EPS: Earnings per share or EPS is an important financial measure, which indicates the profitability

of a company. It is calculated by dividing the company’s net income with its total number of
outstanding shares. It is a tool that market participants use frequently to gauge the profitability of
a company before buying its shares.

EPS = PAT / Total number of outstanding shares

Interpretation: Higher the EPS Better it is for the company. For example the EPS of company
A is 12 and Eps for company B is 10. In this case based on EPS Company A is better than company
B. It means that the company is earning 12 rs on each share for company A and 10 rs on each share
for company B. If profits for the company will increase the EPS will also increase.

How to increase EPS:

● Timely Dividend
● By increasing Profits
● By Increasing sales
● By cost cutting

Basic EPS measures how much a business earns per share without going much into any other
detail.

Diluted EPS, on the other hand, takes convertible securities into account to calculate earnings
per share. Convertible securities include convertible preferred shares, employee stock options,
debt, equity, etc.
2. PE Ratio:

PE Ratio = MPS / EPS

It is a ratio for valuing a company that measures its current share price relative to its EPS. It is
expressed in time. Pe ratio will increase if EPS increases. Higher PE, Higher market value of the
company, If PE is low there is a scope for price appreciation of shares. Higher earnings and Lower
earnings are reflected in MPS either resulting in Higher MPS or lower MPS. It will increase or
decrease the PE ratio. If we invest in an undervalued company, the company stock has more
potential that the prices will go up.

It tells us about the valuation stock whether the stock is undervalued or overvalued.

If the financial performance of the company is not good and still the stock price of the stock is
continuously increasing or hitting the upper circuit, the stock is said to be overvalued stock, For
example Bajaj Finance as compared to the performance of other companies the stock price of
bajaj is too high around 7400. In case of undervalued, if the performance of the company is good
and the share price is low as compared to its performance, The stock is considered to be
undervalued. For example ITC limited is fundamentally a good company with zero debt. Still the
stock price is less for ITC around 220. 10 years ago the stock price was around 200. Hence ITC
can be considered as an undervalued company.
Undervalued company- IOCL, HPCL, REC, TATA STEEL LONG, Godavari power, ITC
Overvalued company- hcl technologies, hdfc bank, kotak mahin bank, bajaj finance.

The lower the P/E ratio is, the better it is for the business and for potential investors

3. Working capital: (Within 1 year assets and liabilities) - Used for day to day operations
Working capital = Current Assets - Current Liabilities
Working capital ratio = Current assets / Current Liabilities
WC is used to pay off it’s day to day expenses within a period of one year.
Higher the working capital the better it is for the company as the company has excess cash to pay
off its liabilities and expenses in short run say within one year.
The working capital less than 1.0 is not good as the company may face problems related to liquidity
in the short run. If the working capital ratio is more than 2.0. Better it is for the company. It means
the company can pay its current liabilities or expenses in the short run which will provide good
liquidity to the company which is good for the company.

4. WACC

The fullform of WACC is the weighted average cost of capital. WACC is commonly used as the
discount rate for future cash flows in DCF analysis.

Capital structure is a very important part of business. It includes the mixture of debt and equity
which is very important for the company. Capital structure refers to the specific mix of debt and
equity used to finance a company's assets and operations.
WACC is the cost of capital which the company has to pay. Lower the WACC better it is for the
company as it is a cost which the company has to bear.

WACC Formula = (E/V * Ke) + (D/V) * Kd * (1 – Tax rate)

E = equity value
V = Total value of firm
Ke = Cost of equity
D = Debt value
Kd = Cost of debt

Interpretation
● Higher the portion of Equity as compared to debt, it will increase the WACC.
● Higher the debt as compared to equity, lower will be the WACC

Through WACC we can calculate the Capital structure of the company. It is a very important part
of business analysis.
Types of Debentures:
A debenture is a marketable security (a type of investment) issued by a business or other
organization to raise money for long-term activities and growth. Bonds are similar, but unlike
bonds, debentures are unsecured i.e., investors have no claim to the assets of the company if default
occurs. For example Company A issued 10,00,00,0000 5.50% debentures 2050. The 5.50%
interest will be paid to the debenture holder by the company A. 2050 is the maturity of the
debenture. After 2050 the par value of the debentures will be paid to the debenture holder on
maturity. Usually bonds are issued by US companies and Debentures are issued by Indian
companies.

● Registered Debentures
● Bearer Debentures
● Secured Debentures
● Unsecured Debentures
● Redeemable Debentures
● Non-redeemable Debentures
● Convertible Debentures
● Non-convertible Debentures

Non- Convertible: Which are not converted to any other form of instrument whether equity or
asset.
Convertible: Which can be easily converted into any other form of instrument or equity, Holder
of the instrument has the right to convert these securities into other forms.

Secured Debentures: Debentures that are issued with collateral. The party issuing the bond offers
a piece of property or other assets to bondholders along with signed permission for those entities
to take possession of the collateral if the issuer (here means company) doesn't repay the debt. If
I am not able to pay my debenture holders out of profit, I will sell off my assets of the company to
pay them their interest and principal amount to the debenture holder. Since it is secured, the interest
paid to debenture holders is less as compared to unsecured debentures holders.
Unsecured debentures: Debentures that are not supported by collateral security. No specific
assets will be set aside against unsecured debentures. It is basically a loan without any protection.
Higher interest is paid to the debenture holders as they are bearing more risk than the secured
debentures.
Types of Financial Statements:
● Profit and Loss Account
● Balance sheet
● Cash Flow statement

Profit and loss account: It includes the statement of profit and loss, income and expenditure to
come to a conclusion to derive its gross profit and net profit for the year ended. It has 2 sides
Income and expenses. Debit side is expenses and the credit side is income. Salary paid is expense
whereas commission received is income for the company.

