Basic terms of business and commerce

41. Which are the PSUs that have been privatised recently ? 

THERE ARE MANY : VSNL – SOLD TO TATA CMC - SOLD TO TATA IPCL – SOLD TO RELIANCE MODERN BREAD – SOLD TO HUL – WHICH ALSO SOLD IT OUT
  

42. What is QIP? 

Qualified institutional placement : here a company can issue equity shares, fully and partly convertible debentures, or any securities other than warrants which are convertible to equity shares to
  

43. Who are qualified institutional buyers ? 

They have expertise and the financial analytical skills to evaluate and invest in the capital markets Public financial instituions Pension funds Provident funds mutual funds venture capital funds FIIs other such bodies as approved by SEBI (DIP) guidelines
  

44. What is ADR? 

ownership in the shares of a non-U.S. company that trades in U.S. financial markets. An owner of an ADR has the right to obtain the foreign stock it represents, but US investors usually find it more convenient simply to own the ADR. The price of an ADR often tracks the price of the foreign stock in its home market,
  

45. What is GDR? 

If you want your shares to be traded in London stock exchange and Luxumberg stock exchange, you can issue GDR. GDR represent shares of non-european company. GDRs are traded on the International Order Book (IOB). Normally 1 GDR = 10 Shares, but not always.
  

46. What is green shoe option? 

It allow underwriters to sell up to 15% more shares than the original number set by the issuer, if demand is more..
  

47. What is red herring prospectus? 

Now most companies fix share prices through bidding process (when the go for IPO). Prospectus require that they have to disclose price in advance. So companies go for red herring prospectus. There is no price or issue size stated in the red herring, and it is sometimes updated several times before being called the final prospectus. It also contains a passage in red that states the company is not attempting to sell its shares before the registration is approved by the SEBI.
  

48. What is gum jumping ? 

If companies invite investors to subscribe their share even before their prospectus is approved by SEBI it is called gum jumping. It is illegal. Trading securities on the basis of information that has not yet been disclosed to the public is illegal. It is done before IPO, insider trading is generally for shares which are already issued.
  

49. What is IPO Locking? 

It is a period of time after a company has initially gone public, usually between 90 to 180 days. During these initial days of trading, company insiders or those holding majority stakes in the company are forbidden to sell any of their shares. Once the lock-up period ends, most trading restrictions are removed.
  

50. What is underwriting? 

Underwriting means an agreement with or without conditions to subscribe to the securities of a body corporate when public (for IPO) OR the existing shareholders (for rights issue) of such body corporate or the public (for rights issue or FPO) do not subscribe to the securities offered to them.

Basic terms of business and commerce

36. What is the difference between fiscal deficit and revenue deficit? 

Fiscal deficit is broader in comparison to revenue deficit. Revenue deficit takes into account only revenues and expenditure (it doesnt include capital expenditure and long term borrowings). But fiscal deficit includes capital revenues and captial expenditure also.
  

37. What is the difference between plan and non plan expenditure ? 

Plan expenditure = for new projects, developmental work nonplan expenditure = every year the government has to spend some money on maintenance, staff salary, interest payments etc. All these are called non-plan expenditure
  

38.What is the difference betwen revenue and capital expenditure ? 

Revenue expenditure is for revenue head (which is having impact on one year). Capital expenditure is related to long term impact creating things – like building / assets etc. (capital = long term investment)
  

39. What are the sources of revenue for the governments? 

1. indirect tax (the biggest source of income for any government – it includes excise, customs, etc.) (the burden of this tax is borne by common people as consumers) 2. direct tax – it includes that tax whic is borne by the tax payer (example : income tax, wealth tax, etc. ) 3. income from PSUs (now the govt. Is disinvesting its profit making units, so this source of income will reduce in future). 4. disinvestment = sale of PSU – now this is becoming a major source of income for the govt – who will tell that it is not good to kill the goose that gives golden eggs.
  

