15 June 2018

UNDERSTANDING CAPITAL STRUCTURE THEORIES

June 15, 2018
UNDERSTANDING CAPITAL STRUCTURE THEORIES

To maintain financial stability, a firm has to maintain an optimum capital structure . This optimum capital structure can be obtained when the market value per share is the maximum. Therefore, the objective of the firm should be taken to select a financing or debt equity mix which will maximise the value of the firm, optimum leverage can be the mix of debt-equity which maximises the value of a company. In order to achieve this goal, the finance managers has to follow the theories of capital structure of corporate enterprises. There are four major theories which explain the relationship between capital structure, cost of capital and value of the firm. They are:

1) Net Income Approach

2) Net Operating Income Approach

3) Modigliani-Miller Approach (MM)

4) Traditional Approach

In order to understand this relationship, following 9 assumptions are need to be made:
(1) The firm employs only two types of capital I.e debt and equity capital
(2) Taxes are not considered
(3) The firm pays its earnings in full as dividend. There is no returned earnings
(4) The firm’s total assets are given and there is no change in the assets

(5)The firm’s total financing remains constant. The firm can change its capital structure by interchanging the source of finance
(6) The operating profit is not expected to change
(7) The business risk remains constant and it is independent of capital structure and financial risk
(8) The firm has a perpetual life. It means the business is a going concern and it has long life
(9) All the investors has the same subjective probability distribution of the future expected operating profit for a given firm

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08 June 2018

List of Life Insurance, General Insurance, Health Insurance and Reinsurance Companies in India

June 08, 2018

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As of June 2018, there are 24 General insurance companies out of which 7 are public limited companies/state owned. As far as Heal insurance concern, there are 6 private insurance companies and there is no state-owned company. In Life insurance sector, we have 24 companies including 1 public limited company I.e. Life Insurance Corporation of India.  Finally, we have 2 Re-insurance company where each one belongs to public and private.

General Insurance Companies

Public

Private

Health Insurance Companies

Private

Life Insurance Companies

Public

Private

Reinsurance Companies

Public

Private

Source:  DEPARTMENT OFECONOMIC AFFAIRS, Ministry of finance, India.

03 June 2018

Understand 6 points before any investments

June 03, 2018

Consider these 6 Objectives on any investments

In the modern and digital world, we have several options available to invest our savings. Each person has different objectives on their investment. Here are 6 most important factors that you should consider before letting your money work for you.

Safety

Perhaps, there is truth to the axiom that there is no such thing as a completely safe and secure investment. Yet, we can get close to ultimate safety for our investment funds through the purchase of government-issued securities in stable economic systems, or through the purchase of the highest quality corporate bonds issued by the economy’s top companies. Such securities are arguably the best means of preserving principle while receiving a rate of return. Safety investment is usually found in the money market and include Treasury bills (T-bills), Certificate of Deposits (CD), Commercial Paper or the fixed income bonds in the form of municipal and other government bonds, and corporate bonds. The securities listed above are ordered according to the typical spectrum of increasing risk and, in turn, increasing potential yield. To compensate for their higher risk, corporate bonds return a greater yield than T-bills and Government bonds.

Income

Safety investment often have the lowest rate of income return or yield. Investors must inevitably sacrifice a degree of safety if they want to increase their yields. There is an inverse relationship between safety and yield; as yield increases, safety generally goes down, and vice versa. In order to increase their rate of investment return and take on risk above that of money market instruments or government bonds, investors may choose to purchase corporate bonds or preferred shared with lower investment ratings. Investment grade bonds rated at A or AA are slightly riskier than AAA bonds, but presumably also offer a higher income return than AAA bonds. Most investors, even the most conservative-minded ones, want some level of income generation in their portfolios, even if it’s just to keep up with the economy’s rate of inflation. But maximizing income return can be an overarching principle for a portfolio, especially for individuals who require a fixed sum from their portfolio every month.

Growth of Capital

The growth of Capital is most closely associated with the purchase of common stock, particularly growth securities, which offer low yields but considerable opportunities for an increase in value. For this reason, common stock generally ranks among most speculative of investments as their return depends on what will happen in an unpredictable future. Blue- chip stocks, by contrast, can potentially offer the best of all worlds by possessing reasonable safety, modest income and potential for growth in capital generated by the long-term increase in corporate revenues and earnings as the company matures. Yet, rarely is any common stock able to provide the near absolute safety and income generation of government bonds.

Tax Minimisation

An investor shall pursue certain investments in order to adopt tax minimisation as part of his or her investment strategy. A highly paid individual seek investments with favourable tax treatment in order to lessor his or her overall income tax burden.

Liquidity

Liquidity refers to an investment ready to convert into cash position. In other words, it is available immediately in cash form. Liquidity means that investment is easily realisable, saleable or marketable. When the liquidity is high, then the return may be low.

