Capital IQ, Broadridge, Factset, Shore Infotech etc.

Technical interview questions 1. Bank reconciliation statement 2. Minority interest . !eprecation " methods #. $orking capital %. Shares forfeit&re '. Fi(ed cost " )aria*le cost +. ,eser)e )s pro)ision -. C&rrent ratio )s Q&ick ratio .. In)estment o*/ecti)e " in)estor o*/ecti)e 10.Capital *&dgeting 11.,atio analysis123 ratio,32S etc.4 12.!eprecation )s amorti5ation 1 .!ilapidation 1#.Cost of capital 1%.6perating e(penses )s non 6perating e(penses 1'.6perating income )s non operating income 1+.Contingent lia*ility 1-.7olding company " s&*sidiary company " associate company 1..Merger " ac8&isition 20.9ross national prod&ct 21.!e*tor:s t&rno)er ratio 22.!eri)ati)es 2 .Financial statements 2#.9;;2 2%.Income statement " *alance sheet 2'.Fictitio&s assets 2+.9!, " ;!, 2-.6perating lease " Financial lease 2..Capital redemption reser)e1C,,4 0.2&*lic company )s pri)ate company 1.;cco&nting concepts " con)entions 1)ery imp4 2.Initial p&*lic offering1I264 .Stock split< re)erse split #.Spin off %.;malgamation '.Stock )al&ation

+.Share premi&m -.=et asset )al&e1=;>4 ..Bridge finance #0.M&t&al f&nds " schemes #1.Break e)en point " margin of safety #2.Market capitali5ation # .3conomic order 8&antity ##.F&nds flo? " cash flo? #%.5ero *ased *&dget #'.@ypes of capital #+.Memorand&m of association #-.BS3 #..9ood?ill %0.,ec&rring e(pendit&re )s. non rec&rring e(pendit&re %1.!e*t m&t&al f&nd %2.Sense( " =ifty % .!eferred income ta( %#.Intrinsic )al&e %%.2rimary market " secondary market %'.Aetter of credit %+.SA, " C,, %-.Factoring %..Bond )al&ation '0.Commercial paper '1.6perating le)erage " financial le)erage '2.Ideal de*t e8&ity ratio ' .S&nk cost '#.FIF6 '%.Cash credit ''.Commercial paper '+.Bank o)erdraft '-.Semi )aria*le cost '..2rimary market +0.3arnings per share +1.!ifference *et?een p.share >s de*ent&re +2.2rospect&s + .!i)idend yield ratio +#.S?eat e8&ity shares +%.Cash profit +'.2ro(y ++.Book )al&e of share +-.Mortgage >S pledge ,hypothecation +..,epo rate >S re)erse repo rate

-0.;sset management company1;MC4 -1.operating profit -2.specific reser)e - .prepaid e(penses -#.!ifferent 9lo*al stock e(change -%.2ortfolio and types -'.AIB6, 1Aondon inter*ank offering rate4 -+.MIB6, 1M&m*ai inter*ank offering rate4 --.,estricted share -..9reenmail .0.$histle Blo?ing .1.Ai8&idity .2.B3@; . .2enny stock and pi)otal share .#.$;CC1$eighted a)erage cost of capital4 .%.Capital asset pricing model1C;2M4 .'.Bapanese candle stick .+.F&nd manager )s. 2ortfolio manager .-.,326 100. @icker 100. CMA )s. SMA 101. >ent&re capital and seed money 102. F&ndamental analysis and technical analysis 10 . S$;21@ypes4. 10#. @reas&ry share. 10%. C>2 analysis. 10'. !6$ @heory. 10+. F&t&re )s. For?ard contract 10-. Call option >s. 2&t option. 10.. 2lain >anila 6ption. 110. ;merican >s. 3&ropean 6ption 111. B&y side. 112. ;r*itrage. 11 . @ime )al&e of money. 11#. 7edging ;pproach. 11%. spec&lati)e )s. in)estment. 11'. acco&nting concepts" con)entions

