Research Analyst – Feel Real Exam – 1

The risk of loss of principal or loss of a financial reward stemming from a borrower's failure to repay a loan or otherwise meet a contractual obligation is known as Credit Risk.

Tom trades are settled on the day next to the trading day, which is T+1. Cash trades, on the other hand, are settled on the same trading day, denoted as T+0.

To appoint directors of Financial Intelligence Unit. Financial Intelligence Unit – India (FIU-IND) was set by the Government of India in 2004 as the central national agency responsible for receiving, processing, analyzing, and disseminating information relating to suspect financial transactions. The directors of FIU are appointed by the Central Government and not by SEBI.

To calculate the Value of Equity based on Enterprise Value (EV) and Value of Debt, we need to subtract the Value of Debt from the EV.

Given that the EV is Rs. 5000 crores and the Value of Debt is Rs. 800 crores, we can calculate the Value of Equity as follows:

Value of Equity = EV - Value of Debt
Value of Equity = Rs. 5000 crores - Rs. 800 crores
Value of Equity = Rs. 4200 crores

Therefore, the Value of Equity is Rs. 4200 crores. This represents the estimated value of the company's equity based on the given EV and Value of Debt.

All the above Macroeconomic Variables will be considered while analyzing an economy.

Earnings Per Share (EPS) is calculated by dividing the net profit of a company by the number of shares outstanding. EPS represents the portion of a company's profit allocated to each outstanding share and indicates the profitability on a per-share basis.

In a bear market, the prices of shares tend to be low. Consequently, the Price Earning (PE) ratios, which compare the market price of shares to the earnings per share, also tend to be low.

All of the above. The primary purpose of conducting a SWOT analysis is to assess both internal and external factors that can impact the performance and competitiveness of a business. It involves identifying and evaluating the internal strengths and weaknesses of the business, analyzing the external opportunities and threats in the business environment, and determining the competitive position of the business in its industry. By considering these factors, businesses can develop strategies to leverage their strengths, address weaknesses, capitalize on opportunities, and mitigate threats.

All of the above. When the fair value of a share is significantly lower than its current price, it indicates that the stock is overvalued. In a research report, it would be appropriate to express this by recommending not to consider buying the share as it's overvalued, recommending the investor to sell the share at the earliest, and assigning an underweight rating to the stock. All of these options convey the same message that the stock is overvalued and may not be a good investment.

When analyzing the 'Performance' of an industry in SCP Analysis, analysts consider both the Return on Equity and the Return on Capital Employed as key performance indicators. Additionally, they may also analyze factors such as the competition within the industry to assess the industry's performance.

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

Capital Account Surplus. The balance of payment statement of a country is broadly divided into two accounts: the current account and the capital account. The current account includes details of transactions on revenue account, such as imports and exports of goods and services, while the capital account captures all capital flows, such as foreign direct investment (FDI), foreign institutional investment (FII), loans, and grants. The capital account will be in surplus if inflows are more than outflows, and it will be in deficit if outflows are more than inflows on the capital account.

National income of an economy can be measured through various methods such as gross domestic product (GDP) and gross national product (GNP). These methods include the Product Method, Income Method, and Expenditure Method, which provide different perspectives on calculating national income.

Economic Cycle. Prices of many hard commodities, such as gold and oil, tend to go up and down in cycles. These commodity cycles are often driven by economic cycles. During an expansionary phase, commodity prices tend to rise due to increased demand. Conversely, during a recessionary phase, commodity prices tend to fall as demand decreases. Secular trends refer to long-term trends that persist over many years or decades and can also influence commodity prices, but they may not have the most significant impact in the near term. Inventory cycles and monetary policy can affect commodity prices, but they are secondary factors compared to the overall economic cycle.

To calculate the Price/Earnings (P/E) ratio, we divide the stock price by the Earnings Per Share (EPS).

