HERE WE GO………

Purpose of Stock Market

IT’S EASY TO DREAM AS A RICH,OFCOURSE EASY TO ATTAIN TOO….

Dhirubhai Ambhani How a Person can Make Billions

with the help of Thousands In a span 40 odd years

Ended his journey with Rs.65,000 Crore

o Warren Buffet His Salary at early days is $1,000 per month,But he donated 85% of his wealth Roughly around $ 31 billion

STORY GOES LIKE THIS Ever Wondered How they Become Rich ??

If they could why can’t we ? ?

Is it Possible

What They Done ???????

How They Done ?????

Any Magic #!!!!!!!

May be a Gimmick !!!!!!!!

Any have they Done it ……..

Not by Any Means ,,,,,, By One Way that is None Other Than ……..

HERE WE GO Stock Market Is all about Facts And Figures

The Basic Ideology of stock market is to support business Growth with Mutual Benefits.

THE STORY STARTED LIKE THIS ….. To Run a business Every body Needs

Money,

The Money can be obtained by means of Banks, Financial Institution,Capitalist,Venture Capitalist

( The Person who Funds A Business).

There Raises the need for an Intermediary or Regulatory to Get things done

EXAMPLE Almost every large corporation started out as a small,

became financial giants.

Reliance Started with the Investment of Rs.15,000, Similarly Bharathi Airtel began With The investment of 5,00,000

But now the Reliance Cumulative Assets is more than 2 lakh crores and Airtel Assets is More Than Billion Dollar

These small companies grow from tiny, hometown enterprises To Large Corporate because

They raised capital by selling stock in themselves and increased revenues

IN NUT SHELL

Business Reliance Industries

Bharathi Airtel

Initial Investment Rs.15,000 Rs.5,00,000

Current Worth More than 5,00,000 Crore

More Than 2 billion

This is not possible by the Profit from Business. There needs a Separate Tool to

Grow beyond Limitation

HOW IT HAPPENS, AN STORY TO KNOW After getting married, a young couple

decided to start a business. To Lead their Life.Both husband and wife have always had a strong interest in furniture, so they decide to open a store in their hometown.

After borrowing money from the bank, they

name their company “Super Star Furniture” and started business.

The first few years, the company makes little profit because the earnings are invested to compensate basic needs like tools ,Land , Machines ,Purchase of More Materials.

SUPER STAR FURNITURE

Ten years later, the business has grown rapidly. The couple has managed to pay off the company’s debt(loan) and profits are over Rs.20,00,000 per year.

Now the Couple desired to start the business

in Neighboring Cities .

They searched for various options and finally concluded that they need over one crore to start new stores in neighboring cities

Borrowing the amount for interest is not possible because the limit for bank loan is over, so they decide to sell stock in the company.

REVIEW Bought Loan Started Super Star Furniture's Repaid Loan in Installment

Bought Basic Things forFirst 10 years Business Like Machine, Material,

Manufacturing Space( Land)etc.

At The End Of Profit is More than 10th Year Rs.20,00,000

Now they Want to Expand Stores to Nearest Cities

SUPER STAR FURNITURE The company approaches an “underwriter”, such as

ICICI or Kotak Mahindra, who determines the value of the business.

Let Us Calculate Book Value of Super Star Furniture

Sales Value (for Ex) 2,50,00,000

Profit

25,00,000

Total Business Values 2,75,00,000

BOOK VALUE OF SUPER STAR FURNITURE

Book Value ={ (Value of the land + building + Materials + Wealth of Super Star Furniture )etc.

– (company’s debt)} + Sales Volume

For Example Book Value For Super Star Furniture

= { 2,50,00,000 - 25,00,000} + 2,75,00,000Total Book Value = 5,00,00,000

All the values are Imaginary Examples

BOOK VALUE OF SUPER STAR = RS.5 CRORE

To expand the business the Young Couple need Money to expand business.

Currently they are the 100% owner of the

company.

By Selling a part of ownership they can expand the business by the amount

they got

OWNERSHIP PARTITION Book Value = Rs.5 crore

Couple decide to Sell 40% OF Their business to start the new Branches

Level Couple Own Others Own Cash Reserve

Available For Owner To Expand

Beginning Stage

Rs.5 crore Nil Nil

After Decision

60% = Rs.3 Crore

40% = Rs.2 crore

Rs.2 Crore

AND HERE THEY GO…… Even Though the Couple Owns only 60 % they

got Rs.2 crore to Expand the Business.

They will Invest Rs.2 crore for opening Store in the Nearest Cities.

By investing So the Profit

Within a year the Profit Increases as Well as Ownership Value Increases

Profit From Old Store

Profit From New Store

Total Profit

25,00,000 20,00,000 45,00,000

EXPANDING…

Super Star Group Profit

Couple Will Have 24,00,000

Others 16,00,000

Total Value Of Total Business = Book Value of Old Business + Book VALUE Of New Business

= Rs.5 crore + Rs.4 Crore = Rs.9 cr(Assumption)

60% For the Couple = Rs.5.4 crore

WITHIN ONE YEAR THE VALUE

For Couple the Value Increases From Rs.3 crore to Rs.5.4 Crore

Similarly for The Share Holders ,VALUE Increases From Rs.2 Crore To Rs.4.6 crore

This is how the Wealth Grows and there raises the Purpose of Stock Market To Regulate and Administrate the Proceedings

FRIENDS THIS IS JUST AN EXAMPLE TO UNDERSTAND THE PURPOSE OF STOCK MARKET

YOUR’S :- V.SARAVANAN (MBA)

“ We Have to Let our money to work for us’’