Markets in which “Money Market Securities” are traded. Short-term interest-bearing assets with maturities of less than one year.
Wednesday, October 26, 2011
Money Market
Markets in which “Money Market Securities” are traded. Short-term interest-bearing assets with maturities of less than one year.
Treasury bills
What is a Treasury Bill?
Treasury bill is a short term debt instrument issued by the Government of Sri Lanka under the Local Treasury Bill Ordinance No. 8 of 1923 (as amended) when it raises domestic public debt for budgetary purposes.
Who Issues Treasury Bills?
As an Agent of the Government of Sri Lanka, the Public Debt Department of the Central Bank of Sri Lanka (CBSL) issues the Treasury bills and repays maturity proceeds on maturity.
Authority to Issue Treasury Bills
In terms of annual borrowing targets specified in the Appropriation Act which is approved by the Parliament annually, the Government of Sri Lanka is authorized to issue Treasury bills.
What Benefits Can An Investor Derive by Investing in Treasury Bills?
- It is an absolutely risk free investment, since it is issued by the sovereign government. Hence, they are called gilt-edged securities meaning that they are covered by gold.
- You can get the highest rate of interest since the yield rates are determined in the market.
- Since these bills are tradable in the secondary market, you can obtain instant liquidity by selling them in the market.
- All receipts of maturity proceeds and capital gains are fully repatriable.
- You could also have a joint investment with some other person or persons. Hence, it is a very good way to share your investments with loved persons.
- You are not subject to further taxation, since a withholding tax of 10 percent is charged at source is the final tax.
- No stamp duty is payable on these bills.
- You can get the best service from the CBSL which maintains your investment in its state of the art, Scripless Security Settlement System and the fully automated Central Depository System (CDS).
What is the Availability of Treasury Bills?
Foreign investors can purchase up to 10 % of the total outstanding Treasury
bills at any given time. Eg. As at April 30, 2008, Treasury bill outstanding
stock was Rs. 340 bn. Accordingly, Rs. 34.0 bn. is available for foreign
investors.
What Types of Treasury Bills Foreign Investors Can Purchase?
- Eligible foreign investors are permitted to purchase Treasury bills issued by the Government of Sri Lanka from direct placement/primary auctions through PDs.
- Foreign investors are permitted to enter into Repo/Reverse Repo transactions with eligible investors only, using Treasury bills purchased under this scheme as collateral.
- Foreign investors are permitted sell Treasury bills in the secondary market at any time.
How Can An Investor Apply for Treasury Bills?
- You can purchase Treasury bills at any time through Primary Dealers (PDs) or Licensed Commercial Banks (LCBs) registered with the CBSL. PDs are the institutions appointed by the CBSL for trading in Government securities. Contact details of these institutions are given below.
- You can purchase Treasury bills by sending bids to the primary auctions through PDs or through direct placements.
- In order to make arrangement for fund transfers, you can advise your own bank to open a Rupee account named “Treasury bill Investment External Rupee Account - 2 (TIERA - 2)” in an LCB in
- After completing the transaction, your agent (LCB/PD) will open a security account for you in the CDS maintained by the CBSL. This account is debited /credited simultaneously based on your tradings in the market.
How Can An Investor Collect Maturity Proceeds?
Maturity proceeds relating to Treasury bills are credited on due dates directly to
your account through your agent. The participants of the CDS are responsible to
pay dues to you on due dates.
Treasury Bonds
What is a Treasury Bond?
Who Issues Treasury Bonds?
As an Agent of the Government of Sri Lanka, the Public Debt Department of the Central Bank of Sri Lanka (CBSL) issues the Treasury bonds, pays interest on due dates and repays the principal on maturity.
Authority to Issue Treasury Bonds
In terms of annual borrowing targets specified in the Appropriation Act which is approved by the Parliament annually, the Government of Sri Lanka is authorized to issue Treasury bonds.
What are the Main Features of Treasury Bonds?
