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Chapter: Business Science - Banking Financial Services Management - Mergers, Diversification and Performance Evaluation

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Important Short Questions and Answers: Mergers, Diversification and Performance Evaluation

Business Science - Banking Financial Services Management - Mergers, Diversification and Performance Evaluation -

MERGERS,DIVERSIFICATION AND PERFORMANCE EVALUATION

 

1.Define merger

It is a voluntary amalgamation of two banks on roughly equal terms into one new legal entity.

 

2.Write about diversification.

Spreading a banks assets(loans)over a wider assortment of quality borrowers,to maintain or improve earning levels while maintaining of same level of exposure

 

3.What is volatility

Volatility is limited by the fact that not all asset classes or industries or individual companies move up and down in value at the same time or at the same rate.

 

4.List out the Benefits of diversification

        Lower cost of capital

        Economic gain

        Increases managerial efficiency

        Increase in market power

        Reduce earnings volatility

 

5.write a note on Securities market/capital market

 According to khan it is fixed  a market for a long term funds.it focus is on financing of  investments in contrast to money market which is the institutional source of working capital finance.

 

6.list out the regulators of securities market

        Department of economic affair(DEA)

        Department of company affair(DCA)

        RBI

        SEBI

 

7. Write about Day order

Order to buy or sell at a specific price or better,the order expires at the end of the day unless executed.

 

8.What is Good till cancelled (gtc)

This orders are must be confirmed semi annually,the dates on which the confirmation periods end shall be prescribed by the exchange.

 

9. Write a note on Not held order

This type of order gives discretion to the floor brokers as to time and price.the floor broker uses his best judgement concerning the proper time to bid for stock(buy) or offer stock(sell)during the auction process.

 

10,Describe the term Participate but do not initiate(PNI)

The customer usually gives this type of order to the broker when she has a large order to buy or sell.

 

11.What is Primary market/new issue market

The primary market represents the new issue market where new securities.Both new companies &existing ones can raise capital on the new issue market.

 

12.Write a note on Secondary market/ Stock exchange

It is one important constitute of capital market.stock exchange is an organized market for purchase &sale of industrial &financial security.

 

13 What do you meant by underwriting?

Underwriting is an agreement entered into before the shares are brought before the public that in the events of the public not taking up the whole of them the underwriter will take an allotment of such part of the shares as the public has not applied for .

 

14. List out the Types of risks under underwriting

        Preferred Risks

        Standard Lives

        Sub-standard Lives

        Declined Lives

 

15.Define mutual fund.

A Mutual Fund is a trust that pools the savings of a number of investors who share a common financial goal.The money thus collected is then invested in capital market instruments such as shares, debentures and other securities.

 

16.Draw a diagram on Mutual fund flow chart


 


 

17.Write about Open&closed ended Schemes

        Open ended Schemes are schemes which offers unit for sale without specifying any duration for redemption. They sell and repurchase schemes on a continuous basis.

        Closed ended schemes are the schemes in which redemption period is specified.Once the units are sold by mutual funds, then any transaction takes place in secondary market only i.e stock exchange.Price is determined by forces of market.

 

18. What is Money market Funds?

• Money market / liquid funds invest in short-term (maturing within one year) interest bearing debt instruments. These securities are highly liquid and provide safety of investment, thus making money market / liquid funds the safest investment option when compared with other mutual fund types.

 

19.Write about ISS

• Industry Specific Schemes invest only in the industries specified in the offer document. The investment of these funds is limited to specific industries like Infotech, FMCG, Pharmaceuticals etc

 

20.What is sectorial funds?

Sectoral funds are those mutual funds which invest in a particular sector of the market, e.g. banking, information technology etc.

 

21.Write a note on insurance.

The undertaking by one person to another person against loss or liability for loss in respect of a certain risk or peril to which the object of the insurance may be exposed, or to pay a sum of money or other thing of value upon the happening of a certain event and includes life insurance”.

 

29.How to calculate CAR?

CAR=  tier one capital + tier two capital / risk weighted assets

 

30.Write a note on Stress testing

Marketing value of a portfolio varies due to movement of market parameters such as interests rates ,market liquidity, inflation , exchange rate , stock prices , etc…….,

 

31.List out the Techniques of stress testing

        Simple sensitivity test:- short term impact of portfolio value.

        scenario analysis:- Risk factors simultaneously.

        Maximum loss:-identifying the most potentially damaging combination of moves of market risk factors

 

32.write a note on bancassurance?

It meaning selling the insurance products through banks.banks and insurance come up in a partnership wherein the bank sells the tied insurance company‟s insurance products to its clients.

 

 

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