tag:blogger.com,1999:blog-74578701216560367052024-03-13T13:47:33.425-07:00The TeacherAbhishek Sinhahttp://www.blogger.com/profile/05955755302598472670noreply@blogger.comBlogger27125tag:blogger.com,1999:blog-7457870121656036705.post-65208413356457449652014-10-29T22:38:00.001-07:002014-12-07T00:49:25.128-08:00Big Billion day sale -Gainers and Losers<div dir="ltr" style="text-align: left;" trbidi="on">
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Flipkart start-up which grew in its formative years under
the guidance of a bunch of go-getters from IIT-Delhi created a sensation with
the ‘big billion day’ sale on 6 October 2014.<o:p></o:p></div>
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In eCommerce, your
prices have to be better because the consumer has to take a leap of faith in
your product.<o:p></o:p></div>
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-Ashton Kutcher, celebrity, investor and entrepreneur<o:p></o:p></div>
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<o:p> </o:p>In September 2013, the e-commerce industry witnessed a
revolution. That month, Groupon, a leading online discount provider, was
selling onion at the 1999 price of Rs. 9 a kg. The price of onion at that point
was approximately Rs. 85 per kg in the retail market. The quantum of sales at
21,000 kg was not big enough to create a stir in the market.</div>
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However, the discount mania came to stay in the Indian e-
commerce industry. The mania reached its height with the big billion-day sale
on 6 October 2014. Flipkart decided to sell goods at impossible prices. The
excitement led to confusion and confu-sion led to Flipkart apologising. So the
question that arises is who gained from the fiasco.<o:p></o:p></div>
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<b>e-commerce market places</b><o:p></o:p></div>
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In India, Internet penetration is increasing exponentially.
This, many believe could lead to “the rebirth of e-commerce <o:p></o:p></div>
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industry.” However, the onus lies on the e-commerce players
to get the netizens to their websites. <o:p></o:p></div>
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Without doubt Big Billion Day has been able to attract
reticent consumers to the different e-market places. Snapdeal ran an
advertisement on the same day: “For others it’s a Big Day. For us, today is no
different.” According to Flipkart’s official numbers the sale for the company
was at almost a billion rupees. Hence, the cumulative sales of the two Indian
e-commerce market places touched Rs.2 billion. Not to be left behind Amazon
used a cost effective strategy for increasing visits to their web-site: they
bought the domain name bigbillionday.com. Hence, anyone who typed
bigbillionday.com was directed to the Amazon website.<o:p></o:p></div>
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Clearly, the e-commerce market place seems to have gained
from the whole exercise especially keeping the gifting season in mind. Sales
have not only increased for the big billion day but remained high even after
that. The perception cre-ated from the whole exercise is, online buying is
cheap.<o:p></o:p></div>
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Customers – loyal and potential<o:p></o:p></div>
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Flipkart customers were unhappy because they hardly could
buy anything that day. However, consumer memory is short and the in-cident does
not seem to have dissuaded these customers from shopping online at
flipkart.com. <o:p></o:p></div>
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It should also be noted that the customers faced the same
kind of problem at the time of the launch of Moto -G and there was hardly any
hue and cry over it.<o:p></o:p></div>
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Offline market places and traders<o:p></o:p></div>
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It is beyond doubt that this kind of predatory pricing would
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kill competition. The worst sufferers would be offline
market places and traders. The cost structure of an offline market place does
not allow the companies to provide this kind of discounting. Eliminating
middlemen helps online companies deliver at lower prices. In the United States
a lot of bookstores, notably the popular Borders, closed as they could not
compete with Amazon. So what is the way out for these offline com-panies in
India? AAP leader Adarsh Shastri, who has spent considerable time at Apple,
Samsung and Vodafone, has taken the cudgels on behalf of more than lakh small
time mobile phone traders so as to lobby with mobile phone manufactures on
protecting the interests of small traders. However, such protectionism might
not work in the face of dynamic nature of e-commerce market.<o:p></o:p></div>
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In all probability the line that proactive traditional
retailers are expected to take would be to collaborate rather than compete with
the online market place. For proof, see the Future Group collaborating with
Amazon to sell their products online.<o:p></o:p></div>
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Regulators<o:p></o:p></div>
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The e-commerce discounting melas are a reminder that
e-commerce is a highly unregulated market with very few con-sumer protection
mechanism in place.<o:p></o:p></div>
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Like, it is possible that the market place increases the
price a day before the discount mela and then provides discounts on the high
prices. There is thus the need to have a separate proactive regulator for
e-commerce markets as the industry is growing fast and needs hands-on
regulations.<o:p></o:p></div>
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The author is Assistant Professor, VJIM Hyderabad.<o:p></o:p></div>
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First published in Industrial Economist, November Edition<o:p></o:p></div>
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Abhishek Sinhahttp://www.blogger.com/profile/05955755302598472670noreply@blogger.com9tag:blogger.com,1999:blog-7457870121656036705.post-52278012450126871322014-09-28T00:26:00.000-07:002014-12-07T00:50:45.920-08:00July numbers give Jitters INDEX OF INDUSTRIAL PRODUCTION <div dir="ltr" style="text-align: left;" trbidi="on">
<span style="font-size: large;">The IIP July data has taken everyone by surprise. After a robust showing for the last 3 months, there was a dip in IIP index in the month of July. The IIP index fell to 0.5 percent as shown by the</span><br />
<span style="font-size: large;">official statistics. It should be noted that June month had shown a growth of 3.9 per cent. The data had been revised upward from 3.4 per cent stated earlier. The growth of the national economies is measured through gross domestic product, which measures performance in manufacturing sector, service sector and agricultural sector. To get a detailed view of how the economy performs one needs to have a bard’s eye view of these sectors which could be interpreted and analyzed through different sets of data. In India the performance of industrial sector is captured with the help of the industrial production index, referred to as IIP or Index of Industrial Production. It is a monthly data that measures the performance of the industrial economy. Hence, the data is used for gauging the growth of the economy in the short run. The base year used for the index is 2004-05. Though it has been changed numerous times in the past, there is a demand to change the base year to 2011-2012.</span><br />
<span style="font-size: large;">A fall in IIP numbers indicates that the industrial economy is facing a downturn. Industrial sector </span><span style="font-size: large;">data is an important indicator of supply side growth in the economy. The fact that the industrial</span><br />
<span style="font-size: large;">sector data shows a meagre growth of 0.5 per cent points to the supply side bottlenecks. In other </span><span style="font-size: large;">words, it means supply is not picking up as was expected in the given period.</span><br />
<b><span style="font-size: large;">Capital goods data indicates low investments </span></b><br />
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<span style="font-size: large;">Though July numbers were disappointing, some experts attribute it to the base effect. Notwithstanding, the fall in capital goods segment is really worrisome. The growth in the segment fell from 23 to -3.5 per cent . This figure indicates the total amount spent on buying machinery which augments production. Hence, this f</span><span style="font-size: large;">igure is indicative of the future expansion plans of the economy. It can thus be used to gauge sentiments of the economy - the direction in which it is moving and why. According to the RBI governor Dr. Raghuram Rajan, the growth of the economy, to a great extent, depends on investment growth. The capital goods figures are indicative of the investment growth. Hence, a fall in the numbers is indicative of the problems the Asia’s third largest economy is facing. The fact that the numbers are below the level in the base year does not help matters either. Hence, efforts are required to improve this number. Many a times high interest rates may dissuade companies from expanding business, which could also be a cause for the fall in July IIP numbers. Another reason could be postponement of investment by many companies, given that several banks are planning to take action against erring corporate borrowers. Given this gloomy scenario, there is a need for bringing in structural changes so as to improve the capital goods expenditure.</span></div>
<span style="font-size: large;">Core sector growth muted The core sectors are the most important constituent of the IIP number. They have a weight of 38 per cent in the total IIP index. This quarter the core sector has seen a fall from 7 to 2 per cent. The contraction in the size of its constituents led to the fall. The fall in the infrastructural index also does not augur well for the economy as the economic growth is impacted by infrastructural support provided by the eight industries which form the core sector. However, according to experts and analysts this low growth can be attributed to continuous increase in core sectors such as electricity and steel. It is believed that these sectors could see growth form hereon.</span><br />
<b><span style="font-size: large;">Consumer goods surprise</span></b><br />
<span style="font-size: large;">Consumer goods refer to the goods to be consumed by individuals. Hence, consumer goods</span><br />
<span style="font-size: large;">are an important demand side indicator. A fall in consumer goods by 7.4 per cent shows a </span><span style="font-size: large;">negative sentiment during the given period. There seems to be fall in both supply and demand </span><span style="font-size: large;">side which does not augur well for the economy. This is followed by a fall in consumer durables </span><span style="font-size: large;">and non durables too.</span><br />
<b><span style="font-size: large;">Expected reaction by the RBI</span></b><br />
<span style="font-size: large;">RBI is expected to continue maintaining status quo (on interest rate front) and would not like </span><span style="font-size: large;">to react to the given situation as these numbers seem to be out of synch with the bigger story. The</span><br />
<span style="font-size: large;">GDP numbers of the last quarter as well as the BOP position seems improved. Hence, reacting on </span><span style="font-size: large;">these numbers would not make sense. Moreover, the reliability of IIP numbers is also debatable.</span><br />
<span style="font-size: large;">Therefore, it is advisable to wait and watch if there is any upward revision in the data.</span><br />
<b><span style="font-size: large;">Government policies and IIP number</span></b><br />
<span style="font-size: large;">It should be noted that the government at present has not made any structural changes in </span><span style="font-size: large;">the economy. However, earnest attempts are being made to iron out bureaucratic inefficiencies </span><span style="font-size: large;">in the system. These attempts would take time and hence it is not expected to yield results </span><span style="font-size: large;">immediately. Having said that, structural changes are of paramount importance for the development </span><span style="font-size: large;">of the economy and efforts should be made to increase the efficiency and efficacy of the</span><br />
<span style="font-size: large;">system by bringing more transparency in the system, making policies irreversible and homogenous </span><span style="font-size: large;">across states. Also, as the IIP numbers show the short term sentiments, they cannot be used</span><br />
<span style="font-size: large;">to judge the long-term sustainability of the policies which have been introduced by the government. </span><span style="font-size: large;">Hence this data should not be given too much of importance in terms of long-term growth.</span><br />
<span style="font-size: large;"><b>Major challenges faced in improving </b><b>IIP data</b></span><br />
<span style="font-size: large;">• Consumer Price Index continues its northward journey The wholesale price index is under </span><span style="font-size: large;">control. However, price level for consumers keeps increasing persistently. This increase </span><span style="font-size: large;">in price levels would stop the RBI from lowering interest rates which, in turn, would impact the </span><span style="font-size: large;">investment climate in the country, thus muting future growth prospects as capital goods numbers</span><br />
<span style="font-size: large;">would decline.</span><br />
<span style="font-size: large;">• Volatility of IIP data </span><br />
<span style="font-size: large;">The IIP data is highly volatile. It keeps on fluctuating regularly. This fluctuation in the value would tender the data unusable. The reliability of the data is also being questioned consistently. The revision of data adds to the woe of decision makers. Hence, it is imperative that steps should be taken to make the data more robust. The long standing demand of converting the base year to 2011- 2012 should also be implemented.</span><br />
<span style="font-size: large;">• Supply side bottlenecks</span><br />
<span style="font-size: large;">There are supply side and bottlenecks, which have hurt growth for long. To tackle them, the</span><br />
<span style="font-size: large;">government is needed to invest heavily.</span><br />
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<span style="font-size: large;"><br /></span>
<span style="font-size: large;">Going forward, a lot is being expected from the BJP government at the helm. They need to make sure that the investment increases in the long run. Development without structural changes is not</span><br />
<span style="font-size: large;">achievable and the government must go all out to bring in the same.</span><br />
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<span style="font-size: large;"><b>Note: </b><span style="background-color: white; color: #141823; font-family: Helvetica, Arial, 'lucida grande', tahoma, verdana, arial, sans-serif; line-height: 19.3199996948242px;">This article expresses my view on IIP July data released in September published first in Global Analyst October edition.</span></span></div>
Abhishek Sinhahttp://www.blogger.com/profile/05955755302598472670noreply@blogger.com0tag:blogger.com,1999:blog-7457870121656036705.post-83139869987077121952014-09-20T03:29:00.001-07:002014-09-21T19:38:57.965-07:00"Jugaad by Uber, scorned by RBI" - Right or Wrong<div dir="ltr" style="text-align: left;" trbidi="on">
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India is known for Jugaad and innovation. However, the Indian regulators such as RBI are not known for appreciating the jugaad or innovation by players who innovate. Uber, a cab company seems to be at the wrong end of the stick. So what happened, and how. </div>
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<b>Uber's Entry into India :</b></div>
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Uber is an online platform that acts as an interface between passengers and taxi drivers. They operate through a smartphone which facilitates internet booking for passenger.<br />
<a href="http://yourstory.com/2013/08/uber-enters-india-rolls-out-first-in-bangalore/" style="font-family: Helvetica, sans-serif; font-size: 13pt; text-align: right;"> The company entered India in August 2013 via Bangalore.</a> (more on their entry can be known through the preceding link.) They were already present in around 40 countries.The main reasons for the company to venture in India was fragmented unorganized market and low entry barriers. The market was dominated by few players such as Meru, orange cab, and green cab . The company operates in the high end segment where there are very few players in the country. The cars available on rental include luxury cars such as Mercedes, Audi etc. <span style="line-height: 1.5em;">The company derives strength from huge financial muscle that it derives from investors such as Goldman Sachs, Jeff Bezos (the man behind Amazon) and Google Ventures. </span></div>
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<span style="line-height: 1.5em;"><b>Major Challenge for Cab Industry in India:</b></span></div>
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The major challenge for cab industry in India is customers cancellation rate at last minute . This has also lead to strikes at leading companies such as Meru. (<a href="http://articles.economictimes.indiatimes.com/2014-07-10/news/51300992_1_uber-indian-startups-payment-gateway" style="line-height: 1.5em;">Last
minute cancellation impacting drivers morale</a>) . Cab Companies have been trying different methods such as allocating pick ups only 20 minutes drive from drivers residence, however these methods cannot work always due to practical challenges. Then entered Uber, taking advantage of a loophole in the system they came with a novel solution. </div>
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<b>Solution through JUGAAD: </b></div>
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All the payments were to be made online and no cash payments were accepted. <span style="line-height: 1.5em;">It was made through a foreign gateway hence the two step authentication which is mandated by RBI was circumvented.</span><span style="line-height: 1.5em;"> </span><span style="line-height: 1.5em;">The payments were to be made as soon as the person stepped out and hence the company could now conveniently charge for cancellation of cabs too as payment data was stored in advance. This made both the company and the drivers laugh all the way to the bank. However, it created an uneven playing ground leaving the traditional Indian cab companies complaining about not being able to charge for cancellations.</span></div>
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<span style="line-height: 1.5em;"><b>RBI's Action and Reaction thereafter</b></span></div>
<span style="color: #333333; font-family: apres-regular-webfont, Helvetica, Arial, sans-serif; font-size: 17px; line-height: 1.5em;">RBI has disallowed payments gateways from foreign countries from being used in India. Thus companies such as Uber are in a fix. There is a lot of hue and cry from supporters of free economy including economists such as Ajay Shah who in his blog entry Uber versus RBI ( </span><span style="color: #333333; font-family: apres-regular-webfont, Helvetica, Arial, sans-serif;"><span style="font-size: 17px; line-height: 25.5px;">http://ajayshahblog.blogspot.in/2014/09/rbi-vs-uber-continued.html )</span></span><br />
<span style="color: #333333; font-family: apres-regular-webfont, Helvetica, Arial, sans-serif; font-size: 17px; line-height: 25.5px;"> has denounced RBI as being dictatorial in it's approach and not helping free economy to function in India. His example of Uber helping save millions because of few minutes saved in payment process appear highly stretched. In India we waste a lot of time due to roads being non existent and public transport system failing. Hence a few minute here and there involved in making payments will not make too much of a difference. On the other hand average speed of internet is surely on the lower side and everyone does not have internet access on their mobiles. Where, technological literacy is low and technology usage is on the higher side as a customer we do expect the regulator to play a proactive role in protecting our interests.</span><br />
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<span style="color: #333333; font-family: apres-regular-webfont, Helvetica, Arial, sans-serif; font-size: 17px; line-height: 25.5px;">To add to this India is not the only country where Uber is facing stiff opposition. Even in countries such as Germany and South Korea Uber has run into problems with the authorities. When it comes to payments online I agree it is difficult to make regulations that satisfy everyone. However before making any radical changes to the existing regulations it is important that we are able to regulate based on existing norms. So I do not find anything wrong in the action taken by RBI.</span><br />
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<b style="line-height: 1.5em; text-align: left;">The Way Forward:</b></div>
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The company needs to change their business model going forward if it wants to continue to function in India. According to media reports the company would most probably continue to operate in India however the payment gateway would have to shift to some Indian gateway such as PayTM. This would lead to following the 2 step authentication process which might increase the "waiting time" and hence the inconvenience for the customers.</div>
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Abhishek Sinhahttp://www.blogger.com/profile/05955755302598472670noreply@blogger.com1tag:blogger.com,1999:blog-7457870121656036705.post-682075434321631902014-09-15T00:39:00.000-07:002014-09-20T21:53:37.373-07:00Will Pro Kabaddi Franchisees make money<div dir="ltr" style="text-align: left;" trbidi="on">
Every sports worth the name seems to have a pro league in India which has commenced or will commence soon. These games include cricket, football, hockey badminton and lawn tennis.Now the question that need to be asked is do these leagues just have prestige value or can they make money too for the franchise owner.<br />
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The common wisdom has it that "pro-leagues do not really help create money for the franchisees" but it does help create mileage for businesses and individuals who are looking for brand name for future. What if there is a popular sport where players are available cheap; the game is exciting and the audience can relate to the team and above all there are brand icons associated to add glitz and glamour to the game. So kabaddi seems to be the answer.<br />
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Here are some facts about the pro kabaddi league that would help the game become popular:</div>
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<li>Audience in India can relate to the game easily as it is a popular game in India.</li>
<li>The prokabaddi is fast paced and can be finished in 40 minutes hence it is short and exciting.</li>
<li>The space required for the game is lesser compared to other popular games such as cricket and football.It is popular among both men and women hence couples watching matches together would bre more common.</li>
<li>Mashaal sports the brain behind pro kabaddi is run by Charu Sharma who understands the sports industry well and Anand Mahindra who is an astute businessman who can monetise these opportunities well.</li>
<li>The support of a strong media partner in the form of star sports adds strength to the whole process.</li>
<li>The owners of the teams are all brand icons in their own right. This adds to the who process.</li>
<li>With a nationalist government at the helm of affairs the government support could also come in if the game attracts the requisite critical mass. </li>
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Following is the business model of kabaddi: :<br />
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<li>Revenue: The major sources of revenue for the company includes sales of tickets for home matches, sponsorship, memorabilia, share of advertisement revenue and share of stadium revenue.</li>
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<li>In the first season the major source of revenue was sales of tickets. The last leg saw full house. </li>
<li>Revenue from advertisements and sponsorship were on the lower side. this edition. However, going forward with the reach estimated at 218 million it is expected that the revenue from advertisements and sponsorship would increase in the March edition of the event. One fourth of the total viewership could be attributed to age group 15 to 24. Hence, the growth of revenue through advertisements targeted at this age group is expected to increase.</li>
<li>As the popularity of pro kabaddi increases the icon players could help generate revenue for the game through sales of memorabilia going forward.</li>
</ul>
<li> Cost: The major cost drivers for pro kabaddi league teams include player acquisition cost, license fees, transportation and lodging costs for players.</li>
</ol>
<ul style="text-align: left;"><ul>
<li>To promote the game the pro kabaddi franchisees have been able to acquire the teams at token price only.</li>
<li>As the game is not rewarding financially for the players traditionally, the whole team have been bought at INR 60 lakhs. Hence the cost of acquisition is extremely low.</li>
<li>The other major expense is travelling and lodging cost.</li>
</ul>
</ul>
<div>
Looking at the low cost structure it can be deduced that the investors in pro kabaddi league can breakeven in a short period. It is estimated that the franchisees will break-even in three months compared to fifteen months in case of the bellwether IPL cricket league. </div>
<div>
<br /></div>
<div>
<br /></div>
</div>
Abhishek Sinhahttp://www.blogger.com/profile/05955755302598472670noreply@blogger.com2tag:blogger.com,1999:blog-7457870121656036705.post-59733493758636819452014-08-25T09:21:00.000-07:002014-09-23T01:42:14.467-07:00Budding Entrepreneurs should not ignore financial feasibility<div dir="ltr" style="text-align: left;" trbidi="on">
A lot of us would like to be entrepreneurs given a choice. However, what is that we must know about finance before setting up the business. This is a question which i have been asked many a times from friends, relatives and even co-passengers while travelling. Here, is my attempt at answering the question.<br />
<ol style="text-align: left;">
<li>Every entrepreneur should know the concept of <b>risk and return</b>.Newspapers frequently talk about individuals who have invested money and believed in their ideas, and this belief has resulted in profits unheard of. The counry also is seeing a spurt in young entrepreneurs who have jumped into the fray with nothing but intellectual capital. The question is do all these ideas work. According to Bloomberg, around 80% of businesses that start fail. What does it mean in terms of risk? In simple terms, the risk is high. Hence, even though expected returns are on the higher side the chances are that getting the returns are low. Same was true for most of the software firms that registered loss in 2014.</li>
<li>Profit is a function of <b>revenue and cost</b>. However, good your business idea is if you are not able to earn profits from the business sustaining it in the long run is generally difficult . Being conventional, I would not really look at business idea, which sustain on investments rather than their own internal accruals in medium and long term. Any organisation which has had a life of more than five years should be in black and making profits. The profit can be earned only when revenue is more than cost. If revenue is less than cost for more than five years, for any start up, it should seriously start looking at different avenues of augmenting revenue or controlling cost.</li>
<li><b>Profit</b> is not equal to <b>cash flow from operations</b> - A lot of start ups face challenges in monetizing their idea and generating revenue out of it. Once revenue is generated, the next big challenge is to realize it in terms of cash, especially if you are a start up in the Business to Business (B2B) space. If your business model is such that you make immediate payment to everyone you owe, but it takes time for you to collect money, there are going to be a severe liquidity crunch in the future. Case in the point, is a digital marketing company I know which went bust because the real estate company which owed them INR 20 lakhs defaulted .</li>
<li>Revenue is a function of <b>selling price and quantum sold</b>. The main aim of any entrepreneur is to maximize revenue and have sustainability in the long run. However, the same cannot be done until and unless the company understands the value proposition it delivers to the consumer. If the consumer is not satisfied with the value proposition, the revenue cannot be maximized. This is true in the case of a lot of intangible services. Case in the point, is the dabbawallahs of Mumbai. Even though dabbawallahs of Mumbai, was a idea that caught up in Mumbai it did not pick up in other cities. It was because it did not provide the same value proposition to the consumers in other cities. The other factor to be considered is the life of your product. In case of technology intensive products, with disruptive technology becoming the buzz word, sustainability is an issue hence generating sustainable and predictable revenue stream is becoming a challenge.</li>
<li><b>Fixed Cost </b>increases pressure to deliver: Cost can either be categorized as fixed or variable. Fixed Cost does not change with time, while variable cost is proportional to Sales. Hence, if sales are low for a start up and fixed cost is high the pressure to deliver increases and hence the probability of going cashless also increases. An important factor to be kept in mind for any business where salaries is the largest cost driver, is that salaries is a fixed cost. Hence, hiring people who are not required just because you have some idle cash from investors should be strictly avoided. Case in the point is pagalguy.com in education digital space which has only 14 employees whereas most of it's competitors have more than 100 employees.</li>
<li>The expected return is always a function of the servicing cost of raising money for the business. The money for business could be raised from internal accruals (previous years profits), borrowing, preference shares, equity shares, or hybrid instruments comprising two or more instruments.</li>
</ol>
<br />
<br /></div>
Abhishek Sinhahttp://www.blogger.com/profile/05955755302598472670noreply@blogger.com0tag:blogger.com,1999:blog-7457870121656036705.post-12983159553138059762014-06-21T22:12:00.004-07:002014-06-22T05:22:58.610-07:00A finance teacher's view on rail price hike<div dir="ltr" style="text-align: left;" trbidi="on">
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" The railways can survive only if users pay for
availing of facilities." - Arun Jaitley, the finance minister<o:p></o:p></div>
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<br /></div>
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When the finance minister makes this statement it reminded
me of a post from one of my friends from school days who has returned to India
after quite some time: <o:p></o:p></div>
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"Having jaw dropping experiences in India every time I
go out shopping. Prices of everything have tripled or may be even quadrupled
than what it was four years ago. The only solace I have is to convert the
prices to USD as opposed to my first trip outside India when I used to convert
prices to INR and panic." </div>
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source:
Facebook. </div>
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<br /></div>
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Mortals like me who chose to stay in India do not have the
"solace" of converting prices to dollar also. So increase in fares
cannot be seen in isolation, we need to look at existing inflation levels and
impact of increased rail freight on inflation and growth.<o:p></o:p></div>
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Now being a student and teacher of business models,I know
one thing for sure people like to pay a premium only when they are satisfied
with the existing services. No one pays premium to support future infrastructure growth. I have been
travelling the length and breadth of the country using railway as a medium of
transport extensively for the last two years and these are my observations:<o:p></o:p></div>
<div class="MsoNormal">
</div>
<ol style="text-align: left;">
<li>Every second person travelling in Ac 2 tier and every person
travelling in AC 1 tier does not pay for the service because either he is a
railway employee or he is a politician. These are the compartments where the
margins are high and elasticity of demand is also high. Imagine if banks starts
giving money to employees without claiming it back and only person taking
loans meant to be at higher interest rates are bankers who will never return it.</li>
<li>The quality of service in trains are pathetic. Toilets are
never clean. The staff on the train who is supposed to clean the toilets is
only seen at the time of collecting tips. The attendants never give towels
unless asked by the passenger because if the towels are lost he needs to pay from
his pockets.</li>
<li>There are very few trains which run on time especially long
distance trains. There is no value for money.</li>
<li>Streamlining of operations with a view to reduce cot is more important than increasing prices.</li>
</ol>
Here is a suggestion I have for the government:<br />
<div>
Please understand that if you want to operate as a company you need to appreciate the fact that government is a conglomerate with a number of Strategic business units.In your case, it is not possible to run all the SBU's profitably</div>
<br />
<div class="MsoNormal">
<o:p></o:p></div>
<br />
<div class="MsoNormal">
The system needs to be streamlined so that corruption is minimized, if not removed. Inflation stems from inability to develop a proper warehousing facility and from wasteful government expenditure. I am yet to hear of any concrete steps taken by the government in these two areas. I would also like to know if there is any tax payer whose son goes to a state government school </div>
<div class="MsoNormal">
(I know centre government cannot do much, but then something needs to be done) or he can even imagine being admitted in most of the government hospitals. Please concentrate on these areas it would help improve the standard of living of the country rather than looking at simplistic measures of revenue generation and then using rhetoric to justify a move that does not make sense.</div>
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<br /></div>
<div class="MsoNormal">
Disclaimer: This is my personal view </div>
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<br /></div>
</div>
Abhishek Sinhahttp://www.blogger.com/profile/05955755302598472670noreply@blogger.com12tag:blogger.com,1999:blog-7457870121656036705.post-144083588245805132013-11-09T23:08:00.000-08:002014-05-27T19:31:12.981-07:00How to analyse news pertaining to companies - part I&II<div dir="ltr" style="text-align: left;" trbidi="on">
