Archive | Special Studies in Finance

Stock Option : Under a stock Option Plan a company grants to an employee the right (option) to buy a certain number of shares in the company at a fixed price for a certain number of years (option period). The fixed price is called the ‘grant’ or ‘strike’ or ‘exercise’ price and is typically the [...]

Advantages of ESOP : 1.      Employee Stock Ownership Plan (ESOP) is an employee benefit plan. The scheme provides employees the ownership of stocks in the company. 2.      Ownership : It is one of the profit sharing plans. Employers have the benefit to use the ESOPs as a tool to fetch loans from a financial institute. [...]

Disadvantages of ESOP: 1.      Dilution. If the ESOP is used to finance the company’s growth, the cash flows benefits must be weighed against the rate of dilution. 2.      Fiduciary Liability. The plan committee members who administer the plan are deemed to be fiduciaries, and can be held liable if they knowingly participate in improper transactions. [...]

Different types of ESOPs : ESOP can be a one-time plan or an ongoing scheme depending upon the objective that the company wants to achieve. ESOPs can be in the form of ESOS (Employee Stock Option Schemes), ESPP (Employee Stock Purchase Plans), Compensation Plans, Incentive Plans, SAR / Phantom ESOPs etc. 1.      Employee Stock Option [...]

Sweat Equity : 1.      ‘Sweat Equity’ means equity shares issued by the company to employees or directors at a discount or for consideration other than cash for making available know how in the nature of intellectual property rights or value additions, by whatever name called. 2.      It can be issued by All Company(s), whether private, [...]

ESOPs : ESOPs are Employee Stock Ownership Plans where a trust holds and stock of the employers for the benefit of the employees. Primarily, the trust acquires the stock from the employer or from the shareholders of the employing company that has floated the stock in the market. Basically, it is a retirement plan that [...]

Corporate Finance : Corporate finance is the field of finance dealing with financial decisions that business enterprise make and the tools and analysis used to make these decisions. The primary goal of corporate finance is to maximize corporate value while managing the firm’s financial risks. Although it is in principle different from managerial finance which [...]

Accounting Standards : Accounting communicates the financial results of business to various parties by means of financial statements which have to exhibit a “true and fair” view of the state of affairs. Like any other language, accounting also has complex set of rules. However, these rules have to be used with a reasonable degree of [...]

IFRS : International Financial Reporting Standards (IFRS) was issued by International Accounting Standards Board (IASB). The International Standard setting process began long ago as an effort to Standardize and make easier to adopt by the developing and smaller nations which feel difficult to set and establish their own standards on Accounting and Reporting. The importance [...]

Introduction : Financial Instrument is a document which has a monetary value. Financial Instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity. A financial instrument includes wide spectrum of assets and liabilities of entities and contrary to popular impression is [...]