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Yogita Ingle 4 years, 9 months ago
Trading procedure :
- Selection of a Broker: The first step is to select a broker, who will buy/sell securities on behalf of the speculator/investor. This is necessary because trading of securities can only be done through SEBI registered brokers, who are members of stock exchange. Brokers may be individuals, partnership firms and corporate bodies.
- Opening Demat Account with Depository: The next step is to open a demat account. Demat (Dematerialised) account refers to an account which an Indian citizen must open with the depository participant (banks and stock brokers) to trade in listed securities in "electronic form.
The securities are held in the electronic form by a depository. ‘Depository’ is an institution/organisation which holds securities (e.g. shares, debentures, bonds, mutual funds, etc) in electronic form, in which trading is done. - Placing the Order: The next step is to place the order with the broker. The order can be communicated to the broker either personally or through telephone, cell phone, e-mail, etc.
The instructions should specify the securities to be bought or sold and the price range within which the order is to be executed. Only the securities of listed companies can be traded on the stock exchange. - Executing the Order: According to the instructions of the investor, the broker buys or sells securities. The broker, then issues a contract note. A copy of the contract note contains the name and the price of securities, names of the parties, brokerage charges, etc. It is duly signed by the broker.
- Settlement: This is the last stage in the trading of securities done by the brokers on behalf of their clients. The mode of settlement depends upon the nature of the contract. Equity spot markets follow a T + 2 rolling settlement. This means that any trade taking place on Monday gets settled by Wednesday. Stock, exchange operates from Monday to Friday between 9:55am and 3:30pm. Each exchange has its own clearing house, which assumes all settlement risk.
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Yogita Ingle 4 years, 9 months ago
Capital structure refers to mix sources of long-term finance. Sources of finance include
Share Capital Borrowed fund and Retained earnings. The appropriate proportion of funds is made in such a manner that it can give more benefit or return to the shareholders.
Some of the chief factors affecting the choice of the capital structure are the following:
Cash Flow Position: While making a choice of the capital structure, the future cash flow position should be kept in mind. Debt capital should be used only if the cash flow position is really good because a lot of cash is needed in order to make payment of interest and refund of capital.
Interest Coverage Ratio ICR: With the help of this ratio, an effort is made to find out how many times is the Earning Before Interest and Tax (EBIT) available to the payment of interest. The capacity of the company to use debt capital will be in direct proportion to this ratio. This ratio can be found out with the help of the following formula:
ICR = EBIT/Interest
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