Posts in category: NISM Series-XV: Research Analyst Certification

False. The Growth Adjusted Price to Earning Ratio (PEG) is calculated as [Current price of stock / Earnings Per Share] / Growth rate.

Puttable bonds provide the investor with the right to sell back the bonds to the issuer before maturity. In a rising interest rate scenario, investors can take advantage of this and protect their investments.

Macroeconomic models are used to analyze and understand the overall functioning and performance of an economy, helping in formulating policies for economic growth and stability.

To calculate the Equity Capital, we can rearrange the Return on Equity (ROE) formula:

ROE = Net Profit / Equity Capital

Rearranging the formula:

Equity Capital = Net Profit / ROE

Substituting the values:

Equity Capital = Rs 750,000 * 0.20 / 0.30

Equity Capital = Rs 500,000

Therefore, the Equity Capital is Rs 500,000 based on the given information.

All of the above. A good research analyst should possess clarity in financial concepts, the ability to read and understand financial statements, and a knack for numbers and interpretation.

If a government changes its expansionary fiscal policy to a contractionary fiscal policy, the equity markets are likely to go down. A contractionary fiscal policy involves reducing government spending and increasing taxes, which can lead to decreased economic activity. This can negatively impact corporate profits and investor sentiment, causing a decline in equity markets. Therefore, a shift from an expansionary to a contractionary fiscal policy is generally associated with a downward trend in equity markets.

Earnings Per Share (EPS) = Net Income / No. of Shares = 400,000 / 0.50 = 800,000 shares.

Return on Equity (ROE) is the Net Profit as a percentage of Equity. Net Profit is Rs 400,000. So, Equity will be 400,000 / (40 x 100) = 1,000,000.

Book Value = Equity / No. of Shares = 1,000,000 / 800,000 = 1.25.

Price to Book Value (P/BV) is a ratio that compares the current market price of a company’s share to its book value. So, the Current Market Price = P/BV x Book Value = 6 x 1.25 = Rs 7.50.

Therefore, the Market Price of the company’s share, based on the given data, is Rs 7.50.

To calculate the Current Assets, we can use the formulas for the Quick Ratio and Current Ratio:

Quick Ratio = (Current Assets – Inventories) / Current Liabilities
Current Ratio = Current Assets / Current Liabilities

Given that the Quick Ratio is 1.4, the Current Ratio is 2, and the Inventory levels are Rs 3,000, we can set up the following equations:

1.4 = (Current Assets – 3,000) / Current Liabilities
2 = Current Assets / Current Liabilities

To solve these equations simultaneously, we can use substitution. Rearranging the second equation, we have:

Current Assets = 2 * Current Liabilities

Substituting this value into the first equation, we get:

1.4 = (2 * Current Liabilities – 3,000) / Current Liabilities

Simplifying the equation:

1.4 * Current Liabilities = 2 * Current Liabilities – 3,000

1.4 * Current Liabilities – 2 * Current Liabilities = -3,000

-0.6 * Current Liabilities = -3,000

Dividing both sides by -0.6 to solve for Current Liabilities:

Current Liabilities = -3,000 / -0.6

Current Liabilities = Rs 5,000

Substituting this value back into the second equation, we find:

Current Assets = 2 * 5,000

Current Assets = Rs 10,000

Therefore, the Current Assets of the business are Rs 10,000.

The portfolio was overweight in that security. If a fund manager sells a security to maintain its weight in the portfolio, it indicates that the portfolio was overweight in that security and needed to be rebalanced.

A Support level in Technical Analysis is a level where the price tends to find support as it is going down.

Investors who own property can indeed earn rental income from the property and also earn returns on the capital invested. This is because they receive rental income in addition to any capital appreciation or dividends received from their investment. Therefore, the statement is true.

The Price-to-Earnings (P/E) ratio divided by the growth rate gives the Price/Earnings to Growth (PEG) ratio. The company with a lower PEG ratio (P/E of 40) is considered cheaper in terms of growth potential.

The telecom industry also faces a threat of substitutes. Mobile phones have overtaken the once dominant landline phones. In the future, some new technology may make mobile phones obsolete. Some industries like power, healthcare, education, etc., do not have the threat of substitutes at all.

A Balance Sheet of a company includes both the sources of funds (liabilities and shareholders’ equity) and the application of those funds (assets). It provides a snapshot of the company’s financial position at a given point in time, listing its assets, liabilities, and shareholders’ equity.

Government; Central Bank. The decisions of the Government (fiscal policy) and actions of the Central Bank (monetary policy) are the major influencers of public policies in an economy.

False. The Code of Conduct is defined in the Schedule III of Research Analyst Regulations.

It requires the combination of knowledge, experience, and professional judgment to arrive at a fair valuation of any asset.

Indian Depository Receipts are issued in India and are listed on an Indian Stock Exchange with foreign stocks as underlying shares.

Correct and detailed management views can be obtained only through personal interactions. These views are generally not available elsewhere.

the Profit and Loss Statement. This financial statement summarizes the revenues earned and costs/expenses incurred by a company over a specific period of time, typically a year. It provides insights into the profitability and financial performance of the business.

When an economy is going through tough times, fewer jobs are created, and so the unemployment rate rises.

A Depository Participant (DP) is an agent of the depository. Depositories are institutions that hold securities of investors in electronic form. Investors open an account with the depository through a registered Depository Participant. The DP acts as an intermediary between the depository and the investors, providing depository services such as account opening, dematerialization, rematerialization, and other related services.

Enterprise Value (EV) is a measure of a company’s total value, representing the theoretical takeover price. It is calculated by adding the market value of equity (market capitalization) to the market value of debt and then subtracting cash and cash equivalents.

In the given scenario, the market capitalization is Rs 28 lakhs, the total debt is Rs 7 lakhs, and the cash and cash equivalents are Rs 6 lakhs. To calculate the Enterprise Value (EV), we can use the formula:

EV = Market value of equity + Market value of debt – Cash and cash equivalents

EV = Rs 28 lakhs + Rs 7 lakhs – Rs 6 lakhs
= Rs 29 lakhs

Therefore, the Enterprise Value (EV) based on the given information is Rs 29 lakhs.

Rise. When interest rates fall, the old bonds with high coupon rates become attractive, leading to an increase in their prices.

A fundamental research analyst focuses on studying macroeconomic fundamentals. This includes analyzing factors such as economic indicators, government policies, inflation rates, interest rates, GDP growth, and other macro-level factors that can impact the overall economy. Studying historical price movements, trends, and volume is typically part of technical analysis, which is a different approach used by technical research analysts.

To calculate the earnings yield, we divide the earnings per share (EPS) by the price of the stock and express it as a percentage.

Given:
Price of the stock = Rs 100
Earnings per share (EPS) = Rs 5

Earnings Yield = (EPS / Price) * 100

Substituting the given values:
Earnings Yield = (5 / 100) * 100
Earnings Yield = 5%

Therefore, the earnings yield of the stock is 5%.

False. Stock dividend, also known as Bonus shares, refers to the additional free shares given to shareholders in proportion to their holdings, and it is not a dividend payment.

Credit Risk refers to the possibility of a company being unable to meet its debt obligations, including interest payments and principal repayment.

