the auditors are convinced that whole or part of the financial statements do not reflect true and fair view. These may arise when auditors disagree with the accounting policy being followed by the company or if they believe that there are some other serious discrepancies in the financial statements.

Explanation:

Insider information is a material non-public information that when published would immediately affect an investor’s decision to buy or sell the security. Whether an information can be considered insider depends on the source of the information (how reliable it is), its impact and its certainty.

From the three options given above, the Managing Director mentioning about an acquisition proposal not yet disclosed to the public, will be considered as an insider information.

Explanation:

Some companies may fail to fulfill its obligation to its creditors or to certain class of shareholders. Under such conditions, company and the creditors or members may enter into a scheme of arrangement to settle the issue.

Scheme of arrangement is a court monitored settlement process between the company and its creditors or members. It typically involves reorganization of the share capital of the company. It may involve the existing shareholder’s relinquishing full / part of their ownership in favor of the creditors or consolidation or division of class of shares.

Explanation:

Additional surveillance measures is not applicable for the following securities :

– Securities that already under Graded surveillance measures

– Securities that are placed under trade for trade segment

– Securities on which derivative products are available

– Public sector units

Explanation:

Explanation:
Strengths, Weaknesses, Opportunities and Threats (SWOT) Analysis

Strengths in SWOT analysis refer to internal capabilities of the company that allows it to exploit external opportunities and withstand threats. Strengths of a company include the following: – Strong financial position – Highly valuable intellectual properties – Low customer concentration – Low cost or high margins etc.

Form the options given above, only ‘Large number of patents’ is an internal strength of the company.

Explanation:

Explanation:
As an economy grows, the income levels grow and the disposable income of population increases. This can cause change in category of goods and services being consumed. People start consuming premium products compared to cheaper alternatives.

Explanation:

Additional surveillance measures is not applicable for the following securities :

– Securities that already under Graded surveillance measures

– Securities that are placed under trade for trade segment

– Securities on which derivative products are available

– Public sector units

Explanation:

Auditors provide disclaimer when they are unable to verify any part of the financials on account of non-availability of information.

Explanation:

Low inflation rate enables central banks to loosen their monetary policy and extend liquidity in the market. With relative easy availability of money and decrease in prices, consumers start buying goods and services. This results in economic activity picking up and eventually results in return of expansionary phase.

Explanation:

SEBI regulation stipulates that independent directors should constitute at least 50% of the board if the chairman is an executive director. In all other cases, it requires 1/3rd of the board to be comprised of independent directors.

Explanation:

Consider an example. The fair value of ABC Ltd. share according to a research analyst is Rs 100 and the current market price is Rs 120.

In such a case, where the share is over priced, the analyst will recommend selling the share in case an investor is holding it or not to buy these shares for a new investor. An ‘Underweight’ rating will be assigned.

(An ‘overweight’ rating indicates the expectation that the stock will perform better than the market, while ‘underweight’ indicates a relatively poor performance)

Explanation:

As per SEBI (Research Analyst) Regulation 18: Limitations on publication of research report, public appearance and conduct of business, etc. –

‘Research analyst or research entity shall not issue a research report that is not consistent with the views of the individuals employed as research analyst regarding a subject company’.

Explanation:

Passive investing involves investing in a broad set of securities that fairly represent the asset class the investor needs to invest. Typically, passive investing strategy follows indexing strategy where an investor buys all securities that are part of an index. The objective of a passive investor is to earn the rate of return that the select asset class provides.

A passive investor does not decide upon individual securities to buy or sell but rather their analysis is limited to the broader asset class.

Explanation:

Earning Per Share (EPS) = Net Profit / No. of shares

So Net Profit = EPS X No, of Shares

Net Profit = 4 X 30000 = Rs 1,20,000

The Net Profit (Rs 120000) is 25% of EBITDA

So EBITA = 120000 X 100 / 25 = Rs 4,80,000

EBITDA is 60% of business, which means EBITDA is 60% of sales

So Sales = 480000 X 100 / 60 = Rs 8,00,000

Explanation:

In the Product Method, national income is measured as an aggregated flow of goods and services in the economy from the different sectors: agriculture, industry and services. Economists calculate money value of all final goods and services produced in the economy during a specified period.

