1.Describe the basic 5 components of the Indian financial system.

Components of Financial System

• Financial Institutions.

• Financial Markets.

• Financial Instruments (Assets or Securities)

• Financial Services.

• Money.

2. Write about Credit Market and Capital Market.

The credit market is a financial market where the government and companies issue debt to

investors to raise money. ... Also, it includes debt offerings such as notes and securitized obligations,

collateralized debt obligations (CDOs), credit default swaps (CDS) and mortgage-backed securities.

Capital market is a market where buyers and sellers engage in trade of financial securities

like bonds, stocks, etc. The buying/selling is undertaken by participants such as individuals and

institutions. ... Capital market consists of primary markets and secondary markets.

3. Discuss Financial System and its Goals.

A financial system is an economic arrangement wherein financial institutions facilitate the

transfer of funds and assets between borrowers, lenders, and investors.

Its goal is to efficiently distribute economic resources to promote economic growth and generate a

return on investment (ROI) for market participants.

4. Describe Money Market and Capital Market

The money market is an organized exchange market where participants can lend and borrow

short-term, high-quality debt securities with average maturities of one year or less. It enables

governments, banks, and other large institutions to sell short-term securities.

Capital market is a market where buyers and sellers engage in trade of financial securities

like bonds, stocks, etc. The buying/selling is undertaken by participants such as individuals and

institutions. ... Capital market consists of primary markets and secondary markets.

5.What is Capital Budgeting?

Capital budgeting is a company's formal process used for evaluating potential expenditures or investments that are
significant in amount. It involves the decision to invest the current funds for addition, disposition, modification or
replacement of fixed assets.
6. Differentiate between NPV and IRR

Net present value is a tool of Capital budgeting to analyze the profitability of a project or investment. It

is calculated by taking the difference between the present value of cash inflows and present value of

cash outflows over a period of time.

Internal Rate of Return (IRR) is one such technique of capital budgeting. It is the rate of return at which the

net present value of a project becomes zero. They call it 'internal' because it does not take any external

factor (like inflation) into consideration.

7. What do you mean by Payback period?

The payback period is the time required to recover the initial cost of an investment. It is the

number of years it would take to get back the initial investment made for a project.

Payback period= Initial investment/Net annual cash inflows

8. Write about Net Present Value (NPV)

It is calculated by taking the difference between the present value of cash inflows and present value of

cash outflows over a period of time.

NPV Positive + (Accept)

NPV Negative - (Reject)

9. State Ration Analysis

Ratio analysis is a quantitative method of gaining insight into a company's liquidity, operational

efficiency, and profitability by studying its financial statements. such as the balance sheet and income

statement. Ratio analysis is a cornerstone of fundamental equity analysis.

10. Define Solvency Ratio

A solvency ratio is a key metric used to measure an enterprise's ability to meet its long-term debt

obligations and is used often by prospective business lenders.

11. Identify Steps involved in Financial Statement Analysis.

• Identify the industry economic characteristics

• Identify company strategies.
• Assess the quality of the firm’s financial statements
• Analyze current profitability and risk.
• Prepare forecasted financial statements.

12. Define Liquidity Ratio.

Liquidity ratios quantitatively measure the adequacy of current and liquid assets and help
evaluate the ability of a business to meet its short-term debts.
1. What is Money Market? Explain Different types of Money Market Instruments.

The money market is an organized exchange market where participants can lend and borrow

short-term, high-quality debt securities with average maturities of one year or less. It enables

governments, banks, and other large institutions to sell short-term securities.

Types of Money Market Instruments:

➢ Treasury Bills (T-Bills) Treasury bills or T- Bills are issued by the Reserve Bank of India on behalf of
theCentral Government for raising money. ...

➢ Commercial Papers. ...

➢ Certificates of Deposits (CD) ...

➢ Certificates of Deposits (CD) ...

➢ Repurchase Agreements. ...

➢ Banker's Acceptance.

