The money market mutual fund segment has a total corpus of $ 7.58 trillion in the U.S. against a corpus of $34.3 billion in India.
• Out of the top 10 mutual funds worldwide, eight are bank- sponsored. Only Fidelity and Capital are non-bank mutual funds in this group.
• In the U.S. the total number of schemes (over 8000) is higher than that of the listed companies while in India we have just 592 schemes.
• Internationally, mutual funds are allowed to go short. In India fund managers do not have such leeway.
• In the U.S. about 9.7 million households will manage their assets on-line by the year 2003, such a facility is not yet of avail in India.
• On- line trading is a great idea to reduce management expenses from the current 2 % of total assets to about 0.75 % of the total assets.
Internationally, on- line investing continues its meteoric rise. Many have debated about the success of e- commerce and its breakthroughs, but it is true that this aspect of technology could and will change the way financial sectors function. However, mutual funds cannot be left far behind. They have realized the potential of the Internet and are equipping themselves to perform better. In fact in advanced countries like the U.S.A, mutual funds buy- sell transactions have already begun on the Net, while in India the Net is used as a source of Information.
Such changes could facilitate easy access, lower intermediation costs and better services for all. A research agency that specializes in internet technology estimates that over the next four years Mutual Fund Assets traded on- line will grow ten folds from $ 128 billion to $ 1,227 billion; whereas equity assets traded on-line will increase during the period from $ 246 billion to $ 1,561 billion. This will increase the share of mutual funds from 34% to 40% during the period.
Such increases in volumes are expected to bring about large changes in the way Mutual Funds conduct their business.
Here are some of the basic changes that have taken place since the advent of the Net.
• Lower Costs: Distribution cost of funds will fall in the online trading regime by 2003. Mutual funds could bring down their administrative costs to 0.75% if trading is done on- line. As per SEBI regulations, bond funds can charge a maximum of 2.25% and equity funds can charge 2.5% as administrative fees. Therefore if the administrative costs are low, the benefits are passed down and hence Mutual Funds are able to attract mire investors and increase their asset base.
• Better advice: Mutual funds could provide better advice to their investors through the Net rather than through the traditional investment routes where there is an additional channel to deal with the Brokers. Direct dealing with the fund could help the investor with their financial planning.
• In India, brokers could get more Net savvy than investors and could help the investors with the knowledge through get from the Net.
• New investors would prefer online: Mutual funds can target investors who are young individuals and who are Net savvy, since servicing them would be easier on the Net.
India has around 1.6 million net users who are prime target for these funds and this could just be the beginning. The Internet users are going to increase dramatically and mutual funds are going to be the best beneficiary. would be mobilized .
RECENT TRENDS IN MUTUAL FUND INDUSTRY
The most important trend in the mutual fund industry is the aggressive expansion of the private owned mutual fund companies and the decline of the companies floated by nationalized banks and smaller private sector players.
Many nationalized banks got into the mutual fund business in the early nineties and got off to a good start due to the stock market boom prevailing then. These banks did not really understand the mutual fund business and they just viewed it as another kind of banking activity. Few hired specialized staff and generally chose to transfer staff from the parent organizations. The performance of most of the schemes floated by these funds was not good. Some schemes had offered guaranteed returns and their parent organizations had to bail out these AMCs by paying large amounts of money as the difference between the guaranteed and actual returns. The service levels were also very bad. Most of these AMCs have not been able to retain staff, float new schemes etc. and it is doubtful whether, barring a few exceptions, they have serious plans of continuing the activity in a major way.
The experience of some of the AMCs floated by private sector Indian companies was also very similar. They quickly realized that the AMC business is a business, which makes money in the long term and requires deep-pocketed support in the intermediate years. Some have sold out to foreign owned companies, some have merged with others and there is general restructuring going on.
The foreign owned companies have deep pockets and have come in here with the expectation of a long haul. They can be credited with introducing many new practices such as new product innovation, sharp improvement in service standards and disclosure, usage of technology, broker education and support etc. In fact, they have forced the industry to upgrade itself and service levels of organizations like UTI have improved dramatically in the last few years in response to the competition provided by these.
RECENT DEVELOPMENTS
Systematic Investment Plan
Systematic Investment Plan is available for planned and regular investments. Under this plan unit holders can benefit by investing specified rupee amounts periodically or a continuous period. This concept is called Rupee Cost Averaging (RCA). This program allows Unit holders to save a fixed amount of rupees every month / quarter by purchasing additional units of the Scheme (S). Rupee cost averaging does not guarantee a profit or project against a loss. Rupee cost averaging can smooth out the market’s ups and downs and reduce the risk of investing in volatile markets.
For as little as Rs/ ‘50’ each month for 12 months or Rs. 500 every month for 6 months, one can purchase mutual fund units and avoid larger minimum investment amount of over Rs. 1000 fixed amounts can be invested in /mutual Funds each month using funds drawn automatically from you savings account regularly.
Under these plan investors invests a specific amount for a continuous period, at regular intervals. By doing this, the investor gets the advantage of rupee cost averaging, which means that by investing the same amount at regular intervals, the average cost per unit remains lower than the average market price, irrespective of how the market is rising, falling or fluctuating i.e. with every fluctuation in the market the units are purchased systematically, thus resulting in averaging the purchase price. Whereas this is not true for a one-time investment. This is the reason why a SIP investor gets phenomenal rate of return compared to a one – time investor.
Features of a Systematic investment plan
1. Entry at various market levels (averaging the risk)
2. Disciplined habit of investing
3. Hassle – free mechanism (one time arrangement).
4. The benefit of compounding.
5. Saving and wealth accumulation.
How to start an SIP?
1. Start with an initial investment
2. Invest a fixed sum every month.
3. Minimum investment – Rs. 1000 per month.
4. Post – dated cheques/standing instructions to the bank
5. Investment happens on the preset date in the specified scheme every month.
Advantages of Systematic investment plan
• An SIP reduces these risks by spreading the investments over a longer period o time, at various levels of the market.
• An SIP reduces the average cost of investment in fluctuating markets.
• SIP gives the advantage by allowing one to buy fewer units when the market is up and more units when the market moves down, thus an investor buys at an average price.
• Tax free returns after on year of investments.
