FINANCIAL MANAGEMENT MODULE

MODULE: FINANCIAL MANAGEMENT-I

·         ZERO-BASE BUDGETING	A rigorous method of drawing up BUDGETS in which the premise is that expenditures will be zero, and so allocations are made thereafter, only upon a justification of the true requirements. Thus, this method does not consider the previous year's allocation, but instead, imposes an onerous burden of justifying any expenditure whose approval is sought.
·         COST OF GOODS SOLD (COGS)	The directly attributable costs of products or services sold, (usually materials, labour, and direct production costs). Sales less COGS = gross profit. Effectively the same as cost of sales (COS) see below for fuller explanation.
·         COST OF SALES (COS)	Commonly arrived at via the formula: opening stock + stock purchased - closing stock. Cost of sales is the value, at cost, of the goods or services sold during the period in question, usually the financial year, as shown in a Profit and Loss Account (P&L).
·         DIVIDEND	A dividend is a payment made per share, to a company's shareholders by a company, based on the profits of the year, but not necessarily all of the profits, arrived at by the directors and voted at the company's annual general meeting.
·         EARNINGS BEFORE..	There are several 'Earnings Before..' ratios and acronyms: EBT = Earnings Before Taxes; EBIT = Earnings Before Interest and Taxes; EBIAT = Earnings Before Interest after Taxes; EBITD = Earnings Before Interest, Taxes and Depreciation; and EBITDA = Earnings Before Interest, Taxes, Depreciation, and Amortization. (Earnings = operating and non-operating profits (eg interest, dividends received from other investments)
·         FOB - 'FREE ON BOARD'	The FOB (Free On Board) abbreviation is an import/export term relating to the point at which responsibility for goods passes from seller (exporter) to buyer (importer). FOB meant originally (and depending on the context stills generally means) that the seller is liable for the goods and is responsible for all costs of transport, insurance, etc., until and including the goods being loaded at the (nominated FOB) port.
·         GOODWILL	Any surplus money paid to acquire a company that exceeds its net tangible assets value.
·         ECONOMIC VALUE ADDED (EVA)	A tool for evaluating and selecting stocks for investment, and also used as a measure of managerial performance. EVA = After-tax Operating Profits – Total cost of capital
·         EURO	The common European currency that will come into being with the formation of the European Union. This economic union has given birth to the European Monetary Union that will be characterized by a common CENTRAL BANK and MONETARY POLICY, besides the common currency. Elimination of exchange rate risk and reduction of transaction costs between members are seen as major benefits of the common currency. The circulation of the Euro is slated to take place in 2002 and it is expected to emerge as an important international currency.
·         EURO ISSUE	An issue of securities to raise funds outside the domestic market. Euro issues by Indian companies have been by way of GDRS or EUROCONVERTIBLE BONDS. The advantages associated with Euro issues are: Reduced cost of capital owing to lower interest rates and floatation costs.
·         AMORTIZATION	The reduction f an amount at regular intervals over a certain time period. This term is used to refer to the reduction of debt by regular payment of loan instalments during the life of a loan. It is also used to describe the accounting process of writing off an intangible ASSET.
·         BEAR	A person who expects share prices in general to decline and who is likely to indulge in SHORT SALES.
·         BEAR MARKET	A long period of declining security prices. Widespread expectations of a fall in corporate profits or a slowdown in general economic activity can bring about a bear market.
·         BETA	A measure of the volatility of a stock in relation to the market. More specifically, it is the index of SYSTEMATIC RISK, indicating the sensitivity of return on a security or a PORTFOLIO to return from the market. It is the slope of the regression line, known as the CHARACTERISTIC LINE, which shows the relationship of an ASSET with the market.
·         BOND	A long-term debt instrument on which the issuer pays interest periodically, known as 'Coupon'. Bonds are secured by COLLATERAL in the form of immovable property. While generally, bonds have a definite MATURITY, In the U.S., the term DEBENTURES refers to long-term debt instruments which are not secured by specific collateral, so as to distinguish them from bonds.
