NISM-Series XV: Research Analyst Certification 'Last Day Revision' Test 2

Explanation:

Every industry typically goes through the following phases – Pioneering stage, Growth stage, Matured stage, Declining stage and Reinvention and revival.

Matured stage: The industry has existed for long and most customers who can use the product are already using it.

From the above four options, Oil and Gas industry is a matured industry as it has existed for very long.

Explanation:

Under section 230 of Companies Act 2013, Scheme of arrangement can be sought by the company or its creditors / members. The person claiming the scheme of arrangement shall approach the National Company Law Tribunal (NCLT). The tribunal then orders the meeting between the company, its creditors and/or members to arrive a compromise or arrangement.

Explanation:

Price to book value ratio = Market capitalization/ Net-worth

10 = 8,00,000/Net-worth

Net-worth = 800000/10 = 80000

Explanation:

Expansion / Boom phase of Economic Cycle : The expansion is characterized by increased consumption of goods and services driven by higher income, lower interest rates and high level of consumer confidence. High demand for products results in higher production and higher employment which in turn keeps the momentum on the consumption high.

Booming economy increases consumer and business confidence. Thus, businesses plan capacity expansion and consumers plan to acquire long term assets.

Explanation:

Regulation 17: Compensation of research analysts

The compensation of all individuals employed as research analyst shall be reviewed, documented and approved annually by board of directors/committee appointed by board of directors of the research entity, which does not consist of representation from its merchant banking or investment banking or brokerage services divisions.

From the above given three options, Head of the brokerage division and Head of investment banking division cannot review the salaries of research analyst. Therefore, Head of research division is the right answer.

Explanation:

International trade refers to the total trade that a country does with all other countries in the world. A country’s balance of payment is the statement showing transactions of a country with the rest of 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.

None of the above are considered as Capital Account transaction.

Explanation:

FCFF is a measurement of a company’s profitability after all expenses and reinvestments.

The Free Cash Flow model cannot be used when the cash flows are negative as it becomes difficult to determine the growth rates and form a terminal value.

Also, if the firm is likely to change significantly in the future, to know the real value of the business, FCFF model is preferable.

Explanation:

Price to book value ratio can be calculated using : Market capitalization / Net worth

50,000,00 / 10,00,000 = 5

Explanation:

As per SEBI (Research Analyst) Regulations, 2014 – Regulation 18: Limitations on publication of research report, public appearance and conduct of business, etc. :

Research entity shall ensure that the individuals employed as research analyst are separate from other employees who are performing sales trading, dealing, corporate finance advisory or any other activity that may affect the independence of its research report: Provided that the individual employed as research analyst by research entity can receive feedback from sales or trading personnel of brokerage division to ascertain the impact of research report.

Explanation:

In the case of capital-intensive industries, the difference in the historical cost of asset and choice of depreciation method can cause major discrepancy in the method of depreciation. Therefore, for such industries it is preferable to use EV/EBITDA. For other industries, EV/EBIT is preferable.

Explanation:

Entry barriers in an industry 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. It’s a hindrance or obstacle for a new entrant trying to establish themselves in a business.

Explanation:

Foreign capital flows to a country can be either in active form known as Foreign Direct Investment (FDI) or passive form known as Foreign Portfolio Investment (FPI).

In case of FDIs, investing entities participate in decision making and drive the businesses. However, Portfolio Investment, as name indicates is investment in the existing financial instruments – equity or bonds by the Foreign Portfolio Investors (FPIs) without any management participation.

Explanation:

The PE ratio indicates the amount of money an investor needs to invest to receive 1 unit of profit. It is calculated using the current market price and the EPS.

All else held constant, a stock with higher PE ratio compared to the peer group numbers is considered to be expensive stock. Similarly, a stock with a relatively low PE is considered as undervalued stock.

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:

Current asset represents assets that are likely to benefit the organization within one operating cycle. Non-current asset represents assets that are likely to give benefits over the long term.

Eg of Current Assets – Inventory, Current Financial assets like Bank balance, cash, investments etc.

Eg of Non Current Assets – Property, Plant and Equipment, Capital work in progress, Goodwill, Intangible assets etc.

Explanation:

In a consolidation, companies combine together to form a new company and the merged companies cease to exist.

(In a merger, the acquirer buys up the shares of the target company and it is absorbed into the acquiring company and ceases to exist. In an acquisition or takeover, the acquiring company acquires all or a substantial portion of the stock of the target company. Both entities typically continue to exist after the acquisition)

Explanation:

Deep cyclical industries: These industries witness extreme cyclicality in their revenues as they are largely driven by economic cycle and/or commodity cycles. Capital goods industry exhibits such behaviour.

