``

Joint Stock Companies

 Public Ltd Company
I. Listed/ quoted/ Registered on a particular Stock
exchange
II. Unlisted Companies/ Unquoted companies
 Private Ltd Company
 Guarantee Ltd Company
 Govt Company
Differences Public LTd Private Ltd Guarantee Govt
Company Company Ltd Company
Company
Liability Is limited up It is also The liability The liability
to the share limited upto in guarantee is also ltd
of investment the share of ltd is limited
investment upto the a
certain
guarantee
Name and ABC Ltd Co XYZ (pvt) ltd Xyz (G) ltd NBP ltd co
Title MTM ltd co Paradise Chenab Because
engineering Club( G) ltd more than
(pvt) ltd 50% shares
are owned
by govt
To Publish Mandatory Not Not Mandatory
accounts requirement Mandatory mandatory
publically
Voting Rights Share holders Shareholder Members Share holder
have voting have no right have voting have the
rights to to Select BOD rights to voting rights
Select BOD because these select the but it is govt
are family BOG / BOD owned
owned company
``

business
Maximum There is no There is limit A limitedAs 51%
Shareholder limit of of 50 persons amount of shares are
maximum no (shareholders) Members ishold by Govt
of share in a family decided byand
holder owned pvt ltd the BOD remaining
companies 49% shares
may be hold
by other
shareholder
upto
issuance of
capital
Strength of From 7 to 50 From 1 to 20 Approximate From 7 to 50
BOD not more
than 10
Transfer Shareholder Cannot Cannot be Up 49%
can transfer transfer share transfer shareholding
their share of holding but in can be
ownership by some transferred
selling their condition is
share or allowed if
transferred to BOD decides
heirs
Liquidation The liquidator Liquidation is It may be Liquidator is
is appointed through the dissolved appointed by
by the consent of the through the the
Honorable BOD and BOD Honorable
higher courts through court higher courts
for liquidation order
process
``

Tax Environment
Tax is source of revenue for the state
Direct Taxation: income tax, property taxes, estate taxes
Indirect Taxation: duty, cess, charge, fee, challan, Excise
( domestic trade) Custom( international Trade)

Tax is imposed on the earning earned by the household,

business and Govt
In corporate taxation system in Pakistan 35% income tax have
to pay the companies on their EBT. Tax losses are allowed to
adjustable and the facility of Carry forward / Carry Back is
allowed.
Interest payments are Tax adjustable
Depreciation is tax adjustable: So it is very clear that the
decided rates of Depreciation should be used
Depreciation Methods: Straight line method, double decline
method, Sum of year digit method, MACRS system.. Modified
Accelerated Cost Recovery system. MACRS rates are pre-
decided rates for 3 years property class, for 5 years, for 7
years and for 9 years etc.
Deferred Liabilities arise through the difference of taxation
computation by the company and tax department.
``

Financial Environment
In financial environment we have financial markets
Financial markets are those markets where financial asset are
traded (bought and Sold)
Financial Markets
Money Market:
Such markets where short term (Financial Assets or
instruments) are traded. i.e. Short term marketable securities,
commercial papers:
There are two types of Money Markets
Primary Market: The short term security is first time
traded:
Secondary market: Existing short term
Securities are traded
Capital Market:
Such markets where long term (Financial Assets or
instruments) are traded. i.e. Bonds, Debentures, TFC,
preferred stock, Common Stock
There are two types of Capital Markets
Primary Market: The Long term security is first time
traded:
Secondary market: Existing long term
``

Securities are traded

NOTE: Secondary market is know as stock exchange

Financial Assets: Financial Assets are also known as financial

securities or financial instruments.
There are generally 3 types of financial assets:
Debt Instruments: Short terms (marketable Securities,
commercial papers) Long Term (Bonds, Debentures, Term
Finance Certificates, Mortgage equitable certificates)
Equity Instruments: Preferred Share capital and common
share capital
Derivative Instruments: Forward Contracts, Future Contracts;
options, Swaps.
Flow of Funds in An Economy
Individual (household) = Y = (C+S)
Business = Y = (C+S)
Govt = Y = (C+S)
I=S
Saving sector is surplus sector and Investment sector deficient
Sector and fund moves from Surplus sector to deficient sector:
S --------------------I ------------->Directly
S-----Financial Intermediaries---------I
``

Financial Intermediaries:
 Commercial Banks
 DFI- Development Financial Institutions, HBFC, ZTBL,
 Finance Companies
 Leasing Companies
 Insurance Companies
 Pension Funds

S----------Financial Brokers----------------I
Financial Brokers are investment Banks, Underwriters (group
of investment banks)
S<---------------------- Secondary market
FI-------------- Secondary market
NOTE: Security moves in opposite direction to funds.
How Securities are priced
It depends upon the Liquidity, marketability, taxability,
durability, tradability and Default Risk
For ranking of Securities: Moody, S& P and in Pakistan “
PACRA” Pakistan Credit rating agency
AAA High Quality
BBB Medium Quality
CCC lower quality
D default securities
A+ A- B+ B- such may also use for ranking
``

Level of Riskiness Securities.

Treasurey Bill rate T-Bill (risk free securities)
Marketable Securities ( low Risk)
Bonds , Debentures TFC ( Medium Risk)
Preferred Stock ( Low High Risk)
Common Stock ( higly Risky)