Vous êtes sur la page 1sur 34

Seed Capital

Money used for the initial investment in a project or startup company, for proof-ofconcept, market research, or initial product development. Also called seed financing or seed money.

Lead Investor A company's principal provider of capital, such as the entity which originates and structures a syndicated deal. Angel Investor An individual who provides capital to one or more startup companies. The individual is usually affluent or has a personal stake in the success of the venture. Such investments are characterized by high levels of risk and a potentially large return on investment. Hedge An investment made in order to reduce the risk of adverse price movements in a security, by taking an offsetting position in a related security, such as an option or a short sale. Treasury Stock Stock reacquired by a corporation to be retired or resold to the public. Treasury stock is issued but not outstanding, and is not taken into consideration when calculating earnings per share or dividends, or for voting purposes. Eating Stock What an underwriter does when he/she can't find enough buyers and is forced to purchase the stock for his/her own account. To cover for risk associated with not being able to find enough buyers for an issue, underwriters charge an underwriting fee. Thus, even in an underwriter is "eating" stock, he/she might still make a profit on the deal. However, in the situation that a new issue is severely undersubscribed, the underwriter might make a loss on the deal. Lead Manager The commercial or investment bank which has primary responsibility for organizing a given credit or bond issuance. This bank will find other lending organizations or underwriters to create the syndicate, negotiate terms with the issuer, and assess market conditions. also called syndicate manager, managing underwriter or lead underwriter.

Red Herring Same as preliminary prospectus. Its name comes from the warning, printed in red, that information in the document is still being reviewed by the SEC and is subject to change. Pari Passu Often seen in venture capital term sheets, indicating that one series of equity will have the same rights and privileges as another series of equity. Forex An over-the-counter market where buyers and sellers conduct foreign exchange transactions. also called foreign exchange market. Bullion Gold, silver, platinum, or palladium, in the form of bars or ingots. Some central banks use bullion for settlement of international debt, and some investors purchase bullion as a hedge against inflation. Derivative A financial instrument whose characteristics and value depend upon the characteristics and value of an underlier, typically a commodity, bond, equity or currency. Dividend Payout Ratio Dividends paid divided by company earnings over some period of time, expressed as a percentage. also called payout ratio. Shadow Stock First, a public company may create a stock that strips out the market wide movements for the purpose of rewarding managers. That is, the management might have done a great job - but the traded stock plummets because the market as a whole plummets. A second interpretation of shadow stock is a phantom stock that is created by a private company (i.e. that does not have stock traded either on exchange or over the counter) again for the purpose of performance evaluation and rewards. Surplus Funds

Cash flow available after payment of taxes in a project. Sunk Cost Costs that have been incurred and can not be reversed. Strong Currency A currency whose value compared to other currencies is improving, as indicated by a decrease in the direct exchange rates for the currency. Striking Price The price at which an option can be exercised.

Strategic alliance Collaboration between two or more companies designed to achieve some corporate objective. May include international licensing agreements, management contracts, or joint ventures. Stock Split Occurs when a firm issues new shares of stock and in turn lowers the current market price of its stock to a level that is proportionate to pre-split prices. For example, if IBM trades at $100 before a two-for-one split, after the split it will trade at $50, and holders of the stock will have twice as many shares as they had before the split. Stock Insurance Company An insurance company owned by a group of stockholders, who are not necessarily policyholders. Capital Budgeting The process of choosing the firm`s long-term Capital assets. Clone Fund A new fund Set up in a Fund family to emulate another successful fund.

Closed fund A mutual fund that is no longer issuing shares, mainly because it has grown too large. Collateral Asset than can be repossessed if a borrower defaults. Consignment Transfer of goods to a seller while title to the Merchandise is retained by the owner. Consortium A group of companies that cooperate and share resources in Order to achieve a common objective. Custodian bank Bank or other Financial institution that keeps custody of Stock certificates and other Assets of a mutual fund, individual, or corporate client. Margin of Profit Gross Profit divided by Net sales. Used to measure a firm`s operating Efficiency and pricing policies in Order to determine how competitive the Firm is within the industry. Monte Carlo simulation An analytical technique for solving a problem by performing a large number of trail runs, called simulations, and inferring a solution from the collective results of the trial runs. Method for calculating the probability Distribution of possible outcomes. Public limited partnership A limited Partnership with an unlimited number of partners that is registered with the SEC and is available for public Trading by broker/dealers. Portfolio A Collection of investments, Real and/or financial. Phantom stock plan

An incentive scheme that awards Management bonuses based On increases in The Market price of the company`s stock. Performance shares Shares of Stock given to managers On the Basis of performance as measured by Earnings per share and similar criteria. A Control device shareholders sometimes use to tie Management to the self-interest of shareholders. Venture capital An Investment in a Start-up business that is perceived to have excellent growth prospects but does not have access to Capital markets. Type of financing sought by early-stage companies seeking to grow rapidly. Vertical acquisition Buying or taking over a Firm in the same Industry in which the acquired firm and the acquiring firm represent different steps in the production process. Vertical merger When one Firm acquires another firm that is in the same Industry but at another stage in the production cycle. For example, the firm being acquired serves as a supplier to the firm doing the acquiring. Open-end fund Used in the context of general equities. Mutual fund that continually creates new Shares on demand. Mutual fund shareholders Buy the funds at Net asset value and may redeem them at any time at the prevailing Market prices. Antithesis of closed-end fund.

Opportunity costs The difference in the performance of an actual Investment and a desired investment adjusted for fixed costs and Execution costs. When not all desired trades can be implemented. Most valuable alternative that is given up. Owners equity

Paid-in Capital plus donated capital Plus retained Earnings less liabilities. Outside director A director of a Company who is not an employee of that company and brings in outside experience to help make board decisions. Breakup Value The value of a company if each of its parts were independent, publicly traded entities. Companies often consider the breakup value of targets when evaluating a possible takeover. Also called Private Market Value (PMV). Suspense Account An account used temporarily to record receipts and disbursements that have yet to be classified. SurTax A tax added to the normal tax paid by corporations or individuals who have earned income above a certain level. Generally Accepted Accounting Principals (GAAP) The overall conventions, rules, and procedures that define accepted accounting practice at a particular time in the U.S. Gold bond Bonds issued by gold-mining companies and backed by gold. The Bonds make Interest payments based On the level of gold prices.

General To reinforce the independence of the Board of Directors of the Corporation (the Board), the Board appoints a Lead Director, on a rotating basis, from the independent Directors present at each regularly held in-camera session. The purpose of this document is to establish the terms of reference for the Lead Director of the Corporation. Structure and Authority

As long as the Chairman of the Corporation is a member of Management, there will be a Lead Director. The Lead Director will serve during the pleasure of the Board and, in any event, only so long as that person shall be a Director of the Corporation. The Corporate Governance and Nominating Committee will review annually the Terms of Reference for the Lead Director and recommend to the Board any changes that it considers appropriate. The Terms of Reference for the Lead Director will be approved annually but the Board. The Lead Director provides a source of Board leadership complementary to that of the Board Chair/CEO. The Lead Director shall be entitled to request materials and receive notice of and attend all meetings of Committees. Responsibilities The Lead Director shall be responsible for:

Providing leadership to ensure the Board works in an independent, cohesive fashion; Working with the Chairman and Corporate Secretary to set the agenda for Board meetings; Ensuring Board leadership in times of crisis; Chairing regular meetings of independent Board members without Management present; acting as liaison between the independent Directors and the Chairman on sensitive issues Chairing Board meeting when the Chairman is not in attendance Working with the Chairman to ensure the conduct of the Board meeting provides adequate time for serious discussion of appropriate issues and that appropriate information is made available to Board members on a timely basis.