Systematic Transfer Plan
Advantages
• Saving and wealth accumulation
• Entry at various market levels (averages out the possible risk associated with the equity market)
• Hassle free mechanism (one time arrangement – instructions are given at the time of initial transaction)
• Power of Compounding
• Lump sum amount not sitting idle (you are getting better – than bank return on the initial amount)
Investing in Systematic Investment Plan (SIP) offer the benefit “Rupee – Cost averaging” i.e. by purchasing Mutual Fund units over a period of time, you automatically buy more units when prices are low and fewer units when prices are high, resulting in lower “per unit acquiring cost” as a result of averaging.
Systematic Withdrawal Plan
Systematic Withdrawal Plan (SWP) lets you automatically redeem a prearranged amount of mutual fund holdings each month. SWPs are an ideal way to supplement your monthly cash flow, meet minimum withdrawal requirements or move assets between the funds.
SWP is a no-charge service, when you set up your SWP, cash proceeds from each redemption) minimum balance maintained @ 25% of the holding at any given point of tie) are given to you in the form of post – dated cheques (six monthly cheques at par, which enables you to get the funds lodged)
Equity Linked Saving Schemes (ELSS)
Taxpayers have now been allowed a consolidated limit of Rs. 1 lakh for savings as deduction from the income before tax. This Rs. 1 lakh will include the provisions of pension U/S 80 CCC, the tax mutual funds (ELSS), Government Bonds, Pension funds, provident funds and insurance policies etc. without any specified demarcation. The important point here is the inclusion of the words ‘tax mutual funds’, which are also known as “Equity Linked Savings Schemes (ELSS)”.
Equity Linked Savings Schemes (ELSS) is an ideal way to save on tax as well as staying invested in equity mutual funds. ELSS schemes have been introduced in India to promote investments in equity markets by giving tax concessions to the investors. ELSS is basically equity diversified scheme and has a lock in period of three-years. ELSS invests more than 80 percent of their money in equity and related instrument.
As the stock market is volatile at high levels the need today is to adopt long-term investment approach. If we invest money for long term, it will give more returns. That’s what ELSS does as it has lock in period of three years.
Why should one invest in ELSS?
• A perfect investment option to fight against rising inflation.
• Now one can save up to Rs. 1 lakh in ELSS.
• Save tax as well as get high returns.
• As ELSS invests money for 3 years.
Fixed Monthly Plans
Like fixed deposits in Bank, Fixed Maturity Plans of one month, three months, one year, three years and five years duration’s are also launched by Mutual Funds. They provide an easy route to invest in different types of bonds – government securities, corporate bonds and money market instruments through mutual funds. Since saving in a fixed maturity plans is allowed only during initial public offering (IPO) period and the saving are returned on the maturity date, these schemes are also called ‘closed ended schemes’. In contrast throughout the existence of the schemes options available for withdrawal before the maturity date vary from schemes to scheme. These are specified in the offer document of the scheme. Usually short term fixed maturity plans (dividend plan) are preferred for less than one year and thirteen months fixed maturity plans are better alternative for one year bank deposits. Another way to perk up regular income is to invest a portion of investment in equity based dividend yield schemes, which invest in high dividend paying stock and are less risky. The dividend paid is tax – free.
Thursday, February 5, 2009
INDIAN STOCK MARKETS
INDIAN STOCK MARKETS
The Bombay stock exchanges (BSE) and the National Stock Exchange of India Ltd (NSE) are the two primary exchange in India. In addition, there are 28 Regional Stock Exchanges However, the BSE and NSE have established themselves as the two leading exchanges and account for about 80% of the equity volume traded in India.
The average daily turnover at the exchanges has increased from Rs. 851 crore in 1997-98 to Rs. 1,284 crore in 1998-99 and further to Re. 2273 crore in 1999-2000 (April- August 1999). NSE has around 1500 shares listed with a total market capitalization of around Rs. 921500 crore (Rs. 9215 Bln). The BSE has over 6000 stocks listed and has a market capitalization of around Rs. 968000 crore (9680 Bln). Most key stocks are traded on both the exchanges and hence the investor could buy them on either exchange. Both exchanges have a different settlement cycle, which allows investors to shift their positions on the bourse. The primary index of BSE is BSE Sensex comprising 30 stocks. NSE has the S&P NSE 50 index (Nifty) which consists of fifty stocks.
The BSE Sensex is the older and more widely followed index. Both these indices are calculated on the basis of market capitalization and contain the heavily traded shares from key sectors. The markets are closed on Saturdays and Sundays. Both the exchanges have switched over from the open outcry trading system to a fully automated computerized mode of trading known as BOLT (BSE On Line Trading) and NEAT (National Exchange Automated Trading) System. It facilitates more efficient processing, automatic order matching, faster execution of trades and transparency.
The Scripts traded on the BSE have been classified into ‘A’, ‘B1’, ‘B2’, ‘C’, ‘F’ and ‘Z’ groups. The ‘A’ group shares represent those, which are in the carry forward system (Badla). The ‘F’ group represents the debt market (fixed income securities) segment. The ‘Z’ group scripts are the blacklisted companies. The ‘C’ group covers the odd lot secutities in ‘A’, ‘B1’& ‘B2’ groups and Rights renunciations. The key regulator governing Stock Exchanges, Brokers, Depositories, Depository participants, Mutual Funds, FIIs and other participants in Indian secondary and primary market is the Securities and Exchange Board of India (SEBI) Ltd.
About NSE
The National Stock Exchange of India Limited has genesis in the report of the High Powered Study Group on Establishment of New Stock Exchanges, which recommended promotion of a National Stock Exchange by financial institutions (FIs) to provide access to investors from all across the country on an equal footing. Based on the recommendations, NSE was promoted by leading Financial Institutions at the behest of the Government of India and was incorporated in November 1992 as a tax-paying company unlike other stock exchanges in the country.
On its recognition as a stock exchange under the Securities Contracts (Regulation) Act, 1956 in April 1993, NSE commenced operations in the Wholesale Debt Market (WDM) segment in June 1994. The Capital Market (Equities) segment commenced operations in November 1994 and operations in Derivatives segment commenced in June 2000
NSCCL
IISL
NSE.IT
NSDL
DotEx Intl. Ltd.
ABOUT BSE
The Stock Exchange, Mumbai, popularly known as "BSE" was established in 1875 as "The Native Share and Stock Brokers Association". It is the oldest one in Asia, even older than the Tokyo Stock Exchange, which was established in 1878. It is a voluntary non-profit making Association of Persons (AOP) and is currently engaged in the process of converting itself into demutualised and corporate entity. It has evolved over the years into its present status as the premier Stock Exchange in the country. It is the first Stock Exchange in the Country to have obtained permanent recognition in 1956 from the Govt. of India under the Securities Contracts (Regulation) Act, 1956.
