Contents COST ACCOUNTING : PRIME COST AND OVERHEADS. Part One OVERVIEW OF COST ACCOUNTING CLASSIFICATION OF COST MATERIAL PROCUREMENT PROCEDURES C-11

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1 Contents Part One COST ACCOUNTING : PRIME COST AND OVERHEADS Chapter 1 OVERVIEW OF COST ACCOUNTING 1. 1 Need for Cost Management Introduction to Cost Accounting Cost Costing Cost Accounting Cost Accountancy Art, Science and Practice Scope of Cost Accounting Objectives of Cost Accounting Cost Accounting System Necessity for Cost Accounting System Essentials of Good Cost Accounting System Essential Factors for Good Cost Accounting System Reports Provided by Cost Accounting Department Practical Difficulties in Installation Suggestions to Overcome Practical Difficulties Cost Accounting and Financial Accounting : Distinction Cost Accounting and Management Accounting : Distinction Limitations of Cost Accounting Important Features of a Performance Measurement Costing Cost Unit Examples of Cost Units Composite Cost Unit Cost Object Cost Centre Benefits of Establishment of Cost Centre Types of Cost Centres Profit Centre Investment Centre Methods of Costing Specific Order Costing Continuous Operation Costing Specific Order Costing and Continuous Order Costing: Distinction Types of Costing Systems Levels of Variability of Costs Strategic Cost Management (SCM) 17 Theoretical Examination Questions 17 True or False Statements 17 Choose Correct Answer 18 Chapter 2 CLASSIFICATION OF COST 2. 1 Classification of Costs Cost Classification by Nature Cost Classification in Relation to Cost Centre Cost Classification by Time Cost Classification for Decision Making Cost Classification by Nature of Production Process Classification of Costs based on Behaviour Importance of Behaviourwise Cost Classification Segregation of Semi-variable Costs Industrial Engineering Method Account Inspection Method Scatter Graph Method High and Low Method Regression Analysis Assumptions in Regression Analysis Meaning of Cost Codification Objectives of Codification Requirements of Efficient Coding System Methods of Codification of Costs 34 Theoretical Examination Questions 35 True or False Statements 35 Choose Correct Answer 36 Practical Examination Problems 40 Chapter 3 MATERIAL PROCUREMENT PROCEDURES 3. 1 Components in Direct Material Cost Bill of Materials Advantages of Bill of Materials Purchase Requisition Purchase Order Material Inspection Note Goods Received Note (GRN) 46 C-11

2 C-12 Cost Accounting and Financial Management 3. 8 Stores Requisition Note Material Transfer Note Material Return Note Bin Card Stores Ledger Methods of Pricing Material Issues First-In First-Out (FIFO) Method Last-In First-Out (LIFO) Method Weighted Average Cost Method Standard Cost Method Replacement Cost Method Factors Effecting Selection of Pricing Method Suitability of Pricing Method in Rising Prices Reasons for Stock Discrepancies Steps to Avoid Stock Discrepancies Accounting Procedure for Material Shortages Material Control System Perpetual Inventory System Advantages of Perpetual Inventory System Continuous Stock Taking System Advantages of Continuous Stock Taking System 59 Theoretical Examination Questions 59 True or False Statements 60 Choose Correct Answer 60 Practical Examination Problems 63 Chapter 4 INVENTORY MANAGEMENT 4. 1 Definition and Meaning of Inventory Features of Ideal Inventory Policy Requirements of Stock Control Impact of Inflation on Inventory Holding Input-Output Ratio Stock Turnover Ratio Basic Concept of Economic Order Quantity (EOQ) Categories of Inventory Costs Assumptions of EOQ Graphical Determination of EOQ EOQ with Discounts Pull System in Inventory Control Fixation of Inventory Levels VED Analysis FNSD Analysis ABC Analysis Just in Time Inventory Management 81 Theoretical Examination Questions 81 Choose Correct Answer 82 Practical Examination Problems 85 Chapter 5 EMPLOYEE REMUNERATION METHODS 5. 