Board of Directors: Elected by the shareholders, the board of directors is made up of two types of representatives. The first type involves individuals chosen from within the company. This can be a CEO, CFO, manager, or any other person who works for the company on a daily basis. The other type of representative is chosen externally and is considered to be independent from the company. The role of the board is to monitor the managers of a corporation, acting as an advocate

for stockholders. In essence, the board of directors tries to make sure that shareholders' interests are well served. Board members can be divided into three categories Chairman Technically the leader of the corporation, the chairman of the board is responsible for running the board smoothly and effectively. His/her duties typically include maintaining strong communication with the chief executive officer and high-level executives, formulating the company's business strategy, representing management and the board to the general public and shareholders, and maintaining corporate integrity. A chairman is elected from the board of governors. Inside Directors: These directors are responsible for approving high-level budgets prepared by upper management, implementing and monitoring business strategy, and approving core corporate initiatives and projects. Inside directors are either shareholders or high-level management from within the company. Inside directors help provide internal perspectives for other board members. These individuals are also referred to as executive directors if they are part of company's management team. Outside Directors: While having the same responsibilities as the inside directors in determining strategic direction and corporate policy, outside directors are different in that they are not directly part of the management team. The purpose of having outside directors is to provide unbiased and impartial perspectives on issues brought to the board. Chief Executive Officer (CEO) As the top manager, the CEO is typically responsible for the entire operations of the corporation and reports directly to the chairman and board of directors. It is the CEO's responsibility to implement board decisions and initiatives and to maintain the smooth operation of the firm, with the assistance of senior management. Often, the CEO will also be designated as the company's president and therefore also be one of the inside directors on the board (if not the chairman). CEO is often but not always also the President of a company. The CEO reports to the Chairman of the Board and board members. The CEO is usually the most important spokesperson for the company, the person who is responsible for quarterly results, and the best paid member of the company. Chief Operations Officer (COO) Responsible for the corporation's operations, the COO looks after issues related to marketing, sales, production, and personnel. More hands-on than the CEO, the COO looks after day-to-day activities while providing feedback to the CEO. The COO is often referred to as a senior vice-president. Chief Finance Officer (CFO) Also reporting directly to the CEO, the CFO is responsible for analyzing and reviewing financial data, reporting financial performance, preparing budgets, and monitoring expenditures and costs. The

CFO is required to present this information to the board of directors at regular intervals and provide this information to shareholders and regulatory bodies such as the Securities and Exchange Commission (SEC). Also usually referred to as a senior vice-president, the CFO routinely checks the corporation's financial health and integrity. Chief Finance Officer is sometimes also the company Treasurer and, in many companies, is seen as the second most important person in the company (since managing the quarterly results often depends on an understanding of how to keep the books). Human Resources Officer: Human Resources Officer oversees the development, administration and monitoring of human resource policies, procedures and programs. Responsibilities include Master Plan accountability, organization, planning, and development; recruitment, selection and placement; certification; orientation and performance review; employee and labor relations; classification and compensation, HRMS, and employee benefits. Chief Compliance Officer (CCO) Chief Compliance Officer is a corporate official in charge of overseeing and managing compliance issues within an organization, ensuring, for example, that a company is complying with regulatory requirements, and that the company and its employees are complying with internal policies and procedures. CCO is one of a growing number of fairly new corporate titles including CEO,CFO,CIO,CTO and CSO. Corporations have become concerned about compliance because of increasingly stringent legal requirements. In the wake of the Enron and WorldCom accounting scandals, the United States federal government has passed legislation to guard against corporate fraud. The Sarbanes-Oxley Act, for example, stipulates how corporations must report their financial results, and makes executives responsible for accounting irregularities. CCO is sometimes said to stand for Corporate Compliance Officer Chief Technology Officer: Chief Technology Officer, another relatively new arrival to the top executive ranks in many companies, is likely to be seen as the second or third most important person in any technology company. The CTO is responsible for research and development and possibly for new product plans. Chief Information Officer: Chief Information Officer, a relative newcomer to the ranks of the top executives in a corporation, is responsible for a company's internal information systems, and, especially with the arrival of the Internet, sometimes in charge of the company's ebusiness infrastructure. Chief Security Officer: Chief Security Officer is a recent arrival, is responsible for the security of a company's communications and business systems. Corporate Governance:

The relationship between all the stakeholders in a company. This includes the shareholders, directors, and management of a company, as defined by the corporate charter, bylaws, formal policy, and rule of law.

################################################################ ######################### FAQs: Secondary Market What are the various types of financial markets? The financial markets can broadly be divided into money and capital market. Money Market: Money market is a market for debt securities that pay off in the short term usually less than one year, for example the market for 90-days treasury bills. This market encompasses the trading and issuance of short term non equity debt instruments including treasury bills, commercial papers, bankers acceptance, certificates of deposits, etc. Capital Market: Capital market is a market for long-term debt and equity shares. In this market, the capital funds comprising of both equity and debt are issued and traded. This also includes private placement sources of debt and equity as well as organized markets like stock exchanges. Capital market can be further divided into primary and secondary markets. What is meant by the secondary market? Secondary market refers to a market where securities are traded after being initially offered to the public in the primary market and/or listed on the Stock Exchange. Majority of the trading is done in the secondary market. Secondary market comprises of equity markets and the debt markets. For the general investor, the secondary market provides an efficient platform for trading of his securities. For the management of the company, Secondary equity markets serve as a monitoring and control conduitby facilitating valueenhancing control activities, enabling implementation of incentive-based management contracts, and aggregating information (via price discovery) that guides management decisions. What is the difference between the primary market and the secondary market? In the primary market, securities are offered to public for subscription for the purpose of raising capital or fund. Secondary market is an equity trading venue in which already existing/pre- issued securities are traded among investors. Secondary market could be either auction or dealer market. While stock exchange is the part of an auction market, Over-the-Counter (OTC) is a part of the dealer market.

