Finance Note for Mba s

7/29/2019 Finance Note for Mba s

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FINANCE JOB COACHING, GUIDANCE FOR PROJECT WORKS (FINANCE HR,

MARKETING) CELL: 9908701362,9000176217,SAP(FICO/SD,CRM)

MBA FINANCE NOTES FOR INTERVIEWS1.Definition of accounting: the art of recording, classifying and summarizing in a significant

manner and in terms of money, transactions and events which are, in part at least of afinancial character and interpreting the results there of.

2.Book keeping:It is mainly concerned with recording of financial data relating to the businessoperations in a significant and orderly manner.

3. Concepts of accounting:A. separate entity conceptB. going concernconceptC. money measurement conceptD. cost concept

E. dual aspect conceptF. accounting period conceptG. periodic matching of costs and revenue conceptH. realization concept.

4 Conventions of accountingA. conservatismB. full disclosureC. consistencyD materiality.

5. Systems of book keeping:A. single entry systemB. double entry system

6. Systems of accountingA. cash system accounting

B. mercantile system of accounting.

7. Principles of accounting

a. personal a/c : debit the receiverCredit the giver

b. real a/c : debit what comes incredit what goes out

c. nominal a/c : debit all expenses and lossescredit all gains and incomes

8. Meaning of journal: journal means chronological record of transactions.

Prepared by:-C.BALAKRISHNA MBACELL: 9908701362

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MBA FINANCE NOTES FOR INTERVIEWS

9. Meaning of ledger: ledger is a set of accounts. It contains all accounts of the businessenterprise whether real, nominal, personal.

10. Posting: it means transferring the debit and credit items from the journal to their respectiveaccounts in the ledger.

11. Trial balance: trial balance is a statement containing the various ledger balances on aparticular date.

12. Credit note: the customer when returns the goods get credit for the value of the goodsreturned. A credit note is sent to him intimating that his a/c has been credited with the

value of the goods returned.

13. Debit note: when the goods are returned to the supplier, a debit note is sent to himindicating that his a/c has been debited with the amount mentioned in the debit note.

14. Contra entry: which accounting entry is recorded on both the debit and credit side ofthe cashbook is known as the contra entry.

15. Petty cash book: petty cash is maintained by business to record petty cash expenses ofthe business, such as postage, cartage, stationery, etc.

16.promisory note: an instrument in writing containing an unconditional undertaking igned bythe maker, to pay certain sum of money only to or to the order of a certain person or to thebarer of the instrument.

17. Cheque: a bill of exchange drawn on a specified banker and payable on demand.

18. Stale cheque: a stale cheque means not valid of cheque that means more than sixmonths the cheque is not valid.

20. Bank reconciliation statement: it is a statement reconciling the balance as shown by thebank passbook and the balance as shown by the Cash Book. Obj: to know the difference& pass necessary correcting, adjusting entries in the books.

21. Matching concept: matching means requires proper matching of expense with therevenue.

22. Capital income: the term capital income means an income which does not grow out of orpertain to the running of the business proper.


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MBA FINANCE NOTES FOR INTERVIEWS23. Revenue income: the income, which arises out of and in the course of the regular

business transactions of a concern.

24. Capital expenditure: it means an expenditure which has been incurred for the purpose ofobtaining a long term advantage for the business.

25. Revenue expenditure: an expenditure that incurred in the course of regular businesstransactions of a concern.

26. Differed revenue expenditure: an expenditure, which is incurred during an accountingperiod but is applicable further periods also. Eg: heavy advertisement.

27. Bad debts: bad debts denote the amount lost from debtors to whom the goods were soldon credit.

28. Depreciation: depreciation denotes gradually and permanent decrease in the value ofasset due to wear and tear, technology changes, laps of time and accident.

29. Fictitious assets: These are assets not represented by tangible possession or property.Examples of preliminary expenses, discount on issue of shares, debit balance in the

profit and loss account when shown on the assets side in the balance sheet.

30.Intanglbe Assets: Intangible assets mean the assets which is not having the physical

appearance. And its have the real value, it shown on the assets side of the balance sheet.

31. Accrued Income: Accrued income means income which has been earned by the businessduring the accounting year but which has not yet been due and, therefore, has not beenreceived.

32. Out standing Income: Outstanding Income means income which has become due duringthe accounting year but which has not so far been received by the firm.

33. Suspense account: the suspense account is an account to which the difference in the trialbalance has been put temporarily.

34. Depletion: it implies removal of an available but not replaceable source, Such asextracting coal from a coal mine.

35. Amortization: the process of writing of intangible assets is term as amortization.

36. Dilapidations: the term dilapidations to damage done to a building or other property duringtenancy.


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MBA FINANCE NOTES FOR INTERVIEWS37. Capital employed: the term capital employed means sum of total long term funds

employed in the business. i.e.

(share capital+ reserves & surplus +long term loans (non business assets + fictitious assets)

38. Equity shares: those shares which are not having pref. rights are called equity shares.

39. Pref.shares: Those shares which are carrying the pref.rights is called pref. sharesPref.rights in respect of fixed dividend. Pref.right to repayment of capital in the even ofCompany winding up.

40. Leverage: It is a force applied at a particular work to get the desired result.

41. Operating leverage: the operating leverage takes place when a changes in revenuegreater changes in EBIT.

42. Financial leverage : it is nothing but a process of using debt capital to increase the rate ofreturn on equity

43. Combine leverage: it is used to measure of the total risk of the firm = operating risk +financial risk.

44. Joint venture: A joint venture is an association of two or more the persons whocombined for the execution of a specific transaction and divide the profit or loss their of anagreed ratio.

45. Partnership: partnership is the relation b/w the persons who have agreed to share theprofits of business carried on by all or any of them acting for all.

46. Factoring: It is an arrangement under which a firm (called borrower) receives advancesagainst its receivables, from a financial institutions (called factor)

47. Capital reserve: The reserve which transferred from the capital gains is called capitalreserve.

48.General reserve: the reserve which is transferred from normal profits of the firm iscalled general reserve

49. Free Cash: The cash not for any specific purpose free from any encumbrance likesurplus cash.


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MBA FINANCE NOTES FOR INTERVIEWS50. Minority Interest: minority interest refers to the equity of the minority shareholders in a

subsidiary company.

51. Capital receipts: capital receipts may be defined as non-recurring receipts from the ownerof the business or lender of the money crating a liability to either of them.

52. Revenue receipts: Revenue receipts may defined as A recurring receipts against sale ofgoods in the normal course of business and which generally the result of the tradingactivities.

53. Meaning of Company: A company is an association of many persons who contributemoney or moneys worth to common stock and employs it for a common purpose. Thecommon stock so contributed is denoted in money and is the capital of the company.

54. Types of a company:1.Statutory companies2.government company3.foreign company4.Registered companies:

a. Companies limited by sharesb. Companies limited by guaranteec. Unlimited companiesD. private companyE. public company

55. Private company: A private co. is which by itsAOA: Restricts the right of the members to transfer of shares Limits the no. Of members50. Prohibits any Invitation to the public to subscribe for its shares or debentures.

56. Public company: A company, the articles of association of which do not contain therequisite restrictions to make it a private limited company, is called a public company.

57. Characteristics of a company:Voluntary associationSeparate legal entityFree transfer of sharesLimited liabilityCommon seal

Perpetual existence.