Balance Sheet: A balance sheet is a financial statement that reports a company's assets, liabilities,
and shareholder equity. The balance sheet is one of the three core financial statements that are used
to evaluate a business. It tells us about the financial position of the company at a particular date.
It has 2 sides: assets and liabilities. Example land is an asset and Creditors is liabilities.

A liability is something a company owes, usually a sum of money. liabilities include loans,
accounts payable, mortgages, deferred revenues, bonds, warranties, and accrued expenses.

An asset included in the BS is Fixed Asset or Current Assets. Current assets, such as cash,
accounts receivable and short-term investments, are listed first on the left-hand side and then
totaled, followed by fixed assets, such as building and equipment.

Cash Flow Statement:

It tells us about the cash position of a company at the year end. It includes 3 types of activities
which form the cash flow statement. It includes Cash flow from operating activities, Investing
Activities and Financing activities.
Examples:
Cash Flow from operating activities: Related to day to day activities. Cash receipts from goods
sold, payments to employees, taxes, and payments to suppliers.

Cash Flow from Investing activities: The purchase or sale of a fixed asset like property, plant,
or equipment would be an investing activity.

Cash Flow from Financing activities: dividends paid, repurchase of common stock, and proceeds
from the issuance of debt.

Which Financial statements are important and why?

There are 3 financial statements which are Profit and loss, Balance sheet and Cash Flow statement.
All the financial statements are important because they provide various important information
related to company revenues, profit, debt of the company, equity portion of the company and also
to know the financial position of the company whether the company is performing good or bad.

All Financial statements are important as they are linked to each other and without them it is very
difficult to know the financial position of the company. As in the profit and loss statement there is
net profit and Gross profit which is transferred to the liabilities side of the balance sheet. We also
have debtors, if they aren't able to pay it can form bad debts which is also reflected in the profit
and loss account and deducted in the asset side of BS. The cash and cash equivalents are also an
important part of the financial statement as it tells us about the cash inflows and outflows which
can help the company to know the cash position at the year end. In short all these financial
statements are important and linked to each other and have various different uses as per the
requirements of financial position.

Contingent Liability:
It is a liability for which the event does not happen but might occur in the future. Is called
contingent liability. It is based on the occurrence and non occurrence of the event. It is an off
balance sheet item.
Examples: Potential lawsuits, product warranties, and pending investigation

Minority Interest:
It also known as non-controlling interest
It is shown as a non current liability in the balance sheet side. A minority interest is less than 50
percent ownership or interest in a company. An investor or other entity other than the parent
company holds a minority interest in a company.
Eg- If Company A holds 80% in company B then the 20% stake that someone else holds in
company B is known as minority interest.

Lease:
A lease refers to a contract where one party grants a right to use a property or land to another party
in return for consideration and for a specific period of time. For example: if I am doing a business,
and I require a land for 30 years. I can take that land on lease by paying the amount for the land
for 30 years and in Future if I want to extend the lease, it can be extended with the mutual
understanding of lessor and lessee. The lease liability is shown on the Liability side of the balance
sheet and if it is right of use assets it is shown on the asset side of the Balance Sheet.

Lessor: The lessor is the legal owner of the asset or property, and he gives the lessee the right to
use or occupy the asset or property for a specific period.

Lessee: A person who has a legal agreement (a lease) allowing him/her use of a building, an area
of land for a specific period of time.

Operating Lease:
An operating lease is an agreement to use and operate an asset without the transfer of ownership
of Common assets.risk and rewards remains with the lessor, lessor bears all the expenses lessee
only pay lease payments. Examples include property, plant, and equipment. Tangible assets that
are leased include real estate, automobiles, aircraft, or heavy equipment.

Finance Lease: Risk and reward is transferred to the lessee, ownership is transferred to the lessee,
lessee bears all the expenses like insurance, maintenance, taxes and any other expenses. interest
expenses, depreciation expenses, assets, and liabilities.

Money Market Instruments: Refer book

It is a short term obligation which Provides liquidity to the company for a short run. It has a
maturity usually less than 1 year. ) Refer Book

● Promissory Note
● Bills of exchange or commercial bills
● Treasury Bills (T-Bills)
● Call and Notice Money
● Commercial Papers (CPs)
● Certificate of Deposits (CD’s)

Promissory Notes:
It is a debt instrument in which one party writes to another party about the payment of a sum of
mentioned money either on demand or at a specified date in future. There are 2 parties payor and
payee. It is a promise made by the payor to the payee that he or she will pay the amount at a certain
date or at a future date.
● The payee is the person who receives money from the payor.
● The payor is the person who pays the money to the payee.

For Example, We both are involved in a business transaction. I am Mr. A (Payee) and I am issuing
the promissory note to Mr. B to payee that he has to pay me Rupess 10 lakhs tomorrow or at a
specified date in future, say suppose after 10 days. For payor Rupees 10 lakhs will be debt for him
or his company as he has to pay that amount to Mr. A. This is issued because parties don’t have
such huge funds to pay immediately hence they issue promissory notes to the other party so that
they pay them in the near future.

Bills of Exchange/Commercial bill:

It is a debt instrument in writing which contains an unconditional order to pay another person or
directing to pay another person. For example Mr. A issues bills of exchange to Mr. B saying that
you have to pay this on or before certain date or Mr. A wants to pay Mr. C,and he has his funds
with Mr. B.In this case Mr. A can issue bills of exchange to Mr. B stating him to pay a certain
amount to Mr. C.
For example, X orders Y to pay ₹ 50,000 for 90 days after the date and Y accepts this order by
signing his name, then it will be a bill of exchange.