All of the Above. Fundamental analysis involves evaluating various factors to determine the intrinsic value of a security or business. It includes analyzing economic factors, such as market conditions and monetary policies, industry-specific factors, such as competition and market trends, and company-specific factors, such as financial statements and management performance. Considering all these factors together provides a comprehensive understanding of the investment opportunity.

The analyst’s opinion is likely to be included in all of the mentioned sections of a research report. The valuation section provides the analyst’s opinion on the value of the company or its stock. The industry analysis section includes the analyst’s opinion on the industry’s prospects. The financial forecasting section involves the analyst’s opinion on future financial performance. The research report combines various sections that reflect the analyst’s opinions and analysis.

To calculate the approximate market size of the industry, we can use the information provided:

– Total revenue of the four major companies: Rs. 2100 crores
– Market share controlled by the four major companies: 70%

To find the total market size, we divide the total revenue by the market share percentage:

Market Size = Total Revenue / Market Share
Market Size = Rs. 2100 crores / 0.7
Market Size ≈ Rs. 3000 crores

Therefore, the approximate market size of this industry is Rs. 3000 crores.

The trades executed on the exchange are settled through the Clearing Corporation, which acts as a counterparty and guarantees the settlement of the trades to both buyers and sellers. The clearing corporation gives a settlement guarantee of trades to the counterparties (all buyers and sellers).

True. Companies are required to inform exchanges about their shareholding patterns and any changes periodically as part of regulatory compliance.

To calculate the P/E ratio, we need the Earnings per Share (EPS). Given that the dividend payout ratio is 25%, the EPS can be calculated as:

EPS = Dividend per Share / Dividend Payout Ratio
= 40% of Rs 5 / 25%
= (0.40 * 5) / 0.25
= Rs 2 / 0.25
= Rs 8

The P/E ratio is then calculated by dividing the Market Price per share by the Earnings per Share:

P/E ratio = Market Price per share / Earnings per Share
= Rs 48 / Rs 8
= 6

Therefore, the P/E ratio is 6.

The Earnings Yield can be calculated as the reciprocal of the P/E ratio multiplied by 100:

Earnings Yield = (1 / P/E ratio) * 100
= (1 / 6) * 100
= 16.67%

Hence, the Earnings Yield is 16.67%.

High entry barriers in an industry indicate that there are significant obstacles for new entrants due to licensing requirements and substantial investments in specialized assets.

Department of Expenditure. The Department of Expenditure is involved with matters such as financial assistance to states and borrowings by states, along with overseeing the expenditure management of the Government of India.

As per Regulation 16 of the Code of Conduct for Research Analysts, research analysts should not deal or trade in recommended securities 30 days before the publication of a research report.

A key parameter while analyzing this sector is Average Revenue Per Unit (ARPU). It is calculated by total revenue divided by the number of subscribers, and the higher it is, the better for the company. It must be noted that India has among the lowest ARPUs in the world.

Capital Employed can be calculated using the formula: Capital Employed = Total Equity + Total Debt. In this case, the given values are Total Equity = Rs 700,000 and Total Debt = Rs 400,000.

Capital Employed = Total Equity + Total Debt
= Rs 700,000 + Rs 400,000
= Rs 1,100,000

Therefore, the correct calculation for the Capital Employed is indeed Rs 1,100,000. This represents the total funds employed by the company through its equity and debt sources.

All of the mentioned factors are advantages of merger and acquisition (M& activities. Diversification can be achieved through acquiring companies in different industries or geographic locations. Synergy refers to the combined efficiency and increased value that can be achieved through M&A. Taxation benefits can arise from utilizing tax shields or taking advantage of favorable tax regulations. Therefore, all of the mentioned factors contribute to the advantage of M&A activity.

Given that the Quick Ratio is 1 and the total current assets are Rs 80,000, we can indeed calculate the approximate value of the inventory.

Quick Ratio = (Current Assets – Inventory) / Current Liabilities

Substituting the values:

1 = (80,000 – Inventory) / Current Liabilities

Since the Quick Ratio formula measures the company’s ability to cover its current liabilities with its most liquid assets (excluding inventory), a Quick Ratio of 1 implies that the company has just enough liquid assets to cover its current liabilities.

Therefore, the approximate value of the inventory would be Rs 40,000 (Rs 80,000 – Rs 40,000 = Rs 40,000), assuming the remaining assets besides inventory are sufficient to cover the current liabilities.

True. A good analyst must keep track of disclosures, commitments, and deliveries of an organization periodically to assess the company’s performance and financial health.

To clarify, the Debt to Equity ratio of 1.5:1 means that for every 1.5 units of debt, there is 1 unit of equity. Given that the total size of the balance sheet is Rs 50 lakhs, we can calculate the equity component using the following steps:

1. Determine the total units in the ratio: 1.5 + 1 = 2.5
2. Divide the total size of the balance sheet by the total units: Rs 50 lakhs / 2.5 = Rs 20 lakhs

Therefore, the equity component of the balance sheet is Rs 20 lakhs.

Net Interest Margin (NIM) is a unique parameter used for the evaluation of banks.

Yes, he can buy this stock but after 30 days from the preparation of such a report. As per SEBI (Prohibition of Insider Trading) Regulations, 2015: Analysts employed with the organization/firm while preparing research reports of client company(s) shall disclose their shareholdings/interest in such company(s) to the Compliance Officer, and the Analysts who prepare research reports of listed company shall not trade in securities of that company for thirty days from the preparation of such report.

Winner’s curse – The tendency to win a competitive bid even after overpaying for the asset. While behaviorally it is a win, financially, it may be a loss.

he dividend yield is calculated by dividing the dividend received by the amount invested and then multiplying by 100 to express it as a percentage.

In this case:
Dividend received = Rs 5 x 500 = Rs 2,500
Amount invested = Rs 10,000

Dividend Yield = (Dividend received / Amount invested) x 100
Dividend Yield = (Rs 2,500 / Rs 10,000) x 100
Dividend Yield = 0.25 x 100
Dividend Yield = 25%

Therefore, the dividend yield in this case is 25%. It indicates that the investor has received a return of 25% on their investment in the form of dividends.

Depreciation and Amortization are included in the Income Statement as they represent expenses of the company.

The per share data will deteriorate. In the case of Bonus Shares, the per share data (earning per share, book value per share, market price per share, etc.) will witness immediate deterioration as the total number of shares increases without any economic change in the profit and loss statement or balance sheet.

Bajaj Pulsar. In BCG Analysis, Question Marks are business segments in a fast-growing market but with low market share. Bajaj Pulsar is a successful product in a growing market with the potential to increase market share.

In Bonds, the investor knows the amount of interest, etc., he will receive and when. But in Equity, the returns in the form of dividends and capital appreciation are uncertain.

False. The analysis of historical stock prices of a company is called ‘Technical Analysis,’ not ‘Company Analysis.’

To calculate the net profit of the company, we need to find the equity of the company first.

Given:
Debt to Equity Ratio = 3:1
Total size of Balance Sheet = Rs. 40,00,000
Return on equity = 27%

Let’s assume the debt as D and equity as E.
According to the Debt to Equity Ratio:
D/E = 3/1

We can set up the following equation:
D = 3E

The total size of the Balance Sheet is the sum of debt and equity:
D + E = Rs. 40,00,000

Substituting the value of D from the first equation:
3E + E = Rs. 40,00,000
4E = Rs. 40,00,000
E = Rs. 40,00,000 / 4
E = Rs. 10,00,000

Now, we can calculate the net profit using the return on equity:
Net Profit = Return on Equity * Equity
Net Profit = 27% * Rs. 10,00,000

Converting 27% to decimal form:
Net Profit = 0.27 * Rs. 10,00,000
Net Profit = Rs. 2,70,000

Therefore, the net profit of the company is Rs. 2,70,000.