During recessionary conditions, their sales drop significantly as most companies put their capacity expansion plans on hold. However, these industries experience massive growth at the first signs of economic recovery as pent up demand result in higher orders.

Explanation:

The Debt to Equity ration is 2 : 1. Which means Equity amount is half of Debt amount.

So the equity is half of Rs 8,00,000 = Rs 4,00,000

Net Profit = Return on Equity = 25%.

25% of Rs 4,00,000 = Rs 1,00,000

Explanation:

A good research report will cover the effects of all types of risks to the industry / company to arrive at a sound conclusion.

Explanation:

Contractionary policy is intended to cool down the heated up economy through reduction in the money supply or slow increase in money supply and increase in the interest rates.

When economy is heated up, it may need fiscal measures to slowdown. In such a situation, a government can increase taxes to suck money out of the economy or decrease in its spending thereby decreasing the money in circulation. However, possible negative effects of such a policy in the long run could be a slow moving economy and high unemployment levels which will lead to a negative impact on the equity markets..

Explanation:

As per SEBI, (Prohibition of Insider Trading) Regulations, deemed to be connected persons include –

‘A holding company, subsidiary or associate company under the same management or group’

Explanation:

Balance of payment statement of a country 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.

Capital account will be in surplus if inflows are more than outflows and in deficit if outflows are more than inflows on capital account.

Explanation:

The formula for calculating Future Value is FV=PV( 1+r )n

PV = Present Value ; r = yearly interest rate (6% = .06) ; n = number of years

Substituting :

FV = 75000 (1 + .06) ^ 10

FV = 75000 (1.06) ^ 10

On the Scientific Calculator of your computer press 1.06, X^Y, 10 = 1.790847

FV = 75000 x 1.79 = 1,34,313

Explanation:

question Marks – 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.

Explanation:

Scheme of arrangement is a court monitored settlement process between the company and its creditors or members. The person claiming the scheme of arrangement shall approach the National Company Law Tribunal (NCLT).

The tribunal then orders the meeting between the company, its creditors and/or members to arrive a compromise or arrangement.

Explanation:

The Dividend Payout Ratio (DPR) is the amount of dividends paid to shareholders in relation to the total amount of net income the company generates. In other words, the dividend payout ratio measures the percentage of net income that is distributed to shareholders in the form of dividends.

First lets find the Earning Per Share (EPS)

PE Ratio = Market Price / EPS

13.50 = 40.50 / EPS

EPS = 40.50 / 13.50 = 3

Dividend Payout Ratio = Dividend Per Share / EPS

70% = Dividend Per Share / 3

70% of 3 = 2.10

So the Dividend Per Share = Rs 2.10

Explanation:

Beta of 1 indicates that the security’s price will move with the market. Beta of less than 1 means that the security will be less volatile than the market. And, beta of greater than 1 indicates that the security’s price will be more volatile than the market.

For example, if a stock’s beta is 1.2, it’s theoretically 20% more volatile than the market both on up and down moves.

Explanation:

Herd mentality: This is a common behaviour disorder in investing community. This bias is an outcome of uncertainty and a belief that others may have better information, which leads investors to follow the investment choices that others make.

Small investors keep watching other participants for confirmation and then end up entering when the markets are over heated and poised for correction.

Explanation:

As per SEBI (Prohibition of Insider Trading) Regulations, “insider” is any person who is a connected person or one in possession of or having access to unpublished price sensitive information.

The regulations define unpublished price sensitive information that affect the company or its securities as those that is not generally available and which can materially affect the price of the securities.

Explanation:

All type of expenses are included in the Income or the Profit and Loss Statement. Depreciation and amortisation are expenses of a company.

Depreciation refers to gradual and permanent reduction in value of assets on account of ageing, use and obsolescence. Amortisation refers to gradual write-off of intangible assets over the period of its life.

Accounts receivable, Long term debt, Current assets and Current liabilities are all included in the Balance Sheet of the company.

Explanation:

In the Recession phase of economic cycle the utilization rates are low and so the manufacturers cut down on their further expansion plans.

This results in increase in unemployment, decrease in income levels and in turn decrease in consumption. Decreasing consumption causes losses and more unemployment resulting in low consumer confidence.