In this case, if the stock price is Rs 66.40 and the EPS is Rs 37.68, the calculation would be:

P/E ratio = Stock Price / EPS
= Rs 66.40 / Rs 37.68
= 1.762

Therefore, the P/E ratio is 1.762, indicating that investors are willing to pay 1.762 times the company's earnings for each share of stock.

the Cash Flow Statement. The Cash Flow Statement provides a summary of the various sources and uses of cash during a specific period, typically a year. It helps analyze the company's cash flow from operating activities, investing activities, and financing activities. By reviewing the Cash Flow Statement, one can understand the net increase or decrease in cash and cash equivalents during the period and gain insights into the company's liquidity, cash generation, and utilization. The Balance Sheet provides a snapshot of a company's financial position at a specific point in time, while the Income Statement presents the company's revenue, expenses, and profitability during a specific period. The Working Capital Statement is not a commonly used financial statement.

When analyzing a business, looking at the historical financials of the company can provide a quick sense of its quality. Historical financial performance reveals the company's past profitability, growth, and financial stability, which are essential indicators of business quality.

Businesses with high entry barriers will have pricing power, meaning they can sell products at a premium without fear of losing customers. This gives them a competitive advantage and allows them to sustain their business in the long term.

Businesses in competitive industries are price takers rather than price makers because of the presence of stiff competition. If a competitor reduces prices, other businesses must follow suit to remain competitive in the market. While factors such as low margins and low purchasing power of customers can influence pricing, the primary reason is the need to match competitors' prices.

The quality of management is a major differentiating factor between a great organization and an ordinary one. While accounting policies and organization structure can be similar across organizations, it is the competence, integrity, and leadership of the management that truly sets apart great organizations.

Capital Adequacy. CAMELS is an acronym used in the context of bank ratings and stands for Capital Adequacy, Asset Quality, Management, Earnings, Liquidity, and Sensitivity to Market Risk. It is a framework used by regulators and rating agencies to evaluate the overall financial health and stability of banks. Each letter in the CAMELS acronym represents a specific aspect of the bank's operations and risk profile. While credit risk is an important component of bank ratings, it is represented by the letter 'A' in the CAMELS framework, which stands for Asset Quality. Compliance and Cash Flow Management are not included in the CAMELS acronym. Compliance with regulatory requirements is a general expectation for all banks, and cash flow management is an aspect of liquidity management, which is already covered in the CAMELS framework.

Capital Goods industry. Deeply cyclical industries witness extreme cyclicality in their revenues as they are largely driven by the economic cycle and/or commodity cycles. The capital goods industry exhibits such behavior. During recessionary conditions, their sales drop significantly as most companies put their capacity expansion plans on hold. However, these industries experience massive growth at the first signs of economic recovery as pent-up demand results in higher orders.

that Passive Investing means investing in a broad set of securities that represent an asset class. Passive investing involves investing in a diversified portfolio of securities that fairly represents a particular asset class. It typically follows an indexing strategy, where the investor buys all the securities that are part of an index representing the desired asset class. The objective of passive investing is to earn the rate of return provided by the selected asset class. Passive investors do not engage in active stock picking or try to outperform the market. The other options do not accurately describe passive investing. Investing in matured businesses, buying and holding specific equity shares, or investing in alternative asset classes are different investment strategies that are not synonymous with passive investing.

to prepare financial statements for external users. The primary objective of financial accounting is to provide relevant and reliable financial information to external users, such as investors, creditors, regulators, and other stakeholders. This information is used by external parties to make informed decisions regarding their interactions with the company, such as investing, lending, or assessing the company's financial performance. While financial accounting does involve recording and analyzing financial transactions, its main purpose is to produce financial statements that accurately reflect the company's financial position, performance, and cash flows for external reporting purposes. Providing information for internal decision-making is the primary objective of managerial accounting. Assessing profitability is an aspect of financial analysis, which uses financial accounting information but is not the primary objective of financial accounting itself.

Top Down approach starts with economic analysis, moves to industry analysis, and then finally to the selection of companies in an Industry. Bottom Up approach starts with company analysis first, then industry and economic analysis. Sometimes, bottom-up analysts focus purely on the dynamics of business and industry with little or no attention to the Economic factors as their focus remains on buying and holding fundamentally strong businesses.

