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A bonus shareis a free share of stockgiven to current shareholdersin a company, based upon the

number of shares that the shareholder already owns. While the issue of bonus shares increases the

total number of shares issued and owned, it does not change the value of the company. Although the

total number ofissued sharesincreases, the ratio of number of shares held by each shareholder

remains constant.

[edit]Explanation

Whenever a company announces a bonus issue, it also announces a book closure datewhich is a

date on which the company will ideally temporarily close its books for fresh transfers of stock.

An issue of bonus shares is referred to as a bonus issue. epending upon theconstitutional

documentsof the company, only certainclasses of sharesmay be entitled to bonus issues, or may be

entitled to bonus issues in preference to other classes. !onus shares are distributed in a fixed ratio to

the shareholders.

"ometimes a company will change the number of shares in issue by capitali#ing its reserve. $n other

words, it can convert the right of the shareholders because each individual will hold the same

proportion of the outstanding shares as before.

A bonus share issue is not adividend. Although these shares are %distributed% from a company to its

shareholders, this is almost never a %distribution% in the corporate law sense. &hat is because they

represent no economic event ' no wealth changes hands. &he current shareholders simply receive

new shares, for free, and in proportion to their previous share in the company. &herefore, a bonus

share issue is very similar to a stock split. &he only practical difference is that a bonus issue creates a

change in the structure of the company(sshareholders( e)uity*inaccounting+. Another difference

between a bonus issue and a stock split is that while a stock split usually also splits the

company(s authori#ed share capital,the distribution of bonus shares only changes its issued share

capital*or even only its outstanding shares+.

This economicsor finance-related article is a stub. You can help Wikipedia by expanding it.

Definition of 'Stock Split'A corporate action in which a company's existing shares are divided into multiple shares.Although the number of shares outstanding increases by a specific multiple, the total dollarvalue of the shares remains the same compared to pre-split amounts, because no real valuehas been added as a result of the split.

In the U.K., a stoc split is referred to as a !scrip issue!, !bonus issue!, !capitali"ation issue!

or !free issue!.

explain 'Stock Split'#or example, in a $-for-% split, each stocholder receives an additional share for each share

he or she holds.

&ne reason as to why stoc splits are performed is that a company's share price has grown so

high that to many investors, the shares are too expensive to buy in round lots.

#or example, if a () *orp.'s shares were worth +%, each, investors would need to

purchase +%, in order to own % shares. If each share was worth +%, investor
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would only need to pay +%, to own % shares.

Definition of 'Private Placement'

he sale of securities to a relatively small number of select investors as a way of raising

capital. Investors involved in private placements are usually large bans, mutual funds,insurance companies and pension funds. rivate placement is the opposite of a public issue,in which securities are made available for sale on the open maret.

explains 'Private Placement'/ince a private placement is offered to a few, select individuals, the placement does not have

to be registered with the /ecurities and 0xchange *ommission. In many cases, detailed

financial information is not disclosed and a the need for a prospectus is waived. #inally, since

the placements are private rather than public, the average investor is only made aware of the

placement after it has occurred.

GUIDELINES FOR PREFERENTIAL ISSUES

13.0&he preferential issue of e)uity shares -ully onvertible ebentures*-s+ /artly onvertible ebentures */s+ or any other financial instrumentswhich would be converted into or exchanged with e)uity shares at a later date, bylisted companies whose e)uity share capital is listed on any stock exchange, toany select group of persons under section 01*1A+ of the ompanies Act 1234 onprivate placement basis shall be governed by these guidelines.

13.1"uch preferential issues by listed companies by way of e)uity shares -ullyonvertible ebentures *-s+ /artly onvertible ebentures */s+ or anyother financial instruments which would be converted into exchanged with e)uity

shares at a later date, shall be made in accordance with the pricing provisionsmentioned below5

13.1.1 Pricing o !he issue

16.1.1.1&he issue of shares on a preferential basis can be made at a price notless than the higher of the following5

i+ &he average of the weekly high and low of the closing prices of the relatedshares )uoted on the stock exchange during the six months preceding therelevant date7

89

ii+ &he average of the weekly high and low of the closing prices of the relatedshares )uoted on a stock exchange during the two weeks preceding the relevantdate.

Definition of 'Absorption Costing'A managerial accounting cost method of expensing all costs associated with manufacturing a

particular product. Absorption costing uses the total direct costs and overhead costs

associated with manufacturing a product as the cost base. 1enerally accepted accounting


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principles 21AA3 re4uire absorption costing for external reporting.Absorption costing is also nown as !full absorption costing!.

explains 'Absorption Costing'/ome of the direct costs associated with manufacturing a product include wages for

worers physically manufacturing a product, the raw materials used in producing a product,

and all of the overhead costs, such as all utility costs, used in producing a good.

Absorption costing includes anything that is a direct cost in producing a good as the cost

base. his is contrasted with variable costing, in which fixed manufacturing costs are not

absorbed by the product. Advocates promote absorption costing because fixed manufacturing

costs provide future benefits

Definition of 'Direct Cost'

A price that can be completely attributed to the production of specific goods or services. 5irect costs refer to materials, labospecific product, and therefore are considered indirect costs.

Investopedia explains 'Direct Cost'

#or example, the cost of meat in a hamburger can be attributed directly to the cost of manufacturing that product, as could t

such as the hamburger manufacturer's legal fees and staffing, is anything that is not a direct cost.