<div style="margin: 0in;">
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<span style="background: white; color: #404040; font-family: "Times New Roman","serif"; font-size: 12.0pt; line-height: 150%; mso-fareast-font-family: "Times New Roman";">One
of my students asked me how to analyse news on companies. This made me think
and here is my honest attempt at creating a framework for analysing news. I
would like to break the exercise into three steps in two blog
entries. Hence, this blog entry may look incomplete in in itself. However, I
would like to give the readers time to internalize the process, as the ability
to categorize news depends on their ability to relate to business situations.</span><span style="font-family: 'Times New Roman', serif; font-size: 12pt; line-height: 150%;"><o:p></o:p></span></div>
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<span style="background: white; color: #404040; font-family: "Times New Roman","serif"; font-size: 12.0pt; line-height: 150%; mso-fareast-font-family: "Times New Roman";">This
blog entry talks about the first step. </span><span style="font-family: 'Times New Roman', serif; font-size: 12pt; line-height: 150%;"><o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%; margin-bottom: 0in;">
<span style="background: white; color: #404040; font-family: "Times New Roman","serif"; font-size: 12.0pt; line-height: 150%; mso-fareast-font-family: "Times New Roman";"><br />
The first step involves mapping the news with nature of financial activity
involved.</span><span style="font-family: 'Times New Roman', serif; font-size: 12pt; line-height: 150%;"><o:p></o:p></span></div>
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<br /></div>
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<span style="color: #404040; font-family: "Times New Roman","serif"; font-size: 12.0pt; line-height: 150%; mso-fareast-font-family: "Times New Roman";">There are three basic
financial activity that any company is involved in</span><span style="font-family: 'Times New Roman', serif; font-size: 12pt; line-height: 150%;"><o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%; margin-left: 0in; text-indent: -0.25in;">
<!--[if !supportLists]--><span style="font-family: 'Times New Roman', serif; font-size: 12pt; line-height: 150%;">1.<span style="font-family: 'Times New Roman'; font-size: 7pt; line-height: normal;"> </span></span><!--[endif]--><span style="color: #404040; font-family: "Times New Roman","serif"; font-size: 12.0pt; line-height: 150%; mso-fareast-font-family: "Times New Roman";">Raising of money and
servicing the money raised - Financial activity</span><span style="font-family: 'Times New Roman', serif; font-size: 12pt; line-height: 150%;"><o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%; margin-left: 0in; text-indent: -0.25in;">
<!--[if !supportLists]--><span style="font-family: 'Times New Roman', serif; font-size: 12pt; line-height: 150%;">2.<span style="font-family: 'Times New Roman'; font-size: 7pt; line-height: normal;"> </span></span><!--[endif]--><span style="color: #404040; font-family: "Times New Roman","serif"; font-size: 12.0pt; line-height: 150%; mso-fareast-font-family: "Times New Roman";">Expenditure which
increases future earning capacity and income from selling such asset -
Investment activity</span><span style="font-family: 'Times New Roman', serif; font-size: 12pt; line-height: 150%;"><o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%; margin-left: 0in; text-indent: -0.25in;">
<!--[if !supportLists]--><span style="font-family: 'Times New Roman', serif; font-size: 12pt; line-height: 150%;">3.<span style="font-family: 'Times New Roman'; font-size: 7pt; line-height: normal;"> </span></span><!--[endif]--><span style="color: #404040; font-family: "Times New Roman","serif"; font-size: 12.0pt; line-height: 150%; mso-fareast-font-family: "Times New Roman";">Income and expenditure
as aresult of day to day operations is known as operating activities.</span><span style="font-family: 'Times New Roman', serif; font-size: 12pt; line-height: 150%;"><o:p></o:p></span></div>
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<br /></div>
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<span style="color: #404040; font-family: "Times New Roman","serif"; font-size: 12.0pt; line-height: 150%; mso-fareast-font-family: "Times New Roman";">When any news is
announced if you want to understand the financial implications of it the first
step is to categorize the news as financial, investment and operating. Here are
few examples,taken from google news:</span><span style="font-family: 'Times New Roman', serif; font-size: 12pt; line-height: 150%;"><o:p></o:p></span></div>
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<br /></div>
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<span style="font-family: 'Times New Roman', serif; font-size: 12pt; line-height: 150%;">1. <a href="http://www.just-food.com/news/cargill-eyes-uk-growth-through-capacity-expansion_id125021.aspx"><span style="color: blue;">UK:Cargill eyes UK growth through capacity expansion</span></a> (please
visit the link to know more.) The following news refers to Cargill, an
agro-based company expanding it's operations in UK. Any expansion news pertains
to <b>investment activity</b> as expansion necessarily mandates
investment.<o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%; margin-bottom: 0in; text-indent: -0.25in;">
<span style="font-family: 'Times New Roman', serif; font-size: 12pt; line-height: 150%;">2. <a href="http://www.business-standard.com/article/companies/rolta-to-raise-over-200-mn-through-overseas-bond-issue-113043000639_1.html"><span style="color: blue;">Rolta to raise over $200 mn through overseas bond issue</span></a> (please
visit the link to know more.) Here, bond is a source of raising funds. Hence,
it can be deduced that the company is raising money through bonds. Hence, this
news pertains to <b>financing activity</b>. <o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%; margin-bottom: 0in; text-indent: -0.25in;">
<span style="font-family: 'Times New Roman', serif; font-size: 12pt; line-height: 150%;">3. <a href="http://www.business-standard.com/article/international/kellogg-to-cut-down-jobs-by-2017-as-part-of-cost-cutting-plan-113110500347_1.html"><span style="color: blue;">Kellogg to cut down jobs by 2017 as part of 'cost-cutting
plan'</span></a> (please visit the link to know more.)<o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%; margin-bottom: 0in;">
<span style="font-family: 'Times New Roman', serif; font-size: 12pt; line-height: 150%;">Salary is an expense
which is met on a monthly basis and is recurring in nature. Hence, salary can
be treated as an expense relating to <b>operating activity</b>. It should
be remembered that operating activities impact profitability directly. <o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%; margin-bottom: 0in;">
<span style="font-family: 'Times New Roman', serif; font-size: 12pt; line-height: 150%;">My advice to all those
who are students of business analysis is that you should spend at least a week
in slotting news in different categories. <o:p></o:p></span></div>
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<br /></div>
<div class="MsoNormal" style="line-height: 150%; margin-bottom: 0in;">
<span style="font-family: 'Times New Roman', serif; font-size: 12pt; line-height: 150%;">In the next part we
would talk about how every financial activity has an indirect implication on
other two activities and how the three are connected.<o:p></o:p></span></div>
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<br /></div>
<div class="MsoNormal" style="line-height: 150%; margin-bottom: 0in;">
<span style="font-family: 'Times New Roman', serif; font-size: 12pt; line-height: 150%;">PART II<o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%; margin-bottom: 0in;">
<span style="font-family: 'Times New Roman', serif; font-size: 12pt; line-height: 150%;">How to analyse news
pertaining capacity expansion<o:p></o:p></span></div>
<div class="MsoNormal" style="background-color: white; background-position: initial initial; background-repeat: initial initial; line-height: 150%; margin-bottom: 0in;">
<b><span style="color: #3b3a39; font-family: "Times New Roman","serif"; font-size: 12.0pt; line-height: 150%; mso-fareast-font-family: "Times New Roman"; text-transform: uppercase;">"</span></b><span style="color: #3b3a39; font-family: "Times New Roman","serif"; font-size: 12.0pt; line-height: 150%; mso-fareast-font-family: "Times New Roman";">India Cements plans to
expand its capacity in Rajasthan with the possible investment of around Rs
650-700 crore to cater to increasing demand in Gujarat and Madhya Pradesh"
-Source: Business line Feb 14 th ,2013<o:p></o:p></span></div>
<div class="MsoNormal" style="background-color: white; background-position: initial initial; background-repeat: initial initial; line-height: 150%; margin-bottom: 15pt;">
<b><span style="color: #3b3a39; font-family: "Times New Roman","serif"; font-size: 12.0pt; line-height: 150%; mso-fareast-font-family: "Times New Roman";">Investing Angle:</span></b><span style="color: #3b3a39; font-family: "Times New Roman","serif"; font-size: 12.0pt; line-height: 150%; mso-fareast-font-family: "Times New Roman";"><o:p></o:p></span></div>
<div class="MsoNormal" style="background-color: white; background-position: initial initial; background-repeat: initial initial; line-height: 150%; margin-bottom: 15pt;">
<span style="color: #3b3a39; font-family: "Times New Roman","serif"; font-size: 12.0pt; line-height: 150%; mso-fareast-font-family: "Times New Roman";">If we look at the news
the first thing we realise is that the company is expanding it's operations. So
the news relates to investing activity as the company is augmenting it's future
earning capacity. Here, we should realize that Rome was not built in a day
hence the process of capacity expansion would take more than 1 year. I believe
it would take at least 3 years. <o:p></o:p></span></div>
<div class="MsoNormal" style="background-color: white; background-position: initial initial; background-repeat: initial initial; line-height: 150%; margin-bottom: 15pt;">
<b><span style="color: #3b3a39; font-family: "Times New Roman","serif"; font-size: 12.0pt; line-height: 150%; mso-fareast-font-family: "Times New Roman";">Financing Angle:</span></b><span style="color: #3b3a39; font-family: "Times New Roman","serif"; font-size: 12.0pt; line-height: 150%; mso-fareast-font-family: "Times New Roman";"><o:p></o:p></span></div>
<div class="MsoNormal" style="background-color: white; background-position: initial initial; background-repeat: initial initial; line-height: 150%; margin-bottom: 15pt;">
<span style="color: #3b3a39; font-family: "Times New Roman","serif"; font-size: 12.0pt; line-height: 150%; mso-fareast-font-family: "Times New Roman";">Now the amount
required to expand is INR 650-700 crore. The amount can be raised through the
following sources,<o:p></o:p></span></div>
<div class="MsoListParagraph" style="background-color: white; background-position: initial initial; background-repeat: initial initial; line-height: 150%; margin-bottom: 15pt; text-indent: -0.25in;">
<!--[if !supportLists]--><span style="color: #3b3a39; font-family: Symbol; font-size: 12.0pt; line-height: 150%; mso-bidi-font-family: Symbol; mso-fareast-font-family: Symbol;">·<span style="font-family: 'Times New Roman'; font-size: 7pt; line-height: normal;">
</span></span><!--[endif]--><b><span style="color: #3b3a39; font-family: "Times New Roman","serif"; font-size: 12.0pt; line-height: 150%; mso-fareast-font-family: "Times New Roman";">Internal Accruals:</span></b><span style="color: #3b3a39; font-family: "Times New Roman","serif"; font-size: 12.0pt; line-height: 150%; mso-fareast-font-family: "Times New Roman";"><o:p></o:p></span></div>
<div class="MsoNormal" style="background-color: white; background-position: initial initial; background-repeat: initial initial; line-height: 150%; margin-bottom: 15pt;">
<span style="color: #3b3a39; font-family: "Times New Roman","serif"; font-size: 12.0pt; line-height: 150%; mso-fareast-font-family: "Times New Roman";">Internal Accruals
refers to the profit that the company has not used over the years. Here the best
indicator would be the cash and bank balances.<o:p></o:p></span></div>
<div class="MsoNormal" style="background-color: white; background-position: initial initial; background-repeat: initial initial; line-height: 150%; margin-bottom: 15pt;">
<span style="color: #3b3a39; font-family: "Times New Roman","serif"; font-size: 12.0pt; line-height: 150%; mso-fareast-font-family: "Times New Roman";"> If you look at
the balance sheet of the company for the years 2012 and 2013 at <a href="http://www.moneycontrol.com/financials/indiacements/balance-sheet/IC#IC"><span style="color: blue;">moneycontrol.com</span></a> you realize that the
company has hardly INR 5 crs. Hence it is not possible for the company to raise
the amount through internal accruals. <o:p></o:p></span></div>
<div class="MsoListParagraph" style="background-color: white; background-position: initial initial; background-repeat: initial initial; line-height: 150%; margin-bottom: 0in; text-indent: -0.25in;">
<!--[if !supportLists]--><span style="color: #3b3a39; font-family: Symbol; font-size: 12.0pt; line-height: 150%; mso-bidi-font-family: Symbol; mso-fareast-font-family: Symbol;">·<span style="font-family: 'Times New Roman'; font-size: 7pt; line-height: normal;">
</span></span><!--[endif]--><b><span style="color: #3b3a39; font-family: "Times New Roman","serif"; font-size: 12.0pt; line-height: 150%; mso-fareast-font-family: "Times New Roman";">FPO:</span></b><span style="color: #3b3a39; font-family: "Times New Roman","serif"; font-size: 12.0pt; line-height: 150%; mso-fareast-font-family: "Times New Roman";"><o:p></o:p></span></div>
<div class="MsoNormal" style="background-color: white; background-position: initial initial; background-repeat: initial initial; line-height: 150%; margin-bottom: 0in;">
<span style="color: #3b3a39; font-family: "Times New Roman","serif"; font-size: 12.0pt; line-height: 150%; mso-fareast-font-family: "Times New Roman";">Follow up Public Offer (FPO) refers to the process of raising
money from the stock market. <o:p></o:p></span></div>
<div class="MsoNormal" style="background-color: white; background-position: initial initial; background-repeat: initial initial; line-height: 150%; margin-bottom: 0in;">
<span style="color: #3b3a39; font-family: "Times New Roman","serif"; font-size: 12.0pt; line-height: 150%; mso-fareast-font-family: "Times New Roman";">With Indian economy yet to show signs of growth, the market
might have not been receptive to an IPO in and around February. <o:p></o:p></span></div>
<div class="MsoListParagraph" style="background-color: white; background-position: initial initial; background-repeat: initial initial; line-height: 150%; margin-bottom: 0in; text-indent: -0.25in;">
<!--[if !supportLists]--><span style="color: #3b3a39; font-family: Symbol; font-size: 12.0pt; line-height: 150%; mso-bidi-font-family: Symbol; mso-fareast-font-family: Symbol;">·<span style="font-family: 'Times New Roman'; font-size: 7pt; line-height: normal;">
</span></span><!--[endif]--><b><span style="color: #3b3a39; font-family: "Times New Roman","serif"; font-size: 12.0pt; line-height: 150%; mso-fareast-font-family: "Times New Roman";">Debt Instruments</span></b><span style="color: #3b3a39; font-family: "Times New Roman","serif"; font-size: 12.0pt; line-height: 150%; mso-fareast-font-family: "Times New Roman";"><o:p></o:p></span></div>
<div style="line-height: 150%;">
<br /></div>
<div class="MsoNormal" style="background-color: white; margin-bottom: 0in;">
<span style="color: #3b3a39; font-family: "Times New Roman","serif"; font-size: 12pt; line-height: 150%;">Debt instrument refers to raising funds through borrowings.
Borrowing comes with an obligation, in form of interest payments. If the company
has huge debt as is the case with India Cements raising further debts will be a
herculean task. It could also increase the pressure of performing with an increasing
interest rate scenario.
</span></div>
</div>
<div style="margin-top: 15px;">
<h4>
Author: Abhishek Sinha</h4>
<a bhishek="" bp.blogspot.com="" href="https://www.blogger.com/%3Ca%20href=" http:="" imageanchor="1" inha.jpg="" jwre7ofa4="" qbft2mznxi="" s1600="" vagvddxgi=""><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgBWL9rLPO0EUloSCujRZKvsQHHqRc4hS2aMMtS6LxbTgoYfv99-dNfEaZOWFYQ82o4KkB-Qe0DUHV-x9q5SJ-aZAcYIdkz-c_pNhm06w93wjaIRq1xheAOUactVnwjWvn88nYFZMaOiaO0/s200/Abhishek+Sinha.jpg" /></a><br />
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Abhishek Sinha has approximately 8 year of experience in equity research, business research and consultancy. He has also had the privilege of managing a small portfolio of INR 3 million. However, his interest lies in teaching and "demystifying concepts." He has taught students right from the age of 3 years at PP1, to 40 years at executive courses and believes teaching is not about knowing the concepts; it is about relating the concepts to the audience.
At present he is "gainfully employed" at Vignana Jyothi Institute of Management, Hyderabad; where he loves to teach finance to an enthusiastic bunch of management students. His hobbies include analyzing income statement, balance sheet and cash flow. <a href="https://plus.google.com/u/0/112464735121397739558/about?rel=author">Google +</a></div>
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Abhishek Sinhahttp://www.blogger.com/profile/05955755302598472670noreply@blogger.com1tag:blogger.com,1999:blog-7457870121656036705.post-27813475133500888472013-10-30T01:04:00.001-07:002013-12-05T02:44:01.014-08:00The economics of gifting Cadbury explained <div dir="ltr" style="text-align: left;" trbidi="on">
<div align="center" class="MsoNormal" style="text-align: center;">
<br /></div>
<div class="MsoNormal" style="text-align: justify;">
The monetary consideration
involved in gifting gives rise to a whole industry that thrives on people
gifting each other gifts that have materialistic touch about it. However, hard
we may decry the economics and materialism involved in gifting it would be
difficult for us not to be happy when we get gifts. We are in the middle of the
peak season of gifting. Diwali is around the corner and this is the time when
we exchange the maximum gifts in India. India is an important market for the multinational
companies as along with Brazil, Russia and China they have captured
approximately 45% of the market. So let us
now understand what the big pain point is for these chocolate companies using
Cadbury India example<o:p></o:p></div>
<div class="MsoNormal" style="text-align: justify;">
<b>What are the factors we need to look at to estimate the profitability
of these companies through sales of chocolates?<o:p></o:p></b></div>
<div class="MsoListParagraphCxSpFirst" style="mso-list: l0 level1 lfo1; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: Symbol; mso-bidi-font-family: Symbol; mso-fareast-font-family: Symbol;">·<span style="font-family: 'Times New Roman'; font-size: 7pt;">
</span></span><!--[endif]--><b>Total
Sales - (Product of Selling Price and Units sold)<o:p></o:p></b></div>
<div class="MsoListParagraphCxSpMiddle" style="margin-left: 1.0in; mso-add-space: auto; mso-list: l0 level2 lfo1; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: "Courier New"; mso-fareast-font-family: "Courier New";">o<span style="font-family: 'Times New Roman'; font-size: 7pt;">
</span></span><!--[endif]-->Ability to increase the selling price of
chocolate depends on the responsiveness of change in quantity demand. It is
expected that the price of certain high end chocolates such as Cadbury Dairy
Milk Silk and Bournville should increase as the demand for these chocolates are
inelastic, hence increase in price does not lead to decrease in quantity
demanded.. <o:p></o:p></div>
<div class="MsoListParagraphCxSpLast" style="margin-left: 1.0in; mso-add-space: auto; mso-list: l0 level2 lfo1; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: "Courier New"; mso-fareast-font-family: "Courier New";">o<span style="font-family: 'Times New Roman'; font-size: 7pt;">
</span></span><!--[endif]-->The demand (units sold) for chocolates peaks in
the seasons when there is festivity. Hence, October to December is the best
quarter for the company. The increase in demand might also be attributed to
increase in total online gifting. <o:p></o:p></div>
<div class="MsoListParagraphCxSpLast" style="margin-left: 1.0in; mso-add-space: auto; mso-list: l0 level2 lfo1; text-align: justify; text-indent: -.25in;">
<br /></div>
<div class="MsoNormal" style="text-align: justify;">
<b>Cost of Raw Material</b>: As can be seen from the table below raw
material as % of sales has increased over the years. <o:p></o:p></div>
<div class="MsoNormal" style="tab-stops: center 3.25in; text-align: justify;">
<b> Table 1 - Cadbury India – Raw Material to Sales</b></div>
<div class="MsoNormal" style="tab-stops: center 3.25in; text-align: justify;">
<b> <o:p></o:p></b></div>
<table border="0" cellpadding="0" cellspacing="0" class="MsoNormalTable" style="border-collapse: collapse; margin-left: 5.15pt; mso-padding-alt: 0in 5.4pt 0in 5.4pt; mso-yfti-tbllook: 1184; width: 475px;">
<tbody>
<tr style="height: 15.0pt; mso-yfti-firstrow: yes; mso-yfti-irow: 0;">
<td nowrap="" style="border: solid windowtext 1.0pt; height: 15.0pt; mso-border-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 74.0pt;" valign="bottom" width="99"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-size: 8pt;">Particular (INR Cr.)<o:p></o:p></span></div>
</td>
<td style="border-left: none; border: solid windowtext 1.0pt; height: 15.0pt; mso-border-bottom-alt: solid windowtext .5pt; mso-border-right-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 41.0pt;" valign="bottom" width="55"><div align="right" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: right;">
<b><span style="font-size: 8pt;">Dec 2012<o:p></o:p></span></b></div>
</td>
<td style="border-left: none; border: solid windowtext 1.0pt; height: 15.0pt; mso-border-bottom-alt: solid windowtext .5pt; mso-border-right-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 49.0pt;" valign="bottom" width="65"><div align="right" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: right;">
<b><span style="font-size: 8pt;">Dec 2011<o:p></o:p></span></b></div>
</td>
<td style="border-left: none; border: solid windowtext 1.0pt; height: 15.0pt; mso-border-bottom-alt: solid windowtext .5pt; mso-border-right-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: .5in;" valign="bottom" width="48"><div align="right" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: right;">
<b><span style="font-size: 8pt;">Dec 2010<o:p></o:p></span></b></div>
</td>
<td style="border-left: none; border: solid windowtext 1.0pt; height: 15.0pt; mso-border-bottom-alt: solid windowtext .5pt; mso-border-right-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 41.0pt;" valign="bottom" width="55"><div align="right" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: right;">
<b><span style="font-size: 8pt;">Dec 2009<o:p></o:p></span></b></div>
</td>
<td style="border-left: none; border: solid windowtext 1.0pt; height: 15.0pt; mso-border-bottom-alt: solid windowtext .5pt; mso-border-right-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 42.0pt;" valign="bottom" width="56"><div align="right" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: right;">
<b><span style="font-size: 8pt;">Dec 2008<o:p></o:p></span></b></div>
</td>
<td style="border-left: none; border: solid windowtext 1.0pt; height: 15.0pt; mso-border-bottom-alt: solid windowtext .5pt; mso-border-right-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 37.0pt;" valign="bottom" width="49"><div align="right" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: right;">
<b><span style="font-size: 8pt;">Dec 2007<o:p></o:p></span></b></div>
</td>
<td style="border-left: none; border: solid windowtext 1.0pt; height: 15.0pt; mso-border-bottom-alt: solid windowtext .5pt; mso-border-right-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: .5in;" valign="bottom" width="48"><div align="right" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: right;">
<b><span style="font-size: 8pt;">Dec 2006<o:p></o:p></span></b></div>
</td>
</tr>
<tr style="height: 15.0pt; mso-yfti-irow: 1;">
<td nowrap="" style="border-top: none; border: solid windowtext 1.0pt; height: 15.0pt; mso-border-bottom-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-right-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 74.0pt;" valign="bottom" width="99"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-size: 8pt;"> Net Sales<o:p></o:p></span></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 15.0pt; mso-border-bottom-alt: solid windowtext .5pt; mso-border-right-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 41.0pt;" valign="bottom" width="55"><div align="right" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: right;">
<span style="font-size: 8pt;">4,065.98<o:p></o:p></span></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 15.0pt; mso-border-bottom-alt: solid windowtext .5pt; mso-border-right-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 49.0pt;" valign="bottom" width="65"><div align="right" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: right;">
<span style="font-size: 8pt;">3,364.65<o:p></o:p></span></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 15.0pt; mso-border-bottom-alt: solid windowtext .5pt; mso-border-right-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: .5in;" valign="bottom" width="48"><div align="right" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: right;">
<span style="font-size: 8pt;">2,503.24<o:p></o:p></span></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 15.0pt; mso-border-bottom-alt: solid windowtext .5pt; mso-border-right-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 41.0pt;" valign="bottom" width="55"><div align="right" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: right;">
<span style="font-size: 8pt;">1,934.38<o:p></o:p></span></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 15.0pt; mso-border-bottom-alt: solid windowtext .5pt; mso-border-right-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 42.0pt;" valign="bottom" width="56"><div align="right" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: right;">
<span style="font-size: 8pt;">1,588.59<o:p></o:p></span></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 15.0pt; mso-border-bottom-alt: solid windowtext .5pt; mso-border-right-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 37.0pt;" valign="bottom" width="49"><div align="right" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: right;">
<span style="font-size: 8pt;">1,293.47<o:p></o:p></span></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 15.0pt; mso-border-bottom-alt: solid windowtext .5pt; mso-border-right-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: .5in;" valign="bottom" width="48"><div align="right" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: right;">
<span style="font-size: 8pt;">1,058.24<o:p></o:p></span></div>
</td>
</tr>
<tr style="height: 15.0pt; mso-yfti-irow: 2;">
<td nowrap="" style="border-top: none; border: solid windowtext 1.0pt; height: 15.0pt; mso-border-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 74.0pt;" valign="bottom" width="99"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-size: 8pt;"> Raw Materials <o:p></o:p></span></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 15.0pt; mso-border-bottom-alt: solid windowtext .5pt; mso-border-right-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 41.0pt;" valign="bottom" width="55"><div align="right" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: right;">
<span style="font-size: 8pt;">1,576.33<o:p></o:p></span></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 15.0pt; mso-border-bottom-alt: solid windowtext .5pt; mso-border-right-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 49.0pt;" valign="bottom" width="65"><div align="right" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: right;">
<span style="font-size: 8pt;">1,247.80<o:p></o:p></span></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 15.0pt; mso-border-bottom-alt: solid windowtext .5pt; mso-border-right-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: .5in;" valign="bottom" width="48"><div align="right" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: right;">
<span style="font-size: 8pt;">903.81<o:p></o:p></span></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 15.0pt; mso-border-bottom-alt: solid windowtext .5pt; mso-border-right-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 41.0pt;" valign="bottom" width="55"><div align="right" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: right;">
<span style="font-size: 8pt;">617.29<o:p></o:p></span></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 15.0pt; mso-border-bottom-alt: solid windowtext .5pt; mso-border-right-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 42.0pt;" valign="bottom" width="56"><div align="right" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: right;">
<span style="font-size: 8pt;">522.06<o:p></o:p></span></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 15.0pt; mso-border-bottom-alt: solid windowtext .5pt; mso-border-right-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 37.0pt;" valign="bottom" width="49"><div align="right" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: right;">
<span style="font-size: 8pt;">394.55<o:p></o:p></span></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 15.0pt; mso-border-bottom-alt: solid windowtext .5pt; mso-border-right-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: .5in;" valign="bottom" width="48"><div align="right" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: right;">
<span style="font-size: 8pt;">295.95<o:p></o:p></span></div>
</td>
</tr>
<tr style="height: 15.0pt; mso-yfti-irow: 3; mso-yfti-lastrow: yes;">
<td nowrap="" style="border-top: none; border: solid windowtext 1.0pt; height: 15.0pt; mso-border-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 74.0pt;" valign="bottom" width="99"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-size: 8pt;"> Raw Materials as %
of sales<o:p></o:p></span></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 15.0pt; mso-border-bottom-alt: solid windowtext .5pt; mso-border-right-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 41.0pt;" valign="bottom" width="55"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<b><span style="font-size: 8pt;">39%<o:p></o:p></span></b></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 15.0pt; mso-border-bottom-alt: solid windowtext .5pt; mso-border-right-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 49.0pt;" valign="bottom" width="65"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<b><span style="font-size: 8pt;">37%<o:p></o:p></span></b></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 15.0pt; mso-border-bottom-alt: solid windowtext .5pt; mso-border-right-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: .5in;" valign="bottom" width="48"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<b><span style="font-size: 8pt;">36%<o:p></o:p></span></b></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 15.0pt; mso-border-bottom-alt: solid windowtext .5pt; mso-border-right-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 41.0pt;" valign="bottom" width="55"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<b><span style="font-size: 8pt;">32%<o:p></o:p></span></b></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 15.0pt; mso-border-bottom-alt: solid windowtext .5pt; mso-border-right-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 42.0pt;" valign="bottom" width="56"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<b><span style="font-size: 8pt;">33%<o:p></o:p></span></b></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 15.0pt; mso-border-bottom-alt: solid windowtext .5pt; mso-border-right-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 37.0pt;" valign="bottom" width="49"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<b><span style="font-size: 8pt;">31%<o:p></o:p></span></b></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 15.0pt; mso-border-bottom-alt: solid windowtext .5pt; mso-border-right-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: .5in;" valign="bottom" width="48"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<b><span style="font-size: 8pt;">28%<o:p></o:p></span></b></div>
</td>
</tr>
</tbody></table>
<div class="MsoNormal" style="text-align: justify;">
Source: Capitaline<o:p></o:p></div>
<div class="MsoNormal" style="text-align: justify;">
<br /></div>
<div class="MsoNormal" style="text-align: justify;">
The table above finds the ratio
between cost of raw materials and sales for the FY 2006 to 2012. As the cost of
raw material to sales has been more than 25% it can be deduced that that cost
of raw material is an important cost for the company. The other conclusion that
we can arrive at is cost of raw material has been eating into the potential
profits as it has increased in proportion from 28% to approximately 40% .<b><o:p></o:p></b></div>
<b><span style="font-family: "Calibri","sans-serif"; font-size: 11.0pt; line-height: 115%; mso-ansi-language: EN-US; mso-ascii-theme-font: minor-latin; mso-bidi-font-family: "Times New Roman"; mso-bidi-language: AR-SA; mso-bidi-theme-font: minor-bidi; mso-fareast-font-family: Calibri; mso-fareast-language: EN-US; mso-fareast-theme-font: minor-latin; mso-hansi-theme-font: minor-latin;"><br clear="all" style="mso-special-character: line-break; page-break-before: always;" />
</span></b>
<br />
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal" style="text-align: justify;">
<b>Now the important question is why is cost of raw materials increasing?<o:p></o:p></b></div>
<br />
<div class="MsoNormal" style="text-align: justify;">
The cost of raw materials is increasing
primarily <a href="http://www.livemint.com/Industry/dzZbXrsKi74yU2v6bHUMJK/Rising-global-cocoa-prices-to-hurt-Indian-chocolate-buyers.html">because
the cost of cocoa</a> which is an important ingredient is going up. The reason
why the price of cocoa is going up is that there is a mismatch between demand
and supply with demand outstripping supply. Hence, <a href="http://money.cnn.com/2013/10/14/news/chocolate-prices-cocoa/">one
alternative for manufacturers of chocolate is to reduce cocoa content and
increase artificial ingredients</a>. The other alternative is to decrease the
size of the chocolate bars and keep the price same. I believe most companies
would prefer decreasing the size of the bar rather than impacting the taste of
the chocolate.<o:p></o:p></div>
<div style="margin-top: 15px;">
<h4>Author: Abhishek Sinha</h4><a imageanchor="1" href="<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgBWL9rLPO0EUloSCujRZKvsQHHqRc4hS2aMMtS6LxbTgoYfv99-dNfEaZOWFYQ82o4KkB-Qe0DUHV-x9q5SJ-aZAcYIdkz-c_pNhm06w93wjaIRq1xheAOUactVnwjWvn88nYFZMaOiaO0/s1600/Abhishek+Sinha.jpg" imageanchor="1" ><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgBWL9rLPO0EUloSCujRZKvsQHHqRc4hS2aMMtS6LxbTgoYfv99-dNfEaZOWFYQ82o4KkB-Qe0DUHV-x9q5SJ-aZAcYIdkz-c_pNhm06w93wjaIRq1xheAOUactVnwjWvn88nYFZMaOiaO0/s200/Abhishek+Sinha.jpg" /></a><p style="margin-left:145px; margin-top:-138px;">Abhishek Sinha has approximately 8 year of experience in equity research, business research and consultancy. He has also had the privilege of managing a small portfolio of INR 3 million. However, his interest lies in teaching and "demystifying concepts." He has taught students right from the age of 3 years at PP1, to 40 years at executive courses and believes teaching is not about knowing the concepts; it is about relating the concepts to the audience.
