Basel II

From Wikipedia, the free encyclopedia

Basel II is the second of the Basel Accords, which are recommendations on banking laws and regulations issued by the Basel Committee on Banking Supervision. The purpose of Basel II, which was initially published in June 2004, is to create an international standard that banking regulators can use when creating regulations about how much capital banks need to put aside to guard against the types of financial and operational risks banks face. Advocates of Basel II believe that such an international standard can help protect the international financial system from the types of problems that might arise should a major bank or a series of banks collapse. In practice, Basel II attempts to accomplish this by setting up rigorous risk and capital management requirements designed to ensure that a bank holds capital reserves appropriate to the risk the bank exposes itself to through its lending and investment practices. Generally speaking, these rules mean that the greater risk to which the bank is exposed, the greater the amount of capital the bank needs to hold to safeguard its solvency and overall economic stability.

Objective

The final version aims at:

1. Ensuring that capital allocation is more risk sensitive;

2. Separating operational risk from credit risk, and quantifying both;

3. Attempting to align economic and regulatory capital more closely to reduce the scope for regulatory arbitrage.

While the final accord has largely addressed the regulatory arbitrage issue, there are still areas where regulatory capital requirements will

diverge from the economic.

Basel II has largely left unchanged the question of how to actually define bank capital, which diverges from accounting equity in important

respects. The Basel I definition, as modified up to the present, remains in place.

[edit]The Accord in operation

Basel II uses a "three pillars" concept – (1) minimum capital requirements (addressing risk), (2) supervisory review and (3) market

discipline – to promote greater stability in the financial system.

The Basel I accord dealt with only parts of each of these pillars. For example: with respect to the first Basel II pillar, only one risk, credit risk,

was dealt with in a simple manner while market risk was an afterthought; operational risk was not dealt with at all.

[edit]The first pillar

The first pillar deals with maintenance of regulatory capital calculated for three major components of risk that a bank faces: credit

risk, operational risk, and market risk. Other risks are not considered fully quantifiable at this stage.

The credit risk component can be calculated in three different ways of varying degree of sophistication, namely standardized

approach, Foundation IRB and Advanced IRB. IRB stands for "Internal Rating-Based Approach".

For operational risk, there are three different approaches - basic indicator approach or BIA, standardized approach or TSA, and the internal

measurement approach (an advanced form of which is theadvanced measurement approach or AMA).

For market risk the preferred approach is VaR (value at risk).

As the Basel 2 recommendations are phased in by the banking industry it will move from standardised requirements to more refined and

specific requirements that have been developed for each risk category by each individual bank. The upside for banks that do develop their

own bespoke risk measurement systems is that they will be rewarded with potentially lower risk capital requirements. In future there will be

closer links between the concepts of economic profit and regulatory capital.

Credit Risk can be calculated by using one of three approaches:

1. Standardised Approach

2. Foundation IRB (Internal Ratings Based) Approach

3. Advanced IRB Approach

The standardised approach sets out specific risk weights for certain types of credit risk. The standard risk weight categories are used under

Basel 1 and are 0% for short term government bonds, 20% for exposures to OECD Banks, 50% for residential mortgages and 100%

weighting on unsecured commercial loans. A new 150% rating comes in for borrowers with poor credit ratings. The minimum capital

requirement (the percentage of risk weighted assets to be held as capital) remains at 8%.

For those Banks that decide to adopt the standardised ratings approach they will be forced to rely on the ratings generated by external

agencies. Certain Banks are developing the IRB approach as a result.

[edit]The second pillar

The second pillar deals with the regulatory response to the first pillar, giving regulators much improved 'tools' over those available to them

under Basel I. It also provides a framework for dealing with all the other risks a bank may face, such as systemic risk, pension

risk, concentration risk, strategic risk, reputational risk, liquidity risk and legal risk, which the accord combines under the title of residual risk.

It gives banks a power to review their risk management system.