Equities may produce recurring earnings in the form of dividends and then one-time cash flows on sale.

To calculate the Net Sales, we subtract the amount of indirect taxes from the Gross Sales. In this case, the Gross Sales is Rs 10 Lakhs and the indirect taxes amount to Rs 2 Lakhs.

Therefore, the Net Sales would be Rs 10 Lakhs - Rs 2 Lakhs = Rs 8 Lakhs.

Therefore, the Net Sales amount to Rs 8 Lakhs. This represents the total revenue generated by the company after deducting the indirect taxes.

Callable bonds. A callable bond, also known as a redeemable bond, is a bond that the issuer may redeem before it reaches the stated maturity date. Callable bonds give the issuer the right to call back or redeem the bonds from bondholders. This allows the issuing company to pay off its debt early if it chooses to do so, usually when interest rates have fallen or when the company wants to restructure its debt. Convertible bonds give bondholders the option to convert their bonds into a specified number of shares of the issuer's common stock. Puttable bonds give bondholders the right to sell the bonds back to the issuer before maturity. Zero coupon bonds do not pay periodic interest but are issued at a discount and redeemed at par value.

Entry barriers in an industry would be high if there are lots of licensing required in the business, patents and copyrights prevent new entrants, huge investments in specialized assets pose a challenge, and strong brands, strong distribution networks, specialized execution capabilities, and customer loyalty with existing products/services exist in the business.

False. In expansionary fiscal policy, the government's spending exceeds its income. It is usually undertaken during recessions or slow-moving economies to stimulate economic growth. The government uses its excess income to fund increased government spending, such as infrastructure projects, social programs, or tax cuts, to stimulate aggregate demand and boost economic activity.

Product differentiation. In a monopolistic competition market structure, there are many buyers and sellers, and products are differentiated from one another. Product differentiation means that each firm offers a slightly different product or service, which allows them to have some control over pricing. This differentiation creates a certain degree of market power for each firm, but there are no significant barriers to entry or exit in this type of market structure. Homogeneous products are characteristic of perfect competition, and barriers to entry are more prevalent in monopolies or oligopolies.

The portfolio was underweight in that security.

Capital flows from exports are not part of the Capital Account. The Capital Account of a country's balance of payments captures capital flows such as foreign direct investment (FDI), foreign institutional investment (FII), loans, grants, and other capital-related transactions. Capital flows from exports are included in the Current Account.

To calculate the Inventories, we need to use the Quick Ratio formula.

The Quick Ratio is calculated as (Current Assets - Inventories) divided by Current Liabilities.

In this case, if the Quick Ratio is 1.5, the Current Assets are Rs 1,00,000, and the Current Liabilities are Rs 40,000, the calculation would be:

1.5 = (Rs 1,00,000 - Inventories) / Rs 40,000

Multiplying both sides by Rs 40,000:

1.5 * Rs 40,000 = Rs 1,00,000 - Inventories

Rs 60,000 = Rs 1,00,000 - Inventories

Subtracting Rs 1,00,000 from both sides:

Rs 1,00,000 - Rs 60,000 = Inventories

Rs 40,000 = Inventories

Therefore, the value of Inventories is Rs 40,000.

To calculate the Cost of Equity using the Capital Asset Pricing Model (CAPM), we can use the formula:

Cost of Equity = Risk-Free Rate + Beta * Equity Risk Premium

Given:
Risk-Free Rate = 6% (0.06)
Beta = 0.70
Equity Risk Premium = Market Risk Premium = 8% (0.08)

Substituting the values into the formula:

Cost of Equity = 0.06 + 0.70 * 0.08
Cost of Equity = 0.06 + 0.056
Cost of Equity = 0.116 or 11.6%

Therefore, the Cost of Equity, based on the given data, is 11.6%.

Gold is an asset where the investor typically receives a one-time cash inflow upon selling it. In the case of equity and bonds, there can be regular inflows in the form of dividends and interest, as well as the final inflow when they are sold. However, gold does not provide regular income streams and is primarily associated with a one-time cash inflow.

A convertible bond or debenture is generally issued as a debt instrument with the option for investors to convert the amount invested into equity of the issuer company later.