The Exchange, while providing an efficient and transparent market for trading in securities, debt and derivatives upholds the interests of the investors and ensures redressal of their grievances whether against the companies or its own member-brokers. It also strives to educate and enlighten the investors by conducting investor education programs and making available to them necessary informative inputs.
A Governing Board having 20 directors is the apex body, which decides the policies and regulates the affairs of the Exchange. The Governing Board consists of 9 elected directors, who are from the broking community (one third of them retire ever year by rotation), three SEBI nominees, six public representatives and an Executive Director & Chief Executive Officer and a Chief Operating Officer.
The Executive Director as the Chief Executive Officer is responsible for the day-to-day administration of the Exchange and he is assisted by the Chief Operating Officer and other Heads of Departments.
The Exchange has inserted new Rule No.126 A in its Rules, Bye-laws & Regulations pertaining to constitution of the Executive Committee of the Exchange. Accordingly, an Executive Committee, consisting of three elected directors, three SEBI nominees or public representatives, Executive Director & CEO and Chief Operating Officer has been constituted. The Committee considers judicial & quasi matters in which the Governing Board has powers as an Appellate Authority, matters regarding annulment of transactions, admission, continuance and suspension of member-brokers, declaration of a member-broker as defaulter, norms, procedures and other matters relating to arbitration, fees, deposits, margins and other monies payable by the member brokers to the Exchange, etc.
INDIAN SCENARIO
Strengths
The `do-it-yourself' framework of online share trading offers retail investors the three benefits of transparency, access and efficiency. Paperwork diminishes significantly, and no more painful trips to your broker to check if everything's in order. Online trading has made it possible to universalize access to retail investors. This was earlier very difficult, as the cost of servicing often-outweighed transaction volumes. Online brokerage ranges between 0.05-0.20 per cent of the value of transactions for non-delivery-based trades, and between 0.25-0.95 per cent for delivery-based trades. Once major investments in online infrastructure are over and done with - and with the economies of scale coming into play - it is expected that brokerage rates would head further downwards.
Access to online trading and latest financial happenings, apart from quotes and unbiased investment analyses, all consolidate into a value-added product mix in tandem with evolving markets that are freer and fairer. The Net result: An inquisitive, informed and demanding investor. Today's investor is more involved in managing his or her assets and analyzing a vast array of investment options. Technology and today's enabled investor have, in turn, driven competition, resulting in reduced costs of trading, transparency in dealings, and pricing info that is accurate and real-time. More and more investors now want to know how their trades are executed, and whether they have received the best possible price. Critical components of execution quality include the prices at which orders were executed as well as the speed of execution. The quality of execution, in turn, hinges on efficient order routing. We owe this to our investor fraternity.
Weaknesses
Every thing in the world has a flip side to it - Transaction velocity is crucial. And more often than not, connections are lousy. There's also a degree of investor skepticism about online payment and settlement mechanisms in spite of all the encryption and fire walling brought into play. Time and technology will soon assuage these concerns, which hark back to the `physical' days.
“The three main technology obstacles which have prevented Internet broking from taking off are:
1 Lack of Internet penetration
2 Bandwidth infrastructure
3 Poor quality of ISP infrastructure.”
Opportunities
You have some money to dabble with. Trading shares on BSE/NSE has always been your dream. When will you ever find the time? And besides, the hassle of finding a broker is not easy. This is your main opportunity.
Realizing there is untapped market of investors who want to be able to execute their own trades when it suits them, brokers have taken their trading rooms to the Internet. Known as online brokers, they allow you to buy and sell shares via Internet.
There are 2 types of online trading service: discount brokers and full service online broker. Discount online brokers allow you to trade via Internet at reduced rates. Some provide quality research, other don’t. Full service online brokerage is linked to existing brokerages. These brokers allow their clients to place online orders with the option of talking/ chatting to brokers if advice is needed. Brokerage rates here are higher. 5Paisa.com, ICICIDirect.com, IndiaBulls.com, Sharekhan.com, Geojit securities.com, HDFCsec.com, Tatatdw.com, Kotakstreet.com are some of the online broking sites in India.
And daily trading turnover is estimated in the vicinity of 0.75 per cent of the combined BSE and NSE daily turnover of about RS 11,000 crore!!! The point is, there's tremendous scope for growth. Especially when you consider the US, where trading over the Net accounts for about 55 per cent of the total volumes. And, I believe, in some Asian markets the figures as high as 70 per cent.
Threats
On to some threat perception - Domestic funds, foreign institutional investors and operators comprise the three main market constituents. And all three include term investors as well as opportunists in their pecking order. Some, for instance, hitch their fate with what the FIIs are up to. All this spells spurting volumes. But nobody gives a damn about the resultant volatility. And some, not all, offer free investment advice over the Net to lure rookie investors with misleading information. Prices of scripts can also be influenced to the advantage of vested interests, courtesy the Net. Unlike in the US, stockbrokers out here willingly (or under the force of circumstance) assume the role of `advisors', sans the neutral, non-vested stance.
Hurdles for online share trading
1. Internet fraud
In India, we see this kind of frauds happening in different way due to nature of our society. Here when you talk to broker's staff while buying or selling, he will usually advise you to buy share which he has bought and plans to dump when price goes up.
We have seen enough of PUMP and DUMP even without help of internet in cases of Harshad Mehta boom of 1992 and Ketan Parekh boom of 2000 (he even had cult following with Index of 10 shares called K-10).
Today lot of investor’s depending on TV channel for recommendation about stocks to sell, or buy or hold. Channels like CNBS offer array of experts from economist to brokers to analyst. Most of these people have vested interest in stocks they recommend and promote.
One of the most common forms of securities fraud on the Internet involves an imposter who attempts to manipulate the price of a stock by disseminating phony press releases or information, or creating phony websites. A recent example of this scheme is the hoax perpetrated against US based, PairGain Technologies.
2. Volatility of India’s Stock Markets
Recent market developments have once more focused attention on the volatility that has come to characterise India’s stock markets.