Marketability

Marketability refers to buying and selling of Securities in the market. Marketability means transferability or saleability of an asset. Securities are listed in a stock market which is more easily marketable than which are not listed. Public Limited Companies shares are more easily transferable than those of private limited companies.

Concealability

Concealability means investment to be safe from social disorders, government confiscations or unacceptable levels of taxation, the property must be concealable and leave no record of income received from its use or sale. Gold and precious stones have long been esteemed for these purposes because they combine high value with small bulk and are readily transferable.

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Let us know in comment section what are the other points you consider before investing.

Branches of accounting

June 03, 2018

Branches of accounting

Accounting is not always about finance and records on buying and selling. There are branches of accounting. They are as follows:

Financial Accounting

Financial Accounting is commonly termed as Accounting. The American Institute of Certified Public Accountants defines Accounting as "an art of recoding, classifying and summarizing in a significant manner and in terms of money, transactions and events which are in part at least of a financial character, and interpreting the results thereof."  Reports are always subject to statutory audit and meant for the management as well as for shareholders and creditors of the business concern. The main focus is on recording and classifying monetary transactions in the books of accounts and preparation of financial statements at the end of every accounting period.

Also read: Golden rules of accounting

Cost Accounting

Chartered Institute of Management Accountants (CIMA) define Cost Accounting as "application of costing and cost accounting principles, methods and techniques to the science, art and practice of cost control and the ascertainment
of profitability as well as the presentation of information for the purpose of managerial decision-making."

Management Accounting

Management Accounting is concerned with the use of both Financial and Cost Accounting information to managers within organizations, to provide them with the basis in making informed business decisions that would allow them to be better equipped in their management and control functions. Reports prepared are meant for management and as per management requirement.

Social responsibility Accounting

Social responsibility accounting is concerned with accounting for social costs incurred by the enterprise and social benefits created.

Human Resource Accounting

Human resource accounting is an attempt to identify, quantify and report investment made in human resource of an organisation that are not presently accounted for under conventional accounting practice.

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01 June 2018

Where to collect information of a listed company or listed stock?

June 01, 2018

Where to collect information of a stock?

Stock market is sensitive to information. It gets volatile when new information flows in to the market. A investor should always have close eyes on the scripts that he/she has put his hard earned money. So, in this post I will highlight places where a an investor can gather information.

Red Herring Prospectus (RHP)

RHP is good place to start, this provides key information about a company. It contains the purpose of issuing shares, industry overview, company background, detailed financial statements (Balance sheet and earning statements), Information about directors, underwriters and significant stock holders, Legal opinion on issue and etc. In India, the RHP’s are available on the SEBI website. Using the below link you can search any company that is listed in BSE and NSE. The document is available in pdf format. You can download and go thoroughly to understand the nature of business that the company carries.

SEBI link for Red Herring Prospectus of any company

Quarterly results

For every 3 months public listed companies publish quarterly reports that includes an income statement, balance sheet, and cash flow statement for the quarter and the year-to-date (YTD), as well as comparative results for the prior quarter/ year. By analysing the Quarterly report an investor can understand the company’s performance and growth. Generally, quarters end in March, June, September, and December, and these reports are filed a few weeks later after audited. These quarterly reports can be found in company’s website and stock exchange’s website.

Annual Reports

An annual report is a detailed report on a company's activities throughout the preceding year. It is intended to give information about the company's activities, strategy, business outlook and financial performance. A detailed financial statements is presented for the current and previous financial year. Annual reports are available on the respective company websites and with stock exchange website.

Investor Presentations

Many publicly listed companies provide detailed investor presentations that cover company background, company strategy, business outlook and detailed financial statements of the current and preceding financial period.

Earnings conference calls

Many companies conduct conference calls after quarterly results wherein management provides guidance of performance over the medium term and take questions from investors and analysts.

Interviews in print media/Television

Management interviews provide clues on management’s focus on performance, transparency and shareholder friendliness.

In comment section leave your choices from where obtain information of a listed company. As your queries and follow me in Twitter @sulthankhan .

31 May 2018

Intercontinental Cup 2018: Venue, fixtures and TV guide

May 31, 2018

200px-Intercontinental_cup_india

Intercontinental Cup organised by the All India Football Federation (AIFF) will held at the Mumbai Football Arena in Mumbai from June 01 – June 10. The 2018 Intercontinental Cup will be held with four teams ( India (hosts), Chinese Taipei, Kenya and New Zealand) from three different confederations. The All India Football Federation (AIFF) intends to make the tournament an annual fixture in the Indian footballing calendar.

Fixtures and Venue

All matches are set to kick-off at 8 p.m. IST at  Andheri Sports Complex (Mumbai Football Arena) located at Veer Desai Rd, Azad Nagar, Andheri West, Mumbai, Maharashtra 400053.