The Code of Conduct/Ethics for Research Analysts includes elements such as honesty, fairness, prohibition of insider trading or front running, and maintaining confidentiality. However, it does not include non-compliance, as compliance with regulatory requirements is an integral part of the code.

Valuation parameters consist of intrinsic value, P/E, P/BV, margin of safety aspects. Qualitative parameters take care of aspects like business/revenue model, SWOT analysis, competition in the industry, technology aspects, etc. Quantitative parameters would consist of financial aspects such as ratio analysis, analysis of cash flows, etc.

An Independent director. According to SEBI regulations, the chairman of the Remuneration Committee should be an independent director. The Remuneration Committee is responsible for determining the remuneration of directors and senior management. While the committee may consist of other members, the chairman must be an independent director. An executive director is a director who is also an employee of the company. The chairman of the board may not necessarily lead the Remuneration Committee. A non-executive director may be a member of the committee, but the chairman must be independent.

that Pricing Power means that the company has the ability to increase the prices of its products without affecting the demand. Pricing power refers to a company's ability to independently determine and charge the price of its products or services. A company with strong pricing power can increase prices without significant negative impact on demand. This ability can result from factors such as brand strength, unique product offerings, customer loyalty, or a lack of close substitutes in the market. The other options are not the precise meaning of Pricing Power. While low manufacturing costs or high bargaining power may contribute to a company's overall competitiveness, they do not necessarily represent Pricing Power. High customer purchasing power is a characteristic of customers, not the company itself.

The Return on Capital Employed (ROCE) is calculated by dividing the Earnings Per Share (EPS) by the Book Value per share and multiplying by 100.

Given the EPS of Rs. 5 and the Book value per share of Rs. 25, the calculation is as follows:

ROCE = (EPS / Book Value per share) * 100
ROCE = (5 / 25) * 100
ROCE = 0.2 * 100
ROCE = 20%

Therefore, the Return on Capital Employed (ROCE) for the given scenario is 20%. ROCE is a measure of profitability and efficiency that indicates the percentage return generated by the capital invested in the company. It assesses how effectively a company utilizes its capital to generate profits.

Strengths in SWOT analysis refer to internal capabilities of the company that allow it to exploit external opportunities and withstand threats. Strengths of a company include a strong financial position, highly valuable intellectual properties, low customer concentration, low cost, or high margins, etc. From the options given above, only 'Large number of patents' is an internal strength of the company.

To maintain price stability and ensure financial stability. The primary objective of monetary policy is to maintain price stability, which means keeping inflation under control and ensuring that prices remain stable over time. Additionally, monetary policy also aims to ensure financial stability by promoting the stability and soundness of the financial system. While monetary policy can indirectly influence economic growth, its primary focus is on maintaining price stability and financial stability.

This approach is known as the Top Down Approach. It starts with analyzing the overall economic conditions, such as government policies and investments, and then narrows down to specific industries, such as infrastructure. Finally, it focuses on selecting individual companies within the chosen industry.

To calculate the Return on Equity (ROE), we can use the formula: ROE = Net Profit / Equity Capital.

Given that the Net Profit is Rs 24,000 and the ROE is 25%, we can rearrange the formula to solve for Equity Capital:

Equity Capital = Net Profit / ROE
Equity Capital = Rs 24,000 / 0.25
Equity Capital = Rs 96,000

Therefore, the Equity Capital is Rs 96,000.

An industry with high barriers to entry, weak buyers' bargaining power, few substitutes, and low competition will have strong pricing power and high profit margins. This is because the industry has limited competition and control over pricing, allowing businesses to charge higher prices and earn higher profit margins.

Open Ended Schemes do not have a fixed maturity period and provide investors with the flexibility to buy and sell units at any time. Close Ended Schemes have a fixed maturity period, and FMP (Fixed Maturity Plan) Schemes also have predetermined maturity dates.

Consolidation. In a consolidation, two or more companies combine to form a completely new company, and the previous entities cease to exist. In a merger, one company acquires another, and the acquired company is absorbed into the acquiring company but does not necessarily cease to exist. In an acquisition or takeover, one company acquires a significant portion of the stock or assets of another company, but both entities typically continue to exist as separate entities.

