QP CODE: 22101428
B.COM DEGREE (CBCS) IMPROVEMENT / REAPPEARANCE EXAMINATIONS , May 2022
Fourth Semester
Optional Core - CO4OCT01 - FINANCIAL SERVICES
(Common for B.Com Model I Finance & Taxation, B.Com Model II Finance & Taxation and B.Com
Model III Taxation)
Part A
1. The term Personnel Counselling refers to the measures taken to facilitate the
adjustment of the employee to his work situation.
2. The venture capitalist do not normally actively participate in formulating strategies /
policy matters , in spite of the right to do so.
3. SBI Capital Markets Ltd , Canbank Venture Capital Fund , I D B I venture capital fund.
4. MBS are created from the pooling of mortgages that are sold to interested investors,
whereas ABS is created from the pooling of non-mortgage assets.
5. A lease is a legal, binding contract outlining the terms under which one party agrees to
rent property owned by another party.
6. A step-up lease is a contract that establishes future price increases for the lessee at set
times throughout the life of the contract.
7. There are three parties directly involved: the factor who purchases the receivable, the
one who sells the receivable, and the debtor who has a financial liability that requires
him or her to make a payment to the owner of the invoice.
8. Sovereign credit rating is an independent assessment of the creditworthiness of a
country or sovereign entity.
9. ONICRA is India’s first individual credit rating system. Lending institutions require an
objective individual credit rating system that provides a reliable credit rating for each of
its potential customers to optimize opportunities and reduce financial risk.
10. Divestment is the process of selling subsidiary assets, investments, or divisions of a
company in order to maximize the value of the parent company.
11. A golden parachute consists of substantial benefits given to top executives if the
company is taken over by another firm, and the executives are terminated as a result of
the merger or takeover.
12. Greenmail is a practice whereby a greenmailer buys up a substantial block of a
company's shares and threatens a hostile takeover.
Part B
13. Financial services ensure promotion of domestic as well as foreign trade. The presence
of factoring and forfaiting companies ensures increasing sale of goods in the domestic
market and export of goods in the foreign market. Banking and insurance services
further contribute to step up such promotional activities.
14.
Most deals have involved the transfer of beneficial interest on the asset and not
the legal title.
Most transactions have followed the pass-through mechanism.
In fact, many transactions have followed the escrow mechanism where
receivables are transferred to an escrow account for payment to the buyer.
According to Duff & Phelps India, a rating agency, past deals have mostly been
direct purchases of receivables by institutions and bigger NBFCs.
15. Objectives of SARFAESI Act, 2002
Efficient or rapid recovery of non-performing assets (NPAs) of the banks and FIs.
Allows banks and financial institutions to auction properties (say,
commercial/residential) when the borrower fails to repay their loans.
16. The instalment paid in hire purchasing includes the principal amount and interest. In
contrast to Leasing, in which the lessee has to pay the cost of using the asset only. In
hire-purchasing, the ownership is transferred to the hirer only if he pays all the
outstanding instalments.
17. In factoring, once a business sells its accounts receivables to a factor, they are selling
100% of the invoice. In forfaiting, when a business gives up the right to trade receivables
to international trade finance companies, they are giving up 100% of their claim on it to
the forfaiter. When it comes to factoring and forfaiting, there are a few things to keep in
mind. Factoring is mostly used in domestic trade but can also be used for international
trade. Forfaiting is just used for international trade scenarios only.
18. A credit rating can be the deciding factor on whether a borrower does or does not
receive a loan. Good credit ratings allow people, companies, and governments to easily
borrow from financial institutions or public debt markets. At the consumer level, banks
will usually base the terms of a loan as a function of a credit rating or credit score; this
typically means that the better your credit rating, the better the terms of the loan.
19. Combining your analysis of both qualitative and quantitative information helps you
make the appropriate decision. For example, you may have analyzed how much your
customers like a product so you can decide whether to increase production. You may
find from your customer interviews that your customers like the product and your
quantitative analysis may indicate that 73 percent of customers would purchase the
product again or recommend it.
20. Internal growth, also known as organic growth, occurs when a company uses its own
tools and resources to expand. In most cases, this involves increasing production,
developing new products or services or other developmental strategies.