·         BOOK VALUE	It is the amount of NET ASSETS that would be available per EUQUITY SHARE, after a company pays off all LIABILITES including PREFERENCE SHARES from the sale proceeds of all its ASSETS liquidated at BALANCE SHEE values.
·         BULL	A person who expects share prices in general to move up and who is likely to take a long position in the stock market.
·         BUSINESS RISK	The risk of business failure, which stems from factors such as the cost structure of a venture (i.e., FIXED COST versus VARIABLE COST), intra-industry competition, and government policies. It is reflected in the variability of profits before interest and taxes.
·         CAPITAL RESERVES	The reserves created in certain ways that include the sale of FIXED ASSETS at a profit. These amounts are regarded as not available for distribution as DIVIDENDS.
·         CLOSED-END FUND	A scheme of an investment company in which a fixed number of shares are issued. The funds so mobilized are invested in a variety of vehicles including shares and DEBENTURES, to achieve the stated objective, e.g., capital appreciation for a GROWTH FUND or current income for an INCOME FUND.
·         CORPORATE GOVERNANCE	The manner in which a company is managed. The term, Corporate Governance connotes the importance of responsibility and accountability of a company's management to its shareholders and other stakeholders, viz., employees, suppliers, customers and the local community. Hence it calls for ethics, morals and good practices in running a company.
·         DEBENTURE	A debt security issued by companies, having a certain MATURITY and bearing a stated COUPON RATE. Debentures may be unsecured or secured by ASSETS such as land and building of the issuing company.
·         DEBENTURE REDEMPTION RESERVE (DRR)	The term is given to the reserves that are to be compulsorily created by companies for the express purpose of retiring DEBENTURES issued by them whose MATURITY exceeds 18 months. Before redemption commences, the reserves (DRR) must cumulate to 50 percent of the amount of debentures issued.
·         DEBT SERVICE COVERAGE RATIO (DSCR)	A ratio used to assess the financial ability of a borrower to meet debt obligations.
·         DEPOSITORY	A system of computerized book-entry of securities. This arrangement enables a transfer of shares through a mere book-entry rather than the physical movement of certificates. A depository performs the functions of holding, transferring and allowing withdrawal of securities through its agents viz., depository participants.
·         DUMPING	The sale of goods in a foreign market at a price that is below the price realized in the home country, after allowing for all costs of transfer including transportation charges and duties. The motive may be to enhance revenues, offload surplus stocks or a predatory intent of killing foreign competition.
·         FINANCIAL MARKETS	The transactions which result in the creation or transfer of financial ASSETS and LIABILITIES, mostly in the form of tradable securities. The term connotes a vast forum rather than a specific physical location for trading activity
·           ·         THE MONEY MARKET	The Money Market is that segment of the financial markets wherein financial instruments having maturities of less than one year are traded
·         THE CAPITAL MARKET	The Capital Market is that segment of the financial markets in which securities having maturities exceeding one year are traded. Examples include DEBENTURES, PREFERENCE shares and EQUITY SHARES
·         FISCAL POLICY	The use of tax and expenditure powers by a government. Government all over the world, are vested with the task of creating infrastructure (e.g., roads, ports, power plants, etc.) and are also required to ensure internal and external security. These responsibilities entail government expenditures on various fronts – capital outlays, the defence forces, police, the administrative services and others. Taxes are a major source of revenue to meet these outflows. Thus, the Union Government collects income tax, EXCISE DUTY, customs duty, etc., through its different arms.
·         FUNDING	The technique of extending the MATURITY of debt by substituting long-term debt instruments for short-term securities through REFINANCING operations. Sometimes, this is also referred to as 'debt roll-over' or 'conversion'
·         HEDGING	The action of combining two or more transactions so as to achieve a risk-reducing position. The objective, generally, is to protect a profit or minimize a loss that may result on a transaction.
