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MANAGEMENT

MANAGEMENT Definition: A set of activities planning, organizing, staffing, leading and controlling to achieve the organizational goals. or Management is the process of designing and maintaining an environment for efficiently accomplishing selected aims. or Set of activities (planning, organization, leading,controlling) directed at an organization resources (finance, human, physical and information) to achieve the organizational goals in an effecient and effective manner is called management. Efficient: The efficient mean do work be fore the due date. Effective: To complete the work in time. eg. if we say someone to complete task in 10 days and he complete the task in 10 days no more or no less that person called effective person. Manager: A person who perform all organization activities are called manager. Management Resoureces: There are four basic management resources. Finance Human Physical Information Finance: Finance mean the assets like as C...
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MARKOWITZ MODEL

MARKOWITZ MODEL Portfolio Selection: If number of portfolio we use this method to select the portfolio. for example groups of protfolios sample A:  NBP, Nestle B:  NBP, Nestle, MCB C:  Lucky, Nestle Feasible Set of Portfolio: The number of portfolio which are available for their selection Efficent Portfolio: (Max. return, less risky) The portfolio which is selected from the feasible set of protfolio. Decision Rules 1: If the different portfolio have same return then we select that portfolio who's risk is minimum. Decision Rules 2: If the different protfolio have same risk then we should select that portfolio who's return is maximum. Draw Back: This model just focus only those portfolio who's return are same or risk are same. It ignore the other portfolio. Example: No. of Portfolio          Return          Risk A                       ...
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CAPM MODEL (CAPITAL ASSET PRICING MODEL)

According to this model company have to face two main types of risk. Risk= Systematic + un-systematic Systematic Risk: The risk face by the company due to its external environment is called systematic risk. This risk cannot be controled by the company. Example: Pocitical instability, war in the country, energy crises in the country etc. Un-Systematics Risk: The risk face by the company due to its internal environment is called un-systematic risk.This risk can be conroled by the company. Example: shortage of employees, Clash between the management etc. CAP MODEL: A model which shows the relationship between the systematic return and not shows un-systematic. _ R = R f + ( R m - R f) x    β (beta) _ R = Return (expected) R f = Risk free Return The minimum return which is desire by the investor R m = Market Return The return which is provided by the market β = systematic Risk Note = when minimum then always keep the Rf value less and Rm val...
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ANALYSIS OF COMMON STOCK VALUATION

COMMON STOCK VALUATION METHODS Investor can use two methods for common stock valuation in which investor try to find out expected risk or return. Dividend Discount Model Dividend Growth Model In these method first we find out the expected value and then compare with actual value and then take the decision we should buy the security or not. these are mostly risky investment. Dividend Discount Model: V = D1/(1 + ke)1 + D2/(1 + ke)2 + ........ Dn/(1 + ke)n Discounting: The present Value of future amount is called Discounting. Example: Suppose V=37 Expected Value or its also called Intrinsic value MV= market value Rules: if Intrinsic Value  > MV   then buy the security                      suppoes  IV=37             MV=  32 If Invrinscic (IV) < MV  then not buy the security suppose   IV = 37     MV = 40 ...
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RISK AND RETURN OF AN INDIVIDUAL SECURITIES

RISK AND RETURN OF AN INDIVIDUAL SECURITIES In this analysis we do only one securities analysis Return Formula: =Cash Payment received (interest + dividend) + Difference between the price (capial gain) ------------------------------------------------------------------------------------------ x 100                                       Purchasing price of the security Example: suppose Pepsi Purchasing price = 25 Dividend / yield = 2 Selling price = 28 =    2 + 3      --------  x  100        25 = 20%  Return return can be  (+ ve) (- ve) or zero 2nd METHOD: If probability is given  in the question E(R) =  ∑ R x P E(R)=Expected Return R = total return P = probability ∑ = Sum Example: pepsi security Year:     1991 ,           1992 , ...
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RISK PORTFOLIO ANALYSIS

RISK PORTFOLIO ANALYSIS For risk analysis we use the correlation and we check the variable dependable or nondependable each others. Rules: If variables answers will be (+ve) then variable dependable or if the variables answer are (-ve) then nondependable. (+ve) risky protfolio (-ve) less risky protfolio Correlation: It show the relationship between two or more than two variable If the answer of the correlation is positive it indicate that the securities in the portfolio are depend on each other and this protfolio is a risky portfolio. If the answer of correlation is negative it indicate that the securiteis in the protfolio are not depend on each other and this protfolio is called less risky protfolio. Example: A group securities       NBP , Nestle     answer (+0.05) B group Securites       Lucky, NBP      answer ((-0.03) Decision: risk taker will choose option A risk avioder will choose option B S.D = ri...
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RETURN PORTFOLIO ANALYSIS

RISK AND RETURN  PORTFOLIO ANALYSIS To check how much return and risk will be faced by investor on portfolio investment is called risk and return protfolio analysis In this question we show only how to calculate return. Suppose after analysis we get these results     Pepsi E(R) = 12%    S.D= 9%        amount=50000 Nestle E(R) = 20%  S.D= 12%       amount=30000 Lucky Cement = E(R) = 10%  S.D= 5%     amount=20000 what will be tatal risk and return? Portfolio Return: R p = ∑W x  E (R)  Rp = Return on portfolio E(R) = Expected return ∑W = weights what formula will be for three securite return calculation Rp = Wa x  E (R)a + Wb x  E (R)b +Wc x  E (R)c Weight: The portion of your investment amount invest in a single security is called weight. Weight of single security = single security amount / total all securities amount Tatal amount = 50000 + 300...
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