[edit]Recent chronological updates

[edit]September 2005 update

On September 30, 2005, the four US Federal banking agencies (the Office of the Comptroller of the Currency, the Board of Governors of the

Federal Reserve System, the Federal Deposit Insurance Corporation, and the Office of Thrift Supervision) announced their revised plans for

the U.S. implementation of the Basel II accord. This delays implementation of the accord for US banks by 12 months. [1]

[edit]November 2005 update

On November 15, 2005, the committee released a revised version of the Accord, incorporating changes to the calculations for market risk

and the treatment of double default effects. These changes had been flagged well in advance, as part of a paper released in July 2005. [2]

[edit]July 2006 update

On July 4, 2006, the committee released a comprehensive version of the Accord, incorporating the June 2004 Basel II Framework, the

elements of the 1988 Accord that were not revised during the Basel II process, the 1996 Amendment to the Capital Accord to Incorporate

Market Risks, and the November 2005 paper on Basel II: International Convergence of Capital Measurement and Capital Standards: A

Revised Framework. No new elements have been introduced in this compilation. This version is now the current version. [3]

[edit]November 2007 update

On November 1, 2007, the Office of the Comptroller of the Currency (U.S. Department of the Treasury) approved a final rule implementing

the advanced approaches of the Basel II Capital Accord. This rule establishes regulatory and supervisory expectations for credit risk, through

the Internal Ratings Based Approach (IRB), and operational risk, through the Advanced Measurement Approach (AMA), and articulates

enhanced standards for the supervisory review of capital adequacy and public disclosures for the largest U.S. banks. [4]

[edit]July 16, 2008 update

On July 16, 2008 The federal banking and thrift agencies ( The Board of Governors of the Federal Reserve System; the Federal Deposit

Insurance Corporation; the Office of the Comptroller of the Currency, and; the Office of Thrift Supervision) issued a final guidance outlining

the supervisory review process for the banking institutions that are implementing the new advanced capital adequacy framework (known as

Basel II). The final guidance, relating to the supervisory review, is aimed at helping banking institutions meet certain qualification

requirements in the advanced approaches rule, which took effect on April 1, 2008. [5]

[edit]January 16, 2009 update

For public consultation, a series of proposals to enhance the Basel II framework was announced by the Basel Committee. It releases a

consultative package that includes: the revisions to the Basel II market risk framework; the guidelines for computing capital for incremental

risk in the trading book; and the proposed enhancements to the Basel II framework.[6]

[edit]July 8-9, 2009 update

A final package of measures to enhance the three pillars of the Basel II framework and to strengthen the 1996 rules governing trading book

capital was issued by the newly expanded Basel Committee. These measures include the enhancements to the Basel II framework, the

revisions to the Basel II market-risk framework and the guidelines for computing capital for incremental risk in the trading book. [7]

[edit]Basel II and the regulators

One of the most difficult aspects of implementing an international agreement is the need to accommodate differing cultures, varying structural

models, and the complexities of public policy and existing regulation. Banks’ senior management will determine corporate strategy, as well as

the country in which to base a particular type of business, based in part on how Basel II is ultimately interpreted by various countries'

legislatures and regulators.

To assist banks operating with multiple reporting requirements for different regulators according to geographic location, there are several

software applications available. These include capital calculation engines and extend to automated reporting solutions which include the

reports required under COREP/FINREP.

For example, U.S. FDIC Chair Sheila Bair explained in June 2007 the purpose of capital adequacy requirements for banks, such as the

accord: "There are strong reasons for believing that banks left to their own devices would maintain less capital -- not more -- than would be

prudent. The fact is, banks do benefit from implicit and explicit government safety nets. Investing in a bank is perceived as a safe bet.

Without proper capital regulation, banks can operate in the marketplace with little or no capital. And governments and deposit insurers end

up holding the bag, bearing much of the risk and cost of failure. History shows this problem is very real … as we saw with the U.S. banking

and S & L crisis in the late 1980s and 1990s. The final bill for inadequate capital regulation can be very heavy. In short, regulators can't leave

capital decisions totally to the banks. We wouldn't be doing our jobs or serving the public interest if we did. [8]

[edit]Implementation progress

Regulators in most jurisdictions around the world plan to implement the new Accord, but with widely varying timelines and use of the varying

methodologies being restricted. The United States of America's various regulators have agreed on a final approach.[9] They have required the

Internal Ratings-Based approach for the largest banks, and the standardized approach will not be available to anyone.

(See http://www.federalreserve.gov/newsevents/press/bcreg/20080626b.htm for an update on proposed Standardized Approach)

In India, RBI has implemented the Basel II standardized norms on 31st March 2009 and is moving to internal ratings in credit and AMA

norms for operational risks in banks.

In response to a questionnaire released by the Financial Stability Institute (FSI), 95 national regulators indicated they were to implement

Basel II, in some form or another, by 2015.[10]

The European Union has already implemented the Accord via the EU Capital Requirements Directives and many European banks already

report their capital adequacy ratios according to the new system. All the credit institutions adopted it by 2008.