What is the SEBI and what is its role? The SEBI is the regulatory authority in India established under Section 3 of SEBI Act to protect the interests of the investors in securities and to promote the development of, and to regulate, the securities market and for matters connected therewith and incidental thereto. What are the products dealt in the secondary markets? Following are the main financial products/instruments dealt in the Secondary market: Equity: The ownership interest in a company of holders of its common and preferred stock. The various kinds of equity shares are as follows Equity Shares: An equity share, commonly referred to as ordinary share also represents the form of fractional ownership in which a shareholder, as a fractional owner, undertakes the maximum entrepreneurial risk associated with a business venture. The holder of such shares are member of the company and have voting rights. A company may issue such shares with differential rights as to voting, payment of dividend etc. Rights Issue/ Rights Shares: The issue of new securities to existing shareholders at a ratio to those already held. Bonus Shares: Shares issued by the companies to their shareholders free of cost by capitalization of accumulated reserves from the profits earned in the earlier years. Preferred Stock/ Preference shares: Owners of this kind of shares are entitled to a fixed dividend or dividend calculated at a fixed rate to be paid regularly before dividend can be paid in respect of equity share. They also enjoy priority over the equity shareholders in payment of surplus. But in the event of liquidation, their claims rank below the claims of the companys creditors, bondholders / debenture holders. Cumulative Preference Shares: A type of preference shares on which dividend accumulates if remains unpaid. All arrears of preference dividend have to be paid out before paying dividend on equity shares. Cumulative Convertible Preference Shares: A type of preference shares where the dividend payable on the same accumulates, if not paid. After a specified date, these shares will be converted into equity capital of the company. Participating Preference Share: The right of certain preference shareholders to participate in profits after a specified fixed dividend contracted for is paid. Participation right is linked with the quantum of dividend paid on the equity shares over and above a particular specified level. Bond: A negotiable certificate evidencing indebtedness. It is normally unsecured. A debt security is generally issued by a company, municipality or government agency. A bond investor lends money to the issuer and in exchange, the issuer

promises to repay the loan amount on a specified maturity date. The issuer usually pays the bond holder periodic interest payments over the life of the loan. The various types of Bonds are as follows Zero Coupon Bond: Bond issued at a discount and repaid at a face value. No periodic interest is paid. The difference between the issue price and redemption price represents the return to the holder. The buyer of these bonds receives only one payment, at the maturity of the bond. Convertible Bond: A bond giving the investor the option to convert the bond into equity at a fixed conversion price. Debentures: Bonds issued by a company bearing a fixed rate of interest usually payable half yearly on specific dates and principal amount repayable on particular date on redemption of the debentures. Debentures are normally secured/charged against the asset of the company in favor of debenture holder Commercial Paper: A short term promise to repay a fixed amount that is placed on the market either directly or through a specialized intermediary. It is usually issued by companies with a high credit standing in form of a promissory note redeemable at par to the holder on maturity and therefore doesnt require any guarantee. Commercial paper is a money market instrument issued for the tenure of 90 days. Coupons: Tokens for payment of interest attached to bearer securities. Treasury Bills: Short-term (up to one year) bearer discount security issued by government as a means of financing their cash requirements. Whom should I contact for my Stock Market related transactions? You can contact a broker or a sub broker registered with SEBI for carrying out your transactions pertaining to the capital market. Who is a broker? A broker is a member of a recognized stock exchange, who is permitted to do trades on the floor of the exchange. He is enrolled as a member with the concerned exchange and is registered with SEBI. Who is a sub broker? A sub broker is a person who is registered with SEBI as such and is affiliated to a member of a recognized stock exchange. How do I know if the broker or sub broker is registered? You can confirm it by verifying the registration certificate issued by SEBI. A broker's registration number begins with the letters "INB" and that of a sub broker with the letters INS". Am I required to sign any agreement with the broker or sub-broker? Yes. You have to sign the Member - Client agreement/ Sub broker - Client Agreement for the purpose of engaging a broker to execute trades on your behalf from time to time and furnish details relating to yourself for enabling the

member to maintain client registration form. The Model Agreement between broker-client /Sub Broker client and Know your Client Form can be viewed from SEBI Website at www.sebi.gov.in. The Model Agreement has to be executed on the non-judicial stamp paper. The Agreement contains clauses defining the rights and responsibility of Client vis a vis broker/ sub broker. The Broker/Sub broker can also add further clauses in the Model Agreement as per their requirement. What is Member Client agreement form? This form is an agreement entered between client and broker in presence of witness where the client agrees (is desirous) to trade/invest in the securities listed on the concerned Exchange through the broker after being satisfied of brokers capabilities to deal in securities. The member, on the other hand agrees to be satisfied by the genuineness and financial soundness of the client and making client aware of his(brokers) liability for the business to be conducted. What kind of details do I have to provide in Client Registration form? The brokers have to maintain a database of their clients, for which you have to fill client registration form. In case of individual client registration, you have to broadly provide following information: o Your name, address, educational qualifications, occupation, residential status(Resident Indian/ NRI/others) o Particulars of bank account o Income tax no (PAN/GIR) which also serves as unique client code. o If you are registered with any other broker, then the name of broker and concerned Stock exchange and Client Code Number. o Proof of identity submitted either as Passport number/Driving license/Ration card/Voters identity card. Each client has to use one registration form. Incase of joint names /family members, a separate form has to be submitted form each person. Incase of Corporate Client, following information has to be provided: o Name , address of the Company/Firm o Date of incorporation and date of commencement of business. o Copy of Memorandum and articles of Association/Partnership deed. o Details of Promoters/Partners/Key managerial Personnel the Company/Firm in specified format. o Copies of annual report of last three years. o Net worth pf the Company o Particulars of the Bank Account. o Income tax number of the company o Annual income in last three years and market value of portfolio o If you are registered with any other broker, then the name of broker and concerned Stock exchange and Client Code Number. What is meant by Unique Client Code? In order to facilitate maintaining database of their clients, it is mandatory for all brokers to use unique client code which will act as an exclusive identification for

the client. For this purpose, PAN number/passport number/driving License/voters ID number/ ration card number coupled with the frequently used bank account number and the depository beneficiary account can be used for identification, in the given order, based on availability. How do I place my orders with the broker or sub broker? You can either go to the brokers /sub brokers office or place an order on the phone /internet or as defined in the Model Agreement given above. How do I know whether my order is placed? The Stock Exchanges assign a Unique Order Code Number to each transaction, which is intimated by broker to his client and once the order is executed, this order code number is printed on the contract note. The broker member has to also maintain the record of time when the client has placed order and reflect the same in the contract note along with the time of execution of the order. What documents should be obtained from broker on execution of trade? You have to ensure receipt of the following documents for any trade executed on the Exchange: a. Contract note in Form A to be given within stipulated time. b. Purchase /sale note or confirmation memo in the case of a sub broker. It is the contract note/purchase or sale note (confirmation memo) that gives rise to contractual rights and obligations of parties of the trade. Hence you should insist on contract note from stock broker and purchase/sale note (confirmation memo) from sub broker. The contract note displays the order number, order time and unique trade number. The quantity and the price of the trade executed at the exchange can be verified by the Exchange. The contract note also contains arbitration clause for raising dispute with the Arbitrators as per the byelaws of the Exchange. What details are required to be mentioned on the Contract note issued by the Stock Broker? A broker has to issue a contract note to clients for all transactions in the form specified by the stock exchange. The contract note inter-alia should have following : o Name, address and SEBI Registration number of the Member broker. o Name of partner /proprietor /Authorsied Signatory. o Dealing Office Address/Tel No/Fax no, Code number of the member given by the Exchange. o Contract number, date of issue of contract note, settlement number and time period for settlement. o Constituent (Client) name/Code Number. o Order number and order time corresponding to the trades. o Trade number and Trade time. o Quantity and Kind of Security brought/sold by the client. o Brokerage and Purchase /Sale rate are given separately . o Service tax rates and any other charges levied by the broker.