NPAs are typically low when interest rates are low as defaults become less due to affordability of Equated Monthly Installments (EMIs).

To calculate the asset-to-equity ratio, we need the total assets and equity. In this case, the total assets are Rs 10,00,000 and the equity is Rs 7,38,400.

The asset-to-equity ratio is calculated by dividing the total assets by the equity.

Asset-to-Equity Ratio = Total Assets / Equity

Substituting the given values:

Asset-to-Equity Ratio = Rs 10,00,000 / Rs 7,38,400

Simplifying the calculation:

Asset-to-Equity Ratio ≈ 1.354

Therefore, the asset-to-equity ratio is approximately 1.354.

Retail store formats rely on low-cost procurement of goods from manufacturers and selling them on wafer-thin margins to a large number of people. Hence, footfalls become an important industry driver.

Stocks of large, well-established, and financially stable companies. The term 'Blue Chip' refers to stocks of large, well-established companies that are known for their financial stability, market leadership, and long track record of reliable performance. Blue-chip companies are typically leaders in their industries and have a history of consistent earnings and dividends. They are considered relatively safe investments, offering stability and lower risk compared to smaller or less-established companies. Stocks with significant growth potential may be referred to as growth stocks. Stocks of highly leveraged companies or companies with low market capitalization are not typically associated with the term 'Blue Chip.'

To calculate the compounded rate of return, we can use the formula: [(End Price / Begin Price)^(1/n)] - 1. Let's substitute the given values:

Simplifying this expression:

(1.207^0.73) - 1

Calculating the exponent first:

1.147 - 1

Subtracting 1 from the result:

0.147

Multiplying by 100 to express as a percentage:

0.147 x 100 = 14.7%

Therefore, the compounded rate of return is 14.7%. This indicates the average annualized return over the given period.

Zero Coupon Bonds. Zero Coupon Bonds do not pay periodic interest like regular bonds. They are issued at a discount to their face value and redeemed at par value upon maturity. The return on these bonds is derived from the difference between the issue price and the redemption value. Junk Bonds are high-yield bonds with speculative or below-investment-grade ratings. Puttable Bonds give the bondholder the right to sell the bond back to the issuer before maturity. Convertible Bonds allow bondholders to convert their bonds into a specified number of shares of the issuer's common stock.

Insider information refers to the price-sensitive information about the company which is not available to the general public. As per SEBI (Prohibition of Insider Trading) Regulations, “insider” is any person who is a connected person or one in possession of or having access to unpublished price-sensitive information. The regulations define unpublished price-sensitive information that affects the company or its securities as those that are not generally available and which can materially affect the price of the securities.

Insider information is material non-public information that, when published, would immediately affect an investor’s decision to buy or sell the security. Whether information can be considered insider depends on the source of the information (how reliable it is), its impact, and its certainty. From the three options given above, the Managing Director mentioning an acquisition proposal not yet disclosed to the public will be considered insider information.

To estimate the overall tyre market size, we can calculate it based on the sales of the organized sector and the percentage of the organized sector market share.

Given that the sales of the organized sector are Rs 6,000 crore + Rs 8,000 crore + Rs 10,000 crore = Rs 24,000 crore, and this represents 80% of the tyre industry, we can calculate the total size of the tyre market.

Let's assume the total tyre market size as "X".

80% of X is equal to Rs 24,000 crore.

So, we can calculate X as:

X = (Rs 24,000 crore) * 100 / 80

X = Rs 30,000 crore

Therefore, the estimated overall tyre market size is Rs 30,000 crore. This suggests that the total value of tyre sales in the market is estimated to be Rs 30,000 crore.

All of the above.

The Registrar of Companies (ROC)

Strong financial position of the company. In SWOT analysis, strengths refer to internal capabilities of the company that allow it to exploit external opportunities and withstand threats. The strong financial position is an internal strength of the company. Booming economy and low interest rates are external factors, not internal strengths.