Final goods refer to only those goods which are consumed by economy participants and not the ones used in further production processes (intermediate goods). Product method deals with the economy sector-wise. The total output in the economy is computed as the sum of the outputs of various sectors.

Explanation:

Strengths, Weaknesses, Opportunities and Threats (SWOT) Analysis

In SWOT analysis of a company, ‘Threats’ are essentially risk that comes from external environment. ( ‘Weaknesses’ are something which are internal to the company)

For the above four options, the pressure on Government to ban the company’s products is a threat to the company as its from an external source. The other three are internal weaknesses.

Explanation:

Industry structure in SCP refers to the competitive intensity in the industry (number of players), concentration of business in industry, relationship among the various players, market size, its growth rate, etc.

Explanation:

The formula for calculating PE Ratio is Market Price of the share / Earning Per Share (EPS)

We know the market price. Lets calculate the EPS

EPS = Profit / Number of shares = 300,00,00,000 / 4,72,60,223 = 63.478

PE = 718 / 63.478 = 11.311

Explanation:

A venture capital fund refers to a pooled investment vehicle like mutual fund but with mandate to invest money in enterprises that are in the early stage of development but with the potential of long-term growth.

Since these funds invest in new and upcoming companies, the chances of failure can be high, but it the company succeeds, the returns can also be very high. Therefore there is very high uncertainty of returns.

Explanation:

Cash flow statement provides a summary of the various sources and uses of cash.

Explanation:

Low inflation rate enables central banks to loosen their monetary policy and extend liquidity in the market. With relative easy availability of money and decrease in prices, consumers start buying goods and services. This results in economic activity picking up and eventually results in return of expansionary phase.

Low interest rates motivate the industries to get funds at cheaper rates which leads to increased productivity which leads to increased jobs and increased income which subsequently leads to economic recovery.

Explanation:

quities may produce recurring earnings in the form of dividends and then capital apprecaition on sale if there is a profit.

Bonds do not provide capital appreciation.

Explanation:

The Ministry of Finance (MoF) handles issues related to taxation, financial legislation, financial institutions, capital markets, state finances and the Union Budget.

Under the MoF, the Department of Financial Services covers Banks, Insurance, Financial Services provided by various government agencies and private corporations, pension reforms and Industrial Finance and Micro, Small and Medium Enterprise.

Explanation:

Inventory cycles are short term cycles that occur within a commodity cycle. These occur on account of inventory adjustments by producers and customers. Customers who may have huge inventory may temporarily reduce procurement. This would result in high inventory pile up at the suppliers’ end resulting in fall in prices.

Similarly, during a downturn, cautious customers may significantly reduce their procurement. However, if demand for their products improves marginally, they may not have adequate inventory and will have to go for immediate procurement. This can result in prices increasing.

Explanation:

A few reasons for failure of a research report are :

– Unnecessary details

– Long sentences

– No proper structure

– Inconsistent views

– Complex language

Explanation:

Security transaction tax is paid at the time of sale of securities / derivatives etc. Since it reduces the realisable value of security sales, it discourages short-term trading. Thus, this affects stock traders and in turn stock brokerage firms.

Explanation:

If the unorganised sector market share is 20%, the balance 80% is of the organised sector.

The sale of the organised sector is Rs 6000 cr + Rs 8000 cr + Rs 10000 cr = Rs 24000 cr

Rs 24000 cr sale is 80% sale of the tyre industry. So 100% will be ?

24000 cr x 100 / 80 = Rs 30,000 cr

So the overall tyre market is of Rs 30,000 cr

Explanation:

Return on Capital Employed is similar to Return on Equity.

Return on Equity = (Earning Per Share / Book Value) x 100

= 5 / 25 x 100 = 20%

Explanation:

Beta measures the sensitivity of the stock’s performance to overall market performance.

Beta is a measure of the systematic risk of a security or a by comparing the volatility in the investment relative to the market, as represented by a market index. It measures the risk of an investment that cannot be diversified away.