Movements in the Sensex during the two years have clearly been driven by the behaviour of foreign institutional investors (FIIs), who were responsible for net equity purchases of as much as $6.6 and $8.5 billion respectively in 2003 and 2004. These figures compare with a peak level of net purchases of $3.1 billion as far back as 1996 and net investments by FIIs of just $753 million in 2002. In sum, the sudden FII interest in Indian markets in the last two years account for the two bouts of medium-term buoyancy that the Sensex recently displayed.
Given the presence of foreign institutional investors in Sensex companies and their active trading behaviour, their role in determining share price movements must be considerable. Indian stock markets are known to be narrow and shallow in the sense that there are few companies whose shares are actively traded. Thus, although there are more than 4700 companies listed on the stock exchange, the BSE Sensex incorporates just 30 companies, trading in whose shares is seen as indicative of market activity. This shallowness would also mean that the effects of FII activity would be exaggerated by the influence their behaviour has on other retail investors, who, in herd-like fashion tend to follow the FIIs when making their investment decisions.
The Bombay stock exchanges (BSE) and the National Stock Exchange of India Ltd (NSE) are the two primary exchange in India. In addition, there are 28 Regional Stock Exchanges However, the BSE and NSE have established themselves as the two leading exchanges and account for about 80% of the equity volume traded in India.
The average daily turnover at the exchanges has increased from Rs. 851 crore in 1997-98 to Rs. 1,284 crore in 1998-99 and further to Re. 2273 crore in 1999-2000 (April- August 1999). NSE has around 1500 shares listed with a total market capitalization of around Rs. 921500 crore (Rs. 9215 Bln). The BSE has over 6000 stocks listed and has a market capitalization of around Rs. 968000 crore (9680 Bln). Most key stocks are traded on both the exchanges and hence the investor could buy them on either exchange. Both exchanges have a different settlement cycle, which allows investors to shift their positions on the bourse. The primary index of BSE is BSE Sensex comprising 30 stocks. NSE has the S&P NSE 50 index (Nifty) which consists of fifty stocks.
The BSE Sensex is the older and more widely followed index. Both these indices are calculated on the basis of market capitalization and contain the heavily traded shares from key sectors. The markets are closed on Saturdays and Sundays. Both the exchanges have switched over from the open outcry trading system to a fully automated computerized mode of trading known as BOLT (BSE On Line Trading) and NEAT (National Exchange Automated Trading) System. It facilitates more efficient processing, automatic order matching, faster execution of trades and transparency.
The Scripts traded on the BSE have been classified into ‘A’, ‘B1’, ‘B2’, ‘C’, ‘F’ and ‘Z’ groups. The ‘A’ group shares represent those, which are in the carry forward system (Badla). The ‘F’ group represents the debt market (fixed income securities) segment. The ‘Z’ group scripts are the blacklisted companies. The ‘C’ group covers the odd lot secutities in ‘A’, ‘B1’& ‘B2’ groups and Rights renunciations. The key regulator governing Stock Exchanges, Brokers, Depositories, Depository participants, Mutual Funds, FIIs and other participants in Indian secondary and primary market is the Securities and Exchange Board of India (SEBI) Ltd.
About NSE
The National Stock Exchange of India Limited has genesis in the report of the High Powered Study Group on Establishment of New Stock Exchanges, which recommended promotion of a National Stock Exchange by financial institutions (FIs) to provide access to investors from all across the country on an equal footing. Based on the recommendations, NSE was promoted by leading Financial Institutions at the behest of the Government of India and was incorporated in November 1992 as a tax-paying company unlike other stock exchanges in the country.
On its recognition as a stock exchange under the Securities Contracts (Regulation) Act, 1956 in April 1993, NSE commenced operations in the Wholesale Debt Market (WDM) segment in June 1994. The Capital Market (Equities) segment commenced operations in November 1994 and operations in Derivatives segment commenced in June 2000
NSCCL
IISL
NSE.IT
NSDL
DotEx Intl. Ltd.
ABOUT BSE
The Stock Exchange, Mumbai, popularly known as "BSE" was established in 1875 as "The Native Share and Stock Brokers Association". It is the oldest one in Asia, even older than the Tokyo Stock Exchange, which was established in 1878. It is a voluntary non-profit making Association of Persons (AOP) and is currently engaged in the process of converting itself into demutualised and corporate entity. It has evolved over the years into its present status as the premier Stock Exchange in the country. It is the first Stock Exchange in the Country to have obtained permanent recognition in 1956 from the Govt. of India under the Securities Contracts (Regulation) Act, 1956.
The Exchange, while providing an efficient and transparent market for trading in securities, debt and derivatives upholds the interests of the investors and ensures redressal of their grievances whether against the companies or its own member-brokers. It also strives to educate and enlighten the investors by conducting investor education programs and making available to them necessary informative inputs.
A Governing Board having 20 directors is the apex body, which decides the policies and regulates the affairs of the Exchange. The Governing Board consists of 9 elected directors, who are from the broking community (one third of them retire ever year by rotation), three SEBI nominees, six public representatives and an Executive Director & Chief Executive Officer and a Chief Operating Officer.
The Executive Director as the Chief Executive Officer is responsible for the day-to-day administration of the Exchange and he is assisted by the Chief Operating Officer and other Heads of Departments.
The Exchange has inserted new Rule No.126 A in its Rules, Bye-laws & Regulations pertaining to constitution of the Executive Committee of the Exchange. Accordingly, an Executive Committee, consisting of three elected directors, three SEBI nominees or public representatives, Executive Director & CEO and Chief Operating Officer has been constituted. The Committee considers judicial & quasi matters in which the Governing Board has powers as an Appellate Authority, matters regarding annulment of transactions, admission, continuance and suspension of member-brokers, declaration of a member-broker as defaulter, norms, procedures and other matters relating to arbitration, fees, deposits, margins and other monies payable by the member brokers to the Exchange, etc.
INDIAN SCENARIO
Strengths
The `do-it-yourself' framework of online share trading offers retail investors the three benefits of transparency, access and efficiency. Paperwork diminishes significantly, and no more painful trips to your broker to check if everything's in order. Online trading has made it possible to universalize access to retail investors. This was earlier very difficult, as the cost of servicing often-outweighed transaction volumes. Online brokerage ranges between 0.05-0.20 per cent of the value of transactions for non-delivery-based trades, and between 0.25-0.95 per cent for delivery-based trades. Once major investments in online infrastructure are over and done with - and with the economies of scale coming into play - it is expected that brokerage rates would head further downwards.