Definition of 'Working Capital'A measure of both a company's efficiency and its short-term financial health. he woringcapital ratio is calculated as6

ositive woring capital means that the company is able to pay off its short-termliabilities. 7egative woring capital means that a company currently is unable to meet itsshort-term liabilities with its current assets 2cash, accounts receivable and inventory3.

Also nown as !net woring capital!, or the !woring capital ratio

explains 'Working Capital'If a company's current assets do not exceed its current liabilities, then it may run into trouble

paying bac creditors in the short term. he worst-case scenario is banruptcy. A declining

woring capital ratio over a longer time period could also be a red flag that warrants further

analysis. #or example, it could be that the company's sales volumes are decreasing and, as a

result, its accounts receivables number continues to get smaller and smaller.

8oring capital also gives investors an idea of the company's underlying operational

efficiency. 9oney that is tied up in inventory or money that customers still owe to thecompany cannot be used to pay off any of the company's obligations. /o, if a company is not


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operating in the most efficient manner 2slow collection3, it will show up as an increase in the

woring capital. his can be seen by comparing the woring capital from one period to

another: slow collection may signal an underlying problem in the company's operations.

"ha! is #a$ue%&ase' (anage)en!*;alue-


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(ou can thin of I?? as the rate of growth a pro=ect is expected to generate. 8hile the actual

rate of return that a given pro=ect ends up generating will often differ from its estimated I??

rate, a pro=ect with a substantially higher I?? value than other available options would still

provide a much better chance of strong growth.

I??s can also be compared against prevailing rates of return in the securities maret. If a firm

can't find any pro=ects with I??s greater than the returns that can be generated in the

financial marets, it may simply choose to invest its retained earnings into the maret.

Definition of 'Net Present Value - NPV'

The difference between the present value of cash inflows and the present value of cash outflows

NPV anal!sis is sensitive to the reliabilit! of future cash inflows that an invest#ent or pro$ect will

%or#ula&

In addition to the for#ula net present value can often be calculated using tables and spreadshee

Investopedia explains 'Net Present Value - NPV'NPV co#pares the value of a dollar toda! to the value of that sa#e dollar in the future ta*ing infl

negative the pro$ect should probabl! be re$ected because cash flows will also be negative

%or exa#ple if a retail clothing business wants to purchase an existing store it would first esti#a

a#ount sa! ,./// If the owner of the store was willing to sell his business for less than ,.

owner would not sell for less than ,./// the purchaser would not bu! the store as the invest

Definition of 'Compound Annual ro!t" Rate - CAR'he year-over-year growth rate of an investment over a specified period of time.

he compound annual growth rate is calculated by taing the nth root of the total percentagegrowth rate, where n is the number of years in the period being considered.

his can be written as follows6


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'Compound Annual ro!t" Rate - CAR'*A1? isn't the actual return in reality. It's an imaginary number that describes the rate at

which an investment would have grown if it grew at a steady rate. (ou can thin of *A1? as

a way to smooth out the returns.

5on't worry if this concept is still fu""y to you - *A1? is one of those terms best defined by

example. /uppose you invested +%, in a portfolio on @an %, $. >et's say by @an %,

$B, your portfolio had grown to +%C,, then +%D, by $E, and finally ended up at

+%F, by $G.

(our *A1? would be the ratio of your ending value to beginning value 2+%F, H +%,

%.F3 raised to the power of %HC 2since %HJ of years %HC3, then subtracting % from the

resulting number6

%.F raised to %HC power %.$DFC. 2his could be written as %.F.CCCC3.

%.$DFC - % .$DFC

Another way of writing .$DFC is $D.FCL.

hus, your *A1? for your three-year investment is e4ual to $D.FCL, representing the

smoothed annuali"ed gain you earned over your investment time hori"on.

Definition of '#reak-$ven Anal%sis'An analysis to determine the point at which revenue received e4uals the costs associated withreceiving the revenue.


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factoring and forfaiting They are widely used as alternati$e financing tools to

ban%s

FACTORING

Factoring is the process of purchasing in$oices from a business at acertain discount Factors pro$ide financing ser$ice to small an medium&si'ed companies who need cash For this the factor charges a fee e(ual toa percentage of the in$oices purchased generally )* Factoring is a low$alue short term financing forms It in$ol$es the purchase of in$oices" foran amount less than +,-"--- an .-&,/- days payment terms Aftershipping your goods or ser$ices" the factor purchases the in$oices" andad$ances cash to you company Factoring pro$ide li(uid assets to smallbusiness In fact ban%s ha$e strict criteria when lending money so it isdifficult for these companies to obtain loans

FORFAITING

Forfaiting is the purchase of a series of credit instruments such as drafts" bills of

e!change" other freely negotiable instruments on a nonrecourse basis

Nonrecourse means that if the importer does not pay" the forfeiter cannot

reco$er payment from the e!porter

The e!porter gets immediate cash on presentation of rele$ant documents and

the importer is the liable for the cost of the contract and recei$es credit for 0!1

years and at certain per cent interest

The forfaiter deducts interest at an agreed rate for credit period The debt

instruments are drawn by the e!porter" accepted by the importer" and will bear

an a$al or unconditional guarantee" issue by the importer2s ban% The forfeiter

ta%es o$er responsibility for claiming the debt from the importer The forfeiter

holds the notes until maturity" or sells them to another in$estor The holder of

the notes presents each note to the ban% at which they are payable" as that fall

due

Forfaiting is a high&$alue medium and long term financing form It in$ol$es thepurchase of negotiable instruments for not less than +,----- and from si!

