...does the Government of India hope to achieve with the new draft RBI guidelines for the wealth management industry? What are the reasons behind introduction of the new regulations? A. Reserve bank of India’s guidelines for the wealth management industry prohibit banks from offering discretionary wealth management services to their customers, wherein a portfolio manager independently manages funds of individual customers and takes their investment decisions. The discretionary portfolio management service also includes portfolios broadly directed by the customer, or those wherein the customer gives a negative list of investment products at the time of opening the account so that the fund manager ensures that such investment products are not included in the portfolio. In case of non-discretionary services, the RBI allows banks to work through a separately identifiable department or division (SIDD) or a subsidiary. Such a subsidiary or SIDD would require to be registered with market regulator Securities and Exchange Board of India (SEBI) and comply with SEBI guidelines on providing these services, including the code of conduct, if any. There should be an arm’s length relationship between the bank and the subsidiary if the latter is offering wealth management services, the central bank said. RBI has also stated that bank employees involved in marketing or sales of third-party products should not be given any direct incentives in cash or non-cash form linked to their performance...
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...the corporation tax rate in United State of America is high. It is one of the highest corporation rates in the developed world which reach to 35%. In order to reduce the tax burden and make them more profitable, more and more American corporations choose to stash their cash overseas, since the developing countries such as China use tax incentives to attract foreign firms to support economic growth. Launching business in the developing countries become the strategy help foreign firms to increase their after-tax returns. For example, General Electric keeps only 30.7 billion of its 85.5 billion in cash reserves in the U.S., while intends to invests more than 1.5 billion in joint ventures with Chinese state-owned companies in “key high-technology sectors”. The purpose of the paper is to present the forms of foreign investment enterprises can be taken in China and the different tax incentives are used to induce foreign investment enterprises, then to analyze their influence on selection of a particular form of FIE. Body China developed one of the biggest market in the world and is attracting more and more global investors to move into China's market. It is necessary for foreign investor to understand all the potential tax costs would be incurred in China before making an investment decision in order to operate business in a most efficient way. Learning the regulation of taxation is the first step for foreign investors who decide to invest in China. The investment forms of FIE in...
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...and homemade alternative (borrowing on personal account). Arbitrage is the process that ensures that two firms differing on laying their capital structure must have the same performance. At the same time the homemade alternative describes that an investor holding an equity stake in a levered firm can sell his stake, raise a personal loan equal to the share that he held in the levered firm, spend the proceeds in a firm that is not levered and increase his income without additional cost. They assume that the shares of the firms within a given class both have the same expected return and the same probability distribution of expected return, and therefore can be considered perfect substitutes for each other. Modigliani and Miller proposition two This proposition is derived from the first one and it concerns he performance of a Common stock in companies whose capital structure contains some debt. The expected rate of return of a stock of any company belonging to a class is a linear function of the firm's leverage. “The expected yield of a share of stock is equal to the appropriate capitalization rate for a pure equity stream in the same risk class, plus a premium related to financial risk equal to the debt-equity ratio times the spread between the capitalization rate and the cost of debt. " Proposition explains that the firm's assets will generate stream of cash flows or profits, and the assessment of the...
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...The Debt-Equity Trade Off: The Capital Structure Decision Aswath Damodaran Stern School of Business Aswath Damodaran 1 First Principles n Invest in projects that yield a return greater than the minimum acceptable hurdle rate. • The hurdle rate should be higher for riskier projects and reflect the financing mix used - owners’ funds (equity) or borrowed money (debt) • Returns on projects should be measured based on cash flows generated and the timing of these cash flows; they should also consider both positive and negative side effects of these projects. n n Choose a financing mix that minimizes the hurdle rate and matches the assets being financed. If there are not enough investments that earn the hurdle rate, return the cash to stockholders. • The form of returns - dividends and stock buybacks - will depend upon the stockholders’ characteristics. Aswath Damodaran 2 The Agenda n n n n What is debt? What determines the optimal mix of debt and equity for a company? How does altering the mix of debt and equity affect investment analysis and value at a company? What is the right kind of debt for a company? Aswath Damodaran 3 What is debt... n General Rule: Debt generally has the following characteristics: • Commitment to make fixed payments in the future • The fixed payments are tax deductible • Failure to make the payments can lead to either default or loss of control of the firm to the party to whom payments are due...