·         INDEX FUND	This is a MUTUAL FUND whose PORTFOLIO mirrors a market index. The investments of such a fund are in the same stocks as those comprising the selected market index and in the same proportion as their weights in the index. Setting up the portfolio is called 'Indexing'
·         INTERCORPORATE DEPOSIT	A short-term deposit made by one company with another. The period usually does not exceed six months, and it could be as short as one or a few days. These deposits are essentially "brokered Deposits" given the extensive involvement of brokers.
·         LIBOR	An abbreviation for London Inter Bank Offer Rate, which is an average of the interest rates at which leading international banks are prepared to offer term EURODOLLAR DEPOSITS to each other.
·         MARKET CAPITALIZATION	The value of equity shares outstanding at prevailing market prices. Market capitalization = Number of shares x Market price of each share.
·         MIBOR	An acronym for the Mumbai Inter Bank Offer Rate, which is the weighted average interest rate of the rates at which certain banks/ institutions in Mumbai belonging to a representative panel are prepared to lend CALL MONEY.
·         NATIONAL STOCK EXCHANGE (NSE)	It is a nationwide screen-based trading network using computers, satellite link and electronic media that facilitate transactions in securities by investors across India
·         NON-PERFORMING ASSET (NPA)	A credit facility which ceases to generate income for a bank. Generally, it is one on which interest or any amount to be received has remained 'past due' for a period of two quarters as on March 31, 1995.
·         PRE-SHIPMENT CREDIT	Funds lent by banks in rupees or foreign currency (PCFC) to exporters, prior to the shipment of goods. Pre-shipment finance can be in the form of packing credit, advance against cash incentives and others.
·         PRIME LENDING RATE (PLR)	The rate of interest charged by banks on WORKING CAPITAL and short term loans to their most credit-worthy borrowers. The prime rate serves as a benchmark for deciding on the interest rate to be charged to other borrowers. Accordingly, major banks and also FINANCIAL INSTITUTIONS in India periodically announce their PLRs depending on their cost of funds and competitive lending rates
·         PRIVATE PLACEMENT	The sale, by a company, of its securities to one or a few FINANCIAL INSTITUTIONS through a process of direct negotiations, or to a limited number of individual investors. In contrast, the conventional method of PUBLIC ISSUE invites subscription from investors in general. The advantage of a private placement is the substantial saving in marketing expenses that a public issue entails.
·         SEED CAPITAL	The financial assistance towards a promoter's equity contribution. Seed Capital, alternatively called 'Equity Support', is to enable promising entrepreneurs with inadequate capital to set up their enterprises.
·         SPECULATION	An approach to investing that relies more on chance and therefore, entails a greater risk. Speculation is driven by an expectation of a high rate of return over a very short holding period.
·         SWEAT EQUITY	Equity shares allotted to certain employees of company either on discount or for consideration other than cash, as a reward for providing know-how or sharing intellectual rights or some other value addition to the company.

MODULE: FINANCIAL MANAGEMENT-II

·         INITIAL PUBLIC OFFERING (IPO)	An Initial Public Offering (IPO being the Stock Exchange and corporate acronym) is the first sale of privately owned equity (stock or shares) in a company via the issue of shares to the public and other investing institutions. In other words an IPO is the first sale of stock by a private company to the public.
·         LETTERS OF CREDIT	When an exporter agrees to supply a customer in another country, the exporter needs to know that the goods will be paid for. The common system, which has been in use for many years, is for the customer's bank to issue a 'letter of credit' at the request of the buyer, to the seller. The letter of credit essentially guarantees that the bank will pay the seller's invoice (using the customer's money of course) provided the goods or services are supplied in accordance with the terms stipulated in the letter,
·         LETTERS OF GUARANTEE	There are many types of letters of guarantee. These types of letters of guarantee are concerned with providing safeguards to buyers that suppliers will meet their obligations or vice-versa, and are issued by the supplier's or customer's bank depending on which party seeks the guarantee. While a letter of credit essentially guarantees payment to the exporter, a letter of guarantee provides safeguard that other aspects of the supplier's or customer's obligations will be met.
·         RESTRICTED FUNDS	These are funds used by an organisation that are restricted or earmarked by a donor for a specific purpose, which can be extremely specific or quite broad, eg. endowment or pensions investment.