1 Time and Motion Study Method Study Work Study Activity Sampling Work Simplification Job Evaluation Advantages of Job Evaluation Job Evaluation Methods Merit Rating Labour Remuneration Plans Suitability of Time Rate Remuneration Plans Advantages and Disadvantages of Time Rate Remuneration Plans Flat Time Rate Plan High Day Rate Plan Plan with Different Time Rates Halsey Premium Bonus Plan Rowan Premium Bonus Plan Comparison of Halsey and Rowan Plans Halsey-Wair Plan Accelerated Premium Bonus Plan Emerson s Efficiency Bonus Plan Barth Variable Bonus Plan Bedaux Points Plan Gnatt s Task Bonus Plan Piece Rate Remuneration Plans Straight Piece Rate Plan Piece Rate with Guaranteed Time Rate Plan Differential Piece Rate Plan Taylor s Differential Piece Rate Plan Merrick s Differential Piece Rate Plan Group Bonus Plans Applicability of Group Bonus Plans Advantages and Disadvantages Profit Sharing Plan Co-partnership Plan Requisites of Good Wage Incentive Plan 106 Theoretical Examination Questions 107 True or False Statements 108 Choose Correct Answer 108 Practical Examination Problems 111 True or False Statements 82

3 Contents C-13 Chapter 6 EMPLOYEE COST ACCOUNTING 6. 1 Labour Cost Records Payroll Accounting Labour Cost Accounting Time Keeping Time Booking Labour Turnover Causes of Labour Turnover Measures to Reduce Labour Turnover Measurement of Labour Turnover Costs of Labour Turnover Total Cost of Labour Turnover Treatment of Cost of Labour Turnover Idle Time Causes of Idle Time Accounting Treatment of Idle Time Overtime Premium Accounting Treatment of Overtime Premium Measures to Control Overtime Premium Disadvantages of Overtime Working Treatment of Special Labour Costs Incentive Schemes Incentive to Indirect Workers and Indirect Incentive to Direct Workers : Distinction Casual Worker and Out Worker 136 Theoretical Examination Questions 136 True or False Statements 137 Choose Correct Answer 137 Practical Examination Problems 140 Chapter 7 OVERHEADS : CLASSIFICATION AND ACCOUNTING 7. 1 Definition and Meaning of Direct Expense Definition and Meaning of Overheads High Overhead Costs and Test of Efficiency Standing Order Number vs. Cost Account Number Steps in Accounting of Overheads Classification and Codification of Overheads Collection of Overheads Cost Allocation Departmentalization of Overheads Allocation of Overheads Apportionment of Overheads Distinction between Allocation and Apportionment Production Overhead Examples of Production Overhead Types of Production Overhead and Basis of Apportionment Re-apportionment of Service Centre Costs Rationale for Allocating Service Departments Costs to Production Departments Methods in re-allocation of Service Department Overheads Direct Method Step down Method Repeated Distribution Method Simultaneous Linear Equation (Matrix) Method Meaning and Definition of Administrative Overhead Examples of Administration Overhead Types of Administration Overhead and Basis of Apportionment Treatment of Administrative Overheads in Cost Accounting Meaning and Classes of Selling and Distribution Overheads Basis of Apportionment of Selling and Distribution Overheads Accounting of Selling and Distribution Overheads Problems in Controlling Selling and Distribution Overheads 163 Theoretical Examination Questions 164 True or False Statements 165 Choose Correct Answer 165 Practical Examination Problems 167 Chapter 8 OVERHEADS : ABSORPTION AND CONTROL 8. 1 Definition and Meaning of Overhead Absorption Methods of Production Overhead Absorption Production Unit Method Percentage of Direct Material Cost Method Percentage of Direct Labour Cost Method Percentage of Prime Cost Method Direct Labour Hour Rate Method Machine Hour Rate Method Single Overhead Absorption Rate Departmental Overhead Absorption Rates Predetermined Overhead Absorption Rates Over and Under Absorption of Overheads Reasons for Over or Under Recovery Treatment of Under/Over Absorption of Overheads 192 Theoretical Examination Questions 193 True or False Statements 194 Choose Correct Answer 194 Practical Examination Problems 195 Chapter 9 OVERHEADS : TREATMENT OF SPECIAL ITEMS 9. 1 Idle Capacity Costs Treatment of Idle Capacity Costs in Cost Accounts 210

