1.

Interest Coverage Ratio:

Formula = PBIT/Interest Expense

Importance:
its interest

Shows whether the company has sufficient income to cover

requirements.

Analysis:
1. High ratio implies adequate safety for payment of interest even if there
were to be a drop in companys earnings.
2. Interest cover depends on profit, debt level and interest rate.
3. Company with less interest cover should try to pay off the debt by raising
equity.
4. Company with high interest cover should take the advantage of leverage
by raising debt. This increases EPS.

2. Portfolio
The age-old wisdom about not putting all your eggs in one basket

A group of financial assets such as shares, bonds, debt instruments, mutual

funds and other cash equivalents.

3. Portfolio Management:
In a laymans language, the art of managing an individuals investment is called as portfolio
management.

Method of selecting the best available securities that will provide the
expected rate of return for any given degree of risk and also to mitigate the
risk.

4. How to calculate beta of a stock:

Beta = Slope (stock returns, Index Returns)

5. How do you decide to invest?

Decisions about Investment in a company can be classified into two categories.

Qualitative
Quantitative

Qualitative
Management's
Background
Business Ethics
Corporate
Governance
Minority Shareholders
Salaries paid to
promoters
Operator activity in
stocks
Shareholders
Political affiliation
Promoter lifestyle

Quantitative
Profitability and its growth
Margins and its growth
Earnings and its growth
Matters related to expenses
Operating efficiency
Pricing power
Matters related to taxes
Dividends payout
Cash flow from various
activities
Debt both short term and
long term
Working capital management
Asset growth
Investments
Financial Ratio