o Appropriate stamps have to be affixed on the original contract note or it is mentioned that the consolidated stamp duty is paid. o Signature of the Stock broker/Authorized Signatory. Incase of purchase and sale note provided by the sub broker, following additional information is provided: o Name and SEBI Registration no of Sub broker. o Name of affiliating trading member. o Purchase/sale note number . o Corresponding contract note issued by the broker for relevant trade number along with the date of contract. Both contract note and purchase / sale note provide for the recourse to the system of arbitrators for settlement of disputes arising out of transactions. What is the pay-in day and pay- out day? Pay in day is the day when the brokers shall make payment or delivery of securities to the exchange. Pay out day is the day when the exchange makes payment or delivery of securities to the broker. Since settlement cycle has been reduced from T+3 rolling settlement to T+2 w.e.f. April 01, 2003, the exchanges have to ensure that the pay out of funds and securities to the clients is done by the broker within 24 hours of the payout. The Exchanges will have to issue press release immediately after pay out. How long it takes to receive my money for a sale transaction and my shares for a buy transaction? Brokers were required to make payment or give delivery within two working days of the pay - out day. However, as settlement cycle has been reduced from T+3 rolling settlement to T+2 w.e.f. April 01, 2003, the pay out of funds and securities to the clients by the broker will be within 24 hours of the payout. Is there any provision where I can get faster delivery of shares in my account? The investors/clients can get direct delivery of shares in their beneficiary accounts. To avail this facility, you have to give details of your beneficiary account and the DP-ID of your DP to your broker along with the Standing Instructions for Delivery-In to your Depository participant for accepting shares in your beneficiary account. Given these details, the Clearing Corporation/Clearing House shall send pay out instructions to the depositories so that you receive pay out of securities directly into the beneficiary account. In case of purchase of shares, when do I make payment to the broker? The payment for the shares purchased is required to be done prior to the pay in date for the relevant settlement or as otherwise provided in the Rules and Regulations of the Exchange. In case of sale of shares, when should the shares be given to the broker?

The delivery of shares has to be done prior to the pay in date for the relevant settlement or as otherwise provided in the Rules and Regulations of the Exchange and agreed with the broker/sub broker in writing. What is the maximum brokerage that a broker/sub broker can charge? The maximum brokerage that can be charged by a broker is decided by the Stock Exchanges as per the Exchange Regulations. The SEBI (Stock brokers and Sub brokers), 1992 stipulates that sub broker cannot charge from his clients a commission which is more than 1.5% of the value mentioned in the respective purchase or sale note . What are the charges that can be levied on the investor by a stock broker/sub Broker? The trading member can charge: 1. Brokerage charged by member broker. 2. Penalties arising on specific default on behalf of client (investor) 3. Service tax as stipulated The brokerage and service tax is indicated separately in the contract note. What happens if I could not make the payment of money or deliver shares on the pay-in day? In case of purchase on your behalf, the member broker has the liberty to close out transactions by selling securities in case you fail to make full payment to the broker for the execution of contract before pay in day as fixed by Stock Exchange for the concerned settlement period unless you already have an equivalent credit with the Broker. Similarly, in case of sale of shares on your behalf, the member broker has the liberty to close out the contract by effecting purchases if you fail to deliver the securities sold with valid transfer documents, if any before delivery day as fixed by Stock Exchange for the concerned settlement period. In both the cases, any loss in transactions will be deductible from the margin money paid by you. The shortages are met through auction process and the difference in price indicated in contract note and price received through auction is paid by member to the Exchange, which is then liable to be recovered from the client. What happens if the shares are not bought in the auction? If the shares could not be bought in the auction i.e. if shares are not offered for sale in the auction, the transactions are closed out as per SEBI guidelines. The guidelines stipulate that the close out Price will be the highest price recorded in that scrip on the exchange in the settlement in which the concerned contract was entered into and upto the date of auction/close out OR 20% above the official closing price on the exchange on the day on which auction offers are called for (and in the event of there being no such closing price on that day, then the official closing price on the immediately preceding trading day on which there was an official closing price), whichever is higher.

Since in the rolling settlement the auction and the close out takes place during trading hours, hence the reference price in the rolling settlement for close out procedures would be taken as the previous days closing price. What happens if I do not get my money or share on the due date? In case a broker fails to deliver to you in timely and proper payment of money /shares or you have complaint against conduct of the stock broker, you can file a complaint with the respective stock exchange. The exchange is required to resolve all the complaints. To resolve the dispute, the complainant can also resort arbitration as provided on the reverse of contract note /purchase or sale note. However, if the complaint is not addressed by the Stock Exchanges or is unduly delayed, then the complaints along with supporting documents may be forwarded to Secondary Market Department of SEBI. Your complaint would be followed up with the exchanges for expeditious redressal. In case of complaint against a sub broker, the complaint may be forwarded to the concerned broker with whom the sub broker is affiliated for redressal. What recourses are available to me for redressing my grievances? You have following recourses available: 1. Office of Investor Assistance and Education : You can lodge complaint with OIAE Cell of SEBI against companies for delay, non-receipt of shares, refund orders etc and with Stock Exchanges against brokers on certain trade disputes or non receipt of payment/securities. 2. Arbitration: If no amicable settlement could be reached, then you can make application for reference to Arbitration under the Bye Laws of concerned Stock exchange. 3. Court of Law What is Arbitration? Arbitration is an alternative dispute resolution mechanism provided by a stock exchange for resolving disputes between the trading members and their clients in respect of trades done on the exchange. What is the process for preferring arbitration? The byelaws of the exchange provide procedure for Arbitration .You can procure a form for filing arbitration from the concerned stock exchange. The arbitral tribunal has to make the arbitral award within 3 months from the date of entering upon the reference. The time taken to make an award cannot be extended beyond three times up to maximum period of three months. Who appoints the arbitrators? Every exchange maintains a panel of arbitrators. Investors may choose the arbitrator of their choice from the panel. The broker also has an option to choose an arbitrator. The name(s) would be forwarded to the member for acceptance. In case of disagreement, the exchange shall decide upon the name of arbitrators. What happens if I am aggrieved by the award of the arbitrator?

