Process of developing financial statements and ratios which deal typically with future projections based upon a defined set of assumptions and logical relationship. In simple financial modeling refers Cash flow forecasting involving the preparation of large detailed spreadsheets for management decision making process
Techniques of Financial Modeling
1. Spreadsheet
2. Mathematical programming package
3. Simulation package
SAST Regulations
Securities and Exchange Board of India (SEBI) introduced Substantial Acquisition of Shares and Takeovers Regulations to prevent hostile takeover resulting in the consequences for the company and its investors. In simple prevent hostile takeovers of voting rights in a company and, in turn, ensure good corporate governance in the entity. the main objective of SAST is to protect the interest of minority shareholders when acquisition is taking place.
Companies Act 2013-Independent Director
An independent director is an non-executive director of a company who helps the company in improving corporate credibility and governance standards. he or she does not have any kind of relationship with the company.
Amalgamation
In the Indian context, both merger and amalgamation are treated as one as per section 2 (1A) of the Income tax Act,1961. Amalgamation is seen as merger of one or more companies with another company or it can be a merger of two or more companies to form a new company. It is done in a way that in totality all the assets, liabilities and shareholder's holding of new.
Merger
Merger is a happy bending of two or more organizations. A merger is the end result of two companies combining into one company.
Demerger
Demerger is a technique of corporate restructuring in which an independent company is created from a parent company
Example: Rolls-Royce motors was created from the demerger of the Rolls-Royce car business from Rolls-Royce Limited in 1973. The main objective behind a demerger is to provide for a clear, precise and un-distracted focus on core business for the parent company.
Loan Stock
This is the exchange of common equity stock for debt based loan stock in the new company. Therefore, equity investment is exchanged for fixed interest investment.
Convertible loan stock
The shareholders of one company exchange their shares for convertible loan stock i.e. loan or debt which can be later converted into equity after a certain period of time
Authorized capital of a Private Limited Company is the maximum value of shares a company can allot to its shareholders. therefore, most promoters incorporate their company with the minimum required authorized capital of Rs. 1 lakh and issue shares with a value of Rs. 1 lakh or less to founding members.
Commercial banks are required to maintain in the form of cash, gold reserves, RBI approved securities before giving credit to the customers. It is directed under section 24 of the Banking regulation Act 1949. The SLR is determined by the RBI. It is usually used to control inflation and fuel growth by increasing and decreasing money supply. It controls the credit growth in India. The maximum limit of SLR is 40% and the minimum limit of SLR is 0 in India. The RBI always decides the percentage of SLR, If banks fails to control the required level of the SLR then it becomes responsible to pay penalty to RBI. When SLR is high banks have less money for commercial operations and hence less money to lend out when it happens, home loan interest rates often rise when the SLR is low, similarly home loan interest rates are likely to fall.
Devaluation of Currency (Rupee)
Decreasing rupee value in foreign exchange market. In 1991 as a immediate measure to resolve the Balance of payment (BOP) crisis the rupee was devaluated against foreign currencies. This was to boost the exports and this led to an increase in the inflow of foreign exchange.
Contingent Liabilities
Liabilities that may be incurred by an entity depending on the outcome of a uncertain future events such as court case, income tax disputes, sales tax disputes etc. These liabilities are not recorded in company accounts and shown in the balance sheet.
