Finance Numericals

Goodwill: It is an intangible asset . If a company pays more than the book value to purchase the company it is due to that goodwill of the company. The company earns goodwill by satisfying the needs of a customer, solving   customer grievances in fixed time, and provide services and product in reasonable prices etc. but all of this not happen in few time. Company earn super profit which means it earns more than normal profit due to its goodwill in a market. Newly established company does not earn goodwill because people don’t know about the company and they can’t trust in new company so easily in comparison to old and well established company who work in a market more years in comparison to new one. With the help of goodwill company gets well known in a market, easily gets the client for the company, profit earns more than normal, easily compete with the competitors. So, it is necessary to ascertain the value of a company’s goodwill. If there is any acquisition, partnership a...

Today we will discuss about the difference between straight line method and written down method: S. No. Point of difference Straight line method Written down value method 1. What is straight line method and written down value method? In this method the equal amount of depreciation is charged on original value of assets. In written down value method the depreciation rate is charged on diminishing value of assets 2. Straight line method and written down value method is also known as? This method is also known as fixed instalment method, Original Cost of method. This method is also known as diminishing balance method, Reducing Instalment method. 3. Which method is used to calculate the tax? Straight line method is not used to calculate the tax. Written down value method is used to calculate the tax. 4. For ...

Candlestick chart: It is a technical tool use to analyse the changes of the stock prices in given period of time. It is based on past data to forecast the future changes in the stock prices. It is also known as Japanese Candlestick chart. The chart shows opening price, closing price, high and low prices of stock for specified period. In candlestick chart the wider part is known as real body which can be white/green and black/red according to the market conditions. The top and bottom line of a candle is known as wick/shadow /tail which represents shows high and low prices. The upper end of the candle shows opening price and lower end of the candle shows closing price in bearish market. Bullish market: When the closing price is higher than the opening prices in a given period is known as bullish market. And the real body is in green or white colour. The closing price shows in upper side of wick and opening prices shows in lower wick of candlestick.   Bearish m...

Elliot wave: The theory is developed by Ralph Nelson Elliot in 1930. It is a technical tool used by traders to analyse the market trend, investor’s psychology and stock prices. Elliot observes the market deeply and understands the movement of the stock prices by repetitive patterns of market trends. His theory is based on Dow Theory. This theory consist 8 waves which shows bullish and bearish both market trend. It works on 5:3 patterns which mean 5 waves up and 3 waves down. Impulsive wave show a trend in the main direction. In Elliot wave 1, 3, and 5 are impulsive wave and 2, 4 are corrective waves. Corrective waves are those which retrace the upward movement of wave. The total five waves show the bullish market trend and 3 waves show bearish market trend. A diagram which shows Elliot wave is given below: ·          In the above diagram the 1 st wave starts from base and then move upward to show rising trend of market. This wave is imp...

Multi stage growth model: In this model Company provides dividend to its shareholders at high rate in each year. And after some time the rates decreases and later the company provides constant rate of dividend in each year. Two stage growth model: In this model Company provides dividend to its shareholders at high rate in each year. And after some time company provides constant rate of dividend in each year. Formula: Different dividend rate: V = D t *(1+ growth rate) / (1+ k) ^t Constant Growth Dividend Discount Model: = D n / (k – g) Where, D n = dividend amount k = required rate of return g = growth rate v = value of stock Let’s understand this model with an example: Example : XYZ Company declares dividend Rs.1.95 per share. The dividend grows at 5% in each year for 3 years and thereafter the dividend grows at the rate of 2% constantly for infinite period. Find the share price value. The required rate of return is 12%. Solution: ...

  Breadth of market theory : It helps to understand the rise and fall in the prices of major indexes or stocks. It is a technical analysis tool which helps to know the market strength with the help of breadth indicators by using total number of stocks in market to know the stock prices rises or fall in a trading day. Breadth of market rises if the stock prices fall but the major indexes rise.   With the help of breadth of market indicators investors can easily predict the market growth or rise or fall in stocks. It indicates how much stocks advances in respect of decline stocks in market or how much stock volume advances in respect of decline in stock volume in a day.   There are two methods which help to measure the breadth of market: ·         A/D ratio (Advances/Decline ratio) ·         A/D Line (Advances/Declines Line) Both the methods are calculated on daily basis. Advances/Declin...

Hello everyone, Happy New Year to all of you Today I am going to tell you what are EPS, EPF and NPS? Both EPS and NPS are pension schemes. EPF and EPS both are for salaried people. In EPF both employer and employee contribute some percentage of amounts from employee basic pay while in EPS only employer contributes.     EPS: It is a retirement saving scheme and the full form of EPS is Employees pension scheme. Under this scheme the employer has to contribute 8.33% of an employee’s basic pay plus dearness allowances. The basic pay will be Rs. 15,000 of an employee. It does not matter if actual basic pay is more than 15, 000 the employer’s contribution is calculated on 8.33% of Rs.15, 000. Employees get pension income when a person will attain the age of 58 years and must complete 10 years of services or 50 year of age for early pension. Employees don't contribute on his pension scheme like EPF (Employees provident fund) and in this scheme no interest is given on...