What is CAGR?

CAGR stands for the Compound Annual Growth Rate. It is a measure of an

investment’s annual growth rate over time, with the effect of compounding
taken into account. It is often used to measure and compare the past
performance of investments, or to project their expected future returns. The
CAGR formula is equal to (ending value / beginning value) ^ (1/# of
periods) – 1.

What is Dividend Payout Ratio (DPR)?

The Dividend Payout Ratio (DPR) is the amount of dividends paid to
shareholders in relation to the total amount of net income the company
generates. In other words, the dividend payout ratio measures the
percentage of net income that is distributed to shareholders in the form of
dividends.

Dividend Payout Ratio Formula

There are several formulas for calculating DPR:

1. DPR = Total dividends / Net income

2. DPR = 1 – Retention ratio (the retention ratio, which measures the

percentage of net income that is kept by the company as retained
earnings, is the opposite, or inverse, of the dividend payout ratio

3. DPR = Dividends per share / Earnings per share

Key Takeaways
In summary, here are the key points you need to know about the DPR:

 The dividend payout ratio is the amount of dividends paid to

investors proportionate to the company’s net income.
 There isn’t an optima’ dividend payout ratio, as the DPR of a
company depends heavily on the industry they operate in, the nature
of their business, and the maturity and business plan of the company.
 Fast-growing companies usually report a relatively lower dividend
payout ratio as earnings are heavily reinvested into the company to
provide further growth and expansion.
  Slower-growing, more mature companies, ones that have relatively
less room for expanding their market share through large capital
expenditures, usually report a higher dividend payout ratio.
 Income-oriented investors typically look for high dividend payout
ratios in choosing companies to invest in.

Issued Share Capital. ... Issued share capital is simply the monetary value of
the shares of stock a company actually offers for sale to investors. The number of issued
shares generally corresponds to the amount of subscribed share capital, though neither
amount can exceed the authorized amount

What is authorized, issued, subscribed and paid

up capital?
Authorized capital: The amount of capital with which a company is registered with the
registrar of companies (body responsible for registration of companies). It is the
maximum amount of capital which a company can raise through shares i.e. shared
capital can be maximum up to the authorized capital and not beyond. Due to this reason
companies are registered with such authorized capital which is well above their current
needs of financing so that if more is needed in future then it is easily possible.
Authorized capital is also called Registered capital or Nominal capital.

Subscribed capital: The amount of capital (out of authorized capital) for which company
has received applications from the general public who are interested in buying shares. If
this term is too technical to be understood then subscription is simply an application in
which investors expresses his interest to buy shares in the company. Usually only that
much shares are subscribed which company intends to issue later. But sometimes, if
company is in good shape then more and more people will be interested in buying
shares and in this case over-subscription will be the result. But if company’s financial
position is not sound or due to other factors it may be possible that subscriptions are
received for lesser then intended shares in which case there will be under-subscription.

Issued capital: The amount of capital (out of subscribed capital) which has been issued
by the company to the subscribers and thus are now shareholders.

Called-up capital: In some jurisdictions, company is permitted to ask for only part of the
total issued capital i.e. company will require shareholders to pay only part of the amount
of the shares they hold and not to pay fully. The partial amount (out of issued capital) so
asked by the company from the shareholders out of the total value of shares is called-up
capital.

Paid-up capital: The amount of capital (out of called-up capital) against which the
company has received the payments from the shareholders so far.
Example:

ABC Ltd was registered with registrar with a registered capital of Rs. 20,000,000 where
each share is of Rs. 10.

In response to the advertisements made by the company to buy shares in the company
applications have been received for 1,000,000 shares but company actually issued
700,000 shares where company has called for Rs. 8 per share.

All the calls have been met in full except three shareholders who still owe for their 6000
shares in total.

Solution:

Authorized capital = Rs. 20,000,000

Subscribed capital = 1,000,000 x Rs. 10 = Rs. 10,000,000

Issued capital = 700,000 x Rs.10 = Rs. 7,000,000

Called-up capital = 700,000 x Rs. 8 = Rs. 5,600,000

Paid-up capital = 5,600,000 – (6000 x Rs. 8 ) = Rs. 5,552,000

ICRA

The Company is exposed to various risks in relation to financial instruments. The Company financial

assets and liabilities are summarise in note 37.1. The main types of financial risks are market risk (pri
ce

risk), credit risk and liquidity risk.

a) Market risk

Market risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate

because of changes in market prices. Such changes may result from changes in foreign currency rate
, interest

rate, price and other market changes. The Company''s exposure to market risk is mainly due to price r
isk.
Price risk

The risk that the fair value or future cash flows of a financial instrument will fluctuate because

changes in the market prices, whether those changes are caused by factors specific to the individual

financial instrument or its issuer, or factors affecting all similar financial instruments traded in the

market. The Company has adopted disciplined practices including position sizing, diversification, valu
ation,

loss prevention, due diligence and exit strategies in order to mitigate losses as defined in Board appro
ved

investment policy.