Australia, through its Australian Prudential Regulation Authority, implemented the Basel II Framework on 1 January 2008[11].

Basel II

Bank for International Settlements

Basel Accords - Basel I

Basel II

Background

Banking

Monetary policy - Central bank

Risk - Risk management

Regulatory capital

Tier 1 - Tier 2

Pillar 1: Regulatory Capital

Credit risk

Standardized - F-IRB - A-IRB

PD - LGD - EAD

Operational risk

Basic - Standardized - AMA

Market risk

Duration - Value at risk

Pillar 2: Supervisory Review

Economic capital

Liquidity risk - Legal risk

Pillar 3: Market Disclosure

Disclosure

Business and Economics Portal

what is BASEL accord and what are BASEL II norms

BCBS (Basel commitee on Banking Supervision) has kept somerestrictions on bank for the maintainance of minimum capitalwith them to esure level playing field. Basel-I keeps thislimit same for all regardless of their risk profiles thatmeans "one size fit all" approach.

Basel-II has got three pillars:Pillar 1- Minimum capital req. based on the risk profile of bankPillar 2- Supervisory review of banks by RBI if they go forinternal rankingPillar 3- Market discipline

Re: what is BASEL accord and what are BASEL II norms

Basel accord can be regarded as the regulations for banks set by Basel Committee, these regulations are mainly to protect the interest of the depositors in a Bank. The Basel-I accord was accountable for two risks viz, Credit Risk and Market Risk but the Basel-II accord came up with an equally important risk i.e., operational Risk. The main difference between Basel-I accord and Basel-II accord is that Basel-! accord was not confined with the rating factor and was

based on the fact "one size fits all" but Basel-II accord mainly focuses on the rating factors of the borrowers.

The following are the norms of Basel-II Accord:1)Minimum Capital Requirement2)Supervisory Review Process3)Market Decipline

Re: what is BASEL accord and what are BASEL II norms

The principle purpose of basel accord is to ensure an adequate level of capital in the international banking system and to create a more level playing field so that banks could no longer build business volume without adequate capital backing The norms for basel 2 accord:1)Minimum capital requirement2)supervisory review process3)Market discipline.

Re: what is BASEL accord and what are BASEL II norms

Basel-I keeps thislimit same for all regardless of their risk profiles thatmeans "one size fit all" approach.The main difference between Basel-I accord and Basel-II accord is that Basel-! accord was not confined with the rating factor and was based on the fact "one size fits all" but Basel-II accord mainly focuses on the rating factors of the borrowers.

Basel 2 has got three pillars1)Minimum capital requirement2)supervisory review process3)Market discipline 

Re: what is BASEL accord and what are BASEL II norms

Basle1 concerned for credit risk mainly and market risk aftermath. Basel2 stipulates compliance to other risks.viz., interest rate risk, solvency risk, operational risk etc., apart from the two risks stipulated in Basel1. Moreover, in Basle1, the risk weightage of exposures of a bank confined into 0%,10%,20%,50% and 100% only but Basle2 has risk weightage of 150% also.

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What is GDR?

GDR is a certificate issued by depository bank by which we trade in securities of foreign countries.

What is Repo

A holder of securities sells these securities to an investor with an agreement to repurchase them at a fixed price on a fixed date.

Repo rate is the rate at which RBI lends money to other banks

What are fixed Assets and current

fixed asset means the value of the asset is more than one yearis called fixed asset ex- Building, Machinery and all....curerent asset means the value of the asset is less than one year is called current asset ex-debtors, stock(inventory) and all..Fixed Assets are longterm like buildings, machines etc. whereas Current assets are used in day-today transctions which is short-term in nature i.e. not more than 1 year.

what is the difference betn Futures contract and Forward contract

Forward contracts is non-standardized in nature and traded over the counter.Future contract is standardized in nature, traded on exchange and more cash settlement rather than physical delivery.

Explain the difference Between P&L A/c and Balance Sheet?

p&l account- shows the profit or loss to the organisation to the particular periodbalace sheet- shows the financial position of the organisation like solvency or insolvency

P/L account shows the profit and loss of the organisation of a particular financial year whereas BS shows the financiall position and performance of the organisation.

What is GDR?

global depository receiptsGDR is a certificate issued by depository bank by which we trade in securities of foreign countries.