Treasury Bills: (Maturity of one year or less)

Treasury bills or T-bills, which are money market instruments, short term debt instruments issued
by the Government of India and are presently issued in three tenors, namely, 91 day, 182 day and
364 day. Treasury bills are zero coupon securities and pay no interest. It includes coupon rate,
maturity date, coupon payment frequency whether semi annually , annually , monthly or quarterly,
par value of the instrument. These funds are issued by GOI so that they can use these funds by
issuing treasury bills so that they can reduce the deficit of the country.

For example, a 91 day Treasury bill of Rs.100/- (face value) may be issued at say Rs. 98.20, that
is, at a discount of say, Rs.1.80 and would be redeemed at the face value of Rs.100/-. The return
to the investors is the difference between the maturity value or the face value (that is Rs.100) and
the issue price.
Certificate of Deposits: Issued by Banks
A certificate of deposit is a simple and popular savings vehicle offered by banks and credit unions.
When a depositor purchases a certificate of deposit, they agree to leave a certain amount of money
on deposit at the bank for a certain period of time, such as one year. (RD or FD)
A certificate of deposit (CD) is defined as an investment instrument mostly issued by banks,
requiring investors to lock in funds for a fixed term to earn premium rates. It is like a savings
account. For example, Joe invested $5,000 in CD with a bank at a fixed interest rate of 5% with 5
years maturity.

Commercial Papers: Issued by companies (Short term in nature)

● Commercial paper is a debt instrument usually issued by the companies to raise funds for
a short term period to pay off short term obligations like, Payroll, Inventories, accounts
payable or any other short term liabilities.
● Maturities on most commercial paper ranges from a few weeks to months
● Commercial paper is not usually backed by any form of collateral, making it a form of
unsecured debt.
● Maturity: Usually not longer than 270 days

Example: An example of commercial paper is when a retail firm is looking for short-term funding
to finance some new inventory for an upcoming holiday season. The firm needs $10 million and
it offers investors $10.1 million in face value of commercial paper in exchange for $10 million in
cash, according to prevailing interest rates. Here $0.1 million is the amount which is paid by the
company to investors of the commercial paper as interest on such securities. (Annually, semi
annually, monthly and quarterly)

Call and Notice Money: Issued by banks

Call money is any type of short-term, interest-earning financial loan that the borrower has to pay
back immediately whenever the lender demands it. Call money allows banks to earn interest,
known as the call loan rate, on their surplus funds. Call money is typically used by brokerage
firms for short-term funding needs.
The call money rate, also known as the broker loan rate

Debt Instruments:
● Term Loan
● Bonds
● Debentures
● Lease
● Revolving credit
● Public deposits
● Promissory Note
● Bills of exchange or commercial bills
● Treasury Bills (T-Bills)
● Call and Notice Money
● Commercial Papers (CPs)
● Certificate of Deposits (CD’s)

Term Loan: It refers to borrowing money from any financial institution and paying the interest
on that money. The companies can take loans from various financial institutions such as banks,
NBFCs, or companies or through the government. Term loan is a very important debt which is
used to calculate WACC of the company and also an important part of capital structure.

Example: Tata wants to take loan from SBI, in this case SBI will give loan to Tata by checking
and verifying the required information and by verifying the purpose of taking loan. Here SBI will
charge a certain amount of interest to TATA. This loan taken by tata will increase the debt of the
company. If the funds are properly used and utilised it can turn into a great opportunity.

Bonds:
Bonds are the financial instruments issued to the public or investors paying them a certain amount
of coupon or interest on such bonds. For example, Morningstar requires funds worth rs 100 Million
and the company is issuing 100 Million 4.50% senior bonds due 2050 to the investors. In this case
the company will get 100 million through these issues with the help of an underwriter and the
investor will get interest of 4.50% till the maturity of the bond and after maturity the investor will
get the entire amount of money invested called par value. Here the maturity year of the bond is
2050. The bond will mature in 2050. If it is redeemed before 2050 it is called callable bonds.

Revolving Credit Facility:

Revolving credit is an agreement that permits an account holder to borrow money repeatedly up
to a set limit while repaying a portion of the current balance due in regular payments.

Example: Ajay ltd entered into a revolving credit agreement or facility with SBI for rupees 100
crores. If the company uses 30 crores it is the Outstanding amount, 100 crores is facility limit, and
undrawn 70 crores.

Public Deposits:
● The deposits that are raised by organisations directly from the public are known as public
deposits.
● Rates offered on public deposits are higher than of bank deposits.
● There is higher risk in public deposits. Public deposits cater to both short term and medium
term finance requirements.
● Companies invite applications through newspapers, magazines, websites, and annual
reports.

Reserves:
A reserve is a retained earnings secured by a company to strengthen a company’s financial
position, clear debt & credits, buy fixed assets, company expansion, legal requirements, investment
and other plans.
● Capital Reserve
● Preference Share Redemption Reserve
● Securities Premium Account
● Debenture Redemption Reserve
● General Reserve
● Capital Redemption Reserve
Importance of Reserves and Surplus: It can be used for:

● Dividend distribution
● Meeting future obligation
● Overcoming losses
● Managing working capital requirements
● Fulfilling funds requirement for expansion of business

Capital Reserve:
A capital reserve is taken out of the capital profit and is not shared as a dividend to the shareholder.
This reserve cannot be created out of the profit earned from the core operation. Few examples of
capital reserves are:

● Cash received by selling current assets

● Premium earned on the issue of share and debentures
● Excess on revaluation of assets and liabilities

Revenue Reserve:
Revenue reserve is a portion of profit owned by the company and is kept aside for the use of other
multiple purposes. This reserve is recorded in the profit and loss account and can be used the
following way:

● Dividend to shareholder
● Expand the business
 ● Stabilise the dividend rate

Types of Revenue Reserve:

● General Reserve
● Special Reserve
● Reserve Fund

Reserve Fund: Reserve funds are established to meet unexpected future costs or financial
obligations that may occur.