Market Penetration: selling more of the company’s existing products to existing
markets. To penetrate and grow the customer base in the existing market.
Market Development: selling more of the company’s existing products to new
markets.
Product Development: developing and selling new products to existing markets
Product development means making some modifications in the existing products
to give increased value to the customers.
Diversification: entering new markets with new products that are either related
or completely unrelated to a company’s existing offering.
21. The process of mergers and acquisitions in India is court driven, long drawn and hence
problematic. The process may be initiated through common agreements between the
two parties, but that is not sufficient to provide a legal cover to it. The sanction of the
High Court is required for bringing it into effect.
Part C
22. Merchant Banking:
A merchant bank is a firm or the financial institution providing capital to the companies
in the form of share ownership instead of loan. Merchant bank also work as a
consultancy and provide advisory on corporate matters to firm in which they invest,
these banks are experts in international trade, which makes them pundit in dealing with
multinational corporation. Merchant bankers helps firms or companies in raising finance
by way of issue of a share. Functions of merchant banks are given below.
Portfolio Management: Merchant banks provide consultancy service to
institutional investors on investment decisions. They trade in exchange/securities
on behalf of their clients and also manage their portfolio.
Raising funds for clients: Merchant bank help their client/ business firm to raise
capital from domestic and international market by issuing securities the capital
raised merchant banks helps business firm in expansion of their business
activities.
Broker in Stock Exchange: Merchant banks act as broker for their client in stock
exchange.
Managing Public Issue of Companies: Merchant bank manage the public issue of
companies
Services to Public Sector Units: Merchant banks offer different services to public
sector units. They provide the facilities to raise long-term capital.
6)Money Market Operation: Merchant bankers deal with underwriters and also
deal with short-term financial/stock market instruments.
23. The impact of venture capitalists is shown in the VC-backed companies and the regions
they operate in. Many pieces of research have been conducted to study and measure
that impact over time and how it’s witnessed from different angles; therefore, the role
of Venture Capitalists can be evident.
Venture capital firms play an inevitable role in the development of the
economy through capitalizing on:
Promoting innovation; financing the development of new products, new
technologies, and processes of the companies that are meant to directly and
positively influence the economy.
Improving the absorptive capacity; raising the level of knowledge, skills, and business
acumen acquired from the process of inventing various solutions and startups.
Creating jobs through the various employment opportunities the empowered
startups get to offer.
Creating wealth that is measured by market performance and growth of sales,
profitability, survival, and return on investment.
24. Every business takes a particular number of days to convert its service or raw material to
cash. And that is the reason every business needs the credit period, may it be a big or
small business. And when the service or the raw material is sold on credit, that party
becomes the debtor of the business. Factoring is the service where a business sells its
debtors to the factoring company. So, generally, factoring companies take charge of the
debtors and release the funds to the company. Thus, factoring is one of the best
unsecured working capital instruments.
Factoring is mainly useful where the customers
(buyer) require the credit period and the company (seller) cannot afford to give the
credit period. In the factoring process, there are three parties involved. One company
(who sells the debtors), the second party is the Factor, (who purchases the debtors), and
the third party is the client, (the debtor). The whole process of the factoring rotates
among these three stakeholders of the process.
25. A merger refers to an agreement in which two companies join together to form one
company. In other words, a merger is the combination of two companies into a single
legal entity. In this article, we will look at different types of mergers that companies can
undergo.
Horizontal Mergers: A horizontal merger is a merger between companies
that directly compete with each other. Horizontal mergers are done to
increase market power (market share), further utilize economies of scale, and
exploit merger synergies.
Vertical Mergers: A vertical merger is a merger between companies that
operate along the same supply chain. A vertical merger is the combination of
companies along the production and distribution process of a business.
Market-Extension Mergers: A market-extension merger is a merger between
companies that sell the same products or services but that operate in different
markets. The goal of a market-extension merger is to gain access to a larger
market and thus a bigger client/customer base.
Product-Extension Mergers: A product-extension merger is a merger between
companies that sell related products or services and that operate in the same
market. By employing a product-extension merger, the merged company is
able to group their products together and gain access to more consumers.
Conglomerate Mergers : A conglomerate merger is a merger between
companies that are totally unrelated. There are two types of a conglomerate
merger: pure and mixed.