Explanation:

Each sector has its own unique parameters for evaluation.

For eg – for Banking it is Net Interest Income (NII)/ Net Interest Margin (NIM) whereas for the retail sector, foot falls and same store sales are important parameters.

Explanation:

Enterprise Value (EV) = Value of Equity + Value of Debt

The EV/EBIT = 10

So the EV is EBIT X 10 = 500 crores X 10 = Rs 5000 crores

EV = Value of Equity + Value of Debt

So Value of Equity = EV – Value of Debt

= 5000 cr – 800 cr = Rs 4200 crores

Explanation:

Entry barriers in an industry can be understood from following simple industry characteristics. They would be high if:

1. There are lots of licensing required in the business 2. Patents and copyrights prevent new entrants 3. Huge investments in specialized assets pose a challenge 4. Strong Brands, strong distribution network, specialized execution capabilities, customers loyalty with existing products/services exist in the business

Explanation:

International trade refers to the total trade that a country does with all other countries in the world. Balance of payment statement is broadly divided into two accounts namely the Current account and the Capital account.

The current account has all the details of transactions on revenue account viz. imports and exports of goods and services while the capital account captures all the capital flows like FDI, FII, loans, and grants etc. If imports are more than exports, then country will have a current account deficit and if exports are more than imports then it will have current account surplus.

Explanation:

In a organisation, if the decision-making process is well delegated and is fairly broad based, it can ensure continuity even when there is churn in top management. On the other hand, if the decision making is highly concentrated then it creates keyman risk as churn in top management can derail the decision-making process.

Explanation:

As per Regulation 16 of the Code of Conduct for Research Analysts :

‘Independent research analysts, individuals employed as research analyst by research entity or their associates shall not deal or trade in securities that the research analyst recommends or follows within thirty days before and five days after the publication of a research report’.

Explanation:

From the above four options, only Research Report from Credit Rating Companies can be considered as a reliable source of information for investment analysis.

Explanation:

Pioneering stage is the first stage of a business life cycle. In this the industry is just taking shape. It is not widely adopted. The concept is still being proven or just been proven.

Explanation:

Credit Risk or default risk refers to the possibility that a particular bond issuer will not be able to make expected interest rate payments and/or principal repayment.

Explanation:

A method of analyzing industries is to look at the industry structure (monopoly, oligopoly), its conduct (commoditized or specialized, seasonal or round the year, cyclical or noncyclical etc.) and finally its performance (RoE, RoIC, WACC, etc.).

Structure, Conduct, Performance (SCP) analysis approaches the industry evaluation exactly with this categorization.

Explanation:

Ownership bias: Things owned by us appear most valuable to us. Sometimes known as the endowment effect, it reflects the tendency to place a higher value on a position than others would. It can cause investors to hold positions they would themselves not buy at the current level.

Explanation:

Debentures are instruments for raising long term debt. Debentures are either unsecured or secured (backed by collateral support) in nature.

There are variety of debentures/bonds such as fully convertible, non-convertible and partly convertible debentures.3

Non-Convertible Debentures are pure debt instruments without a feature of conversion. They are repayable/redeemable on maturity.

Explanation:

While purpose of carrying out valuation could vary from person to person, some of the reasons for carrying out valuations of assets/businesses/liabilities are as follows:
– Buying a business as part of investment exercise
– Selling a business as part of disinvestment exercise
– Mergers and Acquisitions
– General sense of value of business to owners
– Fair treatment to different set of stake holders in case of equity swap
– Accounting, taxation and other regulatory and legal requirements

Explanation:

Explanation:
Return on Equity is the single most important parameter for an investor to know more about a company. It communicates how a business allocates its capital and generates return. An efficient allocator of capital would have high Return on Equity and a poor quality of business would have low Return on Equity.

Explanation:

An attractive Industry from shareholders’ perspective is one that has one or more the following salient features that create a profitable atmosphere for the business:
1. Low competition
2. High barriers to entry
3. Weak suppliers’ bargaining power
4. Weak buyers’ bargaining power
5. Few substitutes

If an industry is having these features, it would have strong pricing power and high profit margins and attract investors.