58. Formation of company:PromotionIncorporation


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MBA FINANCE NOTES FOR INTERVIEWSCommencement of business

59. Equity share capital: The total sum of equity shares is called equity share capital.

60. Authorized share capital: it is the maximum amount of the share capital, which a companycan raise for the time being.

61. Issued capital: It is that part of the authorized capital, which has been allotted to thepublic for subscriptions.

62. Subscribed capital: it is the part of the issued capital, which has been allotted to the public63. Called up capital: It has been portion of the subscribed capital which has been called up

by the company.

64. Paid up capital: It is the portion of the called up capital against which payment has beenreceived.

65. Debentures: Debenture is a certificate issued by a company under its sealacknowledging a debt due by it to its holder.

66. Cash profit: cash profit is the profit it is occurred from the cash sales.

67. Deemed public Ltd. Company: A private company is a subsidiary company to public

company it satisfies the following terms/conditions Sec 3(1)3:1.having minimum share capital 5 lakhs2. accepting investments from the public3. no restriction of the transferable of shares4. No restriction of no. of members.5. accepting deposits from the investors

68. Secret reserves: secret reserves are reserves the existence of which does not appear onthe face of balance sheet. In such a situation, net assets position of the business isstronger than that disclosed by the balance sheet.

These reserves are crated by:1.Excessive dep.of an asset, excessive over-valuation of a liability.2.Complete elimination of an asset, or under valuation of an asset.

69. Provision: provision usually means any amount written off or retained by way of providingdepreciation, renewals or diminutions in the value of assets or retained by way of providingfor any known liability of which the amount can not be determinedwith substantial accuracy.


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MBA FINANCE NOTES FOR INTERVIEWS70. Reserve: The provision in excess of the amount considered necessary for the purpose it

was originally made is also considered as reserve Provision is charge against profits whilereserves is an appropriation of profits Creation of reserve increase proprietors fund whilecreation of provisions decreases his funds in the business.

71. Reserve fund: the term reserve fund means such reserve against which clearlyinvestment etc.,

72. Undisclosed reserves: Sometimes a reserve is created but its identity is merged withsome other a/c or group of accounts so that the existence of the reserve is not known suchreserve is called an undisclosed reserve.

73. Finance management: financial management deals with procurement of funds and theireffective utilization in business.

74. Objectives of financial management: financial management having two objectives that Is:1. Profit maximization: the finance manager has to make his decisions in a manner so thatthe profits of the concern are maximized.2. Wealth maximization: wealth maximization means the objective of a firm should be tomaximize its value or wealth, or value of a firm is represented by the market price of itscommon stock.

75. Functions of financial manager:Investment decisionDividend decisionFinance decisionCash management decisionsPerformance evaluationMarket impact analysis

76. Time value of money: the time value of money means that worth of a rupee receivedtoday is different from the worth of a rupee to be received in future.

77. Capital structure: it refers to the mix of sources from where the long-term funds requiredin a business may be raised; in other words, it refers to the proportion of debt, preferencecapital and equity capital.

78. Optimum capital structure: capital structure is optimum when the firm has a combination ofequity and debt so that the wealth of the firm is maximum.

79. Wacc: it denotes weighted average cost of capital. It is defined as the overall cost ofcapital computed by reference to the proportion of each component of capital as weights.


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80. Financial break-even point: it denotes the level at which a firms EBIT is just sufficient tocover interest and preference dividend.

81. Capital budgeting: capital budgeting involves the process of decision making with regardto investment in fixed assets. Or decision making with regard to investment of money inlong-term projects.

82. Pay back period: payback period represents the time period required for completerecovery of the initial investment in the project.

83. ARR: accounting or average rate of return means the average annual yield on the project.

84. NPV: the net present value of an investment proposal is defined as the sum of the presentvalues of all future cash in flows less the sum of the present values of all cash out flowsassociated with the proposal.

85. Profitability index: where different investment proposal each involving different initialinvestments and cash inflows are to be compared.

86. IRR: internal rate of return is the rate at which the sum total of discounted cash inflowsequals the discounted cash out flow.

87. Treasury management: it means it is defined as the efficient management of liquidity andfinancial risk in business.

88. Concentration banking: it means identify locations or places where customers are placedand open a local bank a/c in each of these locations and open local collection canter.

89. Marketable securities: surplus cash can be invested in short term instruments in order toearn interest.

90. Ageing schedule: in a ageing schedule the receivables are classified according to theirage.

91. Maximum permissible bank finance (MPBF): it is the maximum amount that banks canlend a borrower towards his working capital requirements.

92. Commercial paper: a cp is a short term promissory note issued by a company, negotiableby endorsement and delivery, issued at a discount on face value as may be determined bythe issuing company.


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MBA FINANCE NOTES FOR INTERVIEWS93. Bridge finance: It refers to the loans taken by the company normally from a commercial

banks for a short period pending disbursement of loans sanctionedby the financial institutions.

94. Venture capital: It refers to the financing of high-risk ventures promoted by new qualifiedentrepreneurs who require funds to give shape to their ideas.

95. Debt securitization: It is a mode of financing, where in securities are issued on the basisof a package of assets (called asset pool).

96. Lease financing: Leasing is a contract where one party (owner) purchases assets andpermits its views by another party (lessee) over a specified period

97. Trade Credit: It represents credit granted by suppliers of goods, in the normal course ofbusiness.

98. Over draft: Under this facility a fixed limit is granted within which the borrower allowed tooverdraw from his account.

99. Cash credit: It is an arrangement under which a customer is allowed an advance up tocertain limit against credit granted by bank.

100. Clean overdraft: It refers to an advance by way of overdraft facility, but not back by any

tangible security.

101. Share capital: The sum total of the nominal value of the shares of a company is calledshare capital.

102. Funds flow statement: It is the statement deals with the financial resources for runningbusiness activities. It explains how the funds obtained and how they used.

103.Sources of funds: There are two sources of funds Internal sources and externalsources.

Internal source: Funds from operations is the only internal sources of funds and someimportant points add to it they do not result in the outflow of funds(a) Depreciation on fixed assets(b) (b) Preliminary expenses or goodwill written off, Loss on sale of fixed assets

Deduct the following items, as they do not increase the funds:Profit on sale of fixed assets, profit on revaluationOf fixed assets

External sources: (a) Funds from long-term loans


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MBA FINANCE NOTES FOR INTERVIEWS(b)Sale of fixed assets

(c) Funds from increase in share capital

104. Application of funds: (a) Purchase of fixed assets (b) Payment of dividend (c)Payment oftax liability (d) Payment of fixed liability

105. ICD (Inter corporate deposits): Companies can borrow funds for a short period. Forexample 6 months or less from another company which have surplus liquidity. Sucheposits made by one company in another company are called ICD.

106. Certificate of deposits: The CD is a document of title similar to a fixed deposit receiptissued by banks there is no prescribed interest rate on such CDs it is based on the

prevailing market conditions.

107. Public deposits: It is very important source of short term and medium term finance. Thecompany can accept PD from members of the public and shareholders. It has thematurity period of 6 months to 3 years.

108.Euro issues: The euro issues means that the issue is listed on a European stockExchange. The subscription can come from any part of the world except India.

109.GDR (Global depository receipts): A depository receipt is basically a negotiablecertificate , dominated in us dollars that represents a non-US company publicly traded in

local currency equity shares.

110. ADR (American depository receipts): Depository receipt issued by a company in theUSA are known as ADRs. Such receipts are to be issued in accordance with theprovisions stipulated by the securities Exchange commission (SEC) of USA like SEBI inIndia.

