Escrow Account

A trust account held in the borrower's name to pay obligations such as property taxes and insurance premiums.

An escrow account is

• an account established by a broker, under the provisions of license law, for the purpose of holding funds on behalf of the broker's principal or some other person until the consummation or termination of a transaction, or
• a trust account held in the borrower's name to pay obligations such as property taxes and insurance premiums.

Escrow is best known in the United States in the context of real estate(specifically in mortgages where the mortgage company establishes an escrow account to pay property tax and insurance during the term of the mortgage).

Some good papers on finance

Hi,

I am providing following link. You will get lots of papers written on finance and other areas.

To download these papers, you have to register for it. It contains very good papers, articles...

http://hq.ssrn.com/rankings/Ranking_display.cfm?TRN_gID=10&requesttimeout=900

(Social Science Research Network)

Regards,

Somanth

L&T ratios

I am providing the link to my working file on L&T ratios.
The file is being updated and so please be careful while using it.

Corporate Finance Lecture Series

Dear Forum members,
Kindly make sure that you guys are done with the first two lectures of Damodaran by Wednesday, so that we can straightway start solving problems on the first two parts of CF - Value and Risk.

Here is the link to the video lectures.

Kindly either download them or get them from me in pen drive on Wednesday.

Three cheers
(Happy new year.)

All you ever wanted to know about GST

The goods and services tax (GST) is a comprehensive value-added tax (VAT) on goods and services.

France was the first country to introduce this system in 1954.

Today, it has spread to over 140 countries.

Through a tax credit mechanism, GST is collected on value-added goods and services at each stage of sale or purchase in the supply chain.

GST paid on the procurement of goods and services can be set off against that payable on the supply of goods or services. But being the last person in the supply chain, the end consumer has to bear this tax and so, in many respects, GST is like a last-point retail tax.

Many countries have a unified GST system. However, countries like Brazil and Canada follow a dual system wherein GST is levied by both federal and state or provincial governments.

In India, a dual GST is being proposed wherein a central goods and services tax (CGST) and a state goods and services tax (SGST) will be levied on the taxable value of a transaction.

The central and state governments are discussing the GST system proposed to be implemented in India from April 1, 2010.
Representing the statesin the discussions is the empowered committee of state finance ministers.

Here are some questions on GST and their answers:

Will dual GST be levied in addition to the existing taxes?
No. It is proposed that the CGST will subsume central excise duty (Cenvat), service tax, and additional duties of customs at the Central level; and value-added tax, central sales tax, entertainment tax, luxury tax, octroi, lottery taxes, electricity duty, state surcharges related to supply of goods and services and purchase tax at the state level.

What will be the rate of GST?
The combined GST rate is currently being discussed by the Centre and the EC. The rate is expected to be in the range of 14-16 %. Once the total GST rate is determined, the states and the Centre have to agree on the CGST and SGST rates. Today, services are taxed at 10% and the combined incidence of indirect taxes on most goods is around 20%.

Will prices go up after the implementation of GST?
In fact, the prices of commodities are expected to come down in the long run as dealers pass on the benefits of reduced tax incidence to consumers by slashing the prices of goods.

What are the implications of GST on imports and exports?
Imports would be subject to GST. Exports, however, will be zero-rated, meaning exporters of goods and services need not pay GST on their exports. GST paid by them on the procurement of goods and services will be refunded.

What are the benefits of shifting to a dual GST system?
Dual GST is expected to be a simple and transparent tax structure with only one or two rates of taxes. The result would be a reduction in the number of taxes at the Central and state levels, cut in effective tax rate for many goods, removal of the current cascading effect of taxes, reduction of transaction costs for taxpayers through simplified tax compliance, and increased tax collections due to wider tax base and better compliance.

How will dual GST affect the fiscal health of states?
Being a consumption-based tax, dual GST will result in better revenue collection for states with higher consumption of goods and services.

The backward and less-developed states would see fall in collections. The Centre is expected to put in place a mechanism to compensate states for any revenue loss due to GST.

The introduction of the GST system is by far the most important tax reform in India. Consensus and coordination among states is required for it to succeed. Before it can be introduced, the Centre and states have to sort out issues like agreement on GST rates, constitutional amendments empowering states to tax services, taxation on inter-state transactions of goods and services, drafting of CGST and SGST laws, consultation with all stakeholders including trade and industry associations before finalisation, administrative preparedness to implement the new tax regime and resolution of all other issues under discussion.