Explanation:

In recession, their is unemployment, decrease in income levels and in turn decrease in consumption. During such times, the number of people who can afford travelling by planes fall down considerably and their by negatively affecting the profitability of the airlines industry.

Explanation:

The cost of goods sold is how much it costs to produce your products.

An income statement also includes all types of expenses. In a manufacturing company, it will include the cost of raw materials which are used to make finished goods.

So the ‘Cost of goods sold ‘ will be a part of the Income Statement.

Accounts receivable, Long term debt and Fixed assetsare all included in the Balance Sheet of the company.

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.

Debt instruments are subject to default risk as they have pre-committed pay outs. Equity shares do not have any default risk as the issuer is not required to repay the amount.

Explanation:

Some of the motives behind Merger and Acquisition activities are :

Synergy – Each company may have distinct efficiencies that when combined together may result in greater economic benefits

Increased revenue and market share – If two competitors go through M&A, it would result in increased revenue and market share for the acquiring entity

Geographical or other diversification – Acquiring Company in different geography or complimentary business space may offer significant competitive advantage to the acquirer

Taxation – A profitable company can buy a loss making company to enjoy tax shield against the losses of the target company

Explanation:

Reserve Bank of India (RBI) is the central bank of the country which has the responsibility of administering the monetary policy.

It regulates the money markets and is the manager of Government’s borrowing programs.

Explanation:

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

Explanation:

Once a draft of the research report is ready it should be rechecked for financial figures, spell-checks and grammatical errors and edited accordingly.

Explanation:

The research analyst will give his opinion on all these matters :

1. Is the company rightly valued / over or under valued

2. How competitive is the company in the industry etc.

3. Financial forecasting using various ratios

Explanation:

Price to book value ratio = Market capitalization/ Net-worth

The market capitalisation of the company is No. of shares X Market price = 14 million X Rs 20 = Rs 280 million

The Net worth = Assets – Liabilities = 100 million – 30 million = Rs 70 million

Price to book value ratio = 280 million / 70 million = 4

Explanation:

Audit independence is one of the very critical aspects of corporate governance.

The audit committee is responsible for reviewing the financial statements of the company and for nominating the auditors.

Explanation:

Bonds that do not pay coupons in their entire term are known as Zero Coupon Bonds. Such bonds are issued at a discount to their face values and are redeemed at par.

Thus, the return on these bonds is not in the form of periodic payment of interest but in the form of the difference between the issue price and redemption value.

Explanation:

The remuneration committee decides the remuneration of directors and senior management. Ideally, the committee should comprise entirely of independent directors.

SEBI regulation currently stipulates that all members should be non-executive directors and the chairman of the committee should be independent director.

Explanation:

As per Regulation 17 – Research entity shall not pay any bonus, salary or other form of compensation to any individual employed as research analyst that is determined or based on any specific merchant banking or investment banking or brokerage services transaction.

This means the bonus can be payable to a research analyst irrespective of his/her recommendations and performance.

Explanation:

Camera manufacturing is an example that shows the challenges in defining an industry.

Couple of decades ago, cameras were a standalone product. However, with the emergence of smart mobile phones with built-in cameras, a lot of entry level digital cameras started losing their sales to these phones.

Explanation:

Pricing power refers to a company’s ability to independently determine and charge the price of its products. Companies with strong pricing power would be able to pass on any escalation in input cost to its customers. They can also increase their prices when demand is strong and thus grow their margins.

Explanation:

The returns to an investor from a business depends on various factors, but the most important factor is the performance of the company.

Explanation:

Buyers can exert a lot of pressure and dictate prices, if there are a large number of sellers with similar products/services.

Buyers’ bargaining power would be high if:

1. Competitive intensity in the industry is strong

2. Products/Services are standardized with little or no differentiation.

3. Close substitutes of the products/services exist and switching cost for customers is low or nil.

Explanation:

he EBIT is Rs 200000 and this is 50% of the business ie. 50% of sales.

So Sales = Rs 400000 (200000 / 50 x 100)

Net Profit margin is 20% ie 20% of Sales Rs 400000

20% of Rs 400000 = 80000

EPS = Net Profit / No. of Shares

= 80000 / 20000 = 4

Retention Ratio is 60% which means the Dividend Payout Ration is 40% ( 100 – 60 )

40% dividend is paid from the earnings.

40% of EPS ie. 40% of 4 = Rs 1.60 is the Dividend Paid per share

Explanation:

ROCE considers interest as returns where as ROE considers interest as a cost.