111.Commercial banks: Commercial banks extend foreign currency loans for internationaloperations, just like rupee loans. The banks also provided overdraft.

112.Development banks: It offers long-term and medium term loans including foreigncurrency loans

113.International agencies: International agencies like the IFC,IBRD,ADB,IMF etc. provideindirect assistance for obtaining foreign currency.


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MBA FINANCE NOTES FOR INTERVIEWS114. Seed capital assistance: The seed capital assistance scheme is desired by the IDBI for

professionally or technically qualified entrepreneurs and persons possessing relevantexperience and skills and entrepreneur traits.

115. Unsecured l0ans: It constitutes a significant part of long-term finance available to anenterprise.

116. statement: It is a statement depicting change in cash position from one period toanother.

117.Sources of cash: Internal sources-(a)Depreciation

(b)Amortization(c)Loss on sale of fixed assets(d)Gains from sale of fixed assets(e) Creation of reserves External sources-(a)Issue of new shares(b)Raising long term loans(c)Short-term borrowings(d)Sale of fixed assets, investments

118. Application of cash:(a) Purchase of fixed assets

(b) Payment of long-term loans(c) Decrease in deferred payment liabilities(d) Payment of tax, dividend(e) Decrease in unsecured loans and deposits

119. Budget: It is a detailed plan of operations for some specific future period. It is anestimate prepared in advance of the period to which it applies.

120. Budgetary control: It is the system of management control and accounting in which alloperations are forecasted and so for as possible planned ahead, and the actual resultscompared with the forecasted and planned ones.

121. Cash budget: It is a summary statement of firms expected cash inflow and outflow overa specified time period.

122. Master budget: A summary of budget schedules in capsule form made for the purposeof presenting in one report the highlights of the budget forecast.


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MBA FINANCE NOTES FOR INTERVIEWS123. Fixed budget: It is a budget, which is designed to remain unchanged irrespective of the level of

activity actually attained.

124.Zero- base- budgeting: It is a management tool which provides a systematic method forevaluating all operations and programmes, current of new allows for budget reductionsand expansions in a rational manner and allows reallocation of source from low to highpriority programs.

125. Goodwill: The present value of firms anticipated excess earnings.126. BRS: It is a statement reconciling the balance as shown by the bank pass book and

balance shown by the cash book.

127. Objective of BRS: The objective of preparing such a statement is to know the causes ofdifference between the two balances and pass necessary correcting or adjusting entriesin the books of the firm.

128.Responsibilities of accounting: It is a system of control by delegating and locating theResponsibilities for costs.

129. Profit centre: A centre whose performance is measured in terms of both the expenseincurs and revenue it earns.

130.Cost centre: A location, person or item of equipment for which cost may be ascertainedand used for the purpose of cost control.

131. Cost: The amount of expenditure incurred on to a given thing.

132. Cost accounting: It is thus concerned with recording, classifying, and summarizing costsfor determination of costs of products or services planning, controlling and reducing suchcosts and furnishing of information management for decision making.

133. Elements of cost:(A) Material

(B) Labour(C) Expenses(D) Overheads

134. Components of total costs: (A) Prime cost (B) Factory cost(C)Total cost of production (D) Total c0st

135. Prime cost: It consists of direct material direct labour and direct expenses. It is alsoknown as basic or first or flat cost.


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136. Factory cost: It comprises prime cost, in addition factory overheads which include costof indirect material indirect labour and indirect expenses incurred in factory. This cost isalso known as works cost or production cost or manufacturing cost.

137. Cost of production: In office and administration overheads are added to factory cost,office cost is arrived at.

138. Total cost: Selling and distribution overheads are added to total cost of production to getthe total cost or cost of sales.

139. Cost unit: A unit of quantity of a product, service or time in relation to which costs may

be ascertained or expressed.

140.Methods of costing: (A)Job costing (B)Contract costing (C)Process costing (D)Operationcosting (E)Operating costing (F)Unit costing (G)Batch costing.

141. Techniques of costing: (a) marginal costing (b) direct costing (c)absorption costing (d)uniform costing.

142. Standard costing: standard costing is a system under which the cost of the product isdetermined in advance on certain predetermined standards.

143. Marginal costing: it is a technique of costing in which allocation of expenditure toproduction is restricted to those expenses which arise as a result of production, i.e.,materials, labour, direct expenses and variable overheads.

144. Derivative: derivative is product whose value is derived from the value of one or morebasic variables of underlying asset.

145. Forwards: a forward contract is customized contracts between two entities weresettlement takes place on a specific date in the future at todays pre agreed price.

146. Futures: a future contract is an agreement between two parties to buy or sell an asset ata certain time in the future at a certain price. Future contracts are standardized exchangetraded contracts.

147. Options: an option gives the holder of the option the right to do some thing. The optionholder option may exercise or not.

148. Call option: a call option gives the holder the right but not the obligation to buy an assetby a certain date for a certain price.


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MBA FINANCE NOTES FOR INTERVIEWS149. Put option: a put option gives the holder the right but not obligation to sell an asset by a

certain date for a certain price.

150. Option price: option price is the price which the option buyer pays to the option seller. Itis also referred to as the option premium.

151. Expiration date: the date which is specified in the option contract is called expirationdate.

152. European option: it is the option at exercised only on expiration date it self.

153. Basis: basis means future price minus spot price.

154. Cost of carry: the relation between future prices and spot prices can be summarized interms of what is known as cost of carry.

155. Initial margin: the amount that must be deposited in the margin a/c at the time of firstentered into future contract is known as initial margin.

156 Maintenance margin: this is some what lower than initial margin.

157. Mark to market: in future market, at the end of the each trading day, the margin a/c isadjusted to reflect the investors gains or loss depending upon the futures selling price.

This is called mark to market.

158. Baskets: basket options are options on portfolio of underlying asset.159. Swaps: swaps are private agreements between two parties to exchange cash flows in

the future according to a pre agreed formula.

160. Impact cost: impact cost is cost it is measure of liquidity of the market. It reflects thecosts faced when actually trading in index.

161. Hedging: hedging means minimize the risk.

162. Capital market: capital market is the market it deals with the long term investment funds.It consists of two markets 1.primary market 2.secondary market.

163. Primary market: those companies which are issuing new shares in this market. It is alsocalled new issue market.


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MBA FINANCE NOTES FOR INTERVIEWS164. Secondary market: secondary market is the market where shares buying and selling. In

India secondary market is called stock exchange.

165. Arbitrage: it means purchase and sale of securities in different markets in order to profitfrom price discrepancies. In other words arbitrage is a way of reducing risk of loss causedby price fluctuations of securities held in a portfolio.

166. Meaning of ratio: Ratios are relationships expressed in mathematical terms betweenfigures which are connected with each other in same manner.

167. Activity ratio: it is a measure of the level of activity attained over a period.

168. mutual fund : a mutual fund is a pool of money, collected from investors, and is investedaccording to certain investment objectives.

169. Characteristics of mutual fund : Ownership of the MF is in the hands of the of theinvestors MF managed by investment professionals The value of portfolio is updated everyday

170.advantage of MF to investors : Portfolio diversification Professional managementReduction in risk Reduction of transaction casts Liquidity Convenience and flexibility

171.net asset value : the value of one unit of investment is called as the Net Asset Value

172.open-ended fund : open ended funds means investors can buy and sell units of fund, atNAV related prices at any time, directly from the fund this is called open ended fund. Forex; unit 64

173.close ended funds : close ended funds means it is open for sale to investors for a specificperiod, after which further sales are closed. Any further transaction for buying the units orrepurchasing them, happen, in the secondary markets.