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...leverage increases, the expected rate of return on equity rises by just enough to compensate for its higher risk. The stock price and stockholders’ wealth are unaffected. c. False. The sensitivity of equity returns to business risk, and therefore the cost of equity, increase with leverage even without a change in the risk of financial distress. d. True. 2. While the costs of both debt and equity increase, the weight applied to debt in the cost of capital formula also increases. Applying a higher weight to the lower-cost source of capital offsets the increase in the cost of debt and the cost of equity. 3. The interest tax shield is the reduction in corporate income taxes due to the fact that interest is treated as an expense that reduces taxable income. To the extent that the government collects less tax, there is a bigger pie of after-tax income available to the debt and equity holders. Example: Assume operating income is $100,000, the interest rate on debt is 10%, and the tax rate is 35%. Compare income for an unlevered firm versus a firm that borrows $400,000: | |Zero-debt firm |$400,000 of debt | |Operating income |$100,000 | $100,000 | |Interest on debt | 0 | 40,000 | |Before-tax income | 100,000 ...
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...structure of the firm. We define the concept of agency costs, show its relationship to the ‘separation and control’ issue, investigate the nature of the agency costs generated by the existence of debt and outside equity, demonstrate who bears costs and why, and investigate the Pareto optimality of their existence. We also provide a new definition of the firm, and show how our analysis of the factors influencing the creation and issuance of debt and equity claims is a special case of the supply side of the completeness of markets problem. The directors of such [joint-stock] companies, however, being the managers rather of other people’s money than of their own, it cannot well be expected, that they should watch over it with the same anxious vigilance with which the partners in a private copartnery frequently watch over their own. Like the stewards of a rich man, they are apt to consider attention to small matters as not for their master’s honour, and very easily give themselves a dispensation from having it. Negligence and profusion, therefore, must always prevail, more or less, in the management of the affairs of such a company. — Adam Smith (1776) Keywords: Agency costs and theory, internal control systems, conflicts of interest, capital structure, internal equity, outside equity, demand for security analysis, completeness of markets, supply of claims, limited liability ©1976 Jensen and Meckling Journal of Financial Economics, October, 1976, V. 3, No. 4, pp. 305-360. Reprinted in...
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...structure of the firm. We define the concept of agency costs, show its relationship to the ‘separation and control’ issue, investigate the nature of the agency costs generated by the existence of debt and outside equity, demonstrate who bears costs and why, and investigate the Pareto optimality of their existence. We also provide a new definition of the firm, and show how our analysis of the factors influencing the creation and issuance of debt and equity claims is a special case of the supply side of the completeness of markets problem. The directors of such [joint-stock] companies, however, being the managers rather of other people’s money than of their own, it cannot well be expected, that they should watch over it with the same anxious vigilance with which the partners in a private copartnery frequently watch over their own. Like the stewards of a rich man, they are apt to consider attention to small matters as not for their master’s honour, and very easily give themselves a dispensation from having it. Negligence and profusion, therefore, must always prevail, more or less, in the management of the affairs of such a company. — Adam Smith (1776) Keywords: Agency costs and theory, internal control systems, conflicts of interest, capital structure, internal equity, outside equity, demand for security analysis, completeness of markets, supply of claims, limited liability ©1976 Jensen and Meckling Journal of Financial Economics, October, 1976, V. 3, No. 4, pp. 305-360. Reprinted in...
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...Unit 5 individual project Tax and Social Contracts of India Assignment : Understanding a culture is not as easy as characterizing it based on common behaviors. In fact, a culture can be defined in a multitude of ways. One way is by examining how the people interact with their governing body. The goal of this assignment is to choose one culture and explore its “social contracts”. Please write a three to four page essay, (cover page and work cited page not included) answering the following questions: • Describe the chosen culture in terms of its social, political and economic structure. • Explain how this cultures development has been effected by its “social contract” over time. Tax and Social Contracts of India The Direct Tax Code proposes to cut through the maze of tax laws, starting on a new slate towards overall objectives of growth and equity. The core idea is to expand the tax base to increase the tax to GDP ratio, even while keeping per capita tax liability low. The tax base should rise as compliance costs, exemptions, and resulting arbitrage-induced inefficiencies fall. Clear simple writing should reduce ambiguity and litigation. A sharp shifting up of tax slabs is the carrot provided to swallow the stick of vanishing exemptions. The Code which will be applied as of 2011, has been put out for comments. It has a chance if discussions succeed in hammering a new social contract. Low rates and minimum exemptions would work if everyone pays, and the State...