As per Regulation 17 of the Code of Conduct for research analysts, the bonus payable to a research analyst can be determined based on the overall revenue of the brokerage division, regardless of the sector or stocks covered. This means that the bonus is not tied to specific transactions or recommendations. This approach ensures fairness and avoids potential conflicts of interest.

Economic Factors

Conduct. Analyzing each industry properly, as each industry has its peculiar behavior, is a part of Conduct Analysis of SCP analysis.

Return on Capital Employed (ROCE) is calculated as (Earnings per Share / Book Value per share) x 100. In this case, it is (25 / 75) x 100 = 33.33%.

Yes, it is compulsory for a company listed on stock exchanges to have a Compliance Officer to ensure compliance with applicable laws, regulations, and exchange requirements.

calculation for the Equity to Asset Ratio in this case is:

Equity = Total Assets – Total Liabilities
Equity = Rs 20,000 – Rs 8,000
Equity = Rs 12,000

Equity to Asset Ratio = Equity / Assets
Equity to Asset Ratio = Rs 12,000 / Rs 20,000
Equity to Asset Ratio = 0.6

Price of the share will rise in the future due to some random events on the basis of what happened in the past or making trends when there exists none. This is an example of the Gambler’s fallacy bias.

As per SEBI regulations, a deemed connected person includes all of the mentioned entities: a holding/subsidiary company, a company under the same management, and a company under the same group.

Share swap means exchanging one set of shares with another set of shares. It is often used during a merger or acquisition when the acquiring company uses its own stock as cash to purchase the business. In a share swap, each shareholder of the acquired company receives a pre-determined amount of shares from the acquiring company.

The bias described here is known as “Herd Mentality.” In this bias, investors tend to look for evidence of other investors buying specific securities. They believe that others may have better information, which leads to a herd-like behavior of following the investment choices made by others. This behavior can often be driven by uncertainty and a desire to conform to perceived market trends.

A Scheme of Arrangement should be approached to the National Company Law Tribunal (NCLT) as it is a court-monitored settlement process between the company and its creditors or members.

Venture Capital Fund has the highest uncertainty in terms of return because it invests in early-stage companies with potential long-term growth, but also carries a high risk of failure.

False. The certificate of registration granted to a Research Analyst under regulation 9 is valid until it is suspended or canceled by the relevant regulatory authority. The duration of validity may vary depending on the regulations and requirements of the specific jurisdiction or governing body.

Financing Cash Flows. This section of the Cash Flow statement provides information about the funds a company borrowed during the preceding year. It includes cash inflows from borrowing and cash outflows from repaying debt or issuing equity. This section gives insights into the company’s financing activities and its sources of external funding.

Cost of goods sold is included in the Income Statement as it represents the cost of producing goods.

Management views on opportunities and challenges. While historical data, financial data, and the business model can be obtained through various sources and research methods, management views on opportunities and challenges are often subjective and not easily accessible. These views are typically obtained through personal interactions, such as interviews or meetings with the management team.

All of the above s are considered economic factors in PESTLE analysis. Monetary policies of the RBI, country’s dependence on other nations for essential natural resources, and forex reserves are key economic aspects that influence the business environment and have an impact on organizations’ operations, growth, and sustainability.

The Central Board of Direct Taxes (CBDT) and the Central Board of Excise and Customs (CBEC) are both controlled by the Department of Revenue, which operates under the Ministry of Finance. The Department of Revenue handles matters related to direct and indirect taxes.

Acquisition or takeover. In an acquisition or takeover, the acquiring company purchases all or a significant portion of the target company’s stock. After the acquisition, both entities usually continue to exist, with the acquiring company gaining control over the operations and assets of the target company. This allows for integration and synergy between the two entities.

Rs 20 lakhs. To calculate the Asset to Equity ratio, we need to find the equity of the company. First, we determine the number of shares using the Earnings Per Share (EPS) formula. Then, we calculate the market price of a share using the Price to Earnings ratio. Finally, we compute the equity by multiplying the book value per share by the number of shares. The Asset to Equity ratio is then calculated by dividing the total assets by the equity. In this case, the equity is Rs 20 lakhs.

No. To be eligible for a share buyback, a company should not have defaulted on its payment of interest or principal on debentures, fixed deposits, or any other borrowings. Additionally, redeeming debt and equity is considered a negative cash flow in financing activities. A company with defaults may face financial difficulties and should prioritize meeting its obligations rather than repurchasing shares.

Let’s assume the Sales = 100. As sales are double (200%) of EBIT, EBIT will be half of sales. So the EBIT is 50 (Half of 100).

Now, to calculate the Net Profit, we need to multiply the EBIT by the Net Profit margin. The Net Profit margin is given as 30%, so the Net Profit will be:

Net Profit = EBIT * Net Profit margin
= 50 * 0.30
= 15

Now, we need to calculate the EBIT as a percentage of Net Profit. This can be done by dividing the EBIT by the Net Profit and multiplying by 100:

EBIT % of Net Profit = (EBIT / Net Profit) * 100
= (50 / 15) * 100
= 333.33%

Therefore, the correct calculation for the EBIT % of Net Profit is 333.33%, not 166.66%.

Highest. Symbols such as AAA, A1 indicate the highest degree of creditworthiness according to the standardized system by SEBI for credit rating agencies.

False. Microeconomics focuses on individual households and firms rather than the aggregate aspects of the economy. It analyzes the behavior of consumers and producers, market interactions, and resource allocation at a micro-level. Macroeconomics, on the other hand, examines the overall economy and factors affecting aggregate supply and demand, such as GDP, unemployment, and inflation.

True. Pricing power is a function of industry dynamics, elasticity of demand, branding, and customer loyalty. Nescafe, being a strong brand with a loyal customer base, has the ability to increase prices without a significant decline in volumes. This demonstrates pricing power in action.

Additional surveillance measures are not applicable to securities on which derivative products are available.

The Department of Financial Services administers policies relating to pension reforms, life and general insurance, public sector banks, and other financial services.

Investing money without going through the rigor of understanding and analyzing the investment s, their risk and return features, and appropriate value would be like taking a bet or speculating rather than investing. Such activity has a greater chance of losing rather than making money for the investors. Speculation is typically short-term calls made with leveraged funds, unlike investing money, which is a long-term disciplined activity for creating wealth.

The dividend per share can be calculated by multiplying the earnings per share (EPS) by the dividend payout ratio.

Given the information provided:
Market Price = Rs 40.50
PE ratio = 13.50
Dividend payout ratio = 70%

First, let’s calculate the EPS:
EPS = Market Price / PE ratio
EPS = 40.50 / 13.50
EPS = 3

Next, we can calculate the dividend per share:
Dividend Per Share = Dividend Payout Ratio * EPS
Dividend Per Share = 70% * 3
Dividend Per Share = Rs 2.10

Therefore, the dividend per share is Rs 2.10.

True. Business risk, also known as operating risk, refers to the risk caused by factors that affect the day-to-day operations of a company. It includes risks related to sales volume, production efficiency, competition, technological changes, and other operational factors. Business risk directly impacts the company’s profitability and ability to generate sustainable earnings.