174. dividend option : investors who choose a dividend on their investments, will receivedividends from the MF, as when such dividends are declared.

175.growth option : investors who do not require periodic income distributions can be choosethe growth option.

176.equity funds : equity funds are those that invest pre-dominantly in equity shares ofcompany.

177.types of equity funds : Simple equity funds Primary market funds Sectoral funds Indexfunds


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178. sectoral funds : sectoral funds choose to invest in one or more chosen sectors of theequity markets.

179.index funds :the fund manager takes a view on companies that are expected to performwell, and invests in these companies

180. debt funds : the debt funds are those that are pre-dominantly invest in debt securities.

181. Liquid funds : the debt funds invest only in instruments with maturities less than oneyear.

182. gilt funds : gilt funds invests only in securities that are issued by the GOVT. and thereforedoes not carry any credit risk.

183.balanced funds :funds that invest both in debt and equity markets are called balancedfunds.

184. sponsor : sponsor is the promoter of the MF and appoints trustees, custodians and theAMC with prior approval of SEBI .

185. trustee : trustee is responsible to the investors in the MF and appoint the AMC formanaging the investment portfolio.

186. AMC : the AMC describes Asset Management Company, it is the business face of theMF, as it manages all the affairs of the MF.

187. R & T Agents : the R&T agents are responsible for the investor servicing functions, as

they maintain the records of investors in MF.

188. custodians : custodians are responsible for the securities held in the mutual fundsportfolio.

189. scheme take over : if an existing MF scheme is taken over by the another AMC, it iscalled as scheme take over.

190.meaning of load: load is the factor that is applied to the NAV of a scheme to arrive at theprice.

192. market capitalization : market capitalization means number of shares issued multipliedwith market price per share.


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MBA FINANCE NOTES FOR INTERVIEWS193.price earning ratio : the ratio between the share price and the post tax earnings of

company is called as price earning ratio.

194. dividend yield : the dividend paid out by the company, is usually a percentage of theface value of a share.

195. market risk : it refers to the risk which the investor is exposed to as a result of adversemovements in the interest rates. It also referred to as the interest rate risk.

196. Re-investment risk : it the risk which an investor has to face as a result of a fall in theinterest rates at the time of reinvesting the interest income flows from the fixed income

security.

197. call risk : call risk is associated with bonds have an embedded call option in them. Thisoption hives the issuer the right to call back the bonds prior to maturity.

198. credit risk : credit risk refers to the probability that a borrower could default on acommitment to repay debt or band loans

199.inflation risk : inflation risk reflects the changes in the purchasing power of the cash flowsresulting from the fixed income security.

200.liquid risk : it is also called market risk, it refers to the ease with which bonds could be

traded in the market.

201. Drawings: drawings denote the money withdrawn by the proprietor from the business forhis personal use.

202. Outstanding Income : Outstanding Income means income which has become due duringthe accounting year but which has not so far been received by the firm.

203. Outstanding Expenses : Outstanding Expenses refer to those expenses which havebecome due during the accounting period for which the Final Accounts have beenprepared but have not yet been paid.

204.closing stock : The term closing stock means goods lying unsold with the businessman atthe end of the accounting year.

205. Methods of depreciation:1. Unirorm charge methods :

a. Fixed installment methodb .Depletion methodc. Machine hour rate method.


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MBA FINANCE NOTES FOR INTERVIEWS2. Declining charge methods :

a. Diminishing balance methodb.Sum of years digits methodc. Double declining method

3. Other methods :a. Group depreciation methodb. Inventory system of depreciationc. Annuity methodd. Depreciation fund methode. Insurance policy method.

206. Accrued Income: Accrued Income means income which has been earned by the

business during the accounting year but which has not yet become due and, therefore,has not been received.

207.Gross profit ratio : it indicates the efficiency of the production/trading operations.Formula : Gross profit

-------------------X100Net sales

208.Net profit ratio : it indicates net margin on sales

Formula: Net profit

--------------- X 100Net sales

209. Return on share holders funds : it indicates measures earning power of equity capital.Formula:

Profits available for Equity shareholders-----------------------------------------------X 100

Average Equity Shareholders Funds

210. Earning per Equity share (EPS): it shows the amount of earnings attributable to eachequity share.

Formula:Profits available for Equity shareholders----------------------------------------------

Number of Equity shares


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MBA FINANCE NOTES FOR INTERVIEWS211. Dividend yield ratio : it shows the rate of return to shareholders in the form of dividends

based in the market price of the share

Formula: Dividend per share---------------------------- X100

Market price per share

212. price earning ratio : it a measure for determining the value of a share. May also be usedtoMeasure the rate of return expected by investors.

Formula: Market price of share(MPS)

-------------------------------X 100Earning per share (EPS)

213.Current ratio : it measures short-term debt paying ability.

Formula: Current Assets------------------------Current Liabilities

214. Debt-Equity Ratio: it indicates the percentage of funds being financed throughborrowings; a measure of the extent of trading on equity.

Formula : Total Long-term Debt---------------------------Shareholders funds

215. Fixed Assets ratio: This ratio explains whether the firm has raised adepuate long-termfunds to meet its fixed assets requirements.

Formula Fixed Assets-------------------

Long-term Funds

216. Quick Ratio : The ratio termed as liquidity ratio. The ratio is ascertained y comparingthe

liquid assets to current liabilities.

Formula : Liquid Assets


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MBA FINANCE NOTES FOR INTERVIEWS------------------------

Current Liabilities

217. Stock turnover Ratio : the ratio indicates whether investment in inventory in efficientlyused or not. It, therefore explains whether investment in inventory within proper limits ornot.

Formula: cost of goods sold------------------------

Average stock

218. Debtors Turnover Ratio : the ratio the better it is, since it would indicate that debts arebeing

collected more promptly. The ration helps in cash budgeting since the flow of cash fromcustomers can be worked out on the basis of sales.

Formula: Credit sales

----------------------------Average Accounts Receivable

219.Creditors Turnover Ratio : it indicates the speed with which the payments for creditpurchases are made to the creditors.

Formula: Credit Purchases-----------------------

Average Accounts Payable

220. Working capital turnover ratio : it is also known as Working Capital Leverage Ratio. Thisratio

Indicates whether or not working capital has been effectively utilized in making sales.

Formula: Net Sales----------------------------

Working Capital

221.Fixed Assets Turnover ratio : This ratio indicates the extent to which the investments infixed assets contributes towards sales.

Formula: Net Sales


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MBA FINANCE NOTES FOR INTERVIEWS--------------------------

Fixed Assets

222 .Pay-out Ratio : This ratio indicates what proportion of earning per share has been usedforPaying dividend.

Formula: Dividend per Equity Share--------------------------------------------X100

Earning per Equity share

223.Overall Profitability Ratio : It is also called as Return on Investment (ROI) or Return on

Capital Employed (ROCE) . It indicates the percentage of return on the total capitalemployed in the business.

Formula :Operating profit

------------------------X 100Capital employed

The term capital employed has been given different meanings a.sum total of all assetswhether fixed or current b.sum total of fixed assets, c.sum total of long-term fundsemployed in the business, i.e., share capital +reserves &surplus +long term loans (non

business assets + fictitious assets). Operating profit means profit before interest and tax

224 . Fixed Interest Cover ratio : the ratio is very important from the lenders point of view. Itindicates whether the business would earn sufficient profits to pay periodically theinterest charges.

