5 Things To Know About Exceptional Items In Company Balance Sheets

In the quarter gone by, a lot of companies reported Exceptional items in their balance sheets. Read the article to understand what you can make of it.

Reading and analyzing a company’s business is no less than an art. It needs careful understanding, especially when you are using it to invest in stocks. It’s not enough to just compare the growth in profits and revenue. It is equally important to know if the trend will continue. For this, one of the things to look for is ‘Exceptional Items’.

·         What Are Exceptional Items

As the name suggests, these are one-off events that either caused a great expense or a big bout of revenue. For example, suppose a company sold off some of its machinery because it did not use it anymore. This led to an income of Rs 1 crore – a big sum for a single transaction. This could easily boost the company’s profits in that particular quarter/year. However, this is not likely to recur again. So, it is counted as an ‘Exceptional Item’.

·         Different From Extraordinary Items

Don’t confuse it, however, with ‘Extraordinary Items’. The key difference lies in whether or not the item is related to the company’s regular operations. Selling machinery (from the previous example) is a part of the company’s operations, although not one conducted every quarter or year. Extraordinary items, however, are not part of the regular operations. For example, a flood damaging company equipment or loss in production due to labour strike can be considered Extraordinary Items.

·         Why Do They Matter

While they may be different, both Exceptional and Extraordinary Items are important. First, it can provide insight into the financial repercussions of certain events and company decisions. For example, Asian Paints reported a Rs 52.5-crore expense due to loss of goodwill related to a company acquisition in its recent result. This is vital information when calculating the profitability of its investment in the new company. Secondly, exceptional and extraordinary items are important while calculating the actual growth in the business.

·         Use In Company Analysis

Exceptional items as well as Extraordinary Items are reported in the Profit and Loss statement. A detailed explanation regarding the nature of the item is given in the notes to accounts. It is in the best interest of the investor to look for recurring profit to make any judgement regarding the performance of the company. To do this, analysts usually adjust the Net Profit or Operating Profit for these items by subtracting the expense/income as well as its tax. The idea is that since these items do not recur on a regular basis so taking them out of the picture is likely to give a truer account of the business.

·         Window Dressing

It is also important that you look at Exceptional and Extraordinary Items. Companies have to give explanations for these Items in their financial reports. That said, it can also be manipulated to make the company’s balance sheet look better. This is called ‘Window Dressing’. So, do read the details of these Items and check for the explanations.

 

The accounting standards define some of the key exceptional items as follows:
 

The write down of inventories to net realizable value

Disposal of items of fixed assets

Disposal of long term investments

Legislative changes having retrospective application like increase in dearness allowance with retrospective effect

Litigation Settlement.

 

 

Why is fixed deposit important

Fixed Deposits

 

 

Why are Fixed Deposits important and what are the advantages?

Fixed Deposits (FD) are the most popular investment options among individuals looking for a safe and secure way to grow their savings. It is a type of Savings Account in which a person deposits a lump sum of money for a specified period, usually from months to several years. In return, the bank offers a guaranteed interest rate higher than the interest rate offered on a regular Savings Account. 

Let us find out why FDs are important and highlight their key advantages. From the stability of returns to the flexibility of investment options, we will explore the factors that make FDs a popular choice for people looking to grow their wealth. 

What is the meaning of a Fixed Deposit?

You deposit a lump sum of money into a Fixed Deposit for a set period at a fixed interest rate. When the Fixed Deposit's term is up, you receive the money you initially put down plus compound interest. 

Who qualifies?

In India, the following entities are permitted to open a Fixed Deposit Account: 

·         Indian nationals

·         NRIs

·         Minors

·         Elderly people

·         Company Partnerships

·         Companies

·         Clubs and Societies

·         Single-person business

·         Investors (alone or in groups).

How does a Fixed Deposit work?

A Fixed Deposit is an investment option with a guaranteed return provided by the banks and enables you to invest a one-time lump sum payment for a pre-determined period and earn a higher interest than a Savings Account. 

Once you deposit money with your bank, it begins to earn interest based on how long the deposit has been there. An FD may last for a duration of seven days to ten years. You can withdraw money from your FD account prematurely. However, there may be a penalty if you do so.

You have flexibility in selecting the tenure of a Fixed Deposit. It can therefore be used as long as you have available finances. The principal sum and interest are credited to the account holder's bank account on the date of maturity by the bank. 

Before investing, you must know the investment and its features, benefits and various types. 

Different types of Fixed Deposits

You need to be aware of the many types of Fixed Deposits offered in the market before you set aside money for one. To learn more, read on:

1. Standard Fixed Deposit

One must commit to a specified period and a fixed interest rate to invest money in a normal Fixed Deposit. A standard Fixed Deposit can be made anytime and the tenure varies from seven days to 10 years.

2. Particular Fixed Deposit

Special FDs are popular among many stakeholders and offer a higher interest rate. Because they are often only given for a limited time, special Fixed Deposits are considered special, if they fall anywhere between 290 and 390 days.

