Q.1.What is alpha of stocks?

1. A measure of performance on a risk-adjusted basis. Alpha takes the volatility (price risk) of a mutual fund and compares its risk-adjusted performance to a benchmark index. The excess return of the fund relative to the return of the benchmark index is a fund's alpha. 2. The abnormal rate of return on a security or portfolio in excess of what would be predicted by an equilibrium model like the capital asset pricing model (CAPM). Investopedia explains Alpha 1. Alpha is one of five technical risk ratios; the others are beta, standard deviation, R-squared, and the Sharpe ratio. These are all statistical measurements used in modern portfolio theory (MPT). All of these indicators are intended to help investors determine the risk-reward profile of a mutual fund. Simply stated, alpha is often considered to represent the value that a portfolio manager adds to or subtracts from a fund's return. A positive alpha of 1.0 means the fund has outperformed its benchmark index by 1%. Correspondingly, a similar negative alpha would indicate an underperformance of 1%. 2. If a CAPM analysis estimates that a portfolio should earn 10% based on the risk of the portfolio but the portfolio actually earns 15%, the portfolio's alpha would be 5%. This 5% is the excess return over what was predicted in the CAPM model.

Q.2. How many types of accounts?

The business transactions can be grouped under three types of accounts : y y y Personal accounts Real accounts Nominal accounts

Personal Accounts Personal accounts are the accounts of persons or firms that the business deals with. These are primarily of three types : y Natural persons account : These are accounts of real persons who transact with the business in various capacities. The proprietors account and the accounts of customers are some examples of natural persons accounts Artificial persons accounts : These are accounts of firms and entities that transact with the business. The accounts of a limited companies or banks that are not real persons are the examples of artificial persons accounts. Representative personal account : These are accounts that represent certain person or persons. If a business has not paid the rent of a number of shops for the past two months then all landlords are creditors of the business and the amount due to them is recorded under a common head called Rent Outstanding Account. This is a representative personal account. Other examples of representative personal accounts are Interest Outstanding and Interest Paid in Advance accounts.

Real Accounts

Real accounts are the accounts of the properties, assets and possessions of a business. These can be of two types : Tangible Real accounts: These are accounts of things that can be touched, measured, sold or purchase. Examples of tangible real accounts are land account, furniture account and cash account. Intangible Real accounts: These are accounts of things that cannot be touched in the physical sense but can be measured in terms of money value. Trademark or patent rights are examples of intangible real accounts. Nominal Accounts Nominal accounts are the accounts of each head of expense or income of a business. They are used to define the nature of the transactions; hence, they are also called fictitious accounts. Without nominal accounts, it is very difficult for the management to find out where the money was spent. As these accounts are used to define the nature of the transaction they are nominal accounts. Certain rules have to be followed for the different accounts to decide which account has to be debited and which has to be credited. It is also important to understand whether the transaction has to be posted n the debit side or the credit side of an account

Q.3.What do you mean by repo rate n reverse repo rate?

bps
It is an acronym for basis point and is used to indicate changes in rate of interest and other financial instruments. 1 basis point is equal to 0.01%. So when we say that repo rate has been increased by 25 bps, it means that the rate has been increased by 0.25%.

Repo Rate and Bank Rate

People often get confused between these two terms. Though they appear similar there is a basic difference between them. Repo rate or repurchase rate is the rate at which banks borrow money from the central bank (read RBI for India) for short period by selling their securities (financial assets) to the central bank with an agreement to repurchase it at a future date at predetermined price. It is similar to borrowing money from a money-lender by selling him something, and later buying it back at a pre-fixed price.

Bank rate is the rate at which banks borrow money from the central bank without any sale of securities. It is generally for a longer period of time. This is similar to borrowing money from someone and paying interest on that amount. Both these rates are determined by the central bank of the country based on the demand and supply of money in the economy.

Reverse Repo Rate

Reverse repo rate is the rate of interest at which the central bank borrows funds from other banks for a short duration. The banks deposit their short term excess funds with the central bank and earn interest on it. Reverse Repo Rate is used by the central bank to absorb liquidity from the economy. When it feels that there is too much money floating in the market, it increases the reverse repo rate, meaning that the central bank will pay a higher rate of interest to the banks for depositing money with it.