4 C-14 Cost Accounting and Financial Management 9. 3 Interest on Capital Arguments in Favour of Inclusion Arguments Against Inclusion Definition and Meaning of Depreciation Obsolescence Depreciation and Obsolescence : Distinction Importance of Sound Depreciation Policy Plant and Other Fixed Assets Registers Using of Asset After Fully Depreciated Material Handling Expenses Market Research Expenses Subscriptions and Donations After Sales Service Costs Royalties and Patent Fees Training Costs Taxation Financing Charges Major Repairs to Equipment Cost of Tools Bad Debts Notional Rent Packing Expenses Data Processing Cost Stores Overhead Erection and Dismantling of Plant and Machinery Transport Cost Insurance Cost Research and Development Costs Treatment of Research Cost Treatment of Development Cost Waste Scrap Spoilage Defectives 220 Theoretical Examination Questions 221 True or False Statements 222 Choose Correct Answer 222 Practical Examination Problems 223 Chapter 10 COST ACCOUNTING STANDARDS Cost Accounting Standards Board (CASB) and its Objectives Cost Accounting Standards (CAS) Generally Accepted Cost Accounting Principles (GACAP) Principles Applicable to all Elements of Cost as per GACAP Principles Applicable to Presentation and Disclosure as per GACAP 229 C A S 1 Classification of Cost 229 C A S 2 Capacity Determination 234 C A S 3 Overheads 235 C A S 4 Cost of Production for Captive Consumption 236 C A S 5 Determination of Average (equalized) Cost of Transportation 236 C A S 6 Materials 237 C A S 7 Employee Cost 239 C A S 8 Cost of Utilities 241 C A S 9 Packing Material Cost 242 C A S 10 Direct Expenses 243 C A S 11 Administrative Overheads 244 C A S 12 Repairs and Maintenance Cost 244 C A S 13 Cost of Service Centre Costs 245 C A S 14 Pollution Control Cost 246 C A S 15 Selling and Distribution Overheads 247 C A S 16 Depreciation and Amortization 248 C A S 17 Interest and Financing Charges 249 Part Two FINANCIAL MANAGEMENT Chapter 11 OVERVIEW OF FINANCIAL MANAGEMENT Traditional View of Financial Management Modern View of Financial Management Types of Decisions made by Finance Manager Investment Decisions Finance Decisions Classification of Capital Structure Dividend Decisions Tenets of Financial Management Interrelationship of Investment, Financing and Dividend Decisions Liquidity and Profitability Financial Management and Accounting : Distinction Financial Management-Science or Art Significance of Financial Management Functions of Financial Controller Finance Manager as a Facilitator Organization Chart of Finance Function Reasons for Centralizing Finance Function Financial Objectives of Business Firm Profit Maximization Objective Wealth Maximization Objective Value Maximization Objective Costing and Risk Risk-Return Trade off 264

5 Contents C Impact of Business Taxation on Financial Management Impact of Personal Taxation on Financial Management Finance Manager Role as Tax Planner Tax Shield Meaning of Tax Planning and Tax Avoidance Impact of Inflation on Financial Management Impact of Depreciation on Financial Management Objectives of Depreciation Policy Depreciation and Inflation Depreciation and Capital Budgeting Depreciation as a Source of Fund Depreciation and Tax Liability Depreciation and Dividend Techniques of Financial Management 268 True or False Statements 270 Choose Correct Answer 270 Chapter 12 CONCEPTS OF VALUE AND RETURN Time Value of Money Simple Interest Compound Interest Present Value