 T-bills are one of the most popular money market instruments. They have varying short-term maturities. The
Government of India issues it at a discount for 14 days to 364 days.
 Commercial bills, also a money market instrument, works more like the bill of exchange. Businesses issue
them to meet their short-term money requirements.
 Certificate of deposit or CD’s is a negotiable term deposit accepted by commercial banks. It is usually issued
through a promissory note.
 Corporates issue CPs to meet their short-term working capital requirements. Hence serves as an alternative
to borrowing from a bank.
 It is a segment of the market where scheduled commercial banks lend or borrow on short notice (say a
period of 14 days). In order to manage day-to-day cash flows.

2. Define Financial Intermediaries? What are different types of intermediaries and its advantages.

Financial Intermediaries

Is an entity that acts as the middleman between two parties in a financial transaction, such as a

commercial bank, investment bank, mutual fund, or pension fund.

Types of Financial Intermediaries

• Banks.

• Credit Unions.

• Pension Funds.

• Insurance Companies.

• Stock Exchanges.

There are two essential advantages from using financial intermediaries:

1. Cost advantage over direct lending/borrowing

 2. Market failure protection; The conflicting needs of lenders and borrowers are reconciled, Preventing
market failure

3. Economies of scale

3. Explain in details about the five basic components of Indian Financial System

1. Financial Institutions

➢ Banking Institutions

➢ Non-Banking Institutions

2. Financial Markets

➢ Money Market

➢ Capital Market

➢ Forex Market

➢ Commodity Market

3. Financial Instruments

➢ Money Market Instruments

➢ Capital Market Instruments

➢ Derivative Instruments

4. Financial Services

➢ General Banking Services

➢ Insurance Services

➢ Investment Services

➢ Foreign Exchange Services

5. Financial Regulators
4. What is Credit Market? Explain different types of credit market instrument?

5. Your client is 40 years old and wants to begin saving for retirement. You advise the client to put Rs.

5,000 a year into the stock market. You estimate that the market’s return will be on average of 12% a
year. Assume the investment will be made at the end of the year. How much money will she have by

age 65 by factor formula and table?

6. The management of Fine Electronics Company is considering to purchase an equipment to be attached

with the main manufacturing machine. The equipment will cost $6,000 and will increase annual cash

inflow by $2,200. The useful life of the equipment is 6 years. After 6 years it will have no salvage value.

The management wants a 20% return on all investments.

7. Mr. Naeem has won a scholarship which pays him $5,000 per year for 3 years beginning a year from
today. He wants to know the present value of the scholarship using a discount rate of 7%. Solve by

Factor Formula?
8. A Company wants to invest in new set of vehicles for the business. The vehicles cost £350,000 and

would increase the company’s annual revenue by £100,000, as well as the company’s annual expenses

by £10,000. The vehicles are estimated to have a useful shelf life of 20 years, with no salvage value.

Do, the ARR calculation.

9. Following are the current assets and current liabilities of a trading

company:Current assets:

• Cash and Bank: $5,000

• Marketable securities: $18,000

• Accounts receivables, net: $8,000

• Inventories: $10,000

• Prepaid expenses: $500

Current liabilities:

• Accounts payable: $15,000

• Accrued payable: $5,000

• Notes payable: $8,000

10.Trinity Bikes Shop is a retail store that sells biking equipment and bikes. Due to declining cash sales, John,
the CEO,decides to extend credit sales to all his customers. In the fiscal year ended December 31, 2017, there were
$100,000 gross credit sales and returns of $10,000. Starting and ending accounts receivable for the year were
$10,000 and $15,000, respectively.
John wants to know how many times his company collects its average accounts receivable turnover ratio over the
year.
11. Following are the particulars of XYZ trading company: Calculate the 4 Profitability ration – Return on Equity,
Return on Assets, Gross Profit and Net Profit Ratios.
• Total Assets : 30111
• Sales : 53553
• Gross Profit : 16147
• Net Profit: 3044
• Total Net Worth: 19802

12. Calculate the 4 Profitability Ratio – Return on Equity, Return on Assets, Gross Profit and Net Profit
Ratios.Company A reported annual purchases on credit of $123,555 and returns of $10,000 during the year ended
December 31, 2017. Accounts payable at the beginning and end of the year were $12,555 and $25,121, respectively.
The company wants to measure how many times it paid its creditors over the fiscal year using Payable turnover
ratio.