Definition: Capital asset pricing model (CAPM) is a tool used by investors, financial analysts and economists to study the relationship between the expected return from the investment and the systematic risk involved (measured in terms of Beta coefficient), by taking into consideration the expected overall market return and the risk-free rate of interest. Whenever an … [Read more...] about Capital Asset Pricing Model (CAPM)
Monthly Income Plan (MIP)
Definition: A monthly income plan (MIP) is a debt-oriented hybrid mutual fund scheme generating monthly returns in the form of a dividend, by investing more than 60-80% of the amount in debts and the remaining amount in equity, cash or money market. These funds reduce the level of risk on the one hand by investing majorly in debts and increases the possibilities of high … [Read more...] about Monthly Income Plan (MIP)
Public Limited Company (PLC)
Definition: A Public Limited Company (PLC) is a separate legal business entity which offers its shares to be traded on the stock exchange for the general public. According to the regulations of the corporate law, a PLC has to compulsorily present its financial stats and position publicly to maintain transparency. Example: Barclays Public Limited Company incorporated in the … [Read more...] about Public Limited Company (PLC)
Non-Banking Financial Company (NBFC)
Definition: A non-banking financial company is that financial institution which provides the banking services to the customers without having a banking license. An NBFC needs to be compulsorily registered under the Companies Act 1956 however, it can be owned privately or by the government. Example Bajaj Finserv Ltd. is the NBFC belonging to Bajaj Finance Limited. It provides … [Read more...] about Non-Banking Financial Company (NBFC)
Cash Management
Definition: Cash Management refers to the collection, handling, control and investment of the organizational cash and cash equivalents, to ensure optimum utilization of the firm's liquid resources. Money is the lifeline of the business, and therefore it is essential to maintain a sound cash flow position in the organization. Receivables Cash Management Any amount which the … [Read more...] about Cash Management
Stock Warrants
Definition: A stock warrant is an investment tool which provides the holder with the right (although not the obligation) to purchase or sell back the stock at the specific quantity and price within the stipulated future period. The stock warrants are issued by the company directly. They are very similar to the options but involves higher risk and yields a better return to … [Read more...] about Stock Warrants
Financial Leverage
Definition: Financial leverage refers to the utilization of borrowed funds to acquire new assets which are assumed to generate a higher capital gain or income as compared to the cost of borrowing. It is a liability for the borrowing business organization whereas, makes a source of income for the lender. The three ways in which the company can obtain funds are as follows: … [Read more...] about Financial Leverage
Financial Intermediaries
Definition: Financial intermediary is the organization which acts as a link between the investor and the borrower, to meet the financial objectives of both the parties. These can be seen as business entities which accept deposits from the depositors or investors (lenders) by allowing them low interest on their sum. Further, these organizations, lend this amount to the … [Read more...] about Financial Intermediaries
Profitability Ratios
Definition: Profitability ratios are the financial measures to analyze the earning capacity and determine the financial soundness of the organization by comparing the earnings with different expenditures, and ensure the optimum utilization of the various resources. Analyzing the financial position of an organization using the profitability ratios, are essential for all the … [Read more...] about Profitability Ratios
Line of Credit (LOC)
Definition: A line of credit can be seen as a revolving account opened with the bank or other financial institution. It allows the borrower (customer) to withdraw the required amount as a loan, partially or wholly, up to the given maximum limit mentioned in the agreement. The principal feature of a line of credit is that the interest is chargeable only on the sum withdrawn by … [Read more...] about Line of Credit (LOC)