CRR (Cash Reserve Ratio)

Banks are required to maintain a percentage of their deposits as cash, meaning that if you deposit Rs. 100/- in your bank, then bank cant use the entire Rs. 100/- for lending or investment purpose. They have to maintain a portion of the deposit as cash and can use only the remaining amount for lending/investment. This minimum percentage which is determined by the central bank is known as Cash Reserve Ratio. So if CRR is 6% then it means for every Rs. 100/- deposited in bank, it has to maintain a minimum of Rs. 6/- as cash. However banks do not keep this cash with them, but are required to deposit it with the central bank, so that it can help them with cash at the time of need.

SLR (Statutory Liquidity Ratio)

Apart from keeping a portion of deposits with the RBI as cash, banks are also required to maintain a minimum percentage of deposits with them at the end of every business day, in the form of gold, cash, government bonds or other approved securities. This minimum percentage is called Statutory Liquidity Ratio.

Example If you deposit Rs. 100/- in bank, CRR being 6% and SLR being 8%, then bank can use 100-6-8= Rs. 84/- for giving loan or for investment purpose.

How it effects us
Having understood the meaning of these banking terms, let us now see how we are affected by increase/decrease of these rates. The central bank uses these rates to control inflation. All About Inflation Inflation and Types of Inflation Banks earn profit by borrowing at a lower rate of interest from the central bank, and lending the same amount at a higher rate to the customers. If the repo rate or the bank rate is increased, bank has to pay more interest to the central bank. So in order to make profit, banks in turn increase their interest rate at which they take deposit from the customer and lend money to the customer. So the demand for loan decreases, and people start putting more and more money in bank accounts to earn higher rate of interest. This helps in controlling inflation. An increase in Reverse repo rate causes the banks to transfer more funds to the central bank, because banks earn attractive interest rates and also their money is in safe hands. This results in the money being drawn out of the banking system, thus banks are left with lesser funds. Thus, by lowering repo rate, central bank injects liquidity in the banking system and by increasing reverse repo rate it absorbs liquidity from the banking system. Increase in SLR and CRR rate means that banks will have less power to give loans (see our example above), which again controls amount of money floating in the market; thereby controlling inflation. It also makes banks safer to keep money because banks will have a higher liquidity to meet the demand of customers. As we learnt from the recession, giving loans expose banks to great risks. So if banks have lesser funds to give as loan, they become relatively safer.

Conclusion

Thus we conclude that the central bank of a country uses these rates to fight inflation and to keep a check on economy.

Q.4.What is MIS and QIS formats?

Management Information System(MIS).RBI recommended dat it shud consist of certain categories of data such as investor analysis,credit analysis,customer base analysis and defaulter s analysis. Quantitative Impact Study(QIS).

Q.5.What do you mean by cash flow?

Cash flow is the movement of cash into or out of a business, project, or financial product. (Note that "cash" is used here in the broader sense of the term, where it includes bank deposits.) It is usually measured during a specified, finite period of time. Measurement of cash flow can be used for calculating other parameters that give information on a company's value and situation. Cash flow can e.g. be used for calculating parameters:

to determine a project's rate of return or value. The time of cash flows into and out of projects are used as inputs in financial models such as internal rate of return and net present value. to determine problems with a business's liquidity. Being profitable does not necessarily mean being liquid. A company can fail because of a shortage of cash even while profitable. as an alternative measure of a business's profits when it is believed that accrual accounting concepts do not represent economic realities. For example, a company may be notionally profitable but generating little operational cash (as may be the case for a company that barters its products rather than selling for cash). In such a case, the company may be deriving additional operating cash by issuing shares or raising additional debt finance. cash flow can be used to evaluate the 'quality' of income generated by accrual accounting. When net income is composed of large non-cash items it is considered low quality. to evaluate the risks within a financial product, e.g. matching cash requirements, evaluating default risk, re-investment requirements, etc.

Q.6.What do you mean by fund flow?

The net of all cash inflows and outflows in and out of various financial assets. Fund flow is usually measured on a monthly or quarterly basis. The performance of an asset or fund is not taken into account, only share redemptions (outflows) and share purchases (inflows). Net inflows create excess cash for managers to invest, which theoretically creates demand for securities such as stocks and bonds.

Investopedia explains Fund Flow Investors and market analysts watch fund flows to gauge investor sentiment within specific asset classes, sectors, or for the market as a whole. For instance, if net

fund flows for bonds funds during a given month is negative by a large amount, this would signal broadbased pessimism over the fixed-income markets.

Q.7.Example of 3 types of accounts? Q.8.Fundamental rules of accounting?