At present he is "gainfully employed" at Vignana Jyothi Institute of Management, Hyderabad; where he loves to teach finance to an enthusiastic bunch of management students. His hobbies include analyzing income statement, balance sheet and cash flow.> <a href="https://plus.google.com/u/0/112464735121397739558/about?rel=author">Google +</a></p></div>
</div>
Abhishek Sinhahttp://www.blogger.com/profile/05955755302598472670noreply@blogger.com2tag:blogger.com,1999:blog-7457870121656036705.post-34974113979934866462013-10-22T10:51:00.000-07:002013-12-06T01:05:49.841-08:00PVR Cinemas sells off Anupam, South Delhi Cineplex and Leases it back - explained<div dir="ltr" style="text-align: left;" trbidi="on">
<div style="background-color: white; border-bottom: 0px; border-left: 0px; border-right: 0px; border-top: 0px; color: #404040; font-family: Arial; line-height: 18px; margin-bottom: 15px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;">
<a href="http://in.reuters.com/article/2013/10/21/pvr-to-sell-anupam-multiplex-property-in-idINDEE99K08S20131021">PVR, one of the most popular chains of cineplexes in India</a> has of late sold Anupam, one of it's flagship cineplex, situated in South Delhi, to an undisclosed party for Rs. 52 cr. This news would have been noticed by all those Delhites who have seen movies at PVR Anupam. However, it is not the selling of Anupam cineplex that has evoked interest from the analyst community. The fact that the buyer has leased back the asset to PVR is what has evinced interest. So what are the financial ramifications of this transaction is the question that I try and explain the readers of the blog. </div>
<div style="background-color: white; border-bottom: 0px; border-left: 0px; border-right: 0px; border-top: 0px; color: #404040; font-family: Arial; line-height: 18px; margin-bottom: 15px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;">
Let us see how the financial statements are being impacted by the news. If you are not clear with your financial statements you could just read the paragraph below. If you are a pro just ignore it.</div>
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<div style="color: #404040; font-family: Arial; line-height: 18px;">
There are three financial statements that companies essentially prepare:</div>
<div style="color: #404040; font-family: Arial; line-height: 18px;">
<br /></div>
<ol style="color: #404040; font-family: Arial; line-height: 18px; text-align: left;">
<li>Income Statement - Aimed at arriving at the profit the company earns in the given accounting period</li>
<li>Balance Sheet - Aimed at calculating the solvency (long term debt paying ability) and liquidity (short term debt paying ability) position of the company as on a given date.</li>
<li>Cash Flow Statement - Aimed at arriving at the cash balance at the end of the year. It is divided into three parts cash flow from operations (money generated from operations) , cash flow from investing (money spent on buying assets net of assets sold) and cash flow from financing (money raised for business net of money returned to investors,lenders etc.). </li>
</ol>
<div style="color: #404040; font-family: Arial; line-height: 18px;">
<br /></div>
<div style="color: #404040; font-family: Arial; line-height: 18px;">
<b>When cineplex is sold for Rs. 52 cr. in cash what happens to the financial statement?</b></div>
<div style="color: #404040; font-family: Arial; line-height: 18px;">
<br /></div>
<div>
<div style="color: #404040; font-family: Arial; line-height: 18px;">
<b>Balance Sheet</b>: Operating non current asset (long term asset which help earn revenues) decreases in this case and cash (which is a part of short term asset increases) . Thus, the company's operating profit generating capacity decreases as it's operating non current asset decreases and hence if we look in isolation the company has contracted in size. </div>
<div style="color: #404040; font-family: Arial; line-height: 18px;">
<br /></div>
<div style="color: #404040; font-family: Arial; line-height: 18px;">
So here is how the balance sheet would be impacted by the transaction when it comes to PVR Cinemas Ltd.</div>
<div style="color: #404040; font-family: Arial; line-height: 18px;">
<br /></div>
<table border="0" cellpadding="0" cellspacing="0" class="MsoNormalTable" style="border-collapse: collapse; color: #404040; font-family: Arial; line-height: 18px; margin-left: 5.15pt; width: 477px;"><tbody>
<tr style="height: 15pt; mso-yfti-firstrow: yes; mso-yfti-irow: 0;"><td nowrap="" style="border-bottom: windowtext 1pt solid; border-left: windowtext 1pt solid; border-right: windowtext 1pt solid; border-top: windowtext 1pt solid; height: 15pt; mso-border-alt: solid windowtext .5pt; padding-bottom: 0in; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; width: 166pt;" valign="bottom" width="221"><div class="MsoNormal" style="margin-bottom: 0pt;">
<b><span style="font-size: x-small;">PVR Fixed Assets (A)<o:p></o:p></span></b></div>
</td><td nowrap="" style="border-bottom: windowtext 1pt solid; border-left: windowtext 1pt solid; border-right: windowtext 1pt solid; border-top: windowtext 1pt solid; height: 15pt; mso-border-bottom-alt: solid windowtext .5pt; mso-border-right-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding-bottom: 0in; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; width: 48pt;" valign="bottom" width="64"><div class="MsoNormal" style="margin-bottom: 0pt;">
<b><span style="font-size: x-small;">Impact<o:p></o:p></span></b></div>
</td><td nowrap="" style="border-bottom: windowtext 1pt solid; border-left: windowtext 1pt solid; border-right: windowtext 1pt solid; border-top: windowtext 1pt solid; height: 15pt; mso-border-bottom-alt: solid windowtext .5pt; mso-border-right-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding-bottom: 0in; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; width: 48pt;" valign="bottom" width="64"><div class="MsoNormal" style="margin-bottom: 0pt;">
<b><span style="font-size: x-small;">FY 2013<o:p></o:p></span></b></div>
</td><td nowrap="" style="border-bottom: windowtext 1pt solid; border-left: windowtext 1pt solid; border-right: windowtext 1pt solid; border-top: windowtext 1pt solid; height: 15pt; mso-border-bottom-alt: solid windowtext .5pt; mso-border-right-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding-bottom: 0in; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; width: 48pt;" valign="bottom" width="64"><div class="MsoNormal" style="margin-bottom: 0pt;">
<b><span style="font-size: x-small;">FY 2012<o:p></o:p></span></b></div>
</td><td nowrap="" style="border-bottom: windowtext 1pt solid; border-left: windowtext 1pt solid; border-right: windowtext 1pt solid; border-top: windowtext 1pt solid; height: 15pt; mso-border-bottom-alt: solid windowtext .5pt; mso-border-right-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding-bottom: 0in; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; width: 48pt;" valign="bottom" width="64"><div class="MsoNormal" style="margin-bottom: 0pt;">
<b><span style="font-size: x-small;">FY 2011<o:p></o:p></span></b></div>
</td></tr>
<tr style="height: 15pt; mso-yfti-irow: 1;"><td nowrap="" style="border-bottom: windowtext 1pt solid; border-left: windowtext 1pt solid; border-right: windowtext 1pt solid; border-top: windowtext 1pt solid; height: 15pt; mso-border-bottom-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-right-alt: solid windowtext .5pt; padding-bottom: 0in; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; width: 166pt;" valign="bottom" width="221"><div class="MsoNormal" style="margin-bottom: 0pt;">
<b><span style="font-size: x-small;"> Gross Block <o:p></o:p></span></b></div>
</td><td style="border-bottom: windowtext 1pt solid; border-left: medium none; border-right: windowtext 1pt solid; border-top: medium none; height: 15pt; mso-border-bottom-alt: solid windowtext .5pt; mso-border-right-alt: solid windowtext .5pt; padding-bottom: 0in; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; width: 48pt;" valign="bottom" width="64"><div align="right" class="MsoNormal" style="margin-bottom: 0pt; text-align: right;">
<span style="font-size: x-small;">493.57<o:p></o:p></span></div>
</td><td style="border-bottom: windowtext 1pt solid; border-left: medium none; border-right: windowtext 1pt solid; border-top: medium none; height: 15pt; mso-border-bottom-alt: solid windowtext .5pt; mso-border-right-alt: solid windowtext .5pt; padding-bottom: 0in; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; width: 48pt;" valign="bottom" width="64"><div align="right" class="MsoNormal" style="margin-bottom: 0pt; text-align: right;">
<span style="font-size: x-small;">545.57<o:p></o:p></span></div>
</td><td style="border-bottom: windowtext 1pt solid; border-left: medium none; border-right: windowtext 1pt solid; border-top: medium none; height: 15pt; mso-border-bottom-alt: solid windowtext .5pt; mso-border-right-alt: solid windowtext .5pt; padding-bottom: 0in; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; width: 48pt;" valign="bottom" width="64"><div align="right" class="MsoNormal" style="margin-bottom: 0pt; text-align: right;">
<span style="font-size: x-small;">385.37<o:p></o:p></span></div>
</td><td style="border-bottom: windowtext 1pt solid; border-left: medium none; border-right: windowtext 1pt solid; border-top: medium none; height: 15pt; mso-border-bottom-alt: solid windowtext .5pt; mso-border-right-alt: solid windowtext .5pt; padding-bottom: 0in; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; width: 48pt;" valign="bottom" width="64"><div align="right" class="MsoNormal" style="margin-bottom: 0pt; text-align: right;">
<span style="font-size: x-small;">353.24<o:p></o:p></span></div>
</td></tr>
<tr style="height: 15pt; mso-yfti-irow: 2;"><td nowrap="" style="border-bottom: windowtext 1pt solid; border-left: windowtext 1pt solid; border-right: windowtext 1pt solid; border-top: windowtext 1pt solid; height: 15pt; mso-border-bottom-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-right-alt: solid windowtext .5pt; padding-bottom: 0in; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; width: 166pt;" valign="bottom" width="221"><div class="MsoNormal" style="margin-bottom: 0pt;">
<b><span style="font-size: x-small;"> Less : Accumulated Depreciation <o:p></o:p></span></b></div>
</td><td style="border-bottom: windowtext 1pt solid; border-left: medium none; border-right: windowtext 1pt solid; border-top: medium none; height: 15pt; mso-border-bottom-alt: solid windowtext .5pt; mso-border-right-alt: solid windowtext .5pt; padding-bottom: 0in; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; width: 48pt;" valign="bottom" width="64"><div align="right" class="MsoNormal" style="margin-bottom: 0pt; text-align: right;">
<span style="font-size: x-small;">230.78<o:p></o:p></span></div>
</td><td style="border-bottom: windowtext 1pt solid; border-left: medium none; border-right: windowtext 1pt solid; border-top: medium none; height: 15pt; mso-border-bottom-alt: solid windowtext .5pt; mso-border-right-alt: solid windowtext .5pt; padding-bottom: 0in; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; width: 48pt;" valign="bottom" width="64"><div align="right" class="MsoNormal" style="margin-bottom: 0pt; text-align: right;">
<span style="font-size: x-small;">181.68<o:p></o:p></span></div>
</td><td style="border-bottom: windowtext 1pt solid; border-left: medium none; border-right: windowtext 1pt solid; border-top: medium none; height: 15pt; mso-border-bottom-alt: solid windowtext .5pt; mso-border-right-alt: solid windowtext .5pt; padding-bottom: 0in; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; width: 48pt;" valign="bottom" width="64"><div align="right" class="MsoNormal" style="margin-bottom: 0pt; text-align: right;">
<span style="font-size: x-small;">143.60<o:p></o:p></span></div>
</td><td style="border-bottom: windowtext 1pt solid; border-left: medium none; border-right: windowtext 1pt solid; border-top: medium none; height: 15pt; mso-border-bottom-alt: solid windowtext .5pt; mso-border-right-alt: solid windowtext .5pt; padding-bottom: 0in; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; width: 48pt;" valign="bottom" width="64"><div align="right" class="MsoNormal" style="margin-bottom: 0pt; text-align: right;">
<span style="font-size: x-small;">112.84<o:p></o:p></span></div>
</td></tr>
<tr style="height: 15pt; mso-yfti-irow: 3;"><td nowrap="" style="border-bottom: windowtext 1pt solid; border-left: windowtext 1pt solid; border-right: windowtext 1pt solid; border-top: windowtext 1pt solid; height: 15pt; mso-border-bottom-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-right-alt: solid windowtext .5pt; padding-bottom: 0in; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; width: 166pt;" valign="bottom" width="221"><div class="MsoNormal" style="margin-bottom: 0pt;">
<b><span style="font-size: x-small;">Depreciation (As shown in Income Statement)<o:p></o:p></span></b></div>
</td><td style="border-bottom: windowtext 1pt solid; border-left: medium none; border-right: windowtext 1pt solid; border-top: medium none; height: 15pt; mso-border-bottom-alt: solid windowtext .5pt; mso-border-right-alt: solid windowtext .5pt; padding-bottom: 0in; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; width: 48pt;" valign="bottom" width="64"><div align="right" class="MsoNormal" style="margin-bottom: 0pt; text-align: right;">
<span style="font-size: x-small;"><b>49.10</b><o:p></o:p></span></div>
</td><td style="border-bottom: windowtext 1pt solid; border-left: medium none; border-right: windowtext 1pt solid; border-top: medium none; height: 15pt; mso-border-bottom-alt: solid windowtext .5pt; mso-border-right-alt: solid windowtext .5pt; padding-bottom: 0in; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; width: 48pt;" valign="bottom" width="64"><div align="right" class="MsoNormal" style="margin-bottom: 0pt; text-align: right;">
<b><span style="font-size: x-small;">42.95<o:p></o:p></span></b></div>
</td><td style="border-bottom: windowtext 1pt solid; border-left: medium none; border-right: windowtext 1pt solid; border-top: medium none; height: 15pt; mso-border-bottom-alt: solid windowtext .5pt; mso-border-right-alt: solid windowtext .5pt; padding-bottom: 0in; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; width: 48pt;" valign="bottom" width="64"><div align="right" class="MsoNormal" style="margin-bottom: 0pt; text-align: right;">
<b><span style="font-size: x-small;">31.36<o:p></o:p></span></b></div>
</td><td style="border-bottom: windowtext 1pt solid; border-left: medium none; border-right: windowtext 1pt solid; border-top: medium none; height: 15pt; mso-border-bottom-alt: solid windowtext .5pt; mso-border-right-alt: solid windowtext .5pt; padding-bottom: 0in; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; width: 48pt;" valign="bottom" width="64"><div align="right" class="MsoNormal" style="margin-bottom: 0pt; text-align: right;">
<b><span style="font-size: x-small;">24.11<o:p></o:p></span></b></div>
</td></tr>
<tr style="height: 15pt; mso-yfti-irow: 4;"><td nowrap="" style="border-bottom: windowtext 1pt solid; border-left: windowtext 1pt solid; border-right: windowtext 1pt solid; border-top: windowtext 1pt solid; height: 15pt; mso-border-bottom-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-right-alt: solid windowtext .5pt; padding-bottom: 0in; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; width: 166pt;" valign="bottom" width="221"><div class="MsoNormal" style="margin-bottom: 0pt;">
<b><span style="font-size: x-small;"> Net Block <o:p></o:p></span></b></div>
</td><td style="border-bottom: windowtext 1pt solid; border-left: medium none; border-right: windowtext 1pt solid; border-top: medium none; height: 15pt; mso-border-bottom-alt: solid windowtext .5pt; mso-border-right-alt: solid windowtext .5pt; padding-bottom: 0in; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; width: 48pt;" valign="bottom" width="64"><div align="right" class="MsoNormal" style="margin-bottom: 0pt; text-align: right;">
<span style="font-size: x-small;">262.79<o:p></o:p></span></div>
</td><td style="border-bottom: windowtext 1pt solid; border-left: medium none; border-right: windowtext 1pt solid; border-top: medium none; height: 15pt; mso-border-bottom-alt: solid windowtext .5pt; mso-border-right-alt: solid windowtext .5pt; padding-bottom: 0in; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; width: 48pt;" valign="bottom" width="64"><div align="right" class="MsoNormal" style="margin-bottom: 0pt; text-align: right;">
<span style="font-size: x-small;">363.89<o:p></o:p></span></div>
</td><td style="border-bottom: windowtext 1pt solid; border-left: medium none; border-right: windowtext 1pt solid; border-top: medium none; height: 15pt; mso-border-bottom-alt: solid windowtext .5pt; mso-border-right-alt: solid windowtext .5pt; padding-bottom: 0in; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; width: 48pt;" valign="bottom" width="64"><div align="right" class="MsoNormal" style="margin-bottom: 0pt; text-align: right;">
<span style="font-size: x-small;">241.77<o:p></o:p></span></div>
</td><td style="border-bottom: windowtext 1pt solid; border-left: medium none; border-right: windowtext 1pt solid; border-top: medium none; height: 15pt; mso-border-bottom-alt: solid windowtext .5pt; mso-border-right-alt: solid windowtext .5pt; padding-bottom: 0in; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; width: 48pt;" valign="bottom" width="64"><div align="right" class="MsoNormal" style="margin-bottom: 0pt; text-align: right;">
<span style="font-size: x-small;">240.40<o:p></o:p></span></div>
</td></tr>
<tr style="height: 15pt; mso-yfti-irow: 5;"><td nowrap="" style="border-bottom: windowtext 1pt solid; border-left: windowtext 1pt solid; border-right: windowtext 1pt solid; border-top: windowtext 1pt solid; height: 15pt; mso-border-bottom-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-right-alt: solid windowtext .5pt; padding-bottom: 0in; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; width: 166pt;" valign="bottom" width="221"><div class="MsoNormal" style="margin-bottom: 0pt;">
<b><span style="font-size: x-small;">Depreciation Rate<o:p></o:p></span></b></div>
</td><td style="border-bottom: windowtext 1pt solid; border-left: medium none; border-right: windowtext 1pt solid; border-top: medium none; height: 15pt; mso-border-bottom-alt: solid windowtext .5pt; mso-border-right-alt: solid windowtext .5pt; padding-bottom: 0in; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; width: 48pt;" valign="bottom" width="64"><div align="right" class="MsoNormal" style="margin-bottom: 0pt; text-align: right;">
<span style="font-size: x-small;">9%<o:p></o:p></span></div>
</td><td style="border-bottom: windowtext 1pt solid; border-left: medium none; border-right: windowtext 1pt solid; border-top: medium none; height: 15pt; mso-border-bottom-alt: solid windowtext .5pt; mso-border-right-alt: solid windowtext .5pt; padding-bottom: 0in; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; width: 48pt;" valign="bottom" width="64"><div align="right" class="MsoNormal" style="margin-bottom: 0pt; text-align: right;">
<span style="font-size: x-small;">11%<o:p></o:p></span></div>
</td><td style="border-bottom: windowtext 1pt solid; border-left: medium none; border-right: windowtext 1pt solid; border-top: medium none; height: 15pt; mso-border-bottom-alt: solid windowtext .5pt; mso-border-right-alt: solid windowtext .5pt; padding-bottom: 0in; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; width: 48pt;" valign="bottom" width="64"><div align="right" class="MsoNormal" style="margin-bottom: 0pt; text-align: right;">
<span style="font-size: x-small;">9%<o:p></o:p></span></div>
</td><td style="border-bottom: windowtext 1pt solid; border-left: medium none; border-right: windowtext 1pt solid; border-top: medium none; height: 15pt; mso-border-bottom-alt: solid windowtext .5pt; mso-border-right-alt: solid windowtext .5pt; padding-bottom: 0in; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; width: 48pt;" valign="bottom" width="64"><div align="right" class="MsoNormal" style="margin-bottom: 0pt; text-align: right;">
<span style="font-size: x-small;">9%<o:p></o:p></span></div>
</td></tr>
<tr style="height: 15pt; mso-yfti-irow: 6; mso-yfti-lastrow: yes;"><td nowrap="" style="border-bottom: windowtext 1pt solid; border-left: windowtext 1pt solid; border-right: windowtext 1pt solid; border-top: windowtext 1pt solid; height: 15pt; mso-border-bottom-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-right-alt: solid windowtext .5pt; padding-bottom: 0in; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; width: 166pt;" valign="bottom" width="221"><div class="MsoNormal" style="margin-bottom: 0pt;">
<b><span style="font-size: x-small;">Cash (B)<o:p></o:p></span></b></div>
</td><td nowrap="" style="border-bottom: windowtext 1pt solid; border-left: medium none; border-right: windowtext 1pt solid; border-top: medium none; height: 15pt; mso-border-bottom-alt: solid windowtext .5pt; mso-border-right-alt: solid windowtext .5pt; padding-bottom: 0in; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; width: 48pt;" valign="bottom" width="64"><div align="right" class="MsoNormal" style="margin-bottom: 0pt; text-align: right;">
<span style="font-size: x-small;">72.63<o:p></o:p></span></div>
</td><td style="border-bottom: windowtext 1pt solid; border-left: medium none; border-right: windowtext 1pt solid; border-top: medium none; height: 15pt; mso-border-bottom-alt: solid windowtext .5pt; mso-border-right-alt: solid windowtext .5pt; padding-bottom: 0in; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; width: 48pt;" valign="bottom" width="64"><div align="right" class="MsoNormal" style="margin-bottom: 0pt; text-align: right;">
<span style="font-size: x-small;">20.63<o:p></o:p></span></div>
</td><td style="border-bottom: windowtext 1pt solid; border-left: medium none; border-right: windowtext 1pt solid; border-top: medium none; height: 15pt; mso-border-bottom-alt: solid windowtext .5pt; mso-border-right-alt: solid windowtext .5pt; padding-bottom: 0in; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; width: 48pt;" valign="bottom" width="64"><div align="right" class="MsoNormal" style="margin-bottom: 0pt; text-align: right;">
<span style="font-size: x-small;">12.55<o:p></o:p></span></div>
</td><td style="border-bottom: windowtext 1pt solid; border-left: medium none; border-right: windowtext 1pt solid; border-top: medium none; height: 15pt; mso-border-bottom-alt: solid windowtext .5pt; mso-border-right-alt: solid windowtext .5pt; padding-bottom: 0in; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; width: 48pt;" valign="bottom" width="64"><div align="right" class="MsoNormal" style="margin-bottom: 0pt; text-align: right;">
<span style="font-size: x-small;">35.12<o:p></o:p></span></div>
</td></tr>
</tbody></table>
<div style="color: #404040; font-family: Arial; line-height: 18px;">
<br /></div>
<div style="color: #404040; font-family: Arial; line-height: 18px;">
<span style="font-size: x-small;">Source: Capitaline.com, PVR Annual Report 2012,2013</span></div>
<div style="color: #404040; font-family: Arial; line-height: 18px;">
<br />
Hence, as can be seen in the table the Net Block of Property, Plant and Equipment will reduce while Cash has increased.</div>
<div style="color: #404040; font-family: Arial; line-height: 18px;">
<br /></div>
<div style="color: #404040; font-family: Arial; line-height: 18px;">
<b>Cash Flow Statement -</b></div>
<br />
<ul style="text-align: left;">
<li><span style="color: #404040; font-family: Arial;"><span style="line-height: 18px;">Cash Flow from operations would decrease/ increase depending on the lease agreement</span></span></li>
<li style="line-height: 18px;"><span style="color: #404040; font-family: Arial;">Lease Expenses would appear as an operating expense; cash flow from operations would decrease.</span></li>
</ul>
<div>
<ul style="text-align: left;">
<li><span style="color: #404040; font-family: Arial;"><span style="line-height: 18px;">Cash Flow from investment would increase as sales of asset would bring in cash.</span></span></li>
</ul>
<div>
<b>Income Statement</b></div>
</div>
<div>
<br /></div>
<div>
Operating Profit (EBIT) would also depend on the lease agreement as in the case of </div>
<ul style="text-align: left;">
<li style="line-height: 18px;"><span style="color: #404040; font-family: Arial;">Lease Expenses would appear as an operating expense</span></li>
<li style="line-height: 18px;"><span style="color: #404040; font-family: Arial;">Depreciation expenses would decrease by approximatelty Rs. 5.1 cr. (10% of Rs. 52 cr.). Rate of depreciation is based on historic depreciation rate.</span></li>
</ul>
<div style="color: #404040; font-family: Arial; line-height: 18px;">
<br /></div>
<div style="color: #404040; font-family: Arial; line-height: 18px;">
<br /></div>
<div style="color: #404040; font-family: Arial; line-height: 18px;">
<b>Impact on the stock price:</b></div>
<div style="color: #404040; font-family: Arial; line-height: 18px;">
<br /></div>
<div style="color: #404040; font-family: Arial; line-height: 18px;">
<a href="http://www.moneycontrol.com/india/stockpricequote/mediaentertainment/pvr/PVR" target="_blank">The markets have reacted favourably</a> to the news as even though technically assets have decreased, the company still reaps the benefit of assets. With decrease in assets, return on asset and asset turnover ratio has improved. The price of the stock has moved up from Rs. 485 to Rs. Rs. 515 in 3 days of trade.</div><div style="margin-top: 15px;">
<h4>Author: Abhishek Sinha</h4><a imageanchor="1" href="<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgBWL9rLPO0EUloSCujRZKvsQHHqRc4hS2aMMtS6LxbTgoYfv99-dNfEaZOWFYQ82o4KkB-Qe0DUHV-x9q5SJ-aZAcYIdkz-c_pNhm06w93wjaIRq1xheAOUactVnwjWvn88nYFZMaOiaO0/s1600/Abhishek+Sinha.jpg" imageanchor="1" ><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgBWL9rLPO0EUloSCujRZKvsQHHqRc4hS2aMMtS6LxbTgoYfv99-dNfEaZOWFYQ82o4KkB-Qe0DUHV-x9q5SJ-aZAcYIdkz-c_pNhm06w93wjaIRq1xheAOUactVnwjWvn88nYFZMaOiaO0/s200/Abhishek+Sinha.jpg" /></a><p style="margin-left:145px; margin-top:-138px;">Abhishek Sinha has approximately 8 year of experience in equity research, business research and consultancy. He has also had the privilege of managing a small portfolio of INR 3 million. However, his interest lies in teaching and "demystifying concepts." He has taught students right from the age of 3 years at PP1, to 40 years at executive courses and believes teaching is not about knowing the concepts; it is about relating the concepts to the audience.
