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Demystifying Finance - BQuest Times


BQuest Financial Times

With CAT-XAT-IIFT-SNAP-TISS already on its way, it won’t be much longer before you’re donning your business formals and attending the GD-PI process of these prestigious B-Schools. The basic expectation from an aspiring manager for one of the top B Schools through CAT, XAT, IIFT etc. is for them to be adept with the most basic finance terms. BQuest brings for you your weekly dose of finance preparation for the upcoming GD-PI. Let’s start with first identifying what are these most commonly used words and what they mean.


Earnings Per Share: Earnings per share (EPS) measures net income earned on each share of a company's common stock. The company's analysts divide its net income by the weighted average number of common shares outstanding during the year.

Price-to-Earnings Ratio (P/E): P/E Ratio = Price per Share / Earnings Per Share
What it means:     price-to-earnings ratio is effectively the price you'll pay for Rs. 1 of earnings. A very, very general rule of thumb is that shares trading at a "low" P/E are a value, though the definition of "low" varies from industry to industry. 

Price-to-Book Ratio (P/B) : P/B Ratio = Price per Share / Book Value per Share    
Book value (BV) is already listed on the balance sheet as shareholder equity. Dividing book value by the number of shares outstanding gives you book value per share.

Equity: Generally speaking, equity is the value of an asset less the amount of all liabilities on that asset. It can be represented by the accounting equation: Assets - Liabilities =  Equity.

Debt to Equity Ratio: Debt-to-Equity Ratio = Total Liabilities / Total Shareholder Equity
The debt-to-equity ratio measures the relationship between the amount of capital that has been borrowed (i.e. debt) and the amount of capital contributed by shareholders (i.e. equity).
Generally speaking, as a firm's debt-to-equity ratio increases, it becomes riskier because if it becomes unable to meet its debt obligations, it will be forced into bankruptcy. 

 Bond: A written promise made by governments and companies to repay any money borrowed, with interest, on a certain date in the future

Credit: Money that a bank, building society or a credit card company has lent a person to buy goods or services

Debit: A payment from an account or the cost of buying goods or services


Watch out this space for regular updates.
BQuest will take care of your GK and GD-PI Preparation. Your partner in success. 

About the Author: Sanket works as Financial Advisor at a Wealth Management Firm in Dubai, UAE. He has scored 99.76 percentile in CAT, 99.89 in XAT and 99.54 in IIFT. His tryst with Aptitude and GK extends back to clearing SBI PO and other Banking exams. Extending his hobby of giving ‘Gyaan’, he is ready to be a part of your journey to a Top B-School.

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