Ø Risk free, gilt edged debt instrument
Ø Maturities are available with 2-20 years
Ø It carries half yearly coupon payments and the principal is repaid on maturity
Ø Yield rates are determined by the market
Ø Tradable instrument in the secondary market
Ø Issued in scripless form
What Benefits Can I Derive by Investing in Treasury Bonds
- It is an absolutely risk free investment, since it is issued by the sovereign government. Hence, they are called gilt-edged securities meaning that they are covered by gold
- You can get the highest rate of interest since the yield rates are determined in the market.
- Since these bonds are tradable in the secondary market, you can obtain instant liquidity by selling them in the market.
- All receipts of interest and maturity proceeds are fully repatriable.
- You could also have a joint investment with some other person or persons. Hence, it is a very good way to share your investments with loved persons.
- You are not subject to further taxation, since a withholding tax of 10 percent is charged at source.
- No stamp duty is payable on these bonds.
- You can get the best service from the CBSL which maintains your investment in its state of the art, Scripless Security Settlement System and the fully automated Central Depository System (CDS).
What Types of Treasury Bills Foreign Investors Can Purchase?
- Eligible foreign investors are permitted to purchase Treasury bills issued by the Government of Sri Lanka from direct placement/primary auctions through PDs
- Foreign investors are permitted to enter into Repo/Reverse Repo transactions with eligible investors only, using Treasury bills purchased under this scheme as collateral.
- Foreign investors are permitted sell Treasury bills in the secondary market at any time.
How Can An Investor Apply for Treasury Bills?
- You can purchase Treasury bills at any time through Primary Dealers (PDs) or Licensed Commercial Banks (LCBs) registered with the CBSL. PDs are the institutions appointed by the CBSL for trading in Government securities. Contact details of these institutions are given below.
- You can purchase Treasury bills by sending bids to the primary auctions through PDs or through direct placements.
- In order to make arrangement for fund transfers, you can advise your own bank to open a Rupee account named “Treasury bill Investment External Rupee Account - 2 (TIERA - 2)” in an LCB in
- After completing the transaction, your agent (LCB/PD) will open a security account for you in the CDS maintained by the CBSL. This account is debited /credited simultaneously based on your tradings in the market.
Wednesday, June 22, 2011
Financial Statement Analysis Ratios
Financial ratios quantify many aspects of a business and are an integral part of financial statement analysis. To compare the company’s performance, position and stability we have used several ratios. According to the financial aspects of the business we have categorize the ratios as below.
- Profitability Ratios - measure the firm's use of its assets and control of its expenses to generate an acceptable rate of return.
- Return on investment - performance measure used to evaluate the efficiency of an investment or to compare the efficiency of a number of different investments.
- Liquidity Ratios - measure the availability of cash to pay debt.
- Efficiency Ratios - used to analyze how well a company uses its assets and liabilities internally.
- Gearing Ratios - measure of financial leverage, demonstrating the degree to which a firm's activities are funded by owner's funds versus creditor's funds.
http://en.wikipedia.org
Gross Profit Rate
Gross margin, Gross profit margin or Gross Profit Rate is the difference between the sales and the production costs excluding overhead, payroll, taxation, and interest payments. Gross margin can be defined as the amount of contribution to the business enterprise, after paying for direct-fixed and direct-variable unit costs, required to cover overheads (fixed commitments) and provide a buffer for unknown items. It expresses the relationship between gross profit and sales revenue. It is a measure of how well each Rupee of a company's revenue is utilized to cover the costs of goods sold.
It can be expressed in absolute terms:
Gross margin = Net Sales - Cost of goods sold + annual sales return
or as the ratio of gross profit to sales revenue, usually in the form of a percentage:
Gross Profit Margin = (Revenue-Cost of goods sold)/Revenue
However in an insurance concern Gross Profit Margin is calculated by dividing underwriting results by the net earned premium.
While net earned premium is the result of gross written primium net of premiums ceded to re- insurers, underwriting results reflect the net earned premium after deducting insurance cliams, transfers to long term ins fund etc.