Access to online trading and latest financial happenings, apart from quotes and unbiased investment analyses, all consolidate into a value-added product mix in tandem with evolving markets that are freer and fairer. The Net result: An inquisitive, informed and demanding investor. Today's investor is more involved in managing his or her assets and analyzing a vast array of investment options. Technology and today's enabled investor have, in turn, driven competition, resulting in reduced costs of trading, transparency in dealings, and pricing info that is accurate and real-time. More and more investors now want to know how their trades are executed, and whether they have received the best possible price. Critical components of execution quality include the prices at which orders were executed as well as the speed of execution. The quality of execution, in turn, hinges on efficient order routing. We owe this to our investor fraternity.
Weaknesses
Every thing in the world has a flip side to it - Transaction velocity is crucial. And more often than not, connections are lousy. There's also a degree of investor skepticism about online payment and settlement mechanisms in spite of all the encryption and fire walling brought into play. Time and technology will soon assuage these concerns, which hark back to the `physical' days.
“The three main technology obstacles which have prevented Internet broking from taking off are:
1 Lack of Internet penetration
2 Bandwidth infrastructure
3 Poor quality of ISP infrastructure.”
Opportunities
You have some money to dabble with. Trading shares on BSE/NSE has always been your dream. When will you ever find the time? And besides, the hassle of finding a broker is not easy. This is your main opportunity.
Realizing there is untapped market of investors who want to be able to execute their own trades when it suits them, brokers have taken their trading rooms to the Internet. Known as online brokers, they allow you to buy and sell shares via Internet.
There are 2 types of online trading service: discount brokers and full service online broker. Discount online brokers allow you to trade via Internet at reduced rates. Some provide quality research, other don’t. Full service online brokerage is linked to existing brokerages. These brokers allow their clients to place online orders with the option of talking/ chatting to brokers if advice is needed. Brokerage rates here are higher. 5Paisa.com, ICICIDirect.com, IndiaBulls.com, Sharekhan.com, Geojit securities.com, HDFCsec.com, Tatatdw.com, Kotakstreet.com are some of the online broking sites in India.
And daily trading turnover is estimated in the vicinity of 0.75 per cent of the combined BSE and NSE daily turnover of about RS 11,000 crore!!! The point is, there's tremendous scope for growth. Especially when you consider the US, where trading over the Net accounts for about 55 per cent of the total volumes. And, I believe, in some Asian markets the figures as high as 70 per cent.
Threats
On to some threat perception - Domestic funds, foreign institutional investors and operators comprise the three main market constituents. And all three include term investors as well as opportunists in their pecking order. Some, for instance, hitch their fate with what the FIIs are up to. All this spells spurting volumes. But nobody gives a damn about the resultant volatility. And some, not all, offer free investment advice over the Net to lure rookie investors with misleading information. Prices of scripts can also be influenced to the advantage of vested interests, courtesy the Net. Unlike in the US, stockbrokers out here willingly (or under the force of circumstance) assume the role of `advisors', sans the neutral, non-vested stance.
Hurdles for online share trading
1. Internet fraud
In India, we see this kind of frauds happening in different way due to nature of our society. Here when you talk to broker's staff while buying or selling, he will usually advise you to buy share which he has bought and plans to dump when price goes up.
We have seen enough of PUMP and DUMP even without help of internet in cases of Harshad Mehta boom of 1992 and Ketan Parekh boom of 2000 (he even had cult following with Index of 10 shares called K-10).
Today lot of investor’s depending on TV channel for recommendation about stocks to sell, or buy or hold. Channels like CNBS offer array of experts from economist to brokers to analyst. Most of these people have vested interest in stocks they recommend and promote.
One of the most common forms of securities fraud on the Internet involves an imposter who attempts to manipulate the price of a stock by disseminating phony press releases or information, or creating phony websites. A recent example of this scheme is the hoax perpetrated against US based, PairGain Technologies.
2. Volatility of India’s Stock Markets
Recent market developments have once more focused attention on the volatility that has come to characterise India’s stock markets.
Movements in the Sensex during the two years have clearly been driven by the behaviour of foreign institutional investors (FIIs), who were responsible for net equity purchases of as much as $6.6 and $8.5 billion respectively in 2003 and 2004. These figures compare with a peak level of net purchases of $3.1 billion as far back as 1996 and net investments by FIIs of just $753 million in 2002. In sum, the sudden FII interest in Indian markets in the last two years account for the two bouts of medium-term buoyancy that the Sensex recently displayed.
Given the presence of foreign institutional investors in Sensex companies and their active trading behaviour, their role in determining share price movements must be considerable. Indian stock markets are known to be narrow and shallow in the sense that there are few companies whose shares are actively traded. Thus, although there are more than 4700 companies listed on the stock exchange, the BSE Sensex incorporates just 30 companies, trading in whose shares is seen as indicative of market activity. This shallowness would also mean that the effects of FII activity would be exaggerated by the influence their behaviour has on other retail investors, who, in herd-like fashion tend to follow the FIIs when making their investment decisions.
Friday, December 26, 2008
finolex - ratio analysis etc.
The ratios calculated in this exercise are wrong, try to do it yourself for finolex industries and prepare new report.
RATIO ANALYSIS
Financial ratios are useful indicators of a firm's performance and financial situation. Financial ratios can be used to analyze trends and to compare the firm's financials to those of other firms.
Financial ratios can be classified according to the information they provide. The following types of ratios frequently are used:
1. Liquidity ratios
2. Asset management ratios
3. Debt management ratios
4. Profitability ratios
5. Market value ratios
LIQUIDITY RATIOS
Liquidity ratios are the first ones to come in the picture. These ratios actually show the relationship of a firm’s cash and other current assets to its current liabilities. Two ratios are discussed under Liquidity ratios. They are:
1. Current ratio
2. Quick/ Acid Test ratio.
1. Current ratio: This ratio indicates the extent to which current liabilities are covered by those assets expected to be converted to cash in the near future. Current assets normally include cash, marketable securities, accounts receivables, and inventories. Current liabilities consist of accounts payable, short-term notes payable, current maturities of long-term debt, accrued taxes, and other accrued expenses (principally wages).