In case you are aggrieved by the arbitration award, you can take recourse to the appeal provisions as given in the bye-laws of the Exchange. OTHER GENERAL QUESTIONS What is the traditional structure of the stock exchanges in India? In terms of legal structure, the stock exchanges in India could be segregated into two broad groups 20 stock exchanges which were set up as companies, either limited by guarantees or by shares, and the 3 stock exchanges which are functioning as associations of persons (AOP) viz. BSE, ASE and Madhya Pradesh Stock Exchange. The 20 stock exchanges which are companies are: the stock exchanges of Bangalore, Bhubaneswar, Calcutta, Cochin, Coimbatore, Delhi, Gauhati, Hyderabad, Interconnected SE, Jaipur, Ludhiana, Madras, Magadh, Managalore, NSE, Pune, OTCEI, Saurashtra-Kutch, Uttar Pradesh, and Vadodara. Apart from NSE, all stock exchanges whether established as corporate bodies or Association of Persons (AOPs), are non-profit making organizations. What is meant by corporatisation of stock exchanges? Corporatisation is the process of converting the organizational structure of the stock exchange from a non-corporate structure to a corporate structure. Traditionally, some of the stock exchanges in India were established as Association of persons, e.g. BSE, ASE and MPSE. Corporatisation of such exchanges is the process of converting them into incorporated Companies. What is demutualisation of stock exchanges? Demutualisation refers to the transition process of an exchange from a mutuallyowned association to a company owned by shareholders. In other words, transforming the legal structure of an exchange from a mutual form to a business corporation form is referred to as demutualisation. The above, in effect means that after demutualisation, the ownership, the management and the trading rights at the exchange are segregated from one another. How is a demutualised exchange different from a mutual exchange? In a mutual exchange, the three functions of ownership, management and trading are intervened into a single Group. Here, the broker members of the exchange are both the owners and the traders on the exchange and they further manage the exchange as well. A demutualised exchange, on the other hand, has all these three functions clearly segregated, i.e. the ownership, management and trading are in separate hands. Currently are there any demutualised stock exchanges in India? Currently, two stock exchanges in India, the National Stock Exchange (NSE) and Over the Counter Exchange of India (OTCEI) are not only corporatised but also demutualised with segregation of ownership and trading rights of members.

What steps have been taken by SEBI to give a head start to the process of demutualisation in India? SEBI had constituted a Group on Corporatisation and Demutualisation of Stock Exchanges under the Chairmanship of Justice M H Kania, former Chief Justice of India, for advising SEBI on corporatisation and demutualisation of exchanges and to recommend the steps that need to be taken to implement the same. The Group had submitted its Report to SEBI on August 28, 2002. SEBI has taken up with Central Government to amend the SC( R) A to effect Corporatisation and Demutualization .The amendment is to be introduced in the House of Parliament. What is meant by delisting of securities? The term delisting of securities means permanent removal of securities of a listed company from a stock exchange. As a consequence of delisting, the securities of that company would no longer be traded at that stock exchange. What is the difference between Voluntary delisting and Compulsory delisting? Compulsory delisting refers to permanent removal of securities of a listed company from a stock exchange as a penalizing measure at the behest of the Stock exchange for not making submissions/comply with various requirements set out in the Listing agreement within the time frames prescribed. In voluntary delisting, a listed company decides on its own to permanently remove its securities from a stock exchange. What is the exit opportunity available for investors in case a company gets delisted? SEBI (Delisting of Securities) Guidelines, 2003 provide an exit mechanism, whereby the exit price for voluntary delisting of securities is determined by the promoter of the concerned company which desires to get delisted, in accordance to book building process. The offer price has a floor price ,which is average of 26 weeks average of traded price quoted on the stock exchange where the shares of the company are most frequently traded preceding 26 weeks from the date public announcement is made. There is no ceiling on the maximum price. In case of infrequently traded securities, the offer price is as per Regulation20 (5) of SEBI (Substantial Acquisition and Takeover) Regulations. For this purpose, infrequently traded securities is determined in the manner as provided in Regulation20 (5) of SEBI (Substantial Acquisition and Takeover) Regulations. Does a company listed at BSE/NSE have to provide exit offer to shareholders in case it delists from stock exchanges other than BSE and NSE? No, the company does not have to provide exit offer to shareholders because it continues to be listed on the BSE /NSE which have nationwide reach and shareholders can exit any time they decide to so by way of selling shares in NSE/BSE. What is a Central Listing Authority?

The Central Listing Authority (CLA) is set up to address the issue of multiple listing of the same security and to bring about uniformity in the due diligence exercise in scrutinizing all listing applications on any stock exchanges. The functions of CLA as enumerated in SEBI (Central Listing Authority) Regulations, 2003 include: 1.Processing the application made by any body corporate, mutual fund or collective investment scheme for the letter of recommendation to get listed at the stock exchange, 2. Making recommendations as to listing conditions, and 3. Any other functions that may be specified by the SEBI Board from time to time. What are the established codes of corporate governance? The Codes may be divided into supranational, national or institutional codes, depending on author. Some of the selected examples of supranational Codes are: OECD, ICGN (International Corporate Governance Network), CACG (Commonwealth Association for Corporate Governance); selected examples of national Codes are: Vinot Report from France, the Cadbury, Greenbury and Hampel Reports and the Combined Code from the UK, , the Malaysian code; and selected institutional Codes are: Calpers, Hermes Investment Management, the CII code on desirable corporate governance. SEBI has also laid down certain codes like Kumar Mangalam Birla Committee Report, Clause 49 of Listing Agreement for good governance of listed companies with the purpose of enhancing wealth creation, wealth management and distribution. What is meant by Corporate Governance? As Kumar Managalam Committee Report on Corporate Governance enumerates, the fundamental objective of corporate governance is the "enhancement of shareholder value, keeping in view the interests of other stakeholder. This definition harmonizes the need for a company to strike a balance at all times between the need to enhance shareholders wealth whilst not in any way being detrimental to the interests of the other stakeholders in the company. What is meant by independent directors? As per Clause 49 of the listing agreement, Independent directors means directors who apart from receiving directors remuneration, do not have any other material pecuniary relationship or transactions with the company, its promoters, its management or its subsidiaries, which in judgment of the Board may affect independence of judgment of the director What is EDIFAR? Electronic Data Information Filing and Retrieval System( EDIFAR) is a website launched by SEBI in association with National Informatics Center (NIC) in July 2002 to facilitate filing of certain material information/ documents/statements by the listed companies on line in the EDIFAR web site - www.sebiedifar.nic.in .EDIFAR would enable electronic filing of information in a standard format by the companies and expedite dissemination of information to various classes of

market participants like investors, regulatory organization, research institutions, etc.

INDEXES: The companies which normally deal with investment process by segregating their investments made from the funds raised from public in the INDEX specifically build by them. This is normally represents the stock market INDEX. Example: 1. NSE NIFTY 2. BSE SENSEX 3. Standard & Poors 500

Audit Committee: The key functions of the Committee are: Reviewing with the management, the annual financial statements before submission to the Board. Overseeing the Companys financial reporting and public disclosure processes to ensure that financial statements are correct, sufficient and credible. Recommending the appointment and termination of services of external and internal auditors, making recommendations on fee levels and determining the fees payable for any other services.

Compensation Committee: The Committee performs the following key functions: Reviewing and periodically determines the compensation and benefits for the senior management Reviewing the Employee Stock Option Plan of the Company. Reviewing the grant and issue of options in line with the Company policy guidelines.

