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Articles by Probir Banerjee
Page 10 of 45
What are the Sources and Uses of Funds Statements?
Sources of FundsThere are some notable sources of funds or working capital for firms in their financial statements. These sources are as mentioned below −Funds from OperationsThe most important source of funds for a firm is its profit from operations. As all companies work to gain as much profit as possible, it is easy to realize why funds gained from operations are so popular in nature. The major source of information of profits for a firm is the profit and loss account. However, the profit and loss account may contain some sources that do not affect the working capital. So, ...
Read MoreWhat is Net Working Capital (NWC) Flow?
The working capital flow occurs when there is a net increase or decrease in working capital due to a transaction. There are some transactions involved in a firm’s projects that change working capital. Whereas, there are other transactions that have no net effect on the working capital.Usually, items from profit and loss accounts and business events that affect current and non-current accounts simultaneously effect the net working capital flow of a company. There are also current-only and non-current-only accounts the changes in which do not affect the net-working capital flow.Increase and Decrease in Working CapitalFollowing are some examples to understand ...
Read MoreClosed-ended vs. Open-ended Mutual Funds: What is the difference?
Duration of FundsThe main difference between closed-ended and open-ended mutual funds is that the closed-ended funds are for a specific duration, while the open-ended funds have no specific duration.The investors in open-ended funds may join and leave the funds anytime they wish.In case of closed-ended funds, the investors must stay invested for a specific duration pre-set by the fund managers.Number of Outstanding SharesIn case of closed-ended funds, there is a fixed number of shares outstanding which are traded in the market. The markets may include the share markets or OTC (Over the Counter) markets. The price of the shares is ...
Read MoreBonus Issue vs. Share Split: What is the difference?
There are many similarities between bonus shares and share splits.In both the cases, the total number of outstanding shares goes up.Share split and bonus shares both increase the good future outlook of the shares.A company issuing a bonus share or splitting its shares shows a kind of promise to the shareholders that the future of the company is healthy and there would be no issues with profitability in the future.However, there are differences in the way the bonus shares and the share splits are treated in accounting.In case of bonus shares, the reserves and surplus capital goes down due to ...
Read MoreWhat is Private Placement of Shares?
We know that a company can raise funds from the capital markets by issuing shares to a number of shareholders. When a company offers the opportunity of investment to a select group of investors, it is known as private placement.Private placement is an alternative to an Initial Public Offering (IPO) for a company seeking to raise capital. In a private placement, the number of investment participants is limited to less than 50.Private placement is a popular way to resource funding by the companies in India. Let's check why companies prefer private placement as a source of funding.Less Stress of ComplianceThere ...
Read MoreWhat is meant by a Share Split?
Share split is a method of increasing the total outstanding number of shares in the market by decreasing the value of the share in a given proportion.Share split does not alter the total funds. It only decreases the par value of the shares.Share split is a matter of dividing the value of the shares in a proportionate manner and it is not a way to increase the value of the share in the market.Increases the Number of Outstanding SharesShare split affects the total number of outstanding shares in the market. For example, if stock of price Rs 10 has 1 ...
Read MoreWhat are the attributes of a Perfect Capital Market?
The efficiency of a capital market is measured by the speed and disclosure of information in the market about the shares. The capital markets of advanced as well as some emerging markets are found to be fairly efficient. However, efficiency does not guarantee the fact that the market is perfect.In order to be considered as a perfect market, the following conditions must be satisfied.Absence of Entry BarrierIn order to be perfect, there should be no entry barrier in a capital market. Thereby, in a capital market, anyone can buy or sell shares without needing to fulfill any rules or regulations ...
Read MoreWhat is meant by the Informational Content of Dividends?
Informational Content of DividendsDividend payout by competitive companies usually comes with statements of profitability and future growth. A successful firm uses the information to woo its current and potential investors by using promotional content about the profitability of the shares issued by the company. Thus, there is often a statement or content that is used along with dividend payouts. This is known as the informational content of dividends.Informational Content is Useful for InvestorsIt is a fact that any statement made by a profitable firm becomes stronger if it adds some dividend or cash payout to its shareholders with the informational ...
Read MoreWhy were Primary Markets not active in India until the 80s?
What is a Primary Market?There are two forms of securities markets that are differentiated based on the type of issues of securities in them.The primary market is for the new security issuance, while the secondary market is for the purchase and sale of already existing securities.As the primary markets deal only in new securities, they are also called new issues markets.Primary Market Vs Secondary MarketThe issued securities are bought and sold in the secondary market that is also known as the stock market. The stock market is a second-hand security market that deals in all listed securities.In a primary market, ...
Read MoreWhat are the Advantages and Disadvantages of Mutual Funds?
Mutual funds pool investments of like-minded investors and invest the cumulative sum in large and diversified investment projects. This helps small investors access big projects which they might not access individually.Advantages of Mutual FundsThere are some distinct benefits of mutual funds such as the following −SimplicityMutual funds are an easy means for small investors who do not have quite a good knowledge of the stock market or the shares being traded in the markets.Small investors who cannot access large projects can simply invest money in small amounts which are pooled by the mutual funds and invested in the market.The investors ...
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