Current Ratio=Current Assets/Current Liabilities
Following table shows the Current ratios of Finolex in different years:
| Year | 2005-06 | 2004-05 | 2003-04 |
| Current ratio | 1.78 times | 1.66 times | 1.62 times |
Following graph shows the change of Current ratios over different periods:
From the analysis, we can see that in 2003-04 the current assets were 1.62 times than the current liabilities that has not fluctuated much through out these three years. A minimal increase is seen in 2004-05 and it went up to 1.66 times which kept slightly increasing and resulted at 1.78 times in 2005-06. The reason for such stability can be there not investing remarkably on assets and not making any huge loan or financing from outside. If we take a closer look on the balance sheet, this assumption gets a more realistic touch. Year by year assets have gone slightly up and the liabilities as well, but proportionately assets were a littler higher than the liabilities which actually reflected as a marginal increase in the ratio.
2. Quick/ Acid Test ratio: This ratio indicates the firm’s liquidity position as well. It actually refers to the extent to which current liabilities are covered by those assets except inventories.
Quick Ratio=(Current Assets-Inventories)/Current Liabilities
Following table shows the Quick/ acid test ratios of Finolex in different years:
| Year | 2005-06 | 2004-05 | 2003-04 |
| Quick ratio | 1.19 times | 1.08 times | .98 times |
Following graph shows the change of Current ratios over different periods:
Analysis of this ratio speaks in a same language as current ratio. In 2003-04, the quick ratio was .98 times which increased very silently just like current ratio and resulted as 1.19 times in 2005-06. Both of these ratios portray the idea that square has so far an almost constant liquidity position which is good at some point, but at the same token it can be said that they have not been able to improve them-selves. Standing at this point, we can make an assumption that may be their profit margin was not so high that they can make some investments paying off the liabilities that could result in an increase in assets and decrease in liabilities to make the liquidity position far better. This assumption can only be proved as we go on analyzing their financial statement and calculate the profitability ratios.
Asset Management Ratios
ASSET MANAGEMENT RATIOS
Asset management ratios are the financial statement ratios that measure how effectively a business uses and controls its assets. Below are discussed five types of asset management ratios:
1. Inventory turnover ratio
2. The days sales outstanding
3. Average payment period
4. Fixed asset turnover ratio
5. Total asset turnover ratio
1. Inventory turnover ratio: The ratio is regarded as a test of efficiency and indicates the rapidity with which the company is able to move its merchandise.
Inventory turnover ratio = Gross Turnover / Inventories
Following table shows the Inventory Turnover ratio of Finolex in different years:
| Year | 2005-06 | 2004-05 | 2003-04 |
| Inventory Turnover Ratio | 5.27 times | 5.41 times | 6.89 times |
Analysis shows a gradual declination of Inventory Turnover Ratio over the last three yeas. In 2003-04, the ratio was 6.89 times, then it rapidly declined to 5.41 times in following year and dropped further to 5.27 times in the year 2005-06.
The company’s balance sheets show increase of inventory with declining turnover every year. Declining inventory turnover commonly indicates that the company is not being able to flush its inventory very well as it was doing in the previous years. A low turnover rate may point to overstocking, obsolescence, or deficiencies in the product line or marketing effort. High inventory levels are unhealthy because they represent an investment with a zero rate of return in addition to the increased cost associated with maintaining those inventories. It also opens the company up to trouble should prices begin to fall. However, in some instances a low rate may by appropriate, such as where higher inventory levels occur in anticipation of rapidly rising prices or shortages.
In order to improve Inventory Turnover ratio, at first an end-to-end view in addressing inventory needs to be looked at. Supply chains need to be optimized, production processes should have to be efficient as well, so that the suppliers become able to produce and deliver materials in a timely, low cost fashion that allows the company to minimize their inventory and cost of materials. Collaborative relationships with customers can allow them to make their demand for products more predictable thereby allowing to minimize finished product inventory without failing to meet their needs for volume and timeliness.
Discount-driven sales may generate a boost in sales. Such discounts can erode the company’s profit margins but will boost revenue and rate of inventory turnover. The company might look like it is becoming leaner, when in fact it may simply be pushing products into the marketplace using artificial low pricing. However, before it can be done, the gross margins reported by the business needs to be analyzed carefully. If gross margins decrease as a percentage of sales in spite of an increase in inventory turnover, they should not apply this policy.
Supplier-financed inventory may reduce inventories and show improved inventory turnover by forcing suppliers to carry the inventory for the company. The suppliers assume the cost of maintaining inventory and passes that cost on. Alternatively, the company may reduce inventory by the use of express shipment or other costly means of delivery to ensure the availability of materials and supplies when needed. Solutions of maintaining inventory that simply shift cost to suppliers return the cost in added mark-ups to the materials and supplies purchased. This results in a rise in unit product unit cost.
2. The Days Sales Outstanding: The Days Sales Outstanding ratio shows both the average time it takes to turn the receivables into cash and the age, in terms of days, of a company's accounts receivable. This ratio is of particular importance to credit and collection associates.
Days Sales Outstanding (DSO) = Trade Debtors/(Annual gross turnover/365)
Following table shows the DSOs of Finolex in different years:
| Year | 2005-06 | 2004-05 | 2003-04 |
| DSO | 14.87 days | 15.75 days | 14.99 days |
Analysis shows that DSO was 15.75 days in 2003-04; highest among the three years. In 2003-04, it was 14.99 days and in 2005-06 it was 14.87 days; lowest among the three years.
Since the DSO was the highest in 2004-05 that indicates that customers were taking longer times to pay their bills, which may be a warning that customers were dissatisfied with the company's product or service, or that salespeople were making sales to customers that are less credit-worthy, or that salespeople have to offer longer payment terms in order to seal the deal. Long credit policy might be used deliberately to boost sales temporarily. Of course, it could also mean that the company has an inefficient or overtaxed accounts receivables department. However, the significant improvement in 2005-06 signifies that the company collected its outstanding receivables quicker than the previous years and that the credit terms are getting more realistic. It also connotes that the company had greater control over quality of its customer relationship management (CRM) during the following year.
3. Average payment period: The accounts payable turnover ratio includes all outstanding obligations that a company owes its creditors.
Average Payment Period (APP) = Payables / (Cost of goods sold/365)
Following table shows the APPs of Finolex in different years:
| Year | 2005-06 | 2004-05 | 2003-04 |
| APP | 234.07 days | 225.27 days | 161.25 days |
Analysis shows a gradual increase of company’s average payment period. In 2003-04, the average payment period was 161.25 days, and then it became 225.27 days and 234.07 days consecutively for the following two years.