General Reserve:

Reserves also known as retained earnings are portions of a business's profits which have been set
aside to strengthen the business's financial position.
It is used for meeting contingencies, offsetting future losses, enhancing the working capital, and
paying dividends, to expand business, for research and development.

Debenture Redemption Reserve:

A debenture redemption reserve (DRR) is a provision stating that any Indian corporation that
issues debentures must create a debenture redemption service in an effort to protect investors from
the possibility of a company defaulting.

GAAP (Generally Accepted Accounting Principles)

It is a set of common principles which companies have to follow GAAP while preparing their
financial statements according to the GAAP guidelines and it should be complete , consistent and
accurate.
It is a collection of commonly-followed accounting rules and standards for financial reporting.

IFRS: International Financial Reporting Standards

It refers to the set of international accounting standards, which state how particular types of
transactions and other events should be reported in financial statements.
Difference between IFRS and GAAP
GAAP is rules-based and IFRS is principles-based.

Cashflow Flow:
In indirect method, In these investment and finance activities both are same as compared
to Direct method. Only operating activities are different for Direct and Indirect methods. It
means operating activities of direct method alag hai indirect method. Ye (Operating
Activities) change hoga both method mai. In short ye ki direct and indirect ka ye difference
hai ki indirect method mai we take operating activities which includes non cash
transactions and changes in assets and liabilities and Direct method mai we don't take
non cash transactions and changes in assets and liabilities.

Non - cash Items matlab jo cash transaction nahi hote.

Examples of Non cash cash items: Amortization, Depreciation, Loss on sale of assets,
Loss on Investment.

Examples of Non cash Income: Profit on sale of assets, Profit on Investment

All trading activities are related to operating activities. In indirect method adjustments are
made to the net profit whereas in Direct method the adjustments are not made to net
profit.

In the Indirect method the base for calculating cash flow is net income. Ismai non cash
items add hota hai and non cash income items are deducted.

Whereas direct method starts with transactions related to cash paid and cash received
transactions and does not include non cash items.

In the Indirect method under operating activities it includes changes in assets and
liabilities to calculate cash and cash equivalent for the year end.
In Direct Method it only includes transactions related to cash paid and cash received to
calculate cash and cash equivalent for the year end.

In the Indirect method, net income is automatically converted in the form of cash flow
after all changes. All factors are taken into account. This method is mostly used by
companies to calculate the cash flow.

In the Direct Method, All non cash transactions are ignored. The direct method is used
by very few companies.

Market capitalisation:
Market capitalisation of a company, which is calculated by multiplying the number of shares in
circulation by the current market price. Higher the market capitalization the better it is for the
company. As the current market price of share will increase the Market capitalization will also
increase and if it decreases the market capitalization will also decrease.

Market Capitalization = MPS * Number of shares

Enterprise Value:
It is also known as the total enterprise value or firm value which is an economic measure to reflect
the total value of the firm.

Importance of Enterprise value:

● Enterprise value (EV) is a metric used to value a company
● It is more accurate than a reflection of a company's value compared to market
capitalization.
● The enterprise value of a company shows how much money would be needed to buy that
company.
Enterprise value = Market Capitalization + Market Value of Debt – Cash and Equivalents.

Example: The Market capitalization of ABC ltd is 2000 crores and MV of debt is 1500 crores and
cash and cash equivalents are 500 crores, then the Enterprise value will be Market Capitalization
+ Market Value of Debt – Cash and Equivalents = 2000 + 1500 - 500 = 3000 crores.

Zero Coupon bond: also known as accrual bond.

A zero coupon bond is a bond in which the face value is repaid at the time of maturity.
A zero-coupon bond is a bond that pays no interest and trades at a discount to its face value.
The difference between the purchase price of a zero-coupon bond and the par value indicates the
investor's return.

For example: Issued at discount 95 and the face value is 100. It will be sold at 100 only as it has
zero coupon. The profit will be 100 - 95 = 05 per bond

Example: U.S. Treasury bills

Stock Based Compensation:

● Stock Based Compensation (also called Share-Based Compensation or Equity
Compensation) is a way of paying employees, executives, and directors of a company with
equity in the business. By this they can retain employees.
● Companies allow their employees to purchase shares of the company under this stock based
compensation.
● It's a better way to motivate employees.
● It is an non-cash expense for the company

Example: the employee is given a right to purchase upto 1000 shares for $20 per share. Regardless
of stock price, what it will be in the next coming years.

Outstanding Shares:
Shares outstanding are all the shares of a corporation that have been authorized, issued and
purchased by investors and are held by them.

For example, the shares of Tata are 250,000,000 in the market issued, subscribed and authorised
which are held by the investors of TATA. Here 250,000,000 is the Outstanding number of shares.

Discounted cash flow:

The discount rate is the rate of return used in a discounted cash flow analysis to determine the
present value of future cash flows.

Return on Capital Employed:

ROCE stands for Return on capital employed. The ROCE of the company should be high for value
stocks. (Avg for the past 5 years should be more than 35%)

Earnings before interest and tax (EBIT) is the company’s profit, including all expenses except
interest and tax expenses.

Capital employed is the total amount of equity invested in a business. Capital employed is
commonly calculated as either total assets less current liabilities or fixed assets plus working
capital.

ROCE = EBIT / (Total Assets - Current Liabilities)

Return on Assets:
Return on assets is a profitability ratio that provides how much profit a company is able to generate
from its assets.

Return on Assets = Net Income / Total Assets

 =sales-expenses/total asset
Higher the ROA, Better it is for the company. It means that the company is generating more
revenue on total assets of the company. An ROA of 5% or better is typically considered good,
while 20% or better is considered great. In general, the higher the ROA, the more efficient the
company is at generating profits.