At present he is "gainfully employed" at Vignana Jyothi Institute of Management, Hyderabad; where he loves to teach finance to an enthusiastic bunch of management students. His hobbies include analyzing income statement, balance sheet and cash flow.> <a href="https://plus.google.com/u/0/112464735121397739558/about?rel=author">Google +</a></p></div>
</div>
<div style="color: #404040; font-family: Arial; font-size: 13px; line-height: 18px;">
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<div style="color: #404040; font-family: Arial; font-size: 13px; line-height: 18px;">
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<div style="color: #404040; font-family: Arial; font-size: 13px; line-height: 18px;">
<img src="file:///C:/Users/1053344/Desktop/chart.gif" /><img src="file:///C:/Users/1053344/Desktop/chart.gif" /> </div>
</div>
<div style="color: #404040; font-family: Arial; font-size: 13px; line-height: 18px;">
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</div>Abhishek Sinhahttp://www.blogger.com/profile/05955755302598472670noreply@blogger.com2tag:blogger.com,1999:blog-7457870121656036705.post-55636252575830800462013-10-19T00:46:00.000-07:002013-12-06T01:08:52.920-08:00Asset Liability Management explained using Yes Bank example<div dir="ltr" style="text-align: left;" trbidi="on">
<div style="margin-bottom: .0001pt; margin: 0in;">
<span style="font-size: 13.5pt;">A lot of people want to understand what the cause of woes of
Indian bank is. Here is my attempt at demystifying the asset liability
mismanagement <o:p></o:p></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin-bottom: 0in; margin-left: .5in; margin-right: 0in; margin-top: 0in; mso-list: l0 level1 lfo1; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-size: 13.5pt;">1.<span style="font-size: 7pt;"> </span></span><!--[endif]--><span style="font-size: 13.5pt;">What does “asset liability” in the term
asset liability management imply?<o:p></o:p></span></div>
<div style="margin-bottom: .0001pt; margin-bottom: 0in; margin-left: .25in; margin-right: 0in; margin-top: 0in;">
<span style="font-size: 13.5pt;">Asset for a
bank in this case refers to assets that generate interest and liabilities are
those on which we pay interest. Hence, assets would primarily include loans and
advances given by bank and interest generating investments. On the other hand,
liability would include deposits and loans and advances taken by bank to finance their investment.<o:p></o:p></span></div>
<div style="margin-bottom: .0001pt; margin-bottom: 0in; margin-left: .25in; margin-right: 0in; margin-top: 0in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin-bottom: 0in; margin-left: .5in; margin-right: 0in; margin-top: 0in; mso-list: l0 level1 lfo1; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-size: 13.5pt;">2.<span style="font-size: 7pt;"> </span></span><!--[endif]--><span style="font-size: 13.5pt;">So what does asset liability management
imply? <o:p></o:p></span></div>
<div style="margin-bottom: .0001pt; margin-bottom: 0in; margin-left: .25in; margin-right: 0in; margin-top: 0in;">
<span style="font-size: 13.5pt;">Here the
assets are primarily funded by liabilities. Example, the loan that the bank
grants you for your house may be funded by the deposit that people make in
their accounts or the loan that the bank takes to fund the assets. <o:p></o:p></span></div>
<div style="margin-bottom: .0001pt; margin-bottom: 0in; margin-left: .25in; margin-right: 0in; margin-top: 0in;">
<span style="font-size: 13.5pt;">Asset
Liability Management refers to the process of balancing tenure of assets with
the tenure of liability. Tenure refers to the period for which the money is
lent and borrowed. Ideally, a short term asset should be financed with a short
term liability.<o:p></o:p></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin-bottom: 0in; margin-left: .5in; margin-right: 0in; margin-top: 0in; mso-list: l0 level1 lfo1; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-size: 13.5pt;">3.<span style="font-size: 7pt;"> </span></span><!--[endif]--><span style="font-size: 13.5pt;">Why do we need to match the tenure for
assets and liabilities?<o:p></o:p></span></div>
<div style="margin-bottom: .0001pt; margin-bottom: 0in; margin-left: .25in; margin-right: 0in; margin-top: 0in; text-align: justify;">
<span style="font-size: 13.5pt;">We need to match the tenure of the loans because the rate of short
term and middle term assets and liabilities (1-5 years) change at a faster rate
compared to change in the rate of interest of loans which are long term assets.
For example, if the base rates change the banks are forced to increase deposit
rates on short term and medium term deposits. However, interest rates on loans
which are of longer tenure do not increase in hurry on the other hand. <o:p></o:p></span></div>
<div style="margin-bottom: .0001pt; margin-bottom: 0in; margin-left: .5in; margin-right: 0in; margin-top: 0in; mso-list: l0 level1 lfo1; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-size: 13.5pt;">4.<span style="font-size: 7pt;"> </span></span><!--[endif]--><span style="font-size: 13.5pt;">So how does it impact the income?<o:p></o:p></span></div>
<div style="margin-bottom: .0001pt; margin-bottom: 0in; margin-left: .5in; margin-right: 0in; margin-top: 0in; text-align: justify;">
<span style="font-size: 13.5pt;">It impacts the net interest income negatively, whenever interest
rates go up. The interest income remains constant, while interest expense
increases as re-pricing of bank assets take longer than pricing of bank
liabilities. (Re-pricing is<o:p></o:p></span></div>
<div style="margin-bottom: .0001pt; margin-bottom: 0in; margin-left: .5in; margin-right: 0in; margin-top: 0in; text-align: justify;">
<span style="font-size: 13.5pt;">technical term for adjustment of interest rates.) <o:p></o:p></span></div>
<div style="margin-bottom: .0001pt; margin-bottom: 0in; margin-left: .5in; margin-right: 0in; margin-top: 0in; text-align: justify;">
<br /></div>
<div style="margin-bottom: .0001pt; margin-bottom: 0in; margin-left: .5in; margin-right: 0in; margin-top: 0in; mso-list: l0 level1 lfo1; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-size: 13.5pt;">5.<span style="font-size: 7pt;"> </span></span><!--[endif]--><span style="font-size: 13.5pt;">What are the interest rate expectations in
the future?<o:p></o:p></span></div>
<div style="margin-bottom: .0001pt; margin-bottom: 0in; margin-left: .5in; margin-right: 0in; margin-top: 0in;">
<span style="font-size: 13.5pt;">Banks fear
that the interest rate might go up as the inflation rate is at all-time high. RBI
ideally uses interest rates as a tool to control liquidity. According to a </span><a href="http://in.reuters.com/article/2013/09/25/india-rate-rbi-rajan-idINDEE98O06R20130925"><span style="font-size: 13.5pt;">recent survey done by Reuters</span></a><span style="font-size: 13.5pt;"> unexpectedly high inflationary pressure
has led to analysts expecting higher interest rates.<o:p></o:p></span></div>
<div style="margin-bottom: .0001pt; margin-bottom: 0in; margin-left: .5in; margin-right: 0in; margin-top: 0in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin-bottom: 0in; margin-left: .5in; margin-right: 0in; margin-top: 0in; mso-list: l0 level1 lfo1; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-size: 13.5pt;">6.<span style="font-size: 7pt;"> </span></span><!--[endif]--><span style="font-size: 13.5pt;">What are asset liability buckets?<o:p></o:p></span></div>
<div style="margin-bottom: .0001pt; margin-bottom: 0in; margin-left: .5in; margin-right: 0in; margin-top: 0in;">
<span style="font-size: 13.5pt;">Asset
Liability bucket refers to the process of dividing assets and liabilities based
on their tenures. Following is the asset liability maturity bucket of Yes Bank
Ltd. <o:p></o:p></span></div>
<table align="left" border="1" cellpadding="0" cellspacing="0" class="MsoNormalTable" style="border-collapse: collapse; border: none; margin-left: 6.75pt; margin-right: 6.75pt; mso-border-alt: solid windowtext .5pt; mso-border-insideh: .5pt solid windowtext; mso-border-insidev: .5pt solid windowtext; mso-padding-alt: 0in 5.4pt 0in 5.4pt; mso-table-anchor-horizontal: margin; mso-table-anchor-vertical: page; mso-table-left: center; mso-table-lspace: 9.0pt; mso-table-rspace: 9.0pt; mso-table-top: 99.7pt; mso-yfti-tbllook: 1184; width: 643px;">
<tbody>
<tr style="height: 15.0pt; mso-yfti-firstrow: yes; mso-yfti-irow: 0;">
<td nowrap="" style="border: solid windowtext 1.0pt; height: 15.0pt; mso-border-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 64.95pt;" valign="bottom" width="87"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
</td>
<td nowrap="" style="border-left: none; border: solid windowtext 1.0pt; height: 15.0pt; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 51.6pt;" valign="bottom" width="69"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<b><span style="font-size: 8pt;">Assets<o:p></o:p></span></b></div>
</td>
<td nowrap="" style="border-left: none; border: solid windowtext 1.0pt; height: 15.0pt; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 64.15pt;" valign="bottom" width="86"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
</td>
<td nowrap="" style="border-left: none; border: solid windowtext 1.0pt; height: 15.0pt; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 53.7pt;" valign="bottom" width="72"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
</td>
<td nowrap="" style="border-left: none; border: solid windowtext 1.0pt; height: 15.0pt; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 73.05pt;" valign="bottom" width="97"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<b><span style="font-size: 8pt;">Liabilities<o:p></o:p></span></b></div>
</td>
<td nowrap="" style="border-left: none; border: solid windowtext 1.0pt; height: 15.0pt; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 57.05pt;" valign="bottom" width="76"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
</td>
<td nowrap="" style="border-left: none; border: solid windowtext 1.0pt; height: 15.0pt; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 53.55pt;" valign="bottom" width="71"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
</td>
<td nowrap="" style="border-left: none; border: solid windowtext 1.0pt; height: 15.0pt; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 64.2pt;" valign="bottom" width="86"></td>
</tr>
<tr style="height: 15.25pt; mso-yfti-irow: 1;">
<td nowrap="" style="border-top: none; border: solid windowtext 1.0pt; height: 15.25pt; mso-border-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 64.95pt;" valign="bottom" width="87"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<b><span style="font-size: 8pt;">Maturity Buckets<o:p></o:p></span></b></div>
</td>
<td nowrap="" style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 15.25pt; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 51.6pt;" valign="bottom" width="69"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<b><span style="font-size: 8pt;">Loans & Adv<o:p></o:p></span></b></div>
</td>
<td nowrap="" style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 15.25pt; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 64.15pt;" valign="bottom" width="86"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<b><span style="font-size: 8pt;">Investment<o:p></o:p></span></b></div>
</td>
<td nowrap="" style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 15.25pt; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 53.7pt;" valign="bottom" width="72"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<b><span style="font-size: 8pt;">Total Assets<o:p></o:p></span></b></div>
</td>
<td nowrap="" style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 15.25pt; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 73.05pt;" valign="bottom" width="97"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<b><span style="font-size: 8pt;">Deposits and Securities<o:p></o:p></span></b></div>
</td>
<td nowrap="" style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 15.25pt; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 57.05pt;" valign="bottom" width="76"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<b><span style="font-size: 8pt;">Borrowings<o:p></o:p></span></b></div>
</td>
<td nowrap="" style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 15.25pt; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 53.55pt;" valign="bottom" width="71"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<b><span style="font-size: 8pt;">Total Liabilities<o:p></o:p></span></b></div>
</td>
<td nowrap="" style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 15.25pt; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 64.2pt;" valign="bottom" width="86"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<b><span style="font-size: 8pt;">Net Assets<o:p></o:p></span></b></div>
</td>
</tr>
<tr style="height: 15.0pt; mso-yfti-irow: 2;">
<td nowrap="" style="border-top: none; border: solid windowtext 1.0pt; height: 15.0pt; mso-border-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 64.95pt;" valign="bottom" width="87"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-size: 8pt;">1 day<o:p></o:p></span></div>
</td>
<td nowrap="" style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 15.0pt; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 51.6pt;" valign="bottom" width="69"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-size: 8pt;"> 2,211,941 <o:p></o:p></span></div>
</td>
<td nowrap="" style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 15.0pt; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 64.15pt;" valign="bottom" width="86"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-size: 8pt;"> - <o:p></o:p></span></div>
</td>
<td nowrap="" style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 15.0pt; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 53.7pt;" valign="bottom" width="72"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-size: 8pt;"> 2,211,941 <o:p></o:p></span></div>
</td>
<td nowrap="" style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 15.0pt; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 73.05pt;" valign="bottom" width="97"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-size: 8pt;"> 5,968,491 <o:p></o:p></span></div>
</td>
<td nowrap="" style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 15.0pt; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 57.05pt;" valign="bottom" width="76"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-size: 8pt;">
- <o:p></o:p></span></div>
</td>
<td nowrap="" style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 15.0pt; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 53.55pt;" valign="bottom" width="71"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-size: 8pt;"> 5,968,491 <o:p></o:p></span></div>
</td>
<td nowrap="" style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 15.0pt; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 64.2pt;" valign="bottom" width="86"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-size: 8pt;"> (3,756,550)<o:p></o:p></span></div>
</td>
</tr>
<tr style="height: 15.0pt; mso-yfti-irow: 3;">
<td nowrap="" style="border-top: none; border: solid windowtext 1.0pt; height: 15.0pt; mso-border-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 64.95pt;" valign="bottom" width="87"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-size: 8pt;">2-7 days<o:p></o:p></span></div>
</td>
<td nowrap="" style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 15.0pt; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 51.6pt;" valign="bottom" width="69"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-size: 8pt;"> 6,687,905 <o:p></o:p></span></div>
</td>
<td nowrap="" style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 15.0pt; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 64.15pt;" valign="bottom" width="86"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-size: 8pt;">
- <o:p></o:p></span></div>
</td>
<td nowrap="" style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 15.0pt; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 53.7pt;" valign="bottom" width="72"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-size: 8pt;"> 6,687,905 <o:p></o:p></span></div>
</td>
<td nowrap="" style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 15.0pt; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 73.05pt;" valign="bottom" width="97"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-size: 8pt;"> 45,289,832 <o:p></o:p></span></div>
</td>
<td nowrap="" style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 15.0pt; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 57.05pt;" valign="bottom" width="76"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-size: 8pt;"> 62,347,081 <o:p></o:p></span></div>
</td>
<td nowrap="" style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 15.0pt; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 53.55pt;" valign="bottom" width="71"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-size: 8pt;"> 107,636,913 <o:p></o:p></span></div>
</td>
<td nowrap="" style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 15.0pt; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 64.2pt;" valign="bottom" width="86"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-size: 8pt;"> (100,949,008)<o:p></o:p></span></div>
</td>
</tr>
<tr style="height: 15.0pt; mso-yfti-irow: 4;">
<td nowrap="" style="border-top: none; border: solid windowtext 1.0pt; height: 15.0pt; mso-border-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 64.95pt;" valign="bottom" width="87"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-size: 8pt;">8-14 days<o:p></o:p></span></div>
</td>
<td nowrap="" style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 15.0pt; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 51.6pt;" valign="bottom" width="69"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-size: 8pt;"> 6,245,494 <o:p></o:p></span></div>
</td>
<td nowrap="" style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 15.0pt; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 64.15pt;" valign="bottom" width="86"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-size: 8pt;"> 368,400 <o:p></o:p></span></div>
</td>
<td nowrap="" style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 15.0pt; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 53.7pt;" valign="bottom" width="72"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-size: 8pt;"> 6,613,894 <o:p></o:p></span></div>
</td>
<td nowrap="" style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 15.0pt; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 73.05pt;" valign="bottom" width="97"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-size: 8pt;"> 35,097,867 <o:p></o:p></span></div>
</td>
<td nowrap="" style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 15.0pt; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 57.05pt;" valign="bottom" width="76"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-size: 8pt;"> 2,671,425 <o:p></o:p></span></div>
</td>
<td nowrap="" style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 15.0pt; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 53.55pt;" valign="bottom" width="71"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-size: 8pt;"> 37,769,292 <o:p></o:p></span></div>
</td>
<td nowrap="" style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 15.0pt; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 64.2pt;" valign="bottom" width="86"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-size: 8pt;"> (31,155,398)<o:p></o:p></span></div>
</td>
</tr>
<tr style="height: 15.0pt; mso-yfti-irow: 5;">
<td nowrap="" style="border-top: none; border: solid windowtext 1.0pt; height: 15.0pt; mso-border-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 64.95pt;" valign="bottom" width="87"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-size: 8pt;">15-28 days<o:p></o:p></span></div>
</td>
<td nowrap="" style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 15.0pt; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 51.6pt;" valign="bottom" width="69"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-size: 8pt;"> 10,089,421 <o:p></o:p></span></div>
</td>
<td nowrap="" style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 15.0pt; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 64.15pt;" valign="bottom" width="86"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-size: 8pt;"> -
<o:p></o:p></span></div>
</td>
<td nowrap="" style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 15.0pt; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 53.7pt;" valign="bottom" width="72"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-size: 8pt;"> 10,089,421 <o:p></o:p></span></div>
</td>
<td nowrap="" style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 15.0pt; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 73.05pt;" valign="bottom" width="97"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-size: 8pt;"> 34,129,892 <o:p></o:p></span></div>
</td>
<td nowrap="" style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 15.0pt; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 57.05pt;" valign="bottom" width="76"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-size: 8pt;"> 12,926,268 <o:p></o:p></span></div>
</td>
<td nowrap="" style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 15.0pt; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 53.55pt;" valign="bottom" width="71"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-size: 8pt;"> 47,056,160 <o:p></o:p></span></div>
</td>
<td nowrap="" style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 15.0pt; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 64.2pt;" valign="bottom" width="86"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-size: 8pt;"> (36,966,739)<o:p></o:p></span></div>
</td>
</tr>
<tr style="height: 15.0pt; mso-yfti-irow: 6;">
<td nowrap="" style="border-top: none; border: solid windowtext 1.0pt; height: 15.0pt; mso-border-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 64.95pt;" valign="bottom" width="87"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-size: 8pt;">29-3 months<o:p></o:p></span></div>
</td>
<td nowrap="" style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 15.0pt; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 51.6pt;" valign="bottom" width="69"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-size: 8pt;"> 43,069,022 <o:p></o:p></span></div>
</td>
<td nowrap="" style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 15.0pt; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 64.15pt;" valign="bottom" width="86"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-size: 8pt;"> 43,168,616 <o:p></o:p></span></div>
</td>
<td nowrap="" style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 15.0pt; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 53.7pt;" valign="bottom" width="72"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-size: 8pt;"> 86,237,638 <o:p></o:p></span></div>
</td>
<td nowrap="" style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 15.0pt; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 73.05pt;" valign="bottom" width="97"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-size: 8pt;"> 128,802,454 <o:p></o:p></span></div>
</td>
<td nowrap="" style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 15.0pt; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 57.05pt;" valign="bottom" width="76"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-size: 8pt;"> 15,102,693 <o:p></o:p></span></div>
</td>
<td nowrap="" style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 15.0pt; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 53.55pt;" valign="bottom" width="71"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-size: 8pt;"> 143,905,147 <o:p></o:p></span></div>
</td>
<td nowrap="" style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 15.0pt; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 64.2pt;" valign="bottom" width="86"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-size: 8pt;"> (57,667,509)<o:p></o:p></span></div>
</td>
</tr>
<tr style="height: 15.0pt; mso-yfti-irow: 7;">
<td nowrap="" style="border-top: none; border: solid windowtext 1.0pt; height: 15.0pt; mso-border-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 64.95pt;" valign="bottom" width="87"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-size: 8pt;">3-6 months<o:p></o:p></span></div>
</td>
<td nowrap="" style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 15.0pt; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 51.6pt;" valign="bottom" width="69"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-size: 8pt;"> 37,436,803 <o:p></o:p></span></div>
</td>
<td nowrap="" style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 15.0pt; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 64.15pt;" valign="bottom" width="86"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-size: 8pt;"> 19,475,685 <o:p></o:p></span></div>
</td>
<td nowrap="" style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 15.0pt; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 53.7pt;" valign="bottom" width="72"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-size: 8pt;"> 56,912,488 <o:p></o:p></span></div>
</td>
<td nowrap="" style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 15.0pt; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 73.05pt;" valign="bottom" width="97"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-size: 8pt;"> 98,147,190 <o:p></o:p></span></div>
</td>
<td nowrap="" style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 15.0pt; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 57.05pt;" valign="bottom" width="76"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-size: 8pt;"> 24,550,604 <o:p></o:p></span></div>
</td>
<td nowrap="" style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 15.0pt; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 53.55pt;" valign="bottom" width="71"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-size: 8pt;"> 122,697,794 <o:p></o:p></span></div>
</td>
<td nowrap="" style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 15.0pt; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 64.2pt;" valign="bottom" width="86"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-size: 8pt;"> (65,785,306)<o:p></o:p></span></div>
</td>
</tr>
<tr style="height: 15.0pt; mso-yfti-irow: 8;">
<td nowrap="" style="border-top: none; border: solid windowtext 1.0pt; height: 15.0pt; mso-border-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 64.95pt;" valign="bottom" width="87"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-size: 8pt;">6-12 months<o:p></o:p></span></div>
</td>
<td nowrap="" style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 15.0pt; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 51.6pt;" valign="bottom" width="69"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-size: 8pt;"> 51,190,708 <o:p></o:p></span></div>
</td>
<td nowrap="" style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 15.0pt; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 64.15pt;" valign="bottom" width="86"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-size: 8pt;"> 31,694,415 <o:p></o:p></span></div>
</td>
<td nowrap="" style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 15.0pt; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 53.7pt;" valign="bottom" width="72"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-size: 8pt;"> 82,885,123 <o:p></o:p></span></div>
</td>
<td nowrap="" style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 15.0pt; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 73.05pt;" valign="bottom" width="97"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-size: 8pt;"> 192,640,064 <o:p></o:p></span></div>
</td>
<td nowrap="" style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 15.0pt; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 57.05pt;" valign="bottom" width="76"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-size: 8pt;"> 10,020,585 <o:p></o:p></span></div>
</td>
<td nowrap="" style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 15.0pt; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 53.55pt;" valign="bottom" width="71"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-size: 8pt;"> 202,660,649 <o:p></o:p></span></div>
</td>
<td nowrap="" style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 15.0pt; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 64.2pt;" valign="bottom" width="86"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-size: 8pt;"> (119,775,526)<o:p></o:p></span></div>
</td>
</tr>
<tr style="height: 15.0pt; mso-yfti-irow: 9;">
<td nowrap="" style="border-top: none; border: solid windowtext 1.0pt; height: 15.0pt; mso-border-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 64.95pt;" valign="bottom" width="87"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-size: 8pt;">1-3 years<o:p></o:p></span></div>
</td>
<td nowrap="" style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 15.0pt; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 51.6pt;" valign="bottom" width="69"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-size: 8pt;"> 193,093,925 <o:p></o:p></span></div>
</td>
<td nowrap="" style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 15.0pt; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 64.15pt;" valign="bottom" width="86"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-size: 8pt;"> 56,155,228 <o:p></o:p></span></div>
</td>
<td nowrap="" style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 15.0pt; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 53.7pt;" valign="bottom" width="72"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-size: 8pt;"> 249,249,153 <o:p></o:p></span></div>
</td>
<td nowrap="" style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 15.0pt; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 73.05pt;" valign="bottom" width="97"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-size: 8pt;"> 35,536,058 <o:p></o:p></span></div>
</td>
<td nowrap="" style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 15.0pt; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 57.05pt;" valign="bottom" width="76"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-size: 8pt;"> 14,750,088 <o:p></o:p></span></div>
</td>
<td nowrap="" style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 15.0pt; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 53.55pt;" valign="bottom" width="71"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-size: 8pt;"> 50,286,146 <o:p></o:p></span></div>
</td>
<td nowrap="" style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 15.0pt; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 64.2pt;" valign="bottom" width="86"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-size: 8pt;"> 198,963,007 <o:p></o:p></span></div>
</td>
</tr>
<tr style="height: 15.0pt; mso-yfti-irow: 10;">
<td nowrap="" style="border-top: none; border: solid windowtext 1.0pt; height: 15.0pt; mso-border-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 64.95pt;" valign="bottom" width="87"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-size: 8pt;">3 -5 years<o:p></o:p></span></div>
</td>
<td nowrap="" style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 15.0pt; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 51.6pt;" valign="bottom" width="69"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-size: 8pt;"> 61,576,756 <o:p></o:p></span></div>
