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Difference between financing & investing decision 1.Financing decisions refers to decision as to the sources of finance, viz.

, equity, bonds, bank borrowings, lease financing, creditors, etc. 2. Investment decisions refers to decisions in regard to investments to be made in various projects expansion projects, modernization projects, new projects, take over projects, joint venture projects, etc. Difference between loan & lease &&& lease & rental agreement Loan means taking money n giving it back with interest. Lease means like giving a car for rent and return it back after pre decided time with certain terms & conditions. Rental agreement is for short period usually varies betwn 30/60days and it gets renewed after the time period unless the tenant/landlord wants to end it with prior notice period. Lease dont get renewed & typically betwn 6months/1yr/2yrs What Is the Difference between Bonds and Equities? bonds are long term investments while equities are short term, bonds have assured rates of return while the return on equity depends on the market performance and when equities presents ownership in a corporation, bonds do not and they don't share in losses. Stocks are simply shares of individual companies. Heres how it works: say a company has made it through its start-up phase and has become successful. The owners wish to expand, but they are unable to do so solely through the income they earn through their operations. As a result, they can turn to the financial markets for additional financing. One way to do this is to split the company up into shares, and then sell a portion of these shares on the open market in a process known as an initial public offering, or IPO. A person who buys stock is therefore buying an actual share of the company, which makes him or her a part owner however small. This is why stock is also referred to as equity. Bonds, on the other hand, represent debt. A government, corporation, or other entity that needs to raise cash borrows money in the public market and subsequently pays interest on that loan to investors. Each bond has a certain par value (say, $1000) and pays a coupon to investors. For instance, a $1000 bond with a 4% coupon would pay $20 to the investor twice a year ($40 annually) until it matures. Upon maturity, the investor is returned the full amount of his or her original principal except for the rare occasion when a bond defaults (i.e., the issuer is unable to make the payment).
Individual stocks, and the overall stock market, tend to be on the riskier end of the investment spectrum in terms of their volatility and the risk that the investor could lose money in the short term. However, they also tend to provide superior long-term returns. Stocks are therefore favoured by those with a longterm investment horizon and a tolerance for short-term risk. WHY????

Investors vs. Creditors?


Investors are people who buy equity in a company. Creditors are people who loan money or goods to a company and thus create liabilities for the company. Creditors expect and have a legal right to be paid what they loan, including interest. Investors have no guarantee they will ever see their money again. When a company is liquidated, creditors have priority over investors in sharing in the proceeds. Risk is high if Std Dev is high How does share price goes up? If demand of share(ppl who want to buy it) > supply(ppl who want to sell its) then share prices go up. Can a shareholder sell his shares back to the company instead of to other investors?

Can? Is it possible, yes. Does it happen, not generally. Not shareholder initiated, anyway The company must make an offer to buy ("Microsoft announced a share repurchase program this week to extend until the 4th quarter of 2007...") and this is almost always handled by the official agent of the company in the most cost efficient manner available.

Capital Structure A mix of a company's long-term debt, specific short-term debt, common equity and preferred equity. The capital structure is how a firm finances its overall operations and growth by using different sources of funds.
Definition of 'Earnings Per Share - EPS' 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:

When calculating, it is more accurate to use a weighted average number of shares outstanding over the reporting term, because the number of shares outstanding can change over time. However, data sources sometimes simplify the calculation by using the number of shares outstanding at the end of the period. Diluted EPS expands on basic EPS by including the shares of convertibles or warrants outstanding in the outstanding shares number. Earnings per share is generally considered to be the single most important variable in determining a share's price. It is also a major component used to calculate the price-to-earnings valuation ratio. For example, assume that a company has a net income of $25 million. If the company pays out $1 million in preferred dividends and has 10 million shares for half of the year and 15 million shares for the other half, the EPS would be $1.92 (24/12.5). First, the $1 million is deducted from the net income to get $24 million, then a weighted average is taken to find the number of shares outstanding (0.5 x 10M+ 0.5 x 15M = 12.5M). An important aspect of EPS that's often ignored is the capital that is required to generate the earnings (net income) in the calculation. Two companies could generate the same EPS number, but one could do so with less equity (investment) - that company would be more efficient at using its capital to generate income and, all other things being equal, would be a "better" company. Investors also need to be aware of earnings manipulation that will affect the quality of the earnings number. It is important not to rely on any one financial measure, but to use it in conjunction with statement analysis and other measures. Convertible Bonds Bond that can be exchanged for the issuing company's other securities (common stock or ordinary shares, for example) under certain terms and conditions.

Share premium is the amount received by a company over and above the face value of its shares. Face value of a share is its value that is printed on the share certificate. For example, face value of a $1 share is one dollar. But just because the value of share is printed $1 does not necessarily mean that the share is worth only one dollar. If a company has a history of good financial performance, it can sell its shares at a price higher than the face value of the shares. This difference between the selling price and the face value of a share is known as share premium. It is important to note that share premium arises only when the company sells the shares. It arises only when a company issues new equity shares. It does not arise when the investor sells shares at a price greater than face value. If a company sells a share whose face value is $1 at a price of $2, the company earns a share premium of $1. But subsequently if the investor sells the same share to someone else at a price of $4, no share premium will be gained by the company. The investor will benefit from this gain.

What's the difference between book and market value?


Book value is the price paid for a particular asset. This price never changes so long as you own the asset. On the other hand, market value is the current price at which you can sell an asset.

Definition of 'Treasury Stock (Treasury Shares)'


The portion of shares that a company keeps in their own treasury. Treasury stock may have come from a repurchase or buyback from shareholders; or it may have never been issued to the public in the first place. These shares don't pay dividends, have no voting rights, and should not be included in shares outstanding calculations.

Investopedia explains 'Treasury Stock (Treasury Shares)'


Treasury stock is often created when shares of a company are initially issued. In this case, not all shares are issued to the public, as some are kept in the companies treasury to be used to create extra cash should it be needed. Another reason may be to keep a controlling interest within the treasury to help ward off hostile takeovers. Alternatively, treasury stock can be created when a company does a share buyback and purchases its shares on the open market. This can be

advantageous to shareholders because it lowers the number of shares outstanding. However, not all buybacks are a good thing. For example, if a company merely buys stock to improve financial ratios such as EPS or P/E, then the buyback is detrimental to the shareholders, and it is done without the shareholders' best interests in mind

Commercial Paper
An unsecured, short-term debt instrument issued by a corporation, typically for the financing of accounts receivable, inventories and meeting short-term liabilities. Maturities on commercial paper rarely range any longer than 270 days. The debt is usually issued at a discount, reflecting prevailing market interest rates.