month to fi$e years payment terms The forfeiter needs to %now some important

information" such as#

who the buyer is and his nationality

what goods are being sold

date and duration of the contract

interest rate already agreed with the buyer

negotiable instruments used identity of the guarantor of payment


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0udgets can be broadl! classified into two categories&

Capital 0udgets

1perating 0udgets

WHAT IS Capital Budget&

is concerned with the provision of resources for the long-ter# running of a business for

exa#ple the Capital )xpenditure 0udget

WHAT IS Operating Budget&

Is concerned with the DA2-T1-DA2 operating activities of the business

3suall! prepared for a nor#al operating c!cle of one !ear

Co##on operating budgets includes the following&

4ales 0udget

Production 0udget

(achine 3tili"ation 0udget

(aterial 0udget

5abor 0udget

1verhead 0udget- the Production 1verhead 0udget Ad#inistration 0udget 4elling 1verhead

0udget and Distribution 1verhead 0udget

6esearch and Develop#ent 768D9 0udget

:or*ing Capital 0udgets which includes the 4toc* 0udge Debtors 0udget and Creditor 0udget

Cash 0udget

Operating Budgets

When informal conversation in a company turns to the budget, the term usually refers to the operating budget.-acility managers are more likely to have control of the operating budget rather than the capital budget. &heoperating budget is also far more likely to be the sub:ect of intense scrutiny and cost;cutting efforts. uge corporations evolved that now do nothing butdeal with information. &he whole idea of capital expenditures correspondingly shifted. =a:or capital expenditures


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now take the form of computers, printers, scanners, plotters, and the like. &his differs greatly from huge printingpresses, ma:or new assembly lines, or new production e)uipment for manufacturing concerns that were muchmore common in past decades.

ompared to operating budgets, capital budgets may seem rather static5 they involve fewer cost types, lessscrutiny, and longer terms. &hings ought to happen more slowly, but they don(t. $f interest rates rise, investmentcapital for real estate;related and facilities;related pro:ects almost always becomes scarce. apital budget plansmay also be disrupted when the government raises the discount *prime+ rate to control inflationary growth.

$mplications of apital "pending for 8perating !udgets and of 8perations osts on apital !udgets

apital budgets are sensitive to how operating budgets are managed. -or example, preventive maintenance, iffunded and practiced, will have a very beneficial long;term impact on capital pro:ects by extending the useful lifeof capital assets. =ost preventive maintenance programs can provide reasonable predictions of how longmechanical >?A e)uipment will last, enabling you to make some sober predictions about planned e)uipmentreplacement, which is almost always a capital expense.

&here is one caveat, however5 your company will reali#e these savings only if it remains in the facility or uses thee)uipment long enough to reap the benefits. -or this reason, such financial arguments rarely make sense forleased space unless the lease is a long;term triple;net lease.

apital pro:ects and investments usually re)uire maintenance, care, and operation after they are purchased orbuilt. $t is very important to examine capital expenditures for the ongoing effects they will have on the operatingbudget. &he most commonly used tool to identify such costs is @ *life cycle cost+ analysis, which accounts forall costs associated with an item over its expected life, including purchase, operation, maintenance, and disposal.$n many cases, large capital investments are approved on the basis of @ claims that they will reduce operatingcosts.

$f such predictions turn out to be inaccurate or overstated, the facility management department will bear slightlyhigher ongoing operating costshigher maintenance or housekeeping for each such pro:ect, for each year.Bnless you can research life cycle cost analyses for these pro:ects and compare predicted figures with actualresults, you may have a difficult time proving why your costs keep increasing.

S"OT ana$+sis*alternately SLOT ana$+sis+ is astrategic planningmethod used to evaluatethe Strengths, "eaknesses@imitations, Opportunities, andThreats involved in a pro:ector in

abusinessventure. $t involves specifying the ob:ective of the business venture or pro:ect and

identifying the internal and external factors that are favorable and unfavorable to achieve that

ob:ective. &he techni)ue is credited toAlbert >umphrey, who led a convention at "tanford Bniversity

in the 124Cs and 12DCs using data from-ortune 3CCcompanies.

"etting the ob:ective should be done after the "W8& analysis has been performed. &his would allow

achievable goals or ob:ectives to be set for the organi#ation.

Strengths5 characteristics of the business, or pro:ect team that give it an advantage over

others

"eaknesses *or @imitations+5 are characteristics that place the team at a disadvantage

relative to others

Opportunities5 externalchances to improve performance *e.g. make greater profits+ in the

environment

Threats5 externalelements in the environment that could cause trouble for the business

or pro:ect
http://en.wikipedia.org/wiki/Strategic_planninghttp://en.wikipedia.org/wiki/Strategic_planninghttp://en.wikipedia.org/wiki/Projecthttp://en.wikipedia.org/wiki/Projecthttp://en.wikipedia.org/wiki/Businesshttp://en.wikipedia.org/wiki/Businesshttp://en.wikipedia.org/wiki/Albert_S_Humphreyhttp://en.wikipedia.org/wiki/Albert_S_Humphreyhttp://en.wikipedia.org/wiki/Fortune_500http://en.wikipedia.org/wiki/Fortune_500http://en.wikipedia.org/wiki/Fortune_500http://en.wikipedia.org/wiki/Strategic_planninghttp://en.wikipedia.org/wiki/Projecthttp://en.wikipedia.org/wiki/Businesshttp://en.wikipedia.org/wiki/Albert_S_Humphreyhttp://en.wikipedia.org/wiki/Fortune_500


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$dentification of "W8&s is essential because subse)uent steps in the process of planning for

achievement of the selected ob:ective may be derived from the "W8&s.

