Definition: Capital budgeting is the method of determining and estimating the potential of long-term investment options involving enormous capital expenditure. It is all about the company's strategic decision making, which acts as a milestone in the business. For Example; Let us now consider capital budgeting for buying a new printing machine by a publishing house. The … [Read more...] about Capital Budgeting
CAMELS Rating System
Definition: CAMELS rating system is an internationally recognized supervisory tool which was developed in the US to measure the bank's or other financial institution's level of risk with the help of its financial statements. The parameters used for judgement comprises of capital adequacy, asset quality, management, earnings, liquidity and sensitivity. The CAMELS rating … [Read more...] about CAMELS Rating System
Seed Capital
Definition: Seed capital is the initial fund or money which is required by a budding entrepreneur to start a new business venture. 'Seed' here refers to the business which is at the beginning stage. 'Capital' refers to the money or funds required at the very beginning of a business. A 'budding entrepreneur' is the business aspirant who looks forward to making money from his … [Read more...] about Seed Capital
Foreign Exchange Market
Definition: The foreign exchange market or the 'forex market', is a system which establishes an international network allowing the buyers and sellers to carry out trade or exchange of currencies of different countries. A forex market can be stated as one of the most liquid financial markets which facilitate 'over-the-counter' exchange of currencies. In New York, advanced … [Read more...] about Foreign Exchange Market
Stock Split
Definition: Stock split is a corporate strategy to divide each share of the company into a particular number of shares by reducing the share price proportionately without changing the market capitalization or company's net worth. It is usually done when the share prices become too high, restricting the small investors from investing in these stocks. A stock split is a … [Read more...] about Stock Split
Capital Structure
Definition: Capital structure refers to an arrangement of the different components of business funds, i.e. shareholder's funds and borrowed funds in proper proportion. A business organization utilizes the funds for meeting the everyday expenses and also for budgeting high-end future projects. Computation of capital structure involves a lot of analytical thinking and … [Read more...] about Capital Structure
Capital Asset Pricing Model (CAPM)
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)