FRA and Macroeconomics

FRA and Macroeconomics are pretty large subjects and it would be a challenge to finish it in this trimester. Most of the lecture that I will take will have following pattern:
1)FRA :

• Lectures of FRA will have three components besides core lectures
• Presentations from on different Celebrated Reporting Scandals that have rocked of the World. While we wont discuss in depth about likes of ENRON or Worldcom in an in depth manner as I believe this would  be counter prodcutive till we have sound footing on Reporting analysis and treatments. But we will see how some of the provisions from GAAP and IFRS have been misused. (take these more like anecdotes)
• Case Studies from the book  
• And continuous evaluation. I am a maverick so expect Quizzes any time. I would use multiple formats for quizzes. Quizzes are great way of doing self-evaluation it tells us how we are progressing and if there is any value addition through these. (besides it also lets me know where I should put more stress.)

2) Macroeconomics :

• Lectures of FRA will have two components besides core lectures:
• Presentations on Economic News (typically gleaned from current Economist Magazine).
• And some Quizes given randomly. Quizes for Macroeconomics would have more simpler formats. Lastly they would also cover current happenings across the Globe. ( Please do understand Politics and Economics are interlinked so they are also game, meaning the reason Barack Obama has failed in getting many of the promised legislations esp. the health care bill passed from Senate has more to do with Democrats and Republican Politics then just the merit of the bill as such.

Both of us would also use the Calendar to announce the necessary readings before each Knowledge Meets. Lastly, if any one of us would like to teach any other subjects ( I am esp. scouting for some one with understanding of Econometric or Stochastic Calculus,& in depth understanding of Derivatives.) please do help us out.

MENTOR-SHIP PROGRAM : We would like this to get off the ground by the end of MARCH. But we can not do this unless we can give confidence to the Alumni that their time and resource would be utilized in a manner that would lead to value addition to their lives also.

Finance Management game No 1

Please fill in this form before 11th March.

Corporate Finance - Brealey Mayers

As discussed today, all the lectures on topics for CF (Corporate Finance) need to be covered in this trimester. I was going through the book and i found out that the book is divided into 10 parts comprising of 34 chapters. If we take a look at our time in hand we hardly have 3 months or 12 weeks (Mar - May) before we push off for our Summer interns. If we wish to complete this book by any chance we shall have to cover 1 part each session. That would mean lots of hard work as you have to balance this off with all your hectic schedule of syndicates and other class assignments.

We will discuss part 1 & 2 of the book on next saturday, it would cover the following topics :-

Part 1 - Value (1 hr session)

PV and opportunity cost of capital
How to calculate PV
Value of common stocks
Why PV leads to better investment decisions than other criterion
Making investment decison with PV rule

Part 2 - Risk (2 hr session)

Intorudction to risk, return and opportunity cost of capital
Risk and Return
Capital budgeting and risk

Time suggested is indicative as i am yet to prepare for the sesssions and may vary, any changes shall be indicated subsequently.

Consumer Behavior :Why the Party dresses Spike on Wednesday and Thursday Evening in PUNE?

Last Thursday, I went out to Polka Dots along with my room partner (MBA-Marketing) and his Girl friend. I still had my last paper(Research Methodology) to give, so Time was of an essence in choice of restaurant. Polka Dots fitted the bill, it was near, it had faster service,and it had a good food.

Not surprisingly, FATTY food make my brain work on overdrive. Or its pain to be Kabbab mein Hadi (though they had a different opinion about this!!). A stray thought ran in my mind: Would POLKA DOTS be so efficient on the other days too. Would the waiter be as courteous on the other days? Would the food taste so good every day? Is the food as good on crowded Fridays, Saturdays and Sundays? Do I go out ever on Fridays, Saturdays and Sundays? Occasionally( I have always cringed at all of those occasions) and during my college days but a lot had changed.

Stray thoughts that follow a chain sometimes can lead you to  unknown Insights.

Saturday is a Holiday to most people same goes for Sunday. So its not surprising that People enjoy a meal out on these days, enjoy a movie on Friday, Saturday, and Sundays. So these Days are heavily crowded on most nights. So, I somehow latched on to Thursdays and Wednesdays for my fun days whether it was movies or a good meal out. I asked my friend why dont we go out for food on Saturdays? Aarey yaar Weekend mein Bahut bhid rehta hai. And why not on Monday? Aarey Monday ko BOSS nahi chodega plus pura weekend ka pada hua kaam. And why not on Tuesday? He was getting agitated now ( Kabab mein Hadi). He did not reply(You see you should never make a marketing person a part of your Survey)... just murmured few profanities at me!

I had my answer. Most people behaved this way within my circle of friends.

And then I remembered , some time back we had an Alumnus of PUMBA from Pune Central explaining this seemingly un-explained phenomenon "Why some of the Party dresses see a  Spike on Wednesday and Thursday Evening in PUNE?" 


Did the same reasoning runs for Parties too?

A significant population should have shifted from Friday Nights to Thursdays! To cause an increase in sales for some type of Party Dresses. If so what is this consumer?

DINK? or College Students with more disposable Income?

Perhaps this is a good topic for RM.