·         T/T (TELEGRAPHIC TRANSFER)	International banking payment method: a telegraphic transfer payment, commonly used/required for import/export trade, between a bank and an overseas party enabling transfer of local or foreign currency by telegraph, cable or telex. Also called a cable transfer. The terminology dates from times when such communications were literally 'wired' - before wireless communications technology.
·         EFFICIENT PORTFOLIO	A diversified selection of stocks resulting in a least risk PORTFOLIO for a given rate of return. At that level of RISK, no other portfolio provides superior returns. Combining shares from different unrelated industries helps to neutralize the UNSYSTEMATIC RISK inherent in each security.
·         ESCROW CASH	Securities or other valuable instruments that are held by a third party to ensure that the obligations under a contract are discharged. The escrow mechanism is a technique of mitigating the risk to lenders and it is used typically in infrastructure projects such as power, roads or telecom. For example, an escrow account can be set up at a bank for depositing the payments of electricity bills.
·         EUROBOND	A bond denominated in a currency different from that of the country in which it is sold.
·         ADR	An acronym for American Depository Receipt. It is an instrument traded at U.S. exchanges representing a fixed number of shares of a foreign company that is traded in the foreign country. By trading in ADRs, U.S. investors manage to avoid some of the problems of dealing in foreign securities markets. The ADR route enables companies to raise funds in the U.S. financial markets, provided they meet the stringent regulatory norms for disclosure and accounting.
·         ARBITRAGE	The simultaneous purchase and sale transactions in a security or a commodity, undertaken in different markets to profit from price differences.
·         BANK RATE	The rate of interest charged by the Reserve Bank of India (RBI) on financial accommodation extended to banks and FINANCIAL INSTITUTIONS. The support is provided in the form of a bills rediscounting facility and advances or REFINANCE against specified ASSETS
·         BLUE CHIP	A share of a company that is financially very sound, with an impressive track record of earnings and DIVIDENDS, and which is highly regarded for its competent management, quality products and/or services. Examples in India are Hindustan Lever, Gujarat Ambuja Cements, and Reckitt & Colman among others.
·         BONUS SHARES	The issue of shares to the shareholders of a company, by capitalizing a part of the company's reserves. , the issue can be made out of free reserves created by genuine profits or by share PREMIUM collected in cash only.
·         BOOK BUILDING	A process used to ascertain and record the indicative subscription bids of interested investors to a planned issue of securities. The advantages of this technique of obtaining advance feedback, are that it results in optimal pricing and removes uncertainty regarding mobilization of funds.
·         BOUGHT-OUT DEAL	The sale of securities under a negotiated agreement between an issuer and the investing institution, as an alternative to a PUBLIC ISSUE. The advantage to the issuing company is the saving in time and cost that a public issue would entail. It is a big help to unlisted companies and projects, which must see through a gestation period before tapping the PRIMARY MARKET
·         BRIDGE LOAN	A short-term loan granted to a borrower to tide over a temporary funds shortage. Such an accommodation is usually arranged at the time of a PUBLIC ISSUE, when expenditures on a project lead to a DEFICIT, thereby necessitating a bridge loan.
·         CAPITAL ADEQUACY RATIO	A requirement imposed on banks to have a certain amount of capital in relation to their ASSETS, i.e., loans and investments as a cushion against probable losses in investments and loans Capital is classified into Tier I or Tier II. Tier I comprises share capital and disclosed reserves, whereas Tier II includes revaluation reserves, hybrid capital and subordinated debt. Further, Tier II capital should not exceed Tier I capital. The ratio is being raised to 9%, to take effect from March 31, 2000.
·         CAPITAL MARKET LINE	This is a graphical line which represents a linear relationship between the expected return and the total risk (standard deviation) for efficient PORTFOLIOS of risky and riskless securities.