Therefore, the ROE will be lower than the ROCE of 8%

Explanation:

Under the Free cash flow to firm model (FCFF) model, the value of the business is derived by discounting the FCFF.

Since FCFF is the cash flow available to all sources of capital, discount rate is taken as the weighted average cost of capital that factors all sources of capital and investors’ expected return on the same.

Explanation:

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

In the Income method, national income is measured as the aggregate income of individuals in the economy.

Explanation:

The company has declared 20% dividend on Rs. 5 face value. So the dividend is Re. 1 (20% of 5)

Dividend Payout ratio = Dividend Per Share / EPS

50% = 1 / EPS

EPS = 1 / 0.5

EPS (Earning Per Share) = 2

Earning Yield % = EPS / Stock Price x 100

= 2 / 100 x 100

= .02 x 100 = 2 %

Explanation:

The Financial Intelligence Unit – India (FIU-IND) was established by the Indian government in 2004. It serves as the main national agency for receiving, processing, analyzing, and sharing information about potentially suspicious financial transactions.

The directors of FIU are appointed by the Central Government and not by SEBI (Securities and Exchange Board of India).

Explanation:

A Government tries to balance between its inflows and outflows and based on its actions the fiscal policy can be categorized as –

Expansionary fiscal policy – Fiscal measures when government’s spending exceeds its income. This policy stance is usually undertaken during recessions/slow moving economy.

Contractionary fiscal policy – Fiscal measures when government’s spending is lower than its income. Government uses excess income to repay its debts/obligations or acquire assets.

Explanation:

Structure Conduct Performance (SCP) Analysis looks 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.).

The structure of the industry, as described above, will define the conduct of the businesses on aspects such as pricing and product innovation. Each industry will have its peculiar behaviour. Umbrellas and raincoats would be seasonal businesses and FMCG (Fast Moving Consumer Goods like soaps etc) and Pharma would be round-the-year ones.

Explanation:

Price to book value ratio = Market capitalization/ Net-worth

= 600000 / 300000 = 2

Explanation:

Analysts should focus on the qualifications and experiences of these independent directors, how many meetings they attend and what are their contributions to the business. They also have to see whether these directors are truly independent or are relatives and friends of the promoters.

Explanation:

One basic principles of interaction with Companies/Clients is that during the research, analysts must have an unbiased opinion and should always hold their independence. Their analysis should be based on factual
information and not led by personal inclinations. Also, they must make it clear with the management to not reveal any information which is not available in the public domain.

Explanation:

Free Cash Flow for Equity = Free cash flows to the firm (FCFF) – Interest payment on debt + Net borrowings

Explanation:

Price to book value ratio = Market capitalization / Book value of equity or net-worth

This ratio indicates, how much we are paying to buy each Rs. of book value of equity.

Lower P/B ratio means assets are available cheap and higher this number, assets are expensive.

Explanation:

Investing requires adequate efforts in terms of research and understanding the investment options available, determining their suitability for the needs of the investors and their appropriate value.

Explanation:

Price to Earnings Ratio (P/E) = Current price of stock/ Earnings Per Share (EPS)

The PE ratio represents the value placed by the market on each rupee of earnings of the company. It is calculated using the current market price and the historical EPS, or forward PE by using the forecasted EPS.

Explanation:

Loan or debt restructuring is a mechanism available to companies in financial distress who are unable to meet their obligations to their lenders to restructure their debt by modifying one or more of the terms of the loans. This may include the amount of loan, rate of interest, the mode of repayment: funds and/or equity in the company, and the term of the loan and so that the repayment obligation is within the payment capacity of the borrower.

Explanation:

Enterprise value = Market capitalization + Market value of debt – cash and cash equivalents

First lets find out the Market Capitalisation

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

14 = Market Price / 5

Market Price = 14 X 5 = Rs. 70

Market Capitalisation = Market Price X No. of Shares

= 70 X 100000 = 70,000,00

Enterprise value = Market capitalization + Market value of debt – Cash and cash equivalents

= 7000000 + 700000 – 700000

= Rs. 70,000,00

Explanation:

There are cash inflows and cash outflows in every business as money comes in and money goes out.