Formula for Gross Profit Rate
Gross Profit Rate (Year 2009) = Gross Profit * 100
Revenue
Gross Profit Markup
The mathematical relationship between Gross Profit Markup and Gross Profit Margin can be expressed as follows:
Gross Profit Margin (GM) = [Markup/(1 + Markup)]
Thus markup can be defined as an amount added to a cost price in calculating a selling price.
Thus;
Gross Profit Markup = Gross Profit/ Cost of Sales
Gross Profit Markup = Gross Profit * 100
Cost of sales
= Gross Profit * 100
Net Revenue- Gross Profit
Operating Profit Rate
In business, operating margin, operating income margin, operating profit margin or return on sales (ROS) is the ratio of operating income (operating profit) divided by net sales, usually presented in percent.
It is a measurement of what proportion of a company's revenue is left over, before taxes and other indirect costs (such as rent, bonus, interest, etc.), after paying for variable costs of production as wages, raw materials, etc. A good operating margin is needed for a company to be able to pay for its fixed costs, such as interest on debt. A higher operating margin means that the company has less financial risk.
Operating Profit Rate = Operating Profit * 100
Net Revenue
Net Profit Rate
Return on Investment (Return on Capital Employed) (BPIT)
ROCE compares earnings with capital invested in the company. It could be considered as one of the key profitability ratios of an insurance company. However this comprises two components, namely Profit Before Earnings and Tax (PBIT) and Capital Employed.
PBIT
In an insurance concern PBIT is noramlly equivalent to the profit from operations (the numerator of the ratio).
Capital Employed (share holder funds)
In the denominator we have net assets or capital. Capital Employed in general is the capital investment necessary for a business to function. It is commonly represented as total assets less current liabilities or fixed assets plus working capital.
ROCE uses the reported (period end) capital numbers.
Formula for ROCE (Return on Capital Employed)
ROCE (Return on Capital Employed) = PBIT * 100
Capital Employed
Return on Equity
Return on Equity (ROE) measures the rate of return on the ownership interest (shareholders' equity) of the common stock owners. It measures a firm's efficiency at generating profits from every unit of shareholders' equity (also known as net assets or assets minus liabilities). ROE shows how well a company uses investment funds to generate earnings growth.
ROE is equal to a fiscal year's net income (after preferred stock dividends but before common stock dividends) divided by total equity (excluding preferred shares), expressed as a percentage. As with many financial ratios, ROE is best used to compare companies in the same industry.
High ROE yields no immediate benefit. Since stock prices are most strongly determined by earnings per share (EPS), you will be paying twice as much (in Price/Book terms) for a 20% ROE company as for a 10% ROE company. The benefit comes from the earnings reinvested in the company at a high ROE rate, which in turn gives the company a high growth rate.
ROE = Profit after I,T & PD x 100
Equity
Return On Assets
An indicator of how profitable a company is relative to its total assets. ROA gives an idea as to how efficient management is at using its assets to generate earnings. Calculated by dividing a company's annual earnings by its total assets, ROA is displayed as a percentage. Sometimes this is referred to as "return on investment".
ROA = Net Profit* x 100
Total Assets
ROA tells you what earnings were generated from invested capital (assets). ROA for public companies can vary substantially and will be highly dependent on the industry. This is why when using ROA as a comparative measure, it is best to compare it against a company's previous ROA numbers or the ROA of a similar company.
The assets of the company are comprised of both debt and equity. Both of these types of financing are used to fund the operations of the company. The ROA figure gives investors an idea of how effectively the company is converting the money it has to invest into net income. The higher the ROA number, the better, because the company is earning more money on less investment.
The assets of the company are comprised of both debt and equity. Both of these types of financing are used to fund the operations of the company. The ROA figure gives investors an idea of how effectively the company is converting the money it has to invest into net income. The higher the ROA number, the better, because the company is earning more money on less investment.
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