Both low interest rates and low inflation contribute to economic recovery from a recession. Low interest rates stimulate borrowing and investment, which can boost economic activity. Low inflation allows central banks to implement expansionary monetary policies, making credit more affordable and encouraging spending and investment. These factors combined can help revive economic growth and bring about a recovery from a recession.

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

All of the above factors affect analysis and decision making. Efficiency of operations impacts the effectiveness of processes and resource utilization. Management ethics influence the ethical considerations in decision making. Revenues and costs provide crucial financial information for analysis. Considering all these factors is essential for informed decision making.

Inventory Turnover ratio gives the number of times inventory is rolled over by a company. The Current ratio measures the ability of the company to meet its short-term liabilities.

Put Writer. In s, the buyers have the RIGHT but NO OBLIGATIONS, while the writers (sellers) have the obligations. The Put writer has the obligation to buy/take delivery of the asset from the Put Buyer at a predetermined price.

The P/E ratio (Price-to-Earnings ratio) is calculated by dividing the market price of the share by the earnings per share (EPS).

Given the information provided:
Net Profit = Rs 300 crores
Number of Outstanding Equity Shares = 4,72,60,223
Market Price = Rs 718

First, let’s calculate the EPS:
EPS = Net Profit / Number of Shares
EPS = Rs 300 crores / 4,72,60,223
EPS = Rs 63.478

Next, we can calculate the P/E ratio:
P/E ratio = Market Price / EPS
P/E ratio = Rs 718 / Rs 63.478
P/E ratio ≈ 11.31

Therefore, the P/E ratio of the share is approximately 11.31.

True. A high Current Account Deficit (CAD) indicates a larger outflow of currency, which can weaken the nation’s currency relative to other currencies.

Beta calculations factor in market risks, as it measures the sensitivity of a stock’s performance to overall market performance.

In SCP analysis, industry structure refers to all of the mentioned factors. It includes the market size, the growth rate of the industry, and the relationships among the players in the industry. SCP analysis aims to understand the competitive dynamics and market structure within an industry to analyze its performance and behavior.

False. P-Notes (Participatory Notes) provide access of Indian securities to unregistered overseas investors through SEBI registered foreign portfolio investors.

The Price to Earnings Ratio (PEG) is a valuation ratio that relates a company’s price-to-earnings (PE) ratio to its growth rate. It is used to assess the relative value of a stock considering both its earnings and expected growth.

To calculate the PEG ratio, we divide the PE ratio by the growth rate. In this case, the given PE ratio is 25 and the potential growth rate of the company is 20% for the next few years.

PEG ratio = PE ratio / Growth rate
= 25 / 20
= 1.25

Therefore, the PEG ratio for the company is 1.25. This indicates that the company’s stock price is relatively valued considering its earnings and growth rate.

Callable bonds allow the issuer to redeem/buy back the bonds prior to their original maturity date, making them a safe for issuers in a falling interest rate scenario.

True. Disclosing the allocation of money raised from investors in an Initial Public Offering (IPO) or Follow-on Public Offering (FPO) is one of the responsibilities of the Compliance Officer. The Compliance Officer ensures that the company complies with relevant regulations and guidelines, including disclosing financial information and maintaining transparency in the allocation of funds.

The buyer’s bargaining power is high when all the mentioned factors are present: strong competitive intensity, availability of close substitutes, and standardized products with little differentiation.

Intrinsic Value. The intrinsic value of an equity share is the present value of its expected future cash flows or benefits to the investors.

Both 2 and 3 are not components of the Current Account of a country. The Current Account includes revenue from imports and exports, but not capital flows like FII or FDI.

PESTLE Analysis. PESTLE (Political, Economic, Socio-cultural, Technological, Legal, and Environmental) analysis is done from the perspective of a business looking to set up a unit offshore and analyzing several countries to choose from.

he dividend yield is calculated by dividing the dividend received by the amount invested and then multiplying by 100 to express it as a percentage.

In this case:
Dividend received = Rs 5 x 500 = Rs 2,500
Amount invested = Rs 10,000

Dividend Yield = (Dividend received / Amount invested) x 100
Dividend Yield = (Rs 2,500 / Rs 10,000) x 100
Dividend Yield = 0.25 x 100
Dividend Yield = 25%

Therefore, the dividend yield in this case is 25%. It indicates that the investor has received a return of 25% on their investment in the form of dividends.

No. To be eligible for a share buyback, a company should not have defaulted on its payment of interest or principal on debentures, fixed deposits, or any other borrowings. Additionally, redeeming debt and equity is considered a negative cash flow in financing activities. A company with defaults may face financial difficulties and should prioritize meeting its obligations rather than repurchasing shares.

The Department of Revenue is responsible for handling matters related to all direct and indirect taxes through statutory boards such as the Central Board of Direct Taxes (CBDT) and the Central Board of Excise and Customs (CBEC).

As per Regulation 17 of the Code of Conduct for research analysts, the bonus payable to a research analyst can be determined based on the overall revenue of the brokerage division, regardless of the sector or stocks covered. This means that the bonus is not tied to specific transactions or recommendations. This approach ensures fairness and avoids potential conflicts of interest.

When a foreign investor invests in the existing financial instruments of a country, it is known as Foreign Portfolio Investment (FPI). Foreign Portfolio Investment refers to the passive investment in existing financial instruments, such as equity or bonds, without any management participation. Therefore,

To calculate the net profit margin of the company, we need to deduct the corporate tax from the operating profit and then divide it by the sales.

Given:
Sales = Rs 12,400
Operating Profit = Rs 2,400
Corporate Tax Rate = 35%

First, calculate the net profit by deducting the tax from the operating profit:
Net Profit = Operating Profit – (Corporate Tax Rate * Operating Profit)
Net Profit = 2,400 – (0.35 * 2,400)
Net Profit = 2,400 – 840
Net Profit = Rs 1,560

Next, calculate the net profit margin as a percentage of sales:
Net Profit Margin = (Net Profit / Sales) * 100
Net Profit Margin = (1,560 / 12,400) * 100
Net Profit Margin = 0.1258 * 100
Net Profit Margin ≈ 12.58%

Therefore, the net profit margin of the company is approximately 12.58%.

A Balance Sheet of a company includes both the sources of funds (liabilities and shareholders’ equity) and the application of those funds (assets). It provides a snapshot of the company’s financial position at a given point in time, listing its assets, liabilities, and shareholders’ equity.

The trades executed on the exchange are settled through the Clearing Corporation, which acts as a counterparty and guarantees the settlement of the trades to both buyers and sellers. The clearing corporation gives a settlement guarantee of trades to the counterparties (all buyers and sellers).

False. The correct formula for WACC is WACC = (We * Ke) + (Wd * Kd * (1 – Tx)).

Buy-side analysts typically work for asset management firms, hedge funds, or institutional investors. They analyze investment opportunities and make investment decisions on behalf of their firms or clients. They are not directly involved in investment banking, broking, or advisory services.

True. In a competitive market, businesses have limited control over pricing and have to accept market prices, making them price takers.

the Profit and Loss Statement. This financial statement summarizes the revenues earned and costs/expenses incurred by a company over a specific period of time, typically a year. It provides insights into the profitability and financial performance of the business.