EXECUTIVE COMMITTEE: The Executive Committee, made up of volunteers, is elected by the membership at each Annual General Meeting (AGM). The EC meets six times a year, including immediately before and after the AGM. The major role of

the EC is to oversee the business of the Branch. This includes developing and maintaining Branch policies, ensuring implementation of AGM resolutions, evaluating Branch programs, and setting future plans and priorities for the Branch. CORPORATE GOVERNANCE COMMITTEES: 1. The Corporate Governance Committee has overall responsibility for the governance of the Corporation including monitoring and assessing the functioning of the Board and the Committees thereof, and for developing and implementing good corporate governance practices. The Committee shall, in consultation with the Chairman and the Chief Executive Officer: a) review, from time to time, the size, composition and profile of the Board of Directors; b) identify candidates to be appointed to fill any vacancies and review annually the qualifications of persons proposed for election to the Board of Directors. d) review, from time to time, the retirement age for Directors;

NOMINATING COMMITTEE: The purpose of the Nominating Committee is to (1) identify qualified individuals to become members of the Corporations Board of Directors, and (2) select the director nominees to be presented for election at each annual meeting of stockholders. CASH FLOW STATEMENT A cash flow statement is a financial report that shows incoming and outgoing money during a particular period (often monthly or quarterly). It does not include non-cash items such as depreciation. This makes it useful for determining the short-term viability of a company, particularly its ability to pay bills. INTRINSIC VALUE This is a hypothetical "real value" of a company that's calculated by considering the value of a company's earnings today. Intrinsic value includes hidden things like the value of a brand name, which is difficult to calculate. MARKET VALUE

The price at which a buyer is ready and willing to buy and a seller is ready and willing to sell.

FMCG COMPANIES: FMCG is an acronym for Fast Moving Consumer Goods. FMCG is a classification that refers to wide range of frequently purchased consumer products including: toiletries, soaps, cosmetics, teeth cleaning products, shaving products, detergents, other non-durables such as glassware, bulbs, batteries, and plastic goods such as buckets. Fast Moving is in opposition to consumer durables such as kitchen appliances that are generally replaced less than once a year. The category may include pharmaceuticals, consumer electronics and packaged food products and drinks, although these are often categorised separately. The term Consumer Packaged Goods (CPG) is used interchangeably with FMCG. Two of the largest and most well known examples of FMCG companies are Unilever and Procter & Gamble. CONSUMER PACKAGED GOODS (CPG): Consumer packaged goods (CPG) are consumable goods such as food and beverages, footwear and apparel, tobacco, and cleaning products. In general, CPGs are things that get used up and have to be replaced frequently, in contrast to items that people usually keep for a long time, such as cars and furniture. Although the CPG industry has been slow to invest in new technology, it is increasingly turning to computerized and Web-based applications for customer relationship management (CRM), supply chain management (SCM), enterprise resource planning (ERP), and marketing automation. A number of vendors, including Oracle, SAP, and Siebel Systems offer products for the CPG sector. DURABLE GOODS : Manufactured products capable of long utility, such as refrigerators and automobiles. PORTFOLIO MANAGEMENT: The process of managing the assets of a mutual fund, including choosing and monitoring appropriate investments and allocating funds accordingly. DIFFERENCE BETWEEN A DEBIT CARD AND A CREDIT CARD: The basic difference between a Debit Card and a Credit Card is that the Debit Card gives the customer access to his own money whereas the credit card is a form of loan which is offered by the Bank on which the bank charges some interest on the amount withdrawn by the customer. As in case of Debit Card, there will be on line debit to the customers account, there are no hassle of

receiving bills, making payments on due dates, making payment of interest on the amount not paid etc. PRIMARY MARKET: The market in which investors have the first opportunity to buy a newly issued security. SECONDARY MARKET: A market in which an investor purchases an asset from another investor, rather than an issuing corporation. All stock exchanges are part of the secondary market, as investors buy securities from other investors instead of an issuing company.

STOCK SPLIT: The dividing of a company's existing stock into multiple shares. In a 2-for-1 split, each stockholder receives an additional share for each share he or she holds. REVERSE STOCK SPLIT: A reduction in the number of a corporation's shares outstanding that increases the par value of its stock or its earnings per share. The market value of the total number of shares (market capitalization) remains the same. DELISTING: Removing the stock of a company from a stock exchange so that investors can no longer trade shares of the stock on that exchange. This typically occurs when a company goes out of business or now longer satisfies the listing rules of stock exchange. Delisted securities may be traded on overthe-counter marketplaces like the OTC bulletin board. REVERSE BOOK-BUILDING: Reverse book-building allows shareholders to tender their shares at a price of their choice and the acquirer the freedom to accept or reject the offer. CHAIRMAN Technically the leader of the corporation, the chairman of the board is responsible for running the board smoothly and effectively. His/her duties typically include maintaining strong communication with the chief executive officer and high-level executives, formulating the companys business strategy, representing management and the board to the general public and shareholders, and maintaining corporate integrity. A chairman is elected from the board of governors. Non-Executive Director Non-executive directors bring essential qualities to the board such as specialized commercial and /or technical expertise, an independent perspective, an awareness of the differing approaches taken on issues by

other companies and the ability to ask critical, incisive questions which management itself may find it difficult to express. The non-executive directors bring a crucial control element to the board by ensuring compliance with governance codes and best practice and, along with the Company Secretary, should report regularly to the Chairman and highlight any concerns immediately. Managing Director The MD/CEO is responsible for the day-day management of the company with all powers, discretions and delegations authorized, from time to time, by the board. Fixed cost: Fixed costs remain the same irrespective of the volume of production. They may have to be incurred even if there is no production. PAR VALUE: The amount that an issuer agrees to repay at the date of maturity of a bond. Most bonds are issued with a par value of $1,000. Also called face value or maturity value. Variable cost: Variable cost is the cost which varies according to the production proportions. Marginal Costing: Marginal cost is the amount of any given volume of output by which aggregate cost are changed, if the volume of output is increased or decreased by one unit. EquationFixed cost + Profit = Sales Variable cost Contribution: Contribution is the difference between sales and variable cost. Contribution per unit = Selling price p.u Variable cost p.u P/V Ration: Profit Volume Ratio P/V Ratio = change in contribution / change in Sales Break Even Point: A business is said to Break Even when its total sales are equal to its total costs. It is point of No Profit No Loss. BEP= Fix Cost / Selling price p.u Variable cost p.u Margin of Safety: = Profit / P/v Ratio Earnings per Share: The term earnings per share (EPS) represents the portion of a companys earnings, net of taxes and preferred stock dividends, that is allocated to each share of common stock. The figure can be calculated simply by dividing net income earned in a given reporting period (usually quarterly or annually) by

the total number of shares outstanding during the same term. Because the number of shares outstanding can fluctuate, a weighted average is typically used. Bankruptcy: The condition of being financially insolvent. The state of a person or firm unable to repay debts. Chapter 7 of the Bankruptcy Reform Act deals with liquidation, while Chapter 11 deals with reorganization. Derivative: Derivative is a product whose value is derived from the value of one or more basic variables, called bases (underlying asset, index, or reference rate), in a contractual manner. The underlying asset can be equity, forex, commodity or any other asset. WARRANT : A derivative that gives the buyer a right to buy share of stock at a certain price at a certain time. BOND: PDF: A duty, promise, or other obligation by which one is bound. Portable Document Format

ACCESSION NUMBER: A unique number generated by the EDGAR system for each electronic submission. Accession numbers are reported to submitters and filers in the acceptance and suspense messages. Assignment of an accession number does not mean that EDGAR has accepted your submission. (CIK) CENTRAL INDEX KEY: A unique ten-digit number assigned by the SEC, distinguishing the company or individual to which it is assigned. Used by EDGAR to identify either a submitter (LOGIN CIK) or filer. EDGAR: The term "EDGAR" Electronic Data Gathering, Analysis, and Retrieval refers to the computer system for the receipt, acceptance, review and dissemination of documents submitted to the SEC in electronic format. PUBLIC FLOAT: The portion of a company's outstanding shares that is in the hands of public investors, as opposed to company officers, directors, or controlling-interest investors. FLOAT: The number of shares of a security that are outstanding and available for trading by the public.