</td>
<td nowrap="" style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 15.0pt; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 64.15pt;" valign="bottom" width="86"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-size: 8pt;"> 85,004,308 <o:p></o:p></span></div>
</td>
<td nowrap="" style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 15.0pt; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 53.7pt;" valign="bottom" width="72"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-size: 8pt;"> 146,581,064 <o:p></o:p></span></div>
</td>
<td nowrap="" style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 15.0pt; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 73.05pt;" valign="bottom" width="97"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-size: 8pt;"> 89,478,067 <o:p></o:p></span></div>
</td>
<td nowrap="" style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 15.0pt; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 57.05pt;" valign="bottom" width="76"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-size: 8pt;"> 2,463,321 <o:p></o:p></span></div>
</td>
<td nowrap="" style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 15.0pt; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 53.55pt;" valign="bottom" width="71"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-size: 8pt;"> 91,941,388 <o:p></o:p></span></div>
</td>
<td nowrap="" style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 15.0pt; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 64.2pt;" valign="bottom" width="86"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-size: 8pt;"> 54,639,676 <o:p></o:p></span></div>
</td>
</tr>
<tr style="height: 15.0pt; mso-yfti-irow: 11;">
<td nowrap="" style="border-top: none; border: solid windowtext 1.0pt; height: 15.0pt; mso-border-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 64.95pt;" valign="bottom" width="87"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-size: 8pt;">>5<o:p></o:p></span></div>
</td>
<td nowrap="" style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 15.0pt; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 51.6pt;" valign="bottom" width="69"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-size: 8pt;"> 58,393,688 <o:p></o:p></span></div>
</td>
<td nowrap="" style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 15.0pt; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 64.15pt;" valign="bottom" width="86"><div align="center" class="MsoNormal" style="mso-element-anchor-horizontal: margin; mso-element-anchor-vertical: page; mso-element-frame-hspace: 9.0pt; mso-element-left: center; mso-element-top: 99.7pt; mso-element-wrap: around; mso-element: frame; mso-height-rule: exactly; text-align: center;">
<span style="font-size: 8pt; line-height: 115%;">193,893,769</span><span style="font-size: 8pt; line-height: 115%;"><o:p></o:p></span></div>
</td>
<td nowrap="" style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 15.0pt; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 53.7pt;" valign="bottom" width="72"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-size: 8pt;"> 252,287,457 <o:p></o:p></span></div>
</td>
<td nowrap="" style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 15.0pt; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 73.05pt;" valign="bottom" width="97"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-size: 8pt;"> 4,465,937 <o:p></o:p></span></div>
</td>
<td nowrap="" style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 15.0pt; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 57.05pt;" valign="bottom" width="76"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-size: 8pt;"> 64,389,407 <o:p></o:p></span></div>
</td>
<td nowrap="" style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 15.0pt; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 53.55pt;" valign="bottom" width="71"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-size: 8pt;"> 68,855,344 <o:p></o:p></span></div>
</td>
<td nowrap="" style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 15.0pt; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 64.2pt;" valign="bottom" width="86"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-size: 8pt;"> 183,432,113 <o:p></o:p></span></div>
</td>
</tr>
<tr style="height: 15.0pt; mso-yfti-irow: 12; mso-yfti-lastrow: yes;">
<td nowrap="" style="border-top: none; border: solid windowtext 1.0pt; height: 15.0pt; mso-border-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 64.95pt;" valign="bottom" width="87"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
</td>
<td nowrap="" style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 15.0pt; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 51.6pt;" valign="bottom" width="69"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<b><span style="font-size: 8pt;"> 469,995,663 <o:p></o:p></span></b></div>
</td>
<td nowrap="" style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 15.0pt; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 64.15pt;" valign="bottom" width="86"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<b><span style="font-size: 8pt;">429,760,421<o:p></o:p></span></b></div>
</td>
<td nowrap="" style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 15.0pt; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 53.7pt;" valign="bottom" width="72"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<b><span style="font-size: 8pt;"> 899,756,084 <o:p></o:p></span></b></div>
</td>
<td nowrap="" style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 15.0pt; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 73.05pt;" valign="bottom" width="97"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<b><span style="font-size: 8pt;"> 669,555,852 <o:p></o:p></span></b></div>
</td>
<td nowrap="" style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 15.0pt; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 57.05pt;" valign="bottom" width="76"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<b><span style="font-size: 8pt;">209,221,472<o:p></o:p></span></b></div>
</td>
<td nowrap="" style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 15.0pt; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 53.55pt;" valign="bottom" width="71"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<b><span style="font-size: 8pt;"> 878,777,324 <o:p></o:p></span></b></div>
</td>
<td nowrap="" style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 15.0pt; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 64.2pt;" valign="bottom" width="86"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<b><span style="font-size: 8pt;"> 20,978,760 <o:p></o:p></span></b></div>
</td>
</tr>
</tbody></table>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-family: 'Times New Roman', serif; font-size: 13.5pt; line-height: 115%;">Source: Annual Report Yes Bank 2013</span></div>
<div class="MsoNormal">
<span style="font-family: 'Times New Roman', serif; font-size: 13.5pt; line-height: 115%;"><b>Comparing
the tenure of Assets and Liability</b><o:p></o:p></span></div>
<br />
<div class="MsoNormal">
<span style="font-family: 'Times New Roman', serif; font-size: 13.5pt; line-height: 115%;">The
table below compares the tenure of assets and liabilities of Yes bank. The mismatch between the Assets and Liabilities tenure is there for all to see. <o:p></o:p></span><span style="font-family: 'Times New Roman', serif; font-size: 18px; line-height: 20px;">Hence interest income which depends on assets will be repriced after the interest expenses which depends on the liabilities. Thus, banks such as Yes Bank might see negative Net Interest from income if banks continue to increase interest rate. In other words, these banks will earn losses from NII. Interest Income is approximately 87% of the total income for Yes Bank. This shows the dependence of the bank on Interest Income. Hence, if net interest becomes negative the bank is in deep problem. </span></div>
<div class="MsoNormal">
<span style="font-family: 'Times New Roman', serif; font-size: 13.5pt; line-height: 115%;"><br /></span></div>
<table border="0" cellpadding="0" cellspacing="0" class="MsoNormalTable" style="border-collapse: collapse; margin-left: 4.65pt; mso-padding-alt: 0in 5.4pt 0in 5.4pt; mso-yfti-tbllook: 1184; width: 209px;">
<tbody>
<tr style="height: 45.75pt; mso-yfti-firstrow: yes; mso-yfti-irow: 0;">
<td nowrap="" style="border: solid windowtext 1.0pt; height: 45.75pt; mso-border-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 50.0pt;" valign="bottom" width="67"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-size: 8pt;">ALM Bucket<o:p></o:p></span></div>
</td>
<td style="border-left: none; border: solid windowtext 1.0pt; height: 45.75pt; mso-border-bottom-alt: solid windowtext .5pt; mso-border-right-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 57.0pt;" valign="bottom" width="76"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<b><span style="font-size: 8pt;">Assets in the category to total assets<o:p></o:p></span></b></div>
</td>
<td style="border-left: none; border: solid windowtext 1.0pt; height: 45.75pt; mso-border-bottom-alt: solid windowtext .5pt; mso-border-right-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 50.0pt;" valign="bottom" width="67"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<b><span style="font-size: 8pt;">Liability in the category to toal liabilities<o:p></o:p></span></b></div>
</td>
</tr>
<tr style="height: 15.0pt; mso-yfti-irow: 1;">
<td nowrap="" style="border-top: none; border: solid windowtext 1.0pt; height: 15.0pt; mso-border-bottom-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-right-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 50.0pt;" valign="bottom" width="67"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-size: 8pt;">1 day<o:p></o:p></span></div>
</td>
<td nowrap="" style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 15.0pt; mso-border-bottom-alt: solid windowtext .5pt; mso-border-right-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 57.0pt;" valign="bottom" width="76"><div align="right" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: right;">
<span style="font-size: 8pt;">0.25%<o:p></o:p></span></div>
</td>
<td nowrap="" style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 15.0pt; mso-border-bottom-alt: solid windowtext .5pt; mso-border-right-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 50.0pt;" valign="bottom" width="67"><div align="right" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: right;">
<span style="font-size: 8pt;">1%<o:p></o:p></span></div>
</td>
</tr>
<tr style="height: 15.0pt; mso-yfti-irow: 2;">
<td nowrap="" style="border-top: none; border: solid windowtext 1.0pt; height: 15.0pt; mso-border-bottom-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-right-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 50.0pt;" valign="bottom" width="67"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-size: 8pt;">2-7 days<o:p></o:p></span></div>
</td>
<td nowrap="" style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 15.0pt; mso-border-bottom-alt: solid windowtext .5pt; mso-border-right-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 57.0pt;" valign="bottom" width="76"><div align="right" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: right;">
<span style="font-size: 8pt;">0.74%<o:p></o:p></span></div>
</td>
<td nowrap="" style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 15.0pt; mso-border-bottom-alt: solid windowtext .5pt; mso-border-right-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 50.0pt;" valign="bottom" width="67"><div align="right" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: right;">
<span style="font-size: 8pt;">12.2%<o:p></o:p></span></div>
</td>
</tr>
<tr style="height: 15.0pt; mso-yfti-irow: 3;">
<td nowrap="" style="border-top: none; border: solid windowtext 1.0pt; height: 15.0pt; mso-border-bottom-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-right-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 50.0pt;" valign="bottom" width="67"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-size: 8pt;">8-14 days<o:p></o:p></span></div>
</td>
<td nowrap="" style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 15.0pt; mso-border-bottom-alt: solid windowtext .5pt; mso-border-right-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 57.0pt;" valign="bottom" width="76"><div align="right" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: right;">
<span style="font-size: 8pt;">0.74%<o:p></o:p></span></div>
</td>
<td nowrap="" style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 15.0pt; mso-border-bottom-alt: solid windowtext .5pt; mso-border-right-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 50.0pt;" valign="bottom" width="67"><div align="right" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: right;">
<span style="font-size: 8pt;">4.3%<o:p></o:p></span></div>
</td>
</tr>
<tr style="height: 15.0pt; mso-yfti-irow: 4;">
<td nowrap="" style="border-top: none; border: solid windowtext 1.0pt; height: 15.0pt; mso-border-bottom-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-right-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 50.0pt;" valign="bottom" width="67"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-size: 8pt;">15-28 days<o:p></o:p></span></div>
</td>
<td nowrap="" style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 15.0pt; mso-border-bottom-alt: solid windowtext .5pt; mso-border-right-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 57.0pt;" valign="bottom" width="76"><div align="right" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: right;">
<span style="font-size: 8pt;">1.12%<o:p></o:p></span></div>
</td>
<td nowrap="" style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 15.0pt; mso-border-bottom-alt: solid windowtext .5pt; mso-border-right-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 50.0pt;" valign="bottom" width="67"><div align="right" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: right;">
<span style="font-size: 8pt;">5.4%<o:p></o:p></span></div>
</td>
</tr>
<tr style="height: 15.0pt; mso-yfti-irow: 5;">
<td nowrap="" style="border-top: none; border: solid windowtext 1.0pt; height: 15.0pt; mso-border-bottom-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-right-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 50.0pt;" valign="bottom" width="67"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-size: 8pt;">29-3 months<o:p></o:p></span></div>
</td>
<td nowrap="" style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 15.0pt; mso-border-bottom-alt: solid windowtext .5pt; mso-border-right-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 57.0pt;" valign="bottom" width="76"><div align="right" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: right;">
<span style="font-size: 8pt;">9.58%<o:p></o:p></span></div>
</td>
<td nowrap="" style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 15.0pt; mso-border-bottom-alt: solid windowtext .5pt; mso-border-right-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 50.0pt;" valign="bottom" width="67"><div align="right" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: right;">
<span style="font-size: 8pt;">16.4%<o:p></o:p></span></div>
</td>
</tr>
<tr style="height: 15.0pt; mso-yfti-irow: 6;">
<td nowrap="" style="border-top: none; border: solid windowtext 1.0pt; height: 15.0pt; mso-border-bottom-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-right-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 50.0pt;" valign="bottom" width="67"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-size: 8pt;">3-6 months<o:p></o:p></span></div>
</td>
<td nowrap="" style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 15.0pt; mso-border-bottom-alt: solid windowtext .5pt; mso-border-right-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 57.0pt;" valign="bottom" width="76"><div align="right" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: right;">
<span style="font-size: 8pt;">6.33%<o:p></o:p></span></div>
</td>
<td nowrap="" style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 15.0pt; mso-border-bottom-alt: solid windowtext .5pt; mso-border-right-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 50.0pt;" valign="bottom" width="67"><div align="right" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: right;">
<span style="font-size: 8pt;">14.0%<o:p></o:p></span></div>
</td>
</tr>
<tr style="height: 15.0pt; mso-yfti-irow: 7;">
<td nowrap="" style="border-top: none; border: solid windowtext 1.0pt; height: 15.0pt; mso-border-bottom-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-right-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 50.0pt;" valign="bottom" width="67"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-size: 8pt;">6-12 months<o:p></o:p></span></div>
</td>
<td nowrap="" style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 15.0pt; mso-border-bottom-alt: solid windowtext .5pt; mso-border-right-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 57.0pt;" valign="bottom" width="76"><div align="right" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: right;">
<span style="font-size: 8pt;">9.21%<o:p></o:p></span></div>
</td>
<td nowrap="" style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 15.0pt; mso-border-bottom-alt: solid windowtext .5pt; mso-border-right-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 50.0pt;" valign="bottom" width="67"><div align="right" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: right;">
<span style="font-size: 8pt;">23.1%<o:p></o:p></span></div>
</td>
</tr>
<tr style="height: 15.0pt; mso-yfti-irow: 8;">
<td nowrap="" style="border-top: none; border: solid windowtext 1.0pt; height: 15.0pt; mso-border-bottom-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-right-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 50.0pt;" valign="bottom" width="67"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-size: 8pt;">1-3 years<o:p></o:p></span></div>
</td>
<td nowrap="" style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 15.0pt; mso-border-bottom-alt: solid windowtext .5pt; mso-border-right-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 57.0pt;" valign="bottom" width="76"><div align="right" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: right;">
<span style="font-size: 8pt;">27.70%<o:p></o:p></span></div>
</td>
<td nowrap="" style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 15.0pt; mso-border-bottom-alt: solid windowtext .5pt; mso-border-right-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 50.0pt;" valign="bottom" width="67"><div align="right" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: right;">
<span style="font-size: 8pt;">5.7%<o:p></o:p></span></div>
</td>
</tr>
<tr style="height: 15.0pt; mso-yfti-irow: 9;">
<td nowrap="" style="border-top: none; border: solid windowtext 1.0pt; height: 15.0pt; mso-border-bottom-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-right-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 50.0pt;" valign="bottom" width="67"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-size: 8pt;">3 -5 years<o:p></o:p></span></div>
</td>
<td nowrap="" style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 15.0pt; mso-border-bottom-alt: solid windowtext .5pt; mso-border-right-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 57.0pt;" valign="bottom" width="76"><div align="right" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: right;">
<span style="font-size: 8pt;">16.29%<o:p></o:p></span></div>
</td>
<td nowrap="" style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 15.0pt; mso-border-bottom-alt: solid windowtext .5pt; mso-border-right-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 50.0pt;" valign="bottom" width="67"><div align="right" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: right;">
<span style="font-size: 8pt;">10.5%<o:p></o:p></span></div>
</td>
</tr>
<tr style="height: 15.0pt; mso-yfti-irow: 10;">
<td nowrap="" style="border-top: none; border: solid windowtext 1.0pt; height: 15.0pt; mso-border-bottom-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-right-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 50.0pt;" valign="bottom" width="67"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-size: 8pt;">>5<o:p></o:p></span></div>
</td>
<td nowrap="" style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 15.0pt; mso-border-bottom-alt: solid windowtext .5pt; mso-border-right-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 57.0pt;" valign="bottom" width="76"><div align="right" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: right;">
<span style="font-size: 8pt;">28.04%<o:p></o:p></span></div>
</td>
<td nowrap="" style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 15.0pt; mso-border-bottom-alt: solid windowtext .5pt; mso-border-right-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 50.0pt;" valign="bottom" width="67"><div align="right" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: right;">
<span style="font-size: 8pt;">7.8%<o:p></o:p></span></div>
</td>
</tr>
<tr style="height: 15.0pt; mso-yfti-irow: 11; mso-yfti-lastrow: yes;">
<td nowrap="" style="border-top: none; border: solid windowtext 1.0pt; height: 15.0pt; mso-border-bottom-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-right-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 50.0pt;" valign="bottom" width="67"><div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
</td>
<td nowrap="" style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 15.0pt; mso-border-bottom-alt: solid windowtext .5pt; mso-border-right-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 57.0pt;" valign="bottom" width="76"><div align="right" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: right;">
<span style="font-size: 8pt;">100.00%<o:p></o:p></span></div>
</td>
<td nowrap="" style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 15.0pt; mso-border-bottom-alt: solid windowtext .5pt; mso-border-right-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 50.0pt;" valign="bottom" width="67"><div align="right" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: right;">
<span style="font-size: 8pt;">100.0%<o:p></o:p></span></div>
</td>
</tr>
</tbody></table>
</div><div style="margin-top: 15px;">
<h4>Author: Abhishek Sinha</h4><a imageanchor="1" href="<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgBWL9rLPO0EUloSCujRZKvsQHHqRc4hS2aMMtS6LxbTgoYfv99-dNfEaZOWFYQ82o4KkB-Qe0DUHV-x9q5SJ-aZAcYIdkz-c_pNhm06w93wjaIRq1xheAOUactVnwjWvn88nYFZMaOiaO0/s1600/Abhishek+Sinha.jpg" imageanchor="1" ><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgBWL9rLPO0EUloSCujRZKvsQHHqRc4hS2aMMtS6LxbTgoYfv99-dNfEaZOWFYQ82o4KkB-Qe0DUHV-x9q5SJ-aZAcYIdkz-c_pNhm06w93wjaIRq1xheAOUactVnwjWvn88nYFZMaOiaO0/s200/Abhishek+Sinha.jpg" /></a><p style="margin-left:145px; margin-top:-138px;">Abhishek Sinha has approximately 8 year of experience in equity research, business research and consultancy. He has also had the privilege of managing a small portfolio of INR 3 million. However, his interest lies in teaching and "demystifying concepts." He has taught students right from the age of 3 years at PP1, to 40 years at executive courses and believes teaching is not about knowing the concepts; it is about relating the concepts to the audience.
At present he is "gainfully employed" at Vignana Jyothi Institute of Management, Hyderabad; where he loves to teach finance to an enthusiastic bunch of management students. His hobbies include analyzing income statement, balance sheet and cash flow.> <a href="https://plus.google.com/u/0/112464735121397739558/about?rel=author">Google +</a></p></div>
</div>Abhishek Sinhahttp://www.blogger.com/profile/05955755302598472670noreply@blogger.com6tag:blogger.com,1999:blog-7457870121656036705.post-31717944695692059452013-10-12T01:33:00.000-07:002014-10-15T08:20:33.841-07:00Economics behind natural disasters<div dir="ltr" style="text-align: left;" trbidi="on">
<div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: 'Times New Roman', serif; font-size: 12pt;">Natural disasters are
tragedies which tests the human race's preparedness to survive under adverse
situation. It also tests the ability of the government and the country to tackle the adverse economic impact. With cyclone Phailin ready to cause disaster in the eastern and southern part of the country let's understand the economic implication of the same:<o:p></o:p></span></div>
</div>
<ol start="1" type="1">
<li class="MsoNormal"><span style="font-family: "Times New Roman","serif"; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">Revenue from the affected area comes to naught for a
short period of time.<o:p></o:p></span></li>
</ol>
<div class="MsoNormal" style="margin-left: 0.5in;">
<span style="font-family: "Times New Roman","serif"; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">Agriculturalists
are the worst hit in third world countries as they do not have huge savings.
They have a hand to mouth existence and such disasters force them to borrow at exorbitant
interest rates from moneylenders/ MFI’s / chitfunds/ pawnbrokers etc. <o:p></o:p></span></div>
<div class="MsoNormal" style="margin-left: 0.5in;">
<b><span style="font-family: "Times New Roman","serif"; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">Impact</span></b><span style="font-family: "Times New Roman","serif"; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">: Here the
effectiveness of the government to provide economic aid is of paramount importance.
In countries like India the money generally flows through intermediaries and
does not reach the individuals on time. <o:p></o:p></span></div>
<ol start="2" type="1">
<li class="MsoNormal"><span style="font-family: "Times New Roman","serif"; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">Price of essential commodities and generators
(depending upon affordability) increase due to mismatch between demand and
supply.<o:p></o:p></span></li>
</ol>
<div class="MsoNormal" style="margin-left: 0.5in;">
<b><span style="font-family: "Times New Roman","serif"; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">Impact:</span></b><span style="font-family: "Times New Roman","serif"; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";"> It is
well-nigh impossible to get the disaster management team to provide essential
commodities on time due to logistic problem caused by destruction during such periods.<o:p></o:p></span></div>
<ol start="3" type="1">
<li class="MsoNormal"><span style="font-family: "Times New Roman","serif"; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">If the insurance coverage is high in the area (both
life and non-life) insurance claims increase.<o:p></o:p></span></li>
</ol>
<div class="MsoNormal" style="margin-left: 0.5in;">
<b><span style="font-family: "Times New Roman","serif"; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">Impact: </span></b><span style="font-family: "Times New Roman","serif"; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">The cost
of insuring life and property would increase as the probability of occurrence of
such disasters will be more likely going forward.<b> <o:p></o:p></b></span></div>
<ol start="4" type="1">
<li class="MsoNormal"><span style="font-family: "Times New Roman","serif"; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">Black marketing of essential commodities increase.<o:p></o:p></span></li>
</ol>
<div class="MsoNormal" style="margin-left: 0.5in;">
<b><span style="font-family: "Times New Roman","serif"; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">Impact:</span></b><span style="font-family: "Times New Roman","serif"; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";"> The
impact of black marketing depends on the government’s ability to control such
activities. In India historically the government has not been successful in
controlling such activities.<o:p></o:p></span></div>
<ol start="5" type="1">
<li class="MsoNormal"><span style="font-family: "Times New Roman","serif"; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">Tourism revenues are adversely impacted for a period of
6 months to 12 months.<o:p></o:p></span></li>
</ol>
<div class="MsoNormal" style="margin-left: 0.5in;">
<b><span style="font-family: "Times New Roman","serif"; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">Impact: </span></b><span style="font-family: "Times New Roman","serif"; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">Most of
these businesses have huge fixed cost hence a lot of new players and marginal
(small players) have to close shops. Cyclones hit areas in and around sea,
which depends on tourism.<o:p></o:p></span></div>
<ol start="6" type="1">
<li class="MsoNormal"><span style="font-family: "Times New Roman","serif"; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">Demand for infrastructural development will increase as
renovation and rebuilding expenses will increase.<o:p></o:p></span></li>
</ol>
<div class="MsoNormal" style="margin-left: 0.5in;">
<b><span style="font-family: "Times New Roman","serif"; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">Impact</span></b><span style="font-family: "Times New Roman","serif"; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">: Infrastructural
spending would depend on government spending, donations and grants by NGO’s <o:p></o:p></span></div>
<div class="MsoNormal" style="margin-left: 0.5in;">
<span style="font-family: "Times New Roman","serif"; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";"><br /></span></div>
<div class="MsoListParagraph" style="text-align: left; text-indent: -0.25in;">
<span style="font-family: 'Times New Roman', serif; text-indent: -0.25in;"><span style="font-family: 'Times New Roman'; font-size: 7pt;"> </span><span style="font-family: 'Times New Roman';">7 . </span></span><span style="font-family: 'Times New Roman', serif; font-size: 12pt; text-indent: -0.25in;">Pharmaceutical companies, pharmacists
and hospitals would see an increase in revenue.</span><!--[if !supportLists]--></div>
<div class="MsoNormal" style="margin-left: 0.25in;">
<b><span style="font-family: "Times New Roman","serif"; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";"> Impact:</span></b><span style="font-family: "Times New Roman","serif"; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";"> Even though it does sound unnerving this is the time when
these sectors make windfall gains. <o:p></o:p></span></div>
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<h4>
Author: Abhishek Sinha</h4>
<a bhishek="" bp.blogspot.com="" href="https://www.blogger.com/%3Ca%20href=" http:="" imageanchor="1" inha.jpg="" jwre7ofa4="" qbft2mznxi="" s1600="" vagvddxgi=""><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgBWL9rLPO0EUloSCujRZKvsQHHqRc4hS2aMMtS6LxbTgoYfv99-dNfEaZOWFYQ82o4KkB-Qe0DUHV-x9q5SJ-aZAcYIdkz-c_pNhm06w93wjaIRq1xheAOUactVnwjWvn88nYFZMaOiaO0/s200/Abhishek+Sinha.jpg" /></a><br />
<div style="margin-left: 145px; margin-top: -138px;">
Abhishek Sinha has approximately 8 year of experience in equity research, business research and consultancy. He has also had the privilege of managing a small portfolio of INR 3 million. However, his interest lies in teaching and "demystifying concepts." He has taught students right from the age of 3 years at PP1, to 40 years at executive courses and believes teaching is not about knowing the concepts; it is about relating the concepts to the audience.