The underlying reason for the ratio to go up is the significant increase of company’s debt; especially short and long term bank loans (which made the current portion of long-term loans high). Each year this amount is getting higher than the previous years. Furthermore, in 2004-05 there was a huge sum trade credits unpaid. All these played key role for the payables to increase. A long payment period at first improves the company's liquidity, but my also be an indicator for liquidity problems. Therefore, it is important to keep the value equal or close to the average value. Since the company’s payment period is getting longer, i.e. the company pays too late, then it means the liquidity problem of the company. The company probably lacks of the money to pay its liability. Hence, questions may arise on the company's credit worthiness and paying habits. It has long been recognized that late payment of business debt is a serious problem for suppliers of goods and services. Late Payment can make it necessary for a company to increase borrowing and to extend overdraft facilities. Time and resources can be taken up on maintaining and collecting late payments instead of being devoted to other areas of business.
4. Fixed asset turnover ratio: The Fixed Asset Turnover ratio measures the effectiveness in generating Net Sales revenue from investments in Net Property, Plant, and Equipment back into the company evaluates only the investments.
Fixed assets turnover ratio (FATO) = Gross Turnover / Net fixed assets
Following table shows the FATO ratios of Finolex in different years:
| Year | 2005-06 | 2004-05 | 2003-04 |
| FATO | 1.35 times | 1.33 times | 1.42 times |
Analysis shows that the fixed asset turnover ratio was as high as 1.42 times among three years. However, it declined to 1.33 times in the following year. In 2005-06 the turnover somewhat increased to 1.35 times.
The rapid declination of turnover in 2004-05 occurred because sales did not keep pace with the increase of company’s fixed assets. Company’s capital work-in-progress increased substantially in the year 2005-06. 2004-05 capital work-in-progress was also higher then the previous year. It may happen if the company was not being able to utilize its assets efficiently. However, conclusions should not be drawn solely on the numerical results of this ratio. A careful study on the balance sheet shows that large amount of investments were made during that year that inflate the dollar volume of fixed assets, and give an impression of mismanagement. The case is applicable for the 2005-06 as well. The turnover was highest in 2003-04 only because no significant investments were made during that period and the capital work-in-progress was lowest amongst the three years. Therefore, enough evidence is not available from this ratio analysis whether the company is really performing inefficiently or it is the investments that pulled down the turnover. Perhaps total asset turnover ratio can tell more about what really went wrong.
5. Total asset turnover ratio: The Total Asset Turnover is similar to fixed asset turnover since both measures a company's effectiveness in generating sales revenue from investments back into the company. Total Asset Turnover evaluates the efficiency of managing all of the company's assets.
Total assets turnover ratio (TATO) = Gross Turnover/Total Assets
Following table shows the TATO ratios of Finolex in different years:
| Year | 2005-06 | 2004-05 | 2003-04 |
| TATO | 0.76 times | 0.78 times | 0.93 times |
Analysis shows a gradual fall of company’s total asset turnover. In 2003-04, it was 0.93 times, declined to 0.78 times in the following year and then again declined slightly to 0.76% in 2005-06.
It may be an indicator of company’s pricing strategy as company with high profit margins tends to have low asset turnover. It is in fact might be one of the reasons for why the assets turnover was low in the year 2004-05. Profit margin went up from 17.69% in 2003-04 to 20.25% in the next year. However, there are other reasons as well. In 2004-05 total assets increased by 25.68% while sales increased by only 11.57%. Other than investment in marketable securities, every other asset especially long-term investments, inventories, short-term loans and cash balance had gone up substantially. Same is the case for the year 2006-06 as sales could not keep up with assets. Long-term investment, capital work-in-progress, inventories, short-term loan was also high during this year. On the other hand, the profit margin was only 16.45%. So it could be concluded than higher profit margin may not be the actual reason for the turnover to go down. Perhaps the company is not utilizing its assets efficiently.
Debt Management Ratios
Debt management ratios reveal 1) the extent to which the firm is financed with debt and 2) its likelihood of defaulting on its debt obligations. These ratios include:
1. Debt ratio
2. Times-Interest-Earned (TIE) ratio
1. Debt ratio: The ratio of total debt to total assets, generally called the debt ratio, measures the percentage of funds provided by the creditors.
Debt ratio = Total Debt / Total Assets
Following table shows the Debt ratios of Finolex in different years:
| Year | 2005-06 | 2004-05 | 2003-04 |
| Debt ratio | 31% | 46% | 37% |
Calculating the debt ratio, we came to see that this company is not that highly leveraged one. In 2003-04, it was 37%, in 2004-05, it suddenly went up to 46%, and than again in 2005-06, it climbed down to 31%. A little bit of fluctuation is seen here in debt management, which is actually nothing but their strategic move. The reason behind such fluctuation is better understandable form the balance sheet. In 2004-05, the company has issued long-term loan, which happens to be BTD 389,193,080 that is way too high than the previous year’s loan, which is BDT 36,544,158 that actually increased the total debt thus resulting in a high debt ratio. Again, in the following year they paid off the loans and have not made any huge financing from outside which decreased.
2. Times-Interest-Earned (TIE) ratio: This ratio measures the extent to which operating income can decline before the firm is unable to meet its annual interest cost.
TIE ratio = EBIT / Interest Charges
Following table shows the times-interest-earned (TIE) ratios of Finolex in different years:
| Year | 2005-06 | 2004-05 | 2003-04 |
| TIE ratio | 11.30 times | 14.92 times | 11.12 times |
We can see from this ratio analysis that, this company has covered their interest expenses 11 times in 2003-04, 15 times in 2004-05 and 11 times in 2005-06. It means they have performed pretty much same in 2003-04 and 2005-06 but has taken a different look in 2004-05. As in 2004-05 they issued a little high number of long-term loans and does not have good liquidity position, their EBIT became high thus making TIE a little high as well.
PROFITIBILITY RATIO:
Profitability is the net result of a number of policies and decisions. Profitability ratios show the combined effects of liquidity, asset management and debt on operating results.
There are four important profitability ratios that we are going to analyze:
1. Net Profit Margin
2. Gross Profit Margin
3. Return on Asset
4. Return on Equity
1. Net Profit Margin: Net Profit Margin gives us the net profit that the business is earning per dollar of sales. The equation is as follows:
Net Profit margin = Net income available to the stockholders / gross turnover
Following shows the Net Profit Margin of Finolex in different years:
| Year | 2005-06 | 2004-05 | 2003-04 |
| Net Profit Margin | 16.45% | 20.26% | 17.69% |
Therefore, the Net Profit Margin was 17.69% in 2003-04, increase to 20.26% in 2004-05 and then again decreased to 16.45% in 2005-06.