-irst, the decision makers have to determine whether the ob:ective is attainable, given the

"W8&s. $f the ob:ective is 8& attainable a different ob:ective must be selected and the process

repeated.&he "W8& analysis is often used in academiato highlight and identify strengths, weaknesses,

opportunities and threats.[citation needed]$t is particularly helpful in identifying areas for development.

ost;volume;profit analysis *?/+, or break;even analysis, is used tocompute the volume level at which total revenues are e)ual to total costs. When total costs and

total revenues are e)ual, the business organi#ation is said to be %breaking even.% &he analysis is

based on a set of linear e)uations for a straight line and the separation of variable and fixed

costs.

&otal variable costs are considered to be those costs that vary as the production volume

changes. $n a factory, production volume is considered to be the number of units produced, but in

a governmental organi#ation with no assembly process, the units produced might refer, for

example, to the number of welfare cases processed.

&here are a number of costs that vary or change, but if the variation is not due to volumechanges, it is not considered to be a variable cost. Examples of variable costs are directmaterials and direct labor. &otal fixed costs do not vary as volume levels change within therelevant range. Examples of fixed costs are straight;line depreciation and annual insurancecharges. &otal variable costs can be viewed as a F3 line and total fixed costs as a straight line. $nthe break;even chart shown in -igure 1, the upward slope of line - represents the change invariable costs. ?ariable costs sit on top of fixed costs, line E. /oint - represents the breakevenpoint. &his is where the total cost *costs below the line -+ crosses and is e)ual to total

revenues *line A-!+.?esponsibility accounting is an underlying concept ofaccounting performance measurement systems. he basic idea is that largediversified organi"ations are difficult, if not impossible to manage as a singlesegment, thus they must be decentrali"ed or separated into manageable parts.hese parts, or segments are referred to as responsibility centers that include6 %3revenue centers, $3 cost centers, C3 profit centers and D3 investment centers. his

approach allows responsibility to be assigned to the segment managers that havethe greatest amount of influence over the ey elements to be managed. heseelements include revenue for a revenue center 2a segment that mainly generatesrevenue with relatively little costs3, costs for a cost center 2a segment that generatescosts, but no revenue3, a measure of profitability for a profit center 2a segment thatgenerates both revenue and costs3 and return on investment 2?&I3 for aninvestment center 2a segment such as a division of a company where the managercontrols the ac4uisition and utili"ation of assets, as well as revenue and costs3.

Controllability Concept
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An underlying concept of responsibility accounting is referred to as controllability.*onceptually, a manager should only be held responsible for those aspects of

performance that he or she can control. In my view, this concept is rarely, if ever,applied successfully in practice because of the system variation present in all

systems. Attempts to apply the controllability concept produce responsibilityreports where each layer of management is held responsible for all subordinatemanagement layers as illustrated below.

Definition of ';ero-0ased 0udgeting - ;00'

A #ethod of budgeting in which all expenses #ust be $ustified for each new

period ;ero-based budgeting starts fro# a


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decreases to a

prior period's

budget It is

however a ti#e-

consu#ing

process that ta*es

#uch longer than

traditional cost-

based budgeting

The practice also

favors areas that

achieve direct

revenues or

production= their

contributions are

#ore easil!

$ustified than in

depart#ents such

as client service

and research and

develop#ent

an your business benefit from a orporate 9estructureG

orporate financial restructuring is any substantial change in a companyHs financial structure, orownership or control, or business portfolio, designed to increase the value of the firm. $f you

want to increase the value of your firm, you may need to reorgani#e your financial assets in order

to create the most financially beneficial environment for the company.

-inancial difficulty can creep up on a company, only to be noticed when itHs almost too late. While

running the day;to;day affairs, itHs easy to become busy to the point of overlooking small issues.

8ver time, these issues can add up and grow, until the company is facing a crisis they never saw

coming. $n such cases, finding the underlying causes can be a time;consuming and difficult

process, often re)uiring the help of an outside company. ot addressing certain problems

upfront, or simply hoping that they will fix themselves, is the best way to see a company crumble

from within. 8n the other hand, when tough decisions need to be made, there is often a fear of

making the wrong ones. At !usiness apital, we speciali#e in financial restructuringfor

businesses facing such situations. As an outside third party, we have the ability to properly

assess a businessHs needs and prescribe the proper remedy.