3. Tax-Saving Fixed Deposit

Unlike standard Fixed Deposits, tax-saving Fixed Deposits cannot be reserved for terms shorter than five years. According to section 80C of the Income Tax Act 1961, the sum invested is tax-exempt, but the Fixed Deposit interest earned is subject to taxation.

4. Floater Fixed Deposit

People can benefit from a floating interest rate by investing in a floating Fixed Deposit, which fluctuates quarterly or annually.

The rules set forth by the Reserve Bank of India (RBI) influence changes to interest rates. Fixed Deposits will undoubtedly become more and more popular as banks offer their investors higher interest rates. The principal amount and the way the money develops security, in addition to a promised interest rate, have made Fixed Deposits an alluring investment for Indians. Additionally, it provides individuals with a consistent source of income in the form of interest, which they can either reclaim or reinvest.

Advantages of Fixed Deposits

Read on to learn about the advantages of Fixed Deposits:

1. Assurance of Returns

The certainty of returns is one of the key benefits of investing in a Fixed Deposit Account. You will receive a fixed interest rate on your investment when the FD matures. Compared to other investment options like Mutual Funds, this implies no risks.

2. Convenient to use

You could open a Fixed Deposit Account very easily and quickly. Apply for it online, or request that a bank representative open one for you when you visit the nearest branch.

How long should I make an FD investment?

How quickly you want to reach your financial objective will determine the time you need to invest in an FD. An FD tenure would be suitable for short-term objectives of up to a year, but a tax-saving FD with a 5-year tenure would be better suited for long-term investment objectives.

With a Fixed Deposit, your financial stability is assured. The convenience and ease of use of an FD are its main features. Based on your comfort level, you can choose whether to open an FD online or offline, once you have a basic idea of a Fixed Deposit and how it works.

 

 

Pakistan Rupee VS Indian Rupee

डॉलर क्या खाता है? कि यह इतना मजबूत है | Why Dollar is so strong? | BY ...

DIVIDEND DISTRIBUTION TAX -SECTION 115O

DIVIDEND DISTRIBUTION TAX• The domestic company has to pay dividend distribution tax on any amount declared, distributed or paid by such company by
way of dividend.• The rate of dividend distribution tax is 15% (plus applicable surcharge and cess)• Dividend received from domestic company is not taxable in hands of shareholders.• Deemed divided received under section 2(22)(e) from an Indian company or any dividend received from a foreign company is
taxable in hands of shareholders. Dividend Distribution Tax is hence, not applicable on Deemed Dividend• Surcharge for Dividend payments from 1.4.2015 is 12%. Education cess for is 3%.Amendment in S.115­O w.e.f Assessment Year 2015­16Subsection 1B is introduced w.e.f Assessment year 2015‐16 wherein, the Rate of Dividend Distribution Tax shall be Grossed up on the
Amount of Dividend Declared. The dividend declared minus the DDT is now termed as Net Distributable Profits.
The computation of Dividend Distribution Tax shall be as below –

Particulars	Calculation
Net Distributable Profit	100
Add: Dividend Distribution Tax	17.64706
Distributed Profit	117.64706

Question1. What is the formula for grossing up the DDT?
2. What is the Rate of DDT including Surcharge and Education Cess?
3. What is the DDT if the Net Distributable Profit [after DDT]is Rs.1,00,000/‐Answer1. The formula for grossing up the DDT isNet Distributable Profit of 100 divided by 0.85 = 117.64706 [Distributable Profit]2. The Rate of DDT including Surcharge and Education Cess is 20.35765%
Calculation as below‐

Dividend Distribution Tax [As computed under Question 1]	17.64706
Add: Surcharge @12%	2.11765
19.76471
Add: Education Cess @ 3%	0.59294
DDT including Surcharge and Education Cess	20.35765

3. The Dividend Distribution Tax on Distributable profit of Rs.1,00,000 is Rs. 20,357/‐The essence behind this computation–A company will have cash profit to be distributed to the tune of Rs.1,20,357/‐ Such a company, pays DDT of 20,357/‐ and the
Net distributable profit of Rs.1,00,000 is paid to the shareholders as dividend

DIFFERENCE BETWEEN SHARE AND STOCK

Key Differences Between Share and Stock

The principal points of difference between share and stock are as follows:

1.       A share is that smallest part of the share capital of the company which highlights the ownership of the shareholder. On the other hand, the bundle of shares of a member in a company, are collectively known as stock.

2.      The share is always originally issued while the original issue of Stock is not possible.

3.      A share has a definite number known as a distinctive number which distinguishes it from other shares, but a stock does not have such number.

4.      Shares can be partly paid or fully paid. Conversely, Stock is always fully paid.

5.      Shares can never be transferred in the fraction. As opposed to stock, can be transferred in the fraction.

6.      Shares have nominal value, but the stock does not have any nominal value.