What is Securitization? Securitization is the process of pooling and repackaging homogeneous illiquid financial assets on the originator’s balance sheet into marketable securities that can be sold in the capital markets to the ultimate investor via the Special Purpose Vehicle (SPV). Securitization transaction consists of the following steps: The securities issued by the SPV could
What is Foreign Exchange Market? The foreign exchange market is the market in which currencies are bought and sold against each other. Like the money market, the foreign exchange market is a market where financial paper with a relatively short period of maturity is traded. It is a non-localized market that exists in the network
What are Preference Shares? Preference shares, also known as preferred shares or preferred stock, are a class of shares that have certain preferential rights and privileges compared to ordinary shares. These shares are typically issued by corporations to attract investors who desire a fixed income stream and priority treatment in the event of liquidation or
What are Ordinary Shares? Ordinary shares, also known as common shares or common stock, represent ownership in a corporation. When you own ordinary shares of a company, you become a shareholder and have certain rights, such as voting at shareholder meetings and receiving dividends. Features of Ordinary Shares Ordinary share has a number of special
Banks generally do not provide working capital finance without adequate security. The following are the modes of security that a bank may require. Hypothecation Under hypothecation, the borrower is provided with working capital finance by the bank against the security of movable property, generally inventories. The borrower does not transfer the property to the bank;
Irrelevance of Capital Structure In this article, you will learn the irrelevance of capital structure. For this, you will study the NOI approach and the MM Hypothesis. NOI Approach According to NOI approach the market value of the firm is not affected by capital structure change. The market value of the firm is found by
What is the Evaluation of Investment Proposals? Evaluating investment proposals involves a number of methods and techniques to determine the potential profitability and risk associated with a particular investment. These methods help decision-makers to choose the most viable and profitable investment. Three steps are involved in the evaluation of an investment: Investment Decision Rule The
What is Capital Budgeting Process? Capital expenditure or investment planning and control involve a process of facilitating decisions covering expenditures on long-term assets. Since a company’s survival and profitability hinge on capital expenditures, especially the major ones, the importance of capital budgeting or investment process cannot be over-emphasized. A number of managers think that investment
What is Budgeting? A budget is a comprehensive and coordinated plan, expressed in financial terms, for the operations and resources of an enterprise for some specific period in the future. It is a plan of the management’s intentions of attaining specified objectives. The commitment of the management is key to the success in the preparation
What is Commercial Paper Market? Commercial paper is one of the financial instruments of the money market. It provides an opportunity for well-rated companies /good track record companies for raising funds on a short-term basis. The market always provides funds to sincere companies which maintain financial discipline enabling them to procure funds confidently. In the
