Wednesday, April 21, 2010

Questions on Finance 31-40

1. Define Hard currency Hard currency or strong currency, in economics, refers to a globally traded currency that can serve as a reliable and stable store of value
2. What do u understand from Spring Loading An option-granting practice in which options are granted at a time that precedes a positive news event. Spring loading relies on the fact that positive news typically causes the underlying company's stock to surge in value. Timing an option grant to precede the public news release provides the option holder with an almost instant profit
3. Explain Commodity swap A swap in which exchanged cash flows are dependent on the price of an underlying commodity. A commodity swap is usually used to hedge against the price of a commodity
4. Define Love Money Seed money or capital given by family or friends to an entrepreneur to start a business. The decision to lend money and the terms of the agreement are usually based on qualitative factors and the relationship between the two parties, rather than on a formulaic risk analysis.
5. Define Hobby Loss A non-deductible loss incurred as a result of doing an activity for personal pleasure instead of for profit. A taxpayer cannot deduct the hobby loss as a business loss. A "hobby loss rule" is used to determine whether an activity is a hobby or a business.
6. What do u understand from a Cafeteria Plan / Flexible benefit plan An employee benefit plan that allows staff to choose from a variety of benefits to formulate a plan that best suits their needs. Cafeteria plan options may include health and accident insurance, cash benefits, tax advantages and/or retirement plan contributions
7. What do u understand from Sin tax A state-sponsored tax that is added to products or services that are seen as vices, such as alcohol, tobacco and gambling. These type of taxes are levied by governments to discourage individuals from partaking in such activities without making the use of the products illegal. These taxes also provide a source of government revenue
8. Define Crack spread The spread created in commodity markets by purchasing oil futures and offsetting the position by selling gasoline and heating oil futures. This investment alignment allows the investor to hedge against risk due to the offsetting nature of the securities.
9. Define transfer tax Any kind of tax that is levied on the transfer of official documents or other property. Transfer tax is paid by the seller of the property. Gift and estate taxes are both transfer taxes
10. Define surrender period The amount of time an investor must wait until he or she can withdraw funds from an annuity without facing a penalty. Withdrawing money before the agreed-upon holding period can result in a surrender charge.

Questions on Costing 11-20

1. What is conversion cost
Direct labour and overhead are called conversion cost

2. What is Prime Cost
Direct material and direct labour are referred to as prime cost

3. Define Variable cost
Variable costs are expenses that change in proportion to the activity of a business

4. Define Direct cost
Direct Costs, however, are costs that can easily be associated with a particular cost object

5. Are all variable cost classified as direct cost?
Not all variable costs are direct costs, however; for example, variable manufacturing overhead costs are variable costs that are not a direct costs, but indirect costs.

6. What is contribution margin
- Contribution margin is the marginal profit per unit sale.
- Contribution margin analysis is a measure of operating leverage: it measures how growth in sales translates to growth in profits.
- High contribution margins are prevalent in labour-intensive tertiary sector
- Low contribution margins are prevalent in capital-intensive industrial sector.

7. What is CVP analysis?
Cost-Volume-profit(CVP), in managerial economics is a form of cost accounting. It is a simplified model, useful for elementary instruction and for short-run decisions.

8. What are the assumptions used in CVP analysis
- The behaviour of both costs and revenues is linear throughout the relevant range of activity.
- Costs can be classified accurately as either fixed or variable.
- Changes in activity are the only factors that affect costs.
- All units produced are sold ie there is no finished goods inventory
- When a company sells more than one type of product, the sales mix (the ratio of each product to total sales) will remain constant.

9. What is break –even point.
In Cost accounting, the break-even point (BEP) is the point at which cost or expenses and revenue are equal: there is no net loss or gain.

Break even point (for output) = fixed cost / contribution per unit
Contribution (per unit) = selling price (per unit) - variable cost (per unit)
Break even point (for sales) = fixed cost / contribution (per unit) * selling price (per unit)

10.Define Margin of safety
Margin of safety represents the strength of the business. It enables a business to know what is the exact amount he/ she has gained or lost and whether they are over or below the break even point.

The actual sales minus break even sales gives the margin of safety.

Questions on pricing 1- 10

1. What is cost pricing?
The cost pricing is the theory that the price of an object is determined by the sum of the cost of the resources that went into making it. The cost can compose any of the factors of production including labor, capital, or land and taxation.