What is SEBI?

Securities and Exchange Board of India, which regulates the security market of India by its formulated rules and regulations.

What is debt?

debt is a obligation to the organization

What are the Types of capital Resources?

or the solpropritry consorn - bringing of cashcompanys(public)- issue of shares to the public and collectin money from public like debentures and bonds

What are Subsidiary Books

there are 8 subsidiry book purchasebook,salesbook, debtorsboook, creditorsbook, purchasereturnsbook, salesreturnebook,cashbook,journalproper

What is meant by Leaselease means organisation which need heavy machinery for thier organisationthey are not in the position to buy the machinery so they will use the another organisations asset for that they will collect some rent so it is called lease rent

 What are Current Liabilities

means liabilities which can be paid with in one year

What are GAAP?

generally accepted accountig principals

What is Liability

liability is an obligation to the organisation

What is Book Value?

book value means the value of any asset showen in financial statements

 What is Real account

real account tells about the assets which come into the organisation & which goes out to the organisationprincpaldebit all the assets which comes into the organisationcredit all the assets which goes out to the organisation

List out the differences between Funds Flow and Cash Flow statements?

cash flow statement tells about the cash inflows and outflows to the organisationfunds flow statment tells about working capital changes in the organisation

what is perpose of derivatives?

What is Secondary Market

Secondary market refers to market where securities are traded after being initially offered to the public in the primary market and/or listed on the stock exchange.Financial instrument is considered as liquid instrument when they changes hand after tehy are issued.As corporate or goverment agencies issue securities in primary market to raise fund and these securities are traded in secondry market after they are issued in primary market.Secondary market is simply interaction between investors.What is Bond?

In chemistry bond means interaction between two atoms for the purpose to complete their outermost shells

What is EPS

earning per share thats portion of stehcompay profitEarning Per Share are the earnings returned on the initial investment amount.earning per share is defined as the total dividend declared by the company is divide by total outstanding share.If say the dividend declared by the company is 1 billlion and total share outstanding is 1 million then earning per share is 1 billion/1 million.EPS is the received amount of dividend from the company out of the total net profit as per the holding capacity of shares of the shareholders. It is declared by the BOD of company.

What is NP

NP is equal to the Gross Profit minus overheads and interest payable for an accounting period

What is personal account

recording of transaction between persons

What will you find in Balance Sheet

The Balance Sheet of the firm consists of two sides.One is the righthand side and the other is the lefthand side.Lefthand side contains all liabilities of the firm and righthand side contains all assets.through this statement we come to know about financial possition of the company

What is a share

It is a unit of the capital of a company.it is fractions of capital of limited company

What is Liquidity Ratio

The ratio which is used to know the liquidity position of the firm is known as "Liquidity Ratio".

liquidity ratio tells about the position of the company to get from the liquidity of the firm.liquidity ratio is calculated by the considering the debt of the company as the equity holder are those who will get the return of the investment at last after the payment of the debt holder.so the company is more liquid which have lower debt to equity ratio.

What is meant By ADR

ADR IS AMERICAN DEPOSITORY RECEIPT.indian company raise the fund from abroad by issuing equity to foreign investor.ADR is receipt which is issued on basis of underlying equity.ADR is traded in american bourse to insure the liquidity.The price of ADR is alligned with the equity that is listed in indian stock exchange.The price is such to reduce the arbitrage.ADR is issued by non american company and it is listed in american stock exchange.

What is meant by company Deposits

company deposit is defined as liability of company when it invited deposit from the investor.company deposit can be asset of the company when one company deposit with other company.

What is Beta?

A measure of the volatility, or systematic risk, of a security or a portfolio in comparison to the market as a whole.Risk is differentiated as systematic risk or undiversifible risk and unsystematic risk or diversifible risk.Diversifible risk is what which can be minimized by diversification but systematic risk is market risk which is not possible to diversify.The sensitivity of stock with the market is defined as systematic risk or beta of the stock.

What are the Intangible assets

What are the Intangible assets

What are the Intangible assets

Intangiblity Is What Which Can Not Be Touched But It Can Be Felt.intangible Asset Is Which Can Not Be Touched As Patent Of Company,goodwill Of Company.

