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Inflation Bond provides hedge against inflation risk to the investor because Rate of interest of theses bonds may vary.
Wednesday, June 29, 2016
Definition of Inflation Bond
Inflation Bond provides hedge against inflation risk to the investor because Rate of interest of theses bonds may vary.
Debt Securitization
Debt Securitization is the process adopted by financial institution to arrange funds for lending to a particular sector or particular purpose. In this process financial institution make a pool of funds granted to a particular sector which is transferred to a particular account called as Special Purpose Vehicle. Against this SPV institution issues securities to general public. These securities are backed by Assets.
Full Forms
APEDA
- Agriculture and Processed Food Export Development
MPEDA
- Marine Product Export Development Authority
ICT
- Information Communication Technology
ICA – Indian Council of Arbitration
ITPO
– Indian Trade Promotion Organization
IIP
– Indian Institute of Packaging
UNDO
– United Nation Development Organization
ITC
– International Trade Center
SEZ
– Special Economic Zone
EPC
– Export Promotion Council
DGFT
– Director General of Foreign Trade
DGCI
– Director General of Commercial Intelligence
HACCP
– Hazard Analysis and Critical Control Point
ECGC
– Export Credit Guarantee Corporation
FIEO
– Federation of Indian Exporter Organization
MSTC
– Metals Scrap Trading Corporation
STC
– Spices Trading Corporation
CLE
– Council for Leather Export
MDA
– Market Development Assessment
MAI
– Market Assess Initiatives
Marine Product Export Development Authority
It is also known as MPEDA. Those who have majority of vegetarian wagons. Sea food is good for health. In some countries, it is treated as organic food. MPEDA works on the development of these kinds of product. It talks about Marine life of animal, possible variety of grain and water pollution.
Agriculture and Processed Food Export Development
It is also known as APEDA. It is a autonomous body. Being an agriculture country India is a member of it. Food Processing and Development has a new scheme and policy for better use of it. Need of production is also comes under this scheme. APEDA works on per hectare production. It helps in arranging vital imports. It also collects data related to agriculture.
Basis of Keynes Theory
Basis of Keynes Theory
1. The national income is equal to the volume of total
employment.
2. Total volume of employment depends upon and originates
from the level of effective demand in the economy.
3. Effective demand is composed of two elements. ADF
(Aggregate Demand Function), ASF (Aggregate supply function).
4. Effective demand is determinant by the equilibrium
point of ADF and ASF.
5. Keynes assumed that Aggregate supply function to be
given in the short period and regard in Aggregate Demand Function as the most
significant element in his theory.
6. ADF is composed of consumption function and investment
function.
7. The consumption function or the consumption
expenditure is determinant by Size of income and Propensity of consume. Keynes
assumed that Consumption function is always given in a short period.
8. The investment function depends on two factor.-
Marginal Efficiency of Capital, Rate of Interest.
9. Marginal Efficiency of Capital is determinant by
Prospective yield of Capital Assets or Supply price of Capital Assets.
10.
Keynes assumed
that Marginal Efficiency of Capital is highly fluctuating.
- The Rate of Interest depends on Liquidity preferences income and quantity of Money. Keynes assumed that Rate of Interest is stable in short run.
Debt Market
Debt Market is that market in which firm can avail facility of long term Bond. It is also include Market Debenture and Bond.
Factorization Bill
Factorization Bill is the instruments which are issued to meet out crisis of working capital of Small Scale industries. Now a day 5 crore is fixed for it. In this, Debtor ledger is maintained by factoring agency on behalf of vendor
Public Deposit
These are also unsecured promissory note by Corporate for minimum of 6 months. These public deposit must be rated by some highly credit agencies. These are issued to increase capital base but the amount of public deposit can not exceed 25% of paid up capital. It is subscribed by anyone.
Money at call and short notices
The duration of call money market ranges from 14 days to 3 months. The rate of interest on call money is market intervals.
Tuesday, June 28, 2016
Commercial Papers
These are unsecured promissory note issued by highly reputed corporate whose tangible assets are equal to or more than 5 crore. Credit rating of debt instrument is compulsory. Commercial paper must be rated by some highly reputed credit agencies and this rating should not be older than 3 months. These are issued for a minimum of 50 lacs or more in the multiple of 10 lacs. It is subscribed by individual, corporate, Banking company, insurance company, financial institution investors and NRIs also.