Explanation:

Microeconomics is the study of the behaviour of individuals and their decisions on what to buy and consume based on prevalent prices which in turn signals where the economy has to direct its productive activities. Accordingly, Microeconomics focuses on the drivers of decision making, as well as the ways in which individuals’ decisions affect the overall supply and demand and supply of particular goods and services, in an economy, and in turn their prices.

Macroeconomics is the study of “the big picture” in the economy. While microeconomics focuses on individual households and firms, macroeconomics deals with the economy as a whole.

Explanation:

In a share consolidation, the company changes the structure of its share capital by increasing the par value of its shares in a defined ratio and correspondingly reducing the number of shares outstanding to maintain the paid up/subscribed capital.

Companies consider consolidating their shares if prices of their shares in the secondary market are seen to be very low effecting the perception of investors. An increase in the price per share post- consolidation, leads to better perception among the market participants about the company’s prospects.

Explanation:

Each industry/sector has a specific set of factors which affect its profitability and prospects. For example – On-line businesses are dependent on internet penetration and changing habits of people on shopping

Explanation:

Fundamental analysts maintain that market may misprice securities in the short run but in the long run, prices would merge with the securities’ fair value or intrinsic value.

technical analysts do not care to analyze the fundamentals of the business. Instead, the approach is to forecast the direction of prices through the study of patterns in historical market data – price and volume.
Unlike fundamental analysis, technical analysis is not concerned if the stock is trading at a fair price relative to its intrinsic value.

Explanation:

Unsystematic risk is the risk specific to individual securities or a small class of investments. Hence it can be diversified away by including other assets in the portfolio. Unsystematic risk is also known as diversifiable risk. Credit risk, business risk, and liquidity risks are unsystematic risks

Explanation:

Fundamental analysis includes following:

1. Economic analysis
2. Industry analysis
3. Company analysis

It does not include analysis of investors behaviour.

Explanation:

Size of a Balance Sheet includes Equity + Debt.

Therefore Rs. 51,00,000 includes Debts & Equity in the ratio 2 : 1 (Total of 2+1 = 3)

So 5100000 / 3 x 2 = Rs. 3400000 is the Debt component

5100000 / 3 x 1 = Rs. 1700000 is the Equity component.

Explanation:

Low cost deposits like Current Account, Savings Account – CASA is a one of the determining factor for banks profitability. More CASA means more low cost of funds which can be lend out and so more profits.

Explanation:

Price Earning (PE) Ratio = Market Price / Earning Per Share (EPS)

18 = 432 / EPS

So EPS = 432/18 = 24

Dividend Payout Ratio = Dividend Per Share / EPS

60% = Dividend Per Share / 24

So Dividend Per Share = 24 X 60% = Rs. 14.40

Explanation:

Book Value of a company is the net-worth of the company.

To compute book value per share, net-worth of the company is divided by the number of outstanding shares.

In simple terms, book value per share means the theoretical amount of money each share would get in case the company was to wind up.

Explanation:

Trading or speculating is an act of purchase or sale of an asset in the expectation of a gain from changes in the price of that asset over a short period of time. Traders or speculators seek to benefit from acting on information which bring about changes in prices.

Explanation:

Net Sales: This is the income which the company generates by selling its goods and services.
Applicable indirect tax (GST) has to be deducted from the Gross Sales to get the Net Sales figure as these taxes are collected by the business for the government and don’t belong to the business.

Net Sales = Sales – Indirect Taxes
= 500000 – 20000
= 480000

Explanation:

Research Analysts play an important role in interpreting the complex data related to economy, industry, companies etc. They study Companies and industries, analyze raw data, and make forecasts / recommendations about whether to buy, hold or sell securities.

Explanation:

A checklist is a type of job aid used to reduce failure by compensating for potential limits of human memory. It helps to ensure consistency and completeness in carrying out a task. A basic example is the “to do list”.

Advantages of checklist approach are:

– Checklist helps avoid lazy mistakes or short-cuts.
– Checklist ensures than an analyst always does what he or she intends to do in a disciplined
manner.
– Checklists help in objective and facts based decisions.
– Checklists leave a decision-making trail that can be modified and corrected with time.