CAGR:
Compound annual growth rate, or CAGR, is the mean annual growth rate of an investment over a
specified period of time longer than one year.

(FV/PV)^1/n - 1

Good GAGR is anything between 15% to 25% over 5 years of investment can be considered as a
good compound annual growth rate. Higher the CAGR the better it is for the company.

Job Role:
We have to collect various financial data from these financial statements so that we can come to a
conclusion about various companies. It can be a collection related to equity or debt or ratios which
is a part of fundamental analysis. These are important parts to know about the financial position
of companies. These data must be provided to clients so that they can decide whether to invest or
not.

Why have you chosen Finance specialisation?

● To study various role of finance, how finance helps corporates to grow
● Opportunities for faster career growth
● How business make money
● How businesses generate value. What value is generated.
● How investments work, how ppl plan around those investments.
● How a plan works.
● How businesses raise and deploy money.

Why have you applied for this job-

What's the job of a data research analyst-
The role of a Data Research Analyst is to conduct research, collect and manage data and databases,
and develop the data and result into a format easily representable to other employees, investors,
and other researchers.

WHat are your hobbies

Dancing, cooking, acting, travelling.

Where do see yourself five years from now-

My ultimate goal for the next five years is to master my position and advance into a managerial
role within that department. I see myself taking on new and exciting projects within your company.
I’m excited about the opportunities this job would provide me, as I believe they will support my
long-term career goals and allow me to grow within your company and give back by utilizing the
skills I’ll gain.’

ABOUT MORNING STAR-

Morningstar businesses- Med’s , debt capital structure, equity capital structure, credit rating
agency(DBRS), pitch book systanalytics.

Morningstar is a leading provider of independent Fund investment research. Morningstar focuses

on Work done to study the performance” of stocks, mutual funds, and other assets to produce “a
guide to what investments to make and advise clients on the same. Calculates fundamentals data
and submit the report to the clients and Investors.

WHY WE SHOULD WE HIRE YOU?

Over the years, I have acquired relevant skills and experience, which I shall bring to your
organization. I have also worked tirelessly on my communication abilities by teaching a student
through Kotak Education Foundation's Telephonic Spoken English Program. I have also
worked on my teamwork skills, which I will put to use in my future career. I have pretty knowledge
in Fundamental analysis. I have calculated ratios from the annual report of the company and also
come to a conclusion whether it is good to invest for the long term or not. I have studied technical
analysis during my internship.

Corporate governance : Corporate governance is the system of rules, practices and processes by
which a company is directed and controlled. It identifies who has power and accountability, and
who makes decisions.

Footnotes:
Footnotes are notes placed at the bottom of a page. They cite references or comment on a
designated part of the text above it.
For example, There is a term loan of 1000000 and it has a footnote stating that it includes interest
rate at 4% which means any extra information related to it can be considered as footnote.

Notes to Account:
Notes to accounts of financial statements consist of details related to the information mentioned in
the main body of financial statements.
For example there is Borrowings worth rs 10,000,000 but it has notes to accounts which includes
2,000,000 as Term loan, 5,000,000 Lease Liabilities and 3,000,000 Commercial Papers which
totals to 10,000,000.

Equity:
Equity refers to the value of a company's ownership shares. An equity investment is money that is
invested in a company by purchasing shares of that company in the stock market. These shares are
typically traded on a stock exchange.
Importance of Equity:

Equity is important because it represents the value of an investor's stake in a company, represented
by their proportion of the company's shares.

Funding business expansion by selling shares of stock to investors is “equity financing.” When a
company sells stock, it sells equity to investors for cash that it can use to fund growth.

Optimal capital structure:

It is the best mix of debt and equity which forms the part of capital structure. Lower the cost of
capital , It will increase the market value of the company. If the WACC is lowered or decreased it
will optimize the lower cost mix of financing. Lower the WACC, Better it is for the company as
the company has to pay less cost on such securities.

Debt investors take less risk because they have the first claim on the assets of the business in the
event of bankruptcy. For this reason, they accept a lower rate of return and, thus, the firm has a
lower cost of capital when it issues debt compared to equity.

For example there is debt of 100000 and equity of 50000, it means the WACC will be lower as it
has more debt as compared to equity as interest paid on debentures is less compared to returns paid
to equity shareholders which reduces the WACC.

In order to optimize the structure, a firm can issue either more debt.

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EBIT VS EBITDA
 ● EBIT stands for: Earnings Before Interest and Taxes. EBITDA stands for: Earnings Before
Interest, Taxes, Depreciation, and Amortization
● EBIT deducts the cost of depreciation and amortization from net profit, whereas EBITDA
does not.
● EBIT therefore includes some non-cash expenses, whereas EBITDA includes only cash
expenses.
EBITDA = E + I + T + D +A
E = Net Income, I = Interest, T = Taxes, D = Depreciation, A = Amortization

EBIT = Revenue - COGS - Operating Expenses

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Bonus Shares:

Bonus shares are additional shares given to the current shareholders without any additional cost,
based upon the number of shares that a shareholder owns. For example, if a 4:1 bonus issue is
announced, shareholders will receive four shares for every one share they hold.

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Which is the best way to measure performance in finance:
Financial statements used in evaluating overall financial performance include the balance sheet,
the income statement, and the statement of cash flows. We can use various websites (Money
control and screener.com) or the annual report of the respective companies where we can find the
various financial information which will help to measure the performance of the company. We
can use ratio analysis as a tool for analyzing the financial performance of a company. For valuation,
we can use the DCF model of cash flow, NPV Method.

NPV method:
Net present value is a tool of Capital budgeting to analyze the profitability of a project or
investment. It is calculated by taking the difference between the present value of cash inflows and
present value of cash outflows over a period of time. For example, If the NPV of a project is
positive it should be accepted and if negative it should be rejected and if it is zero, it is on the
decision of the management. Higher the NPV Better the project and that project should be
accepted.