Component of money supply
Component of money supply
- 1. Mo = Reserve Money, it includes Bank deposits with RBI, Currency in circulation and other deposit with Central Bank
- 2. M1 = Narrow Money, Currency with the Public, Demand deposit with the Banking system, other deposit with the RBI
- 3. M2 = M1 + Saving deposits of Post Office
- 4. M3 = Broad Money, M1 + Time deposit with the Banking system
- 5. M4 = M3 + All deposits with the Post Office excluding NSC
How we increase MPC
(1) Government should infuse money supply in the economy.
(2) By reducing the interest rate
(3) Providing subsidies
(4) By promoting production activity
(5) Guaranteed employment
(6) By attracting private investment
(7) By promoting conducive economic environment
(8) By increasing the wage and salary level of labour
(9) By liberal tax policy
(10) By aggressive advertisement
(11) By attracting population towards urbanization
(2) By reducing the interest rate
(3) Providing subsidies
(4) By promoting production activity
(5) Guaranteed employment
(6) By attracting private investment
(7) By promoting conducive economic environment
(8) By increasing the wage and salary level of labour
(9) By liberal tax policy
(10) By aggressive advertisement
(11) By attracting population towards urbanization
Poverty Paradox
It is also known as “Trickle down theory of effect”. It means increased income will automatically flow down up to the lower level of income of the society. So, income will be distributed to anyone. If we take this theory at macro economic level then Trickle down theory breaks down
Classical theory of Adam Smith
Adam Smith wrote a book in 1776 entitled “An enquiry into the nature and causes of wealth of nation”. He said economic development will be done if Gold is employed into production because human beings are selfish in nature and are concerned with multiplication of wealth. The working of economy should not interfere in market and ultimately wealth of nation is achieved.
This means that economy operates at equilibrium point and there are no savings in the economy.
Therefore, income = expenditure
However, if savings is done then there are chances of equilibrium. Thus, to balance it, a new sector is introduced
Major assumption of Classical theory
1) The main idea of classical thought is economy always operates at equilibrium point.
2) Another assumption is there is always full employment. J. B. SAY said, “Supply creates its own demand” it is known as SAY’s law. It means that whatever is produced that will be sold out because there is always price flexibility in labour, goods and service in the market
Certificate of Deposits
Certificate of Deposits are issued by Banks and financial institutions. Normally Banks issued CDs for a period of more than one year to 3 year. These are issue to increase deposit base. These can be subscribe by big qualified investors particularly Institutional Investors.
Sunday, June 26, 2016
Full Forms
- IPO – Initial Public Offer
- BSE – Bombay Stock Exchange
- OTCEI – Over the Counter Exchange of India
- NSE – National Stock Exchange
- NSDL – National Securities Depository Limited
- NSCCL – National Securities Clearing Corporation Limited
- VCF – Venture Capital Financing
- VSAT – Very Small Aperture Terminal
- PTI – Press Trust of India
- BOLT – Bombay On Line Trading system
- F&O – Future and Option
- S&PCNX NIFTY – Standard & Poor CRISIL INDEX NIFTY
- LTP – Last Trade Price
- WDMS – Wholesale Debt Market Segment
- CMS – Capital Market Segment
Gild Edged Securities
It refers to Government dated securities. It matured at a prescribed date. It is offered by Government or Government regulatory organization for a period of one year. It includes Government bonds, Debentures and Bonds issued by public sector units. Treasury Bill also a part of Gild Edged Securities.
Full forms
- FII – Foreign Institutional Investor
- IRBI – International Reconstruction Bank of India
- SIDBI – Small Industrial Development Bank of India
- CRR – Cash Reserve Ratio
- SLR – Statutory Liquidity Ratio
- CDs – Certificate of Deposits
- SEBI – S tock Exchange Bank of India
Full forms
- FERA – Foreign Exchange Regulation Act
- FEMA - Foreign Exchange Management Act
- DGTF – Director General Foreign Trade
- CII – Confederation on Indian Industry
- FICCI – Federation of Indian Chamber of Commerce and Industry
- FEDAI – Foreign Exchange Dealers Association of India
- ONGC – Oil and Natural Gas Corporation
- MMTC – Mineral and Metals Trading Corporation
- MSTC – Metal Scrap Trading Corporation
- OGL – Open General License
BETA – ß
This is a measure to calculate the degree of financial risk. It refers to volatility or variation in return on security x in response to variation in the market returns. It is a most widely used measure.
ßj = covariance jm/ SD mSo, j refers to ß of individual security, covariance jm means covariance between returns on security j and market returns.