What is meant by OTC

Otc Is Defined As Over The Counter Exchange.as Financial Instrument Is Traded In Secondary Market To Increase The Liquidity Of The Instrument.secondary Market Can Be Regulated Bt Exchange Or It Cold Be Otc.exchange Regulated Market Is Governed By Standard Units Of Instrument And Delivery Of The Delivery Of The Instrument Is Gurented By Intermediary Body ,but In Otc Market ,there Is No Such Defined Market Place And It Is Regulated On Telephone And Internet.there Is No Intermediary Body To Guarantee The Delivery Of The Instrument.

What is Interium Dividend?

Interim Dividend Is Defined As The Declaration Of The Dividend By The Company Before The Annual General Meting.

What is meant by Take Over ?

In business, a takeover is the purchase of one company by another.

Takeover Is Defined As The Purchased Of The Equty Share Of Target Company From The Market Or Institution In Order To Take The Hold On Management.company Take The Strategy To Curb The Competitor Or Diversify The Business.take Over Can Be Done By Mutually Negation Or It Can Be Hostile Takeover,where Targeting Company Purchase The Share From Outside (retail) At Premium And Get Control Over Company Management.

What is Retained Earnings

When a company or corporation earns a profit or surplus, that money can be put to two uses it can either be re-invested in the business called retained earnings or it can be paid to the shareholders as a dividends.

Profit Of A Company Is Distributed As Dividend To The Preference Shareholder And Common Equity Holder,it Depends Upon The Discretion Of The Company.the Surplus After Dividend Payment Is Retained By The Company.the Retained Earning Is Added To The Reserve And Surplus Of The Balance Sheet.it Is Consider As The Liblity In The Balance Sheet.this Fund Is Used As Expansion Or Accumulated Fund Is Distributed As Bonus.

 Is Profit a Liability or asset

1) Profit is asset..but we wil show it in liability side as it is belongs to share holders so company has to give it to shareholders...so we r showing under liability side.

profit with respect to company it is a liability as it has to pay it to shareholders.

Profit with respect to shareholders it is a asset.

2) it is a liability from the company point of view as it owe it to its shareholders, that is the reason it is added to the reserves under the liabilities side.

3) PROFIT IS APPROPRIATION. i.e.IT IS NEITHER ASSET NOR LIBLITY.

What is Risk

Risk is defined as the difference between "the actual return and expected return."

RISK CAN BE DEFINED AS THE PROBABILITY OF UNEXPECTED OUTCOME TO THE EXPECTED OUTCOME.

RISK IS DEFINED AS THE PROBABILITY OF UNEXPECTED OUTCOME TO THE ACTUAL OUTCOME OF AN EVENT.

What is Hedging

Taking a position in a futures market opposite to a position held in the cash market to minimize the risk of financial loss from an adverse price .

HEDGING CAN BE DEFINED as a strategy to take minimize the exposure towards the risk.Risk can be defined as probability of unexpected outcome from expected outcome.Risk could be any of as interest rate risk,default risk,currency risk,rising price,etc.Hedging is defined as taking an opposite position in future market to lessen the risk.It couls be done by forward,future,option,swaps.Heding offset the loss in spot market with the equal gain in the future market if it is perfect hedge.

What are debentures

A Debenture is " A certificate of agreement of loans which is given under the company's stamp and carries an undertaking that the debenture holder will get a fixed return and the principal amount whenever the debenture matures.

it is a written acknowledgement of debt, it is one of the source through which the company raises money from public, under this the company pays interest and the debentures gets redemeed at maturity either at discount or at premium

Debenture Is The Debt Instrument Through Which Company Raises The Fund.debenture Carries A Fixed Interst Payment.it Is A Tradable Instrument,which Can Be Traded On Bourse After It Get Listed.in Certain Case It Carries The Call Option Where Company Can Buy Back If The Rate Of Interest Decrease.it Can Be Redemmed After Certain Period As Per The Contact.

What is AMC

asset management companya mutual fund company is also known as an AMC for ex-franklin templeton is an AMC, it is so called as it manages the assets i.e. cash provided by investors productively by investing in various investment options.

As Per The Indian Sebi Law, Company Engaged In The Business Of Mutal Fund Which Involved Pooling Of The Fund From The Investor And Invest In Diversified Instrument To Lessen The Exposure Towards The Risk.mutal Fund Can Be Established By Formation Of Trust As Per The Law And This Trust Establish The Asset Managment Company(amc) Which Take Care Of The Investment Decision .so Every Amc Works Under A Trust.