At present he is "gainfully employed" at Vignana Jyothi Institute of Management, Hyderabad; where he loves to teach finance to an enthusiastic bunch of management students. His hobbies include analyzing income statement, balance sheet and cash flow.> <a href="https://plus.google.com/u/0/112464735121397739558/about?rel=author">Google +</a></div>
</div>
<br />
<div class="MsoNormal">
<br /></div>
</div>
Abhishek Sinhahttp://www.blogger.com/profile/05955755302598472670noreply@blogger.com2tag:blogger.com,1999:blog-7457870121656036705.post-40506148069345564872013-10-11T10:27:00.001-07:002013-12-06T01:11:19.994-08:00GOVERNMENT SHUTDOWN - WHAT IT MEANS<div dir="ltr" style="text-align: left;" trbidi="on">
<div style="background: white; line-height: 150%; margin: 0in;">
<span style="color: #333333; font-size: 10pt; line-height: 150%;"><b>What does it mean?</b></span><br />
<span style="color: #333333; font-size: 10pt; line-height: 150%;">This refers to an impasse between the two pillars of US democratic system - the two pillars are the Senate and the Congress leading to a situation where the government fails to provide those services which can be categorized as non essential items.</span></div>
<div style="background: white; line-height: 150%; margin: 0in;">
<b><span style="color: #333333; font-size: 10pt; line-height: 150%;">Analogy</span></b><span style="color: #333333; font-size: 10pt; line-height: 150%;">: When two room-mates cannot agree who would clean the utensils once the food is cooked, next day no food is cooked as there are no utensils.<o:p></o:p></span></div>
<div style="background-color: white; line-height: 150%; margin: 0in 0in 0pt; outline-color: invert; outline-style: none; outline-width: 0px;">
<strong style="outline-color: invert; outline-style: none; outline-width: 0px;"><span style="border-bottom: windowtext 1pt; border-left: windowtext 1pt; border-right: windowtext 1pt; border-top: windowtext 1pt; color: #333333; font-size: 10pt; line-height: 150%; mso-border-alt: none windowtext 0in; padding-bottom: 0in; padding-left: 0in; padding-right: 0in; padding-top: 0in;"> What is the impact of the impasse?</span></strong><span style="color: #333333; font-size: 10pt; line-height: 150%;"><o:p></o:p></span></div>
<div style="background-color: white; line-height: 150%; margin: 0in 0in 0pt; outline-color: invert; outline-style: none; outline-width: 0px;">
<span style="color: #333333; font-size: 10pt; line-height: 150%;">The US government needs to pass all the bills for the fiscal year which begins on 1<sup>st</sup> October on or before 31 st September so that the funds can be released. However, this year the two houses could not reach to a consensus on how to fund the programs before 1<sup>st</sup> October Hence, there is no way the programs could be implemented as source for the same is not clear.<o:p></o:p></span></div>
<div style="background: white; line-height: 150%; margin: 0in;">
<b><span style="color: #333333; font-size: 10pt; line-height: 150%;">Analogy:</span></b><span style="color: #333333; font-size: 10pt; line-height: 150%;"> The roommates had whole night to decide who would clean the utensil however the night has passed but the utensils cannot be used so the hired cook goes away without cooking. <o:p></o:p></span></div>
<div style="background-color: white; line-height: 150%; margin: 0in 0in 0pt; outline-color: invert; outline-style: none; outline-width: 0px;">
<strong style="outline-color: invert; outline-style: none; outline-width: 0px;"><span style="border-bottom: windowtext 1pt; border-left: windowtext 1pt; border-right: windowtext 1pt; border-top: windowtext 1pt; color: #333333; font-size: 10pt; line-height: 150%; mso-border-alt: none windowtext 0in; padding-bottom: 0in; padding-left: 0in; padding-right: 0in; padding-top: 0in;">Why are they not able to decide on how to fund the expenditure assuming that this is their primary job?</span></strong><span style="color: #333333; font-size: 10pt; line-height: 150%;"><o:p></o:p></span></div>
<div style="background-color: white; line-height: 150%; margin: 0in 0in 0pt; outline-color: invert; outline-style: none; outline-width: 0px;">
<span style="color: #333333; font-size: 10pt; line-height: 150%;">The Congress is dominated by the Republicans who do not want to provide funds for Obama’s pet project The Patient Protection and Affordable Care Act (PPACA) which is called Obamacare by the print media. On the other hand the democrats who dominate the senate do not agree with the congress on not providing fund to their leader's pet project.<o:p></o:p></span></div>
<div style="background-color: white; line-height: 150%; margin: 0in 0in 0pt; outline-color: invert; outline-style: none; outline-width: 0px;">
<b><span style="color: #333333; font-size: 10pt; line-height: 150%;">Analogy:<o:p></o:p></span></b></div>
<div style="background: white; line-height: 150%; margin: 0in;">
<b><span style="color: #333333; font-size: 10pt; line-height: 150%;"> </span></b><span style="color: #333333; font-size: 10pt; line-height: 150%;">The two roommates do not wash the utensils because the other roommate did not wash it. So it is more of a ego issue which cannot be solved.<o:p></o:p></span></div>
<div style="background: white; line-height: 150%; margin: 0in;">
<strong><span style="border-bottom: windowtext 1pt; border-left: windowtext 1pt; border-right: windowtext 1pt; border-top: windowtext 1pt; color: #333333; font-size: 10pt; line-height: 150%; mso-border-alt: none windowtext 0in; padding-bottom: 0in; padding-left: 0in; padding-right: 0in; padding-top: 0in;">Could you demystify the PPACA bill?</span></strong><span style="color: #333333; font-size: 10pt; line-height: 150%;"><o:p></o:p></span></div>
<div style="background-color: white; line-height: 150%; margin: 0in 0in 0pt; outline-color: invert; outline-style: none; outline-width: 0px;">
<span style="color: #333333; font-size: 10pt; line-height: 150%;">This pet project of the President of United States aims at providing healthcare to every American. Under this act the insurers are compelled to insure every American. Those who cannot afford are provided financial support and those who can afford and do not insure themselves are forced to pay a fees on their taxes.<o:p></o:p></span></div>
<div style="background: white; line-height: 150%; margin: 0in;">
<b><span style="color: #333333; font-size: 10pt; line-height: 150%;">Analogy:<o:p></o:p></span></b></div>
<div style="background: white; line-height: 150%; margin: 0in;">
<span style="color: #333333; font-size: 10pt; line-height: 150%;">The government will decide what will be cooked today in my house because the government is concerned about my health. <o:p></o:p></span></div>
<div style="background-color: white; line-height: 150%; margin: 0in 0in 0pt; outline-color: invert; outline-style: none; outline-width: 0px;">
<strong style="outline-color: invert; outline-style: none; outline-width: 0px;"><span style="border-bottom: windowtext 1pt; border-left: windowtext 1pt; border-right: windowtext 1pt; border-top: windowtext 1pt; color: #333333; font-size: 10pt; line-height: 150%; mso-border-alt: none windowtext 0in; padding-bottom: 0in; padding-left: 0in; padding-right: 0in; padding-top: 0in;">Is there any reason for the republicans opposing?</span></strong><span style="color: #333333; font-size: 10pt; line-height: 150%;"><o:p></o:p></span></div>
<div style="background-color: white; line-height: 150%; margin: 0in 0in 0pt; outline-color: invert; outline-style: none; outline-width: 0px;">
<span style="color: #333333; font-size: 10pt; line-height: 150%;">They believe and rightly so that in a democratic set up the government cannot force people to decide how to spend their own hard earned money <o:p></o:p></span></div>
<div style="background-color: white; line-height: 150%; margin: 0in 0in 0pt; outline-color: invert; outline-style: none; outline-width: 0px;">
<b><span style="color: #333333; font-size: 10pt; line-height: 150%;">Analogy: None needed here I presume<o:p></o:p></span></b></div>
<div style="background: white; line-height: 150%; margin: 0in;">
<strong><span style="border-bottom: windowtext 1pt; border-left: windowtext 1pt; border-right: windowtext 1pt; border-top: windowtext 1pt; color: #333333; font-size: 10pt; line-height: 150%; mso-border-alt: none windowtext 0in; padding-bottom: 0in; padding-left: 0in; padding-right: 0in; padding-top: 0in;">Give me some example of non–essential services?</span></strong><span style="color: #333333; font-size: 10pt; line-height: 150%;"><o:p></o:p></span></div>
<div style="background-color: white; line-height: 150%; margin: 0in 0in 0pt; outline-color: invert; outline-style: none; outline-width: 0px;">
<span style="color: #333333; font-size: 10pt; line-height: 150%;">Non essential services include maintenance of zoos, passport services, homeland securities etc<strong><span style="font-weight: normal;"><o:p></o:p></span></strong></span></div>
<div style="background: white; line-height: 150%; margin: 0in;">
<strong><span style="border-bottom: windowtext 1pt; border-left: windowtext 1pt; border-right: windowtext 1pt; border-top: windowtext 1pt; color: #333333; font-size: 10pt; line-height: 150%; mso-border-alt: none windowtext 0in; padding-bottom: 0in; padding-left: 0in; padding-right: 0in; padding-top: 0in;">What would happen to the salary of the people engaged in non essential services?<o:p></o:p></span></strong></div>
<div style="background: white; line-height: 150%; margin: 0in;">
<strong><span style="border-bottom: windowtext 1pt; border-left: windowtext 1pt; border-right: windowtext 1pt; border-top: windowtext 1pt; color: #333333; font-size: 10pt; font-weight: normal; line-height: 150%; mso-bidi-font-weight: bold; mso-border-alt: none windowtext 0in; padding-bottom: 0in; padding-left: 0in; padding-right: 0in; padding-top: 0in;">They will not be paid any salary till the uncertainty prevails.<o:p></o:p></span></strong></div>
<div style="background: white; line-height: 19.2pt; margin: 0in;">
<strong style="background-color: transparent; line-height: 150%;"><span style="border-bottom: windowtext 1pt; border-left: windowtext 1pt; border-right: windowtext 1pt; border-top: windowtext 1pt; color: #333333; font-size: 10pt; line-height: 150%; mso-border-alt: none windowtext 0in; mso-fareast-font-family: 'Times New Roman'; padding-bottom: 0in; padding-left: 0in; padding-right: 0in; padding-top: 0in;"><o:p> </o:p></span></strong><strong style="background-color: transparent; line-height: 150%;"><span style="border-bottom: windowtext 1pt; border-left: windowtext 1pt; border-right: windowtext 1pt; border-top: windowtext 1pt; color: #333333; font-size: 10pt; line-height: 150%; mso-border-alt: none windowtext 0in; padding-bottom: 0in; padding-left: 0in; padding-right: 0in; padding-top: 0in;">Million Dollar Question – will the congress members be paid during the period?</span></strong></div>
<div style="background: white; line-height: 19.2pt; margin: 0in;">
</div>
<div style="background: white; line-height: 150%; margin: 0in;">
<strong><span style="border-bottom: windowtext 1pt; border-left: windowtext 1pt; border-right: windowtext 1pt; border-top: windowtext 1pt; color: #333333; font-size: 10pt; font-weight: normal; line-height: 150%; mso-bidi-font-weight: bold; mso-border-alt: none windowtext 0in; padding-bottom: 0in; padding-left: 0in; padding-right: 0in; padding-top: 0in;">Yes the congress members will be paid hence they do not lose anything for being the cause of the problem and causing the exchequer a loss estimated at $500 million per week.</span></strong><span style="color: #333333; font-size: 10pt; line-height: 150%;"><o:p></o:p></span></div>
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<h4>Author: Abhishek Sinha</h4><a imageanchor="1" href="<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgBWL9rLPO0EUloSCujRZKvsQHHqRc4hS2aMMtS6LxbTgoYfv99-dNfEaZOWFYQ82o4KkB-Qe0DUHV-x9q5SJ-aZAcYIdkz-c_pNhm06w93wjaIRq1xheAOUactVnwjWvn88nYFZMaOiaO0/s1600/Abhishek+Sinha.jpg" imageanchor="1" ><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgBWL9rLPO0EUloSCujRZKvsQHHqRc4hS2aMMtS6LxbTgoYfv99-dNfEaZOWFYQ82o4KkB-Qe0DUHV-x9q5SJ-aZAcYIdkz-c_pNhm06w93wjaIRq1xheAOUactVnwjWvn88nYFZMaOiaO0/s200/Abhishek+Sinha.jpg" /></a><p style="margin-left:145px; margin-top:-138px;">Abhishek Sinha has approximately 8 year of experience in equity research, business research and consultancy. He has also had the privilege of managing a small portfolio of INR 3 million. However, his interest lies in teaching and "demystifying concepts." He has taught students right from the age of 3 years at PP1, to 40 years at executive courses and believes teaching is not about knowing the concepts; it is about relating the concepts to the audience.
At present he is "gainfully employed" at Vignana Jyothi Institute of Management, Hyderabad; where he loves to teach finance to an enthusiastic bunch of management students. His hobbies include analyzing income statement, balance sheet and cash flow.> <a href="https://plus.google.com/u/0/112464735121397739558/about?rel=author">Google +</a></p></div>
</div>Abhishek Sinhahttp://www.blogger.com/profile/05955755302598472670noreply@blogger.com7tag:blogger.com,1999:blog-7457870121656036705.post-73316255680878740472013-10-06T10:41:00.000-07:002013-12-06T01:15:35.891-08:00Interrelationship between components of income statement and balance sheet<div dir="ltr" style="text-align: left;" trbidi="on">
The aim of this article is to determine relationship between components of income statement and balance sheet. Income statement has basically three components:<br />
<br />
<ol style="text-align: left;">
<li>Revenue </li>
<li>Expense</li>
<li>Profit</li>
</ol>
<div>
Balance Sheet on the other hand has two components:</div>
<div>
<ol style="text-align: left;">
<li>Asset</li>
<li>Liability</li>
<li>Owners equity</li>
</ol>
<div>
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</div>
<div>
Asset is financed with the help of liability and owner's equity. Liability refers to long term and short term debt along with other components of current liability such as account's payable and pre- received income. Owners equity on the hand has two components - equity share capital and reserves and surplus. Equity share capital is the product of outstanding shares and face value of shares. In other words equity share capital is shown at book value which is far removed from market value. Long term debt is of two types secured and unsecured debt. Most of the debt is in form of secured debt. Ideally companies choose to finance long term assets with long term debts or internal accruals. However, in case of Indian companies using cross border acquisition as a method of future growth it should be noted that issuing new debts become inevitable.<br />
It is important to describe long term assets into two parts- Operating Non Current Assets and Non Operating Non Current Assets. The growth of a company comes through operating non current assets. Hence , it is important to see how long is it taking for a company to yield returns from increase in non current operating assets. For example, Tata Motors has seen it's non current operating assets grow by more than three times in the last 5 years whereas it's operating profits has marginally declined from 3654 cr. to 3380 cr. Hence, with increase in debt due to inorganic growth, the company is now forced with a sutation wherein it's net profit is under immense pressure due to increasing interest and declining operating profit.<br />
This is when the cross border acquisition has worked for the company. There are cases where cross border acquisitions do not work for the company then the pressure on operating profits and net profit is considerable and even lead the company to bankruptcy. Thus, it is important to understand that financing of growth is as important as growth itself. Hence, any news on capacity augmentation must be seen in view of how the company manages it's balance sheet (increase in operating non current asset matched with increase in debt, equity or decrease in cash.) </div>
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<h4>Author: Abhishek Sinha</h4><a imageanchor="1" href="<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgBWL9rLPO0EUloSCujRZKvsQHHqRc4hS2aMMtS6LxbTgoYfv99-dNfEaZOWFYQ82o4KkB-Qe0DUHV-x9q5SJ-aZAcYIdkz-c_pNhm06w93wjaIRq1xheAOUactVnwjWvn88nYFZMaOiaO0/s1600/Abhishek+Sinha.jpg" imageanchor="1" ><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgBWL9rLPO0EUloSCujRZKvsQHHqRc4hS2aMMtS6LxbTgoYfv99-dNfEaZOWFYQ82o4KkB-Qe0DUHV-x9q5SJ-aZAcYIdkz-c_pNhm06w93wjaIRq1xheAOUactVnwjWvn88nYFZMaOiaO0/s200/Abhishek+Sinha.jpg" /></a><p style="margin-left:145px; margin-top:-138px;">Abhishek Sinha has approximately 8 year of experience in equity research, business research and consultancy. He has also had the privilege of managing a small portfolio of INR 3 million. However, his interest lies in teaching and "demystifying concepts." He has taught students right from the age of 3 years at PP1, to 40 years at executive courses and believes teaching is not about knowing the concepts; it is about relating the concepts to the audience.
At present he is "gainfully employed" at Vignana Jyothi Institute of Management, Hyderabad; where he loves to teach finance to an enthusiastic bunch of management students. His hobbies include analyzing income statement, balance sheet and cash flow.> <a href="https://plus.google.com/u/0/112464735121397739558/about?rel=author">Google +</a></p></div>
</div>Abhishek Sinhahttp://www.blogger.com/profile/05955755302598472670noreply@blogger.com2tag:blogger.com,1999:blog-7457870121656036705.post-87807235509262981002013-07-18T11:15:00.001-07:002013-12-06T01:17:26.391-08:00Quantitative risk modeling and it's pitfalls<div dir="ltr" style="text-align: left;" trbidi="on">
Risk refers to the potential quantifiable losses that can occur in the foreseeable future. The quantitative risk models are tools which have been designed with the aim of building consumer confidence by reducing and finally eliminating the risk factor in any investment scenario. However, it should be noted that these models do not provide for extremely unlikely losses. Thus, it often happens that in highly volatile environment these models do not work the reason being that the occurrence of extremely rare events are no longer a rarity. Case in the point is Long Term Capital Management which had a robust risk management system. However, when Russia defaulted in loans in ruble denominated currencies the whole US market and economy was impacted. This has lead to occurrence of a series of events that impacted the investment environment of United States adversely. The number of exceptions reported by banks such as UBS, Soceital General and Deutsche bank has increased exceptionally during the 2007 and 2008 collapse. It is important to understand the role of irrational exuberance and fear of losses in such events. When events proves that the investment decision has been right for a long period of time continuously irrational exuberance sets in. On the other hand the bubble bursts abruptly at the triggering of one negative event. This is because of setting of one unexpected event. The problem with most of the models is the inability to foresee losses by occurrence of such events. It would be wrong to say that models are not linked with the practical world however such losses cannot be predicted. According to Rene Stulz, the fact that a company has incurred huge losses after having robust risk models in place is not an indication of the failure of risk models. Risk models even if they are perfectly designed can at times fail to predict the future potential losses. Most of the risk models world over are based on the basic tenet that diversification reduces risks. Hence, investment companies possess assets that are negatively correlated. These negative correlated assets are identified using quantitative models which cannot be understood by individuals like us. However, it should be noted that when the whole market collapses the risk management models fail. This can be attributed to the fact that the falling market leads to margin calls which in turn lead to squaring of profitable positions in the market hence causing a further market wide collapse. The important feature of these collapses is the abruptness with which they occur and their ability to make the possibility of occurrence extremely remote events a reality. When most of the models are based on long term historical data and collapses happen abruptly and are short term events it is not surprising that the models fail to capture risk. The success or failure of the risk models depends primarily on the ability of the modeler to capture both rational and irrational factors in his model. It is not important whether the factors are logical or illogical what is important is whether the factors are observable and statistically tested. Hence, it can be concluded that even though models work well in non- trending as well as bull markets they tend to fail in volatile and bearish market.</div><div style="margin-top: 15px;">
<h4>Author: Abhishek Sinha</h4><a imageanchor="1" href="<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgBWL9rLPO0EUloSCujRZKvsQHHqRc4hS2aMMtS6LxbTgoYfv99-dNfEaZOWFYQ82o4KkB-Qe0DUHV-x9q5SJ-aZAcYIdkz-c_pNhm06w93wjaIRq1xheAOUactVnwjWvn88nYFZMaOiaO0/s1600/Abhishek+Sinha.jpg" imageanchor="1" ><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgBWL9rLPO0EUloSCujRZKvsQHHqRc4hS2aMMtS6LxbTgoYfv99-dNfEaZOWFYQ82o4KkB-Qe0DUHV-x9q5SJ-aZAcYIdkz-c_pNhm06w93wjaIRq1xheAOUactVnwjWvn88nYFZMaOiaO0/s200/Abhishek+Sinha.jpg" /></a><p style="margin-left:145px; margin-top:-138px;">Abhishek Sinha has approximately 8 year of experience in equity research, business research and consultancy. He has also had the privilege of managing a small portfolio of INR 3 million. However, his interest lies in teaching and "demystifying concepts." He has taught students right from the age of 3 years at PP1, to 40 years at executive courses and believes teaching is not about knowing the concepts; it is about relating the concepts to the audience.
At present he is "gainfully employed" at Vignana Jyothi Institute of Management, Hyderabad; where he loves to teach finance to an enthusiastic bunch of management students. His hobbies include analyzing income statement, balance sheet and cash flow.> <a href="https://plus.google.com/u/0/112464735121397739558/about?rel=author">Google +</a></p></div>
</div>Abhishek Sinhahttp://www.blogger.com/profile/05955755302598472670noreply@blogger.com0tag:blogger.com,1999:blog-7457870121656036705.post-16379061260704130382013-07-17T22:49:00.001-07:002013-12-06T01:18:54.919-08:00Correlation between debt and stock prices<div dir="ltr" style="text-align: left;" trbidi="on">
<div style="background: white; line-height: 15.75pt; text-align: justify;">
<br /></div>
<div style="background: white; line-height: 15.75pt; text-align: justify;">
<span style="font-family: "Verdana","sans-serif"; font-size: 11.5pt;">Investors do not
generally invest in individual assets they invest in a group of assets which is
known as a portfolio. To gauge the performance of the portfolio it is important
to determine the co-movement of different classes of assets. This is done to mitigate and manage risk
better. For example, if an asset portfolio consists of only stocks and gold the
relationship between the price movements theoretically would be negative.
Hence, risk can be hedged. <o:p></o:p></span></div>
<div style="background: white; line-height: 15.75pt; text-align: justify;">
<span style="font-family: "Verdana","sans-serif"; font-size: 11.5pt;">Under the risk and
return framework, it should be noted that stocks are supposed to possess higher
level of risk hence the return expected from the stocks in the long run is
higher than the return expected from debts in the long run. The valuation of
both stocks and debt are done with the help of cash flow models. These models
are based on the premise that the value of the asset is dependent on the
discounted value of the stream of cash flow it generates. Hence, other things
remaining same if the cash flows are positively correlated and the discounting
rates are same then the two asset classes would move in the same direction. Thus,
relationship between stocks and bond prices are said to be theoretically
correlated such that they both move in the same direction. However, it should
be noted that there are different factors that impact the cash flow of both
stocks and debt instruments. The cash flows in case of stock prices are driven
by dividend (assuming dividend discount model) and in case of debt instruments
are driven by the regular coupon payments and the principal payments.
Discounting rates on the other hand are based on expectation of returns by the
two classes of assets. The other factor that can cause a difference in the
direction of price movement is inflation. An increase or decrease in inflation
impact debt instruments more compared to the shares. This implies that if the
prices of the stocks increase the prices of debt instruments would also
increase and vice versa. <o:p></o:p></span></div>
<div style="background: white; line-height: 15.75pt; text-align: justify;">
<span style="font-family: "Verdana","sans-serif"; font-size: 11.5pt;">In 1993, a research
was carried out by Campbell and team to determine the factors that move both
the asset classes – stocks and debts. For this purpose, they researched on
monthly prices of both the assets between the time period 1952 to 1987. The
research showed that the stock prices were not impacted much by real interest
rates and inflation. On the other hand inflation played an important role in
determining the price of debt instruments. It was also observed that there is a
higher volatility in the prices of debt compared to stocks. A research carried
by Malcolm Baker and Jeffery Wrengler in 2011 prove that the relationship
between bond and stock index is unstable. It also goes on to say that the
stocks which give stable returns akin to bonds are more closely related to the
government bonds. Hence, it can be concluded that though theoretically the
price of a stock has a direct positive correlation with the price of debt
empirically the same has not been established. <o:p></o:p></span></div>
<div style="background: white; line-height: 15.75pt; text-align: justify;">
<b><span style="font-family: "Verdana","sans-serif"; font-size: 11.5pt;">References:<o:p></o:p></span></b></div>
<div style="background: white; line-height: 15.75pt; margin-left: .5in; mso-list: l0 level1 lfo1; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: Symbol; font-size: 11.5pt; mso-bidi-font-family: Symbol; mso-fareast-font-family: Symbol;">·<span style="font-family: 'Times New Roman'; font-size: 7pt; line-height: normal;">
</span></span><!--[endif]--><span style="font-family: "Verdana","sans-serif"; font-size: 11.5pt;">Fama
E.F., and G.W. Schwert, 1977, Asset Returns and Financial Economics, 115-46<o:p></o:p></span></div>
<div style="background: white; line-height: 15.75pt; margin-left: .5in; mso-list: l0 level1 lfo1; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: Symbol; font-size: 11.5pt; mso-bidi-font-family: Symbol; mso-fareast-font-family: Symbol;">·<span style="font-family: 'Times New Roman'; font-size: 7pt; line-height: normal;">
</span></span><!--[endif]--><span style="font-family: "Verdana","sans-serif"; font-size: 11.5pt;">Malcolm
Baker and Jeffery Wurgler, 2012, Comovement and Predictability Relationship
Between Bonds and Cross section of stocks<o:p></o:p></span></div>
<div style="background: white; line-height: 15.75pt; margin-left: .5in; mso-list: l0 level1 lfo1; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: Symbol; font-size: 11.5pt; mso-bidi-font-family: Symbol; mso-fareast-font-family: Symbol;">·<span style="font-family: 'Times New Roman'; font-size: 7pt; line-height: normal;">
</span></span><!--[endif]--><span style="font-family: "Verdana","sans-serif"; font-size: 11.5pt;">Cory
Mitchell, 2011, Intermarket Relationships: Following The Cycle, Investopedia<o:p></o:p></span></div>
<div style="background: white; line-height: 15.75pt; margin-left: .5in; mso-list: l0 level1 lfo1; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: Symbol; font-size: 11.5pt; mso-bidi-font-family: Symbol; mso-fareast-font-family: Symbol;">·<span style="font-family: 'Times New Roman'; font-size: 7pt; line-height: normal;">
</span></span><!--[endif]--><span style="font-family: "Verdana","sans-serif"; font-size: 11.5pt;">IllhanDemiralp,
Scott E Hein, 2010, Default Risk and Correlation of Stock Returns and Bond
Yield Changes<o:p></o:p></span></div>
<br />
<div style="background: white; line-height: 15.75pt; margin-left: .5in; mso-list: l0 level1 lfo1; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: Symbol; font-size: 11.5pt; mso-bidi-font-family: Symbol; mso-fareast-font-family: Symbol;">·<span style="font-family: 'Times New Roman'; font-size: 7pt; line-height: normal;">
</span></span><!--[endif]--><span style="background-position: initial initial; background-repeat: initial initial; color: #444444; font-family: Arial, sans-serif;">Campbell R. Harvey, Journal of Portfolio
Management,<span class="apple-converted-space"> </span><em><span style="font-family: "Arial","sans-serif"; font-style: normal; mso-bidi-font-weight: bold;">1993, Errors in Means, Variances and Covariances on Optimal Portfolio
Choice”</span></em></span><span style="font-family: "Verdana","sans-serif"; font-size: 11.5pt;"><o:p></o:p></span></div>
</div><div style="margin-top: 15px;">
<h4>Author: Abhishek Sinha</h4><a imageanchor="1" href="<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgBWL9rLPO0EUloSCujRZKvsQHHqRc4hS2aMMtS6LxbTgoYfv99-dNfEaZOWFYQ82o4KkB-Qe0DUHV-x9q5SJ-aZAcYIdkz-c_pNhm06w93wjaIRq1xheAOUactVnwjWvn88nYFZMaOiaO0/s1600/Abhishek+Sinha.jpg" imageanchor="1" ><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgBWL9rLPO0EUloSCujRZKvsQHHqRc4hS2aMMtS6LxbTgoYfv99-dNfEaZOWFYQ82o4KkB-Qe0DUHV-x9q5SJ-aZAcYIdkz-c_pNhm06w93wjaIRq1xheAOUactVnwjWvn88nYFZMaOiaO0/s200/Abhishek+Sinha.jpg" /></a><p style="margin-left:145px; margin-top:-138px;">Abhishek Sinha has approximately 8 year of experience in equity research, business research and consultancy. He has also had the privilege of managing a small portfolio of INR 3 million. However, his interest lies in teaching and "demystifying concepts." He has taught students right from the age of 3 years at PP1, to 40 years at executive courses and believes teaching is not about knowing the concepts; it is about relating the concepts to the audience.