Calculation of Discount Factors Compounding Rate and Capitalising Rate Annuity Future Value of Ordinary Annuity Present Value of Ordinary Annuity Present Value of Deferred Annuity Present Value of Perpetuity Amortisation Sinking Fund Interest Rates Nominal and Real Rates of Interest Interest Rates, Capital Gains and Losses Interest Rates and Share Prices Changes in Interest Rates and Financing Decisions Theories on Term Structure of Interest Rates Yield to Maturity Factors Determining Yields Yield of Stocks 284 Choose Correct Answer 285 Practical Examination Problems 285 Chapter 13 RATIO ANALYSIS Introduction to Ratio Analysis Categories of Ratios Liquidity Ratios Current Ratio Quick/ Liquid/Acid Test Ratio Absolute Liquid/Super Quick Ratio Defensive - Interval Ratio Leverage Ratios Debt-Equity Ratio Shareholders Equity Ratio Long-term Debt to Shareholders Net Worth Ratio Capital Gearing Ratio Fixed Assets to Long-Term Funds Ratio Proprietary Ratio Interest Coverage Ratio Debt Service Coverage Ratio (DSCR) Dividend Cover Asset Management Ratios Inventory Turnover Ratio Inventory Ratio Debtors Turnover Ratio Debtors Collection Period Bad Debts to Sales Ratio Creditors Turnover Ratio Creditors Payment Period Fixed Assets Turnover Ratio Total Assets Turnover Ratio Working Capital Turnover Ratio Sales to Capital Employed Ratio Profitability Ratios Gross Profit Margin Net Profit Margin Cash Profit Ratio Return on Total Assets Return on Shareholders Funds or Return on Net Worth Return on Capital Employed (ROCE) Operating Ratios Market Based Ratios Earnings Per Share (EPS) Cash Earnings Per Share Dividend Payout Ratio Dividend Yield Book Value Price Earnings Ratio (P/E Ratio) Market Price to Book Value Ratio (P/BV ratio) 301

6 C-16 Cost Accounting and Financial Management Du Pont Analysis Importance of Ratio Analysis Factors Affecting Efficacy of Ratios Non-financial Performance Measures 304 Theoretical Examination Questions 306 True or False Statements 306 Choose Correct Answer 306 Practical Examination Problems 310 Chapter 14 FUNDS FLOW ANALYSIS Meaning of Funds Flow Statement Classification of Balance Sheet Items Meaning of Fund and Flow Identification of Flow of Funds Computation of Sources and Application of Funds Calculation of Funds from Operations Sources of Funds Application of Funds Changes in Working Capital Position Computation of Net Increase or Decrease in Working Capital Funds Flow Statement and Balance Sheet : Distinction Funds Flow Statement and Income Statement : Benefits of Funds Flow Analysis Drawbacks of Funds Flow Analysis 342 Theoretical Examination Questions 344 Choose Correct Answer 344 Practical Examination Problems 345 Chapter 15 CASH FLOW ANALYSIS Introduction to Cash Flow Statement Scope of AS-3 Cash Flow Statements (Revised) Meaning of Certain Terms in Cash Flow Analysis Classification of Cash Flows Cash Flows from Operating Activities Cash Flows from Investing Activities Cash Flows from Financing Activities Foreign Currency Cash Flows Extraordinary Items Interest and Dividends Treatment of Certain Items Data Required In Preparation of a Cash Flow Statement Procedure In Preparation of Cash Flow Statement Reporting of Cash Flows from Operating Activities Direct Method Indirect Method Other Disclosure Requirements Uses of Cash Flow Statement Limitations of Cash Flow Statement Funds Flow Statement and Cash Flow Statement : Distinction Cash Flow Statement and Cash Budget : Distinction 371 Choose Correct Answer 372 Practical Examination Problems 373 Chapter 16 ANALYSIS OF OPERATING AND FINANCIAL LEVERAGES Meaning of Leverage Operating Leverage Financial Leverage Impact of Financial Leverage on ROE and ROA Combined Leverage Structural Leverage Interest Cover and Income Gearing Debt and Equity : Distinction Trading on Equity Gearing in Relation to Financial Risk Impact of Gearing on Cost