0
Investment Theory
Topics include Efficient Market Hypothesis, Capital Asset Pricing Model (CAPM), Arbitrage Pricing Theory, and investment strategies
364 Questions
How do you calculate unleverd cost of capital?
Leverage indicates the use of debt in conjunction with owner's equity to finance an accumulation of assets. The term "unlevered" implies that there is no use of debt to make such asset acquisitions. Therefore, the cost of capital would include the costs associated with equity-only financing. This includes the rate of required return on both preferred and common stock (with their appropriate weighting).
What strategy the Indian importer needs to follow to hedge the exchange risk?
it is better to go for forward contract
What is the difference between cycle stock and safety stock?
safety is a type of tea with heavy sugar and strong decation .
cycle stock is a cycle with two punctured tyres owned by gudack .
What are the institutional use of bond markets?
All types of financial institutions participate in the bond markets. Commercial banks, savings institutions, and finance companies commonly issue bonds in order to raise capital to support their operations. Commercial banks,savings institutions, bond mutual funds, insurance companies and pension funds are investors in the bond market. Financial institutions dominate the bond market in that they purchase a very large proportion of bonds issued.
The role of an underwriter in an initial public offering?
Underwriters are the institutions/individuals who agree to buy the shares of the company in case the company is unable to sell all its shares to the public. For providing this safety, the underwriters charge a commission to the company for providing this service.
It is not the right time to invest in stock market and why?
There is no right or wrong "time to get into the stock market." It is always time to invest, as long as you know what you are investing in. If you know that a company will soon be making money because of Christmas or another holiday, than of course you would want to invest in it.
How much is one share of walmart's stock?
Wal-Mart closed at 49.19 on 3/13/09. See Related Links for an updated stock price for Wal-Mart (WMT).
Primary markets can not function well without secondary markets?
Primary markets can not function well without secondary markets
What are the listed companies in Colombo stock exchange?
Some companies are:
* Ceylinco insurance company * Commerical bank of ceylon * DFCC bank * Hatton National bank * National development bank
* Sampath bank * Nations trust bank * Seylan bank * Distilleries company of Sri Lanka * Hayleys limited * Hemas holdings * John keels holdings * Asian hotels * Caltex lubricants lanka limited * Tokyo cement company * ACL cables * Royal ceramics lanka ltd * Sri lanka telecom * Chemical industries ceylon ltd
What are the 2 ways in which a public limited company may finance its activities?
# By Issuing Equity Shares or # By Issuing Corporate Bonds
If you decide to invest in the securities market Do you prefer equity or debt tools?
It depends on what you want.
If you want high returns and are ready to take high risk go for Equities
If you are happy with average returns and are not ready to take high risk go for Debt products.
What is effect on profit Previous year forget closing stock for next year profit?
previous year profit under stated and present year profit understated
The twofold goal of marketing?
lkasjflksjaldkas ashdlksahd as dsakhd sa dhskjadhsajlkdhsaldas dsakd lsakhdassdklhsadhksahdadskadsakldhsa dsadhsaldjhsad asdsajkldhs lakhds adsakdjsaklhd as dsajdhasljdhsa dsahdskalhdsjaldh sadsa nlkjasdas dkl ashd jashd sa dsahdksahdlasd sadhsajdhsa;ldhsa dsadhs;alhds'adsa dhsald;sad dsakldh slahd sa d shad 'sakhd sa' Dsajdsa'd sad arjohn arjohn arjkohn
Order that a company goes through to make an initial public offering?
Steps in an IPO Process:
Let us now have a look at how an initial public offering process is initiated and reaches its conclusion. The entire process is regulated by the 'Securities and Exchange Board of India (SEBI)', to prevent the possibility of a fraud and safeguard investor interest.
Selection of Investment Bank
The first thing that company management must do when they have taken a unanimous decision to go public is to find an investment bank or a conglomerate of investment banks that will act as underwriters on behalf of the company. Underwriter's buy the shares of the company and resell them to the general public. The company must also hire lawyers that can guide them through the legal maze that an IPO setup can be. It must be ready with detailed financial records for intensive fiscal health scrutiny that SEBI would perform. Some companies may also opt to directly sell their shares through the stock market, but most prefer going through the underwriters.
Step 1: Preparation of Registration Statement
To begin an IPO process, the company involved must submit a registration statement to the SEBI, which includes a detailed report of its fiscal health and business plans. SEBI scrutinizes this report and does its own background check of the company. It must also see that registration statement fulfils all the mandatory requirements and satisfies all rules and regulations.