1Capital IQ4 @hese are some of the Inter)ie? Q&estions asked in the Inter)ie? 1. !ifference *et?een 32S " !il&ted 32S 2. !ifference *et?een 2ri)ate Company " 2&*lic company . !ifference *et?een cash flo? statement " F&nd Flo? Statement #. !ifference *et?een marginal cost " )aria*le cost %. !ifference *et?een /oint )ent&re " 2artnership '. ?hat is p<) ratio +. $hat is the meaning of 7edging -. $hat is Initial of C&rrent ,atio

Ratio Analysis Techniques Ratio Analysis: It is concerned with the calculation of relationships, which after proper identification & interpretation may provide information about the operations and state of affairs of a business enterprise. The analysis is used to provide indicators of past performance in terms of critical success factors of a business. This assistance in decision-making reduces reliance on guesswork and intuition and establishes a basis for sound judgments. Types of Ratios Liquidity Profitability Measurement Indicators Current )uick atio atio !rofit "argin #nalysis eturn on #ssets eturn on $%uity Financial !erating Leverage/Gearing Performance $%uity *ebt atio atio atio atio &i'ed #ssets Turnover +ales( evenue Investment "aluation !rice($arnings atio !rice($arnings to ,rowth ratio *ividend -ield *ividend !ayout atio

*ebt-$%uity

#verage Collection !eriod Inventory Turnover Total assets Turnover

eturn on Capital Capitali.ation $mployed

Interest Coverage atio Liquidity Measurement Ratios

/i%uidity refers to the ability of a firm to meet its short-term financial obligations when and as they fall due. The main concern of li%uidity ratio is to measure the ability of the firms to meet their short-term maturing obligations. The greater the coverage of li%uid assets to short-term liabilities the better as it is a clear signal that a company can pay its debts that are coming due in the near future and still fund its ongoing operations. 0n the other hand, a company with a low coverage rate should raise a red flag for investors as it may be a sign that the company will have difficulty meeting running its operations, as well as meeting its obligations. Ratio #urrent Ratio Formula #urrent Assets / #urrent Liabilities Current assets includes cash, marketable securities, accounts receivable and inventories. Current liabilities includes accounts payable, short term notes payable, short-term loans, current maturities of long term debt, accrued Meaning The number of times that the short term assets can cover the short term debts. In other words, it indicates an ability to meet the short term obligations as & when they fall due Analysis 1igher the ratio, the better it is, however but too high ratio reflects an in-efficient use of resources & too low ratio leads to insolvency. The ideal ratio is considered to be 234.,

income ta'es and other accrued e'penses $uic% Ratio or 5Cash 6 Cash Acid Test $%uivalents 6 +hort Ratio Term Investments 6 #ccounts eceivables7 ( Current /iabilities Indicates the ability to meet short term payments using the most li%uid assets. This ratio is more conservative than the current ratio because it e'cludes inventory and other current assets, which are more difficult to turn into cash The ideal ratio is 434. #nother beneficial use is to compare the %uick ratio with the current ratio. If the current ratio is significantly higher, it is a clear indication that the company8s current assets are dependent on inventory.

Profitability Indicators Ratios !rofitability is the ability of a business to earn profit over a period of time.The profitability ratios show the combined effects of li%uidity, asset management 5activity7 and debt management 5gearing7 on operating results. The overall measure of success of a business is the profitability which results from the effective use of its resources. Ratio Formula Meaning Analysis

Gross Margin

Profit &Gross Profit/'et # company8s cost of 1igher the ratio, the (ales)*+,, goods sold represents higher is the profit the e'pense related to earned on sales labor, raw materials and manufacturing overhead involved in its production process. This e'pense is deducted from the company8s net sales(revenue, which results in a company8s gross profit. The gross profit margin is used to analy.e how efficiently a company is using its raw materials, labor and manufacturing-related fi'ed assets to generate profits. & !erating Profit/'et 9y subtracting selling, /ower the ratio, lower (ales)*+,, general and the e'pense related to administrative e'penses the sales from a company8s gross profit number, we get operating income. "anagement has much more control over