of Capital Impact of Gearing on EPS 404 Theoretical Examination Questions 405 Choose Correct Answer 405 Practical Examination Problems 406 Chapter 17 TREASURY MANAGEMENT Meaning of Treasury Management Role of Treasurer Functions of Treasurer Advantages of Centralized Treasury Management Advantages of Decentralized Treasury Management Cash Management and Treasury Management : Distinction Meaning of Cash Assets and Cash Assets Management Classification of Cash Flows Motives for Holding Cash Cost-Benefit Analysis of Cash Management Management of Liquidity Reasons for Cash Surplus Reasons for Cash Flow Problems Effects of Cash Deficits Methods of Improving Liquidity Baumol s EOQ Model of Cash Management 418

7 Contents C Assumptions of Baumol s Model Limitations of Baumol s Model Miller-Orr Cash Management Model Assumptions of Miller-Orr Model Setting Cash Balance Cash Cycle Zero Balance Account Money Market Banking Petty Cash Imprest System Principles of Investment in Marketable Securities Meaning of Float Sources of Float Types of Float Collection Float Payment Float Net Float Management of Float Accelerating Cash Collections Lock Box System Concentration Banking Electronic Fund Transfer Delaying Payments Electronic Cash Management System Benefits of Electronic Cash Management System Virtual Banking Advantages of Virtual Banking Services Cash Budget Points to be Considered in Cash Budgeting Methods of Cash Budgeting Preparation of Cash Budget under Receipts and Payments Method Cash Flow Statement and Cash Budget : Distinction Cash Budget and Profit & Loss Account : Distinction 432 Choose Correct Answer 433 Practical Examination Problems 433 Chapter 18 RECEIVABLES MANAGEMENT Introduction to Receivables Management Trade Debt Types of Trade Credit Costs of Granting Credit Administration Costs of Debtors Balances Costs of Denying Credit Payment Terms Examples of Payment Terms Steps in Evaluation of Increase in Credit Term Steps in Evaluation of Increase in Cash Discount Monitoring of Accounts Receivables Ratio Analysis for Control of Receivables Ageing Schedule ABC Analysis of Receivables Discriminate Analysis and Credit Scoring Credit Utilization Report Cost-Benefit Analysis of Collection Expenditure Measuring Day s Sales in Terms of Debtors Credit Control Department Establish Credit Policy 448 Choose Correct Answer 449 Practical Examination Problems 449 Chapter 19 WORKING CAPITAL MANAGEMENT Need for Working Capital Management Meaning of Working Capital Components of Working Capital Gross and Net Working Capital Computation of Net Working Capital Permanent Working Capital Temporary Working Capital Positive and Negative Working Capital Disadvantages of Negative Working Capital Objectives of Working Capital Management Operating Cycle Concept Computation of Operating Cycle Period Reasons for Prolonged Operating Cycle How to Reduce Operating Cycle? Impact of Overtrading on Working Capital Impact of Under Capitalization on Working Capital Suggestions to Overcome situation of Under Capitalization Impact of Over Capitalization on Working Capital Poor Working Capital Management Symptoms Working Capital Management Strategies Conservative Approach Aggressive Approach Matching or Hedging Approach Zero Working Capital Approach Working Capital Policies Factors Determining Working Capital Requirement Working Capital Requirement in Seasonal Industries Working Capital Requirement During Periods of Inflation Working Capital Requirement in Industries with Shift Working Working Capital Leverage Economics of Cash Discount 442