2. What is full cost pricing.
Full cost pricing is a practice where the price of a product is calculated by a firm on the basis of its direct costs per unit of output plus a markup to cover overhead costs and profits. The overhead costs are generally calculated assuming less than full capacity operation of a plant in order to allow for fluctuating levels of production and costs.

3. What is the guiding principle for full cost pricing?
The guiding principle underlying the Full Cost Pricing Policy is that a government business should not enjoy any net competitive advantage (or disadvantage) in respect of its private sector counterparts simply because of its public sector ownership. That is, the policy aims to achieve competitive neutrality between public and private sector businesses

4. What’s the difference between costing and pricing
Costing involves determining the value of resources consumed in the production of goods or the provision of a service. Costing's role in pricing is to act as a benchmark against which pricing and production decisions can be made. Pricing refers to the process of determining a figure at which products or services will be exchanged in the marketplace. The focus on pricing is on the income received from the exchange of the good or service.

5. What is market based pricing?
A pricing model wherin the concern is how to price , so that it can affect the company’s position in the marketplace. Value is included in this notion of price, and the underlying marketing theme is to set prices at ‘what the market will bear’. The assumption behind market-based pricing techniques is that prices are a major factor in achieving competitiveness.

6. What are the various methods of market based pricing?

- Penetration pricing
- Skimming
- Perceived value pricing
- Psychological pricing

7. Define Penetration pricing
Penetration pricing involves setting prices at a sufficiently low level to make them attractive to the mass market. The aim is to achieve high initial sales, which are maintained during the life cycle of the product. An associated aim is to deter competitors. Penetration pricing is particularly appropriate for products where unit cost reductions can be achieved through initial mass production. Setting-up costs are usually high and initial development costs are recovered over a long period. The task of marketing is to ensure that customers retain interest during the life of the product.

8. Define Skimming
A skimming approach adopts a high-price strategy, charging what the market will bear. The aim is to ’skim the cream off the market’. This policy is particularly attractive to a company with a new and unique product. When the cream has been skimmed, prices can be progressively reduced.

9. Define Perceived value pricing
Perceived value pricing determines prices from assumptions made about the beliefs that consumers have of the value of the product to them. These assumptions may be founded on market research aimed at establishing in buyers’ minds values about the basic product and the various special features in the product that appeal to them. If the company charges more than the buyer-recognized value, sales will suffer. Revenue may also fall below attainable levels if prices are lower than the perceived value.

10.Define Psychological pricing
Many consumers use price as an indicator of quality. Prestige pricing uses higher prices to promote the idea of value and status. Price levels can be set just below a round figure, for example Rs 9.99 rather than Rs 10.00. These pricing points, as they are called, persuade people to think that the price is in a lower range than they expected. Value for money can be emphasized by the effective presentation of discounts and free offers. The perceived value of offering one item free if four items are purchased may have a greater impact than a 20 per cent discount offered over the whole five purchases.

Questions on Costing 1- 1o

1. Define Product Costs.
Product cost includes all costs that are required to make a product. Product costs are Direct Material, Direct Labor, Manufacturing Overhead costs. Its included as part of inventory and shown on the balance sheet until the product is sold. Product costs are often called “inventoriable costs” or “manufacturing costs”.

2. Define Period Costs.
Period cost includes Selling and Administrative costs. These costs are reported on the income statement as they are incurred. Not part of manufacturing overhead, not related to making the product.

3. Give few examples of period cost
Any cost at corporate headquaters, anything related to selling the product, shipping costs, administrative salaries, executive salaries, administrative office expenses, sales commissions, advertising, research and development, etc. Warehouse costs and people who move inventory are period costs

4. Define Selling Costs
All cost associated with marketing the finished products and getting the product to the customer

5. Define Administrative Costs
Costs incurred for the general administration of the organization

6. Define Direct Materials
Raw materials that become a part of the finished product

7. Explain Manufacturing Overhead
All costs of manufacturing the product except direct materials and direct labor. Costs associated with operating the factory that makes the product. If the cost has the word “factory”, “plant”, “manufacturing”, as a descriptive word, the cost will be part of manufacturing overhead.

8. Give few examples of manufacturing overhead costs
Utilities at the plant such as electricity, water, phone. Support personnel at the plant such as an accountant, human resources or computer support. Training, maintenance and repairs, rent, insurance, taxes, etc.

Hint – it has to happen at the manufacturing facility.
Indirect labor and indirect material are part of manufacturing overhead.