1. Cash inflow will happen when an asset is sold – for eg. old factory machine is sold
2. Cash inflow will happen when liabilities increase – for eg. taking a loan
3. Cash inflow will happen when equity is increased – for eg. more equity shares are sold to investors in an IPO

(Investing cash flows – Cash flows on account of assets. Buying assets is negative cash flow and selling assets is positive cash flow.
Financing cash flows – Cash flows on account of liabilities. Borrowing money or issuing/expanding equity is positive cash flow and redeeming debt and/or equity is negative cash flow)

Explanation:

As per Technical Analysis, there are three essential elements in understanding price behaviour:

1. The history of past prices provides indications of the underlying trend and its direction.
2. The volume of trading that accompanies price movements provides important inputs on the underlying strength of the trend.
3. The time span over which price and volume are observed factors in the impact of long term factors that influence prices over a period of time.

Explanation:

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

So Equity = Assets – Liabilities

= 530000 – 410000 = 120000

Asset to Equity Ratio = Assets / Equity

= 530000 / 120000

= 4.41

Explanation:

The Ministry of Corporate Affairs is primarily concerned with administration of the Companies Act and other allied Acts, rules and regulations framed there-under mainly for regulating the functioning of the corporate sector in accordance with law

Explanation:

Source of information for a Research Analyst : Communication with management, Personal Understanding of the business and industry.

Explanation:

Investors look for investments that not only beat inflation and provide adequate returns but also ensure the safety of the principal amount invested. Therefore, the correct answer is “All of the above.”

Explanation:

The EBIT is Rs 200000 and this is 50% of the business ie. 50% of sales.

So Sales = Rs 400000 (200000 / 50 x 100)

Net Profit margin is 20% ie 20% of Sales Rs 400000

20% of Rs 400000 = 80000

EPS = Net Profit / No. of Shares

= 80000 / 20000 = 4

Explanation:

Price to Book Value = Stock Price / Book Value

So Stock Price = Price to Book Value X Book Value

Stock Price = 4 X 10 = Rs 40.

PE = Stock Price / EPS

So EPS = Stock Price / PE

EPS = 40 / 8 = 5

EPS is calculated as : Net Profit / No. of Shares

So Net Profit = EPS X No. of Shares

Net Profit = 5 X 10000 = Rs. 50000

Explanation:

Presence of great brands, existence over long periods of time, history of clean and ethical management, aggressive takeovers and buyouts, monopoly/ large market share, great execution capabilities, great distribution network, great customer loyalty etc. are some of the qualitative aspects which differentiate companies from one another and makes them strong and successful.

Explanation:

Inflation is defined as the general increase in price levels of goods and services in the economy leading to an erosion of purchasing power of money.

When one says – “things have become very expensive over a period of time”. How do things become expensive? What explains the rise in the price of general goods and services? Answer to that question is “Inflation”

Explanation:

As per SCRA, the term ‘Securities’ include:
1. Shares, scrips, stocks, bonds, debentures, debenture stock or other marketable securities of a like nature in or of any incorporated company or other body corporate
2. Derivative
3. Units or any other instrument issued by any collective investment scheme to the investors in such schemes units
4. Security receipt
5. Units or any other such instrument issued to the investors under any mutual fund scheme
6. Any certificate or instrument
7. Government securities
8. Such other securities as may be declared by the Central Government to be securities and
9. Rights or interest in securities

Explanation:

The Securities Contracts (Regulation) Act, 1956 covers a variety of issues like –

1. Granting recognition to stock exchanges
2. Corporatization and demutualization of stock exchanges
3. The power of the Central Government to call for periodical returns from stock exchanges
4. The power of SEBI to make or amend bye-laws of recognized stock exchanges
5. The power of the Central Government (exercisable by SEBI also) to supersede the governing body of a recognized stock exchange
6. The power to suspend business of recognized stock exchanges
7. The power to prohibit undesirable speculation

Explanation:

For calculating the EPS, one has to know the number of shares ( EPS = Net Profit / No. of Shares)

This data is not available nor can it be derived from the give data.

Explanation:

All the above corporate actions have a effect on the share prices and the ex-price (ie. price after the action is over) is usually quiet different. For example, if a company announces a 1: 1 bonus and the share price is Rs. 200, the ex-bonus price will be closer to Rs. 100.

Explanation:

Capital appreciation usually happens over a long period of time but it is not a certainity. There could be losses also in the long term.

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:

Systematic risk refers to those risks whose impact is felt across investment categories. These risks are undiversifiable risks, because they cannot be eliminated through diversification.

When Foreign Financial Institutions (FIIs) pull out their money from a economy/market, the entire spectrum of investments tend to fall. This is a Systematic risk which cannot be diversified.

