Working Capital financing.

A firm's working capital is the money available to meet current obligations (those due in less
than a year) and to acquire earning assets. China-trust Commercial Bank offers corporations WorkingSolved Assignments for
Rs.150 each Mail me at: subjects4u@gmail.com or at 08627023490 Fall-2013 Master of Business Administration - MBA Semester 4
MF0017Merchant Banking and Financial Services-4 Credits (Book ID: B1815) Assignment (60 Marks) Note: Answers for 10 marks
questions should be approximately of 400 words. Each question is followed by evaluation scheme. Each Question carries 10 marks

6 X 10=60.
Q1. Explain the concept of merchant banking. Give a small introduction on book building and write about the methods and

guidelines for book building.

Answer. Merchant Banking is a combination of Banking and consultancy services. It provides consultancy to its clients for
financial, marketing, managerial and legal matters. Consultancy means to provide advice, guidance and service for a fee. It helps a
businessman to start a business. It helps to raise (collect) finance. It helps to expand and modernize the business. It helps in
restructuring of a business. It helps to revive sick business units. It also helps companies to register,
Merchant Banking is a combination of Banking and consultancy services. It provides consultancy to its clients for
financial, marketing, managerial and legal matters. Consultancy means to provide advice, guidance and service for
a fee. It helps a businessman to start a business. It helps to raise (collect) finance. It helps to expand and
modernize the business. It helps in restructuring of a business. It helps to revive sick business units. It also helps
companies to register, buy and sell shares at the stock exchange. In short, merchant banking provides a wide
range of services for starting until running a business. It acts as Financial Engineer for a business.
The functions of merchant banking are listed as follows:

Raising Finance for Clients

Broker in Stock Exchange

Q2. Explain the whole concept of issue management which includes pre-issue and post issue management.

Answer. The phrase issue management was coined by Howard Chase in April of 1976. Throughout the 1950s and 1960s
in his role as a corporate PR officer, Chase was fascinated with the increasing influence that outside forces exerted on corporations.
Chase was convinced that there exists within the company a group of professionals with the network of relationships in place that
could alert the organization early on that an issue was brewing. The resulting lead time could enable the company to better respond
when trouble hit.

Introduction of issue management :

Issues or issue management refers to the systematic examination of an organization (usually companies,
public authorities, political parties, associations, etc.), with their environmental concerns. Its about the
public to identify emerging, organization relevant issues early and to react accordingly. This can be
through participation in shaping public opinion or done by adapting the organization policy. In addition, an
organization also includes measures to bring subjects even in the public debate, the issue management.
The term is also used in the project management and the software testing is used. There are, for
example, the problem management , the task of management or the management and processing of
reported errors so designated.

Q3. Financial services are of several kinds. Financial services are divided into two extensive categories. Explain in detail
both the categories of financial services.
Answer. Fund Based Services:

 2. Capital Finance to meet their operating expenses, purchasing inventory, receivables financing, either by direct funding or by
issuing letter of credit. Key Benefits:1. Funded facilities, i.e. the bank provides funding and assistance to actually purchase business
assets or to meet business expenses.
A. Fund based financial services:

1. These Involve provision of funds against assets, bank deposits, etc.

2.Fund based income comes mainly from interest spread (the difference between the interest earned and interest
paid), lease rentals, income from investments in capital market and real estate
3. Major part of the income is earned through fund-based activities. At the same time, it involves a large share of
expenditure also in the form of interest and brokerage.
1.Equipment leasing :

A lease is an agreement under which a company or a firm acquires a right to make use of a capital asset like
machinery, on payment of a prescribed fee called rental charges. Long-term.

Q4. Give the difference between Bank Vs Depository. Explain the functions performed by depository.
Answer. Bank: A bank is a financial institution and a financial intermediary that accepts deposits and channels those deposits into
lending activities, either directly by loaning or indirectly through capital markets. A bank links together customers that have capital
deficits and customers with capital surpluses. The place where a deposit is placed and kept, e.g., a bank, savings and loan
institution, credit union, or trust company. A place where something is deposited or stored as for safekeeping or

Ans : Differences between bank and depository :

Powered By AlbireoOn the simplest level, depository is used to refer to any place where something is deposited for
storage or security purposes. More specifically, it can refer to a company, bank or an institution that holds and
facilitates the exchange of securities. Or a depository can refer to a depository institution that is allowed to accept
monetary deposits from customers. Central security depositories allow brokers and other financial companies to
deposit securities where book entry and other services can be performed, like clearance, settlement and securities
borrowing and lending. On the other hand ,
A bank is a financial institution and a financial intermediary

Q5. Give the introduction of leasing with an example. Explain all the four types of leasing.
Answer. Leasing is a process by which a firm can obtain the use of a certain fixed assets for which it must pay a series of
contractual, periodic, tax deductible payments. The lessee is the receiver of the services or the assets under the lease contract and
the lessor is the owner of the assets. The relationship between the tenant and the landlord is called a tenancy, and can be for a fixed
or an indefinite period of time (called the term of the lease). The consideration for the lease is called rent. A gross lease is when the
tenant pays a flat rental
ns : Introduction of leasing with example :

Leasing is a process by which a firm can obtain the use of a certain fixed assets for which it must pay a series of
contractual, periodic, tax deductible payments.
The lessee is the receiver of the services or the assets under the lease contract and the lessor is the owner of the
assets. The relationship between the tenant and the landlord is called a tenancy, and can be for a fixed or an
indefinite period of time (called the term of the lease). The consideration for the lease is called rent.

Example:

Powered By AlbireoSuppose the AB company takes a new automobile on lease for three year. Also assume that at the
end of three years the AB company will be called to take the ownership of vehicle at no extra cost. Here not only
the vehicle is taken on lease but also the AB company is using the lease agreement as a means of financing the
automobile.

Explanation all the four types of leasing :

Q6. Write about the concept of securitization and its features. Explain the process of securitization of debts and its advantages.
Answer. Securitization is the process of taking an illiquid asset, or group of assets, and through financial engineering, transforming
them into a security. The process through which an issuer creates a financial instrument by combining other financial assets and
then marketing different
Introduction of securitization :

Securitization is the financial practice of pooling various types of contractual debt, such as residential mortgages,
commercial mortgages, auto loans, or credit card debt obligations, and selling said consolidated debt as passthrough securities, or collateralized mortgage obligation (CMOs) to various investors. The cash collected from the
financial instruments underlying the security is paid to the various investors who had advance money for that right.
Securities backed by residential mortgage receivables are called residential-mortgage-backed securities (RMBS),
while those backed by other types of receivables are asset-backed securities.

Features of securitization :

1. Marketability: