Finance For Trainers
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Finance for Trainers
Objective of the session
Business orientation
Commonly Used terms Security Bond Stock
Security
Security :A security is a negotiable instrument representing financial value.
Bond
Bond (also known as Debenture): it is a long-term debt instrument used by governments and large companies to obtain funds. It is defined as "any form of borrowing that commits a firm to pay interest and repay capital”.
Share
Commonly Used Terms
Share (also known as stock and equity):means a share of ownership in a corporation (company)
Money market
In finance, the money market is the global financial market for short-term borrowing and lending. It provides short-term liquidity funding for the global financial system.
Capital Market
The Capital Market is the market for securities, where companies and governments can raise long term funds (periods longer than a year). The capital market includes the stock market and the bond market. Financial regulators like SEBI, oversee the capital markets in their countries to ensure that investors are protected against fraud.
Capital Market contd. Consist of Primary market :The primary market is that part of the capital markets that deals with the issuance of new securities. For e.g. In the case of a new stock issue, this sale is an initial public offering (IPO). Secondary market: Is the financial market where previously issued securities and financial instruments such as stock, bonds are bought and sold.
Understanding Indian economy
Monetary policy Fiscal policy
Monetary policy
One of the roles of RBI. Monetary policy is the process by which the RBI controls (I) availability of money, and (ii) cost of money or rate of interest, in order to attain a set of objectives oriented towards the growth and stability of the economy
Types of Monetary policy
Expansionary policy: increases the total supply of money in the economy, to combat unemployment in a recession by lowering interest rates.
Contractionary policy: involves raising interest rates in order to combat inflation.
Important terms in monetary policy
CRR: (CASH RESERVE RATIO) RBI or central banks require banks to keep a small portion of their deposits as “banks reserves”, which the banks cannot lend out.
Quiz Time Q.1:What will happen if RBI increases CRR?
Bank Rate/Repo rate
This is the rate at which RBI lends money to other banks (or financial institutions). These loans are usually very short-term loans.
Reverse Repo Rate
The rate at which RBI borrows money from the banks (or banks lend money to the RBI) is termed the reverse repo rate. The RBI uses this tool when it feels there is too much money floating in the banking system.
Quiz:2
What is the CRR Repo rate Reverse repo rate
Ans.
Current Rates Figures (as of Jan 6, 2009) CRR = 5.0% Repo Rate = 5.5% Reverse Repo Rate = 4.0%
Fiscal Policy Fiscal Policy is considered to be acts of a government to influence the direction of nation’s economy by using its financial and regulatory powers. Financial power: The two main important instruments of fiscal policy are government spending and taxation. Regulatory powers :The ability of government to influence its people to change their behaviour.
Government Revenue: Government generates revenue by collecting taxes from its people and businesses. By changing tax rates government can influence demand. For e.g.– lowering of income tax rate will increase the disposable income of people. With more money in hand people will spend those money on goods and service; hence, creating a demand for the same.
Government Spending: Constructing schools, colleges, hospitals, ports, airports, highways, factories etc. In several welfare schemes such as unemployment benefits, elderly pensions, healthcare benefits.
Quiz:What is infrastructure?
Infrastructure can be defined as the basic physical and organizational structures needed for the operation of a society or enterprise. the services and facilities necessary for an economy to function. E.g. :roads, water supply, sewers, power grids, telecommunications.
Business Planning For Development Projects THE PLAYERS EQUITY SOURCE: Owners and Investors
DEBT SOURCE: Lenders
CAPITAL
FUNDS
FUNDS
DEBT SERVICE
INFRASTRUCTURE & MUNICIPAL SERVICES
PUBLIC SECTOR AGENCIES
ECONOMIC DEVELOPMENT PROPERTY TAXES & USE FEES
RETURN ON AND OF EQUITY
THE REAL ESTATE ______ Political / Physical / Economic Opportunities & Constraints
OCCUPANCY COSTS
SKILLS & SERVICES
FEES & INCENTIVES
DEVELOPER ____________ OPERATOR
USE & ENJOYMENT
THE MARKET ______ USERS
26
it!