8 C-18 Cost Accounting and Financial Management Methods of Working Capital Estimation Percentage of Sales Method Regression Analysis Method Operating Cycle Method Steps in Determination of Working Capital Approaches to Working Capital Estimation Total Approach and Cash Cost Approach : Distinction Sources of Working Capital Finance Trade Credit Terms in Trade Credit Cost of Taking Credit Management of Trade Credit Financial Ratios in Management of Trade Credit Bills Discounting Meaning of Factoring Factoring Mechanism Functions of a Factor Benefits of Factoring Cost-Benefit Analysis of Factoring Impact of Factoring on Financial Statements Factoring and Bills Discounting : Distinction Factoring and Securitization : Distinction Working Capital Finance from Banks Forms of Bank Credit Maximum Permissible Bank Finance Approaches to Bank Financing Bank Guarantees Features of Bank Guarantees Other Sources of Working Capital Finance Pledge of Accounts Receivables Charge on Inventory 494 Theoretical Examination Questions 494 Choose Correct Answer 494 Practical Examination Problems 496 Chapter 20 CAPITAL BUDGETING Introduction to Capital Budgeting Investment appraisal techniques Payback Period Method Merits of Payback Period Method Demerits of Payback Period Method Accounting Rate of Return Method Merits of Accounting Rate of Return Method Demerits of Accounting Rate of Return Method Net Present Value Method Merits of Net Present Value Method Demerits of Net Present Value Method Internal Rate of Return Method Merits of IRR Method Demerits of IRR Method Relative Ranking of Projects : IRR vs. NPV Profitability Index Method Discounted Payback Period Method Adjusted Net Present Value Method Assumptions in Use of DCF Techniques Capital Rationing Factors Leading to Capital Rationing Situations of Capital Rationing Use of Linear Programming Technique in Capital Rationing Impact of Inflation in Capital Budgeting Synchronized and Differential Inflation Money Cash Flows and Real Cash Flows Impact of Taxation in Capital Budgeting Impact of Investment Incentives in Capital Budgeting Replacement or Retirement of an Asset Appraisal of Replacement Decisions Non-financial Factors In Capital Investment Decisions 525 Theoretical Examination Questions 526 True or False Statements 526 Choose Correct Answer 526 Practical Examination Problems 528 Chapter 21 PROBABILITY AND EXPECTED VALUE Meaning of Probability Analysis Theory of Probability Advantages and Disadvantages of Probability Analysis 547 Practical Examination Problems 548 Chapter 22 COST OF CAPITAL Meaning of Cost of Capital Sources of Long-term Finance Cost of Equity Capital (K ) 554 e Dividend Yield Method Dividend Growth Method Price Earning Method Capital Asset Pricing Method Cost of Retained Earnings (K ) 559 r Opportunity Cost Approach Rights Offer Approach Cost of Preferred Capital (K ) 561 p

9 Contents C Cost of Irredeemable Preference Shares Cost of Redeemable Preference Shares Cost of Debt (K ) 562 d Nominal and Real Cost of Debt Cost of Perpetual Debt Cost of Redeemable Debt Cost of Deep Discount Bonds and Zero Coupon Bonds Cost of Convertible Debentures Cost of Floating Debt Weighted Average Cost of Capital Simple WACC Computation of WACC using Book Values and Market Values Computation of WACC after considering Tax Shields Opportunity Cost of Capital 568 True or False Statements 568 Choose Correct Answer 568 Practical Examination Problems 570 Chapter 23 CAPITAL STRUCTURE THEORIES Meaning and Definition of Capital Structure Categories of Capital Financial Structure and Capital Structure : Distinction Optimum Capital Structure Advantages of Debt Factors Determining Capital Structure Basic Assumptions on Optimum Capital Structure Theories Debt-Equity Ratio Analysis EBIT-EPS Analysis Net Income Approach Net Operating Income Approach Weighted Average Cost of Capital Approach (Traditional View) Modigliani and Miller Theory (Modern View) Assumptions of MM Theory MM Theory : No Taxation MM Theory : Proposition I MM Theory : Proposition II MM Theory : Proposition III MM Theory : Arbitrage Criticism of MM Theory MM Theory : Corporate Taxation MM Theory and Corporate Debt 594 