40. What is PSU? 

PSU = public sector unit – there are many examples : Navratnas & Maharatnas : for example : IOC, ONGC, GAIL, SAIL, NTPC, MTNL etc./

Basic terms of business and commerce

 32. What is REPO rate? 

Repo= REPURCHASE rate. Discount rate at which a central bank repurchases government securities from the commercial banks, depending on the level of money supply it decides to maintain in the country's monetary system. To temporarily expand the money supply, the central bank decreases repo rates (so that banks can swap their holdings of government securities for cash), to contract the money supply it increases the repo rates. Alternatively, the central bank decides on a desired level of money supply and lets the market determine the appropriate repo rate.
  

33. What is inflation and what are its types ? 

When prices are rising it is called inflation. It may be due to two reasons : 1. demand is more than supply (called demand pull inflation) 2. cost is increasing (cost push inflation) due to inflation, the purchasing price of money falls. Small level of inflation is healthy for growth of industries, but hyper inflation is dangerous.
  

34. What is deficit financing ? 

When government uses deficits (expenses are more than revenue) in its budget, it is called deficit financing. Every govt. Goes for deficit financing. Revenue deficit is acceptable, but fiscal deficit should not be excessive. Then it would result in inflation, and anomalies in economic system. Deficit should be small so that it is less than half of the growth in the GDP so that it can be absorbed in the economy.
  

35. What is fiscal policy ? 

Fiscal = relating to government revenues policy = overall guidelines for action Overall policy of the government regarding taxation, revenue and expenditure is called fiscal policy

Basic terms of business and commerceb

21. What is ombudsman? 

It is the executive, who tries to handle public grievances (complaint). Now ombudsman is appointed in every department In banks also we have banking ombudsman it is there to stop corruption

22. What is IBA?

Indian Banks association it promotes knowledge about banking and promotes research in this sector. It conducts some sources for banking professionals

23. What is IDRBT? 

Institute of development and research in banking technology it is located in Hyderabad it introduces latest technology in banking it also conducts training programmes in banking technology

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 25. What is SLR?

Statutory liquidity ratio : banks have to keep some part of their deposits in government securities / specified investments, this is called SLR
 

26. WHAT IS CRR? 

Cash Reserve Ratio : banks have to keep some % of their deposits in cash with RBI, this is called CRR. Current rate : 5.75 % when liquidity is more in the system, CRR is increase. Reently RBI increase it by .75 so as to reduce liquidity in the system and to reduce inflation.

27. WHAT IS BANK RATE?

The rate at which RBI lends to other banks or discounts the bills of other banks is called bank rate. It is 6% now

28. What is PLR ? 

The rate at which banks give loans to their best customers, is called PLR. P=prime (best customers) L = lending R = rate suppose a bank is giving loan to a govt. Department - it will give at PLR. To an ordinary customer, the bank will give at PLR + SOME POINTS.

 29. Who decides PLR ? 

Each bank decides at its own – what is its PLR. PLR depends on the costing of the bank.

30. What is LIBOR?

LONDON INTERBANK OFFERED RATE it is the most popular international base rate. Most international transactions take place on this rate. There are many other rates also like this like : MIBOR = mumbai inter bank offered rate.

Basic terms of business and commerce

16. What is public key and private key ? 

 These are base of ecommerce. Every transaction can be executed only with combination of these two keys. Public key can be known, but private key is known only to the user.

  17. What is dayend? 
In any organisation, the software generates a key at the time of day end. Which has to be kept safe and it has to tally with the opening key of the next day. Thus it is ensured that there is no unauthorised transaction in between and data are safe. Every organisation keeps a register of the keys generated at the time of day end and day start.
  

18. What is whistle blowing ?

If you are working in a company and finds that some unethical (wrong) thing is taking place, you can raise this issue with the top executives – this is called whistle blowing companies have some executives to look after these issues.

19. What is ALM?

Asset Liability Management banks have to ensure that their assets and liabilities are balanced – for this they do ALM.

20. What is a cartel?

When a group of firms join together and fix prices together, it is called cartel. They are in collusion (an agreement).

Basic terms of business and commerce

11. How does ATM work? 
You have a card – which is called debit card (ATM card). You can go to any bank. You insert the card in the ATM machine. The machine will authenticate it. There is a centralised hub in Mumbai – which has data connectivity to all the banks. There will be authentication from this data base – thus your balance will be ascertained and you will be allowed to withdraw money from this balance.
 