Step 2: Getting the Prospectus Ready
While awaiting the approval, the company, with assistance from the underwriters, must create a preliminary 'Red Herring' prospectus. It includes detailed financial records, future plans and the specification of expected share price range. This prospectus is meant for prospective investors who would be interested in buying the stock. It also has a legal warning about the IPO pending SEBI approval.
Step 3: The Roadshow
Once the prospectus is ready, underwriters and company officials go on countrywide 'roadshows', visiting the major trade hubs and promote the company's IPO among select few private buyers (Usually corporates or HNIs). They are fed with detailed information regarding company's future plans and growth potential. They get a feel of investor response through these tours and try to woo big investors.
Step 4: SEBI Approval & Go Ahead
Once SEBI is satisfied with the registration statement, it declares the statement to be effective, giving a go ahead for the IPO to happen and a date to be fixed for the same. Sometimes it asks for amendments to be made before giving its approval. The prospectus cannot be given to the public without the amendments suggested by SEBI. The company needs to select a stock exchange where it intends to sell its shares and get listed.
Step 5: Deciding On Price Band & Share Number
After the SEBI approval, the company, with assistance from the underwriters decide on the final price band of the shares and also decide the number of shares to be sold.
There are two types of issues: Fixed Price and Book Building
Fixed Price - In a Fixed price issue - the company decides the price of the share issue and the number of shares being sold. Ex: ABC Ltd public issue of 10 lakh shares of face value Rs. 10/- each at a premium of Rs. 55/- each is available to the public thereby generating Rs. 6.5 Crores.
Book Building - A Book building issue helps the company discover the price of the issue. The company decides a price band and it gives the investor an option to choose the price at which he/she wishes to bid for the company shares. Ex: ABC Ltd issue of 10 lakh shares of face value Rs. 10/- each at a price band of Rs. 60 to 70 is available to the public thereby generating upto Rs. 7 Crores. Here the amount generated through the issue would depend on the highest amount bid by most investors.
Step 6: Available to Public for Purchase
On the dates mentioned in the prospectus, the shares are available to public. Investors can fill out the IPO form and specify the price at which they wish to make the purchase and submit the application. This open period usually lasts for 5 working days which is a SEBI requirement.
Step 7: Issue Price Determination & Share Allotment
Once the subscription period is over, members of the underwriting banks, share issuing company etc will meet and determine the price at which shares are to be allotted to the prospective investors. The price would be directly determined by the demand and the bid price quoted by investors. Once the price is finalized, shares are allotted to investors based on the bid amounts and the shares available.
Note: In case of oversubscribed issues, shares are not allotted to all applicants.
Step 8: Listing & Refund
The last step is the listing in the stock exchange. Investors to whom shares were allotted would get the shares credited to their DEMAT accounts and for the remaining the money would be refunded.
How to compute residual variance of RIL and Sensex?
Variance is variability and diversity of security from average mean and expected value
Variance = standard deviation fo security * co relation (r) devided by standanrd deviation of sensex
How would you analyze the financial position of company from the point of view or investor?
please give some ideas about a investor One who lays out money, usually by lending or purchasing, in the expectation of profiting from interest earnings or capital gain.
Why didn't the US national debt from World War 2 cause hyperinflation?
America instituted many price and wage controls during World War II to hold down inflation. Rent control got its start during the war and employers starting offering benefits such as health insurance to bypass wage controls. Shortages did occur and life was quite tough for those back home during the war. Once the wage controls were released after the war, prices did increase significantly. Prices went up 37 percent from 1944 and 1948, about the equivalent of the increase from 1976 to 1980.
What is a diversified portfolio?
Investing in different types of securities to reduce inherent risk in selecting one type of investment only. Example would be different types of bonds, or technology companies, etc. The only drawback is the more diversified-the more diminished returns. The advantage is reduced risk for the investor.
What the procedure of initial public offering?
you first file a petition with SEBI and get their approval
then you have to prepare a prospectus
then you will have to decide a price band for your shares. based on ur credentials SEBI may or may not accept the price you want directly...
then you have decide a broker or securities agency who wil help you in securitization like ICICI securities or HDFC securities etc.
then you ca declare a public offering
What is Stock acquisition from open market?
It is the process of buying stocks of a particular company from the stock market. The number of stocks that can be acquired in a particular day would depend on the number of stocks that are available for sale on that trading day.