The Company is exposed to price risk arising mainly from investment in equity shares and investment
in

mutual funds recognised at fair value through profit or loss. The detail of such investments are given i
n

note 37.1. If the prices had been higher/ lower by 1% from the market prices existing as at the reportin
g

date, profit would have been increased/ decreased by Rs. 276.37 lakh and Rs. 223.68 lakh for the ye
ar ended

March 31, 2018 and March 31,

2017 respectively.

b) Credit risk

Credit risk is the risk of financial loss to the Company if customer or counterparty to financial

instrument fails to meet its contractual obligations, and arises principally from the Company''s receiva
bles
from customer and investment in mutual funds and deposits with banks.

To manage credit risk, the Company periodically review its receivables from customer for any

non-recoverability of the dues, taking in to account the inputs from business development team and a
geing of

trade receivables. The Company establishes an allowance for impairment that represents its expected
credit

losses in respect of trade and other financial assets. The management uses a simplified approach for
the

purpose of computation of expected credit loss. While computing expected credit loss, the Company c
onsider

historical credit loss experience adjusted with forward looking information.

The Company''s exposure to customers is diversified and no single customer contributes to more than
10%

of outstanding accounts receivable and unbilled revenue as of March 31, 2018 and March 31, 2017. T
he

concentration of credit risk is limited due to the fact that the customer base is large.

The Company only invests surplus funds as per the investment policy of the Company, which has bee
n

approved by the Board of Directors. Deposits are held with only high rated banks.

c) Liquidity risk

Liquidity risk is the risk that the Company''s will encounter difficultly in meeting the obligations

associated with its financial liabilities that are settled by delivering cash or another financial assets.

For the Company, liquidity risk arises from obligations on account of financial liabilities - Trade payabl
e
and other financial liabilities.

Liquidity risk management

The Company continues to maintain adequate amount of liquidity to meet strategic and growth objecti
ves.

The Company''s finance department is responsible for liquidity and funding as well as settlement man
agement.

In addition, processes and policies related to such risks are overseen by senior management. Manag
ement

monitors the Company''s liquidity position through forecasts on the basis of expected cash flows.

Cash Flow from Operations vs Net Income

Operating cash flow is calculated by starting with net income, which comes
from the bottom of the income statement. Since the income statement uses
accrual-based accounting, it includes expenses that may not have actually
been paid for yet. Thus, net income has to be adjusted by adding back all
non-cash expense like depreciation, stock-based compensation, and others.

Once net income is adjusted for all non-cash expenses it must also be
adjusted for changes in working capital balances. Since accountants
recognize revenue based on when a product or service is delivered (and not
when it’s actually paid), some of the revenue may be unpaid and thus will
create an accounts receivable balance. The same is true for expenses that
have been accrued on the income statement, but not actually paid.

https://corporatefinanceinstitute.com/resources/knowledge/accounting/share-stock-based-
compensation/

Working capital, also known as net working capital (NWC), is the difference
between a company’s current assets, such as cash, accounts receivable
(customers’ unpaid bills) and inventories of raw materials and finished goods,
and its current liabilities, such as accounts payable.
TAKEAWAYS

 A company has negative working capital If the ratio of current assets to

liabilities is less than one.
 Positive working capital indicates that a company can fund its current
operations and invest in future activities and growth.
 High working capital isn't always a good thing. It might indicate that the
business has too much inventory or is not investing its excess cash.

Net Working Capital = Current Assets – Current Liabilities

Net Working Capital = Current Assets (less cash) – Current Liabilities (less
debt)
NWC = Accounts Receivable + Inventory – Accounts Payable

Fixed costs include lease and rent payments, utilities, insurance, certain
salaries, and interest payments.
Takeaways

 Companies incur two types of costs: variable costs and fixed costs.
 Variable costs vary based on the amount of output, while fixed costs are
the same regardless of production output.
 Examples of variable costs include labor and the cost of raw materials,
while fixed costs may include lease and rental payments, insurance,
and interest payments.

KEY TAKEAWAYS

 Operating income measures the amount of profit realized from a

business's operations.
 Operating income takes a company's gross income, which is equivalent
to total revenue minus COGS, and subtracts all operating expenses.
 Analyzing operating income is helpful to investors since it doesn't
include taxes and other one-off items that might skew profit.
How to Calculate Operating Income
The operating income formula is outlined below:

Operating Income=Gross Income−Operating Expenses

Operating expenses include selling, general, and administrative expense (SG&A), depreciation, and
amortization, and other operating expenses. Operating income excludes items such as
investments in other firms (non-operating income), taxes, and interest expenses