Accounts: transaction account -- any account from which funds may be transferred to a third party on demand of the account holder. Included are demand deposit (checking) accounts, negotiable order of withdrawal (NOW) accounts, automatic transfer (bill paying) accounts, and credit union share draft accounts,

term deposit -- funds deposited in a savings account, the terms of which impose a financial penalty if funds are withdrawn before a specified date. time deposit -- a deposit of funds in a savings institution under an agreement stipulating that (a) the funds must be kept on deposit for a stated period of time, or (b) the institution may require a minimum period of notification before a withdrawal is made. demand deposit account -- an account from which a depositor may withdraw funds immediately without prior notice, commonly known as a checking account. Since funds may be withdrawn on demand in person or by presentation of a check, the account has many of the liquid characteristics of circulating currency. checking account -- a demand deposit account, withdrawals from which may be made by a written, negotiable instrument. certificate of deposit (CD) -- the certificate issued to a depositor who opens a certificate account. The certificate is the written document issued by the financial institution as evidence of a deposit. It includes the issuer's promise to return the deposit at a specified future date plus earnings at a specified rate of interest. negotiable order of withdrawal (NOW) account -- a savings account with characteristics of a checking account. An account holder can withdraw funds by writing a negotiable order of withdrawal payable to a third party. NOW accounts may earn interest. See Super NOW accounts. money market certificate -- a certificate of deposit that when first authorized had a fixed maturity of six months and a $2,500 minimum deposit, with rates based on the weekly posting of average yields for United States Treasury bills. With deregulation in the 1980s, federal regulators now leave it up to each individual thrift institution to determine the maturity and yield of this savings instrument. money market deposit account (MMDA) -- a savings account, offered by financial institutions, that pays fluctuating market rates of interest as long as the balance does not fall below a predetermined minimum. passbook account -- a savings account that normally requires no minimum balance, no minimum term, no specified frequency of deposits, and no notice or penalty for withdrawals. Passbook accounts, once the most widely used form of thrift savings account, have been largely replaced by statement accounts that provide a monthly statement mailed to the depositor. savings account -- an account maintained by a customer with a depository institution for the purpose of accumulating funds over a period of time. Funds deposited in a savings account may be withdrawn only by the account owner or a duly authorized agent, or on the owner's nontransferable order. The account may be owned by one or more persons. Some accounts require funds to be kept on deposit for a minimum length of time, while others permit

unlimited access to funds. Earnings may be in the form of dividends, as in the case of a share type savings account, or interest as in the case of a deposit type account. demand deposit account -- an account from which a depositor may withdraw funds immediately without prior notice, commonly known as a checking account. Since funds may be withdrawn on demand in person or by presentation of a check, the account has many of the liquid characteristics of circulating currency. overnight money -- any money that replaces daily. It generally refers to funds that are loaned by one institution to another overnight, including but not limited to the federal funds market. Thrift Bank : A bank whose main purpose is to take deposits from consumers and make home mortgages

Thrift Company: An organization formed for the purpose of holding deposits

for individuals; examples include savings banks and savings and loans. Demand Deposit: An account from which deposited funds can be withdrawn at any time without any notice to the depository institution.

Book Value A company's common stock equity as it appears on a balance sheet, equal to total assets minus liabilities, preferred stock, and intangible assets such as goodwill. This is how much the company would have left over in assets if it went out of business immediately. Since companies are usually expected to grow and generate more profits in the future, most companies end up being worth far more in the marketplace than their book value would suggest. For this reason, book value is of more interest to value investors than growth investors. In other way The value of an asset as it appears on a balance sheet, equal to cost minus accumulated depreciation. Book value often differs substantially from market price, especially in knowledge industries such as high-tech. Adjusted book value The book value on a company's balance sheet after assets and liabilities are adjusted to market value. also called modified book value

Demand Deposit; An account from which deposited funds can be withdrawn at any time without any notice to the depository institution.

Federal Home Loan Bank System;

The FHLB system consists of privately owned wholesale banks (Home Loan Banks) that provide readily available, low-cost funding (known as advances) and other credit products to over 8,000 stockholder members. FHLB-system members include commercial banks, savings institutions, credit unions and insurance companies. Each member belongs to one of 12 regional Home Loan Banks, which represent all 50 states plus Guam, American Samoa and Puerto Rico.

Leverage The degree to which an investor or business is utilizing borrowed money. Companies that are highly leveraged may be at risk of bankruptcy if they are unable to make payments on their debt; they may also be unable to find new lenders in the future. Leverage is not always bad, however; it can increase the shareholders' return on their investment and often there are tax advantages associated with borrowing. Also called financial leverage. And it can be expressed in ratios as; Debt/Equity Ratio A measure of a company's leverage, calculated by dividing long-term debt by common shareholders' equity, usually using the data from the previous fiscal year. Sometimes, long-term debt plus preferred shareholder's equity is divided by common shareholders' equity, since preferred stock can be viewed as a form of debt. A company with a higher debt/equity ratio can offer greater returns to shareholders but be riskier.

Money Market Account; A savings account which shares some of the characteristics of a money market fund. Like other savings accounts, money market accounts are insured by the Federal government. Money market accounts offer many of the same services as checking accounts although transactions may be somewhat more limited. These accounts are usually managed by banks or brokerages, and can be a convenient place to store money that is to be used for upcoming investments or has been received from the sale of recent investments. They are very safe and highly liquid investments, but offer a lower interest rate than most other investments.

NOW Negotiable Order of Withdrawal. An interest-bearing checking account at a bank or savings and loan. Checking Account An account which allows the holder to write checks against deposited funds. Checking accounts which pay interest are sometimes referred to as negotiable order of withdrawal (NOW) accounts. The interest rate often

depends on how large the balance in the account is, and most charge a monthly service fee if the account balance falls below a preset level.

Return on Assets ROA. A measure of a company's profitability, equal to a fiscal year's earnings divided by its total assets, expressed as a percentage.

Return on Equity ROE. A measure of how well a company used reinvested earnings to generate additional earnings, equal to a fiscal year's after-tax income (after preferred stock dividends but before common stock dividends) divided by book value, expressed as a percentage. It is used as a general indication of the company's efficiency; in other words, how much profit it is able to generate given the resources provided by its stockholders. investors usually look for companies with returns on equity that are high and growing.