At present he is "gainfully employed" at Vignana Jyothi Institute of Management, Hyderabad; where he loves to teach finance to an enthusiastic bunch of management students. His hobbies include analyzing income statement, balance sheet and cash flow.> <a href="https://plus.google.com/u/0/112464735121397739558/about?rel=author">Google +</a></p></div>
</div>Abhishek Sinhahttp://www.blogger.com/profile/05955755302598472670noreply@blogger.com1tag:blogger.com,1999:blog-7457870121656036705.post-27849717993388153632012-12-19T08:06:00.003-08:002013-12-06T01:20:07.914-08:00Ek sikshak ki vidambana<div dir="ltr" style="text-align: left;" trbidi="on">
<br />
<div class="_kso fsm direction_ltr" data-jsid="message" style="background-color: white; color: #333333; direction: ltr; font-family: 'lucida grande', tahoma, verdana, arial, sans-serif; font-size: 10.909090995788574px; line-height: 12.727272033691406px; margin-bottom: 3px; white-space: pre-wrap; word-wrap: break-word;">
<br />
Mein baitha soch raha aaj,<br />
Kiya vidya du tumhe eh chatra,<br />
<br />
Samay pe tum class nahi aate,<br />
Kyoki raat ko disc jaate<br />
Gyan nahi chahiye tumhe,<br />
Jab ankh iske bina bhi milta,<br />
Har chatra naukri chata,<br />
Magar mehnat karna usse nahi bhaata,<br />
<br />
Sochte sochte yeh vichar aaya,<br />
Ye system ham log hi ne banaya,<br />
Phir kyon kare ham chatra ko badnam<br />
Magar afsos! Mein baitha ab bhi soch raha aaj,<br />
Kiya vidya du tumhe eh chatra,</div>
<div class="_kso fsm direction_ltr" data-jsid="message" style="background-color: white; color: #333333; direction: ltr; font-family: 'lucida grande', tahoma, verdana, arial, sans-serif; font-size: 10.909090995788574px; line-height: 12.727272033691406px; margin-bottom: 3px; white-space: pre-wrap; word-wrap: break-word;">
how is it?</div>
</div>
<div style="margin-top: 15px;">
<h4>Author: Abhishek Sinha</h4><a imageanchor="1" href="<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgBWL9rLPO0EUloSCujRZKvsQHHqRc4hS2aMMtS6LxbTgoYfv99-dNfEaZOWFYQ82o4KkB-Qe0DUHV-x9q5SJ-aZAcYIdkz-c_pNhm06w93wjaIRq1xheAOUactVnwjWvn88nYFZMaOiaO0/s1600/Abhishek+Sinha.jpg" imageanchor="1" ><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgBWL9rLPO0EUloSCujRZKvsQHHqRc4hS2aMMtS6LxbTgoYfv99-dNfEaZOWFYQ82o4KkB-Qe0DUHV-x9q5SJ-aZAcYIdkz-c_pNhm06w93wjaIRq1xheAOUactVnwjWvn88nYFZMaOiaO0/s200/Abhishek+Sinha.jpg" /></a><p style="margin-left:145px; margin-top:-138px;">Abhishek Sinha has approximately 8 year of experience in equity research, business research and consultancy. He has also had the privilege of managing a small portfolio of INR 3 million. However, his interest lies in teaching and "demystifying concepts." He has taught students right from the age of 3 years at PP1, to 40 years at executive courses and believes teaching is not about knowing the concepts; it is about relating the concepts to the audience.
At present he is "gainfully employed" at Vignana Jyothi Institute of Management, Hyderabad; where he loves to teach finance to an enthusiastic bunch of management students. His hobbies include analyzing income statement, balance sheet and cash flow.> <a href="https://plus.google.com/u/0/112464735121397739558/about?rel=author">Google +</a></p></div>
</div>Abhishek Sinhahttp://www.blogger.com/profile/05955755302598472670noreply@blogger.com2tag:blogger.com,1999:blog-7457870121656036705.post-2949940272887377952012-06-09T01:45:00.002-07:002013-12-06T01:20:15.537-08:00Assumptions in "valuation"<div dir="ltr" style="text-align: left;" trbidi="on">
<div>
A student walked to me after a valuation class and asked me " Abhishek, it is a beautiful subject. I don't think anyone of us would lose marks. It involves taking any assumptions and then using formula based on these assumptions." This made me think and think hard. Is valuation all about taking assumptions and proving your assumptions?</div>
The answer I finally arrived at is a firm no. You have got the whole process of valuation wrong if you think that is what valuation is all about.Through this piece, I aim trying to reason out why is this approach wrong.<br />
Let us start by defining valuation. Valuation is the process by which we determine the "most likely value" of an asset, project, firm, business, share, goodwill etc. If the existing price is lower than the "perceived value " of the asset then we should sell the assets.<br />
Hence, logically it can be inferred from the above statement that to determine the most likely value we need to have a complete understanding on what makes a buyer pay for the asset.Thus, all the assumption that an analyst makes is to come at the most logical value. These assumptions are not made to make the life of the analyst easy. Following are the important attributes of assumptions that analysts make:<br />
<br />
<ol style="text-align: left;">
<li>The assumptions should be logical.</li>
<li>It should be in line with the assumption generally made in the given industry.</li>
<li>The assumption should never be made keeping the end result in mind.</li>
<li>Assumptions cannot be tweaked at the end so that the valuation looks justified</li>
</ol>
</div><div style="margin-top: 15px;">
<h4>Author: Abhishek Sinha</h4><a imageanchor="1" href="<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgBWL9rLPO0EUloSCujRZKvsQHHqRc4hS2aMMtS6LxbTgoYfv99-dNfEaZOWFYQ82o4KkB-Qe0DUHV-x9q5SJ-aZAcYIdkz-c_pNhm06w93wjaIRq1xheAOUactVnwjWvn88nYFZMaOiaO0/s1600/Abhishek+Sinha.jpg" imageanchor="1" ><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgBWL9rLPO0EUloSCujRZKvsQHHqRc4hS2aMMtS6LxbTgoYfv99-dNfEaZOWFYQ82o4KkB-Qe0DUHV-x9q5SJ-aZAcYIdkz-c_pNhm06w93wjaIRq1xheAOUactVnwjWvn88nYFZMaOiaO0/s200/Abhishek+Sinha.jpg" /></a><p style="margin-left:145px; margin-top:-138px;">Abhishek Sinha has approximately 8 year of experience in equity research, business research and consultancy. He has also had the privilege of managing a small portfolio of INR 3 million. However, his interest lies in teaching and "demystifying concepts." He has taught students right from the age of 3 years at PP1, to 40 years at executive courses and believes teaching is not about knowing the concepts; it is about relating the concepts to the audience.
At present he is "gainfully employed" at Vignana Jyothi Institute of Management, Hyderabad; where he loves to teach finance to an enthusiastic bunch of management students. His hobbies include analyzing income statement, balance sheet and cash flow.> <a href="https://plus.google.com/u/0/112464735121397739558/about?rel=author">Google +</a></p></div>
</div>Abhishek Sinhahttp://www.blogger.com/profile/05955755302598472670noreply@blogger.com1tag:blogger.com,1999:blog-7457870121656036705.post-58780180987601513092012-06-09T01:21:00.000-07:002013-12-06T01:20:43.949-08:00Information is everywhere; how to search is the game<div dir="ltr" style="text-align: left;" trbidi="on">
<br />
<div class="MsoNormal">
</div>
<div class="MsoNormal">
<span style="font-family: Arial, sans-serif;">Searching
information on website is not easy. Especially, if you are new to financial
research. The fact that you are not an expert on financial research bogs you
down. On top of that scarcity of information is a real concern for a novice in
the world where knowledge determines your existence. <o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: Arial, sans-serif;">Websites that
help:<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: Arial, sans-serif;"><a href="http://www.ibef.org/">http://www.ibef.org/</a><o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: Arial, sans-serif;">Global
Perspectives<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: Arial, sans-serif;"><a href="http://www.ibef.org/resource/perspectives/global-perspectives-on-india.aspx">http://www.ibef.org/resource/perspectives/global-perspectives-on-india.aspx</a><o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: Arial, sans-serif;">Quick Facts<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: Arial, sans-serif;"><a href="http://www.ibef.org/resource/perspectives/global-perspectives-on-india.aspx">http://www.ibef.org/resource/perspectives/global-perspectives-on-india.aspx</a><o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: Arial, sans-serif;">Indian Policy
Watch<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: Arial, sans-serif;"><a href="http://www.ibef.org/news/Policywatch.aspx">http://www.ibef.org/news/Policywatch.aspx</a><o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: Arial, sans-serif;">Sector
Research<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: Arial, sans-serif;"><a href="http://www.ibef.org/resource/perspectives/global-perspectives-on-india.aspx">http://www.ibef.org/resource/perspectives/global-perspectives-on-india.aspx</a><o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: Arial, sans-serif;">Indian States
– Business Information and Statistics<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: Arial, sans-serif;"><a href="http://www.ibef.org/states.aspx">http://www.ibef.org/states.aspx</a><o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: Arial, sans-serif;"><a href="http://www.ibef.org/artdisplay.aspx?cat_id=1028&art_id=28689">http://www.ibef.org/artdisplay.aspx?cat_id=1028&art_id=28689</a><o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: Arial, sans-serif;">M&A Deal
Trackers<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: Arial, sans-serif;">Monthly data
released by Grant Thornton India provides business owners with M&A market
insight. Monthly <o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: Arial, sans-serif;"><a href="http://www.ibef.org/artdisplay.aspx?cat_id=409&art_id=30612">http://www.ibef.org/artdisplay.aspx?cat_id=409&art_id=30612</a><o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: Arial, sans-serif;">Valuenotes<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: Arial, sans-serif;"><a href="http://www.valuenotes.com/classroom/classroom.php">Fundamentals of equity
research</a><o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: Arial, sans-serif;">Research
views by eminent broking firms<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: Arial, sans-serif;"><a href="http://www.valuenotes.com/research-analysis/company/company-research.php?cc=MTA1MTAwMDguMDA=&companyname=Tata%20Motors%20Ltd.">http://www.valuenotes.com/research-analysis/company/company-research.php?cc=MTA1MTAwMDguMDA=&companyname=Tata%20Motorsl%20Ltd.</a><o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: Arial, sans-serif;">Equity Master<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: Arial, sans-serif;">India Ecomomy<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: Arial, sans-serif;"><a href="http://www.equitymaster.com/research-it/india-economy/">http://www.equitymaster.com/research-it/india-economy/</a><o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: Arial, sans-serif;">Sector
Analysis<o:p></o:p></span></div>
<div class="MsoNormal">
<cite><span lang="EN-IN" style="color: #666666; font-family: Arial, sans-serif;">Example<o:p></o:p></span></cite></div>
<div class="MsoNormal">
<span style="font-family: Arial, sans-serif;"><a href="http://www.equitymaster.com/research-it/sector-info/hotels/"><span lang="EN-IN">www.<b>equitymaster</b>.com/research-it/<b>sector</b>-info/hotels/</span></a></span><cite><span lang="EN-IN" style="color: #666666; font-family: Arial, sans-serif;"><o:p></o:p></span></cite></div>
<div class="MsoNormal">
<cite><span lang="EN-IN" style="color: #666666; font-family: Arial, sans-serif;">Articles on Indian sectors/companies<o:p></o:p></span></cite></div>
<div class="MsoNormal">
<span style="font-family: Arial, sans-serif;"><a href="http://www.equitymaster.com/outsideview/detail.asp?date=12/30/2011&story=4&title=International%2DCombustion%2DNeeds%2Dto%2Dget%2Dfiring"><span lang="EN-IN">http://www.equitymaster.com/outsideview/detail.asp?date=12/30/2011&story=4&title=International%2DCombustion%2DNeeds%2Dto%2Dget%2Dfiring</span></a></span><cite><span lang="EN-IN" style="color: #666666; font-family: Arial, sans-serif;"><o:p></o:p></span></cite></div>
<div class="MsoNormal">
<span class="vshid2"><span lang="EN-IN" style="color: #666666; font-family: Arial, sans-serif;">Views on news – Outlook Arena</span></span><span class="vshid2"><span lang="EN-IN" style="color: #666666; font-family: Arial, sans-serif;"><o:p></o:p></span></span></div>
<div class="MsoNormal">
<span style="font-family: Arial, sans-serif;"><a href="http://www.equitymaster.com/research-it/india-economy/"><span lang="EN-IN">http://www.equitymaster.com/research-it/india-economy/</span></a></span><span class="vshid2"><span lang="EN-IN" style="color: #666666; font-family: Arial, sans-serif;"><o:p></o:p></span></span></div>
<div class="MsoNormal">
<span class="vshid2"><span lang="EN-IN" style="color: #666666; font-family: Arial, sans-serif;">Excellent source on views on sector</span></span><span class="vshid2"><span lang="EN-IN" style="color: #666666; font-family: Arial, sans-serif;"><o:p></o:p></span></span></div>
<div class="MsoNormal">
<span class="vshid2"><span lang="EN-IN" style="color: #666666; font-family: Arial, sans-serif;">Sector Specific- Pharma</span></span><span class="vshid2"><span lang="EN-IN" style="color: #666666; font-family: Arial, sans-serif;"><o:p></o:p></span></span></div>
<div class="MsoNormal">
<span style="font-family: Arial, sans-serif;"><a href="http://www.expresspharmaonline.com/"><span lang="EN-IN">http://www.expresspharmaonline.com/</span></a></span><span class="vshid2"><span lang="EN-IN" style="color: #666666; font-family: Arial, sans-serif;"><o:p></o:p></span></span></div>
<div class="MsoNormal">
<span style="font-family: Arial, sans-serif;">Finance Topic
Specific<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: Arial, sans-serif;">Vinod Kothari
on Securitisation<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: Arial, sans-serif;"><a href="http://www.vinodkothari.com/seclinx.htm">http://www.vinodkothari.com/seclinx.htm</a><o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: Arial, sans-serif;">Sources for
information on securitsation<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: Arial, sans-serif;"><a href="http://www.vinodkothari.com/seclinx.htm">http://www.vinodkothari.com/seclinx.htm</a><o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: Arial, sans-serif;">Valueresearch
Online<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: Arial, sans-serif;">Excellent
resource on researching on Mutual Fund Sector in India<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: Arial, sans-serif;"><a href="http://www.valueresearchonline.com/">www.valueresearchonline.com</a><o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: Arial, sans-serif;">Good Blogs on
Valuation<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: Arial, sans-serif;">Aswath
Damodaran – Musing on the Markets<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: Arial, sans-serif;">Jim’s Finance
and Investment Blog – A slightly outdated but good<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: Arial, sans-serif;"><a href="http://financeandinvestments.blogspot.com/search?updated-min=2011-01-01T00:00:00-08:00&updated-max=2012-01-01T00:00:00-08:00&max-results=6">http://financeandinvestments.blogspot.com/search?updated-min=2011-01-01T00:00:00-08:00&updated-max=2012-01-01T00:00:00-08:00&max-results=6</a><o:p></o:p></span></div>
<span style="font-family: Arial, sans-serif;">Information
on US companies</span><br />
<div class="MsoListParagraphCxSpFirst" style="mso-list: l0 level1 lfo1; text-indent: -.25in;">
<span style="font-family: Symbol;">·<span style="font-family: 'Times New Roman'; font-size: 7pt;">
</span></span><span style="font-family: Arial, sans-serif;">Hoovers
is an excellent source to search mid sized and large sized US and European companies<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpMiddle" style="mso-list: l0 level1 lfo1; text-indent: -.25in;">
<span style="font-family: Symbol;">·<span style="font-family: 'Times New Roman'; font-size: 7pt;">
</span></span><a href="http://www.finance.yahoo.com/">www.finance.yahoo.com</a></div>
<div class="MsoListParagraphCxSpLast" style="mso-list: l0 level1 lfo1; text-indent: -.25in;">
<span style="font-family: Symbol;">·<span style="font-family: 'Times New Roman'; font-size: 7pt;">
</span></span><a href="http://www.finance.google.com/">www.finance.google.com</a></div>
<br /></div><div style="margin-top: 15px;">
<h4>Author: Abhishek Sinha</h4><a imageanchor="1" href="<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgBWL9rLPO0EUloSCujRZKvsQHHqRc4hS2aMMtS6LxbTgoYfv99-dNfEaZOWFYQ82o4KkB-Qe0DUHV-x9q5SJ-aZAcYIdkz-c_pNhm06w93wjaIRq1xheAOUactVnwjWvn88nYFZMaOiaO0/s1600/Abhishek+Sinha.jpg" imageanchor="1" ><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgBWL9rLPO0EUloSCujRZKvsQHHqRc4hS2aMMtS6LxbTgoYfv99-dNfEaZOWFYQ82o4KkB-Qe0DUHV-x9q5SJ-aZAcYIdkz-c_pNhm06w93wjaIRq1xheAOUactVnwjWvn88nYFZMaOiaO0/s200/Abhishek+Sinha.jpg" /></a><p style="margin-left:145px; margin-top:-138px;">Abhishek Sinha has approximately 8 year of experience in equity research, business research and consultancy. He has also had the privilege of managing a small portfolio of INR 3 million. However, his interest lies in teaching and "demystifying concepts." He has taught students right from the age of 3 years at PP1, to 40 years at executive courses and believes teaching is not about knowing the concepts; it is about relating the concepts to the audience.
At present he is "gainfully employed" at Vignana Jyothi Institute of Management, Hyderabad; where he loves to teach finance to an enthusiastic bunch of management students. His hobbies include analyzing income statement, balance sheet and cash flow.> <a href="https://plus.google.com/u/0/112464735121397739558/about?rel=author">Google +</a></p></div>
</div>Abhishek Sinhahttp://www.blogger.com/profile/05955755302598472670noreply@blogger.com3tag:blogger.com,1999:blog-7457870121656036705.post-86979880383586732182012-06-09T00:46:00.000-07:002013-12-06T01:21:15.763-08:00Budgetary Allocation to NSDC:A welcome news<div dir="ltr" style="text-align: left;" trbidi="on">
<br />
<div class="MsoNormal" style="background-color: white; background-position: initial initial; background-repeat: initial initial; margin-bottom: 0.0001pt;">
<br /></div>
<div class="MsoNormal" style="background: white; line-height: 150%; margin-bottom: .0001pt; margin-bottom: 0in; text-align: justify;">
<b><span style="color: #333333; font-family: "Arial","sans-serif"; font-size: 9.0pt; line-height: 150%; mso-fareast-font-family: "Times New Roman";">'India has exam
system, not education system'<o:p></o:p></span></b></div>
<div class="MsoNormal" style="background: white; line-height: 150%; margin-bottom: .0001pt; margin-bottom: 0in; text-align: justify;">
<span style="color: #333333; font-family: "Arial","sans-serif"; font-size: 9.0pt; line-height: 150%; mso-fareast-font-family: "Times New Roman";">C N R Rao, who heads the Scientific Advisory Council to the
Prime Minister (SACPM), made this statement in a letter to the Prime Minister
in April 2011. This hurt the sentiments of lot of educationists who believed
that India was able to face competition from global forces effectively on job
front.<o:p></o:p></span></div>
<div class="MsoNormal" style="background: white; line-height: 150%; margin-bottom: .0001pt; margin-bottom: 0in; text-align: justify;">
<br /></div>
<div class="MsoNormal" style="background: white; line-height: 150%; margin-bottom: .0001pt; margin-bottom: 0in; text-align: justify;">
<span style="color: #333333; font-family: "Arial","sans-serif"; font-size: 9.0pt; line-height: 150%; mso-fareast-font-family: "Times New Roman";">However, this is what I believe: The skills possessed by Indians,
is not the reason for the “growth story”. India is enjoying the benefits of “demographic
dividend” due to fall in birth rates and improvement in life expectancy; Hence,
the availability of employable youths in the country has increased manifold in
the last two decades. Thus a lot of jobs were created with outsourcing becoming
the buzz word. Let’s face it most of the
jobs being created were those which required minimum skill set.<o:p></o:p></span></div>
<div class="MsoNormal" style="background: white; line-height: 150%; margin-bottom: .0001pt; margin-bottom: 0in; text-align: justify;">
<br /></div>
<div class="MsoNormal" style="background: white; line-height: 150%; margin-bottom: .0001pt; margin-bottom: 0in; text-align: justify;">
<span style="color: #333333; font-family: "Arial","sans-serif"; font-size: 9.0pt; line-height: 150%; mso-fareast-font-family: "Times New Roman";"> In a country like India
where there is an emphasis on exams rather than skills at any level of formal
education it is important for the government to take steps to promote
organizations which aim to enhance skills of individuals going forward so that
the work being outsourced is higher on the value chain. These organizations
could very well run for profit and contribute in the same way in which NIIT
Ltd. has contributed to overall education. They not only help an individual to
increase his overall employability but also help improve an organisation’s
competitiveness in the long run. This pushes the production possibility
frontier outward and takes growth rate of the country to the next level. Skill
building could also be seen as an instrument to empower the individual and
improve his/her social position. In
today’s competitive environment where your competitors can be from any part of
the globe quality of the product and services seems to be an important
differentiator. The quality to a great extent depends on the ability of the
work force which in turn depends on the skill set that the employees
possess. Hence, skill building is often
seen as a vehicle to improve the effectiveness and contribution of labor to the
satisfaction of customers. <o:p></o:p></span></div>
<div class="MsoNormal" style="background: white; line-height: 150%; margin-bottom: .0001pt; margin-bottom: 0in; text-align: justify;">
<br /></div>
<div class="MsoNormal" style="background: white; line-height: 150%; margin-bottom: .0001pt; margin-bottom: 0in; text-align: justify;">
<span style="color: #333333; font-family: "Arial","sans-serif"; font-size: 9.0pt; line-height: 150%; mso-fareast-font-family: "Times New Roman";">National Skill Development Corporation (NSDC) was created in
early 2008 with the same objectives in mind. It has Union finance ministry as
one of it’s founders and aims at training 500 million people by 2022, and has
identified 21 sectors for which 150 million people will be trained by 2022 .
This, comes as a welcome relief for everyone in the education sector who
believe that education is all about getting the students prepared for bigger
battles in life and not about creating walking encyclopedias who cannot even
provide four square meal for his family. In 2011-12, the National Skill
Development Corporation (NSDC) approved 26 new projects, doubling the projects
sanctioned since 2009 to 52, with a total funding commitment of Rs 1,205 crore.
This is a welcome sign for future of skill development industry in India. To
add to to this Skill development received
Rs 1,000 crore as an allocation to the National Skill Development Fund
for 2012-13. <o:p></o:p></span></div>
<div class="MsoNormal" style="background: white; line-height: 150%; margin-bottom: .0001pt; margin-bottom: 0in; text-align: justify;">
<br /></div>
<div class="MsoNormal" style="background: white; line-height: 150%; margin-bottom: .0001pt; margin-bottom: 0in; text-align: justify;">
<span style="color: #333333; font-family: "Arial","sans-serif"; font-size: 9.0pt; line-height: 150%; mso-fareast-font-family: "Times New Roman";">I would like to conclude by saying that it might be small news
compared to the ones that hogged the limelight with respect to budget but a
giant step in the process of helping Indian industries move up the value chain.<o:p></o:p></span></div>
<div class="MsoNormal" style="background: white; line-height: 150%; margin-bottom: .0001pt; margin-bottom: 0in; text-align: justify;">
<br /></div>
</div><div style="margin-top: 15px;">
<h4>Author: Abhishek Sinha</h4><a imageanchor="1" href="<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgBWL9rLPO0EUloSCujRZKvsQHHqRc4hS2aMMtS6LxbTgoYfv99-dNfEaZOWFYQ82o4KkB-Qe0DUHV-x9q5SJ-aZAcYIdkz-c_pNhm06w93wjaIRq1xheAOUactVnwjWvn88nYFZMaOiaO0/s1600/Abhishek+Sinha.jpg" imageanchor="1" ><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgBWL9rLPO0EUloSCujRZKvsQHHqRc4hS2aMMtS6LxbTgoYfv99-dNfEaZOWFYQ82o4KkB-Qe0DUHV-x9q5SJ-aZAcYIdkz-c_pNhm06w93wjaIRq1xheAOUactVnwjWvn88nYFZMaOiaO0/s200/Abhishek+Sinha.jpg" /></a><p style="margin-left:145px; margin-top:-138px;">Abhishek Sinha has approximately 8 year of experience in equity research, business research and consultancy. He has also had the privilege of managing a small portfolio of INR 3 million. However, his interest lies in teaching and "demystifying concepts." He has taught students right from the age of 3 years at PP1, to 40 years at executive courses and believes teaching is not about knowing the concepts; it is about relating the concepts to the audience.
