Key Concepts in Finance

Transcription

1 Key Concepts in Finance Chapter Topics What you will learn Understanding Money Risk Accounting Statements Concept of Money Concept of Interest Compounding and CAGR Time Value of Money Inflation Identifying Risk Measuring & Managing Risk The Risk-Return Concept of Business and its Classification Accounting Principles The Accounting Process Recording Transactions Depreciation Suspense Account and Trial Balance Profit & Loss (P&L) Statement Cash Flow Statement Balance Sheet Live Examples An introduction to money as a standardized unit of exchange. What 'Interest' is; Simple and Compound Interest. Effective Interest (Yield) ; understanding CAGR & its usage. Time Value of Money presented clearly & simply; future value, present value, NPV, IRR with illustrations & explanation of the Excel functions. Inflation and Nominal Rate, Inflation Rate and Real Rate. Types of risk for a Institution faces. Factors considered to measure risk; risk management techniques such as diversification. You will understand how return changes with the associated risk. A brief discussion on the concept of Business and how it is structured. An overview of key accounting principles (such as Going Concern Concept, Conservatism Concept, Accrual Concept etc.) The overall flow right from Transaction, through General Legder till Statements. You will also learn about the Double Entry Method. How financial transactions are recorded; passing Debit and Credit entries. Explanation of Depreciation and Amortisation. The purpose of the suspense account and what a Trial Balance is. The components of a P&L Statement - measures of profitability, and items of expense. The format of a P&L Statement. The concept of a Cash Flow Statement and its break-down into Financing, Investing and Operational Cash flows. A detailed discussion on various components of a Balance Sheet, such as Current Assets, Owner's Equity, Contingent Assets & Liabilities etc. A discussion on the Balance Sheet with a live example. Total Recommended Study Time 2 hours 4 hours 1

2 Raising and Investing Money Chapter Topics What you will learn Raising Money Investing Money Markets - Generic Raising Capital Equity and Equity Instruments Depository Receipts (DRs) Debt Issuance of Debt Instruments Classification of debt instruments Bonds & Money Market instruments The Capital Structure decision Investment Cycle Mutual Funds (MFs) Categorization of MFs The Investment decision Trade Life Cycle Issuance Pre-Trade Analysis & the Trade Post-Trade Asset Servicing Role of Banks in the Trade Life The need for, and broad ways of, raising capital for a business. The sources of equity; types of equity instruments and key attributes (such as redeemability, convertibility etc.). The concept of Depository Receipts (ADRs and GDRs), and how they're used. Sources of debt; the concept of debt instruments An insight to the process related to the issuance of Debt Securities. We will also discuss key features of Debt Securities such as, Face Value, Maturity Period etc. Classification of Debt Instruments basis tenor & Issuer. Key - and often poorly understood - concepts such as Coupon & Yield. Types of Money Market Securities, such as: T-Bills, CDs, CPs, Repos. The factors affecting the capital structure decision: cost, operations, strategy. The effect of debt on return for equity holders, and Weighted Average Cost of Capital (WACC) The stages of an investment cycle: planning, Risk profiling, Asset allocation, Portfolio Maintenance; the role of Asset Management Companies (AMCs). The structure of a fund, key features (entry load, exit load, NAV) and benefits. Categorisation of MFs basis liquidity, Investment objective & Invesment plan. An insight into the trade-off between Returns, Safety and Liquidity. The Life Cycle of a trade: Issuance, Pretrade, Trade, Post trade, and Asset servicing Types of Issues & the entire Issuance Process The systems needed for pre-trade; trading process followed in different markets. The stages of Post Trade - Clearing, Settlement, Settlement Conventions. Post trade systems and Monitoring systems The steps in Asset Servicing such as, Income collection, Corporate actions, etc. Manage the issuance process, research and Proprietary trading Recommended Study Time 2 Hours 3 hours

3 Markets - Equity Markets - Bonds and Currencies Cycle Working of a Stock Market Stock Market Participants Stock Indices Stock Valuation Bond Markets Bond pricing and valuation of bonds Money markets: Bank rate and repo rate Foreign Exchange Markets Exchange Rates and its key drivers Valuation of currencies A basic understanding of how stock trading works. The participants of a stock market and their roles, such as: Brokers, Custodian Banks, Depositories, and Clearing Firms; understanding a Demat account. What indices are; Key markets and their indices (f Nifty/Sensex of India, DAX of Germany etc.). Determination of share prices and market sentiment. Calculating the value of a stock basis Mark to Market (MTM); estimation of Realised and unrealised losses Various participants & their roles: Government/corporation, commercial banks, investment managers/mutual funds, depository & clearing corporation, regulators. Bond pricing based on Present Value. Understanding Coupon, bond price and yield. Money Market Instruments and the difference from Bonds and Debentures. Players, traded currencies? etc. Factors affecting the Exchange Rate, Market Conventions; Spot, Tom & Forward Rates. Valuation of currencies, with the help of an illustration. Total 3 hours 1

