1) A typical housing contract of any large builder is highly skewed. While the home buyer pays a penal interest of 18% per annum for a delay of 15 days on his instalments to the builder, the builder pays as little as 1% per annum for a delay exceeding 18 months in the delivery of the house — an incentive and not a deterrent to delay.
2) Microsoft had a profit margin of 25%, while Apple reported 19% Indian market, which generates as much revenue for the company as China, despite the latter adding eight times as many new personal computers in a year compared to India. The revenues from both remain almost the same. The reason: Piracy, which is higher in China.
3) The value of shares pledged has gone up, partly because of additional pledging and partly stock price appreciation. However, sectors such as consumer goods, utilities, IT, manufacturing and healthcare have seen a year-on-year rise in the number of additional shares pledged by the promoter, an analysis by Morgan Stanley revealed. Companies such as Videocon, United Spirits, Fortis Healthcare, Plethico Pharma, Suzlon Energy, Parsvnath Developers, Ackruti City and Adani Power have pledged more number of shares in value terms, the Morgan Stanley report said.
According to corporate advisors, certain sectors such as utilities have higher promoter pledging (also called loan against shares) due to the requirement of providing larger collateral security to banks and financial institutions to avail themselves of loans.
Saturday, May 29, 2010
Wednesday, April 14, 2010
EXPLAINATION OF BALANCE SHEET TERMS
LIABILITIES - These are claims of outsiders against the business. These are amounts owed by the business to persons other than owners.
CURRENT LIABILITIES - These are obligations to be met with current assets or creation of other current liabilities. Obligations entered in the course of the operating cycle. These also compromise of other liabilities whose ordinary retirement is a short period of time, usually 12 months. Amounts owing to creditors are purposes of goods for instance.
PROVISIONS - These are amounts set aside out of profits or other surpluses to meet :
- Specific requirements.
- Specific commitments, known contingencies and dimunition in value of assets.
- Bad debts provisionds for instance.
CREDITORS / ACCOUNTS PAYABLE - Claims of vendors and others; for sale of goods for instance.
ACCRUED EXPENSES - Valid claims against the company remaining unpaid. Interest accrued or accuring on loans for instance.
DEFERRED INCOME - Advance payment received for service or goods to be rendered / delivered in future.
OTHER LIABILITIES - Compromising of other than current liability. Are claims of outsiders that do not fall within one year; medium term loans for instance.
CONTINGENT LIABILITY - Liabilities indefinite has to either their amount or occurance, for instance, law suits against the business.
DEBENTURE / BOND - Is a certificate of debt which usually : represents a part of loan; bears interest; matuares on a stated future date. It may be with or without a charge on the assets of the company. Debentures do not have voting rights.
NET WORTH / OWNER'S EQUITY - These are the claims of the owners represented by the capital and surplus.
SHARE CAPITAL - Is money subscribed by shareholders.
NOMINAL / AUTHORISED / REGISTERED CAPITAL - Is amount stated in the Memorandum of Association as authorsed to be issued and upon which stamp duty is paid.
ISSUED / SUBSCRIBED CAPITAL - Capital represented by number of shares issued to the public.
CALLED - UP CAPITAL - Amount of money called -up on the shares actually subscribed.
PAID UP CAPITAL - Amount of the called up capital that has actually been paid by the shareholders by way of application money, allotment money and call money on the share taken by them.
UNCALLED CAPITAL - Amount of capital remaining uncalled on the shares actually issued.
RESERVE CAPITAL - It is that part of the issued capital which is set aside for being called up at the time of winding up of the Company.
CALL - It is a demand made by the company to pay the balance amount outstanding on the shares taken up by the shareholers. There may be several calls. eg. 1st call, 2nd call, 3rd call etc.
SHARE PREMIUM - This is the excess of issue price of share over its face or par value.
SHARE DISCOUNT - Where shares are issued at a price lower than the book (face) value, a discount results.
PREPAID CALLS - Are calls paid in advance.
CALLS IN ARREARS - Calls outstanding to be paid by the shareholders.
SHARE FORFEITURE - These are the shares which are forfeited by the Company for non-payment of allotment money or call money.
EQUITY SHARES - To these shares no special rights are attached. These shares carry ordinary rights to participate in the profits of the company and have voting rights.
BONUS SHARES - This is in the nature of capitalisation of profits or reserves of a company.
PREFERENCE SHARES - These have a prior claim on profits available for dividend at a fixed rate, or amount; Are also preferential as regards repayment of capital in the event of winding up; Ordinarily have no voting rights.
CUMULATIVE PREFERENCE SHARES - The stipulated dividend accumulates until it is all paid; Arrears of any one year are carried forward as a charge upon the subsequent year's profit.
NON-CUMULATIVE PREFERENCE SHARES - Preference dividend is payable only out of profits of each year; If not paid, shareholders cannot claim to receive it out of profits of subsequent years.
REDEEMABLE PREFERENCE SHARES - The company may redeem or pay off these at a later date; Re-payment may be by creating a 'Reserve Fund' built out of profits or alternatively by an issue of new shares for this purpose.
CAPITAL - In a narrow sense, it is the value assigned in the balance sheet to the various stock issues.
In broader sense, it represents stock issues and surplus. In a still broader sense it includes long term debts.
TOTAL CAPITAL EMPLOYED - Total assets less fictitious assets and deferred expenses.
TRADING CAPITAL - Consists of fixed and floating assets.