The Department of Financial Services is responsible for overseeing and regulating various financial institutions and services, including banks, insurance companies, and financial services provided by both government agencies and private corporations.

SEBI (Securities and Exchange Board of Indi primarily regulates the securities market in India. The promotion and orderly growth of pension markets are overseen by the Pension Fund Regulatory and Development Authority (PFRD. Therefore, the statement is false.

When an economy is going through tough times, fewer jobs are created, and so the unemployment rate rises.

While quantitative analysis plays a crucial role in fundamental analysis, it has limitations. One such limitation is the impact of changes in accounting standards, business structures, and regulations, which can affect the accuracy and effectiveness of quantitative analysis in predicting future outcomes.

Liquidity Risk refers to the risk of not being able to sell an investment at the desired price or time, leading to potential losses or high transaction costs.

calculation for the Equity to Asset Ratio in this case is:

Equity = Total Assets – Total Liabilities
Equity = Rs 20,000 – Rs 8,000
Equity = Rs 12,000

Equity to Asset Ratio = Equity / Assets
Equity to Asset Ratio = Rs 12,000 / Rs 20,000
Equity to Asset Ratio = 0.6

Acquisition or takeover. In an acquisition or takeover, the acquiring company purchases all or a significant portion of the target company’s stock. After the acquisition, both entities usually continue to exist, with the acquiring company gaining control over the operations and assets of the target company. This allows for integration and synergy between the two entities.

Sometimes, bottom-up analysts focus primarily on analyzing the dynamics of specific businesses and industries without giving significant consideration to broader economic factors. Their focus is on identifying and investing in fundamentally strong businesses that are expected to perform well regardless of economic cycles.

The Reserve Bank of India (RBI) regulates the money market segment of the securities market and is also the manager of the Indian Government’s borrowing program. RBI is the central bank of India and has the responsibility of administering the monetary policy, regulating the money markets, and managing the Government’s borrowing programs. Therefore,

Number of shares: 14,000,000
Market price per share: Rs 20
Assets: Rs 100,000,000
Liabilities: Rs 30,000,000
Market capitalization = Number of shares × Market price per share
= 14,000,000 × Rs 20
= Rs 280,000,000

Net worth = Assets – Liabilities
= Rs 100,000,000 – Rs 30,000,000
= Rs 70,000,000

Price to Book value ratio = Market capitalization / Net worth
= Rs 280,000,000 / Rs 70,000,000
= 4

Therefore, the Price to Book value ratio is 4.

The objective of all regulators in a financial market is to create a fair and competitive marketplace, ensure that intermediaries maintain high standards of services to market participants, and promote and ensure the orderly growth of financial markets.

Economic Factors

The Discounted Cash Flow (DCF) model is indeed used for valuation when the stream of future cash flows, timings of these cash flows, and discount rate are known with certainty. It is a widely used method in financial valuation for estimating the present value of expected future cash flows. Therefore, the statement is true.

The bias described here is known as “Herd Mentality.” In this bias, investors tend to look for evidence of other investors buying specific securities. They believe that others may have better information, which leads to a herd-like behavior of following the investment choices made by others. This behavior can often be driven by uncertainty and a desire to conform to perceived market trends.

False. The certificate of registration granted to a Research Analyst under regulation 9 is valid until it is suspended or canceled by the relevant regulatory authority. The duration of validity may vary depending on the regulations and requirements of the specific jurisdiction or governing body.

True. Pricing power is a function of industry dynamics, elasticity of demand, branding, and customer loyalty. Nescafe, being a strong brand with a loyal customer base, has the ability to increase prices without a significant decline in volumes. This demonstrates pricing power in action.

In SWOT analysis of a company, ‘Threats’ are external risks. Among the given s, the pressure on the Government to ban the company’s products represents an external threat. The other s are internal weaknesses of the company. Therefore, 4.

Investing money without going through the rigor of understanding and analyzing the investment s, their risk and return features, and appropriate value would be like taking a bet or speculating rather than investing. Such activity has a greater chance of losing rather than making money for the investors. Speculation is typically short-term calls made with leveraged funds, unlike investing money, which is a long-term disciplined activity for creating wealth.

Return on Capital Employed (ROCE) can be calculated by dividing Earnings Before Interest and Tax (EBIT) by the Total Capital Employed. The Total Capital Employed is typically calculated as the Net Worth plus Debt of the company. Therefore, the correct is “EBIT / Total Capital Employed (Where Capital Employed = Net Worth + Debt)”.

Mark to Market (MTM) margin represents the notional loss or gain that an outstanding trade has incurred during a specified period due to price movements. It is used by clearing corporations to manage the risk of default by buyers and sellers in financial markets.

The audit committee is responsible for reviewing the financial statements of the company and for nominating the auditors. Its role is to ensure the accuracy and reliability of financial reporting and oversee the company’s audit process. Therefore,

The P/E ratio (Price-to-Earnings ratio) is calculated by dividing the market price of the share by the earnings per share (EPS).

Given the information provided:
Net Profit = Rs 300 crores
Number of Outstanding Equity Shares = 4,72,60,223
Market Price = Rs 718

First, let’s calculate the EPS:
EPS = Net Profit / Number of Shares
EPS = Rs 300 crores / 4,72,60,223
EPS = Rs 63.478

Next, we can calculate the P/E ratio:
P/E ratio = Market Price / EPS
P/E ratio = Rs 718 / Rs 63.478
P/E ratio ≈ 11.31

Therefore, the P/E ratio of the share is approximately 11.31.

Share swap means exchanging one set of shares with another set of shares. It is often used during a merger or acquisition when the acquiring company uses its own stock as cash to purchase the business. In a share swap, each shareholder of the acquired company receives a pre-determined amount of shares from the acquiring company.

A research analyst’s work can be hampered by various factors, including the presence of lots of unnecessary and irrelevant information, contradiction of data from multiple sources, and inaccessibility of data. All of these factors can make the research process time-consuming, unproductive, and hinder the analyst from obtaining the correct information. Therefore, 4.

To calculate the earnings yield of a company, you can use the formula: Earnings Yield = (Net Profit / Market Capitalization) * 100.

In this case, the Net Profit is Rs 12,00,000 and the Market Capitalization is Rs 60,00,000.

Using these values, we can calculate the earnings yield as follows:

Earnings Yield = (12,00,000 / 60,00,000) * 100

= 0.2 * 100

= 20%

Therefore, the earnings yield of the company is 20%.

To calculate the approximate market size of the industry, we can use the information provided:

– Total revenue of the four major companies: Rs. 2100 crores
– Market share controlled by the four major companies: 70%

To find the total market size, we divide the total revenue by the market share percentage:

Market Size = Total Revenue / Market Share
Market Size = Rs. 2100 crores / 0.7
Market Size ≈ Rs. 3000 crores

Therefore, the approximate market size of this industry is Rs. 3000 crores.

Indian Depository Receipts are issued in India and are listed on an Indian Stock Exchange with foreign stocks as underlying shares.

Yes, he can buy this stock but after 30 days from the preparation of such a report. As per SEBI (Prohibition of Insider Trading) Regulations, 2015: Analysts employed with the organization/firm while preparing research reports of client company(s) shall disclose their shareholdings/interest in such company(s) to the Compliance Officer, and the Analysts who prepare research reports of listed company shall not trade in securities of that company for thirty days from the preparation of such report.