What does financial restructuringentailG $n the case of excessive debt, we negotiate directly with

creditors and vendors to create repayment plans that are acceptable to both parties. &hrough

limited asset li)uidation and accounts receivable funding, we secure capital that the company

can use to expand. We also help create a business plan that details the financial direction of thecompany and the steps needed to achieve success.
http://www.bizcap.com/reports/corporate-restructure/http://www.bizcap.com/http://www.bizcap.com/services/business-debt-restructuring/http://www.bizcap.com/services/chief-restructuring-officer-cro/http://www.bizcap.com/reports/corporate-restructure/http://www.bizcap.com/http://www.bizcap.com/services/business-debt-restructuring/http://www.bizcap.com/services/chief-restructuring-officer-cro/


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Badlawas an indigenous carry;forwardsystem invented on the !ombay "tock Exchangeas

a solution to the perpetual lack ofli)uidityin the secondary market.Badlawere banned by

the "ecurities and Exchange !oard of $ndiaor "E!$in 1226 *effective =arch 122F+, amid

complaints fromforeign investors, with the expectation that it would be replaced by a futures;

and;optionsexchange.[1]"uch an exchange was not established and badlawere legali#ed

again in 1224 *with a carry;forward limit of9sICcroreper broker+ and banned again on July

I, ICC1, following the introduction of futures contracts in ICCC.[I][6]

Badlatrading involved buyingstockswith borrowed moneywith the stock exchangeacting as

an intermediaryat an interest ratedetermined by the demandfor the underlying stock and

amaturitynot greater than DC days. @ike a traditional futures contract, badlais a form

of leverage7unlike futures, the brokernot the buyer or selleris responsible for the

maintenance of the marked;to;market margin.[F]

&he mechanism of badla finance can be explained as follows5 "uppose A has to buy 1CCshares of a company at 9s 3C each. !ut he doesn(t has enough money now. !ut the value of

shares is very less now, so in order to buy the shares at current prices, A can do a badla

transaction. ow there is a badla financier ! who has enough money to purchase the shares,

so on A(s re)uest, ! purchases the shares and gives the money to his broker. &he broker

gives the money to exchange and the shares are transferred to !. !ut the exchange keeps

the shares with itself on behalf of !. ow, say one month later, when A has enough money,

he gives this money to ! and takes the shares. &he money that A gives to ! is slightly higher

than the total value of the shares. &his difference between the two values is the interest as

badla finance is treated as a loan from ! to A. &he rate of interest is decided by the exchange

and it changes from time to time.

+awala transaction is a process in which large amount of black money is convertedinto white.The #one! is also used for illegal purposes such as terroris# In India thePrevention of (one! 5aundering Act B//B is defined as B> and >B>A of Indian Penal Code9 and so#e offensesunder the NDP4 Act >? offenses under Part 0 is sub$ected to a #onetar! li#it of 6s #illion or #ore People found guilt! under the Act can be sentenced to a rigorousi#prison#ent for a period of -E !ears and also a fine of up to 6s la*h

What is !"

AD6 is the full for# of A#erican Depositor! 6eceipts This is the recent #ethod adoptedb! #an! large and well respected co#panies fro# India to raise funds fro# A#erican(ar*ets

#ow !" Operates

Indian co#panies have direct access to raise funds fro# Indian public b! wa! of issuing4hares Debentures etc +owever Indian co#panies cannot do so in such a direct#anner when it co#es to raising funds fro# A#erican people That would entail theIndian co#panies to adopt 34 Accounting Nor#s which is also called as FAAP #aintainaccounting practices as per A#erican %inancial 2ear 7:hich starts in Ganuar! and ends in

Dece#ber of an! particular !ear9 as also follow variet! of stringent standards as per

