Investment means a monetary commitment- lay person
Investment is the net addition made to the nation’s
capital stock that consists of goods and services that are used in production process - Economist
Investment is the allocation of money to assets that are
expected to yield some gains over a period of time - Finance Investment involves employment of funds with the aim of achieving additional income or growth in values. Lending money to another [interest] Purchasing of gold[value appreciation] Purchase of insurance plan[promised future benefits]
“A commitment of funds made in the expectation of some
positive rate of return”
“A sacrifice of current money or other resources for future
If the share value is 50/- initially. We hold it up to one year.
The divided for month is 5/- and at the end the year we sold that share at 60/-. What is our return on investment? Investment is something that is purchased with money that is expected to produce income or profit It commonly referred to as common stock or ordinary shares. Equity shares are the main source of finance of a firm. It is issued to the general public. Equity shareholders do not enjoy any preferential rights with regard to repayment of capital and dividend.
They are permanent in nature
Equity shareholders are the actual owners of the company and they bear the highest risk Equity shares are transferable Equity shareholders do not get fixed rate of dividend Equity shareholders have the right to control the affairs of the company The liability of equity shareholders is limited to the extent of their investment. New issue(IPO). Bonus issue. Right issue.(Sec 81 of Companies Act, 1956) Sweat issue(Sec 79A of Companies Act, 1956 & SER 2002 SEBI) Preferred stock is hybrid in nature It receives fixed amount of income as dividend It is perpetual liability of the corporate These shares holders do not enjoy any of the voting powers. Return of preference share capital before the return of equity share capital at the time of winding up of the company.
Cumulative Preference Shares
Non-Cumulative Preference Shares Redeemable Preference Shares Non-Redeemable Preference Shares Convertible Preference Shares Non-Convertible Preference Shares Cumulative Convertible Preference Shares A Bond is a long-term debt instrument that promises to pay a fixed annual sum as interest for a specified period of time. Bonds have a face value and interest rate. The maturity date of the bond is usually specified at the time of issue. The redemption value is also stated in the bonds. Bonds are traded in the stock market
Secured Bonds and Unsecured Bonds
Perpetual bonds and redeemable bonds Fixed interest rate bonds and floating interest rate bonds Zero coupon bonds Debentures are generally issued by the private sector companies as a long term promissory note for raising loan capital. The company promises to pay interest and principal as stipulated.
Debenture holders are the creditors of the company carrying
a fixed rate of interest. Debenture is redeemed after a fixed period of time. Debentures may be either secured or unsecured. Interest payable on a debenture is a charge against profit and hence it is a tax deductible expenditure. Debenture holders do not enjoy any voting right. Interest on debenture is payable even if there is a loss. Ordinary Debenture Mortgage Debenture Non-convertible Debentures Partly Convertible Debentures Fully Convertible Debenture Redeemable Debentures Irredeemable Debenture