The main reason that the profit margin declined is high cost. High cost, in turn, generally occurs due to inefficient operations. Profit margin also declined because in 2005-06 Finolex used a lot of long-term debt. This invariably resulted in more interest cost, which brought the Net income down.
2. Gross Profit Margin: Gross Profit Margin gives us the amount of Gross profit a firm is earning per dollar of its sales. The equation is as follows:
Gross Profit Margin (GPM) = Gross profit / Gross trunover
Following shows the Gross Profit Margin of Finolex in different years:
| Year | 2005-06 | 2004-05 | 2003-04 |
| Gross Profit Margin | 36.19% | 35.04% | 34.78% |
So, the Gross Profit Margin has remained pretty much stable throughout the whole three years. It increased slowly each year. It indicates that Square Pharmaceutical is managing its Sales and Cost of Goods Sold very well.
Return on Total Assets (ROA): Return of total asset measures the amount of Net Income earned by utilizing each dollar of Total Assets. The equation is:
Return on Total Assets (ROA) = Net income available to total common shareholders / Total assets
Following shows the Return on Total Assets of Finolex in different years:
| Year | 2005-06 | 2004-05 | 2003-04 |
| ROA | 12.54% | 15.88% | 16.52% |
So, return on total assets decreased gradually throughout the years. This may have occurred because Square used more debt financing in 2005-06 and 2004-05 compared to 2003-04 which resulted in more interest cost and brought the Net income down.
4. Return on Equity (ROE): Return on Equity measures the amount of Net Income earned by utilizing each dollar of Total common equity. It is the most important of the “Bottom line” ratio. By this, we can find out how much the shareholders are going to get for their shares. The equation is:
Return on Equity (ROE) = Net income available to common shareholders / Total common equity
Following shows the Return on equity of Finolex in different years:
| Year | 2005-06 | 2004-05 | 2003-04 |
| Return on Equity | 18.21% | 22.55% | 21.13% |
Therefore, the Return on Equity increased in 2004-05 but decreased a little in 2005-06. This again may have happened due to the issue of more long-term debt in 2005-06.
MARKET VALUE RATIOS
The final group of ratios, the market value ratios relates the firm’s stock price to its earnings and book value per share. These ratios give management an indication of what investors think of the company’s past performance and future prospects. In this section, we are going to have a discussion mainly on two types of ratios:
1. Price/ Earnings ratio
2. Market/ Book ratio
1. Price/ Earnings ratio: The Price/ Earnings ratio (price-to-earnings ratio) of a stock is a measure of the price paid for a share relative to the income or profit earned by the firm per share.
P/E ratio - Price per share / earnings per share
2. Market/ Book ratio: The ratio of book value to market value of stocks.
Market/Book ratio (M/B) = Market price per share / Book value per share
Following table shows the P/E and M/B ratios of Finolex in different years:
| Year | 2005-06 | 2004-05 | 2003-04 |
| P/E Ratio | 9.70 times | 12.95 times | 8.43 times |
| M/B ratio | 1.77 times | 2.92 times | 1.78 times |
The P/E ratio was 8.43 times in 2003-04 and increased further to as high as 12.95 times in the following year. However, in 2005-06 it declined to 9.70 times which is an alarming signal for the potential investors.
The M/B ratio was 1.78 times in 2003-04 and increased further to 2.92 times in the following year which was excellent to draw the attention of investors. However, in 2005-06 it became as same as 2003-04 value.
The main reason behind the declination of P/E and M/B ratio is the fall of price per share. Price of share may fall for several reasons. Failing to meet market expectations is one of the main reasons for the market to lose interest in a share. Shares are usually valued according to what investors reckon the company will do in future. Therefore, when a business fails to meet those expectations then it is not unreasonable for investors to reconsider their position. We can see this fact applicable for this company too. As the company was doing well in 2000-05, the share price was higher than among the three years. Interestingly, the impact on shares depends to a large degree on the influence that they have on the market as well. During 2005-06 financial year the capital market situation deteriorated to the level that the DSE General Index fell by 14.91%. The overall hostile market situation put a negative impact on Square Pharmaceutical’s stock price too. Therefore, the investors should not be concerned much about the particular company’s P/E and M/B ratio.
Overall Financial Summary of Square Pharmaceuticals
OVERALL FINANCIAL SUMMARY
After analyzing all the ratios, we have found out the following information:
1. Liquidity Ratios: In the liquidity ratio we can see that both current ratio and quick ratio improved over time marginally. The situation was almost stable.
2. Asset Management Ratios: Inventory turnover, Total Asset Turnover, Fixed Asset Turnover all had been relatively stable throughout the three years. Average Collection period is also very good. The only problem here is the Average collection period which is way high. However, such a situation is actually pretty much normal for big companies.
3. Debt Management Ratios: Here Debt ratio has improved over time and TIE has remained pretty much stable.
4. Profitability Ratios: Apart from Gross Profit Ratio, most of the Profitability ratios have actually decreased in 2005-06. Although the decrease rate is very minimal still it is a problem for Square and they need to try to improve these ratios.
5. Market Value Ratios: Both P/E ratio and M/B ratio declined in the year 2005-06. But this happened mostly not because of the company’s failure but for the fact that the whole market was not so friendly for investment in that year.
From the total analysis, we can summarize that Finolex Ltd. has been doing pretty good through out the years. It is true that last year there return did decline but it is still pretty much satisfactory. Therefore, we can conclude that Finolex Ltd. is a good enough company to invest on.
APPENDIX
All the ratios below are calculated for 2005-06 financial year:
1. Current ratio = 1.78 times
2. Quick ratio = .299 times
3. Inventory turnover ratio = 5.27 times
4. Days Sales Outstanding (DSO) = 14.87 days
5. Average Payment Period (APP) = 234.07 days
6. Fixed assets turnover ratio (FATO) = 1.35 times
7. Total assets turnover ratio (TATO) = 0.76 times
8. Debt ratio = 31%
9. TIE ratio = 11.30 times
10. Net Profit margin = 16.45%
11. Gross Profit Margin (GPM) = 20.19%
12. ROA = 12.54%
13. ROE = 18.21%
14. P/E ratio = 9.70 times
15. Market/Book ratio (M/B) = 1.77 times
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