Capturea

TV guide

The Hero Intercontinental Cup will be broadcast on Star Sports 2 SD as well as HD platforms giving fans the opportunity to experience the best of Indian football. The matches will be streamed on Hotstar and Jio TV. For regional fans the games will be broadcasted on Star Sports Hindi 1/HD and Star Sports Tamil 1.

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30 May 2018

USCIRF again places India on its Tier 2 list as religious minorities feel increasingly insecure

May 30, 2018

Capturel

In 2016, religious tolerance and religious freedom conditions continued to deteriorate in India. Hindu nationalist groups— such as the Rashtriya Swayamsevak Sangh (RSS), Sangh Parivar, and Vishva Hindu Parishad (VHP)—and their sympathizers perpetrated numerous incidents of intimidation, harassment, and violence against religious minority communities and Hindu Dalits. These violations were most frequent and severe in 10 of India’s 29 states. National and state laws that restrict religious conversion, cow slaughter, and the foreign funding of nongovernmental organizations (NGOs) and a constitutional provision deeming Sikhs, Buddhists, and Jains to be Hindus helped create the conditions enabling these violations. While Prime Minister Narendra Modi spoke publicly about the importance of communal tolerance and religious freedom, members of the ruling party have ties to Hindu nationalist groups implicated in religious freedom violations, used religiously divisive language to inflame tensions, and called for additional laws that would restrict religious freedom. These issues, combined with longstanding problems of police and judicial bias and inadequacies, have created a pervasive climate of impunity in which religious minorities feel increasingly insecure and have no recourse when religiously motivated crimes occur. Based on these concerns, in 2017 USCIRF again places India on its Tier 2, where it has been since 2009.

India is the world’s largest democracy, with about 1.26 billion people, or about a one-sixth of the total world population. Nearly 80 percent of the population is Hindu; more than 14 percent is Muslim (the third-largest Muslim population in the world); 2.3 percent is Christian; 1.7 percent is Sikh; less than 1 percent is Buddhist; less than 1 percent is Jain; and about 1 percent adheres to other faiths or professes no religion.

India is a multi-religious, multi-ethnic, multi-linguistic, and multicultural country and a secular democracy. Despite these positive characteristics, the Indian government has struggled to maintain religious and communal harmony, protect minority communities from abuses, and provide justice when crimes occur.

The country has experienced periodic outbreaks of large-scale communal violence against religious minorities, including in Uttar Pradesh in 2013, Odisha in 2007–2008, Gujarat in 2002, and Delhi in 1984. Although the government of India established special structures to investigate and adjudicate crimes stemming from these incidents, the impact has been hindered by limited capacity, an antiquated judiciary system, inconsistent use, political corruption, and religious bias, particularly at the state and local levels. Many cases stemming from these incidents are still pending in the India court system. These large-scale outbreaks of communal violence, as well as smaller-scale Hindu nationalist abuses against religious minorities, tend to occur most frequently in 10 Indian states: Uttar Pradesh, Andhra Pradesh, Bihar, Chhattisgarh, Gujarat, Odisha, Karnataka, Madhya Pradesh, Maharashtra, and Rajasthan. In at least some of these states, religious freedom violations appear to be systematic, ongoing, and egregious and rise to CPC status. Muslims, Christians, Sikhs, other minority communities, and Hindu Dalits recognize that religious freedom issues in India predate the current Bharatiya Janata Party (BJP)-led government. However, they attribute the deterioration in conditions since 2014 to the BJP’s Hindu nationalistic political platform and some of its members’ support of and/or membership in Hindu nationalist groups. The BJP was founded in collaboration with the RSS, and the two maintain close ties at the highest levels. The BJP, RSS, Sangh Parivar, and VHP subscribe to the ideology of Hindutva (“Hinduness”), which seeks to make India a Hindu state based on Hinduism and Hindu values. Some individuals and groups adhering to this ideology are known to use violence, discriminatory acts, and religiously motivated rhetoric against religious minorities, creating a climate of fear and making non-Hindus feel unwelcome in the country. The heightened enforcement against religious minorities by BJP government officials and/or Hindu nationalists of existing constitutional and legal provisions restricting religious conversion, cow slaughter, and foreign funding of NGOs also has contributed to the deterioration of religious freedom in the country. While there was no large-scale communal violence in 2016, the Indian government’s Union Ministry of Home Affairs reported in January 2017 that in the first five months of 2016 there were 278 incidents of communal violence. In 2016, the governmental National Commission for Minorities received 1,288 complaints from minorities regarding such incidents, down from nearly 2,000 in 2015. However, religious minority communities, especially Christians and Muslims, reported to USCIRF that incidents had increased but minorities were afraid or believed it to be pointless to report them.

The report includes following matters in details

  • Violations against Muslims
  • Violations against Christians
  • Violations against Sikhs
  • Violations against Scheduled Castes and Scheduled Tribes (Dalits)
  • Hindu Nationalist Hate Campaigns against Minorities
  • Redress for Past Violence

Read the full text here: 2017 USCIRF Annual Report