CORPORATE ACTIONS, INDEX &

CLEARING AND SETTLEMENT

CORPORATE ACTIONS

 What is Corporate Actions?

TYPES OF CORPORATE ACTIONS

CORPORATE ACTIONS

MANDATORY VOLUNTARY
MANDATORY CORPORATE ACTIONS

 Assimilation (pari passu)  General Announcement

 Acquisition  Initial Public Offering
 Bankruptcy  Liquidation
 Bonus Issue  Mandatory Exchange /
 Bonus Rights Mandatory Conversion
 Cash Dividend  Merger
 Delisting  Name Change
 De-merger  Par Value Change
 Stock Split  Scheme of Arrangement
 Reverse Stock Split  Stock Dividend
VOLUNTARY CORPORATE ACTIONS

 AGM / EGM – proxy voting

 Buy-back program (BIDS) / Repurchase

Offer

 Dividend Reinvestment Plan (DRIP)

 Dutch Auction
 Odd lot Tender
 Rights Issue
VOLUNTARY CORPORATE ACTIONS

 Subscription Offer

 Takeover

 Tender Offer

 Voluntary Exchange / Optional Conversion

Mandatory Events with Options

 Cash Stock Option

 Merger with Elections

 Spin-off with elections

CORPORATE ACTIONS

 What is meant by Dividend yield?

 Example:
ABC Co.
Share price: Rs. 360
Annual dividend: Rs. 10

Dividend yield: 2.77% (10/360)

INDEX

 BSE – SENSEX

 S&P CNX Nifty

CLEARING & SETTLEMENT & REDRESSAL

 What is a Clearing Corporation?

 It clears and settles all transactions
 Provides financial guarantee
 Provides risk management functions

National Securities Clearing Corporation (NSCCL)

The Clearing Corporation of India Ltd (CCIL)
CLEARING & SETTLEMENT & REDRESSAL

 What is Rolling Settlement?

 What is Pay-in and Pay-out?

 What is a Book-closure/Record date?

 What is a No-delivery period?

 What is an Ex-date?
CLEARING & SETTLEMENT & REDRESSAL

 What recourses are available to investor/client

for redressing his grievances?
 IGC

 What is Arbitration?

 What is an Investor Protection Fund?

ANALYZING A COMPANY?

 Industry Analysis.

 Corporate Analysis.

 Financial Analysis.
RATIO ANALYSIS
RATIO ANALYSIS

 Liquidity Ratios
Meeting Short term financial obligations

 Leverage/Capital structure ratio

Long term financial strength or soundness of a firm

 Profitability ratios
Operating/management efficiency of a firm
Liquidity Ratios

(i) Current ratio = Current Assets

Current Liabilities
 Higher the current ratio, greater the short-term solvency

(ii) Acid-test Ratio = Quick Assets

Quick Liabilities
Firm’s ability to convert its current assets quickly into cash
 Liquidity Ratios

 (iii) Turnover Ratios: measure how quickly certain current assets

are converted into cash or how efficiently the assets are employed by a
firm.
 Inventory Turnover Ratio =Cost of Goods Sold
Average Inventory
Gives efficiency of inventory management.
 Debtors’ Turnover Ratio =Net Credit Sales
Average Accounts Receivable(Debtors)
 Average Collection Period=Average Debtors
Average Daily Credit Sales
represents the number of days’ worth credit sales that is locked in debtors
Liquidity Ratios

 Fixed Assets turnover ratio =Net. Sales

NetFixedAssets
Measures how efficiently fixed assets are employed.
Leverage/Capital structure Ratios:

 Debt-Equity ratio =Total Debt

Total Equity
 Debt-Asset Ratio =Total Debt
Total Assets
 Interest Coverage ratio =Earnings Before Interest
&Taxes
Interest
Assess debt servicing capacity of a firm.
Leverage/Capital structure Ratios

 Debt Service Coverage Ratio (DSCR)

Measures debt service capacity of a firm
Used by Financial institutions for the period during which the term
loan for the project is repayable.
=Profitaftertax+Depreciation+OtherNoncashExpenditure+Interest on
termloan
Interest on Term loan + Repayment of term loan
Profitability ratios:

 Gross Profit Ratio (%) =Gross Profit * 100

Net Sales
 Net Profit Ratio (%) = Net Profit * 100
Net Sales
 Return on Total Assets =Profit Before Interest And Tax
FixedAssets+CurrentAssets
Profitability ratios:

 Return on Capital Employed =Net ProfitAfterTax

TotalCapital Employed
Total Capital Employed = Total Fixed Assets + Current Assets
-Current Liabilities
 Return on Shareholders’ Equity=Net Profit AfterTax
AverageTotal Share holders Equity
Note: EPS & P/E can also be used to measure the profits available
to ordinary shareholders
 P/E Ratio =Market Price per Share
EPS