Question

Write short notes on the following concepts

1. Return on investments
2. Re-purchase agreement
3. Salvage value
4. Secondary issue
5. Secondary market
6. Accrued interest
7. Acid-ratio-test

Answer 1

Ans A)
Return On invetment is return earned on capital invested over a given period of time. This is the important project selection criterion to be considered. For an instance if we have "N" number of projects to choose from and if Nth project estimates to provide highest RoI then that Nth project to be selected.

Return on Investment=Cash flow generated/ Capital Invested

Ans B)

Repurchase agreement is the agreement done between two parties where one party promises to buy back the assets sold by him now. For an instance central banks sells securities to other banks with the promis to buy back them from these banks.

Ans C)

Salvage Value is the value left with the asset after the useful life of it. That means Market Value-Sum of Annual Depreciation=Salvage Value.

Ans D)

Secondary market is the type of market in which previously issued stocks or assets in Primary markets are made available to buy or sell to investors. It helps investor with multiple avenue of investments that are missed in Primary markets.

Ans F)

Acid test ratio=Current Assets- Equity/Current Liabilties

It gives measure to identify whether firm has sufficient short term assets to cover immeidtae liabilities