Accounting is the mechanism used to record activities and transactions that occur within a business. In its simplest terms, Accounting is the "language of business." However, in order to have an understandable record, a standard set of rules for accounting within the U.S. has been established. These rules are called the Generally Accepted Accounting Principles (GAAP), and all U.S. businesses are expected to follow them. The first general rule of accounting is that every transaction is recorded. It has been said that businesses that do not record transactions, or incorrectly record transactions, are committing fraud, although this is not necessarily the case. Fraud is part of a much broader area called material misstatement which also can include error. An error is not necessarily fraud under the law. While there are exceptions to this rule, the guidance for applying those exceptions is specifically defined by GAAP, and is applicable to all businesses. The second general rule of accounting is that transactions are recorded using what is called a "double-entry" accounting method. Originally developed in Italy in the 1400s, double-entry means that for a complete record of a transaction, two entries are made. For example, if you have $5 in cash, and want to buy some gasoline for your lawn mower, you take your portable gas can and your money to the gas station and exchange $5 in cash for $5 in gas. This transaction is recorded as an increase in the asset "gas" for $5, and a corresponding reduction in the asset "cash" for $5. In this example, one transaction contained two entries. This takes a little time to get used to, but it is a critical concept in basic accounting. Double entry is tied to the concept of Debits and Credits, which you will learn about in the next section. The act of recording transactions is commonly referred to as making journal entries. In a few more paragraphs, we'll discuss what a journal entry looks like. The third general rule of accounting is that every recorded transaction is captured in a log called the "General Journal." In general, "Accounting is the art of recording, classifying, summarizing and interpreting a business transaction." To make this easier, we can follow the golden rules of accounting. Accounts are one of three basic types: Type Represent Examples

Accounts related to individuals, firms, Personal organizations, or companies

Individuals; partnership firms; corporate entities; non-profit organizations; any local or statutory bodies including governments at the country, state or local levels y Tangibles - Plants and machinery, furniture and fixtures, computers and information processing equipment Intangibles - Goodwill, patents, copyrights, trademarks

Real

Accounts related to assets of a tangible or intangible nature

Temporary income and expenditure accounts for recognition of the Nominal implications of financial transactions during each fiscal term till finalization of accounts at term end

Sales, purchases, utilities, dividends

Example: The Sales account is opened for recording the sales of goods or services. At the end of the financial period, the total sales are transferred to the revenue statement account (Profit and Loss Account or Income and Expenditure Account). Similarly, expenses during the financial period are recorded using the respective Expense accounts, which are also transferred to the revenue statement account. The net positive or negative balance (profit or loss) of the revenue statement account is transferred to reserves or capital account as the case may be.

THE GOLDEN RULES OF ACCOUNTING: Type Personal Real Nominal Debit The receiver What comes in All expenses and losses Credit The giver What goes out All income and gains (profits)

Q.9.What is WC?Ratio of WC.

A measure of both a company's efficiency and its short-term financial health. The working capital ratio is calculated as:

Positive working capital means that the company is able to pay off its short-term liabilities. Negative working capital means that a company currently is unable to meet its short-term liabilities with its current assets (cash, accounts receivable and inventory). Also known as "net working capital", or the "working capital ratio".

Working capital ratio= current assets/current liabilities.The ideal ratio is 2:1.

Q.10.What is the need of BRS?

Bank Reconcilation Statement(BRS). to find out the reason for
difference in cash book &bank pass book.

Q.11.What do you mean accruals?

Accounts on a balance sheet that represent liabilities and non-cash-based assets used in accrualbased accounting. These accounts include, among many others, accounts payable, accounts receivable, goodwill, future tax liability and future interest expense. Investopedia explains Accruals The use of accrual accounts has greatly increased the amount of information on accounting statements. Before the use of accruals only cash transactions were recorded on these statements. But cash transactions don't give information about other important business activities, such as revenue based on credit and future liabilities. By using accruals, a company can measure what it owes looking forward and what cash revenue it expects to receive. It also allows a company to show assets that do not have a cash value, such as goodwill.

Q.12.what is depreciation and its methods?

1. A method of allocating the cost of a tangible asset over its useful life. Businesses depreciate longterm assets for both tax and accounting purposes. 2. A decrease in an assets value caused by unfavorable market conditions.

