Indicative list of questions on Finance for Viva

1. What is SENSEX? An abbreviation of the Bombay Exchange Sensitive Index (Sensex) - the benchmark index of the Bombay Stock Exchange (BSE). It is composed of 30 of the largest and most actively-traded stocks on the BSE. Initially compiled in 1986, What do you mean by Beta? It shows how the price of the security responds to market forces. Which type of risk is measured by beta? Beta measures non-diversifiable risk. What do you say if beta is +0.5? One percent change in market index return causes exactly 0.5% change in the stock return. The stock is less volatile compared to the market. What do you mean by random Walk theory? irregular pattern of numbers that defies prediction. This concept states that stock price movements do not follow any pattern or trend. What dose agency cost mean? A type of internal cost that arises from, or must be paid to, an agent acting on behalf of a principal. Agency costs arise because of core problems such as conflicts of interest between shareholders and management. What is a debt instrument? Document to raise a short term loan, such as promissory note, bill of exchange, bond, certificateof deposit or any other legal binding document. One who buys and sells the same share in the course of trading day, hoping to profit from sharp price movements. Dar Trader or In and Out Trader What do you mean by Acting in Concert? When two or more investors act together with the same goal. The amount of money required to be deposited with exchange for taking a long, short , or a combination of futures contract for covering the potential loss. Initial Margin What do you mean by cross-border listing? listing of shares of a company on the stock exchanges of different countries to create a larger market. What do you mean by cost of Capital? It is the minimum acceptable rate of return on the funds or capital employed by the company. What is risk? The probability that the expected return from the security will not materialise What do you understand by degree of operating leverage? It is the percentage change in operating income that results from a given percentage change in sales. What does negative beta indicates? It indicates that the stock return moves in opposite direction to the market return What is Capital Asset Pricing Model? CAPM is a model used for pricing an individual security (asset) or a portfolio. The security market line enables us to calculate the reward to risk ratio for any security in relation to overall markets. Define Market Capitalization?The total dollar market value of all of a company's outstanding shares. Market capitalization is calculated by multiplying a company's shares outstanding by the current market price of one share. How do you calculate debt? Total Liabilities/Total assets What do you mean by efficient market hypothesis?

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EMH holds that security prices fully reflect all available information at any time. Individual and professional investors buy and sell stocks under assumption that intrinsic value differs from market price. What do you mean by capital market?> It deals with long term securities that have maturity period greater than a year. How many types of delivery Contracts are permitted for security trading in the stock exchange? Spot delivery, hand delivery, special delivery What do you mean by return on equity? Net profit after Tax / Stockholders equity What do you mean by Earning per share? The portion of a company's profit allocated to each outstanding share of common stock. Earnings per share serves as an indicator of a company's profitability. Calculated as:

The portion of a company's profit allocated to each outstanding share of common stock. Earnings per share serves as an indicator of a company's profitability. Calculated as: Net Income Dividend / ang outstanding shares 24. What is the use of standard deviation? It depicts how each possible future outcome of a project will differ from the average value or expected value. 25. What is interest rate risk? The possibility of a reduction in the value of a security especially a bond resulting from a rise in interest rates. This risk can be reduced by diversifying the duration of the fixed-income investments that are held at a given time. 26. What is a cash budget? It is the forecasted cash needs of the firm, it contains details of cash inflows and outflowsof a firm. 27. What is a clearing house? It gurantees payments when shares are delivered, or it returns the shate to the concerned bank if the member defaults 28. What is the function of a stock exchange? It facilitates fund raising by the corporate world and allocation of funds by offering the best risk-return trade off 29. It is very important for a firm to manage its cash? Why It aims at reducing the amount of free cash that is being held up by the firm. This tends to enhance the firms profitability. 30. What is the Net Income approach of Capital Structure? It states thate the capital structureof any given firm creates an impact on the value of the firm.. It states that average cost of capital decreases as the debt proportion in its capital structure increases.