We can check a few ratios like operating margin, Debt equity ratio, Return on equity, EPS, CAGR,
ROCE, Sales and profit growth.

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Depreciation:
It refers to the reduction in the value of assets. For example the cost of an asset is 100000 and it
has a salvage value of 20000 and the life of machinery is 5 years which means the amount of
depreciation is 100000-20000 = 80000 / 5 = 16000 as per SLM method.

There are various methods of calculating depreciation:

● Straight line method
● Written down value method
● sum-of-the-years' digits

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Time value of Money:

The time value of money (TVM) is the concept that a sum of money is worth more now than the
same sum will be at a future date due to its earnings potential

The formula for computing the time value of money considers:

 ● The amount of money
● Its future value
● The amount it can earn
● The time frame.

The formula for calculating time value of money is :

FV = PV x [ 1 + (i / n) ] (n x t)

FV = Future value of money

PV = Present value of money

i = interest rate

n = number of compounding periods per year

t = number of years

*********************************************************************************

*****

Cash Ratio: measurement of a company's liquidity

The cash ratio is a liquidity measure that shows a company's ability to cover its short-term

obligations using only cash and cash equivalents. Higher the cash ratio the better it is for

the company. a ratio of not lower than 0.5 to 1 is usually preferred.

Cash ratio = (Cash + Marketable Securities) / Current Liabilities

How does the Cash ratio decrease?

An increase in short-term debt, a decrease in current assets, or a combination of both
Examples of marketable securities: Stocks, bonds, preferred shares, and ETFs
*********************************************************************************

*****

Reconciliation:

A reconciliation involves matching two sets of records to see if there are any differences. Examples
of reconciliations are: Comparing a bank statement to the internal record of cash receipts and
disbursements. Comparing a receivable statement to a customer's record of invoices outstanding.

What Are the Types of Reconciliation?

● Bank reconciliation.
● Customer reconciliation.
● Vendor reconciliation.

Bank reconciliation-
● cheque issued but not yet presented for payment.
● Cheque paid into the bank but not yet cleared
● Interest charged by bank not entered in the cash book

Customer Reconciliation (Accounts Receivable) is the process of comparing the outstanding

customer balance or bills to the accounts receivable as recorded in the general ledger. The customer
reconciliation is a part of accounts closing activity and is usually conducted at the month-end
before issuance of monthly financial statements.

Vendor reconciliation (Accounts Payables) is defined as the reconciliation of Accounts Payable

for a vendor with the statement provided by the particular vendor. Here, an entity reconciles vendor
balance in its books of accounts with the balance in the books of the vendor.

How sales increases profit:

Like if we are selling any good we will mostly sell in profit. Higher the sales higher the income.
Like if sales is 100 and expenses is 10 then profit = 90

If sales increase to 200 and expenses are 10 then yaha pe sales = 200 jo badha and profit = 190 ye
bhi badha, Humko log sales minus income hi karte hai na to get profit, So higher sales will always
lead to better profit mostly.

We can increase sales and reduce variable costs to reduce the costs which will increase the sales.
For example for producing 100 units we need 10,000 of variable cost, we can reduce such variable
cost to 9,000 as variable costs keeps on changing.

Why Role of Equity Research Analyst:

This role will not only make investors financially independent but also make me independent to
some extent. I will be able to learn a few new things related to investment and research which is a
very important part of today's day to day life. Through these roles I can gain deep knowledge of
financial statements which will help me to a great extent. It will make it easier for me to analyze
and study financial statements such as Balance Sheets, P&L and Cash Flow statements.

Skills required for Equity Research

● Excel Skills
● Knowledge of Financial Statements
● Financial Modeling
● Accounting Skills
● Valuation
● Writing Skills to make report
How to increase Profits:
Minimizing cost
Research and development and bringing new products to market
Target broad market
Bringing new clients and customers
Maintaining Quality
By increasing sales and reducing variable costs
By keeping employees and clients happy

How to Increase Sales:

Minimizing cost (wherever possible without addicting quality)
By reducing prices if possible
By offering offers and discounts
After sales services
Customer feedback

Dividend Yield Ratio:

It means how much % of a dividend company is paying to its shareholders on its share price. It is
not necessary for all the companies to provide dividends. If the companies earn huge and wish to
give to their shareholders they can give it in the form of dividend. If suppose the current share
price is 1000 and the company gives dividend worth 100 then the dividend yield ratio is 10% which
is derived from 100/1000*100 = 10%

Dividend Yield Ratio = Dividend paid / Share price * 100

The higher the dividend paying, the better the company is. It means that the company is making
profits, that's why the company is giving a dividend.

Stock split:
Stock Split: In these the value of per share is reduced to a certain ratio. For example the share price
of HUL is 3000 and the stock split ratio is 5:1 which means for you will get 5 shares at 600. Here
the value is the same but the stock price is reduced. This is called stock split.

Example:
Face value is 2, number of shares is 50000, the total value of shares is 100000. After splitting the
FV at 1, the number of shares increased to 100000 and total value of
share is 100000X1 = 100000

Dividend:
Dividend: when the company shares a part of profit to the shareholders in the form of shares or
money is called dividend. a bigger company gives a dividend. Not compulsory for the company to
give a dividend. it depends on the BOD of the company .Dividend is given on Face value. Fixed
dividend is given to preference shareholders. Usually tha share price falls after the
company gives a dividend to the shareholders.