A#erican nor#s )ffectivel! it would #ean that the Indian co#pan! would have to
http://en.wikipedia.org/wiki/Forward_contracthttp://en.wikipedia.org/wiki/Bombay_Stock_Exchangehttp://en.wikipedia.org/wiki/Market_liquidityhttp://en.wikipedia.org/wiki/Market_liquidityhttp://en.wikipedia.org/wiki/Secondary_markethttp://en.wikipedia.org/wiki/Secondary_markethttp://en.wikipedia.org/wiki/Securities_and_Exchange_Board_of_Indiahttp://en.wikipedia.org/wiki/Securities_and_Exchange_Board_of_Indiahttp://en.wikipedia.org/wiki/Securities_and_Exchange_Board_of_Indiahttp://en.wikipedia.org/wiki/Foreign_direct_investmenthttp://en.wikipedia.org/wiki/Foreign_direct_investmenthttp://en.wikipedia.org/wiki/Futures_exchangehttp://en.wikipedia.org/wiki/Option_(finance)http://en.wikipedia.org/wiki/Option_(finance)http://en.wikipedia.org/wiki/Badla_(stock_trading)#cite_note-Balfour-0http://en.wikipedia.org/wiki/Rupeehttp://en.wikipedia.org/wiki/Rupeehttp://en.wikipedia.org/wiki/Crorehttp://en.wikipedia.org/wiki/Crorehttp://en.wikipedia.org/wiki/Crorehttp://en.wikipedia.org/wiki/Badla_(stock_trading)#cite_note-Rajeshwari-1http://en.wikipedia.org/wiki/Badla_(stock_trading)#cite_note-Thomas-2http://en.wikipedia.org/wiki/Tradehttp://en.wikipedia.org/wiki/Stockhttp://en.wikipedia.org/wiki/Stockhttp://en.wikipedia.org/wiki/Debthttp://en.wikipedia.org/wiki/Stock_exchangehttp://en.wikipedia.org/wiki/Financial_intermediaryhttp://en.wikipedia.org/wiki/Interest_ratehttp://en.wikipedia.org/wiki/Demandhttp://en.wikipedia.org/wiki/Demandhttp://en.wikipedia.org/wiki/Maturity_(finance)http://en.wikipedia.org/wiki/Maturity_(finance)http://en.wikipedia.org/wiki/Futures_contracthttp://en.wikipedia.org/wiki/Leverage_(finance)http://en.wikipedia.org/wiki/Leverage_(finance)http://en.wikipedia.org/wiki/Mark-to-markethttp://en.wikipedia.org/wiki/Badla_(stock_trading)#cite_note-Venkatesh-3http://en.wikipedia.org/wiki/Forward_contracthttp://en.wikipedia.org/wiki/Bombay_Stock_Exchangehttp://en.wikipedia.org/wiki/Market_liquidityhttp://en.wikipedia.org/wiki/Secondary_markethttp://en.wikipedia.org/wiki/Securities_and_Exchange_Board_of_Indiahttp://en.wikipedia.org/wiki/Securities_and_Exchange_Board_of_Indiahttp://en.wikipedia.org/wiki/Foreign_direct_investmenthttp://en.wikipedia.org/wiki/Futures_exchangehttp://en.wikipedia.org/wiki/Option_(finance)http://en.wikipedia.org/wiki/Badla_(stock_trading)#cite_note-Balfour-0http://en.wikipedia.org/wiki/Rupeehttp://en.wikipedia.org/wiki/Crorehttp://en.wikipedia.org/wiki/Badla_(stock_trading)#cite_note-Rajeshwari-1http://en.wikipedia.org/wiki/Badla_(stock_trading)#cite_note-Thomas-2http://en.wikipedia.org/wiki/Tradehttp://en.wikipedia.org/wiki/Stockhttp://en.wikipedia.org/wiki/Debthttp://en.wikipedia.org/wiki/Stock_exchangehttp://en.wikipedia.org/wiki/Financial_intermediaryhttp://en.wikipedia.org/wiki/Interest_ratehttp://en.wikipedia.org/wiki/Demandhttp://en.wikipedia.org/wiki/Maturity_(finance)http://en.wikipedia.org/wiki/Futures_contracthttp://en.wikipedia.org/wiki/Leverage_(finance)http://en.wikipedia.org/wiki/Mark-to-markethttp://en.wikipedia.org/wiki/Badla_(stock_trading)#cite_note-Venkatesh-3


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follow two different set of rules si#ultaneousl! one to co#pl! with the laws of IndianCo#panies Act and the other to co#pl! with the A#erican 5aws

The #ethod to circu#vent the A#erican nor#s but still raise funds fro# A#ericanpeople is available b! wa! of AD6 or A#erican Depositor! 6eceipts In this s!ste# the

Indian co#pan! deposits certain a#ount of its Indian shares with designated A#erican

0an*s The ban*s in turn issues receipts that are e@uivalent in values 7And also basedon the intrinsic value the Indian Co#pan!Hs shares would fetch in the A#erican #ar*et9to the Indian Co#pan! These receipts essentiall! would be in nu#ber of receipts Thenthese Indian Co#panies can trade these AD6s or A#erican Depositor! 6eceipts with theA#erican public These AD6s can be purchased and traded freel! without an!encu#brances in the A#erican 4toc*s and 4hares (ar*et This wa! the Indian co#pan!is able to enter into the A#erican 4toc*s and 4hares #ar*et and raise funds fro# the

A#erican public

The role of the A#erican ban* which has issued these receipts is ver! crucial since it is

the! who stand guarantee to the issued receipts +ence the! do exhaustive stud! of theIndian co#pan! fro# all perspectives and onl! then issue the AD6 to the Indian

co#pan!

What is $!" and how it operates

The full for# of FD6 is Flobal Depositor! 6eceipt It is not a different financial

instru#ent as it #a! sound fro# that of AD6 In fact if the Indian Co#pan! which hasissued FD6s in the A#erican #ar*et wishes to further extend it to other developed and

advanced countries such as )urope then the! can sell these AD6s to the public of)urope and the sa#e would be na#ed as FD6

Indian Companies with !" % $!"

There are @uite a lot of successful Indian co#panies that have now issued AD6s andFD6s 4o#e such co#panies are given underneath

Dr 6edd!s

+D%C 0an*

ICICI 0an*

Infos!s Technologies

(TN5

V4N5

:IP61

he process by which an underwriter attempts to determine at what price to offer an I&based on demand from institutional investors.

'#ook #uilding'An underwriter !builds a boo! by accepting orders from fund managers indicating the

number of shares they desire and the price they are willing to pay


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&he Liboris the average interest rate that leading banks in @ondon charge when lending to other

banks. $t is an acronym for Lon'on In!erban, Oere' Ra!e*LI&OR, 34la5 b 6r3+. !anks borrow

money for one day, one month, two months, six months, one year, etc., and they pay interest to their

lenders based on certain rates. &he @ibor figure is an average of these rates. =any financial

institutions, mortgage lenders and credit card agencies track the rate, which is produced daily at 11

a.m. to fix their own interest rates which are typically higher than the @ibor rate. As such, it is abenchmark for finance all around the world.[1]

Definition of 'Prime Rate'he interest rate that commercial bans charge their most credit-worthy customers.1enerally a ban's best customers consist of large corporations. he prime interest rate, or

prime lending rate, is largely determined by the federal funds rate, which is the overnight ratewhich bans lend to one another. he prime rate is also important for retail customers, as the

prime rate directly affects the lending rates which are available for mortgage, small business

and personal loans.