FIXED CAPITAL - Compromises of fixed assets.
CIRCULATING CAPITAL - Consists of floating and circulating assets.
RETAINED EARNINGS - Is the differnce between total net earnings to date and total amount of dividends. If differnce is negative it becomes deficit.
SURPLUS / RESERVES - Is the excess of net worth over par value of capital stock;
It comprises : Earned Surplus and Capital Surplus
The sum is not designed to meet any liability, contingency, commitment or dimunition in value of assets known to exist.
CONTINGENCY RESERVES - These reserves set up out of earnings or surplus to indicate a possible future loss or claim against the company. A likelihood of loss is open to considerable question.
INVESTMENT ALLOWANCE RESERVE - It is the rebate given to the assessees in respect of new machinery and plant under certain conditions viz.,
1. Ownership
2. Wholly used in the business.
The reserve created for this purpose is called investment allowance reserve.
DOUBTFUL DEBTS RESERVE - This is a Reserve for debts which are doubtful of recovery.
DEBENTURE REDEMPTION RESERVE - This is a fund created by setting aside periodically a sum from the profits of the company with a view to accumulate a sum for repayment of debentures. After repayment of debentures the fund may be transferred to general reserve.
CAPITAL REDEMPTION RESERVE - This is a fund created when redemption is to be done out of the profits of the company by setting aside from the profits of the Company a sum equal to the nominal amount of preference shares reddemable.what is calls-in-arrears?
If any body purchase the share of a company whose per share
value is Rs.10 (Rs 2 on application,3 on first allotment &
Rs 5 on final call)and company demand the the value of
application & first allotment i.e. Rs. 5 but person who
purchase one share pays Rs 2 only in stead of Rs.5.So Rs.3
will be calls in Arrear.
Monday, April 12, 2010
Mergers and Acquisitions - RIL - ATLAS Energy
The Atlas Energy deal envisages RIL paying upfront $339 million for its 40% stake, followed by $1.36 billion out of Atlas’ share of exploration expenditure over a period of seven-anda-half years. In addition, towards its own share of exploration expenditure, the firm will shell out $3.4 billion over ten years. For a company that generated cash profit of $4.2 billion in the first nine months of FY10, and was carrying $3.4 billion as on December 31, 2009, these investments will hardly strain the company.
Since the initial payout under the deal can be easily met out of the company’s existing cash balances, RIL will not need to raise any debt for financing the deal. Similarly, the payment towards future exploration efforts too can be met through recurring cash flows from its existing assets. According to Goldman Sachs, RIL could have generated $25 billion in excess of its committed capex over the next four years and left the company cash surplus and debt-free by as early as FY13.
While RIL has signed the deal at a fair valuation, access to shale gas exploitation technology is a crucial strategic benefit to the company. RIL has retained the option to operate in certain project areas, although Atlas will serve as the development operator for the joint venture. RIL also gets the right of first offer in case Atlas plans to sell any more of its shale gas acreages not covered under the current agreement.
Similar to the coal-bedmethane (CBM), shale gas is an unconventional source of natural gas. Exploiting the shale gas became possible over the past decade due to development of innovative drilling techniques, including horizontal drilling and hydraulic fracturing to create fractures in the rocks to allow permeability. Exploiting shale gas is costlier to conventional gas due to the use of better technology, but the risk of failure is substantially low.
In the contracted area, Atlas and Reliance have already charted a five-year development plan to drill 45 horizontal wells during the remainder of 2010, increasing to a total of 300 wells in 2013. The development opens a new chapter for the Indian energy giant, which also recently completed setting up the solar power plants in New Delhi for the Commonwealth games. Apart from just studying the financial impact, investors should view this development as addition to the energy portfolio of the company improving its diversity.
Since the initial payout under the deal can be easily met out of the company’s existing cash balances, RIL will not need to raise any debt for financing the deal. Similarly, the payment towards future exploration efforts too can be met through recurring cash flows from its existing assets. According to Goldman Sachs, RIL could have generated $25 billion in excess of its committed capex over the next four years and left the company cash surplus and debt-free by as early as FY13.
While RIL has signed the deal at a fair valuation, access to shale gas exploitation technology is a crucial strategic benefit to the company. RIL has retained the option to operate in certain project areas, although Atlas will serve as the development operator for the joint venture. RIL also gets the right of first offer in case Atlas plans to sell any more of its shale gas acreages not covered under the current agreement.
Similar to the coal-bedmethane (CBM), shale gas is an unconventional source of natural gas. Exploiting the shale gas became possible over the past decade due to development of innovative drilling techniques, including horizontal drilling and hydraulic fracturing to create fractures in the rocks to allow permeability. Exploiting shale gas is costlier to conventional gas due to the use of better technology, but the risk of failure is substantially low.
In the contracted area, Atlas and Reliance have already charted a five-year development plan to drill 45 horizontal wells during the remainder of 2010, increasing to a total of 300 wells in 2013. The development opens a new chapter for the Indian energy giant, which also recently completed setting up the solar power plants in New Delhi for the Commonwealth games. Apart from just studying the financial impact, investors should view this development as addition to the energy portfolio of the company improving its diversity.
Wednesday, March 31, 2010
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 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.
Thursday, March 18, 2010
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...
(Social Science Research Network)
Regards,
Somanth
Tuesday, March 16, 2010
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.
The file is being updated and so please be careful while using it.
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