Q. Can you list some of the financial investment or instrument types?
A. Equities, Fixed Income, Futures, Options, Rights/Warrants, Cash, etc.
Q. What are the different investment transaction types?
A. Here are some examples of transaction types for various instrument types like Equities, Fixed Income, etc.
- Equities: Buy, Sell, Sell Short, Cover Short, Cash Dividend, etc.
- Fixed Income: Buy, Sell, Sell Short, Cover Short, Interest Receipt, Reclaim Receipt, Mature, Paydown, Revenue, Expense, Transfer, etc.
- Options: Buy, Sell, etc
- Warrants: Buy, Sell, Expire, Transfer, etc
- Cash: Deposit, Withdrawal, Forward FX, Spot FX, Interest, Transfer, etc.
Q. What do you understand by the term "Portfolio Valuation"?
A. A portfolio in financial terms is set of financial assets such as stocks, bonds, mutual funds and cash equivalents.
Valuation is the process of estimating what something is worth. Items that are usually valued are a financial asset or liability. Valuations can be done on assets (for example, investments in marketable securities such as stocks, options, business enterprises, or intangible assets such as patents and trademarks) or on liabilities (e.g., bonds issued by a company).
Q. What do you understand by the terms GAV (Gross Asset Value) and NAV (Net Asset Value)?
A. The Gross Asset Value (GAV) is the sum of value of asset (e.g. number of shares owned * share price) an entity (e.g. investor) owns. Net asset value (NAV) is the value of an entity's assets less the value of its liabilities.
Q. What do you understand by the terms debit and credit?
Debit = An entry that increases an asset or decreases a liability
Credit =An entry that increases a liability or decreases an asset
Q. What do you understand by the term accruals?
A. The term accrual often used as an abbreviation for the terms accrued expense and accrued revenue, but they have the opposite economic/accounting characteristics.
- Accrued revenue: revenue is recognized before cash is received. For example, a service industry enters a contract for 3 month for which the payment of 50,000 will be made at the end of the 3rd month. In the accounting journal entry, the service industry will enter "accrued billings" as 50K debit (i.e. amount owed), and "consulting revenue" as 50K credit. At the end of the 3rd month, "consulting revenue" will be 50K debit, and "accrued billings" will be 50K credit. This is known as the "double entry" accounting.
- Accrued expense: expense is recognized before cash is paid out. For example, as a business owner, you accrue GST (i.e. Goods and Services Tax) expenses every month, and you pay it off every 3 months. Another example would be to accrue capital gains tax every month, and then pay it off yearly.
Q. What do you do when you are not sure of a financial term?
A. Go to http://www.investopedia.com to get it clarified.