When the RBI announces a hike in interest rates, bond prices generally fall. This is because the existing bonds will be paying a lower interest rate compared to newly issued bonds with higher rates. As a result, investors demand higher yields from existing bonds, causing their prices to decrease.

A fundamental research analyst focuses on studying macroeconomic fundamentals. This includes analyzing factors such as economic indicators, government policies, inflation rates, interest rates, GDP growth, and other macro-level factors that can impact the overall economy. Studying historical price movements, trends, and volume is typically part of technical analysis, which is a different approach used by technical research analysts.

All of the Above. Fundamental analysis involves evaluating various factors to determine the intrinsic value of a security or business. It includes analyzing economic factors, such as market conditions and monetary policies, industry-specific factors, such as competition and market trends, and company-specific factors, such as financial statements and management performance. Considering all these factors together provides a comprehensive understanding of the investment opportunity.

The Dividend Payout Ratio is calculated by dividing the company’s dividend per share by its earnings per share. This ratio indicates the portion of earnings that a company distributes to its shareholders in the form of dividends.

Financing Cash Flows. This section of the Cash Flow statement provides information about the funds a company borrowed during the preceding year. It includes cash inflows from borrowing and cash outflows from repaying debt or issuing equity. This section gives insights into the company’s financing activities and its sources of external funding.

Investors look for businesses with high entry barriers. Such businesses will have pricing power, meaning they can sell their products at a premium without fear of losing customers. This allows them to generate higher profits and potentially deliver better returns for investors. Businesses with low entry barriers may face intense competition, which can lead to lower profits and potentially higher risks.

True. In stock consolidation, the total number of shares decreases without any economic change in the company’s financials. As a result, per share data, including earnings per share, book value per share, and market price per share, immediately improves due to the reduced share count.

Management views on opportunities and challenges. While historical data, financial data, and the business model can be obtained through various sources and research methods, management views on opportunities and challenges are often subjective and not easily accessible. These views are typically obtained through personal interactions, such as interviews or meetings with the management team.

Investors who own property can indeed earn rental income from the property and also earn returns on the capital invested. This is because they receive rental income in addition to any capital appreciation or dividends received from their investment. Therefore, the statement is true.

The Central Board of Direct Taxes (CBDT) and the Central Board of Excise and Customs (CBEC) are both controlled by the Department of Revenue, which operates under the Ministry of Finance. The Department of Revenue handles matters related to direct and indirect taxes.

True. Disclosing the allocation of money raised from investors in an Initial Public Offering (IPO) or Follow-on Public Offering (FPO) is one of the responsibilities of the Compliance Officer. The Compliance Officer ensures that the company complies with relevant regulations and guidelines, including disclosing financial information and maintaining transparency in the allocation of funds.

A Depository Participant (DP) is an agent of the depository. Depositories are institutions that hold securities of investors in electronic form. Investors open an account with the depository through a registered Depository Participant. The DP acts as an intermediary between the depository and the investors, providing depository services such as account opening, dematerialization, rematerialization, and other related services.

Corporate actions like Bonus Issue, Stock Split, and Share Consolidation can lead to changes in per share data. For example, in the case of a Bonus Issue or Stock Split, the total number of shares increases without any economic change in the company’s financials. This can result in a dilution of per share metrics such as earnings per share (EPS) and book value per share. Conversely, in a Share Consolidation, the total number of shares decreases, which can lead to an improvement in per share data. Therefore, “True.”

Stock split does not lead to any increase/decrease in the wealth of shareholders. The increase/decrease depends on the stock price.

A warrant is a financial instrument that provides the holder with the to buy long-term common stock at a specified exercise price over a specified period of time.

A key parameter while analyzing this sector is Average Revenue Per Unit (ARPU). It is calculated by total revenue divided by the number of subscribers, and the higher it is, the better for the company. It must be noted that India has among the lowest ARPUs in the world.

Excel- To calculate the compounded annual rate of return (CAGR) using Excel, follow these steps:

1. Open Microsoft Excel and create a new spreadsheet.
2. Enter the following values in separate cells:
– Begin Price: 11 (cell A1)
– End Price: 12.50 (cell B1)
– Holding Period (in years): 1.0958 (cell C1)
3. In cell D1, enter the formula: =((B1/A1)^(1/C1))-1
4. Press Enter to calculate the result.
5. The cell D1 will display the CAGR, which is approximately 0.1236 or 12.36%.

By using Excel, you can easily perform the calculation and obtain the CAGR of approximately 12.36% for Mr. Singh’s investment.

Solve with Calculation-

To calculate the compounded annual rate of return (CAGR) for Mr. Singh’s investment, you can use the formula: [(End NAV / Begin NAV)^(1/n)] – 1.

In this case, the Begin NAV is Rs 11, the End NAV is Rs 12.50, and the holding period is 400 days, which is approximately 1.0958 years.

Using this information, we can calculate the CAGR as follows:

CAGR = [(End NAV / Begin NAV)^(1/n)] – 1

= [(12.50 / 11)^(1/1.0958)] – 1

≈ 0.1236 or 12.36%

Therefore, Mr. Singh’s compounded annual rate of return is approximately 12.36%.

The telecom industry also faces a threat of substitutes. Mobile phones have overtaken the once dominant landline phones. In the future, some new technology may make mobile phones obsolete. Some industries like power, healthcare, education, etc., do not have the threat of substitutes at all.

All of the above s are considered economic factors in PESTLE analysis. Monetary policies of the RBI, country’s dependence on other nations for essential natural resources, and forex reserves are key economic aspects that influence the business environment and have an impact on organizations’ operations, growth, and sustainability.

Once a draft of the research report is ready, it should be rechecked for financial figures, spell-checks, and grammatical errors. However, validation of the conclusion is not a part of the editing process.

The analyst’s opinion is likely to be included in all of the mentioned sections of a research report. The valuation section provides the analyst’s opinion on the value of the company or its stock. The industry analysis section includes the analyst’s opinion on the industry’s prospects. The financial forecasting section involves the analyst’s opinion on future financial performance. The research report combines various sections that reflect the analyst’s opinions and analysis.

Both low interest rates and low inflation contribute to economic recovery from a recession. Low interest rates stimulate borrowing and investment, which can boost economic activity. Low inflation allows central banks to implement expansionary monetary policies, making credit more affordable and encouraging spending and investment. These factors combined can help revive economic growth and bring about a recovery from a recession.

In SCP analysis, industry structure refers to all of the mentioned factors. It includes the market size, the growth rate of the industry, and the relationships among the players in the industry. SCP analysis aims to understand the competitive dynamics and market structure within an industry to analyze its performance and behavior.

In the Pioneering Stage of a business life cycle, the business concept is still being proven or has just been proven. This stage involves testing and validating the viability of the business idea and establishing its initial market presence. Therefore,

According to SEBI (Securities and Exchange Board of Indi standards of corporate governance, independent directors should constitute at least 50% of the board if the chairman is an executive director. In all other cases, it requires 1/3rd of the board to be comprised of independent directors. Therefore,

All of the mentioned factors are advantages of merger and acquisition (M& activities. Diversification can be achieved through acquiring companies in different industries or geographic locations. Synergy refers to the combined efficiency and increased value that can be achieved through M&A. Taxation benefits can arise from utilizing tax shields or taking advantage of favorable tax regulations. Therefore, all of the mentioned factors contribute to the advantage of M&A activity.