Schedules

As per my earlier post where in I requested forum members to give us about 4 Days. (Finance Forum I know has the largest requirement of all forums) But we will adjust things. We initially planned to have Guest lectures on Saturday.But now lets see about that. Any decision has to consider number of active forum members. For under 15 Guest lectures might not be a good Idea. Then we need to think of some other way of increasing Industry Interaction. Check out Time Table here

I suggest following 

1) Saturday : a. Lecturers CF FRA and Macroeconomics.

2) Tuesday : Lecture CF and Macroeconomics.

3) Friday :  Presentation FIN Div (B)  11 - 4:45 FIN Div (A) 5:00 -7:30

4) Monday : Presentation FIN Div (A) 2;15 - 7:30

5) Wednesday : Presentation FIN Div (B) 

I know I am nearly using most of your time, but this is just one of the possibilities. I look forward to your suggestions.

ps: If there are just few of us, as I believe it would be given the strength. I think we should speak to Sir and shift all of us to one single FIN Div. That would make planning much more easier and robust, giving us some buffer days also.

Plan of Action : "Fire In the Belly"

As enumerated in my previous post the forum will take actions to rectify some of it. At the end of day it should be remembered though that Forum is just a Forum, it on its own can not make or break an Individual. You make this forum. A forum will not work without its dedicated participants.

As decided by forum members following is the Plan of Activities: 

1. Lectures : 
1. Gajju will be teaching Corporate Finance this Trimester. (Recd. Text: Brealey Myers Principles of Corporate Finance. I personally recommend the International Edition the 9th edition will cost about Rs 3000/- so look for 7th Edition on the streets of ABC.)
2. I would be teaching two subjects Macroeconomics and Financial Reporting and Analysis.(Recd Text: Economics by Samuelson and Xerox notes for FRA that you need to order to RAHUL.)
3. All lectures follow IIMA pattern. So do collect your books at the earliest.
2. Presentations: 
1. HBR Articles: HBR articles will have to be presented in the form of presentations. The Articles will be given on an Individual Basis. Aim is to learn current Happening in Business that are re-defining the world of Business. (Jeff Immelt G.E. CEO used HBR to spell out GE strategy for next 2 Decades). Time allocated one Night.
2. Case Studies: Case Studies Involve Presentations of Case Solutions by 1-2 Team members. Depending on Size of the case time would be allocated. But understand that we would progressively move towards 'One Case Study A Day'. ( This does not involve cases taken by Gajju in CF and by me in FRA and Macroeconomics)
3. Assignments: 

1. CF  and FRA Assignment: You need to select Five companies. At max four of them can be Indian or India listed (meaning Rediff that is listed on NASDAQ will be counted as Indian). And one needs to be an International Company.  Some guidelines : Do not select Any Financial firms or Firms that have huge financial operations (so do not select GE). Do not select loss making companies. Do not select unlisted companies. And lastly the companies must have a theme  for eg. Cars is not a theme Locomotion is (so you can choose companies like TATA Motors, Apollo Tyres, Boeing, Container Corporation of India, Great Eastern Shipping Corporation). For those with perverted minds like mine you can select SIN also (Phillip Morris(Malboro), Anheuser Busch(Bud-wiser), United Spirits(Mc Dowells), Playboy Entertainments(well Playboy), General Dynamics (Predator Drones... Weapons). Just Be ready with the companies we will let you know what to do with them.
2. Macroeconomics: A country will be allocated in a group of 2-3 you need to make a presentation with following thing in mind. I have a USD $ 10 Billion Fund for investing in various economies of the world. Your task is to approach us Me and Gajju and suggest us : 
1. To Stay Away from the country. ( if its pakistan... But I really do not know... someone can identify opportunities here also). 
2. To invest in the Country: If so then which sector? Which companies or a Group of Companies (do not worry I am not looking at Company valuations just Country and Sector Attractiveness)?  How Much? Whats are the Risk Factors.
3. To Stay Neutral.  
4. Forum Lectures and Programs :  As you may have been aware we plan to make Budget Discussion a Big event for FINANCE Forum and others. This is one of the event we are targeting at and while going forward we do believe this to become Finance Forums Flagship event, we would also be looking at leveraging forums contacts along with the Alumni base that we have to organize structured lecture on various topics like GST, M&A scenarios, PE funds etc. We welcome topics (topics have to be a structured framework or agenda for a day long or even smaller.) and other suggestions on these. 
5. Alumni Support : We would be looking at approaching Alumni for mentor-ship Program**  

Way forward:
We plan to accomplish this in 4 days per week.

1. Lectures: 2 Days per Week 3 hrs Each day after the college. (the Days would be decided after we get our Time Tables)
2. Presentations: 2 Days per week. Amount of time would be decided after acertaining forum strength as the Aim is to have more frequent presentation practice.

Please do suggest your views on these.

** Conditions applied