What is time value of Money

Time Value of Money: - Today’s money is more valuable than money will be received in tomorrow. This is called time value of money. Due to inflation the purchasing power of money declines day by day that’s why today’s money is more valuable than tomorrow’s.

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What are Money market and capital market?

Money Market: - Money market is a market for short term financing. Short term securities are traded here. Generally commercial banks make money market.

Capital market: - Money market is a market for long term financing. Capital market is a market where long term securities are traded. Bond market, Share market are example of capital market.

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What is retention ratio?

 Retention Ratio:-

Corporations Payout a portion of their earnings as dividend to the shareholders and retain a portion of earnings as retained earnings. The portion of earnings retained with the company divided by net income is called retention ratio. 

For example XYZ a company has BDT 1, 00,000 as net income. It retained BDT 60,000 as retained earnings within the company so the retention ratio of XYZ Company will be-

Retention ratio = Net income - Dividend / Net income

                       = 100000 - 40000/100000

                       = 60000/100000

                       = 60%

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What is dividend Payout Ratio?

Dividend Payout Ratio:-

 

Corporations Payout a portion of their earnings as dividend to the shareholders and retain a portion of earnings as retained earnings. The portion of earnings paid as dividend to the shareholders divided by net income is called dividend payout ratio. 

For example XYZ a company has BDT 100000 as net income. It distributes BDT 40000 as dividend to its common shareholders so the dividend payout ratio of XYZ Company will be-

Payout ratio = Dividend / Net income

                   = 40000/100000

                   = 40%

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What are primary market and Secondary market

Primary Market:-

Primary market is a market for issuing new securities by companies.

Secondary Market:-

Secondary market is a market where already issued securities are traded among investors.

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