In financial jargon, the terms investment and speculation are overlapping and used synonymously. In investment, the time horizon is relatively longer, generally spanning at least one year while in speculation, the term may extend up to a half year only. As per Benjamin Graham, an American economist, and professional investor, investment is an activity, which upon complete analysis assures the safety of the amount invested and adequate return. Conversely, speculation is an activity which does … [Read more...]

In accounting glossary, the term depreciation is often used, for writing off the value of the asset over its useful life. It is nothing but the decrease in the value of the fixed asset because of continuous use, the passage of time and technological obsolescence. There are nine different methods of calculating depreciation of assets out of which straight line method and written down value method is widely used. In straight line method (SLM), an equal amount of depreciation is written off every … [Read more...]

In investment jargon, you have often heard the term depository many times. It refers to an organisation established to hold securities like shares, debentures, bonds, mutual fund units, etc. of the investors in dematerialised form through an agent registered with SEBI i.e. Depository Participant. The two apex depositories in India, incorporated with SEBI namely NSDL and CDSL.NSDL is a pioneer depository in India promoted by the prominent banks and other institutions. On the other end, CDSL is … [Read more...]

Dematerialization is nothing but paperless trading, that has been introduced in a few years ago. In this process, the physical certificates are transformed into the electronic one. For this purpose demat account is used to hold securities in dematerialised form. It is often misconstrued with a trading account which acts as an intermediary between the demat account and the saving bank account. For investing in securities in an stock exchange, there is certain requirement which must be complied … [Read more...]

The profitability and performance of a business concern can be calculated through various measures, which helps in comparing various companies operating in the same industry or sector. EBIT and EBITDA are the examples of such measures. EBIT or Earnings before interest and tax takes into account depreciation and amortisation while calculating the earnings of the company. Conversely, EBITDA or Earnings before interest and tax, depreciation and amortisation, is reckoned by adding back, the … [Read more...]

The interest rate is the rate at which the money is borrowed. Many of us think that the interest cost is greatest, but there are some implied costs included in the cost of borrowing which we don't notice. On the other extreme, APR or Annual Percentage Rate is an example of such cost, that is described as the overall borrowing cost. Nowadays, loan and mortgage are considered as one of the best means to fulfil the monetary requirement of businesses and individuals, for which they need to pay a … [Read more...]

Basic Earning Per Share is the ratio, that is reckoned to know the earnings available to each equity share. It is calculated by considering company's ordinary shares. On the other extreme, diluted earnings per share are computed when there are potential shares, i.e. convertible securities, in the company's financial structure. Earning per share (EPS) as its name suggests, it is that portion of the profit which is attributable to the shares outstanding. Financial Accounting Standard Board … [Read more...]

The primary function of the financial manager is to ensure availability of finance, to fulfill different purposes such as initial promotion, fixed capital, and working capital. Fixed Capital refers to the capital, which is invested in procuring fixed assets for business. On the other hand, working capital represents the amount of money utilized for financing day to day business operations. It is required to support the proper functioning of the company's business operations. Fixed Capital and … [Read more...]

Budget implies a formal quantitative statement of income and expenditure for a certain period. It is a plan for the resources allocated for the completion of the activities, that requires to be followed, to achieve the desired end. It is not exactly same as forecast, which is a simple estimation of the future course of event or trend. It is a forward looking activition, which encompasses projection. Forecast can be understood as the evaluation and interpretation of the conditions that are … [Read more...]

Economies of Scale and Economies of scope are two important strategies used by most of the organizations to gain cost effectiveness. The economies of scale, represents the savings in cost of production by increasing the scale of production or the size of the plant. On the other hand, economies of scope refer to the benefits obtained due to producing multiple products using the same operations efficiently. Economies of scope, is nothing but the savings in cost received by producing two or more … [Read more...]