9. Define Indirect labor
Labor involved in making the product at the plant but do not touch the product to make it. example: salaries of the plant managers, supervisors, and quality inspectors

10. Define Indirect Materials
Low cost materials that end up in the product or are used to make the product. Examples are glue, tape, screw, marking pens, etc. It is not easy to track exactly how much is used to make one product.If the cost of a particular material cannot be easily traced to one product, it is an indirect material and is part of manufacturing overhead. Examples of indirect materials are cheap screws, tape, glue.

Questions on Finance 21-30

1. What Does Foreign Bond Mean?
A bond that is issued in a domestic market by a foreign entity, in the domestic market's currency. Foreign bonds are regulated by the domestic market authorities .Since investors in foreign bonds are usually the residents of the domestic country, investors find them attractive because they can add foreign content to their portfolios without the added exchange rate exposure. Types of foreign bonds include Bulldog bonds, matilda bonds, and samurai bonds

2. Define Angel bonds
Investment-grade bonds that pay a lower interest rate because of the issuing company's high credit rating. Angel bonds are the opposite of fallen angels, which are bonds that have been given a "junk" rating, and are therefore much more risky.

3.Define Sovereign bond
A debt security issued by a national government within a given country and denominated in a foreign currency. The foreign currency used will most likely be a hard currency, and may represent significantly more risk to the bondholder.

4.Define Yankee Bond
A bond denominated in U.S. dollars that is publicly issued in the U.S. by foreign banks and corporations. According to the Securities Act of 1933, these bonds must first be registered with the Securities and Exchange Commission (SEC) before they can be sold.

5. Define Bunny Bond
A type of bond that offers investors the option to reinvest coupon payments into additional bonds with the same coupon and maturity. Also known as "multiplier bond" or "guaranteed coupon reinvestment bond."

6. Define Dragon bond
A bond that is issued in Asia but denominated in U.S. dollars. The bond is denominated in U.S. dollars because the currency is more stable and might entice foreign investors.

7. What Does Bulldog Bond Mean?
A sterling denominated bond that is issued in London by a company that is not British. These sterling bonds are referred to as bulldog bonds as the bulldog is a national symbol of England.

8.What Does Samurai Bond Mean?
A yen-denominated bond issued in Tokyo by a non-Japanese company and subject to Japanese regulations. Other types of yen-denominated bonds are Euro-yens issued in countries other than Japan.

9.What Does Kangaroo Bond Mean / Matilda Bond
A type of foreign bond that is issued in the Australian market by non-Australian firms and is denominated in Australian currency. The bond is subject to Australian laws and regulations. Also known as a "matilda bond."

10.What Does Shogun Bond Mean?
A type of foreign-currency denominated bond that is issued in Japan by foreign entities. Organizations such as the World Bank have issued such debt instruments in the past . Also known as a "geisha bond".

Tuesday, April 20, 2010

Questions on Marketing 1-10

1. What is the difference between Sales and Marketing

The major difference between sales and marketing is that the sales is refer to the conservation of assets by advertising products while marketing is a mechanism through which these sales mechanism are introduce to the general market and the way through which the product is introduce in the market to increase sales. Therefore marketing can be considered as an integral part of sales as it directly influence the amount of sales a company process and makes.

Sales and marketing are interrelated to each other. Both terms are associated with the products which are promoted and sold at different business and commerce associations.

2. What is FMCG?..what are the driving forces of this sector

FMCg stands for Fast moving goods. The main players include P&G(Procter and Gamble),Cadbury, Nestle, Johnson and Johnson etc

3. What is promotion?

It’s a means by which the organization or set of organizations (go-betweens) is involved in the process of making a product or service available for use or consumption by a consumer or business user. It’s a major component of the Marketing Mix.

4. What are the 4-Ps of Marketing

- Product
- Price
- Promotion
- Place

5. Compare market share Vs Wallet Share

Market share refers to the percentage of your presence with respect to the entire market.

Wallet share refers to the percentage this entity is bringing in to your pocket with respect to the entire portfolio of entities in your kitty. A High market share doesn’t mean a huge wallet share and vice versa.

Eg: My business has Product A and B, A has a market share of 15% in India, where as B has a share of 8%.But B” being a highly prices, premium product, my profit margin is huge from ‘B” and hence my wallet share is mostly coming from “B”.

6. What is Skimming.

Price skimming is a pricing strategy in which a marketer sets a relatively high price for a product or service at first, then lowers the price over time.EG. Apple iPhone, Playstation3 etc

7. What is PUSH and PULL STRATEGY?

In a "pull" system the consumer requests the product and "pulls" it through the delivery channel. In push system the seller/shopkeepers push their products to the customers with help of offers and other promotions

8. What are the deciding factors of pricing.

The floor price is determined by production factors like costs , economies of scale, marginal cost, and degree of operating leverage.