There are three types’ securities in the market according to ß point of view.
- 1) Defensive securities – if ß value is less than 1
- 2) Neutral securities – if ß value is equal to 1
- 3) Aggressive securities – if ß value is more than 1
Types of risk – financial point of view
1) Systematic Risk - Systematic Risk are those risk which are inherent in system and which affect most of the sector, industries or company. In this diversification is not possible. It is also known as non- diversification, market risk or non- avoidable risk. Ex- inflation risk, change in general price, interest rate risk, exchange rate risk, natural calamities, political risk, risk associated with policy of the Government, risk associated with scamp etc.
2) Unsystematic Risk - Unsystematic Risk are also known as specific risk, diversiable risk, or residual risk is the type of uncertainty that comes with the company or industry you invest in. it can be reduced through diversification. These risks are unique in nature. It may be industry oriented or sector oriented
Tuesday, June 21, 2016
Some Conditions regarding TDS
1. If PAN is not submitted by employee than maximum marginal rate of Income Tax is apply.
2. No TDS would be charged on withdrawal amount of Provident Fund on or after June 1, 2015.
3. If Provident Fund paid at the time of death or retirement than TDS is not deduct.
4. Any interest on securities other than Bank deposit than 10% TDS would be charged in case of resident.
5. If TDS is deduct by any other country except India than this TDS amount is not included in the Income of Other Sources.
6. If interest on Bank deposit is not exceed Rs. 10,000 than no TDS would be charged.
Tax Deducted At Source
It is also known as TDS. Tax Deducted at Source and Advance payment of Tax both are advance however there are lots of difference. But it is not necessary that every time TDS will deduct.
If any payment made by anybody (Insurance co., Bank, or Employer). This payment is subject to TDS in the norms of Income Tax. If income exceeds minimum taxable limit or in case of other interest on Bank deposit exceeds Rs. 10,000 as per rule of Income Tax Act.
TDS deduct on behalf of Government from the amount of payment
Within 7 days of deduction.
TDS deduct on ;
1) Salary
2) Any withdrawal from Recognized Provident Fund on or after June 1, 2015
3) Insurance commission paid by Post office
4) Winning from lotteries and Game cards
Friday, June 17, 2016
Deduction under section 80 P
This deduction exists only
for co-operative society. 100% deduction is allowed.
1. (A)In the case of co-operative society engaged in the
following business the whole of the amount of profit and gain of business
attributable to any one or more such activities shall be deducted from the
gross total income.
1) Carrying the business of Banking or proving Banking
facilities to its member.
2) A cottage industry.
3) The marketing of Agriculture produce grown by its
member (Egg is also included).
4) The purchase of Agriculture implements, seeds, live
stock or other articles intended for Agriculture for the purpose of supplying
them to its member.
5) The processing without the aid of power of the
Agriculture produce of its members.
6) The collective disposal of the labour of its member.
7) Fishing or aligned activities.
(B)
Sub clause VI or
VII
1) The individuals who contribute their labour or
carrying on the fishing activities
2) The co-operative credit societies who provide the
financial assistance to the society.
3) State Government
2. Activities other than co-operative society engaged in
the following business the whole of the amount of profit and gain of business
attributable to any one or more such activities shall be deducted from the
gross total income.
1) In the case of a co-operative society
engaged in activities other than activities I
2) In case of consumer credit society upto Rs.
1,00,000 from gross total income.
3. The whole of the income by the way of interest or
dividend derived by a co-operative society from its investment with any other
co-operative society shall be deducted from the gross total income (100%
allowed).
4. The whole of the income derived by society from
letting of Godowns and warehouses for storage, processing or marketing of
commodities shall be deducted from gross total income (100% allowed).
5. In the case of co-operative society which is not a
Housing society or an Urban consumer society
or a society carrying on transport business or society engage in the
performance of any manufacturing operation with the aid of power, when gross
total income does not exceed Rs. 20,000 the amount of any income by the way of
interest on securities or any income from house property shall be deducted from
gross total income.
Thursday, June 16, 2016
Jarque Bera Test
One test for normality is used which is known as Jarque Bera Test. Under this test, we
use two dimensions.
1) Skewness
2) Kurtosis
Skewness - Symmetry of the distribution is known as Skewness. If symmetry then it will normal distribution. If Skewness is zero t indicates normal distribution. Skewness should
be zero near to zero. It means distribution is symmetrical. It may be positive and negative.