Winner's curse refers to the tendency of overpaying for an asset or security in a competitive bid just to ensure winning the bid. Although it may feel like a win behaviorally, financially it may result in a loss. Therefore, winner's curse is the bias where investors lose even after winning a trade.

The focus of macroeconomics is on factors that influence aggregate supply and demand in an economy such as unemployment rates, gross domestic product (GDP), overall price levels, inflation, savings rate, investment rate, etc.

Auditors provide a disclaimer when they are unable to verify any part of the financials on account of the non-availability of information.

To calculate the number of shares, we divide the Equity Capital by the Face Value. Given that the Equity Capital is Rs 5,73,47,560 and the Face Value is Rs 5, we have:

Number of Shares = Equity Capital / Face Value
Number of Shares = Rs 5,73,47,560 / Rs 5
Number of Shares = 1,14,69,512

Therefore, the number of shares is 1,14,69,512.

To calculate the Earnings Per Share (EPS), we divide the Net Profit by the number of shares. Given that the Net Profit is Rs 75,00,00,000, we have:

EPS = Net Profit / Number of Shares
EPS = Rs 75,00,00,000 / 1,14,69,512
EPS ≈ Rs 65.39

Therefore, the Earnings Per Share (EPS) is approximately Rs 65.39.

The cost of equity can be calculated using the formula: Cost of Equity = Risk-Free Rate + Beta * Market Risk Premium.

Given that the Risk-Free Rate is 7% and the Beta is 0.60, and the Market Risk Premium is 9%, we can calculate the cost of equity as follows:

Cost of Equity = 7% + 0.60 * 9%
Cost of Equity = 7% + 5.4%
Cost of Equity = 12.4%

Therefore, the cost of equity is 12.4%. This represents the required return on investment for equity shareholders, taking into account the risk-free rate, the company's beta, and the market risk premium.

Loans are not a component of the Current Account. The Current Account of a country's balance of payments mainly includes transactions related to imports and exports of goods and services. Loans fall under the Capital Account, which captures capital flows such as foreign direct investment (FDI), foreign institutional investment (FII), loans, and grants.

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

The unemployment rate is low during boom times in the economy. During periods of economic expansion or boom, more jobs are created, leading to a decrease in the number of unemployed individuals and a lower unemployment rate.

All of the options mentioned (credit risk, business risk, and liquidity risk) are examples of unsystematic risks. Unsystematic risk refers to the risk that is specific to individual securities or industries and can be diversified away by including a variety of assets in a portfolio.

Capitalization of revenue reserves takes place in the form of bonus shares. Bonus shares are additional shares given to shareholders in proportion to their holdings, and they are issued by capitalizing the revenue reserves of the company. Rights issues and stock splits do not involve the capitalization of revenue reserves.

All else held constant, a stock with a relatively low PE is considered undervalued/cheap. The PE ratio indicates the amount of money an investor needs to invest to receive 1 unit of profit. It is calculated using the current market price and the EPS. All else held constant, a stock with a higher PE ratio compared to the peer group numbers is considered an expensive stock. Similarly, a stock with a relatively low PE is considered an undervalued stock.

The Current Ratio measures a company's ability to meet its short-term obligations. It is calculated by dividing current assets by current liabilities. A higher current ratio indicates a better ability to cover short-term liabilities, demonstrating the company's liquidity and financial stability.

Balance Sheet. The balance sheet is a financial statement that provides a snapshot of a company's financial position at a specific point in time. It presents the company's assets, liabilities, and shareholders' equity, providing a summary of what the company owns and owes, as well as the shareholders' investment in the company. The income statement shows the company's revenues, expenses, and net income over a period of time, while the cash flow statement reports the cash inflows and outflows during a specific period. The statement of retained earnings shows the changes in retained earnings over time.

To calculate the dividend yield, we divide the dividend received by the amount invested and multiply by 100. Given that the dividend received is Rs 8000 and the amount invested is Rs 48,000, we have:

Dividend Yield = Dividend Received / Amount Invested x 100
Dividend Yield = Rs 8000 / Rs 48,000 x 100
Dividend Yield = 16.67%

Therefore, the dividend yield is 16.67%. This indicates the percentage return generated by the dividend received in relation to the amount invested.