!erating Profit Margin

operating e'penses than its cost of sales outlays. It "easures the relative impact of operating e'penses 'et Margin Return Assets Profit &'et Profit/'et This ratio measures the 1igher the ratio, the (ales)*+,, ultimate profitability more profitable are the sales. on 'et Income / Average Total Assets 5 $arnings 9efore Interest & Ta' : ;et Income7 This ratio illustrates how well management is employing the company8s total assets to make a profit. 1igher the return, the more efficient management is in utili.ing its asset base 1igher percentage indicates the management is in utili.ing its e%uity base and the better return is to investors.

Return -quity

on 'et Income / Average It measures how much (hareholders the shareholders earned -quity*+,, for their investment in the company

Return #a!ital -m!loyed

on 'et Income / #a!ital -m!loyed Capital $mployed : #vg. *ebt /iabilities 6 #vg. +hareholders $%uity

This ratio complements the return on e%uity ratio by adding a company8s debt liabilities, or funded debt, to e%uity to reflect a company8s total <capital employed<. This measure narrows the focus to gain a better understanding of a company8s ability to generate returns from its available capital base.

It is a more comprehensive profitability indicator because it gauges management8s ability to generate earnings from a company8s total pool of capital.

Financial Leverage/Gearing Ratios These ratios indicate the degree to which the activities of a firm are supported by creditors= funds as opposed to owners as the relationship of owner=s e%uity to borrowed funds is an important indicator of financial strength. The debt re%uires fi'ed interest payments and repayment of the loan and legal action can be taken if any amounts due are not paid at the appointed time. # relatively high proportion of funds contributed by the owners indicates a cushion 5surplus7 which shields creditors against possible losses from default in payment. &inancial leverage will be to the advantage of the ordinary shareholders as long as the rate of earnings on capital employed is greater than the rate payable on borrowed funds.

Ratio -quity Ratio

Formula & rdinary (hareholder.s Interest / assets)*+,,

Meaning This ratio measures the strength of the financial Total structure of the company

Analysis # high e%uity ratio reflects a strong financial structure of the company. # relatively low e%uity ratio reflects a more speculative situation because of the effect of high leverage and the greater possibility of financial difficulty arising from e'cessive debt burden. >ith higher debt ratio 5low e%uity ratio7, a very small cushion has developed thus not giving creditors the security they re%uire. The company would therefore find it relatively difficult to raise additional financial support from e'ternal sources if it wished to take that route. The higher the debt ratio the more difficult it becomes for the firm to raise debt. # lower ratio is always safer, however too low ratio reflects an inefficient use of e%uity. Too high ratio reflects either there is a debt to a great e'tent or the e%uity base is too small

/ebt Ratio

Total /ebt Assets

Total This compares a company8s total debt to its total assets, which is used to gain a general idea as to the amount of leverage being used by a company. This is the measure of financial strength that reflects the proportion of capital which has been funded by debt, including preference shares.

/ebt 0 -quity Total Liabilities Ratio Total -quity

/ . This ratio measures how much suppliers, lenders, creditors and obligors have committed to the company versus what the shareholders have committed. This ratio indicates the e'tent to which debt is covered by shareholders= funds.

#a!itali1ation Ratio

Long Term /ebt / This ratio measures the &Long Term /ebt 2 debt component of a (hareholder.s -quity) company8s capital structure, or capitali.ation 5i.e., the sum of long-term debt liabilities and shareholders8 e%uity7 to support a company8s operations and growth.

# low level of debt and a healthy proportion of e%uity in a company8s capital structure is an indication of financial fitness. # company too highly leveraged 5too much debt7 may find its freedom of action restricted by its creditors and(or have its

profitability hurt by high interest costs. This ratio is one of the more meaningful debt ratios because it focuses on the relationship of debt liabilities as a component of a company8s total capital base, which is the capital raised by shareholders and lenders. Interest #overage Ratio -3IT / Interest Long Term /ebt on This ratio measures the The lower the ratio, the number of times a more the company is company can meet its burdened by debt interest e'pense e'pense. >hen a company8s interest coverage ratio is only 4.? or lower, its ability to meet interest e'penses may be %uestionable.

