CB1 Topics
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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)