Financial terms
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26/06/22 FINANCIAL MANAGEMENT PRESENTATION OF FINANCIAL MANAGEMENT FOR THE TOPIC OF FINANCIAL TERMS Prepared by : Vishal D. Patel
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Financial terms regarding my m.phil.syllabus
Transcript of Financial terms
12/04/23FINANCIAL MANAGEMENT
PRESENTATION OF FINANCIAL MANAGEMENT
FORTHE TOPIC OF
FINANCIAL TERMS
Prepared by : Vishal D. Patel
BUY BACK
FINANCIAL SERVICES
LEASING
MUTUAL FUNDS
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FINANCIAL TERMS
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Buy Back of Shares
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What Does Buyback Mean?
The repurchase of outstanding shares (repurchase) by a company
to reduce the number of shares in the market
Companies will buy back shares either to increase the value of shares still available (reducing supply), or
to eliminate any threats by shareholders who may be looking for a controlling stake
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Why companies buybackUnused cash
Tax gains
Market perception
Exit option
Escape monitoring of accounts and legal contracts
Increase promoters stake
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Ways of Buyback
1. Book building method
2. Open market
3. Dutch method
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Valuation of buy back Average closing price (which is a
weighted average for volume) for a period immediately before to the buyback announcement
In the 2nd, shareholders are invited to sell some or all of their shares within a set price range
Generally, the price is fixed at a mark up over and above the average price of the last 12-18 months
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Legal aspectsIndian Companies Act 1956, Section
77A, SEBI (Buy Back of Securities) Regulations, 1998 are applicable
A special resolution has to be passed in general meeting of the shareholders If the buyback is more than 10% of the total paid up capital
Buyback should not exceed 25% of the total paid-up capital and free reserves
The company should not make any further issue of securities within 2 years, except bonus, conversion of warrants
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FINANCIAL SERVICES
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INTRODUCTION
Financial services refer to services provided by the finance industry.
these organizations are banks, credit card companies, insurance companies, consumer finance companies, stock brokerages, investment funds and some government sponsored enterprises.
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LEASING
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A lease is a contractual arrangement
in which a party owning an asset (lessor)
provide the asset for use to another party (lessee)
for a agreed period of time in consideration of a periodic
payment (rentals). At the end of the contract (lease
period ), the asset reverts back to the lessor,
unless there is a provision for the renewal of the contract
Definition
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Essential Elements
Parties to the contract Essentially two parties : lessor and
lessee Both can be individuals, partnerships,
joint stock companies Joint lessor and lessee , where amount
is enormous Contract may involve lease financiers ,
who refinance lessor
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Asset The asset is the subject matter of the contract Asset must be of lessee's choice , suitable for his
business needs.
Term of lease The time period for which lease remain operational A definite time period is required otherwise , it will be
legally inoperative The period may stretch over the entire economic life
of the asset
Lease rentals So structured as to compensate the lessor for the
investment made in the asset
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Classification basis :
■ The lease transaction can differ on the basis of: The extent to which risk and reward of ownership
are transferred Risk refers to possibility of loss for under utilization or
technological obsolescence of the equipment Reward mean cash flow generated from the usage of
equipment and residual value
No. of parties to the transaction
A Domicile of lessor and lessee
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o Finance lease and operating lease
o Sales and lease back and direct lease
o Single investor lease and leveraged lease
o Domestic lease and international lease
Types of leasing:
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MUTUAL FUNDS
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What is Mutual Fund?
A money-managing systems that are introduced to professionally invest money collected from the public.
The Asset Management Companies (AMCs) manage different types of mutual fund schemes
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4 phases in the Indian Mutual Funds investment
First Phase - 1964- -1987Second Phase - 1987-1993 (Entry of Public Sector Funds)Third Phase - 1993-2003 (Entry of Private Sector Funds)Fourth Phase - since February 2003
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Closed-end mutual funds :-A closed-end mutual fund bears a number of shares which are issued to the public by an initial public offering (IPO).
Open end mutual funds:-Open end funds are managed by mutual fund houses for raising money from shareholders and they invest in a group of assets.
CATAGORIES:
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Top mutual funds in India
Reliance Mutual FundHDFC Equity FundICICI Prudential FundSBI Mutual Fund
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