Theoretical Examination Questions 594 True or False Statements 594 Choose Correct Answer 595 Practical Examination Problems 596 Chapter 24 DIVIDEND DECISIONS Meaning of Dividend Determinants of Dividend Policy Constant Dividend Payout Policy Constant Dividend Rate Policy Variants of Constant Dividend Rate Policy Optimum Dividend Policy Gordon Growth Valuation Model Assumptions of Gordon Growth Valuation Model Criticism of Gordon Growth Model Walter s Valuation Model Assumptions of Walter s Valuation Model Implications of Walter s Model Modigliani and Miller s Dividend Irrelevancy Theory Basic Tenets of MM Dividend Irrelevancy Theory Assumptions of MM Dividend Irrelevancy Theory Capital Asset Pricing Model Bonus Shares Purpose of Bonus Issue Advantages of Bonus Issue Disadvantages of Bonus Issue Impact of Bonus Issue Decision 613 True or False Statements 614 Choose Correct Answer 614 Practical Examination Problems 615 Chapter 25 SOURCES OF FINANCE Equity Shares Advantages of Equity Shares Disadvantages of Equity Shares Preference Shares Advantages of Preference Shares Sweat Equity Shares Non-voting Shares Advantages of Non-voting Shares Disadvantages of Non-voting Shares Tracking Stocks Debentures Advantages of Debentures Drawbacks of Debentures Debentures and Share Capital : Distinction Convertible Debentures Valuation of Convertibles Zero Interest Bond Equity Warrants with NCDs 629

10 C-20 Cost Accounting and Financial Management Secured Premium Notes Deep Discount Bond Zero Coupon Convertible Note Junk Bonds Treasury Bills Central Government Securities (Gilt-edged Securities) Commercial Paper Features of Commercial Paper Advantages and Disadvantages of Commercial Paper Certificate of Deposit Features of Certificate of Deposit Bills Rediscounting Call Money Repurchase Agreements Interbank Participation Certificate Selection of Securities Valuation of Warrants Factors Determining Value of Warrant Advantages of Warrants Valuation of Bonds Value of Bond with Finite Period Maturity Fund Raising through Rights Issues Reasons for a Rights Issue Advantages of Rights Issue Valuation of Rights Valuation of Share after Rights Issue Shares Buyback or Repurchase Reasons for Shares Buyback Financing Aspects of Shares Buyback Shares Repurchase Price Impact of Shares Buyback on Shareholding Pattern Benefits of Shares Buyback Drawbacks of Shares Buyback Meaning of Financial Engineering Features of Financial Engineering 650 Choose Correct Answer 650 Practical Examination Problems 652 Chapter 26 FINANCIAL SERVICES Credit Rating Agencies Types of Credit Rating Benefits of Credit Rating Credit Rating Methodology Merchant Banking Loan Syndication Portfolio Management and Investment Advisory Services Venture Capital Activities Eligible for Support Stages in Venture Capital Financing Forms of Financial Assistance from VC Funds Advantages of VC Finance Private Equity Criteria for Evaluation of Investment Proposal Why PE Investment not popular? Exit Routes from PE Investment Reasons for Growing Popularity of Private Equity 671 Chapter 27 CONTEMPORARY DEVELOPMENTS Concept of Corporate Governance Tests for Effective Corporate Governance Uruguay Round in Setting up of World Trade Organization (WTO) General Principles and Objectives of WTO Important Terms in WTO Market Access Market Access in India General Agreement on Trade in Services (GATS) Trade Related Investment Measures (TRIMs) Trade Related Intellectual Property Rights (TRIPs) Impact of WTO on Indian Economy Dispute Settlement Mechanism under WTO Sector Specific Agreements Regional Trade Agreements Opportunities and Threats under WTO Regime 680 Key to Short Answer Questions 682 Mathematical Tables 710 CMA Intermediate Syllabus Financial Intermediation Credit Cards Advantages to the Cardholder Advantages to Merchants Consumer Credit Consumer Hire Purchase Business Credit Rating 664