Systematic risk is caused due to factors that may affect the economy/markets as a whole, such as changes in government policy, external factors, wars or natural calamities. Inflation risk, exchange rate risk, interest rate risk and reinvestment risk are systematic risks.

Explanation:

Callable Bonds give the right to issuers to call the bonds back. It allows the issuer to redeem the bonds prior to their original maturity date.

When interest rates fall, the issuer would be in a position to raise the same amount of loan, at a lower
interest rate. So it would call back the bonds, redeem the amount and raise the same amount of loan at a lower interest cost.

Explanation:

Price-Value thought means the thought which a consumer has regarding the price he pays for the value which he gets from the product or service.

If the product is very good or if the consumer is very loyal to a brand, he will not mind the price and will ignore the value because he is satisfied. For eg. If a person buys SONY TV, he will pay a higher price for it and believe he has got a good product even though other brands may offer better products at a lower price.

Explanation:

When an information is known publicly, it cannot be misused for any unfair trade practices.

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.

The Government and institutions associated with the government do not have a credit risk / default risk associated with their borrowings because the government has the ability to raise the funds to pay the debt through taxation etc.

Since Government bonds have less credit risk as compared to corporate bonds, they offer lower yields. Corporates bonds have to offer higher yields to attract investors.

Explanation:

Governance, in simplest sense, means telling the “Truth” in all aspects of life.

Corporate Governance basically takes into account the integrity and transparency aspect of the management.

Explanation:

The formula to find the CAGR – Compounded Annual Growth Rate holding period return is :

[ ( End Price / Begin Price) ^ (1/n) ] -1

End Price = 12.50

Begin Price = 11

n = time. We have to find yearly return so 400 / 365 = 1.0958

So [( 12.50/11 )^ 1/1.0958] – 1

= (1.1363 ^ 0.9125) – 1

On the scientific calculator of your computer, type 1.1363 then use x^y key and then type 0.9125 = 1.1236

1.1236 – 1 = .1236x 100 = 12.36 %

Explanation:

Stock dividend or Bonus shares are additional shares are given to the shareholders, without any consideration, in proportion of their holdings by capitalization of revenue reserves.

Explanation:

Price sensitive information includes the following:
1. Periodical financial results of the company
2. Intended declaration of dividends, both interim and final
3. Issue of securities, or buyback of securities and other change in capital structure
4. Mergers, acquisition (takeover), demergers, delisting, disposal of business, amalgamation.
5. Any change in key personnel
6. Material events as defined under the listing agreement

Explanation:

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.

So Loans is not a component of Current Account. It is a component of Capital Account.

Explanation:

Conceptually, discounted cash flow approach to valuation is the most appropriate approach for valuations when three things are known with certainty:
– Stream of future cash flows
– Timings of these cash flows, and
– Expected rate of return by the investors (called Discount Rate).

Explanation:

Trading members or Stock Brokers are registered members of a Stock Exchange. They facilitate buy and sell transactions of investors on stock exchanges. All secondary market transactions on stock exchanges have to be essentially conducted through registered brokers of the stock exchange.

Explanation:

If equity yields are in general higher than bond yields, clearly equity is available cheap. This is typically true when markets are down. On the other hand, during bull markets, equity yields are quite lower than the bond yields.

Explanation:

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.

Macroeconomics helps us understand the general state of the economy – Domestic Production, Domestic Consumption, General Price levels, Growth, Quality of life etc.

Explanation:

The major sections of a research report include – Company business, peer group analysis, shareholding pattern, key strengths, key concerns, industry overview, company fundamentals, key financial indicators and financials.

Explanation:

FIU is an independent body reporting directly to the Economic Intelligence Council (EIC) headed by the Finance Minister

Explanation:

Reserve Bank of India (RBI) is the central bank of the country which has the responsibility of administering the monetary policy. Is functions include all the above options and more.

Explanation:

The company has declared 60% dividend on Rs. 5 face value. So the dividend is Rs. 3 (60% of 5)

Dividend Payout ratio = Dividend Per Share / EPS

50% = 3 / EPS

EPS = 3 / 0.5

EPS (Earning Per Share) = 6

Earning Yield % = EPS / Stock Price x 100

= 6 / 180 x 100

= .033 x 100 = 3.3

Explanation:

Different industries face different challenges and opportunities. Their growth drivers could be significantly different. Accordingly, Research Analysts need to understand thoroughly the regulatory environment prevalent in the industry, business models, competition, operating factors, sensitivity of demand to price changes, consumers’ behaviour etc.