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...percent in local currencies. Converted into SEK, the increase was 7 percent and sales amounted to SEK 108,483 m (101,393). Strong sales increase of 5 percent in comparable units in local currencies. Gross profit amounted to SEK 68,269 m (62,474), corresponding to a gross margin of 62.9 percent (61.6). Profit after financial items amounted to SEK 25,008 m (22,103), an increase of 13 percent. Group profit after tax was SEK 18,681 m (16,384), corresponding to SEK 11.29 (9.90) per share. THE FOURTH QUARTER The H&M Group’s sales excluding VAT increased by 15 percent in local currencies. Converted into SEK, the increase was 6 percent and sales amounted to SEK 29,711 m (28,011). Sales in comparable units increased by 7 percent in local currencies. Gross profit amounted to SEK 18,792 m (18,581), corresponding to a gross margin of 63.2 percent (66.3). Profit after financial items amounted to SEK 7,178 m (7,992), a decrease of 10 percent. Adjusted for currency translation effects, profit after financial items would have been in line with the previous year. Group profit after tax amounted to SEK 5,487 m (6,154), corresponding to SEK 3.32 (3.72) per share. Very good start for H&M in Turkey. -----------------------------------------------------------------------------------------------------------------------------------------The Board of Directors proposes a dividend of SEK 9.50 (8.00) per share for the financial year 2009/2010. Sales in December 2010 increased...
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...UNIVERSITY OF DHAKA DEPARTMENT OF ACCOUNTING & INFORMATION SYSTEMS ------------------------------------------------- ------------------------------------------------- Corporate Tax Planning ------------------------------------------------- Term Paper: Tax Incentives for Attracting FDI and Some Policy Recommendation University Of Dhaka Department of Accounting & Information Systems MBA Program Course title: Corporate Tax Planning A Term Paper on "Tax incentives for attracting FDI and some policy recommendation" Batch: 15th Section A MBA 1st Semester Date of Submission: 30th September, 2013. Letter of Transmittal September 30, 2013 To Mohammad Moniruzzaman ACA Assistant Professor Department of Accounting & Information Systems Faculty of Business Administration University of Dhaka Subject: Submission of term paper on “Tax incentives for attracting FDI and some policy recommendation” Honorable Teacher, It is our pleasure to submit this term paper featuring “Tax incentives for attracting FDI and some policy recommendation”. As a part of our MBA program we tried our best to gather relevant information for preparing a complete term paper. Without your sincere co-operation and proper guideline, it would not possible for us to prepare the term paper. For this act of kindness, we are grateful to you. This overview is not fully free from mistake due to some limitations. We hope you will accept it with gracious consideration...
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...MP A R Munich Personal RePEc Archive The Pecking Order, Trade-off, Signaling, and Market-Timing Theories of Capital Structure: a Review Anton Miglo University of Bridgeport 2010 Online at http://mpra.ub.uni-muenchen.de/46691/ MPRA Paper No. 46691, posted 6. May 2013 19:07 UTC The Pecking Order, Trade-off, Signaling, and Market-Timing Theories of Capital Structure: a Review Anton Miglo Associate professor, University of Bridgeport, School of Business, Bridgeport, CT 06604, phone (203) 576-4366, email: amiglo@bridgeport.edu. This version: 2013 Initial version: 2010 Abstract. This paper surveys 4 major capital structure theories: trade-off, pecking order, signaling and market timing. For each theory, a basic model and its major implications are presented. These implications are compared to the available evidence. This is followed by an overview of pros and cons for each theory. A discussion of major recent papers and suggestions for future research are provided. Introduction The modern theory of capital structure began with and the famous proposition of Modigliani Miller (1958) that described the conditions of capital structure irrelevance. Since then, been changing these conditions to explain factors driving capital many economists have structure decisions. Harris and Raviv (1991) synthesized major theoretical literature in the field, related these to the known empirical evidence, and suggested promising avenues for future research. They argued...