·         CASH RESERVE RATIO (CRR)	A legal obligation on all SCHEDULED COMMERCIAL banks excluding REGIONAL RURAL BANKS to maintain certain reserves in the form of cash with the Reserve Bank of India (RBI). The reserves, to be maintained over a fortnight, are computed as a percentage of a bank's net demand and time LIABILITIES. Banks earn interest on eligible cash balances thus maintained and it contributes to their profitability
·         CHIT FUND	This is a non-banking financial intermediary. A chit fund scheme typically involves the collection of periodic subscriptions from enrolled members, which is then disbursed as a loan to a member. The member is selected either by lot or through an auction. The promoter is also called the 'Foreman' and the capital given out is called 'Prize Money'.
·         COMMERCIAL PAPER (CP)	A short-term, unsecured PROMISSORY NOTE issued by BLUE CHIP companies. Like other MONEY MARKET instruments, it is issued at a DISCOUNT on the FACE VALUE and is freely marketable.
·         CONSORTIUM	A term generally used in banking: it refers to a group of banks associating for the purpose of meeting the financial requirements of a borrower, such as WORKING CAPITAL or a term loan. In business, the term applies to a group of companies, national or international, working together as a joint venture, sharing resources and having interlocking financial agreements.
·         DEBENTURE TRUSTEE	The third party to a DEBENTURE issue, with whom the TRUST DEED is executed and who must ensure that the issuer abides by the promises, pledges and restrictions relating to the DEBENTURE issue. The role of the trustee is that of a watchdog who acts on behalf of the debenture holder.
·         DEFICIT	In general, it connotes a shortfall. In the context of a BUDGET, it refers to the excess of expenditure over revenues during a certain period.
·         REVENUE DEFICIT	The excess of expenditure over receipts in the revenue account of the Government of India. Receipts include taxes and non-tax revenues such as interest and DIVIDENDS and also grants. Some of the expenditure items are interest, SUBSIDIES, certain defence outflows, salaries, pensions etc.
·         BUDGET DEFICIT	The figure that results by subtracting the total expenditures (on revenue and capital accounts) from the total receipts (on revenue and capital accounts) of the Government of India. The budget deficit is financed through the issue of Ad hoc TREASURY BILLS and/or by drawing down cash balances with the Reserve Bank of India
·         DEPRECIATION	In the context of international finance, depreciation refers to the decline in the market value of a currency in relation to another currency. For example, if one U.S. dollar could be bought in the market for Rs.40 as against Rs.41.50 earlier, it means that the dollar has depreciated vis-à-vis the Indian rupee.
·         DEVALUATION	The lowering of a country's official exchange rate in relation to a foreign currency (or to gold), so that exports compete more favourably in the overseas markets.
·         FINANCIAL LEVERAGE	The ability to magnify earnings available to equity shareholders, by the use of debt or fixed-charge securities. Generally, the higher the amount of debt in relation to total financing, the greater will be the impact on profits available to equity shareholders, other things being equal.
·         FORMULA PLANS	These are mechanistic methods of timing decisions relating to the buying and selling of securities. There are different formula plans that include the Constant Dollar Plan and the Constant and Variable Ratio Plans. These methods are for the patient, conservative investor who seeks protection from large losses and is not confident of timing his decisions correctly
·         HAVALA TRANSACTION	An Indian term which refers to a mode of transferring of funds out of India or into the country, bypassing official and legal channels. As an example, an individual may transfer his ill-gotten cash to a discreet bank in a foreign country.
·         HOT MONEY	This refers to large amount of short-term funds held internationally by banks, institutions and wealthy individuals which quickly move out of or into a country, usually, in anticipation of exchange rate movements or interest rate changes. Hot Money is, therefore, an unstable source of funds.
·         INSIDER	Term used for one who has access to information concerning a company that is not publicly available and is of such a nature that it enables him or her to make substantial profits in share transactions.
·         JUNK BONDS	The debt securities of companies bearing a considerable degree of risk that is reflected in their mediocre or poor CREDIT RATINGS. Alternatively referred to as 'Low-grade' or 'High-risk' BONDS.
·         LETTER OF CREDIT	A financial instrument issued by a bank on behalf of a purchaser of goods, undertaking responsibility to pay a certain amount during a specified period, for goods delivered.