Formula : Income before interest and Tax---------------------------------------

Interest Charges


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MBA FINANCE NOTES FOR INTERVIEWS225. Fixed Dividend Cover ratio: This ratio is important for preference shareholders entitled to

get dividend at a fixed rate in priority to other shareholders.

Formula: Net Profit after Interest and Tax------------------------------------------

Preference Dividend

226. Debt Service Coverage ratio : This ratio is explained ability of a company to makepayment of principal amounts also on time.

Formula : Net profit before interest and tax---------------------------------------- 1-Tax rate

Interest + Principal payment installment

227. Proprietary ratio: It is a variant of debt-equity ratio . It establishes relationship betweenthe proprietors funds and the total tangible assets.

Formula : Shareholders funds----------------------------Total tangible assets

228.Difference between joint venture and partner ship : In joint venture the business is carried

on without using a firm name, In the partnership, the business is carried on under a firmname.In the joint venture, the business transactions are recorded under cash system In thepartnership, the business transactions are recorded under mercantile system. In the jointventure, profit and loss is ascertained on completion of the venture In the partner ship ,profit and loss is ascertained at the end of each year. In the joint venture, it is confined to aparticular operation and it is temporary. In the partnership, it is confined to a particularoperation and it is permanent.

229.Meaning of Working capital : The funds available for conducting day to day operations ofan enterprise. Also represented by the excess of current assets over current liabilities.

230.concepts of accounting :1.Business entity concepts :- According to this concept, the business is treated as a separate

entity distinct from its owners and others.

2.Going concern concept :- According to this concept, it is assumed that a business has areasonable expectation of continuing business at a profit for an indefinite period of time.


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3.Money measurement concept :- This concept says that the accounting records only thosetransactions which can be expressed in terms of money only.

4.Cost concept :- According to this concept, an asset is recorded in the books at the pricepaid to acquire it and that this cost is the basis for all subsequent accounting for the asset.

5.Dual aspect concept :- In every transaction, there will be two aspects the receiving aspectand the giving aspect; both are recorded by debiting one accounts and crediting anotheraccount. This is called double entry.

6.Accounting period concept :- It means the final accounts must be prepared on a periodic

basis.Normally accounting period adopted is one year, more than this period reduces the utility ofaccounting data.

7.Realization concept :- According to this concepts, revenue is considered as being earned onthe data which it is realized, i.e., the date when the property in goods passes the buyerand he become legally liable to pay.

8.Materiality concepts :- It is a one of the accounting principle, as per only importantinformation will be taken, and un important information will be ignored in the preparation ofthe financial statement.

9.Matching concepts :- The cost or expenses of a business of a particular period arecompared with the revenue of the period in order to ascertain the net profit and loss.

10.Accrual concept :- The profit arises only when there is an increase in owners capital, whichis aresult of excess of revenue over expenses and loss.

231. Financial analysis :The process of interpreting the past, present, and future financialcondition of a company.

232. Income statement : An accounting statement which shows the level of revenues,expenses and profit occurring for a given accounting period.

233.Annual report : The report issued annually by a company, to its share holders. itcontaining financial statement like, trading and profit & lose account and balance sheet.

234. Bankrupt : A statement in which a firm is unable to meets its obligations and hence, it isassets are surrendered to court for administration


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MBA FINANCE NOTES FOR INTERVIEWS235 . Lease : Lease is a contract between to parties under the contract, the owner of the

asset gives the right to use the asset to the user over an agreed period of the time for aconsideration

236.Opportunity cost : The cost associated with not doing something.

237. Budgeting : The term budgeting is used for preparing budgets and other producer forplanning,co-ordination,and control of business enterprise.

238.Capital : The term capital refers to the total investment of company in money, tangibleandintangible assets. It is the total wealth of a company.

239.Capitalization : It is the sum of the par value of stocks and bonds out standings.

240. Over capitalization : When a business is unable to earn fair rate on its outstandingsecurities.

241. Under capitalization : When a business is able to earn fair rate or over rate on it isoutstanding securities.

242. Capital gearing : The term capital gearing refers to the relationship between equity andlong term debt.

243.Cost of capital : It means the minimum rate of return expected by its investment.

244.Cash dividend : The payment of dividend in cash

245.Define the term accrual : Recognition of revenues and costs as they are earned orincurred . it includes recognition of transaction relating to assets and liabilities as theyoccur irrespective of the actual receipts or payments.

245. accrued expenses : An expense which has been incurred in an accounting period but for

which no enforceable claim has become due in what period against the enterprises.

246.Accrued revenue : Revenue which has been earned is an earned is an accounting periodbut in respect of which no enforceable claim has become due to in that period by theenterprise.

247.Accrued liability : A developing but not yet enforceable claim by an another person whichaccumulates with the passage of time or the receipt of service or otherwise. it may rise

from the purchase of services which at the date of accounting have been only partlyperformed and are not yet billable.


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248.Convention of Full disclosure : According to this convention, all accounting statementsshould be honestly prepared and to that end full disclosure of all significant information willbe made.

249.Convention of consistency : According to this convention it is essential that accountingpractices and methods remain unchanged from one year to another.

250.Define the term preliminary expenses : Expenditure relating to the formation of anenterprise. There include legal accounting and share issue expenses incurred forformation of the enterprise.

251.Meaning of Charge : charge means it is a obligation to secure an indebt ness. It may befixedcharge and floating charge.

252.Appropriation : It is application of profit towards Reserves and Dividends.

253.Absorption costing : A method where by the cost is determine so as to include theappropriate share of both variable and fixed costs.

254.Marginal Cost : Marginal cost is the additional cost to produce an additional unit of aproduct. It is also called variable cost.

255. What are the ex-ordinary items in the P&L a/c : The transaction which are not related tothe business is termed as ex-ordinary transactions or ex-ordinary items. Egg:- profit orlosses on the sale of fixed assets, interest received from other company investments,profit or loss on foreign exchange, unexpected dividend received.

256 . Share premium : The excess of issue of price of shares over their face value. It will beshowed with the allotment entry in the journal, it will be adjusted in the balance sheet onthe liabilities side under the head of reserves & surplus.

257.Accumulated Depreciation : The total to date of the periodic depreciation charges ondepreciable assets.

258.Investment : Expenditure on assets held to earn interest, income, profit or other benefits.

259.Capital : Generally refers to the amount invested in an enterprise by its owner. Ex; paidup share capital in corporate enterprise.

260. Capital Work In Progress : Expenditure on capital assets which are in the process ofconstruction as completion.


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261. Convertible Debenture : A debenture which gives the holder a right to conversion whollyor partly in shares in accordance with term of issues.

262.Redeemable Preference Share : The preference share that is repayable either after afixed (or) determinable period (or) at any time dividend by the management.

263. Cumulative preference shares : A class of preference shares entitled to payment of

umulatesdividends. Preference shares are always deemed to be cumulative unless they are

expressly made non-cumulative preference shares.

264.Debenture redemption reserve : A reserve created for the redemption of debentures at afuture date.

265. Cumulative dividend : A dividend payable as cumulative preference shares which itunpaid cumulates as a claim against the earnings of a corporate before any distribution ismade to the other shareholders.

266. Dividend Equalization reserve : A reserve created to maintain the rate of dividend infuture years.

267. Opening Stock : The term opening stock means goods lying unsold with the

businessman in the beginning of the accounting year. This is shown on the debit side ofthe trading account.