The price ceiling is determined by demand factors like price elasticity and price points

9. Explain the understanding of an individual Brand

Examples, Unilever's Dove, P&Gs Pampers etc. The individual brands are presented to consumers, and the parent company name is given little or no prominence. Other stakeholders, like shareholders or partners, will know the producer by its company name.

10. What is IMC?

IMC stand for integrated marketing communications. A management concept that is designed to make all aspects of marketing communication such as advertising, sales promotion, public relations, and direct marketing work together as a unified force, rather than permitting each to work in isolation

Questions on Operations 1-10

1. Define supply chain
It’s the thread from suppliers supplier to the customers customer. Supply chain management (SCM) is the oversight of materials, information, and finances as they move in a process from supplier to manufacturer to wholesaler to retailer to consumer. Supply chain management involves coordinating and integrating these flows both within and among companies. It is said that the ultimate goal of any effective supply chain management system is to reduce inventory

2. What is Bull Whip effect
This is caused because of forecasting errors or unpredictability. The deviation from the actual goes on increasing like a Bull whip towards the end of the chain, and there would be large stocks of supply demand GAP and inconsistency.

3. What is the practical error percentage acceptable in forecasting the demand?
Practically acceptable range is 15%

4. What are the various methods used for forecasting.
- Mean average forecasting method, Averaging for a period of 3 months, averaging on monthly basis, averaging on yearly basis etc
- Extrapolation from history
- Delphi Method

5. Who are the alpha consumers.
Alpha Consumer is someone that plays a key role in connecting with the concept behind a product, then adopting that product, and finally validating it for the rest of society. These are the customers who boast for being the first few privileged to know the products. Their feedback defines the success of the product to large extent.

6. What do you understand by the term Delphi technique, where is it used.
The Delphi method is a systematic, interactive forecasting method which relies on a panel of experts. The experts answer questionnaires in two or more rounds. After each round, a facilitator provides an anonymous summary of the experts’ forecasts from the previous round as well as the reasons they provided for their judgments. Thus, experts are encouraged to revise their earlier answers in light of the replies of other members of their panel. It is believed that during this process the range of the answers will decrease and the group will converge towards the "correct" answer. Finally, the process is stopped after a pre-defined stop criterion (e.g. number of rounds, achievement of consensus, and stability of results) and the mean or median scores of the final rounds determine the results.

7. What is ABC Analysis?
ABC analysis is a business term used to define an inventory categorization technique often used in materials management. It is also known as Selective Inventory Control.

ABC analysis provides a mechanism for identifying items which will have a significant impact on overall inventory cost whilst also providing a mechanism for identifying different categories of stock that will require different management and controls

8. What does ABC codes stands for.
ABC Analysis, "A class" group account for a large proportion of the overall value but a small percentage of the overall volume of inventory.

-"A class" inventory will typically contain items that account for 80% of total value, or 20% of total items.
-"B class" inventory will have around 15% of total value, or 30% of total items.
- C class" inventory will account for the remaining 5%, or 50% of total items

9. What is 80-20 rule?
The rule states that as a thumb rule roughly 80% of the effects come from 20% of the causes.

10. What’s the principle underlying 80-20 rule

The Pareto principle is also known as the 80-20 rule, the law of the vital few, and the principle of factor sparsity) states that, for many events, roughly 80% of the effects come from 20% of the causes.

Tuesday, April 13, 2010

Questions on Branding 1-10

1. How do you define a BRAND!

A brand is a name, sign, symbol, slogan or anything that is used to identify and distinguish a specific product, service, or business. Each and every person is a brand by itself.

2. What is Brand Parity

Brand parity is the perception of the customers that all brands are equivalent

3. Define co-branding

Co-branding, also called brand partnership, is when two companies form an alliance to work together, creating marketing synergy

4. Define Derived branding

When a supplier of a key component, when being used by a number of suppliers of the end-product, may wish to guarantee its own position by promoting that component as a brand in its own right. Example is Intel, which secures its position in the PC market with the slogan "Intel Inside".

5. Define Brand equity

Brand equity is an intangible asset made out of the BRAND.

- It can be leased or sold
- It increases the cash flow by increasing market share , reducing promotional costs etc
- It allows premium pricing

Brand equity can be measured by – determining the premium a brand commands over a generic product. This can be used for brand extensions and sub-branding where in its leveraging on the already existing brand name. Strong brand equity means a good Brand loyal customer base.