·         M1	A measure of the stock of money in India, which is also referred to as "Narrow Money". M1 is calculated by adding the net demand deposits of banks and 'Other' deposits with the Reserve Bank of India (RBI) to the sum of currency notes and coins held by the public. 'Net demand deposits' comprise current account deposits and a portion of the savings deposits considered as a demand LIABILTY, all held by the public; 'Other' deposits with RBI refers to funds held by certain institutions like the Industrial Development Bank of India and International Monetary Fund, foreign governments and CENTRAL BANKS.
M2	Sum of M1 and post office savings bank deposits.
M3	A measure of the stock of money in the nation with reference to which monetary targets are set by the Reserve Bank of India. It is the sum of M1 and the net TIME DEPOSITS (together with the portion of savings deposits no included in M1) with banks. It is also called 'Broad Money'. M3 is a function of RESERVE MONEY.
M4	The sum of M3 and total post office deposits
NASDAQ	An acronym for National Association of Security Dealers Automated Quotations System, which is a nationwide network of computers and other electronic equipment that connects dealers in the over-the-counter market across the U.S. The system provides the latest BID and ASKING PRICES quoted for any security by different dealers.
ODD-LOT	A lot of shares that is different from a round (marketable) lot. Stock exchanges, transactions are done in lots mostly of 100 or 50 shares and multiples thereof. These conventional trading units are called 'Round Lots'. Any lot that is different from the prescribed trading unit is deemed an odd-lot. At some stock exchanges, odd-lot trading takes place on Saturdays.
PRIMARY RESERVE	The sum of (a) cash reserves, legally required to be held by a bank and (b) working reserves maintained to facilitate operations such as payments to depositors and credit disbursement. The level of working reserves depends on several factors that include the scale of operations, profile of depositors, business conditions, and size of the SECONDARY RESERVE.
PRIVATE PLACEMENT	The sale, by a company, of its securities to one or a few FINANCIAL INSTITUTIONS through a process of direct negotiations, or to a limited number of individual investors
PROXY	A document that facilitates the transfer of a share-holders right to vote in favour of another person who may represent and vote on his/her behalf at a general meeting of the company. The term proxy also refers to the person authorized to act on behalf of another.
PUBLIC DEBT	The debt obligations of the Government of India comprising external debt, i.e., loans from foreign countries, international FINANCIAL INSTITUTIONS, etc. and internal debt that includes market loans, TREASURY BILLS, special bearer BONDS and special loans and securities outstanding. A very large portion of the internal debt obligations is held by the Reserve Bank of India.
SENSITIVE INDEX	A statistical measure of the prices of 30 selected stocks traded on the Bombay Stocks traded on the Bombay Stock Exchange. This base-weighted aggregative method assigns to the price of each component share. A weight corresponding to the number of shares outstanding. Therefore, the index on a particular day is the ratio of the aggregate market capitalization of 30 stocks on that day to the average MARKET CAPITALIZATION of the same stocks during the base period. The base year is the financial year 1978-79.
STOCK SPLIT	Adjustments effected in the FACE VALUE of shares and the number of shares outstanding, such that no change occurs in the total PAID-UP CAPITAL. Stock splits are generally associated with shares having a high face value and which correspondingly trade at a higher price.
SYNERGY	A notion of disproportionately higher financial benefits expected by combining complementary businesses, which would exceed the performances of the entities achieved separately.

MODULE-FINANCIAL MANAGEMENT

Time Value of Money	Time Value of money means calculating the value of money by introducing the factor of time element. It means money earned today is more valuable in comparison to the money earned in the latter on period.
Bond	Bond is one of the forms of security issued by Government.
·         Break Even Point	Break even point is that point where total income equal to total expenditure.
·         Deficit Spending	When the expenditures are more than revenues.
Discounted Cash Flow	It means time adjusted cash flow. The value of cash flows is calculated by discounting cash flows by cost of capital
·         Financial Budget	The cash budget and capital budget in combined are called financial budget.
