1. When should a company issue stock rather than debt to fund its operations?
There are several reasons for a company to issue stock rather than debt. The first is if it believes its stock price is inflated and it can raise money by issuing stock. The second is when the projects for which the money is being raised may not generate predictable cash flows in the immediate future. A simple example of this is a startup company. The owners of startups generally will issue stock rather than take on debt because their ventures will probably not generate predictable cash flows, which is needed to make regular debt payments, and also so that the risk of the venture is diffused among the company's shareholders. A third reason for a company to raise money by selling equity is if it wants to change its debt-to-equity ratio. This ratio in part determines a company's bond rating. If a company's bond rating is poor because it is struggling with large debts, they may decide to issue equity to pay down the debt.
2. Being the finance manager of a company how will you make finance forecasting?
First I will review the previous year's financial statements to get an Idea about the financial operations. Then will discuss with the management about the current year's targets (viz. sales / services) & their growth expectations. Based on that will prepare provisional P&L acct & Balance sheet. I also will check whether there is any possibility in cost cutting and make the adjustments accordingly to arrive at expected profit.
3. Explain derivatives in terms of capital markets?
The term derivative indicates that it has no independent value that is its value is entirely derived from the values of the underlying assets. The underlying asset can be securities, commodities , bullion, currency, livestock or anything else.
4. What are the most important qualities for an investment banking career?
This question is actually a question about your academic qualifications and the thoughts with which you have decided to join the profession of investment banking.
To answer this question perfectly, you would have to go back to your books and understand the concepts that were taught to you in business school. Make sure that you put across the point that being good with numbers, being in the knowledge of current and past market status, and having a good financial strategy that is unfailing are some of the most important qualities for a career in investment making.
Fair Value is an accounting expression, originally defined by the SEC.Under GAAP, the Fair Value of an asset is the amount at which that asset could be bought or sold in a current transaction between willing parties, other than in a liquidation. On the other side of the balance sheet, the Fair Value of a liability is the amount at which that liability could be incurred or settled in a current transaction between willing parties, other than in a liquidation.
If available, a quoted market price in an active market is the best evidence of Fair Value and should be used as the basis for the measurement. If a quoted market price is not available, prepares should make an estimate of Fair Value using the best information available in the circumstances. In many circumstances, quoted market prices are unavailable. As a result, making estimates of Fair Value is often difficult.
6. Distinguish between speculator and hedger?
The main difference lies in the motive of the two parties. The main motive of the hedger is to hedge(minimize) the risk from the occurrence of some events. The motive of the speculator is to gamble in the market in order to make the profit by buying/selling the derivative products.
Hedger is a risk avoider and speculater is risk lover. Speculator is high riskier in market,it is short term, hedger is minimizing risk from occurrence of some event.
Outsourcing is a strategic management model wherein business processes are transferred to another company. The concept is to let a third party service provider perform the management and/or day-to-day execution of one or more business functions. This third party service provider is in sourcing those same processes. Outsourcing occurs when a company uses an outside firm to provide a necessary business function that might otherwise be done in-house.
When a company or corporation earns a profit or surplus, that money can be put to two uses it can either be re-invested in the business called retained earnings or it can be paid to the shareholders as a dividends.
Call option gives the buyer the right but not the obligation to buy a given quantity of the underlying asset, at a given price on or before, depending upon the type of option at given future date.
In economic terms, inflation is the rise in the prices of goods and services in the given economy over a period of time. As the prices rise, each unit of the country's currency will buy fewer goods and services.