  12. What is the difference between debit card and credit card? Debit card is ATM card you can withdraw cash from this. A few organisations take ATM card also for transactions. CREDIT card gives you the facility to buy goods from market using this card. The bank gets commission from the listing / marketing company and you get free credit facility (for 1 month) and you can pay to bank in 1 month.
  
13. What is difference between draft and banker's cheque? \For local transactions, banks give banker's cheque for outstation, the banks give demand draft (which is as good as money) it is also similar to postal order banks earn commission when they issue draft / banker's cheque
  

14. What is money transfer ? 

There are many types of money transfer like : TT (telegraphic transfer) / RTGS (real time gross settlement transfer) here you can transfer money from one account to another instantly (you have to pay some charges if the amount is more than Rs. 25000) the charges are very less and generally banks have some minimum amount requirements
  

15. What is PAYPAL? 

These are used in e-commerce here you can make payment for international transactions. There is a secure system of authentication and the company which has to receive money – gets its account with paypal

Basic terms of business and commerce

6. What is ZERO COUPON BOND? 
Coupon = interest rate These bonds are issued at a price much lower than face value (print price) they dont carry any interest. But the benefit is in terms of price difference. Suppose you buy them in 60 and they are matured at 100 you get 40 on investment of 60. they are for fixed period they are also called deep discount bond
  

7. What is RRB? 
Regional Rural banks – they are for development of a particular area – rural area there are many RRBs in India However, most of these are in financial difficulties
  

8. What is lead bank scheme? 
This is the coordinating bank for a particular area. It tries to promote banking in a particular area and coordinates with other banks. w
   

9. What is clearing? 

If you have an account in SBI, but your friend gives you a cheque drawn on ICICI, you deposit the cheque in your bank. Your bank will not give you credit immediately. It will send the cheque for clearing. The cheque will go to ICICI which will give credit to SBI, which will then give you the credit. Local clearing takes 1 day, outstation clearing may take 10 days – and there are some charges also for this.
  

10. What is at par cheque book? 

Now many banks give at par cheque book. These cheques are such that there is no clearing charge on these chques even if you deposit them in any bank

Basic terms of business and commerce - Presentation TranscriptBasic terms of business and commerce - Presentation Transcript

1. BASIC TERMS OF BUSINESS AND COMMERCE by : M.R Rizwan Anwer ALI Muhammad
   

2. My words..... 

My purpose here is to give basic terms used in business and commerce. Let us spread knowledge as widely as possible. I welcome your suggestions. I also request you to help me in spreading social entrepreneurship across the globe – for which I need support of you people – not of any VIP. With your help, I can spread the ideas – for which we stand....
   

3. What is ULIP? 

Unit Linked Investment Plan= here the investments are attached to share markets. They may rise and fall with share market. Generally ULIPs have option of different combination of equity and debt. A 60:40 scheme means 60% investment goes in equity and 40% in debt (less risky). Higher the equity, higher the risks and rewards (both). It is similar to mutual funds.
   

4. What is a mutual fund or collective investment scheme? 

Mutual fund is a combined investment by small investors – where there is an independent trust which manages these investments – in stock market / debt instruments and distributes profit / returns to the investors collective investment schemes are similar to mutual fund, but not the same.
   
5. What is the difference between equity and debt? Equity = ownership in a company – so it carries dividend – share in profit - if there is no profit – no dividend – more profit = more dividend debt = fixed interest bearing time bound instruments like debenture, bond, etc. (it is similar to FD – fixed deposits

COMMERCE :

COMMERCE Commerce refers to all those activities which help directly or indirectly in the distribution of goods to the ultimate consumer.

Functions of commerce : Functions of commerce 1.Removes Personal Hindrance 2.Removes Place Hindrance 3.Removes Time Hindrance 4.Removes Finance Hindrance 4.Removes Risk Hindrance 5.Removes Knowledge Hindrance

Personal Hindrance : Personal Hindrance
Removed by Trader TRADER manufacturer 
wholesaler retailer

Place Hindrance : Place Hindrance Removed by Transport

TIME HINDRANCE : TIME HINDRANCE
Removed by warehousing

Finance hindrance : Finance hindrance 
Banks remove this hindrance

Risk hindrance : Risk hindrance 
Removed by Insurance