A company may be treated as unconsolidated even when a parent company owns 50% or more of its voting common stock.
This usually occurs when the parent is not in actual control of subsidiary, has temporary control of the subsidiary or if the parent company’s business operations are considerably different than that of the subsidiary.
Read more: http://www.investopedia.com/terms/u/Unconsolidated-Subsidiary.asp#ixzz1VVZcwxXr
Showing posts with label Financial Market. Show all posts
Showing posts with label Financial Market. Show all posts
Where an Option, i.e call option is allowed to run past its expiry date, rather than being sold or exercised. In other words, Where an option is neither sold nor exercised but allowed to lapse at expiry
Classification of Investments
| Financial Management, Financial Market, Financial Service | 0 comments »Investments can be categorized on quite a few bases like significance, size, functional activity, cost and revenue management, etc. On all the above, most appropriate way of classification is on the basis of correlation between investments.
The probable correlation between investments are listed below:
1. Prerequisite
2. Complement
3. Independent
4. Substitute
5. Mutually Exclusive
1. Prerequisite: One investment might be a prerequisite for the other. In other words, an initial investment is required for further investment.
For example: Investment in land is prerequisite for construction company
2. Complement: If secondary investment increases the expected returns from the primary (or decreases cost), then the secondary investment is said to be a complement of the primary investment.
For example, Erection of new plant to enjoy the cost advantage due to mass production.
3. Independent: Investments are said to be independent, if the cash flows from primary investment would be the same despite of whether the secondary investment is undertaken or not.
For example, Buying a lathe for the plant and computerizing administration activities are independent investments.
4. Substitutes: If secondary investment decreases the returns generated from the first investment (or increases costs), then the secondary investment is said to be a substitute of the first. This kind of investment are inversely correlated to complement investment.
For example, Producing air-coolers and fans for the same market may lead to product cannibalization and erode profitability.
5. Mutually Exclusive: In the extreme situation, the benefits from the primary investment may totally disappear if further investment is accepted or it may be technically impossible to undertake both. Such investments are called mutually exclusive investments.
For example, it is not possible to build a plant in two different locations. Accepting one will result in involuntary rejection of the other.
Sweat equity is one kind of Equity share, which was introduced in the Ordinance 1998, smoothing the progress of the companies to get hold of the technical know-how, intellectual property through the issue of equity shares.
In other words, "The equity shares which are issued at discount to employees and directors and consideration other than cash for Technical know-how, intellectual property are known as sweat security."
In general the sweat security is issued by the companies in two different categories:
1. Issued at preferential pricing more specifically for employees
Issued at face value, that may be either at par or above par
Non Voting Shares is one type of equity shares under no circumstances carry any voting rights. These type of shares are also entitled to enjoy the bonus issue and elite listing for the holding of the shares.
The nature of the non voting shares will automatically become as voting shares if two year dividends are continuously missed. The non voting shares are to be declared 20% dividend more than the ordinary dividend. The issue size of the Non voting shares should not go beyond the maximum limit of the voting stock i.e. 25%
Bond issued at a discount and repaid at a face value. No periodic interest is paid. The difference between the issue price and redemption price represents the return to the holder. The buyer of these bonds receives only one payment, at the maturity of the bond.
Read Full post!Options generally have lives of up to one year. The majority of options traded on exchanges have maximum maturity of nine months. Longer dated options are called Warrants and are generally traded over-the counter market (OTC).
Read Full post!The task here is to look for stocks that have been overlooked by other investors and which may have a ‘hidden value’. These companies may have been beaten down in price because of some bad event, or may be in an industry that's not imaginary by most investors.
However, even a company that has seen its stock price decline still has assets to its name - buildings, real estate, inventories, subsidiaries, and so on. Many of these assets still have value, yet that value may not be reflected in the stock's price.
Value investors look to buy stocks that are undervalued, and then hold those stocks until the rest of the market realizes the real value of the company's assets. The value investors tend to purchase a company's stock usually based on relationships between the current market price of the company
and certain business fundamentals.
They like P/E ratio being below a certain absolute limit; dividend yields above a certain absolute limit; Total sales at a certain level relative to the company's market capitalization, or market value, etc.
Short-term (up to one year) bearer discount security issued by government as a means of financing their cash requirements.
Read Full post!Stock Exchange
| Financial Management, Financial Market, Financial Service, Forex Market | 0 comments »The Securities Contract (Regulation) Act, 1956 [SCRA] defines ‘Stock Exchange’ as any body of individuals, whether incorporated or not, constituted for the purpose of assisting, regulating or controlling the business of buying, selling or dealing in securities.
The stock exchanges in India, under the overall supervision of the regulatory authority, the Securities and Exchange Board of India (SEBI), provide a trading platform, where buyers and sellers can meet to transact in securities. The trading platform provided by Indian exchanges is an electronic one and
there is no need for buyers and sellers to meet at a physical location to trade.
Stock exchange could be a regional stock exchange whose area of operation/jurisdiction is specified at the time of its recognition or national exchanges, which are permitted to have nationwide trading since inception.
In India there are two stock exchanges dealing with equities. i.e. National Stock Exchange(NSE) & Bombay Stock Exchange (BSE).