Inflation can be controlled or reduced by the government through a combination of measures. By increasing the supply of goods and services, the government can help reduce prices. By reducing the overall demand through monetary or fiscal policies, the government can also help lower inflationary pressures. Therefore, both increasing supply and reducing demand are ways in which the government can control or reduce inflation.

Cash Flow Statement. The cash flow statement provides a summary of the various sources and uses of cash in a company over a specific period of time. It shows the inflows and outflows of cash from operating activities, investing activities, and financing activities.

Net worth = Book Value x No. of Shares = 9 x 25000 = Rs 225000.

Both the timing and amount of cash flows are certain and known to the holders of a simple bond. They know when and how much interest and principal payments they will receive. Capital appreciation, on the other hand, is not certain and depends on market conditions.

The threat of substitutes is high when the substitute products or services offer equal or better experiences to customers in terms of price, quality, and ease. Additionally, if the switching cost from one product/service to another is low or negligible, it further increases the threat of substitutes. Therefore, all of the above options contribute to a high threat of substitutes.

Both amortization of capital expenses and depreciation are non-cash charges. They are accounting entries that represent the allocation of costs over the useful life of an asset. In contrast, interest on foreign exchange borrowing is a cash charge as it involves an actual payment of interest.

Qualified Report. An auditor gives a qualified report if they are convinced that the whole or part of the financial statements do not reflect a true and fair view. This may occur when auditors disagree with the accounting policies followed by the company or if they identify significant discrepancies or irregularities in the financial statements. A report with a disclaimer is given when the auditor is unable to form an opinion on the financial statements due to limitations on the scope of the audit or lack of sufficient evidence. A negative report implies a negative opinion on the financial statements, indicating material misstatements or non-compliance with accounting standards. An unsigned report does not have any official status as it is not issued by the auditor.

When investing in shares, it is generally not advisable to base investment decisions solely on shares that the masses are buying. This is because following the herd mentality can lead to biased investment choices. Instead, factors such as conducting a SWOT analysis, considering government regulations, and analyzing competition in the industry are more appropriate for making informed investment decisions.

Analysts who prepare research reports of a listed company are typically restricted from trading in securities of that company for 30 days from the preparation of the report. This is to ensure the fairness and integrity of the information provided in the report and to avoid conflicts of interest.

Inventory. Current assets represent assets that are likely to benefit the organization within one operating cycle. Examples of current assets include inventory, current financial assets like bank balance, cash, and investments. Goodwill, intangible assets under development, and plant and equipment are non-current assets.

The Return on Equity (ROE) is calculated by dividing the earnings per share (EPS) by the book value per share and multiplying the result by 100.

In this case, if the EPS is 10 and the book value per share is 50, the calculation would be:

ROE = (EPS / Book Value per share) * 100
= (10 / 50) * 100
= 0.2 * 100
= 20%

Therefore, the Return on Equity is 20%, indicating that for every unit of equity invested, the company generates a return of 20%.

Free cash flows for equity (FCFE) is calculated by subtracting interest and net borrowing from the free cash flows to the firm (FCFF). It represents the cash flows available to equity shareholders after meeting interest obligations and borrowing costs.

A stock with a low PE Ratio may be considered undervalued because it indicates that the market is willing to pay less for each unit of earnings. When the PE Ratio is low, it suggests that the stock may be cheap and potentially a good investment opportunity.

To calculate the Dividend Per Share (DPS), we need to consider the Dividend Payout Ratio and the Earnings Per Share (EPS).

Given that the Retention Ratio is 60%, we can calculate the Dividend Payout Ratio as 100% - 60% = 40%.

The Earnings Per Share (EPS) is Rs 4, as calculated (Rs 80,000 / 20,000 shares).

To find the Dividend Per Share (DPS), we multiply the Dividend Payout Ratio by the EPS:
DPS = Dividend Payout Ratio * EPS
DPS = 0.40 * Rs 4
DPS = Rs 1.60

Therefore, the Dividend Per Share (DPS) is Rs 1.60. This means that for each share held, the company pays out Rs 1.60 as a dividend to the shareholders.