268.Closing Stock : The term Closing Stock includes goods lying unsold with thebusinessman at the end of the accounting year. The amount of closing stock is shown onthe credit side of the trading account and as an asset in the balance sheet.

269.Valuation of closing stock : The closing stock is valued on the basis of Cost or Marketprice whichever is less principle.

272. Contingency : A condition (or) situation the ultimate out come of which gain or loss willbe known as determined only as the occurrence or non occurrence of one or moreuncertain future events.

273.Contingent Asset : An asset the existence ownership or value of which may be known ordetermined only on the occurrence or non occurrence of one more uncertain future events.

274. Contingent liability : An obligation to an existing condition or situation which may arise infuture depending on the occurrence of one or more uncertain future events.


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MBA FINANCE NOTES FOR INTERVIEWS275. Deficiency : the excess of liabilities over assets of an enterprise at a given date is called

deficiency.

276.Deficit : The debit balance in the profit and loss a/c is called deficit.

277.Surplus : Credit balance in the profit & loss statement after providing for proposedappropriation & dividend , reserves.

278.Appropriation Assets : An account sometimes included as a separate section of the profitand loss statement showing application of profits towards dividends, reserves.

279. Capital redemption reserve : A reserve created on redemption of the average cost:- the

cost of an item at a point of time as determined by applying an average of the cost of allitems of the same nature over a period. When weights are also applied in the computationit is termed as weight average cost.

280.Floating Change : Assume change on some or all assets of an enterprise which are notattached to specific assets and are given as security against debt.

281.Difference between Funds flow and Cash flow statement : A Cash flow statement isconcerned only with the change in cash position while a funds flow analysis is concernedwith change in working capital position between two balance sheet dates.

A cash flow statement is merely a record of cash receipts and disbursements. While studyingthe short-term solvency of a business one is interested not only in cash balance but also inthe assets which are easily convertible into cash.

282. Difference Between the Funds flow and Income statement :

A funds flow statement deals with the financial resource required for running the businessactivities. It explains how were the funds obtained and how were they used, Whereas anincome

statement discloses the results of the business activities, i.e., how much has been earnedand how it has been spent.

A funds flow statement matches the funds raised and funds applied during a particularperiod. The source and application of funds may be of capital as well as of revenue nature.

An income statement matches the incomes of a period with the expenditure of that period,which are both of a revenue nature.


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1) American Depository Receipt ADR: A negotiable certificate issued by a U.S. bankrepresenting a specified number of shares (or one share) in a foreign stock that is traded on aU.S. exchange. ADRs are denominated in U.S. dollars, with the underlying security held by aU.S. financial institution overseas, and help to reduce administration and duty costs on eachtransaction that would otherwise be levied.

2) Global Depository Receipt GDR: 1. A bank certificate issued in more than one countryfor shares in a foreign company. The shares are held by a foreign branch of an internationalbank. The shares trade as domestic shares, but are offered for sale globally through thevarious bank branches.

3) Working Capital Cycle: The Cycle of working capital rotates from cash, raw materials,overheads, work-in-progress, debtors and ends with again cash.

4) Negative effects of working capital: The total current liabilities are in excess of total currentassets gives the negative effect of working capital.

5) Depreciation: It is a measure of wearing out, consumption or other loss of value of adepreciable assets arising from its usage or passage of time.


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6) Depletion : It is a method of providing depreciation on wasting assets like mineral orese.t.c.

7) Amortization: It is a method to witing off of the asset over a period of time similar todepreciation. This method is generally used for Intangible assets.

8)Profit & Loss (appropriation) account : The provisions contained in part II of schedule VI ofthe companies act require that the appropriation made out of profit like proposed dividend,transfer to and from reserves and other appropriations should be disclosed in profit & loss(appropriation) a/c.

9)NPV: Net Present Value: The difference between the present value of cash inflows and thepresent value of cash outflows. NPV is used in capital budgeting to analyze the profitability ofan investment or project

10) Internal Rate of Return: It is the rate at which the sum totals of cash inflows afterdiscounting equals to the discounted cash outflows. The IRR of a project is the discount ratewhich makes net present value of the project equal to zero.

11) Treatment of dividends in cash flow statements: When we pay dividend for theinvestments made by the outsiders, it is called as financing activity and taken intoconsideration of cash flow from financing activity where as the receipt of dividend in respect of

investment that we made considered in cash flow from investing activity.

12) Treatment of interest in cash flow statements: When we pay interest on the borrowedamount, it is called as financing activity and taken into consideration of cash flow fromfinancing activity where as the receipt of interest in respect of advances that we madeconsidered in cash flow from investing activity.

13)Profit & loss account Vs Cash flow statement: P & L a/c is a period end account whichgives the details of revenue earned with that of the expenses charged shows the net profit orloss for the period.Cash flow statement is as on date statement which gives the details of flow of cash throughreceipts and expenses irrespective of revenues and expenditure.

14) Operating income Vs Net income: Income generated from the regular operating activitiesof the business is called operating income.Income that is left after taking into consideration of operating income, expenses, non-operating income and non-operating expenses and income taxes is called net income.

15) Gross working capital Vs Net working capital: The total of investments in all currentassets is known as gross working capital.


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MBA FINANCE NOTES FOR INTERVIEWSExcess of total current assets over total current liabilities is called net working capital.

16) Prospectus : It is defined as a public document described or issued as a prospectus andincludes any notice, circular, advertisement or other document, inviting the public to subscribeor purchase of any shares or debentures of a body corporate.

17) Interim dividend Vs Final dividend: Dividend which is paid in the middle of the fiscal yearor before the due date in accordance with the provisions of the companies act is called asInterim dividend.Dividend paid as on due date as per the provisions of the companies act is called finaldividend. If the interim dividend is paid then the final dividend will be paid after excluding theinterim dividend.

18)Net worth.: The total of share holders funds and reserves and surplus after deductingfictitious assets is called as net worth.

19) Capitalization of reserves: The process of conversion of accumulated profits andreserves into equity shares is called as capitalization of reserves. This is used while issue ofbonus shares.

20) P/E Ratio: It is the relationship between the contribution and sales values. It is expressedas a percentage.Contribution/sales * 100 = (Sales-Variable costs)/Sales * 100.

21) Premium on shares: When the shares are issued at a value more than the nominal valuethen it is called shares issued at premium.

22) Discount on shares: When the shares are issued at less than the nominal value then it iscalled shares issued at discount.

23) Bull market/Bear market: When stock prices are rising for an extended period, it is calledbull market which is an opposite to that of bear market.

24) Retained Earnings: Which is nothing but the balance carried forward in the profit and lossaccount to the next year shown under reserves and surplus.ORThe percentage of net earnings not paid out as dividends, but retained by the company to bereinvested in its core business or to pay debt. It is recorded under reserves and surplus on thebalance sheet.

25) Fixed asset/Financial Asset: The property of the company which aids the productionincludes machinery, land, equipment and others.


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MBA FINANCE NOTES FOR INTERVIEWSThe assets of the company which earns the revenue to the company in terms of interest or

dividend is called financial asset.

26) Sunk costs: Historical costs incurred in the past are known as sunk costs.

27) SEBI Vs SEC: SEBI: it is called as the stock exchange board of India which is regulatoryauthority in India established under the act to safeguard the interests of the shareholders.SEC: It is called as the Securities exchange and commission act which is a regulatoryauthority in USA established under the act similar to that of SEBI in India.