According to the Securities Contracts Regulation Act(SCRA), 1956, the term ‘Securities’ is defined as "Instruments such as shares, bonds, scripts, stocks or other marketable securities of similar nature in or of any incorporate company or body corporate, government securities, derivatives of securities, units of collective investment scheme, interest and rights in securities, security receipt or any other instruments so declared by the Central Government."
Read Full post!Securities Markets is a place where buyers and sellers of securities can enter into transactions to purchase and sell shares, bonds, debentures etc.
Further, it performs an important role of enabling corporates, entrepreneurs to raise resources for their companies and business ventures through public issues. Transfer of resources from those having idle resources (investors) to others who have a need for them (corporates) is most efficiently achieved through the securities market.
Stated formally, securities markets provide channels for reallocation of savings to investments and entrepreneurship. Savings are linked to investments by a variety of intermediaries, through a range of financial products, called ‘Securities’.
Securities market is regulated by the regulators.
Various securities one can invest in are:
1. Shares
2. Government Securities
3. Derivative products
4. Units of Mutual Funds etc…
Securities Market has two interdependent segments, they are the primary and secondary markets. The primary market paves path for fresh issue and secondary market deals with securities previously issued.
The Securities and Exchange Board of India (SEBI) is the regulatory authority in India established under Section 3 of SEBI Act, 1992. SEBI Act, 1992 provides for establishment of Securities and Exchange Board of India (SEBI) with statutory powers for
1. Protecting the interests of investors in securities
2. Promoting the development of the securities market and
3. Regulating the securities market.
SEBI's regulatory jurisdiction extends over corporates in the issuance of capital and transfer of securities, in addition to all intermediaries and persons associated with securities market. SEBI has
been obligated to perform the aforesaid functions by such measures as it thinks fit. In particular, it has powers for:
• Regulating the business in stock exchanges and any other securities markets
• Registering and regulating the working of stock brokers, sub–brokers etc.
• Promoting and regulating self-regulatory organizations
• Prohibiting fraudulent and unfair trade practices
• Calling for information from, undertaking inspection, conducting inquiries and audits of the stock exchanges, intermediaries, self –regulatory organizations, mutual funds and other persons associated with the securities market.
Secondary market refers to a market where securities are traded after being initially offered to the public in the primary market and/or listed on the Stock Exchange. Majority of the trading is done in the secondary market. Secondary market comprises of equity markets and the debt markets.
For the general investor, the secondary market provides an efficient platform for trading of his securities. For the management of the company, Secondary equity markets serve as a monitoring and control conduit—by facilitating value-enhancing control activities, enabling implementation of
incentive-based management contracts, and aggregating information (via price discovery) that guides management decisions.
Various Products in Secondary Markets
1. Shares
2. Bonds
3. Derivatives
Stock price is the price at which that particular scrip is traded in the market, It is also known as market price.
Then market price of the scrip is influenced by two specific factors, they are
1. Stock specific factor: It is related to people’s expectations about the company, its future earnings capacity, financial health and management, level of technology and marketing skills.
2. The market specific factor: It is influenced by the investor’s sentiment towards the stock market as a whole. This factor depends on the environment rather than the performance of any particular company. Events favorable to an economy, political or regulatory environment like high economic growth, friendly budget, stable government etc. can fuel euphoria in the investors, resulting in a boom in the market. On the other hand, unfavorable events like war, economic crisis, communal riots, minority government etc. depress the market irrespective of certain companies performing well. However, the effect of market-specific factor is generally short-term. Despite ups and downs, price of a stock in the long run gets stabilized based on the stock specific factors. Therefore, a prudent advice to all investors is to analyze and invest and not speculate in shares.
A stock split is a corporate action which splits the existing shares of a particular face value into smaller denominations so that the number of shares increase, however, the market capitalization or the value of shares held by the investors post split remains the same as that before the split.
Read Full post!The absence of conditions of perfect competition in the securities market makes the role of the Regulator extremely important. The regulator ensures that the market participants behave in a desired manner so that securities market continues to be a major source of finance for corporate and government and the interest of investors are protected.
The responsibility for regulating the securities market is shared by
1. Department of Economic Affairs (DEA),
2. Department of Company Affairs (DCA),
3. Reserve Bank of India (RBI) and
4. Securities and Exchange Board of India (SEBI).
Rights issue is when a listed company which proposes to issue fresh securities to its existing shareholders as on a record date. The rights are normally offered in a particular ratio to the number of securities held prior to the issue. This route is best suited for companies who would like to raise capital without diluting stake of its existing shareholders.
In other words, The issue of new securities to existing shareholders at a ratio to those already held, at a price. For example, a 1:2 rights issue represents the existing shareholder to receive 1 share for every two shares he/she own at same price.
Under rolling settlement all open positions at the end of the day mandatorily result in payment/ delivery ‘n’ days later.
Read Full post!The securities market basically has three class of participants, namely, the issuers of securities, investors in securities and the intermediaries, such as merchant bankers, brokers etc. While the corporate and government raise resources from the securities market to meet their obligations, it is households that invest their savings in the securities market.
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