Investopedia explains 'Prime Rate'5efault ris is the main determiner of the interest rate a ban will charge a borrower.


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efinition of '%oreign Currenc!Convertible 0ond - %CC0'

A t!pe of convertible bond issued in a currenc!

different than the issuer's do#estic currenc! In

other words the #one! being raised b! the issuing

co#pan! is in the for# of a foreign currenc! A

convertible bond is a #ix between a debt and e@uit!

instru#ent It acts li*e a bond b! #a*ing regular

coupon and principal pa!#ents but these bonds also

give the bondholder the option to convert the bond

into stoc*

Investopedia explains '%oreign

Currenc! Convertible 0ond -%CC0'

These t!pes of bonds are attractive to both

investors and issuers The investors receive the

safet! of guaranteed pa!#ents on the bond and

are also able to ta*e advantage of an! large

price appreciation in the co#pan!'s stoc*

70ondholders ta*e advantage of

this appreciation b! #eans warrants attached

to the bonds which are activated when the

price of the stoc* reaches a certain point9 Dueto the e@uit! side of the bond which adds

value the coupon pa!#ents on the bond are

lower for the co#pan! thereb! reducing its

debt-financing costs

Definition of 'Private )@uit!'

)@uit! capital that is not @uoted on a public exchange Private e@uit! consists of investors and funds that #a*e inv

co#panies or conduct bu!outs of public co#panies that result in a delisting of public e@uit! Capital for private e@institutional investors and can be used to fund new technologies expand wor*ing capital within an owned co#pan

a balance sheet

The #a$orit! of private e@uit! consists of institutional investors and accredited investors who can co##it large su

Private e@uit! invest#ents often de#and long holding periods to allow for a turnaround of a distressed co#pan! o

sale to a public co#pan!

explains 'Private )@uit!'

The si"e of the private e@uit! #ar*et has grown steadil! since the >E/s Private e@uit! fir#s will so#eti#es pool

public co#panies private (an! private e@uit! fir#s conduct what are *nown as leveraged bu!outs 7501s9 where


18/22

fund a large purchase Private e@uit! fir#s will then tr! to i#prove the financial results and prospects of the co#p

co#pan! to another fir# or cashing out via an IP1

&he !ombay "tock Exchange SENSE-*portmanteauof sensitiveand index+ also referred to as &SE30is a free;float market capitali#ation;weightedstock market indexof 6C well;established and

financially sound companies listed on !ombay "tock Exchange. &he 6C component companies which

are some of the largest and most actively traded stocks, are representative of variousindustrial

sectorsof the $ndian economy. /ublished since January 1, 1204, the "E"EK is regarded as the

pulse of the domestic stock markets in $ndia. &he base value of the "E"EK is taken as 100on April

1, 12D2, and its base year as 1!"-!. 8n I3 July, ICC1 !"E launched DOLLE-%30, a dollar;linked

version of "E"EK. As of I1 April IC11, the market capitalisation of "E"EK was about I2,D66

billion *B"L343 billion+ *FI.6FM of market capitali#ation of !"E+, while its free;float market

capitali#ation was 13,42C billion *B"LI20 billion+

Definition of ')erc"ant #ank'A ban that deals mostly in 2but is not limited to3 international finance, long-term loans forcompanies and underwriting. 9erchant bans do not provide regular baning services to thegeneral public

explains ')erc"ant #ank'heir nowledge in international finances mae merchant bans specialists in dealing with

multinational corporations.

"ha! is a Reo Ra!e*

Whenever the banks have any shortage of funds they can borrow it from 9!$. 9epo rate

is the rate at which our banks borrow rupees from 9!$. A reduction in the repo rate will

help banks to get money at a cheaper rate. When the repo rate

increases borrowing from 9!$ becomes more expensive

9everse 9epo rate is the rate at which 9eserve !ank of $ndia *9!$+borrows money from banks. !anks are always happy to lend money to 9!$ since theirmoney are in safe hands with a good interest. An increase in 9everse repo rate can

cause the banks to transfer more funds to 9!$ due to this attractive interest rates. $t cancause the money to be drawn out of the banking system.ue to this fine tuning of 9!$ using its tools of 99, !ank 9ate, 9epo 9ate and 9everse9epo rate our banks ad:ust their lending or investment rates for common man.

Definition of '4weat )@uit!'

The e@uit! that is created in a co#pan! or so#e other asset as a direct result of hard wor* b! the owner7s9

Investopedia explains '4weat )@uit!'
http://en.wikipedia.org/wiki/Portmanteauhttp://en.wikipedia.org/wiki/Portmanteauhttp://en.wikipedia.org/wiki/Capitalization-weighted_indexhttp://en.wikipedia.org/wiki/Stock_market_indexhttp://en.wikipedia.org/wiki/Bombay_Stock_Exchangehttp://en.wikipedia.org/wiki/Industryhttp://en.wikipedia.org/wiki/Industryhttp://en.wikipedia.org/wiki/Industryhttp://en.wikipedia.org/wiki/Industryhttp://en.wikipedia.org/wiki/United_States_dollarhttp://en.wikipedia.org/wiki/United_States_dollarhttp://en.wikipedia.org/wiki/Portmanteauhttp://en.wikipedia.org/wiki/Capitalization-weighted_indexhttp://en.wikipedia.org/wiki/Stock_market_indexhttp://en.wikipedia.org/wiki/Bombay_Stock_Exchangehttp://en.wikipedia.org/wiki/Industryhttp://en.wikipedia.org/wiki/Industryhttp://en.wikipedia.org/wiki/United_States_dollarhttp://en.wikipedia.org/wiki/United_States_dollar


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%or exa#ple the wor* !ou #ight put into rebuilding the engine on !our >.? (ustang to increase its value would

S!a!u!or+ $i/ui'i!+ ra!iois the amount of li)uid assets such as precious metals or other approved

securities, that a financial institution must maintain as reserves other than the cash with the entral!ank. &he statutory li)uidity ratio is a term most commonly used in $ndia.

