Finance Numericals

Bond is a debt instrument which an issuer issues to raise capital from public and pay interest to bond holder for fixed period of time.  Yield Curve: It is curve on graph which shows different interest rate against different time period or maturities time. Types of Yield Curve: There are three main types of yield curve. Normal Yield Curve: This curve shows upward movements of interest rate with increase in time period. It indicates the inflation period will happen in future. If the long term debt instruments shows high yield in comparison to short term debt instruments then it is known as Normal Yield Curve. Inverted Yield Curve: This curve shows downward movements of interest rate with increase in time period. It indicates that there will be recession period will be occurred in near future. When the short term securities show high yield in comparison to long term securities yield then this curve is formed. Flat Yield Curve or Hump Yield Curve: It is a curv

Payout ratio:   The amount paying as dividend to shareholders out of net income is known as payout ratio. The higher ratio shows that more net income is used to pay dividend instead of reinvesting in a business. The lesser ratio shows that company have more retained earnings in comparison to dividend paid to shareholders. Payout ratio is shown in a percentage. Retained earnings means instead of paying dividend to shareholders out of net income, the amount reinvested in a business for future expansion or business operation. Formula: Payout ratio = Dividend per share (DPS) / Earnings per share (EPS) Or Dividend paid in a year / Net income DPS (Dividend per Share) = Total dividend / Number of shares EPS (Earnings per Share) = Earnings after tax & preferred dividend / Number of outstanding shares Retention ratio: It is just opposite of payout ratio. The amount of net income reinvested in a company or retained in a company instead of paying as dividend is known as