Right issue of shares

Rights issue is one of the modes of fund raising popular with Indian companies. Through
this mode, the company makes an offer to existing shareholders to buy additional shares
in the company at a discounted price (rights offer price) within a prescribed period

Example: Let's say an investor owns 100 shares of TATA MOTORS and the shares are
trading at 300 each. The company announces a rights issue in the ratio of 2 for 5, i.e.,
each investor holding 5 shares will be eligible to buy 2 new shares

Who is shareholder:
A shareholder, also referred to as a stockholder, is a person, company, or institution that owns at
least one share of a company's stock.
A single shareholder who owns and controls more than 50% of a company's outstanding shares is
a majority shareholder. In comparison, those who hold less than 50% of a company's stock are
classified as minority shareholders.
2 types of shareholders:
● Equity Shareholders
● Preference shareholders

Difference between equity and preference shares

Preference shares are core capital. They do not have voting rights. Equity shareholders have voting
rights. The equity shareholders bear the risk of the company. The risk for preference shareholders
is low. Fixed dividend is given to preference shareholders. The return to equity shareholders is
always high as compared to preference shareholders as they bear the risk of the company.
Preference shares are shown under equity/ shareholders funds.

Consolidated VS Standalone:

Standalone financial statements, which includes profit and loss statement, balance sheet, cash
flow statement, notes to Accounts, changes in equity statement of Head office, branches and
foreign branches, are known as standalone financial statements.

Consolidated statement: Consolidated financial statements are financial statements that present
the assets, liabilities, equity, income, expenses and cash flows of a parent and its subsidiaries as
well as associate companies as those of a single economic entity

Consolidated = own capital + subsidiary + Associates + joint ventures.

For example: L&T standalone company + L&T subsidiary companies + L&T Associate companies
= consolidated Financial statements.
Suppose my co. Make profit of 100 And the subsidiary company makes profit of 60 then my
consolidated profit of the company is 100+60= 160

Spin off: A spinoff is the creation of an independent company through the sale or distribution of
new shares of an existing business or division of a parent company. a corporation spins off a
business unit that has its own management structure, it sets it up as an independent company under
a renamed business entity.

Split off: shareholders in the parent company are offered shares in a subsidiary, but the catch is
that they have to choose between holding shares of the subsidiary or the parent company. A split-
off is a corporate reorganization method in which a parent company divests (Sells) a business unit
using specific structured terms.

Financial Statements:
Types of Financial Statements:
● Profit and Loss Account
● Balance sheet
● Cash Flow statement

Profit and loss account: It includes the statement of profit and loss, income and expenditure to
come to a conclusion to derive its gross profit and net profit for the year ended. It has 2 sides
Income and expenses. Debit side is expenses and the credit side is income. Salary paid is expense
whereas commission received is income for the company.

Balance Sheet: A balance sheet is a financial statement that reports a company's assets, liabilities,
and shareholder equity. The balance sheet is one of the three core financial statements that are used
to evaluate a business. It tells us about the financial position of the company at a particular date.
It has 2 sides: assets and liabilities. Example land is an asset and Creditors is liabilities.

A liability is something a company owes, usually a sum of money. liabilities include loans,
accounts payable, mortgages, deferred revenues, bonds, warranties, and accrued expenses.

An asset included in the BS is Fixed Asset or Current Assets. Current assets, such as cash,
accounts receivable and short-term investments, are listed first on the left-hand side and then
totaled, followed by fixed assets, such as building and equipment.
About role:
The role of a Data Research Analyst is to conduct research, collect and manage data and databases,
and develop the data and result into a format easily representable to other employees, investors,
and other researchers.

We have to collect various financial data from these financial statements so that we can come to a
conclusion about various companies. It can be a collection related to equity or debt or ratios which
is a part of fundamental analysis. These are important parts to know about the financial position
of companies. These data must be provided to clients so that they can decide whether to invest or
not.

Bonus Shares:
Bonus shares are additional shares given to the current shareholders without any additional cost,
based upon the number of shares that a shareholder owns. For example, if a 4:1 bonus issue is
announced, shareholders will receive four shares for every one share they hold.

About shifts: I am ready to work in shifts. I have no issues and concern related to shifts

Types of Annual report:

● General corporate information: A current report that contains basic information of a
company, (such as company name, company number, incorporation date, company type,
company status, registered address, business address and nature of business), share capital,
directors/officers, shareholders, charges (if any) and financial information.

● Director's Report: The Directors' Report should include a non-financial statement

containing information on the undertaking or group's development, performance, position,
and impact of its activities relating to, as a minimum, environmental, social, and employee-
related matters, respect for human rights, and anti-corruption and bribery

● Corporate governance information

● Chairperson's statement
 ● Auditor's report: The auditor's report is a document containing the auditor's opinion on
whether a company's financial statements comply with GAAP and are free from material
misstatement.

● unaudited information: An unaudited financial statement is one that you have not
subjected to an independent verification and review process.

● Financial statements, including. Balance sheet, Profit and loss and cash flow statement
also known as Statement of Financial Position: ( Upar hai info)

IPO: Initial Public offering: Raising funds from the public and giving them a share in the
companies. The company issues its shares to the public for the first time. After the IPO process,
the shares of the company are listed on the stock exchange. In an IPO there is a direct transaction
between the company and the investors.

Capital appreciation:
Share price increases investment value. For example, ABC bought shares at 1000 per share and
the share price rose to 1600 per share. Here 600 per share is capital appreciation.

Technical vs Fundamental analysis (Sirf read kar for knowledge)

Technical analysis focuses on price, volume, Demand, supply
Fundamental analysis: focuses on growth of company and value
News analysis is a fundamental analysis but price analysis is a part of technical analysis.

Medium traders 3 months to 1 year.

Long Investors more than 1 year
Short term 2-3 months

Fundamental analysis is based on profit and loss, balance sheet cash flow, company growth and
profit and all whereas in technical analysis we have to analyse past price patterns and predict
whether the pattern is going to repeat in the upcoming future or not. The prices can be analysed
through various open and close prices, volume through charts.
Parent company:

Subsidiary companies: ( Ye bhi pucha tha)

If the company has more than 50 % stake in that company it is called subsidiary companies.
Example, Tata and sons is a holding company known as parent company. They have
supposed 2-3 Companies such as tata motors, TCS, tata coffee are known as subsidiary
companies as tata and sons companies have more than 50% stake in these companies, that's
why these companies are subsidiary companies of tata and
sons.