·         Finance	Provision of money at the time when it is required.  Basically it is a field of knowledge of the alternative sources and uses of organization resources.
·         Third Party Funding	Financial intermediaries are called third party funding.
·         Mixed Cost	A combination of fixed and variable costs is called mixed cost.
·         NPV	Net present value. It is equal to present value of inflows minus present value of outflows.
·         Capital Spending	Expenditure on the assets whose life is more than one year is called capital spending.
·         Cost of Capital	Cost of capital Minimum rate of return expected by investor is called cost of capital. The total cost of interest payments and other costs associated with raising capital.
·         IRR	The discount rate which equates the present value inflow with the present value of outflows.
·         Netting	The offsetting of cash flows or other obligations against each other.
·         Financial Plan	Financial plan means estimating the amount of capital and determining its pattern (composition).
·         Gross Working Capital	Total of current asset is called gross working capital.
·         Watered Stock	When the stock of a company is not represented by the asset of equal value then it is known as watered stock.
Over Trading	When a company does more business than its financial position allows is called over trading.
·         Deposit Ticket	A receipt given by bank as an evidence of deposit.
·         Market Value of a Share	The price at which a person could buy or sell the stock is called market price of stock
ABC System	ABC is one of the systems of Inventory Management. Here A Means largest investment inventory, B Means second largest and C means smallest investment inventory.
Block of Assets	Block of Assets means group of assets having same class.
Commercial Paper	This is promissory note issued at a discount of face value.
Arbitrage	Arbitrage means buying the security from one market at low price and selling the same in another market at high price.
Benefit/Cost Ratio	It is equal to present value of inflow divided by present value of outflow.
Coverage Ratio	This ratio measures the ability of a firm to meet its fixed obligations.
EVA	Economic Value Added. It is equal to (Net profit after tax-cost of capital*capital invested)
MVA	Market Value Added. It is the sum total of present values of future EVA.
Capital Structure	The proportion of debt, preference shares and equity including retained earning (reserves and surplus).
Bonus Share	Dividend paid in form of equity share and not in cash.
Capital Rationing	The process of allocating limited fund to different mutually exclusive projects.
Contribution Margin	The difference between selling price and variable cost.
Conversion Costs	Cost of converting the marketable securities into cash is called conversion cost.
Equity Funds	Funds related to ordinary shareholders are called Equity Funds. This is equal to ordinary share capital and retained earning.
Factoring	It is a process of discounting receivables before their maturity.
Net Working Capital	The excess of current assets over current liabilities.
Pay-Back Period	The number of years in which original investment will recover.
Price-Earning Ratio	Market price per share divided by earning pre share.
Risk	Variability in return is called risk.
Capitalization Rate	Interest rate expected by investor. It is used to calculate the present value of future cash flows.
Treasury Bill	These are bearer obligation of the government.
Dividend Yield	Dividend per share divided by market price per share.
Financial Modeling	Financial Modeling is a process of developing financial statements and ratios which are useful in future projections. These projections are based on some assumptions.
Salvage Value	The expected value of a depreciable asset at the end of its useful life.
Systematic  Risk	Systematic risk is the risk which affects the whole market not to a particular company.
Agency Problem	When the managers place personal goals ahead of corporate goal then agency problem arises.
Aging of Accounts	Aging of accounts means how long receivable and payable are outstanding.
Yield	The actual return received by an investor. It is a combination of interest return and the price appreciation.
EAC	Earning available for common shareholders. Here common means equity shareholders.
·         Capital Gearing	It represents the ratio of various types of securities in the capital structure of the company. When a company issues more equity capital then it will called low gearing and vice versa.
·         Front Money	Investment of money to finance the initial costs before regular funding is in place.
Capital Allocation	It means allocation of the organization's available financial resources across different projects.
Over Capitalization	When the capitalization of the company is more than its proper capitalization as warranted by its earning capacity.
Under Capitalization	When the capitalization of the company is lower than its proper capitalization as warranted by its earning capacity.
Financial Leverage	The use of preference share capital and debt along with the equity capital is called financial leverage.