Explanation:

When a business is valued, the demand and supply of its shares in the stock market is not considered.

Explanation:

Research Analysts collect data/information from various sources, analyze the collected data/information and make their recommendations. Job of analysts also involves close interaction with companies and clients.

Explanation:

In PESTLE Analysis – Stability in legislation and policy, minimal corruption, bureaucracy, communal tensions and violence coupled with maximum freedom of press, ease of doing business and quick turnaround time are some of the political factors which investors would look at in a country.

Balance of Payment is an Economic factor.

(PESTLE Analysis stands for Political, Economic, Socio-cultural, Technological, Legal and Environmental Analysis)

Explanation:

Department of Economic Affairs is the nodal agency of the Central Government to formulate and monitor India’s macroeconomic policies, covering monetary and fiscal policy as well as the functioning of the Capital Market including stock exchanges.

Explanation:

Each industry has its own specific drivers, a study of which gives the analyst an idea of the sector as well as the company under consideration.

A key parameter while analyzing the Telecom Sector is Average Revenue Per Unit (ARPU). It is calculated by total revenue divided by number of subscribers and the higher it is, the better for the company.

Explanation:

If the intrinsic value is perceived to be more than market value, the scrip is said to be undervalued.

If intrinsic value is perceived to be less than market value, the scrip is said to be overvalued.

Explanation:

Current Ratio: This ratio measures the company’s liquidity situation by comparing its current
assets with its current liabilities. A ratio of more than 1 means that the company has current
assets more than its current liabilities.

This ratio measures the ability of the company to meet its short-term liabilities.

Explanation:

Paid Up Capital of the Company is Rs. 20,000,00 and the face value of shares is Rs. 10

Total number of shares = 2000000 / 10 = 2,00,000

Dividend is Rs 6 per share. So total dividend is Rs 6 X 200000 shares = Rs.12,000,00

Net Income = Income before dividend – Dividend

= 1800000 – 1200000 = Rs. 6,00,000

Total Book value of the company = Book value per share x Number of shares

= 15 X 200000 = 30,000,00

Return on Equity = Net Income / Book Value x 100

= 600000 / 3000000 x 100

= 20%

Explanation:

Regulation 8: Capital adequacy –

(1) A research analyst who is individual or partnership firm shall have net tangible assets of
value not less than one lakh rupees.

(2) A research analyst who is body corporate or limited liability partnership firm shall have a
networth of not less than twenty five lakh rupees.

Explanation:

The difference between the assets and the liabilities is known as equity.

So Equity = Assets – Liabilities

= 70000 – 50000 = 20000

Asset to Equity Ratio = Assets / Equity

= 70000 / 20000

= 3.5

Explanation:

SEBI has mandated that listed companies shall declare dividends in rupees terms on per share basis as against the earlier practice of declaring dividends as a percentage of the face value.

This is to avoid confusion among investors while comparing dividend on various shares of different face values.

Explanation:

SEBI has mandated that listed companies shall declare dividends in rupees terms on per share basis as against the earlier practice of declaring dividends as a percentage of the face value.
This is to avoid confusion among investors while comparing dividend on various shares of different face values.
For eg. If a company declares 50% dividend on shares of face value Rs. 2, it should state that the dividend is Re. 1 per share ( 50% of facevalue Rs. 2)

Explanation:

Sales = Rs 400000

Less : Cost of Goods sold (20% of Sales) – Rs 80000

Less : Op Expenses and Depreciation – Rs 96000

Less : Interest Expenses – Rs 40000

Income before Tax = Rs 184000

Less : Tax at 40% on Rs 184000 – Rs 73600

Net Profit = Rs 110400

Explanation:

As per the Boston Consulting Group (BCG) Analysis – Question Marks are business segments in a fast growing market, but having low market share. The right strategies and investments can help the market share of the business grow, but they also run the risk of consuming cash in the process of increasing market share and in the end turning out to be not enough cash generating. Tata Nano can be considered as an example of a question mark, which did not succeed; whereas, Bajaj Pulsar may be considered as an example of a question mark product which succeeded.