Investopedia explains Depreciation 1. For accounting purposes, depreciation indicates how much of an assets value has been used up. For tax purposes, businesses can deduct the cost of the tangible assets they purchase as business expenses; however, businesses must depreciate these assets in accordance with IRS rules about how and when the deduction may be taken based on what the asset is and how long it will last. Depreciation is used in accounting to try to match the expense of an asset to the income that the asset helps the company earn. For example, if a company buys a piece of equipment for $1 million and expects it to have a useful life of 10 years, it will be depreciated over 10 years. Every accounting year, the company will expense $100,000 (assuming straight-line depreciation), which will be matched with the money that the equipment helps to make each year.

2. Currency and real estate are two examples of assets that can depreciate or lose value. During the infamous Russian ruble crisis in 1998, the ruble lost 25% of its value in one day. During the housing crisis of 2008, homeowners in the hardest-hit areas, such as Las Vegas, saw the value of their homes depreciate by as much as 50%.

straight line method and diminishing balance method.

Q.13.What is finance?
Finance is the study of funds management. The general areas of finance are business finance, personal finance (private finance), and public finance. Finance includes saving money and often includes lending money. The field of finance deals with the concepts of time, money, risk and how they are interrelated. It also deals with how money is spent and budgeted. One facet of finance is through individuals and business organizations, which deposit money in a bank. The bank then lends this money out to other individuals or corporations for consumption or investment and charges interest on the loans

Q.14.What is hedging?
Making an investment to reduce the risk of adverse price movements in an asset. Normally, a hedge consists of taking an offsetting position in a related security, such as a futures contract. Investopedia explains Hedge An example of a hedge would be if you owned a stock, then sold a futures contract stating that you will sell your stock at a set price, therefore avoiding market fluctuations. Investors use this strategy when they are unsure of what the market will do. A perfect hedge reduces your risk to nothing (except for the cost of the hedge).

Q.15.What is CENVAT?
Central value added tax.

Q.16.How to know the present share rate of any company?

we have to use this formula for calculating the present share rate of any company.

TOTAL CAPITALISATION -------------------------------------------------------NO OF SHARE ISSUE BY COMPANY

Q.17.What is sensex?How is it calculated?

The Sensex is an "index". What is an index? An index is basically an indicator. It gives you a general idea about whether most of the stocks have gone up or most of the stocks have gone down. The Sensex is an indicator of all the major companies of the BSE. The Nifty is an indicator of all the major companies of the NSE. If the Sensex goes up, it means that the prices of the stocks of most of the major companies on the BSE have gone up. If the Sensex goes down, this tells you that the stock price of most of the major stocks on the BSE have gone down. Just like the Sensex represents the top stocks of the BSE, the Nifty represents the top stocks of the NSE. Just in case you are confused, the BSE, is the Bombay Stock Exchange and the NSE is the National Stock Exchange. The BSE is situated at Bombay and the NSE is situated at Delhi. These are the major stock exchanges in the country. There are other stock exchanges like the Calcutta Stock Exchange etc. but they are not as popular as the BSE and the NSE.Most of the stock trading in the country is done though the BSE & the NSE. Besides Sensex and the Nifty there are many other indexes. There is an index that gives you an idea about whether the mid-cap stocks go up and down. This is called the BSE Mid-cap Index. There are many other types of indexes. There is an index for the metal stocks. There is an index for the FMCG stocks. There is an index for the automobile stocks etc.

The Sensex has a very important function. The Sensex is supposed to be an indicator of the stocks in the BSE. It is supposed to show whether the stocks are generally going up, or generally going down.

To show this accurately, the Sensex is calculated taking into consideration stock prices of 30 different BSE listed companies. It is

calculated using the free-float market capitalization method. This is a world wide accepted method as one of the best methods for calculating a stock market index.

Please note: The method used for calculating the Sensex and the 30 companies that are taken into consideration are changed from time to time. This is done to make the Sensex an accurate index and so that it represents the BSE stocks properly.

To really understand how the Sensex is calculated, you simply need to understand what the term free-float market capitalization means. (As we said earlier, the Sensex is calculated on basis of the free-float market capitalization method) But, before we understand what free-float market capitalization means, you first need to understand what market capitalization means. Market cap or market capitalization is simply the worth of a company in terms of its shares! To put it in a simple way, if you were to buy all the shares of a particular company, what is the amount you would have to pay? That amount is called the market capitalization!

Q.18. what is merger, acquisition & amalgamation? what is the differnce between them? Q.19.What is IPO? Q.20.Define Financial Leverage.

Q.21.Formula for Book Value Per Share. Q.22.Is der ny difference between a share and a stock?