!erating Performance Ratios4 These ratios look at how well a company turns its assets into revenue as well as how efficiently a company converts its sales into cash, i.e how efficiently & effectively a company is using its resources to generate sales and increase shareholder value. The better these ratios, the better it is for shareholders. Ratios Formula Meaning Analysis

Fi5ed Assets (ales / Turnover Assets

'et

Fi5ed This ratio is a rough measure of the productivity of a company8s fi'ed assets with respect to generating sales

1igh fi'ed assets turnovers are preferred since they indicate a better efficiency in fi'ed assets utili.ation. The shorter the average collection period, the better the %uality of debtors, as a short collection period implies the prompt payment by debtors. #n e'cessively long collection period implies a very liberal and inefficient credit

Average #ollection Period

&Accounts Receivable The average collection / Annual #redit period measures the (ales)*678 days %uality of debtors since it indicates the speed of their collection.

and collection performance. The delay in collection of cash impairs the firm=s li%uidity. 0n the other hand, too low a collection period is not necessarily favorable, rather it may indicate a very restrictive credit and collection policy which may curtail sales and hence adversely affect profit. Inventory Turnover (ales / Inventory Average It measures the stock in relation to turnover in order to determine how often the stock turns over in the business. It indicates the efficiency of the firm in selling its product. This ratio indicates the efficiency with which the firm uses all its assets to generate sales. 1igh ratio indicates that there is a little chance of the firm holding damaged or obsolete stock.

Total Assets (ales / Total Assets Turnover

1igher the firm=s total asset turnover, the more efficiently its assets have been utilised.

Investment "aluation Ratios4 These ratios can be used by investors to estimate the attractiveness of a potential or e'isting investment and get an idea of its valuation. Ratio Formula Meaning Analysis

Price -arning Mar%et Price !er This ratio measures how Ratio & P/- (hare / -arnings Per many times a stock is Ratio ) (hare trading 5its price7 per each rupee of $!+

# stock with high !($ ratio suggests that investors are e'pecting higher earnings growth in the future compared to the overall market, as investors are paying more for today8s earnings in anticipation of future earnings growth. 1ence, stocks with this characteristic

are considered to be growth stocks. Conversely, a stock with a low !($ ratio suggests that investors have more modest e'pectations for its future growth compared to the market as a whole.

Price -arnings & P/- Ratio ) / The price(earnings to to Gro9th -arnings Per (hare growth ratio, commonly Ratio referred to as the !$, ratio, is obviously closely related to the !($ ratio. The !$, ratio is a refinement of the !($ ratio and factors in a stock8s estimated earnings growth into its current valuation. 9y comparing a stock8s !($ ratio with its projected, or estimated, earnings per share 5$!+7 growth, investors are given insight into the degree of overpricing or under pricing of a stock8s current valuation, as indicated by the traditional !($ ratio.

The general consensus is that if the !$, ratio indicates a value of 4, this means that the market is correctly valuing 5the current !($ ratio7 a stock in accordance with the stock8s current estimated earnings per share growth. If the !$, ratio is less than 4, this means that $!+ growth is potentially able to surpass the market8s current valuation. In other words, the stock8s price is being undervalued. 0n the other hand, stocks with high !$, ratios can indicate just the opposite - that the stock is currently overvalued.

/ividend :ield & Annual /ividend !er Ratio (hare / Mar%et Price !er (hare ) *+,,

This ratio allows investors to compare the latest dividend they received with the current market value of the share as an indictor of the return they are earning on their shares

This enables an investor to compare ratios for different companies and industries. 1igher the ratio, the higher is the return to the investor

/ividend Payout Ratio

&/ividend !er (hare / This ratio identifies the -arnings !er (hare ) percentage of earnings * +,, 5net income7 per common share allocated to paying cash dividends to shareholders. The dividend payout

ratio is an indicator of how well earnings support the dividend payment.