That’s
Objective of the session
Business orientation
Commonly Used terms Security Bond Stock
Security
Security :A security is a negotiable instrument representing financial value.
Bond
Bond (also known as Debenture): it is a long-term debt instrument used by governments and large companies to obtain funds. It is defined as "any form of borrowing that commits a firm to pay interest and repay capital”.
Share
Commonly Used Terms
Share (also known as stock and equity):means a share of ownership in a corporation (company)
Money market
In finance, the money market is the global financial market for short-term borrowing and lending. It provides short-term liquidity funding for the global financial system.
Capital Market
The Capital Market is the market for securities, where companies and governments can raise long term funds (periods longer than a year). The capital market includes the stock market and the bond market. Financial regulators like SEBI, oversee the capital markets in their countries to ensure that investors are protected against fraud.
Capital Market contd. Consist of Primary market :The primary market is that part of the capital markets that deals with the issuance of new securities. For e.g. In the case of a new stock issue, this sale is an initial public offering (IPO). Secondary market: Is the financial market where previously issued securities and financial instruments such as stock, bonds are bought and sold.
Understanding Indian economy
Monetary policy Fiscal policy
Monetary policy
One of the roles of RBI. Monetary policy is the process by which the RBI controls (I) availability of money, and (ii) cost of money or rate of interest, in order to attain a set of objectives oriented towards the growth and stability of the economy
Types of Monetary policy
Expansionary policy: increases the total supply of money in the economy, to combat unemployment in a recession by lowering interest rates.
Contractionary policy: involves raising interest rates in order to combat inflation.
Important terms in monetary policy
CRR: (CASH RESERVE RATIO) RBI or central banks require banks to keep a small portion of their deposits as “banks reserves”, which the banks cannot lend out.
Quiz Time Q.1:What will happen if RBI increases CRR?
Bank Rate/Repo rate
This is the rate at which RBI lends money to other banks (or financial institutions). These loans are usually very short-term loans.
Reverse Repo Rate
The rate at which RBI borrows money from the banks (or banks lend money to the RBI) is termed the reverse repo rate. The RBI uses this tool when it feels there is too much money floating in the banking system.
Quiz:2
What is the CRR Repo rate Reverse repo rate
Ans.
Current Rates Figures (as of Jan 6, 2009) CRR = 5.0% Repo Rate = 5.5% Reverse Repo Rate = 4.0%
Fiscal Policy Fiscal Policy is considered to be acts of a government to influence the direction of nation’s economy by using its financial and regulatory powers. Financial power: The two main important instruments of fiscal policy are government spending and taxation. Regulatory powers :The ability of government to influence its people to change their behaviour.
Government Revenue: Government generates revenue by collecting taxes from its people and businesses. By changing tax rates government can influence demand. For e.g.– lowering of income tax rate will increase the disposable income of people. With more money in hand people will spend those money on goods and service; hence, creating a demand for the same.
Government Spending: Constructing schools, colleges, hospitals, ports, airports, highways, factories etc. In several welfare schemes such as unemployment benefits, elderly pensions, healthcare benefits.
Quiz:What is infrastructure?
Infrastructure can be defined as the basic physical and organizational structures needed for the operation of a society or enterprise. the services and facilities necessary for an economy to function. E.g. :roads, water supply, sewers, power grids, telecommunications.
Business Planning For Development Projects THE PLAYERS EQUITY SOURCE: Owners and Investors
DEBT SOURCE: Lenders
CAPITAL
FUNDS
FUNDS
DEBT SERVICE
INFRASTRUCTURE & MUNICIPAL SERVICES
PUBLIC SECTOR AGENCIES
ECONOMIC DEVELOPMENT PROPERTY TAXES & USE FEES
RETURN ON AND OF EQUITY
THE REAL ESTATE ______ Political / Physical / Economic Opportunities & Constraints
OCCUPANCY COSTS
SKILLS & SERVICES
FEES & INCENTIVES
DEVELOPER ____________ OPERATOR
USE & ENJOYMENT
THE MARKET ______ USERS
26
it!
That’s
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