Working Capital

Definition: Working capital can be understood as the capital needed by the firm to finance current assets. It represents the funds available to the enterprise to finance regular operations, i.e. day to day business activities, effectively. It is helpful in gauging the operating liquidity of the company, i.e. how efficiently the company is able to…

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Money Market

Definition: Money Market can be understood as the market for short term funds, wherein lending and borrowing of funds varies from overnight to a year. It is an important part of the financial system that helps in fulfilling the short term and very short term requirements of the companies, banks, financial institution, government agencies and…

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Venture Capital

Definition: Venture Capital can be defined as the financing for startup companies and small enterprises, that involves a considerable amount of risk but are supposed to have long-term growth potential, i.e. the project can earn a high rate of return. A budding company, which is not yet ready to raise funds from the financial market…

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Bonds

Definition: Bonds can be defined as the negotiable instrument, issued in relation to borrowing arrangement, that indicates indebtedness. It is an unsecured debt instrument, in which the bond investor extends credit to the issuer, which in turn commits to repay the loan amount on the specified maturity date, along with interest throughout the life of…

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Certificate of Deposit (CD)

Definition: Certificate of Deposit (CD) implies an unsecured, money market negotiable instrument, issued by the commercial bank or financial institution, either in demat form or as a usance promissory note, at a discount to face value at market rates, against the amount deposited by an individual, for a stipulated time. In finer terms, certificate of…

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Factoring

Definition: Factoring implies a financial arrangement between the factor and client, in which the firm (client) gets advances in return for receivables, from a financial institution (factor). It is a financing technique, in which there is an outright selling of trade debts by a firm to a third party, i.e. factor, at discounted prices. Factoring…

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Credit Rating

Definition: Credit Rating can be defined as the assessment of the ability of the borrower, to discharge their financial obligations. It is an approximation of the creditworthiness of an individual, entity or commercial instrument, considering various factors, representing the capability and willingness, to pay financial commitments in time. Credit rating is instrument specific and is…

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Margin of Safety

Definition: Margin of Safety (MOS) is defined as the excess of actual or projected sales over break-even sales, that can be expressed in monetary terms or units, or as a percentage of total sales. The margin of Safety implies the sales point over and above the break-even point, that results in profit. Break-even point (BEP),…

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Treasury Bills

Definition: Treasury Bills, also known as T-bills are the short-term money market instrument, issued by the central bank on behalf of the government to curb temporary liquidity shortfalls. These do not yield any interest, but issued at a discount, at its redemption price, and repaid at par when it gets matured. T-bills are the key…

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Financial Market

Definition: Financial Market refers to a marketplace, where creation and trading of financial assets, such as shares, debentures, bonds, derivatives, currencies, etc. take place. It plays a crucial role in allocating limited resources, in the country’s economy. It acts as an intermediary between the savers and investors by mobilising funds between them. The financial market…

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