Efficiency Ratio A ratio used to calculate a bank's efficiency. Not all banks calculate the efficiency ratio the same way. We've seen the ratio calculated as all of the following: 1. Non-interest expense divided by total revenue less interest expense 2. Non-interest expense divided by net interest income before provision for loan losses 3. Non-interest expense divided into revenue 4. Operating expenses divided by fee income plus tax equivalent net interest income.

Savings Account; A deposit account intended for funds that are expected to stay in for the short term. A savings account offers lower returns than the market rates.

Time Deposit Savings account or CD held in a financial institution, usually a bank, for a fixed term or with the understanding that the customer can withdraw only by giving advanced notice. Certificate of Deposit CD. Short- or medium-term, interest-bearing, FDIC-insured debt instrument offered by banks and savings and loans. CDs offer higher rates of return than most comparable investments, in exchange for tying up invested money for the duration of the certificate's maturity. Money removed before maturity is subject to a penalty. CDs are low risk, low return investments, and are also known as "time deposits", because the account holder has agreed to keep the

money in the account for a specified amount of time, anywhere from three months to six years.

Categories Of Capital Tier 1 Capital A term used to describe the capital adequacy of a bank. Tier I capital is core capital, this includes equity capital and disclosed reserves. Equity capital includes instruments that can't be redeemed at the option of the holder. Capital adequacy ratio: A measure of a bank's capital. It is expressed as a percentage of a bank's risk weighted credit exposures This ratio is used to protect depositors and promote the stability and efficiency of financial systems around the world. Two types of capital are measured: tier one capital, which can absorb losses without a bank being required to cease trading, and tier two capital, which can absorb losses in the event of a winding-up and so provides a lesser degree of protection to depositors. Tier 2 Capital A term used to describe the capital adequacy of a bank. Tier II capital is secondary bank capital that includes items such as undisclosed reserves, general loss reserves, subordinated term debt, and more. 1) Dual Aspect Concept

This concept sets up for us the basic accounting equation from which financial statements are derived. The Accounting Equation states that "total assets = total liabilities and equities" This is the very foundation of the universally applicable double entry book keeping system and it stems from the fact that every transaction has a double (or dual) effect on the position of a business as recorded in the accounts. For example, when an asset is bought, another asset cash (or bank) is also and simultaneously decreased OR a liability such as creditors is also and simultaneously increased. Similarly, when a sale is made the asset of stock is reduced as goods leave the business and the asset of cash is increased (or the asset of debtors is increased) as cash comes into the business (or a promise to pay is made and accepted). Every financial transaction behaves in this dual way. 2) Money Measurement Concept "Financial statements show only transactions that can be expressed in monetary terms"

The money measurement concept: is one of the simpler concepts. It simply and clearly states that only those transactions that are true financial transactions may be accounted for. That is, only those transactions that may be expressed in money values (whatever the currency) are of interest to the accountant. 3) Entity Concept "Accounts are kept for the business entity as distinguished from the person(s) that own it" Business entity concept Otherwise known as the 'accounting entity' concept:. The idea here is that the financial transactions of one individual or a group of individuals must be kept separate from any unrelated financial transactions of those same individuals or group. The best example here concerns that of the sole trader or one man business: in this situation you may have the sole trader taking money by way of 'drawings': money for his own personal use. Despite it being his business and apparently his money, there are still two aspects to the transaction: the business is 'giving' money and the individual is 'receiving' money. So, the affairs of the individuals behind a business must be kept separate from the affairs of the business itself.

4) Going Concern Concept "Accountants assume that the business will continue indefinitely" It is assumed that the accounts will be drawn upon the basis that the business will be in existence for the for Seeble future This implies that the assets of the company will be valued according to their anticipated use by The business, not at a sell of or scrap valuewhich might be realised if the businee were to be sold. 5) Realization Concept "Revenues are recognized when goods and services are delivered and in an amount that is reasonably certain to be realized" The realisation concept helps the accountant to determine the point at that he feels that a transaction is certain enough for the profit to be made on it to be calculated and taken to the profit and loss account. Realisation occurs when a sale is made to a customer. The basic rule is that revenue is created at the moment a sale is made, and not when the account is later settled by cheque or by cash. Thus, profit can be taken to the profit and loss account on sales made, even though the money has not been collected. The sale is deemed to be made when the goods are delivered, and thus profit cannot be taken to the profit and loss account on orders received and not yet filled. An exception to this rule would be a long term contract that involve payments on account before completion of the work.

6) Cost Concept
Assets are recorded at the price paid to acquire them" 7) Matching Concept "Expenses incurred in earning revenues are matched against the revenues" Whatever revenues your company earns during a certain period, you match the appropriate expenses that you incurred in earning those revenues during the same period Otherwise known as the accrual principle:. The purpose of this concept is to make sure that all revenues and costs are recorded in the appropriate statement at the appropriate time. Thus, when a profit statement is compiled, the cost of goods sold relevant to those sales should be recorded accurately and in full in that statement. Costs concerning a future period must be carried forward as a prepayment for that period and not charged in the current profit statement. For example, payments made in advance such as the prepayment of rent would be treated in this way. Similarly, expenses paid in arrears must, although paid after the period to that they relate, also be shown in the current period's profit statement: by means of an accruals adjustment.

8) Conservatism Concept "Accountants are conservative in recording transactions". Otherwise known as PRUDENCE. It is this concept more than any other that has given rise to the idea that accountants are pessimistic boring people!! Basically the concept says that whenever there are alternative procedures or values, the accountant will choose the one that results in a lower profit, a lower asset value and a higher liability value. The concept is summarised by the well known phrase 'anticipate no profit and provide for all possible losses'. Thus, undue optimism can never be part of the make up of an accountant! The danger is that if an optimistic view of profits is given then dividends may be paid out of profits that have not been earned.

9) Consistency Concept "For a given type of transaction, the same method is used from one period to

Because the methods employed in treating certain items within the accounting records may be varied from time to time, the concept of consistency has come to be applied more and more rigidly. For example, because there can be no single rate of depreciation chargeable on all fixed assets, every business has potentially a lot of discretion over the precise rate it chooses to use. However, if it wishes, a business may vary the rates at which it charges depreciation and alter the profits it reports at the same time. Consider the effects on profit of charging depreciation

at 15% this year on 10,000 worth of fixed assets and then charging depreciation at 10% next year on the same 10,000 worth of fixed assets. This year you would charge 1,500 against profits and next year it would be only 1,000, using the straight line method of providing for depreciation. Because of these sorts of effects, it is now accepted practice that when a company chooses to treat items such as depreciation in a particular way in the accounts it should go on using that method year after year. If it is NECESSARY to change the method being employed or the rates being charged then an explanation of the change and the effects it is having on the results must be shown as a note to the accounts being presented 10) Materiality Concept "Accountants disclose non-trivial transactions"
We are concerned here with the idea that accountants should concern themselves only with matters that are significant because of their size and should not consider trivial matters. The problem, of course, is in deciding what is and what is not material: we are concerned here with RELATIVE IMPORTANCE. As far as an individual is concerned, the loss of a 10 would be important and MATERIAL. As far as Chevron or Barclays Bank are concerned, the loss of 10 could be considered unimportant in many circumstances and therefore immaterial: please note I am not suggesting that fraud or carelessness in the handling of money is acceptable!!