The Registrar of Companies (ROC) is the authority appointed under the Companies Act to register companies and ensure their compliance with the provisions of the law. SEBI, on the other hand, is responsible for regulating the securities market in India. Therefore, the statement is false.

The Price to Earnings Ratio (PEG) is a valuation ratio that relates a company’s price-to-earnings (PE) ratio to its growth rate. It is used to assess the relative value of a stock considering both its earnings and expected growth.

To calculate the PEG ratio, we divide the PE ratio by the growth rate. In this case, the given PE ratio is 25 and the potential growth rate of the company is 20% for the next few years.

PEG ratio = PE ratio / Growth rate
= 25 / 20
= 1.25

Therefore, the PEG ratio for the company is 1.25. This indicates that the company’s stock price is relatively valued considering its earnings and growth rate.

To clarify, the Debt to Equity ratio of 1.5:1 means that for every 1.5 units of debt, there is 1 unit of equity. Given that the total size of the balance sheet is Rs 50 lakhs, we can calculate the equity component using the following steps:

1. Determine the total units in the ratio: 1.5 + 1 = 2.5
2. Divide the total size of the balance sheet by the total units: Rs 50 lakhs / 2.5 = Rs 20 lakhs

Therefore, the equity component of the balance sheet is Rs 20 lakhs.

A Rights Issue is open for subscription for a minimum period of 15 days and a maximum period of 30 days.

Credit risk or default risk refers to the possibility of a bond issuer being unable to make expected interest rate payments and/or principal repayment. Equity shares do not have default risk as the issuer is not obligated to repay the amount. Therefore,

According to SEBI (Research Analyst) Regulation 18: Limitations on publication of research report, public appearance and conduct of business, etc., a research analyst or research entity should not issue a research report that is not consistent with the views of the individuals employed as research analysts regarding a subject company. Therefore,

Correct and detailed management views can be obtained only through personal interactions. These views are generally not available elsewhere.

we have a scenario where the sales of Jupiter Trading Co Ltd. are Rs 750,000. We are provided with certain expenses and tax rates, and we need to calculate the net profit.

Here’s a step-by-step breakdown of the calculations:

Sales: The total sales of the company are given as Rs 750,000.

Cost of Goods Sold: The cost of goods sold is calculated as 25% of the sales. Therefore, 25% of Rs 750,000 is Rs 187,500.

Operating Expenses and Depreciation: The operating expenses and depreciation are given as Rs 233,000.

Interest Expenses: The interest expenses are given as Rs 140,000.

Income Before Tax: To calculate the income before tax, we subtract the cost of goods sold, operating expenses and depreciation, and interest expenses from the sales.

Income Before Tax = Sales – Cost of Goods Sold – Operating Expenses and Depreciation – Interest Expenses
= Rs 750,000 – Rs 187,500 – Rs 233,000 – Rs 140,000
= Rs 189,500

Tax: The tax rate is given as 25% of the income before tax. Therefore, 25% of Rs 189,500 is Rs 47,375.

Net Profit: Finally, we calculate the net profit by subtracting the tax from the income before tax.

Net Profit = Income Before Tax – Tax
= Rs 189,500 – Rs 47,375
= Rs 142,125

Hence, the net profit of the company is Rs 142,125.

If a government changes its expansionary fiscal policy to a contractionary fiscal policy, the equity markets are likely to go down. A contractionary fiscal policy involves reducing government spending and increasing taxes, which can lead to decreased economic activity. This can negatively impact corporate profits and investor sentiment, causing a decline in equity markets. Therefore, a shift from an expansionary to a contractionary fiscal policy is generally associated with a downward trend in equity markets.

The dividend per share can be calculated by multiplying the earnings per share (EPS) by the dividend payout ratio.

Given the information provided:
Market Price = Rs 40.50
PE ratio = 13.50
Dividend payout ratio = 70%

First, let’s calculate the EPS:
EPS = Market Price / PE ratio
EPS = 40.50 / 13.50
EPS = 3

Next, we can calculate the dividend per share:
Dividend Per Share = Dividend Payout Ratio * EPS
Dividend Per Share = 70% * 3
Dividend Per Share = Rs 2.10

Therefore, the dividend per share is Rs 2.10.

Inventory Turnover ratio gives the number of times inventory is rolled over by a company. The Current ratio measures the ability of the company to meet its short-term liabilities.

False. While an increase in national income can contribute to improving the standard of living, it is not a guarantee. Factors such as income distribution, population growth, and inflation can affect the actual improvement in the standard of living. Hence, a rise in national income does not necessarily ensure a rise in the standard of living.

Macroeconomics focuses on studying the overall state of the economy, including factors such as domestic production, domestic consumption, general price levels, economic growth, and the overall quality of life. Therefore, it helps in understanding the general state of the economy.

It requires the combination of knowledge, experience, and professional judgment to arrive at a fair valuation of any asset.

To calculate the Debt component of the company’s Balance Sheet, we need to use the given information of the Debt to Equity ratio (2:1) and the total size of the Balance Sheet (Rs 2,700,000).

First, we determine the sum of the ratio’s parts (2 + 1 = 3), which represents the total proportion of Debt and Equity in the Balance Sheet.

Next, we divide the total size of the Balance Sheet by this sum to find the value of each part:

Part value = Total size of Balance Sheet / Sum of ratio’s parts = Rs 2,700,000 / 3

Finally, we calculate the Debt component by multiplying the part value by the Debt ratio (2/3):

Debt = Part value * Debt ratio = (Rs 2,700,000 / 3) * (2/3) = Rs 1,800,000

Therefore, the Debt of the company is Rs 1,800,000.

This explanation provides a clear and concise calculation method for determining the Debt component based on the Debt to Equity ratio and the total size of the Balance Sheet.

Enterprise Value (EV) is a measure of a company’s total value, representing the theoretical takeover price. It is calculated by adding the market value of equity (market capitalization) to the market value of debt and then subtracting cash and cash equivalents.

In the given scenario, the market capitalization is Rs 28 lakhs, the total debt is Rs 7 lakhs, and the cash and cash equivalents are Rs 6 lakhs. To calculate the Enterprise Value (EV), we can use the formula:

EV = Market value of equity + Market value of debt – Cash and cash equivalents

EV = Rs 28 lakhs + Rs 7 lakhs – Rs 6 lakhs
= Rs 29 lakhs

Therefore, the Enterprise Value (EV) based on the given information is Rs 29 lakhs.

In the balance of payment statement, the current account records the transactions related to imports and exports of goods and services. If imports are more than exports, it indicates a current account deficit, while if exports are more than imports, it indicates a current account surplus. Therefore,

Let’s assume the Sales = 100. As sales are double (200%) of EBIT, EBIT will be half of sales. So the EBIT is 50 (Half of 100).

Now, to calculate the Net Profit, we need to multiply the EBIT by the Net Profit margin. The Net Profit margin is given as 30%, so the Net Profit will be:

Net Profit = EBIT * Net Profit margin
= 50 * 0.30
= 15

Now, we need to calculate the EBIT as a percentage of Net Profit. This can be done by dividing the EBIT by the Net Profit and multiplying by 100:

EBIT % of Net Profit = (EBIT / Net Profit) * 100
= (50 / 15) * 100
= 333.33%

Therefore, the correct calculation for the EBIT % of Net Profit is 333.33%, not 166.66%.