6. Define Brand Architecture.

Brand architecture is the structure of brands within an organizational entity. It is the way in which the brands within a company’s portfolio are related to, and differentiated from, one another.

7. What are the levels of brand architecture

There are three key levels of branding:

· Corporate brand/ umbrella brand/ family brand
· Endorsed brands, and sub-brands
· Individual product brand

8. Explain the understanding of Corporate brand

Examples include TATA, Virgin Group etc.
These are consumer-facing brands used across all the firm's activities, and this name is how they are known to all their stakeholders – consumers, employees, shareholders, partners, suppliers and other parties. These brands may also be used in conjunction with product descriptions or sub-brands: for example TaTa Steel,Tata Nano

9. Explain the understanding of Sub-brand

Examples include Nestle KitKat, Cadbury Dairy Milk etc. These brands include a parent brand - which may be a corporate brand, an umbrella brand, or a family brand - as an endorsement to a sub-brand or an individual product brand. The endorsement should add credibility to the endorsed sub-brand in the eyes of consumers.

10. What is “no- Brand” branding

· A number of companies have successfully pursued "No-Brand" strategies by creating packaging that imitates generic brand simplicity. Examples include the Japanese company Muji, which means "No label" in, and the Florida company No-Ad Sunscreen.

· This no-brand strategy means that little is spent on advertisement or classical marketing and Muji's success is attributed to the word-of-mouth, a simple shopping experience and the anti-brand movement.

· No brand" branding may be construed as a type of branding as the product is made conspicuous through the absence of a brand name.

Saturday, April 10, 2010

Questions on finance 11-20

11. How is NBFC different from a Bank

Non banking

12. Compare Cash Flow Vs Fund Flow

Cash flow is a

13. Define project financing

Its financing

npv vs irr

14. What is Disinvestment


15. How do we Structure a disinvestment


16. What the difference between recession and great depression

rate of defaltion

17. What do you understand from the term portfolio management

folio mgmt

18. Define Markowitz portfolio theory


19. What is the difference between bills discounted and bills purchased


20. What do you understand from the term Due Diligence


Thursday, April 8, 2010

Questions on finance 1-10

1. Define Beta coefficient

The beta coefficient is a key parameter in the capital asset pricing model (CAPM).

Beta can be estimated for individual companies using regression analysis against a stock market index.

2. What is LBO

The acquisition of another company using a significant amount of borrowed money (bonds or loans) to meet the cost of acquisition. Often, the assets of the company being acquired are used as collateral for the loans in addition to the assets of the acquiring company. The purpose of leveraged buyouts is to allow companies to make large acquisitions without having to commit a lot of capital.

3. Define Stagflation

Stagflation occurs when a country's inflation rate is high and unemployment rate is high. It is an economic condition in which inflation and economic stagnation are occurring simultaneously and have remained unchecked for a significant period of time

4. What is a Subprime Loan

A subprime loan is made to customers who typically have low credit scores and histories of payment defaults or bankruptcies. Subprime offers the opportunity for borrowers with less than ideal credit standing to gain access to funds. Borrowers use this credit to purchase homes, or finance other forms of spending such as purchasing a car, paying for living expenses, housing loan, or even paying down a high interest credit card.

5. Define EVA

Enterprise value (EV), Total enterprise value (TEV), or Firm value (FV) is an economic measure reflecting the market value of the whole business. It is a sum of claims of all the security-holders: debtholders, preferred shareholders, minority shareholders, common equity holders, and others. Enterprise value is one of the fundamental metrics used in business valuation, financial modeling, accounting, portfolio analysis, etc

6. What do you understand by class action suit

A lawsuit brought by one party on behalf of a group of individuals all having the same grievance.

7. Compare BSE Vs NSE



Bombay Stock Exchange

National Stock exchange

SENSEX - Index


30 companies

50 companies

Trading volume - 17-18k

Trading range - 5-6 K
Derivative volume is high

Financial year -May to April

Financial year - January to December

Less credit worth-many scams

More reliable

8. What do you understand by open interest

Open interest means all open positions of an underlining asset in a derivative.

9. What is reverse Mortgage?

A reverse mortgage (or lifetime mortgage) is a loan available to seniors, and is used to release the home equity in the property as one lump sum or multiple payments. The homeowner's obligation to repay the loan is deferred until the owner dies, the home is sold, or the owner leaves (e.g., into aged care).

10. What’s the difference between RTGS and NEFT