Positive Skewness = Right side Skewness
Negative Skewness = Left side Skewness
Kurtosis – Sharpness of the peak of the curve is known as Kurtosis. Statistically for
normal distribution Kurtosis should be 3.
More than 3 = flat curve
Exactly 3 = normally sharp curve
Less than 3 = very sharp curve
Jarque Bera Test depends on Skewness and Kurtosis. Jarque Bera Test denoted by “JB” and checked by chi- square test. If calculated value is less than critical value than Ho will be accepted.
Tuesday, June 14, 2016
Environment Reporting
Environment
Reporting is now compulsory for every company.
Under
this report, physical as well as natural conditions are mention. Time to time Government
check that environment of that company is satisfactory or not. Air quality is measure by various
measurements. Now a day every organization shows that they follow every measure
and conduct their business within the policy framework. Toxic is a type of
poison which is harmful for health. It is also measure.
OSHA Report:
OSHA refers to occupational safety and health
alignments. Here Government checks that what type of occupational safety
company provides to the workers. Worker’s uniform is also checked in this
report. Proper hand cover or shoe cover should be provide to the workers
Advance payment of Tax
Advance payment of Tax is paid by Assesse himself of herself. This tax is paid on the current year’s income in the same year. It is paid as a advance that why it is known as Advance payment of Tax.
Advance payment of Tax is not charged on those Assesse whose income are comes under “Income from Salary”. Under any income where TDS is already deduct, Advance payment of Tax is not chargeable.
If the age of Assesse is 60 years or more than 60 years then they are not need to pay Advance payment of Tax.
Income from Other Sources like income from dividend or lottery. Here TDS is deduct. These are casual incomes therefore Advance payment of Tax is not charged.
Aseesing Officer: If assessment would be made by Assessing Officer than advance tax would be calculate just before the current year or any other previous year’s income whichever is more.
1)15 September of the Current year = 30% of total advance tax
2)15 December of the Current year = 60% or next 30% of total advance tax
3)15 March of the Next year = 40% of total advance tax
1)15 June of the Current year = 15% of total advance tax
2)15 September of the Current year = 45% of total advance tax
3)15 December of the Current year = 75% of total advance tax
4)15 March of the Next year = 25% of total advance tax
Advance payment of Tax is not charged on those Assesse whose income are comes under “Income from Salary”. Under any income where TDS is already deduct, Advance payment of Tax is not chargeable.
Conditions where Advance payment of Tax is not compulsory
Any Assesse or person who does not have any income from any “Business or Profession”.If the age of Assesse is 60 years or more than 60 years then they are not need to pay Advance payment of Tax.
Income from Other Sources like income from dividend or lottery. Here TDS is deduct. These are casual incomes therefore Advance payment of Tax is not charged.
Who will pay Advance payment of Tax
The person whose income are taxable or liable to pay tax as per the Finance Act 2015 and the amount of tax is Rs. 10,000 or exceeds Rs. 10,000 than Advance payment of Tax is paid by using current year income.Who will calculate the amount of Advance Tax
Self Assesse : Assesse can himself or herself calculate the amount of tax by following current Finance Act.Aseesing Officer: If assessment would be made by Assessing Officer than advance tax would be calculate just before the current year or any other previous year’s income whichever is more.
Payment of tax
Date and number of installment is fixed as per Income Tax Law1. Non Corporate Assesse: [ BOI, Individual, HUF, Partnership Firm]
1)15 September of the Current year = 30% of total advance tax
2)15 December of the Current year = 60% or next 30% of total advance tax
3)15 March of the Next year = 40% of total advance tax
2. Corporate Assesse:
1)15 June of the Current year = 15% of total advance tax
2)15 September of the Current year = 45% of total advance tax
3)15 December of the Current year = 75% of total advance tax
4)15 March of the Next year = 25% of total advance tax
Difference between Direct Tax and Indirect Tax
Basis
|
Direct Tax
|
Indirect Tax
|
Meaning
|
Direct
Tax are those tax which is not shift the burden of risk to anybody
|
Shifting
of the burden of tax is known as Indirect Tax
|
Impose
|
It
is directly imposed by the Government on Assesse’s income, expenditure and
service.
|
It
is directly imposed by saler or by any service provide on the behalf of
Government
|
Example
|
Social
security contribution
|
Value
added Tax
|
Monday, June 13, 2016
Economic Order Quantity Model
Economic
Order Quantity
This
is the volume or the quantity of material which the firm should order to
maintain for minimizing the overall cost of inventory.