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...1.1 What is Venture Capital? Venture capital is a segment of private equity industry, which focuses on early-stage, high-potential, start-up companies. The venture capital fund earns money by owning equity in the companies it invests in, which usually have a new technology or business in high technology industries, such as biotechnology and IT, however with high risk. Funds are typically established as limited partnerships, which is a contract between institutional investors who become limited partners and the fund manager. The basic intermediation structure of venture capital and private equity funds is graphically summarized in Figure 1. Figure.1 Venture Capital Financial Intermediation Venture capital is a specific form of industrial finance(part...
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...by outsourcing production and labor and taking advantage of capital markets. International business is not a new phenomenom, however the volume of international trade has increased dramatically over the last decade. Today, every nation and an increasing number of companies are investing abroad. Private and public investors must determine which countries offer the best prospects for sound investments. The decision to invest overseas begins with a determination of the riskiness of the investment climate in the country under consideration. In this paper we will evaluate the country risk analysis of investing in Philippines. The Philippines is the third-largest English speaking country in the world, enabling its manpower to have a unique edge over neighboring countries in terms of labor quality. Flanked by the Pacific Ocean and the South China Sea, its strategic location makes it a critical entry point to some 500 million people in the Association of Southeast Asian Nations (ASEAN) market, offering vast trade opportunities, and an ideal base for business. It is also the best Asian country in terms of overall quality of expatriate life, considering its cultural compatibility with expatriates, housing, sporting and recreational facilities, quality healthcare, and first-rate educational institutions. Being an archipelago, the Philippines has a lot to offer as well in terms of natural resources. Its 7,100 islands boast numerous white and black sand beaches, making it eminently attractive...
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...corporations are closely held. They are referred to in this manner because their stock is held by a small group of investors. 6. A corporate bond is an example of a financial asset. 7. Know the difference between financial assets and real assets. A. Financial Assets- (stocks or bonds) is claims on the income generated by real assets. B. Real Assets- includes all assets used in production or sale of the firm’s products or services. They can be intangible (plant, equipment) or intangible (patents or trademarks). 8. A decision to expand into a new line of products, at a cost of 5 million, would be considered a capital budgeting decision. 9. When a corporation decides to issue long-term debt in order to pay for the acquisition of real assets, it has made a financing decision. 10. A manager’s compensation plan that offers financial incentives for increases in quarterly profitability may create agency problems, because short-term, not long-term profits become the focus. 11. Ethical strategies generate the largest value for the firm’s shareholders and create the greatest sustainable competitive advantage for a...
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...ACC 4291 INTEGRATED CASE STUDY SECTION 1 CASE REPORT CASE 3: PROTON – FROM SAGAT TO EXORA LECTURER : Prof. Dr. Shamsul Nahar MEMBERS : Abdul Kudus bin Abdul Muthalib (0930395) Yazlin Mohamed Yusof (0920890) Nurfazlina bt Mohd Jaffar Sadique (1029088) Question 1 From a financial analyst perspective, has the proton management done a good job? Based on the financial performance of PROTON from 2005 till 2009, our observation from a financial analysis perspective showed that Proton management has not done a good job as far as financial performance is concern. The Key Financial Indicators (KFIs) covers measurements such as basic earnings per share, net assets per share; dividend paid as well as retained earnings carried forward. At a glimpse, almost all the KPI of Proton shows decrement throughout the years. Basic earnings per share (EPS) fluctuated vastly from 2005 to 2009. Proton recorded highest basic earnings per share of 80.6 in 2005. However, it can be observed that Proton faced severe problems by making loss in the shares, EPS of -107.3 in 2007 and EPS of -54.9 in 2009. Besides that, there is also a report with regards the net assets per share (NAPS). This net asset indicates the price at which shares are bought and sold, and represents company’s value per share. Based on the information given, we can see that the NAPS of Proton had deteriorated from 2008 to 2009. The decreasing rate of dividend paid to the shareholders simply means company did not do very well...
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