28) Intangible Assets Vs Fictious AssetsIntangible Assets: These are the assets which are useful for the appreciation of the business

and helps for the growth of the business but they are not tangible like Good will, patents,trademarks e.t.c.Fictitious Assets: These are the debit balances of expenditure which are treated assets to bewritten off over a period of time like preliminary expenditure written off, miscellaneousexpenditure written off e.t.c.

29) Gross Profit Vs Net Profit: The surplus balances in the trading account which is carriedforward to the P&L a/c is called as the Gross profit which is arrived from trading or productionactivities.The surplus balance in the P&L account which is reflected in the balance sheet is called asNet profit arrived after taking into account of operating and non-operating revenues, operating

and non-operating expenses.

30) Equity Vs Preferred: Equity holders are those who are the real owners of the companyand are entitled to ownership rights, preferred holders are those who are entitled topreferential rights upon the equity holders in terms of dividends and the distribution of assetsat the time of liquidation.

31) Preliminary Expenditure: Expenditure incurred before the incorporation of the company iscalled as preliminary expenses.

32) Cash flow: It is a statement which gives the details about the cash generated from variousactivities like operating, investing and financing and the cash expended on such activitiesduring the period33) Minority interest: **Paid up equity capital held by outsider plus share of reserves andsurplus on the date of balance sheet

A significant but non-controlling ownership of less than 50% of a company's voting shares byeither an investor or another company

34) Private vs. public: Private ltd is registered company which is limited by shares and limitedby its no. of members and prohibits to publish the prospectus


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MBA FINANCE NOTES FOR INTERVIEWSPublic is a registered company which is opposite to that as private company

35) Goodwill: It is treated to be intangible assets which is purchased for the appreciation asthe business that is acquired and it is amortized over a period of time

36) GAAP: These are generally accepted accounting principles called as accountingstandards which are to be followed while prepares the financial statements like profit and lossa\c and balance sheet

37) Market capitalization: It is total value as all the outstanding shares with that as the currentmarket price as the share

38) Annual report: It is the report which is to be field with the register and companies detailsthe financial results as the company for the year and the preceding year, the report consistsas companys projects and other year end statistics

38) IPO: When a company initial listing with the stock exchanges board of India. Then it iscalled as Initial public offering.

39) SM\AGM\EGM: SM: Every company limited by share and every company limited byguarantee and having a share capital shall with in a period of not less that one month or morethan six months from the date of which the company is entitled to commence business , holda general meeting of the members of the company. This is called as Statuatory meeting.

AGM: Every company shall in each year hold in addition to any other meeting a generalmeeting as its annual general meeting and shall specify the meeting as such in the noticecalling it.EGM: any meeting other than the two above is called E.G.M. It is conducted for special andurgent business.

40) QUORUM: The minimum no of members who must be present in order to constitute avalid meeting and transact business there off.5 members in the case of a public company.2 in the case of public company.

Subsidiary Company: It is a registered company whose maximum share is held by holdingcompany.

Prepaid Vs O/s Exp: Any expenditure which is paid in advance is called as prepaid expense.It is treated as an asset and deducted from the current expenditure.

Any Expenditure which is payable shall be treated as o/s expenses and it is treated as currentliability in the balance sheet.


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MBA FINANCE NOTES FOR INTERVIEWSOperating Vs Non-Operating: Operating Exp are those which are incurred in the regular

course of business for generating revenues.Non-Operating Exp are one time Expenditure which are expended not for regular course ofbusiness.

NAV-Net Assets Value: The value of assets applicable to one unit. This is calculated as totalassets minus all prior charges and divided by the member of the total outstanding units.

AOA Vs MOA: MOA is the most important document which is called as charter of thecompany and regulates the external affairs of the company.

AOA specifies the rules regulations and bye-laws for the internal management of the affairs ofthe company.

Minority Interest: The portion of net assets of subsidiary onthe date of consolidation notcontrolled by the parent itself or through its subsidiary.Paid up share capital held by the outsider (outside group) + share of reserves.

A significant but non-controlling ownership of less than 50% of a company's voting shares byeither an investor or another company

Capital Employed: It is defined as the amount which is invested in the business to generateproduction and revenue with the aid of such capital employed capital. It is calculated asShare capital + Reserves & Surplus + Debenture & long term debt fictituous assets

OrFixed Assets + intangible assets + Net working capital.

Deferred tax asset/ liability: Difference between the tax expense which is calculated onaccrual basis and current tax liability to be paid for particular period as per income tax act iscalled deferred tax asset/liability.

Call Option: A contract giving the holders a right to buy an underlying security at a specifiedprice with in a specified time period.

Diversification: An investment strategy to reduce risks by investing in securities, commonstock, debenture or bonds of several companies.

Share Warrant: A Share warrant is a bearer document issued only by a public company tothe holder on the approval of central govt. it is negotiable without any instrument of transfer.

Rights issue: Where a company proceeds to issue any further shares after the expiry ofTwo years from the date of incorporation of the companyOne year after the first allotment of shares. Which ever is earlier.


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MBA FINANCE NOTES FOR INTERVIEWSSuch an allotment should be made to the shareholders of the company in proportion to the

capital paid.

Reserves Vs Provisions: Reserves are amounts appropriated out of profit which are notintended to meet any liability contingency, commitement or diminuition in the value of assetsknown to exit at the date of balance sheet.

Amounts calculated or transferred form profits to make food the diminuition in asset valuesdue to the fact that that some of them have been lost or destroyed as a result of some naturalcalamities or debts have proved to be irrecoverable are also described as provisions.

Revenue Reserves: Represents profits that are available for distribution to shareholders heldfor the time being or any on or more purpose.

Capital Reserve: A capital reserve represents surplus of profit earned in respect of certaintypes of transactions like sale of fixed assets at a price in excess of cost realization of profitson issue of forfeited shares or balances. It generally used for writing down fictituous assets orlosses for issuing bonus shares.

Capital redemption reserve: When there is redemption of redeemable preference shares outof accumulated profit. It will be necessary to transfer to the CRR account an amount equal tothe amount repaid on the redemption of preference shares on a/c of face value less proceedsof a fresh issue of capital made for the purpose of redemption.

NPL Vs NPA: An asset shall be treated as non performing when income on it is not receivedfor certain period.A loan amount is said to be non performing when the interest and the principle amount is notreceived for certain period.

Share is one of a finite number of equal portions in the capital of a company, entitling theowner to a proportion of distributed, non-reinvested profits known as dividends and to aportion of the value of the company in case of liquidation

Bank reconciliation allows companies or individuals to compare their account records to thebank's records of their account balance in order to uncover any possible discrepancies

Bankruptcy is a legally declared inability or impairment of ability of an individual ororganizations to pay their creditors.

Cash flow is a term that refers to the amount of cash being received and spent by a business during a defined period of time, sometimes tied to a specific project. Measurement of cash flow can be used


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MBA FINANCE NOTES FOR INTERVIEWSPreferred stock differs from common stock in that it typically does not carry voting rights but is

legally entitled to receive a certain level of dividend payments before any dividends can beissued to other shareholders.

Retained earnings refer to the portion of net income which is retained by the corporationrather than distributed to its owners. Similarly, if the corporation makes a loss, then that loss isretained. Retained earnings are cumulative from year to year.

American Depositary Receipt (or ADR) represents ownership in the shares of a foreigncompany trading on US financial markets

Nifty, an index for large cap stocks on the National Stock Exchange of India

Accounting is the discipline of measuring, communicating and interpreting financial activity.Accounting is also widely referred to as the "language of business".[

ROE It measures a firm's efficiency at generating profits from every dollar of net assets(assets minus liabilities), and shows how well a company uses investment dollars to generateearnings growth.

