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  • Kalpesh Agrawal

CB1 Topics

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Do you want to go through the CB1 Concepts?


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✔ Meaning and the importance of Capital Budgeting.

✔ Financial Analysis

✔ Contractual Theory

✔ The theory of maximization of shareholder wealth

✔ Agency theory

✔ Information Asymmetries

✔ The UK Corporate Governance code

✔ Double Taxation Relief (DTR)

✔ What is the meaning of "Crystellising"

✔ Important Accounting Concepts:

  • the cost concept

  • the money measurement concept

  • the business entity concept

  • the realization concept

  • the accruals concept

  • the matching concept

  • the dual aspect concept

  • the materiality concept

  • prudence

  • the going concern concept

  • consistency

✔ The Opportunity Cost

✔ Corporate Governance

✔ The main principles of the UK Corporate Governance Code

  • Leadership

  • Effectiveness

  • Accountability

  • Remuneration

  • Relations with Shareholders

Different types of Business Entities

  • The Sole Trader

  • The Partnership

  • The Limited Company

  • The Limited Liability Partnership

What is Capital Gain Tax?

Different types of Preference Shares

  • Cumulative/ Non-cumulative

  • Redeemable/ Irredeemable

  • Convertible/ Non-convertible

  • Stepped / Variable dividend

Methods of obtaining a quotation

  • Offer for sale (Fixed Price/ Tender/ Subscription)

  • Placing

  • Introduction

Meaning & Purpose of Rights issues & Scrip (bonus) issues

Different types of raising medium-term finance

  • Hire purchase

  • Credit sale

  • Leasing

  • Bank loans

Different types of raising short-term finance

  • Bank overdrafts

  • Trade credit

  • Bills of exchange

  • Commercial Paper

  • Factoring (Recourse and Non-recourse factoring)

Meaning of Maturity Transformation (Converting Short-term liabilities to Long- term assets/ Source of income)

Meaning of Futures and Options

✔ Categories of futures:

  • Bond futures

  • Interest Rate futures

  • Currency futures

  • Stock index futures

Meaning of Default risk and Market risk

✔ Accounting Ratios

  • Interest Cover: In a layman's term, Interest cover measures the number of times that the company covers its interest payment on Loan Stocks with its current income. As an example, If the company has an operating profit (Profit before Interest and Taxation) of $10,000 and the total interest payable on its Loan Capital is $2,000, then the Interest ratio is as given below:

  • Asset Cover: In the calculation of Asset Cover, we use a very conservative approach. As given in the following Definition Current Liabilities and Intangible assets are deducted from Total Assets, because if the company is unable to pay the remaining payment to the suppliers, they should stop giving more credit to the company, and might have a low current liability at the time of wound up. Also, Intangible assets are valued at zero (Worthless) at the time of winding up.

  • Gearing (Leverage): Gearing refers to a Company's Debt/Equity (D/E) ratio. The high gearing means that the company is highly financed by debt finance. Different types of Gearing: Asset Gearing (Capital Gearing) & Shareholders' equity ratio:

Income Gearing:

  • Earning Per Share: This is a simple, but important accounting concept. EPS ratio is the profit earned on each ordinary share.

  • Price Earning (P/E) ratio: The higher P/E ratio indicates that the company's earnings will grow rapidly in the future or the investors have a low risk in the investment in the company.

Written by: Kalpesh Agrawal (Jr. Actuarial Officer - IIB)




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