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Basic questions of finance

1. What do you mean by debentures? Adebenture is a document under companys seal, which provides for the payment of a principal sums and interest there on at regular intervals, which is usually secured by a fixed or floating charge on the companys property or undertaking and which acknowledges a loan to the company. 2. What are bonds and securities? Government Securities are securities issued by the Government for raising a public loan or as notified in the official Gazette. They consist of Government Promissory Notes, Bearer Bonds, Stocks or Bonds held in Bond Ledger Account. They may be in the form of Treasury Bills or Dated Government Securities. 3. Features of Government Securities? Issued at face value No default risk as the securities carry sovereign guarantee. Ample liquidity as the investor can sell the security in the secondary market Interest payment on a half yearly basis on face value No tax deducted at source Can be held in Demat form. Rate of interest and tenor of the security is fixed at the time of issuance and is not subject to change (unless intrinsic to the security like FRBs - Floating Rate Bonds). Redeemed at face value on maturity Maturity ranges from of 2-30 years.

4. What is nifty 50 ? The 50 stocks that were most favored by institutional investors in the 1960s and 1970s. Companies in this group were usually characterized by consistent earnings growth and high P/E ratios.

5. What is senstivity analysis? A technique used to determine how different values of an independent variable will impact a particular dependent variable under a given set of assumptions. This technique is used within specific boundaries that will depend on one or more input variables, such as the effect that changes in interest rates will have on a bond's price. Sensitivity analysis is a way to predict the outcome of a decision if a situation turns out to be different compared . 6. What is net worth or what are net assets?explain? The amount by which assets exceed liabilities. This term can be applied to companies and individuals. For a company, this is known as shareholders' (or owners') equity and is determined by subtracting liabilities on the balance sheet from assets. For example, if a company has $45 million worth of liabilities and $65 million in assets, the company's net worth (shareholders' equity) is $20 million ($65 million - $45 million. 7. What is shareholders equity? The portion of the balance sheet that represents the capital received from investors in exchange for stock (paid-in capital), donated capital and retained earnings. Stockholders' equity represents the equity stake currently held on the books by a firm's equity investors.

It is calculated either as a firm's total assets minus its total liabilities, or as share capital plus retained earnings minus treasury shares:

8. What is liability? A company's legal debts or obligations that arise during the course of business operations. Liabilities are settled over time through the transfer of economic benefits including money, goods or services. 9. What is liquidity? The state of being liquid. The quality of being readily convertible into cash: an investment with high liquidity. Available cash or the capacity to obtain it on demand:

a bank that is increasing its liquidity by shortening the average term of its loans. Liquidity, as a term, in the world of Investment and Finance, refers to a feature of any stock or shares,

widely available via recognised stock exchanges and there is a willingness among people to buy and sell them. Thus, though such stocks and shares do not constitute money in technical terms, but yet, the velocity of their their buying and selling guarantees money that quickly. The ability to convert an asset to cash quickly.

10. What is working capital? Positive working capital means that the company is able to pay off its short-term liabilities. Negative working capital means that a company currently is unable to meet its short-term liabilities with its current assets (cash, accounts receivable and inventory).