ROCE It basically can be used to show how much a business is gaining for its assets, or howmuch it is losing for its liabilities

Finance means the study of different ways in which individuals, businesses and organizationsraise and allocate monetary resources and use the same for business purposes keeping therisks involved in mind

Accounts Related Questions:

what are the models of valuation of the companyexplain about APP in SAP fico module?WHAT IS SECONDARY TRACKING FLEX FIELD QUALIFIER ANDHOW IT IS USED?WHAT IS SECONDARY TRACKING FLEX FIELD QUALIFIER ANDHOW IT IS USED?WHAT IS SECONDARY TRACKING FLEX FIELD QUALIFIER ANDHOW IT IS USED?What is exact difference b/w Accounts and financeIPOwhat is net worthwhat is quick assetWhat are different types of invoice?how to joine accountancy


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MBA FINANCE NOTES FOR INTERVIEWSWhat do you mean by Investment Banking?

What is General LedgerWhat is business entity concept?How to prepare Profit and los accounts?

Forward contract, an agreement between two parties to buy or sell an asset at a pre-agreedfuture point in time.

Futures contract is a standardized contract traded on a futures exchange, to buy or sell acertain underlying instrument at a certain date in the future, at a specified price. The futuredate is called the delivery date or final settlement date

Options are financial instruments that convey the right, but not the obligation, to engage in afuture transaction on some underlying security.

Amortization is the process of decreasing or accounting for an amount over a period of time.

The primary is that part of the capital markets that deals with the issuance of new securities.

The secondary market is the financial market for trading of securities that have already beenissued in an initial private or public offering.

Stock exchange, share market or bourse is a corporation or mutual organization which

provides facilities for stock brokers and traders, to trade company stocks and other securities.Stock exchanges also provide facilities for the issue and redemption of securities as well asother financial instruments and capital events including the payment of income and dividends

Stock split increases the number of shares in a public company. The price of adjusted suchthat the before and after market capitalization of the company remains the same and dilutiondoes not occur. Options and warrants are included. Also known as a Stock Divide.

Initial Public Offering (IPO) is the first sale of stock by a private company to the public. IPOsare often issued by smaller, younger companies seeking capital to expand, but can also bedone by large privately-owned companies looking to become publicly traded

The BSE Sensex or Bombay Stock Exchange Sensitive Index is a value-weighted indexcomposed of 30 stocks with the base April 1979 = 100. It consists of the 30 largest and mostactively traded stocks, representative of various sectors, on the Bombay Stock Exchange

Portfolio management involves deciding what assets to include in the portfolio, given thegoals of the portfolio owner and changing economic conditions. Selection involves decidingwhat assets to purchase, how many to purchase, when to purchase them, and what assets todivest. These decisions always involve some sort of performance measurement, most


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MBA FINANCE NOTES FOR INTERVIEWStypically expected return on the portfolio, and the risk associated with this return (i.e. the

standard deviation of the return). Typically the expected return from portfolios comprised ofdifferent asset bundles are compared.

Income Statement, also called a Profit and Loss Statement (P&L), is a financial statement forcompanies that indicates how Revenue (money received from the sale of products andservices before expenses are taken out, also known as the "top line") is transformed into netincome (the result after all revenues and expenses have been accounted for, also known asthe "bottom line"). The purpose of the income statement is to show managers and investorswhether the company made or lost money during the period being reported.

Capital budgeting (or investment appraisal) is the planning process used to determine a firm's

long term investments such as new machinery, replacement machinery, new plants, newproducts, and research and development projects

Global Depository Receipt or (GDR) is a certificate issued by a depository bank, whichpurchases shares of foreign companies and deposits it on the account.

Zero-based processing one can forget about last year, pretend that the program is brand-new, and see if one can provide a detail of expenses for what one would need to fullyaccomplish the program

venture capital fund is a pooled investment vehicle (often a limited partnership) that primarily

invests the financial capital of third-party investors in enterprises that are too risky for thestandard capital markets orbankloans.

Net worth (sometimes "net assets") is the total assets minus total liabilities of an individual ora company. For a company, this is called shareholders' equity and may be referred to as bookvalue. Net worth is stated for a particular point in time

Accounting on the other hand is the measurement, disclosure or provision of assurance aboutfinancial information that helps managers, investors, tax authorities and other decision makersmake resource allocation decisions. Financial accounting is one branch of accounting andhistorically has involved processes by which financial information about a business isrecorded, classified, summarized, interpreted, and communicated. There are differentcategories in which accounting can be distributed, like cost accounting, financial accounting,internal and external accounting, etc.

Tax Related Questions

What are the exemptions from salary?What is Excise & Service Tax? What's Diffarance Excise & Service Tax?Why are component values not adding up to total values in some tables?


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MBA FINANCE NOTES FOR INTERVIEWSWhy are component values not adding up to total values in some tables?

What is the difference between income year, financial year and FBT year?What is the present rate of T.D.S and what is the tax for person salary at presentWhat is business?What is the meaning of dealer?What is the meaning of dealer?How a dealer shall be registered under O.S.T. & C.S.T. Act?What is Profession Tax?What is the mode of payment of Entry Tax?

At is the mode of payment of Entry Tax?What is Entry Tax as enforceable from 1.12.1999?What is Entry Tax as enforceable from 1.12.1999?

what is luxury tax?What is Entertainment Tax?How the dealer is paying Admitted Tax?What do you mean by Commercial Tax?

Audit Related Questions

What type of questions will be asked in the interviews?Corporate fraudsSecretarial auditDuties of auditor

Investigation vs. auditCost audit systemInvestigation vs. auditCost audit systemComptroller auditor general of India functions

Audit papersAudit programmeInternal check systemInternal auditWhat duty to auditors and independent examiner have to report problems to the Commission?When is income from rented accommodation to be treated as investment income and whenas trading income?Is materiality by fund balance or transactions?

A company charity (gross income


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MBA FINANCE NOTES FOR INTERVIEWSIt includes interest, dividends or realized capital gains from investments, rent from land or

property ownership, and any other income that does not derive from work.

Unearned income has often been treated differently for tax purposes than earned income, inorder to redistribute income. Such a tax structure is most often seen implemented by asocialist government.

A consortium is an association of two or more individuals, companies, organizations orgovernments (or any combination of these entities) with the objective of participating in acommon activity or pooling their resources for achieving a common goal

A prospectus is a legal document that institutions and businesses use to describe thesecurities they are offering for participants and buyers. A prospectus commonly providesinvestors with material information about mutual funds, stocks, bonds and otherinvestments,such as a description of the company's business, financial statements, biographies of officersand directors, detailed information about their compensation, any litigation that is taking place,a list of material properties and any other material information. In the context of an individualsecurities offering such as an initial public offering, a prospectus is distributed by underwritersorbrokerages to potential investors.

The main stock exchanges in the world include:

American Stock Exchange Australian Stock Exchange Bermuda Stock Exchange Bolsa Mexicana de Valores Bombay Stock Exchange Budapest Stock Exchange Casablanca Stock Exchange Euronext Amsterdam

Euronext Brussels Euronext Lisbon Euronext Paris Frankfurt Stock Exchange Ghana Stock Exchange Helsinki Stock Exchange Hong Kong Stock Exchange Istanbul Stock Exchange Jakarta Stock Exchange


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Documents

Finance Note for Mba s