4 Banking Business Chapter Topics What you will learn The Banking Business Retail Banking Corporate Banking The A bank & an NBFC Regulators & Regulations Key Concepts Banking Business Overview The Business Offerings of a Bank Channels Overview Liability Products Asset Products Other Services Introduction Classification of Products Funded & Non Funded Facilities International Trade - Payment Methods The players in the world of finance - Market Players, Regulators etc. What a bank does; categories of banks in India; how NBFCs are different. Regulators for Institutions (such as RBI, NHB). A discussion on key regulations such as Basel Norms, Reserve requirements etc. Key concepts such as Flat & Reducing balance interest rates, Pledge, Hypothecation & Mortgage, etc. A bank's business model ; Related concepts such as: Cost of Funds, Net Interest Income (NII) and Spread Business Divisions: Where we talk about Retail Banking, Corporate Banking, etc. Mid & Back Office functions: Risk Management, Asset/Liability Management etc. Support Functions: Where we discuss about Audit, Finance & Control etc. The channels a bank uses; features of each. The organisational structure of the Retail banking division. Types of liability (deposit) products -Saving Accounts, Current Accounts, Term Deposits, and NRI deposits. Key processes around CASA and Fixed deposits. Categarization basis security, repayment and interest rate; typical loan products such as Home loans, Auto loans, credit cards, etc. The typical loan lifecycle. A discussion on other services provided by banks such as, Remittances, Mutual Funds & Insurance etc. The Organisational Structure, including Transaction Banking and Product Management. Classification of Fund and Non-Fund based products, basis Purpose, Maturity, Revolving and One-Off etc. Types of Funded Facilities such as Working Capital Loans, Long Term Loans; Non funded facilities such as LCs & Cash Management A discussion on International Trade Payment Methods: Recommended Study Time 2 Hours 4 hours

5 Cash in Advance, Open Account and Letter of Credit (LC) Specialized Divisions and Support Functions Non Banking Finance Companies (NBFCs) Payment Systems Risk Management Banking Laws & Regulatory Compliance Credit Evaluation SME Banking Investment Banking Markets and Treasury Private Banking and Wealth Management Rural and Agricultural Banking Other Functions Introduction to NBFCs Business Offerings of an NBFC Banks Vs. NBFCs Introduction to Payment Systems Clearing and Settlement Categorisation of Payments Risk Management Process Typical causes of Crises Risk Management Process - Identifying, Measuring & Managing the Risk Negotiable Instruments Act UCPDC SARFAESI Act Qualitative and Quantitative Analysis required for Credit Evaluation. Small and Medium Enterprise (SME) Banking and its difference from Corporate Banking. An introduction to Investment Banking, its purpose and its functions - Mergers & Acquisitions, Loan Syndication, Issue Management, etc. An overview of the Markets and Treasury division. An introduction to Private Banking and Wealth Management; the typical Private Banking workflow. A discussion on Rural Banking; agricultural credit across the value chain. Sales & marketing; Asset and Liability Management (ALM) ; Human resource management; Legal & compliance, etc. An overview of NBFC sector in India; categorisation into AFCs, ICs, LCs A discussion on the following business offerings of an NBFC: Deposits, Lending, Leasing & Hire purchase, etc. A comparison on the basis of products, services and regulations. The players in a payment system; key terms - clearing, settlement, float, correspondents, etc. A step by step discussion on the process of clearing and settlement with examples. RTGS & Deferred Net Settlement systems. A category-wise discussion on the following modes of payments: Paper based payments Card based payments Electronic payments An introduction to the three steps of the Risk Management Process A discussion on the root causes of the financial crises. For example, Asset Quality, Asset Liability Mismatch etc. Mapping types of risk to the functions of a bank; Var methodologies; the Basel Norms for Capital Adequacy A brief description about the rules around key negotiable instruments. The UCPDC and its key features. A brief description about the SARFAESI Act 6 Hours 4 hours 2 Hours

6 and its usage. Technology in Banking Know Your Customer (KYC) and Anti Money Laundering (AML) A Core Banking System (CBS) Different modules of a CBS Other technology applications A discussion on customer identification procedures, monitoring of transactions, and its reporting. Technology in banks; understanding a CBS An overview of the modules in a CBS such as General Ledge Module, Loan Module, MIS, Risk Management, etc. and how they are used. Cheque Truncation Total 36 Hours