Recession. In the recession phase of the economic cycle, consumer confidence tends to be low. A recession is characterized by a significant decline in economic activity, including reduced employment, income, and consumption. As a result, consumer confidence decreases, as people become more cautious about their financial situation and tend to cut back on spending. During a slowdown phase, economic growth slows down, but it is not as severe as in a recession. The recovery phase is characterized by an improvement in economic indicators following a recession, and the expansion/boom phase represents a period of robust economic growth.

Greater than one. Beta measures the volatility of a stock relative to the market. A beta of 1 indicates that the stock's price will move with the market. A beta of less than 1 means that the stock will be less volatile than the market. A beta of greater than 1 indicates that the stock's price will be more volatile than the market. Therefore, if a stock is more volatile than the market, its beta will be greater than one.

Some companies may fail to fulfill their obligations to creditors or certain classes of shareholders. Under such conditions, a company and its creditors or members may enter into a scheme of arrangement to settle the issue. A scheme of arrangement is a court-monitored settlement process between the company and its creditors or members. It typically involves the reorganization of the share capital of the company. The outcomes can include the conversion of full or part of the debt into equity by creditors and the surrender of entire equity by existing shareholders.

Companies appoint Compliance Officers for all of the mentioned reasons. By regulation, companies are required to have a compliance officer to ensure adherence to legal and regulatory requirements. Compliance officers also play a role in managing investor complaints and facilitating communication with regulatory bodies.

Airlines. During a recession, there is a decrease in income levels, unemployment, and a decrease in consumption. In such times, the number of people who can afford to travel by planes significantly decreases, negatively affecting the profitability of the airlines industry. Other industries like pharmaceutical, food and beverage, and healthcare are relatively more resilient to economic downturns as the demand for essential products and services in these sectors tends to remain relatively stable.

Product method. In the Product Method, national income is measured as an aggregated flow of goods and services in the economy from the different sectors: agriculture, industry, and services. Economists calculate the money value of all final goods and services produced in the economy during a specified period. The Product method deals with the economy sector-wise, and the total output in the economy is computed as the sum of the outputs of various sectors.

To calculate the Earnings Yield, we use the formula: Earnings Yield = Net Profit / Market Capitalization * 100.

Substituting the given values:

Earnings Yield = 50,000 / 600,000 * 100

Calculating the division:

0.083 * 100

Multiplying by 100 to express as a percentage:

8.33%

Therefore, the Earnings Yield is 8.33%. This indicates the percentage of earnings generated for each unit of investment in the company's market capitalization.

To calculate the net profit, we first need to determine the equity portion of the balance sheet. Given that the Debt to Equity Ratio is 2:1, we can calculate the equity as one-third of the total balance sheet size. In this case, the total balance sheet size is Rs. 9,00,000, so the equity would be Rs. 9,00,000/3 = Rs. 3,00,000.

The return on equity is given as 18%. To calculate the net profit, we multiply the equity by the return on equity. In this case, the net profit would be 18% of Rs. 3,00,000, which is Rs. 54,000.

Therefore, the net profit is Rs. 54,000. This represents the profit generated by the company based on its equity investment.

Spreading investments across different asset classes. Diversification in the context of investment refers to spreading investments across different asset classes, such as stocks, bonds, real estate, commodities, etc. The purpose of diversification is to reduce risk by not putting all investments in a single asset class or a single company within the same industry. By diversifying, investors can potentially reduce the impact of any one investment's poor performance on their overall portfolio.

All of the above. Several factors can contribute to the failure of a research report. These include using complicated language that is difficult to understand, presenting inconsistent views or contradictory information, and including unnecessary details that distract from the main points. A successful research report should be clear, concise, and provide a coherent analysis of the subject matter.

When interest rates rise, the price of existing bonds tends to fall. Since the coupon rate of the bond is fixed at 9% p.a., which is lower than the prevailing market interest rates, the bond is likely to quote at a price below its face value.