1.
Basics
Time Value of Money (TVM):
o ₹1,000 today is more valuable than ₹1,000 next year because you can invest it
and earn interest.
o Example: If you invest ₹1,000 today at 10% annual interest, it becomes
₹1,100 in a year.
Risk and Return:
o Higher-risk investments (stocks) often offer higher returns. Lower-risk
investments (bonds) have lower returns.
o Example: A stock may give a 12% return, but it can lose value. A fixed
deposit offers 5% return but is safer.
Financial Statements:
o Balance Sheet: Shows what a company owns (assets) and owes (liabilities).
o Profit & Loss Statement: Shows income and expenses to calculate profit.
o Cash Flow Statement: Tracks cash inflows and outflows.
o Example: If a company has ₹10 lakh assets and ₹7 lakh liabilities, its equity is
₹3 lakh.
2. Corporate Finance
Capital Structure:
o How a company raises money: through loans (debt) or selling shares (equity).
o Example: A company raises ₹5 lakh by taking a loan (debt) and ₹5 lakh by
selling shares (equity).
Working Capital Management:
o Managing cash for day-to-day operations (paying suppliers, salaries, etc.).
o Example: A retailer ensures they have enough cash to buy inventory before
Diwali.
Dividend Policy:
o Deciding whether to reinvest profits or share them with shareholders.
o Example: TCS pays dividends, but startups reinvest profits into growth.
3. Investments
Stocks, Bonds, Mutual Funds:
o Stock: Buying a share of a company (e.g., buying Reliance shares).
o Bond: Lending money to a company or government for fixed returns (e.g.,
government bonds).
o Mutual Fund: Pooling money with others to invest in multiple assets.
Valuation Methods:
o DCF (Discounted Cash Flow): Predict future cash flows and discount them
to today’s value.
o Comparable Analysis: Compare the company with similar ones.
o Example: If a company generates ₹1 lakh profit annually, DCF calculates
today’s value of those future profits.
Market Efficiency:
o Markets quickly reflect all available information in prices.
o Example: If a company announces a big profit, its stock price rises
immediately.
4. Financial Markets
Money Market vs. Capital Market:
o Money Market: Short-term loans (less than a year).
o Capital Market: Long-term investments (stocks, bonds).
o Example: Buying a 6-month treasury bill (money market) vs. 10-year bond
(capital market).
Derivatives:
o Contracts based on underlying assets like stocks or commodities.
o Example: An option to buy Infosys stock at ₹1,000 in the future (even if the
price rises to ₹1,200).
Key Institutions:
o SEBI: Regulates stock markets.
o RBI: Controls monetary policy and banking.
o Example: SEBI ensures fairness in stock trading.
5. Current Trends
ESG (Environmental, Social, Governance):
o Companies focus on sustainability and ethical practices.
o Example: Infosys reduces carbon emissions to attract ESG investors.
FinTech:
o Technology in finance, like UPI, blockchain, and cryptocurrencies.
o Example: Paytm uses UPI; Bitcoin is a blockchain-based currency.
AI in Finance:
o Predicting stock trends or detecting fraud using algorithms.
o Example: AI can suggest mutual funds based on your risk level.
6. Quantitative Tools
Ratio Analysis:
o Assess company performance using ratios.
o Example:
Profit Margin: Profit ÷ Revenue. If profit is ₹20,000 on ₹1 lakh sales,
profit margin = 20%.
Debt-to-Equity Ratio: Debt ÷ Equity. ₹5 lakh debt and ₹10 lakh
equity = 0.5.
Forecasting and Budgeting:
o Predict future sales and expenses.
o Example: A retail store expects ₹10 lakh sales in Diwali and prepares
inventory accordingly.
Excel/Financial Modeling:
o Use Excel for calculations like loan EMIs or DCF.
o Example: Create a sheet to calculate the future value of ₹1 lakh invested at
8% for 5 years.