[edit]8b:ectives

&he ob:ectives of "@9 are expansion of bank credit.

1. &o augment the investment of the banks in government securities.

I. &o ensure solvency of banks. A reduction of "@9 rates looks eminent to support the credit

growth in $ndia.

&he "@9 is commonly used to contain inflationand fuel growth, by increasing or decreasing it

respectively. &his counter acts by decreasing or increasing the money supply in the system

respectively. $ndian banksH holdings of government securities *Novernment securities+ are now close

to the statutory minimum that banks are re)uired to hold to comply with existing regulation. When

measured in rupees, such holdings decreased for the first time in a little less than FC years *since the

nationalisation of banks in 1242+ in ICC3'C4.

While the recent credit boom is a key driver of the decline in banksH portfolios of N;"ec, other factors

have played an important role recently.

&hese include5

1. $nterest rate increases.

I. hanges in the prudential regulation of banksH investments in N;"ec.

=ost N;"ec held by banks are long;term fixed;rate bonds, which are sensitive to changes in interest

rates. $ncreasing interest rates have eroded banksH income from trading in N;"ec.

9ecently a huge demand in N;"ec was seen by almost all the banks when 9!$ released around

1C0CCC crore rupees in the financial system. &his was by reducing 99, "@9 O 9epo rates. &his was

to increase lending by the banks to the corporates and resolveli)uidity crisis./roviding economy withthe much needed fuel of li)uidity to maintain the pace of growth rate. >owever the exercise became

futile with banks being over cautious of lending in highly shaky market conditions. !anks invested

almost DCM of this money to rather safe Novt securities than lending it to corporates.

[edit]?alue and formula

&he )uantum is specified as some percentage of the total demand and time liabilities * i.e. the

liabilities of the bank which are payable on demand anytime, and those liabilities which are accruing in

one months time due to maturity+ of a bank.

"@9 rate P total demandtime liabilities Q 1CCM
http://en.wikipedia.org/w/index.php?title=Statutory_liquidity_ratio&action=edit&section=1http://en.wikipedia.org/wiki/Inflationhttp://en.wikipedia.org/w/index.php?title=G-Sec&action=edit&redlink=1http://en.wikipedia.org/wiki/Liquidity_crisishttp://en.wikipedia.org/wiki/Liquidity_crisishttp://en.wikipedia.org/wiki/Liquidity_crisishttp://en.wikipedia.org/w/index.php?title=Statutory_liquidity_ratio&action=edit&section=2http://en.wikipedia.org/w/index.php?title=Statutory_liquidity_ratio&action=edit&section=1http://en.wikipedia.org/wiki/Inflationhttp://en.wikipedia.org/w/index.php?title=G-Sec&action=edit&redlink=1http://en.wikipedia.org/wiki/Liquidity_crisishttp://en.wikipedia.org/w/index.php?title=Statutory_liquidity_ratio&action=edit&section=2


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&his percentage is fixed by the central bank. &he maximum and minimum limits for the "@9 are FCM

and I3M respectively in $ndia. [1]-ollowing the amendment of the !anking regulation Act*12F2+ in

January ICCD, the floor rate of I3M for "@9 was removed. /resently, the "@9 is I3M with effect from

D ovember ICC2. $t was raised from IFM in the 9!$ policy review on ID 8ctober ICC2. /resently the

"@9 is I3M in the 9!$ policy review december IC11

[edit]ifference between "@9 and 99

!oth 99 and "@9 are instruments in the hands of 9!$ to regulate money supply in the hands of

banks that they can pump in economy

"@9 restricts the bankHs leverage in pumping more money into the economy. 8n the other hand,

99, or cash reserve ratio,is the portion of deposits that the banks have to maintain with the entral

!ank to reduce li)uidity in economy. &hus 99 controls li)uidity in economy while "@9 regulates

credit growth in the country

&he other difference is that to meet "@9, banks can use cash, gold or approved securities whereas

with 99 it has to be only cash. 99 is maintained in cash form with central bank, whereas "@9 ismoney deposited in govt. securities.

99 9ate in

$ndia

ash reserve9atio *99+ isthe amount offunds that thebanks have to

keep with 9!$. $f9!$ decides toincrease thepercent of this,the availableamount with thebanks comesdown. 9!$ isusing thismethod*increase of99 rate+, todrain out the

excessivemoney from thebanks.

Definition of 'Sovereign #ond'A debt security issued by a national government within a given country and denominated in aforeign currency. he foreign currency used will most liely be a hard currency, and mayrepresent significantly more ris to the bondhold

explains 'Sovereign #ond'

he government of a country with an unstable economy will tend to denominate its bonds inthe currency of a country with a stable economy.


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tend to be offered at a discount.


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