The Equity to Asset Ratio is calculated by dividing Equity by Assets. In this case, Equity = Total Assets – Total Liabilities = Rs 124,000 – Rs 79,000 = Rs 45,000. Therefore, the Equity to Asset Ratio is Rs 45,000 / Rs 124,000 = 0.36.

SCP Analysis considers the performance, structure, and conduct of an industry.

To calculate the future value of an investment in an easier way, you can follow these steps:

Start with the initial investment amount, which is Rs. 75,000 in this case.
Add the annual interest rate (6% or 0.06) to 1: 1 + 0.06 = 1.06.
Raise the result to the power of the number of years, which is 10: 1.06^10.
Multiply the initial investment amount by the calculated result: Rs. 75,000 × 1.06^10.
By performing the calculation, you can determine the future value:

Rs. 75,000 × 1.06^10 ≈ Rs. 1,34,250.

To calculate the Price-to-Earnings (P/E) ratio, we need to divide the current stock price by the Earnings per Share (EPS).

Given:
Current stock price (Market Price) = Rs 1200
Profit After Tax (PAT) = Rs 68,00,000
Number of outstanding shares = 100,000

First, calculate the Earnings per Share (EPS) by dividing the Profit After Tax by the number of outstanding shares:
EPS = PAT / Number of outstanding shares
EPS = 68,00,000 / 100,000
EPS = Rs 680

Next, calculate the P/E ratio by dividing the current stock price by the EPS:
P/E Ratio = Market Price per share / EPS
P/E Ratio = 1200 / 680
P/E Ratio ≈ 1.7647

Therefore, the P/E ratio of ABC Software Ltd is approximately 1.7647.

To calculate the Net Profit of the company, we start with the given EBIT (Earnings Before Interest and Taxes) of Rs 400,000, which represents 40% of the business sales. We can determine the total sales amount by dividing the EBIT by the percentage equivalent of 40%, which is 0.4 (40% converted to decimal form).

Sales = EBIT / 0.4 = Rs 400,000 / 0.4 = Rs 1,000,000

Now, we need to calculate the Net Profit margin, which is given as 10% of the sales. To find the Net Profit, we multiply the sales amount by the Net Profit margin percentage, converted to decimal form.

Net Profit = Sales * Net Profit Margin = Rs 1,000,000 * 0.1 = Rs 100,000

Therefore, the Net Profit of the company is Rs 100,000.

This explanation provides a step-by-step calculation process, clarifying how the sales amount and net profit are derived based on the given information.

All of the above factors affect analysis and decision making. Efficiency of operations impacts the effectiveness of processes and resource utilization. Management ethics influence the ethical considerations in decision making. Revenues and costs provide crucial financial information for analysis. Considering all these factors is essential for informed decision making.

Rs 20 lakhs. To calculate the Asset to Equity ratio, we need to find the equity of the company. First, we determine the number of shares using the Earnings Per Share (EPS) formula. Then, we calculate the market price of a share using the Price to Earnings ratio. Finally, we compute the equity by multiplying the book value per share by the number of shares. The Asset to Equity ratio is then calculated by dividing the total assets by the equity. In this case, the equity is Rs 20 lakhs.

Capital Employed can be calculated using the formula: Capital Employed = Total Equity + Total Debt. In this case, the given values are Total Equity = Rs 700,000 and Total Debt = Rs 400,000.

Capital Employed = Total Equity + Total Debt
= Rs 700,000 + Rs 400,000
= Rs 1,100,000

Therefore, the correct calculation for the Capital Employed is indeed Rs 1,100,000. This represents the total funds employed by the company through its equity and debt sources.

Foreign Direct Investment (FDI) has multiple benefits in addition to bringing in capital to the country. It can lead to job creation, introduction of new technologies, new managerial skills, and the development of new products and services. Therefore, FDI does not necessarily lead to job destruction in the economy.

Business risk, also known as operating risk, is an unsystematic risk specific to an individual company or industry. It can be diversified away by including other assets in the portfolio. Therefore, the statement is true.

True. Business risk, also known as operating risk, refers to the risk caused by factors that affect the day-to-day operations of a company. It includes risks related to sales volume, production efficiency, competition, technological changes, and other operational factors. Business risk directly impacts the company’s profitability and ability to generate sustainable earnings.

The Net Worth of a company can be calculated by multiplying the Book Value per share by the number of outstanding shares.

In this case, the company has 200,000 shares and a Price to Book Value ratio of 7. To calculate the Book Value, we divide the Price to Book Value ratio by the Price to Book Value ratio (1/7) and multiply it by the market price per share. Since the Book Value is given as 5, we can calculate the market price per share as 1/7 * 5 = 5/7.

Now, we can calculate the Net Worth by multiplying the Book Value per share (5/7) by the number of outstanding shares (200,000):

Net Worth = Book Value per share * Number of outstanding shares
= (5/7) * 200,000
= 1,000,000

Therefore, the Net Worth of the company is Rs 1,000,000.

This explanation provides a step-by-step calculation process for finding the Net Worth of a company based on the Book Value per share and the number of outstanding shares.

Earnings Per Share (EPS) = Net Income / No. of Shares = 400,000 / 0.50 = 800,000 shares.

Return on Equity (ROE) is the Net Profit as a percentage of Equity. Net Profit is Rs 400,000. So, Equity will be 400,000 / (40 x 100) = 1,000,000.

Book Value = Equity / No. of Shares = 1,000,000 / 800,000 = 1.25.

Price to Book Value (P/BV) is a ratio that compares the current market price of a company’s share to its book value. So, the Current Market Price = P/BV x Book Value = 6 x 1.25 = Rs 7.50.

Therefore, the Market Price of the company’s share, based on the given data, is Rs 7.50.

False. Microeconomics focuses on individual households and firms rather than the aggregate aspects of the economy. It analyzes the behavior of consumers and producers, market interactions, and resource allocation at a micro-level. Macroeconomics, on the other hand, examines the overall economy and factors affecting aggregate supply and demand, such as GDP, unemployment, and inflation.

Given that the Quick Ratio is 1 and the total current assets are Rs 80,000, we can indeed calculate the approximate value of the inventory.

Quick Ratio = (Current Assets – Inventory) / Current Liabilities

Substituting the values:

1 = (80,000 – Inventory) / Current Liabilities

Since the Quick Ratio formula measures the company’s ability to cover its current liabilities with its most liquid assets (excluding inventory), a Quick Ratio of 1 implies that the company has just enough liquid assets to cover its current liabilities.

Therefore, the approximate value of the inventory would be Rs 40,000 (Rs 80,000 – Rs 40,000 = Rs 40,000), assuming the remaining assets besides inventory are sufficient to cover the current liabilities.

The growth rate is calculated as the product (multiplication) of the retention rate and the return on equity, not by adding them. Therefore, the statement is false.

Key Man Risk refers to the risk of dependency on a key individual for business operations. If decision-making is highly concentrated in one person and that person leaves the organization, it can disrupt the decision-making process and impact operations.

When imports are more than exports, the country will have a current account deficit. The current account captures transactions related to imports and exports of goods and services. Therefore,

Book Value is calculated as Net Worth divided by the number of outstanding shares. In this case, Book Value = Net Worth / 200,000 = 5. So, Net Worth = Book Value * Number of Shares = 5 * 200,000 = Rs 1,000,000.