What is merger

The amalgamation of two business enterprises into a new entity.if there are two firms i.e. A and b then merger means AB, BA or A or BMerger Can Be defined As The Amalgamation Of Two Entities(business) Into One Singel Entity.merger Give Birth To New Legal Entity.the Two Entity Involved In Merger Loose Their Identity.

What is Put Option

'Puts' give the buyer the right, but not obligation to sell a given quantity of underlying asset at a given price on or before given future date.A "Put option" gives the holder the right but not obligation to sell an asset by a certain date for a certain pricebut option buyer has the right but not the obligation to sell the underlying assest.Buyer Of Put Otion Get The Right But It Is Not An Obligation To Sell The Underlying Asset Before The Expiration Of Option If It Is European Option And Not Between The Expiration If It Is American Option.

finance related posts

What is Trial Balance

It is statement of balances of all the accounts in the ledger prepared to prove the arithmetical accuracy of the books of accounts.a statement which shows what is the balance in the various accounts maintained by the firm.

 What is PAT

profit after tax, that is the net profit, profit available to the company after paying the tax

What is nominal account

What is nominal account

account relating to income, expenses , gains and losses

What is GPit is Gross profit that is profit left to the company after meeting the production expenses

What is Networth

Networth is the total assets minus total liabilities of a company.Equity share capital plus reserves and surplus is the net worth of any company

Briefly explain about Ledger Postings

ledger posting is done after preparation of journal and subsidiary books, this is the second step in accounting process, it helps one to know how much balance is left in an account at a particular point of time.

What is net present value

Net Present Value is the difference between the present value of cash inflow and the present value of cash outflow.i want some fincance and marketing interview question . plz some one help me out . my e-mail is sankar7077@gmail.comAsme Standards In Pipe LineIt is a standard method for using the time value of money to appraise long-term projects.

What is accounting management

Accounting management is the pratical application of management techniques to control and report on the financial health of the organisation.It involves the analysis, planning, implementation and cotrol of programs designed to provide financial data reporting for managerial decision making.

 What is Cash Flow Statements

A cash flow statement or statement of cash flow is a financial statement that shows a company's incoming and outgoing money during a time period.

What is meant by capital market

Capital market is the market for securities, where companies and governments can raise long-term funds. It inculde both stock market and bond market.

What is Face Value

The face value of a share is the value assigned to it by promoters of the company and this value is shown in the 'share certificate'.What is Treasury Bills?

Treasury Bills are money market instruments to finance the short term requirements of the Government of India. These are discounted securities and thus are issued at a discount to face value.

What is dividend

Dividends are payments made by a corporation to its shareholder members. Dividends are paid out of Profits or Surplus earned by corporation or company.

What is Call Option

'Calls' give the buyer the right but not the obligation to buy a given quantity of the underlying asset, at a given price on or before a given future date.

What are Assets

Anything, which has economic value,is an asset.

What are Mutual Funds

Mutual funds are funds operated by an investment company which raises money from the public and invests in a group of assets(shares, debentures etc.), in accordance with a stated set of objectives.

What is Futures contract

A futures contract is an agreement between two parties to buy or sell an asset at a certain time in the future at a certain price.

What is authorized Capital

Authorized capital is the maximum capital that a company is authorized to raise.

What is warrant

Options generally have lives of up to one year. The majority of options traded on exchange have maximum maturity of nine months, longer dated options are called as warrants and are generally traded over-the-counter.

What is Forward contract

A Forward contract is a customized contract between two entities, where settlement takes place on a specific date in the future at today's pre-agreed price.

What is Paid up Capital?

Paid up capital means the total amount of called up share capital which is actually paid to the company by the members.What is Right IssueWhat is Right Issue

Rights Issue is when a listed company which proposes to issue fresh securities to its existing shareholders as on record date.

What is Money Market

A market for the purchase and sale of liqiud assets especially bills of exchange,treasury bills and other securities that are due to be redeemed within a short time.

What is Dividend Pay out Ratio

It is ratio of Dividend per share to Earning per share. It is calculated as

Dividend per share/Earning per share.

What is ROI

ROI reveals the earning capacity of the capital employed in the business. It is calculated as:

Profit before interest and taxation/capital employed*100

What is depreciation

Permanent decrease in the value of an asset is know as depreciation.

What is BRS

What is ROE

ROE" means Return on equity.

What is NYSE

What is swap

An arrangement between the central banks of two countries for standby credit to facilitate the exchange of each other's currencies.

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