Example 2:
In this more than 50% of the investment is to be made by the individual to be eligible for subsidiary
company. suppose my investment is 60% in the company. The company for me is called a
subsidiary company. For example, the company earns a profit of 100, so I will be eligible for 60
Rs of profits in the company.

Suppose my co. Make profit of 100 And the subsidiary company makes profit of 60 then my
consolidated profit of the company is 100+60= 160

Parent company:
A parent company is a single company that has a controlling interest in another company or
companies. It controls the other company or companies and can directly influence the business’
operations. It is also known as a holding company. Example tata and sons is a parent company as
it is the main holding company under which various businesses are carried.

Buyback of shares:
Buy back can increase the EPS of the company. The promoters buyback the shares of the company
from the market.They buyback to increase the shareholding pattern of the company. For example
the promoter has 60% stake in the company and wants more control in the company, they buyback
shares and increase the shareholding for example from 60 to 70% to excess more control in the
company and decision making.

About morningstar-
● Morningstar, Inc. is an American financial services firm headquartered in Chicago.
● Morningstar is a Chicago-based investment research firm that compiles and
analyzes fund, stock, and general market data.
● Morningstar businesses- Med’s , debt capital structure, equity capital structure, credit
rating agency(DBRS), pitch book systanalytics.
● Morningstar focuses on Work done to study the performance” of stocks, mutual funds, and
other assets to produce “a guide to what investments to make and advise clients on the
same.
● Calculates fundamentals data and submit the report to the clients and Investors.

About role:
The role of a Data Research Analyst is to conduct research, collect and manage data and databases,
and develop the data and result into a format easily representable to other employees, investors,
and other researchers.

We have to collect various financial data from these financial statements so that we can come to a
conclusion about various companies. It can be a collection related to equity or debt or ratios which
is a part of fundamental analysis. These are important parts to know about the financial position
of companies. These data must be provided to clients so that they can decide whether to invest or
not.

Auditors report: An auditor's report is a written letter from the auditor containing their opinion
on whether a company's financial statements comply with generally accepted accounting
principles (GAAP). It includes opinion on the financial statements and basis for opinion which is
given by the auditor in the auditor's report.
A report usually consists of three paragraphs:
● It includes responsibilities of the auditor and directors.
 ● It contains the scope, stating that a set of standard accounting practices was the guide.
● It contains the auditor's opinion

Directors report: Director's report is a financial disclosure made by director to the shareholders
of the company. Only large organisations are required to produce directors’ reports.
It includes:
● The names of each director who served during the reporting year
● A summary of the company’s trading activities
● A summary of future prospects
● The principle activities of the company
● Recommendations for dividends for the reporting year
● Any financial events that occurred after the date on the balance sheet.

Annual report includes:(11 points)

● Founders, directors, Top level management
● Vision & Mission
● Performance of last year
● Upcoming projects
● Shareholding pattern
● Financial statements of current year
● Financial statements
● Standalone and consolidated financial statements.
● Auditors report
● Directors report

Executive and non executive directors:

An executive director gets sitting fees for attending board meetings. It is known as consulting
fees. An Executive Director is the one involved in the routine management of the firm as well as
he/she is the full-time employee of the company.

Non-executive directors are outsider's. They are unbiased and expertise when it comes to board
meetings. A non-executive director attends only board meetings and gives his/her opinion or
decisions. A Non-Executive Director is a member of the company's board, but he/she does not
possess the management responsibilities.

Incorporation Date:
Incorporation Date means the date on which the Corporation is incorporated into a public and
issued with a certificate to commence business

Mergers and acquisitions:

Merger:
● when 2 or more separate entities combine to form a new joint organization is called merger.
Mergers are considered to be a more friendly corporate restructuring strategy. For example
Company A will merge with Company B and after merging they will form a single entity
called Company C. The reason could be to expand the business or to take advantage of the
particular businesses they possess.
● A merger is agreed upon by mutual consent of the involved parties.
● The merged entity operates under a new name.

Acquisitions:
● An acquisition refers to the takeover of one entity by another. For example Company A is
a loss making company and company A decided to sell its business to company B. Here
Company B is acquiring the business of company A. Name of Company B will remain
Company B only. The decision of acquisition might not be mutual.
● The acquired company mostly operates under the name of the parent company.
● The acquiring company exerts absolute power over the acquired one
Examples of mergers:
● Zee Entertainment and Sony India Merger
● Vodafone Idea Merger

Example of Acquisition:
● e-commerce giant Amazon acquired the American supermarket chain Whole Foods Inc.

If someone tell you your negative points, How would you react:

If anyone is telling me negatively, I will consider it as a good point for me as I can overcome such
negativity and will try to convert them into a positive manner. It's good if someone tells us our
negative points so we can overcome those points. Everyone should have a positive mindset. I

Negative and positive points 2 saal pehle life mai

Positive points were that you got to learn and gain knowledge about the finance domain and learn
new things during covid. I had ample time to learn new things.

Short term goal-

By getting a goob job profile in a reputed company and learning new things about the functioning
of corporations and how to engage with team mates.

SIP-
Research kaise kiya vo bata
Questionnaire
Website
Topic vo kyu liya
Conclusion dedena
FUTURES, OPTIONS
DCF IRR, ROCE, ROA, PROFIT MARGIN , CASH RATIO,

Corporate governance, energy, annual report padho, notes to accounts, importance of notes to
account, .important aspect of annual report, footnotes,