In
EOQ, there are three types of inventory are exist.
1.
Cost of Material
2.
Ordering Cost
3.
Carrying Cost/ Holding Cost
1. Cost
of Material includes the cost of raw material
2. Ordering
Costconsist:
1.
Cost of requisition is the costs which are arise at the time of
analyzing what type of material is needed, how much is needed.
2.
Cost of information is arising at the time of collecting information
regarding the raw material from suppliers, vendors.
3.
Cost of Tendering have a cost of preparing a tender notice for calling
the quotation of material.
4.
Cost of placing order is come after analyzing the best material at low
cost. It consist transportation and insurance expenses also till the godown.
5.
Cost of unloading and cartage expenses are comes under this cost.
6.
Cost of inspection is the expense of inspecting the material.
7.
Cost of storage of material in the godown
3. Carrying
Cost/ Holding Cost
1.
Cost of holding the material and rent of godown and warehouses
2.
Cost of insurance of goods in the godown but in case of own godown, depreciation would be
charged.
3.
Salary or wage to the guard
4.
Interest on capital block
5. Obsolescence/spoilage/ wastage
We
should have that size of inventory in which ordering cost and carrying cost
should be minimum which is known as optimal order size or EOQ.
EOQ refers to optimal order size that results
into lowest total ordering cost and
carrying cost for an item of inventory at its given expected usage carrying
cost and ordering cost.
A =
Annual usage
Cp
= Ordering cost per order
Ch
= Carrying cost per unit
Drawbacks
of EOQ
1.
Demand of the product uniform throughout the year.
2.
Price of the material, carrying cost and ordering cost remains constant.
3.
This theory assumes supply of material is strictly in time which is not
absolute and real.
Sunday, June 12, 2016
Difference between Finance Bill and Finance Act
Basis
|
Finance Bill
|
Finance Act
|
Meaning
|
Finance Bill is the set of proposal of various sectors.
|
Finance Act is the modification or implementation of
finance Bill
|
Convert
|
Finance Bill is convert into Finance Act
|
Finance Act can not convert into Finance Bill
|
Process
|
It includes making estimation on expenditure and give a
proposal
|
It includes some modification and changes in finance bill
for the betterment of the public and for a particular sector.
|
Examples
|
Proposal relating to developed small scale industries in a
traditional way
|
Taxation of chargeable Gains Act 1992
|
Direct Tax Code
Direct Tax Code include all direct taxes like Income Tax,
Wealth Tax, etc. Direst Tax are the tax which can not shift to others.
On 2005-06 Finance Minister P.Chidambram issued a draft in
which various suggestions are given. The final Draft came on 2010. It have many
suggestion (proposed).
Budgets always prepare by considering two aspects political
as well as economical. Still 2010 DTC is pending. Under this, various
suggestions are given which are as follows-
EEE is the existing scheme proposed under DTC.
EEE means- Exempt, Exempt, Exempt
E - Exempt initial or original investment
E – Exempt interest on initial investment
E – Exempt maturity amount or withdrawl amount
But this EEE scheme is convert into EET if DTC is pass. EEE
mean Exempt, Exempt, Taxable.
E - Exempt initial or
original investment
E – Exempt interest on initial investment
T - Maturity amount is taxable
Exception of capital assets
1.
Assets which fulfill the definition of capital
asstes given by Income tax even then these assets are not included or in other
words it is exempted.
2.
Any Stock in trade are held for the purpose of
business or profession it is exempted. It is taxable under Business or
Profession.
3.
Any Stores are held for the purpose of of
business or profession it is exempted under Capital Gain head. It is taxable
under Business or Profession.
4.
Assets of personal use other than Gold, Silver
diamond jewellery, platinum or any other precious ornaments will not come under
Capital Assets. Example, a car or refrigerator, television or V.C.R. are
exempted.
5.
Special Bearer Bond 1991 issued by Government
are not treated as a Capital Assets.
6.
Gold Bond transferred or sold by Assesse are not
treated as Capital Assets. These types of Bond are issued by Government time to
time.
7.
Any Agriculture land which has 10,000 population
and 2.km. from the local limits of any Municipality or Cantonment Board are not
treated as Capital Assets.
8.
Any Archaeological collections, Drawing,
Paintings, Sculptures, Any work of art or jewellery for personal use other than
precious jewellery not treated as Capital Assets.
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