At present he is "gainfully employed" at Vignana Jyothi Institute of Management, Hyderabad; where he loves to teach finance to an enthusiastic bunch of management students. His hobbies include analyzing income statement, balance sheet and cash flow.> <a href="https://plus.google.com/u/0/112464735121397739558/about?rel=author">Google +</a></p></div>
</div>Abhishek Sinhahttp://www.blogger.com/profile/05955755302598472670noreply@blogger.com0tag:blogger.com,1999:blog-7457870121656036705.post-9137886212105879382012-06-09T00:30:00.000-07:002013-12-06T01:21:43.206-08:00Capitalization versus Expenses<div dir="ltr" style="text-align: left;" trbidi="on">
<br />
<div class="MsoNormal" style="background: white; line-height: 12.0pt; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto; mso-outline-level: 5;">
<span style="color: #333333; font-family: Verdana, sans-serif; font-size: x-small;"><br /></span></div>
<div class="MsoNormal" style="background: white; line-height: 12.0pt; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto; mso-outline-level: 5;">
<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 10pt;">Expenses refer to amount of money spent in a period which
helps meet the day to day needs of a business. Asset is future benefit at a
particular point of time. <o:p></o:p></span></div>
<div class="MsoNormal" style="background: white; line-height: 12.0pt; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto; mso-outline-level: 5;">
<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 10pt;">Now the best way to understand the concept of
capitalization and expenses is to draw an analogy with how pastries are sold in
the market. The bakery shop bakes a big cake. When the customer walks into the
shop and demands for a pastry, the baker cuts a chunk of the cake and sells it
to the customer. </span><span style="font-family: Verdana, sans-serif; font-size: 10pt;">Same happens<span style="color: #333333;"> when an
asset is expensed. <o:p></o:p></span></span></div>
<div class="MsoNormal" style="background: white; line-height: 12.0pt; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto; mso-outline-level: 5;">
<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 10pt;">Examples:<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpFirst" style="background: white; line-height: 12.0pt; margin-left: 39.0pt; mso-add-space: auto; mso-list: l0 level1 lfo1; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto; mso-outline-level: 5; text-indent: -.25in;">
<span style="color: #333333; font-family: Symbol; font-size: 10pt;">·<span style="font-family: 'Times New Roman'; font-size: 7pt; line-height: normal;">
</span></span><span style="color: #333333; font-family: Verdana, sans-serif; font-size: 10pt;">A machinery is purchased for the
purpose of manufacturing goods. When we purchase the machiney it is shown as an
asset. In the period the goods are manufactured we show the “usage of machinery”
as depreciation and treat it as an expense. Hence, every accounting period the
size of our cake a.k.a machinery in the balance sheet decreases as a chunk of
it goes in the income and expense account.<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpMiddle" style="background: white; line-height: 12.0pt; margin-left: 39.0pt; mso-add-space: auto; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto; mso-outline-level: 5;">
<br /></div>
<div class="MsoListParagraphCxSpMiddle" style="background: white; line-height: 12.0pt; margin-left: 39.0pt; mso-add-space: auto; mso-list: l0 level1 lfo1; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto; mso-outline-level: 5; text-indent: -.25in;">
<span style="color: #333333; font-family: Symbol; font-size: 10pt;">·<span style="font-family: 'Times New Roman'; font-size: 7pt; line-height: normal;">
</span></span><span style="color: #333333; font-family: Verdana, sans-serif; font-size: 10pt;">Inventory or Closing Stock refers to
the goods not sold at the end of the accounting period. Hence, here closing stock is the “cake”, when
we sell the goods the “pastries” a.k.a. cost of goods sold is expensed is expensed.<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpMiddle">
<br /></div>
<div class="MsoListParagraphCxSpLast" style="background: white; line-height: 12.0pt; margin-left: 39.0pt; mso-add-space: auto; mso-list: l0 level1 lfo1; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto; mso-outline-level: 5; text-indent: -.25in;">
<span style="color: #333333; font-family: Symbol; font-size: 10pt;">·<span style="font-family: 'Times New Roman'; font-size: 7pt; line-height: normal;">
</span></span><span style="color: #333333; font-family: Verdana, sans-serif; font-size: 10pt;">Patents and Goodwill are intangible assets
when we utilize the benefits from the same it is expensed out as amortization.<o:p></o:p></span></div>
</div><div style="margin-top: 15px;">
<h4>Author: Abhishek Sinha</h4><a imageanchor="1" href="<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgBWL9rLPO0EUloSCujRZKvsQHHqRc4hS2aMMtS6LxbTgoYfv99-dNfEaZOWFYQ82o4KkB-Qe0DUHV-x9q5SJ-aZAcYIdkz-c_pNhm06w93wjaIRq1xheAOUactVnwjWvn88nYFZMaOiaO0/s1600/Abhishek+Sinha.jpg" imageanchor="1" ><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgBWL9rLPO0EUloSCujRZKvsQHHqRc4hS2aMMtS6LxbTgoYfv99-dNfEaZOWFYQ82o4KkB-Qe0DUHV-x9q5SJ-aZAcYIdkz-c_pNhm06w93wjaIRq1xheAOUactVnwjWvn88nYFZMaOiaO0/s200/Abhishek+Sinha.jpg" /></a><p style="margin-left:145px; margin-top:-138px;">Abhishek Sinha has approximately 8 year of experience in equity research, business research and consultancy. He has also had the privilege of managing a small portfolio of INR 3 million. However, his interest lies in teaching and "demystifying concepts." He has taught students right from the age of 3 years at PP1, to 40 years at executive courses and believes teaching is not about knowing the concepts; it is about relating the concepts to the audience.
At present he is "gainfully employed" at Vignana Jyothi Institute of Management, Hyderabad; where he loves to teach finance to an enthusiastic bunch of management students. His hobbies include analyzing income statement, balance sheet and cash flow.> <a href="https://plus.google.com/u/0/112464735121397739558/about?rel=author">Google +</a></p></div>
</div>Abhishek Sinhahttp://www.blogger.com/profile/05955755302598472670noreply@blogger.com0tag:blogger.com,1999:blog-7457870121656036705.post-81876421602794857202011-12-20T08:33:00.000-08:002013-12-06T01:22:51.878-08:00Retained EarningsMy experience with financial statements says that one of the terms in accounts which need to be understood better is Retained Earnings.<br />The purpose of capital retained is two folds:<br />· Maintain existing operations (maintenance capex) or<br />· To increase future earning capacity by expanding the business (growth capex).<br />Some companies need large amounts of new capital just to keep running. Others, however, can use the capital to grow. When you invest in a company, you should make it your priority to know how much capital the company appears to need and whether management has a track record of providing shareholders with a good return on that capital.<br />Most of us have no difficulty in understanding that whatever is not paid as dividend is transferred to reserves as retained earnings. Hence, retained earnings refer to funds generated by the company through its operations and ploughed back into business.<br />However, the problem starts when retained earnings is used to buy an asset. A lot of students assume that as retained earnings has been used to purchase the assets; retained earnings balance needs to reduce. However the same does not happen. We buy assets either by taking a loan hence debt goes up or by utilizing cash balance hence cash goes down. The rationale for not decreasing retained earnings is that retained earnings is just a “notional amount which tracks the amount invested in the company, it’s important to know where this money is going.<br /><br />Now the million dollars question “How does the retained earnings than decrease?”<br />There are two ways:<br />1. There is a negative net income in other words loss.<br />2. The company utilizes reserves and surplus to pay dividends.even when the company has earned losses.<br />Relevance of reinvestment earnings<br />· Reinvestment of retained earnings can be an important source of financing for many companies. Lenders are often interested in the retained earnings. This is because company’s which use retained earnings to pay dividends when they are running in a loss are not preferred by lenders.<br />· A company’s performance is judged by it’s ability to make it’s retained earnings grow at a rate higher rate than market rate. Retained earnings should increase returns in the long run. The trouble is that most companies use their retained earnings for maintaining the status quo. If a company can use its retained earnings to produce above-average returns, then it is better off keeping those earnings instead of paying them out to shareholders.<div style="margin-top: 15px;">
<h4>Author: Abhishek Sinha</h4><a imageanchor="1" href="<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgBWL9rLPO0EUloSCujRZKvsQHHqRc4hS2aMMtS6LxbTgoYfv99-dNfEaZOWFYQ82o4KkB-Qe0DUHV-x9q5SJ-aZAcYIdkz-c_pNhm06w93wjaIRq1xheAOUactVnwjWvn88nYFZMaOiaO0/s1600/Abhishek+Sinha.jpg" imageanchor="1" ><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgBWL9rLPO0EUloSCujRZKvsQHHqRc4hS2aMMtS6LxbTgoYfv99-dNfEaZOWFYQ82o4KkB-Qe0DUHV-x9q5SJ-aZAcYIdkz-c_pNhm06w93wjaIRq1xheAOUactVnwjWvn88nYFZMaOiaO0/s200/Abhishek+Sinha.jpg" /></a><p style="margin-left:145px; margin-top:-138px;">Abhishek Sinha has approximately 8 year of experience in equity research, business research and consultancy. He has also had the privilege of managing a small portfolio of INR 3 million. However, his interest lies in teaching and "demystifying concepts." He has taught students right from the age of 3 years at PP1, to 40 years at executive courses and believes teaching is not about knowing the concepts; it is about relating the concepts to the audience.
At present he is "gainfully employed" at Vignana Jyothi Institute of Management, Hyderabad; where he loves to teach finance to an enthusiastic bunch of management students. His hobbies include analyzing income statement, balance sheet and cash flow.> <a href="https://plus.google.com/u/0/112464735121397739558/about?rel=author">Google +</a></p></div>
</div>Abhishek Sinhahttp://www.blogger.com/profile/05955755302598472670noreply@blogger.com3tag:blogger.com,1999:blog-7457870121656036705.post-60326566458651453102011-12-18T03:43:00.000-08:002013-12-06T01:23:56.718-08:00Ratio Analysis - Beware - Not as easy as it appears<p>Ratio analysis is a mathematical tool that enables us to gauge the comparative performance of a company. Ratios could be used to compare the performance of a company:<br />· vis-a- vis it’s competitors,<br />· or to judge it’s performance compared to past performance.<br />Before you deep dive into the world of ratio analysis it is worthwhile to emphasise on the purpose of carrying out this exercise. The purpose of ratio analysis is not to merely calculate the value of ratios. The purpose is to gauge the health of the organization through proper analysis. Hence, emphasis should be equally on both the inputs and the formula. Following are certain checks you need to carry in order to ensure that the ratios serve the purpose for which it is being computed:<br />· Understanding the industry and the company: Every company has a story. Numbers just help us understand the story better. Hence, when we want to narrate a story careful choice of inputs to the ratio makes sure we have the logical understanding of the story. Here are certain illustrations to drive the home better.<br />1 The company which has a pension liability equivalent to the market value of debt would have to account for the pension liability value in calculating Enterprise Value (EV), for any of the EV ratios.<br />2 If a company has historically, been sitting on huge piles of cash it would be prudent to net out excess cash while calculating Net Working Capital.<br />· Consistency factor: Whenever we build a framework for analysis in the real world there are a lot of assumption that we make. However, “the logic remains fractured” if we do not make our assumptions pertaining to the numerator and denominator consistent. Here are few examples:<br />o Whenever we account for a Capital Lease in Return on Asset ratio we would also have to net out expenses pertaining to interest and depreciation<br />o Any ratio that involves both expenses (income statement item) and assets (balance sheet item ) needs to be made consistent. This is because balance sheet records an item as on date whereas income and expenditure records all entry for a period. Thus, we average the opening and closing balance sheet item to make the items comparable.<br />· Source of input: It takes time for an amateur to understand how the sources for the input can make a difference. The preferred source for the data generally is annual reports and conference call transcripts. However, at times we are forced to pick up data directly from the databases. When picking data from the databases it is always good to go through the definitions of the terms and remove affect of adjustments with which the analyst does not agree.</p><div style="margin-top: 15px;">
<h4>Author: Abhishek Sinha</h4><a imageanchor="1" href="<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgBWL9rLPO0EUloSCujRZKvsQHHqRc4hS2aMMtS6LxbTgoYfv99-dNfEaZOWFYQ82o4KkB-Qe0DUHV-x9q5SJ-aZAcYIdkz-c_pNhm06w93wjaIRq1xheAOUactVnwjWvn88nYFZMaOiaO0/s1600/Abhishek+Sinha.jpg" imageanchor="1" ><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgBWL9rLPO0EUloSCujRZKvsQHHqRc4hS2aMMtS6LxbTgoYfv99-dNfEaZOWFYQ82o4KkB-Qe0DUHV-x9q5SJ-aZAcYIdkz-c_pNhm06w93wjaIRq1xheAOUactVnwjWvn88nYFZMaOiaO0/s200/Abhishek+Sinha.jpg" /></a><p style="margin-left:145px; margin-top:-138px;">Abhishek Sinha has approximately 8 year of experience in equity research, business research and consultancy. He has also had the privilege of managing a small portfolio of INR 3 million. However, his interest lies in teaching and "demystifying concepts." He has taught students right from the age of 3 years at PP1, to 40 years at executive courses and believes teaching is not about knowing the concepts; it is about relating the concepts to the audience.
At present he is "gainfully employed" at Vignana Jyothi Institute of Management, Hyderabad; where he loves to teach finance to an enthusiastic bunch of management students. His hobbies include analyzing income statement, balance sheet and cash flow.> <a href="https://plus.google.com/u/0/112464735121397739558/about?rel=author">Google +</a></p></div>
</div>Abhishek Sinhahttp://www.blogger.com/profile/05955755302598472670noreply@blogger.com1tag:blogger.com,1999:blog-7457870121656036705.post-83783905627655248082011-09-23T00:25:00.000-07:002014-09-15T00:49:38.421-07:00Mr. Debit and Mr. Credit<div dir="ltr" style="text-align: left;" trbidi="on">
Every accounting transactions has two parties involved : Debit and Credit.<br />
I generally believe that the debit and credit concept should be introduced to the students along with the Accounting Equation:<br />
Asset = Liability + Equity<br />
Following are the pointers to be kept in mind before deep diving into the world of accounts:<br />
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Asset: Refers to any item which has a future benefit. We always look into the future standing at a point. The point is the date on which I am preparing the account. eg.fixed assets,investment etc.<br />
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Liability: Refers to any liabilty to the external world by the orgnization. To determine wether a particular item is a liability we stand on a particular date and look in the future. If there is an obligation as on that date we have a liability. Equity refers to the amount invested by the shareholders/partners/sole traders in the business. This is a class of people who invest to earn profit from a business. Hence whatever profit the company earns is added to the profit.<br />
Owners Equity: Refers to the amount of money owed to the properitor/propertiors. Readers would recall that Profit = Income - Expense<br />
Income is the amount of money earned in a given accounting period. Period could be of any duration depending on the purpose of analysis. It should be noted that the amount received and receivable for a particular accounting period is accounted as income.<br />
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Expense refers to economic costs that is made in order to earn revenue in a given period. The word expenses is restricted to cost incurred in meeting operational need. Period could be of any duration depending on the purpose of analysis<br />
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<ul><br />
<li>Expenses decrease profits; while, income increase profits .</li>
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<li>Profit is added to the owners equity. Profit is the reward for risk the owner takes.</li>
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<li>Hence income increases equity and expenses decrease equity.</li>
</ul>
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Now the rules:<br />
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Any increase in assets and expenses needs to be debited. Any increase in liability and income needs to be credited.<br />
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Any decrease in assets and expenses needs to credited. Any increase in liability and income needs to be debited.<br />
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Accounts is prepared on double entry accounting concept. Hence every debit should have a corresponding credit.<br />
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ILLUSTRATION:<br />Rent expenses paid Rs. 500<br />
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The two aspects of the transaction are Rent and Cash (assumed paid in cash).<br />
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Rent is an expense hence an increase in rent needs to be debited. Cash is an asset hence decrease in cash needs to be credited.<br />
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As the purpose of this blog is to connect the concept of accounts and finance rather than getting into the nitties and grities of account I am not getting into the details of " Debit and "Credit."<br />
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Author: Abhishek Sinha</h4>
<a bhishek="" bp.blogspot.com="" href="https://www.blogger.com/%3Ca%20href=" http:="" imageanchor="1" inha.jpg="" jwre7ofa4="" qbft2mznxi="" s1600="" vagvddxgi=""><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgBWL9rLPO0EUloSCujRZKvsQHHqRc4hS2aMMtS6LxbTgoYfv99-dNfEaZOWFYQ82o4KkB-Qe0DUHV-x9q5SJ-aZAcYIdkz-c_pNhm06w93wjaIRq1xheAOUactVnwjWvn88nYFZMaOiaO0/s200/Abhishek+Sinha.jpg" /></a><br />
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Abhishek Sinha has approximately 8 year of experience in equity research, business research and consultancy. He has also had the privilege of managing a small portfolio of INR 3 million. However, his interest lies in teaching and "demystifying concepts." He has taught students right from the age of 3 years at PP1, to 40 years at executive courses and believes teaching is not about knowing the concepts; it is about relating the concepts to the audience.
At present he is "gainfully employed" at Vignana Jyothi Institute of Management, Hyderabad; where he loves to teach finance to an enthusiastic bunch of management students. His hobbies include analyzing income statement, balance sheet and cash flow.> <a href="https://plus.google.com/u/0/112464735121397739558/about?rel=author">Google +</a></div>
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Abhishek Sinhahttp://www.blogger.com/profile/05955755302598472670noreply@blogger.com0tag:blogger.com,1999:blog-7457870121656036705.post-17708248590847529602011-09-22T03:27:00.000-07:002013-12-06T01:24:27.508-08:00Cash Flow From Investing and Financing- the missing pieces in the cash flow puzzle<span style="font-family:times new roman;">My firm belief is preparing a cash flow from investment and cash flow from financing is relatively easier than preparing cash flow from operating activities. This is because as we use direct method for preparing cash flow from investment and financing it is all about being intuitive.<br />Investment activities here refers to buying and selling of long term assets. As already covered in one of the earlier blogs to determine asset we need to stand at a particular point and look in the future. If the particular item has a future benefit we call it asset. Any asset which provides a benefit of more than one year is know as long term asset.<br />For the purpose of cash flow from investing activities we need to gauge whether:<br />1. The asset is being bought or sold.<br />2. Determine whether cash is involved.<br />Buying of asset generates a cash outflow or decrease in cash balance and selling of assets lead to cash inflow or increase in cash balance.<br />It should also be noted that when a company is expanding, it will buy more assets than it sells and this will lead to net cash outflow. In other words for a company which is growing cash flow from investment is negative.<br />On the other hand, financing activities refers to the process of funding the investments and operation of a business. Following are major sources for long term funding of operations and investing activities:<br />1. Long Term loans(Debts)(External Sources)<br />2. Preference Shares (Internal Sources with fixed rate of dividends)<br />3. Equity Share capital (Internal Sources with dividend rates not fixed).<br />A. The important fact to be remembered is issue of debts/equity share capital/preference capital leads to cash inflow.<br />B. On the other hand interests and dividends which are servicing costs associated with these sources of capital lead to cash outflow.<br />C. Redemption of debentures (Debt) and Equity/Preference leads to outflow of cash.<br /></span><span style="font-family:lucida grande;">Here is a format for cash flow statement:<br /></span><span style="FONT-WEIGHT: bold"><span style="font-family:times new roman;"><span style="font-family:lucida grande;">Cash flows from operating activities (CFO)<br /></span>Profit after taxation<br />Add:Depreciation<br />Add:Interest expense<br />Add:Profit on the sale of property, plant & equipment<br />Working capital changes:<br />(Increase) / Decrease in trade and other receivables<br />(Increase) / (Decrease) in inventories<br />Increase / (Decrease) in trade payables<br />Cash Flow from Operating Activities<br />Cash flows from investing activities (CFI)<br />Less: Business acquisitions, net of cash acquired (purchases of business leads to cash outflow ; hence negative)<br />Less:Purchase of property, plant and equipment(PP&E) (purchases of PP&E leads to cash outflow ; hence negative)<br />Proceeds from sale of equipment (leads to cash inflow ; hence positive)<br />Less: Acquisition of portfolio investments (leads to cash outflow ; hence negative)<br />Add: Investment income (leads to cash inflow ; hence positive)<br />Net cash used in investing activities Cash flows from financing activities (CFF)<br />Add: Proceeds from issue of share capital (Cash inflow)<br />Add: Proceeds from long-term borrowings (Cash inflow)<br />Less: Payment of interest on long term borrowings (Cash Outflow)<br />Less: Payment of Dividend on preference and Equity share capital (Cash Outflow)<br />Redemption of shares and debentures (Debts)(Cash Outflow)<br />Net increase in cash and cash equivalents (CFO+CFI+CFF) Cash and cash equivalents at beginning of period<br />Cash and cash equivalents at end of period (Should match with the cash and cash equivalent in the balance sheet)<br /></span><br /></span><span style="FONT-WEIGHT: bold"></span><div style="margin-top: 15px;">
<h4>Author: Abhishek Sinha</h4><a imageanchor="1" href="<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgBWL9rLPO0EUloSCujRZKvsQHHqRc4hS2aMMtS6LxbTgoYfv99-dNfEaZOWFYQ82o4KkB-Qe0DUHV-x9q5SJ-aZAcYIdkz-c_pNhm06w93wjaIRq1xheAOUactVnwjWvn88nYFZMaOiaO0/s1600/Abhishek+Sinha.jpg" imageanchor="1" ><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgBWL9rLPO0EUloSCujRZKvsQHHqRc4hS2aMMtS6LxbTgoYfv99-dNfEaZOWFYQ82o4KkB-Qe0DUHV-x9q5SJ-aZAcYIdkz-c_pNhm06w93wjaIRq1xheAOUactVnwjWvn88nYFZMaOiaO0/s200/Abhishek+Sinha.jpg" /></a><p style="margin-left:145px; margin-top:-138px;">Abhishek Sinha has approximately 8 year of experience in equity research, business research and consultancy. He has also had the privilege of managing a small portfolio of INR 3 million. However, his interest lies in teaching and "demystifying concepts." He has taught students right from the age of 3 years at PP1, to 40 years at executive courses and believes teaching is not about knowing the concepts; it is about relating the concepts to the audience.
At present he is "gainfully employed" at Vignana Jyothi Institute of Management, Hyderabad; where he loves to teach finance to an enthusiastic bunch of management students. His hobbies include analyzing income statement, balance sheet and cash flow.> <a href="https://plus.google.com/u/0/112464735121397739558/about?rel=author">Google +</a></p></div>
</div>Abhishek Sinhahttp://www.blogger.com/profile/05955755302598472670noreply@blogger.com0tag:blogger.com,1999:blog-7457870121656036705.post-58594103761624744152011-09-15T21:44:00.000-07:002013-12-06T01:26:50.527-08:00Score Keeper prepares a cash flow from operations statement statementI believe that at times drawing analogies help in understanding a concept better. A lot of beginners find difficulty in understanding how a cash flow is derived from an income statement. Even though constructing a cash flow by direct method is easier it is not what companies prefer. <br />Before I start I would like to revisit the Income Statement :<br />Schedule 1:<br />Sales<br />Less: Cost of Goods sold<br />Gross Profit<br />Less: Operating Expenses(Excluding Depreciation Expenses)<br />EBIDTA<br />Less: Depreciation<br />EBIT<br />Less: Interest<br />Add: Other Income (Profit on sale of investments)<br />EBT<br />Less: Tax<br />Net Income<br /><br />Following are the points to be noted:<br />1. We are adding all income - paid in cash or outstanding<br />2. We are subtracting all expenses - paid in cash or outstanding<br />3. Expenses also include non cash expenses such as depreciation. They are notional figures which do not really involve cash.<br />4. All income and expenses are recurring in nature<br /><br />Here I have drawn a parallel between "book keeping" and "score keeping again".<br />The game, cash flow has three parts:<br />Cash flow from operations<br />Cash Flow from investments<br />Cash Flow from Financing activities<br /><br />The results of cash flow from operations is derived from net income statement.<br /><br />To start with imagine that the results of the game income statement is already available. The result of this game is known as "net profit". Look at Schedule 1 to get a better understanding of the same.<br /><br />Now if someone asks you to derive cash flow from operations from the results of an income statement the first thing you need to understand is the difference between the two. <br />1. We do not include income which is not in cash. Example, profit on sales of assets is not in cash hence not included.The same is included in income statement.<br />2. We do not include expenses not in cash. Depreciation is not in cash hence not included.<br />3. Outstanding expenses and income due but not received also is included in income statement but need to be removed to get the cash flow from operations.<br /><br /><br />The facts that we need to know before we start converting the results of one game to another:<br />1. If we want to annul the impact of a positive number we subtract.<br />2. If we want to annul the impact of a negative number we add.<br />3. All income items are positive. Hence to annul it's impact we subtract.<br />4. All expense items are negative. Hence to annul it's impact we add.<br />5. We need to annul impact of non cash expenditure such as depreciation. Hence if the net income is given we add back depreciation.<br />6. We need to annul impact of non cash income such as profit from sale of assets. Hence we subtract the item from net income.<br />7. Interest is amount paid on financing activities. Hence it has no place in cash flow from operating activities. Thus we add interest paid to net income.<br />8. There are certain items such as credit sales and credit purchases which cannot be ascertained from income statement. Now we need to take the help of balance sheet.We can find credit sales as the difference between accounts receivable (current year)and accounts receivable (last year). A positive credit sales leads to increase in net income. Hence to annul it's impact the bookkeeper subtracts increase in accounts receivable and adds back decrease in accounts receivable. <br />9. Following the same principle any increase in non cash current asset needs to be subtracted and any decrease needs to be added.<br />10. In case of increase in current liabilities we add back as increase in current liabilities denote increase in credit expenses. To remove the effect of unwanted cash we need to add back.<br /><br />Following is how a cash flow from operations looks: <br />Profit after taxation<br />Adjustments for:<br />Depreciation (Non Cash Expense)(Hence add back)<br />Interest expense (Non Operating expense)(Hence add back)<br />Profit on the sale of property, plant & equipment (Increase in profits, not in cash flow)Note: total cash from sales has been recorded as a separate <br />Working capital changes:<br />Add Decrease in trade and other receivables<br />Add Decrease in inventories<br />Add Increase in trade payable<br /><br />Cash generated from operations<br /><br />Hence, here the book keeper has converted the income statement into cash flow from operating statement. Comment awaited.<div style="margin-top: 15px;">
<h4>Author: Abhishek Sinha</h4><a imageanchor="1" href="<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgBWL9rLPO0EUloSCujRZKvsQHHqRc4hS2aMMtS6LxbTgoYfv99-dNfEaZOWFYQ82o4KkB-Qe0DUHV-x9q5SJ-aZAcYIdkz-c_pNhm06w93wjaIRq1xheAOUactVnwjWvn88nYFZMaOiaO0/s1600/Abhishek+Sinha.jpg" imageanchor="1" ><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgBWL9rLPO0EUloSCujRZKvsQHHqRc4hS2aMMtS6LxbTgoYfv99-dNfEaZOWFYQ82o4KkB-Qe0DUHV-x9q5SJ-aZAcYIdkz-c_pNhm06w93wjaIRq1xheAOUactVnwjWvn88nYFZMaOiaO0/s200/Abhishek+Sinha.jpg" /></a><p style="margin-left:145px; margin-top:-138px;">Abhishek Sinha has approximately 8 year of experience in equity research, business research and consultancy. He has also had the privilege of managing a small portfolio of INR 3 million. However, his interest lies in teaching and "demystifying concepts." He has taught students right from the age of 3 years at PP1, to 40 years at executive courses and believes teaching is not about knowing the concepts; it is about relating the concepts to the audience.
At present he is "gainfully employed" at Vignana Jyothi Institute of Management, Hyderabad; where he loves to teach finance to an enthusiastic bunch of management students. His hobbies include analyzing income statement, balance sheet and cash flow.> <a href="https://plus.google.com/u/0/112464735121397739558/about?rel=author">Google +</a></p></div>
</div>Abhishek Sinhahttp://www.blogger.com/profile/05955755302598472670noreply@blogger.com1