Wednesday, April 14, 2010

FIN254: Project FAQs!

Please find here answers to some commonly asked questions about the FIN254 Project. Hope you would be benefited.

Q1: I am not sure of the term 1B:5 of B/R column. Will you please explain it sir?

Ans: 1B:5 means 1 bonus share against 5 shares which is equivalent to 20% bonus share. Similarly 1B:2 would mean 50% bonus share.

Q2: I have a problem with interim dividends. Please tell me how to handle that information.

Ans: You probably noticed some MNCs offering interim dividends or multiple dividends in the same period. In such cases you would most commonly see cash dividend declarations. In these types of cases you may add up the cash dividend percentages and use the last div declaration date as dividend declaration date for all dividends.

Q3: How to use the BLUE cells for "Post-Div. Declaration Date" and "close price" in the autocalculation worksheet?

Ans: Please consider post-dividend date to be the date after two months of the dividend declaration date. If in some cases, post-dividend date goes to the next period, then consider the last trading date to be the post-dividend date. Insert close price of that date. Please look at the sample for easy reference and a clearer idea.

Q4: Where do we get face value of a stock?

Ans: You will find it in the company information that you are required to copy from DSE website for each of the assigned stocks in the first worksheet of the excel file. 

Q5: Sir, if 1B:5 is 20% bonus issue.Then how do we calculate the bonus % for 1B:7 and 1B:14?The percentages are in decimals; however when the value is filled in the dividend cell it is automatically converted to a whole number, for e.g it changes from 14.28% to 14%. Is this correct?

Ans: You are correct. 1B:7 and 1B:14 are equivalent to 14.29% and 7.14%. Don't bother about the auto-rounding. Formula will take decimals into consideration.

Q6: How to use excel findings in the Report template file?

Ans: Try to find out the reasons behind their performance. Let me give you some hints about possible reasons behind stock performance. Most common reasons should be the level of dividends companies declare and side by side the earnings they make. Usually better performance should be directly related to high level of dividends and satisfactory operating success, that is, their high earnings, and vice versa.

Q7: I want to know that what is the meaning of "10%B, 1R:5". Should i consider it as stock dividend... how could i can input 1R:5.....i want to know clearly what should dividend should considered as cash dividend and stock dividend? 

Ans: R is for right declaration and you should avoid that as additional investment would be required for right share. You would only consider cash and stock dividends. If you notice there are two columns for dividend information, one is "Dividend %" which is for cash dividend, and another is B/R which is for stock dividend and right. 10%B, 1R:5 means 10% stock dividend and 20% right. You would only consider the 10% stock dividend portion and avoid the rest.

Q8: What do I do if there is no dividend declaration date but dividend information is there? 

Ans: Companies usually declare their dividends around the same time every year. What you can do is to take average of previous period date and later period date.

Q9: Sir, in the ACI Formulations I cannot find the dividends. if you check the file DIV. ARCHIVE then you will notice.

Ans: They were recently listed with DSE. However, they did declare dividend last year. Please check again 10% cash and 20% stock.

Q10: Sir, i am working on the project for the powergrid co. It has two dividend declarations dates and two different dividends declared in those dates....sir, can you please tell me how can I deal with this problem?

Ans: The initial 10% cash dividend was for 2005-06 fiscal year and the next 25% was for 2006-07 fiscal. What you can do is to add them up and use the later dividend declaration date. That means you count 35% cash dividend and use the 13 Nov 07 as the dividend declaration date. Use the last trading day to be the post dividend date.

Q11: Sir, I am having some problem with the project. For Desh Garments last Close Price given is of 14-12-02. Should I take it as the end CP of DEC 2002?

Ans: Yes, you are correct. End of Dec closing price of a scrip in any year does not necessarily mean trading on the last day of December of that year. Your project requires you to pick the last closing price in a particular year. If a particular scrip was last traded on the 14th of Dec in 2002, then let it be. Use that to be the Year-end closing price. You may even find a scrip which was not at all traded in the month of December. In that case, the Year-end closing price might be the closing price of last trading day, even if it was in Nov or earlier. 

Q12: Are we just required to comment on the cumm. and average return for the various companies in the word file? Do I mail you both the excel and the word file (softcopies) only?

Ans: Exactly! You are required to discuss the findings and compare stock performances in the word file. You should email me six files: five excel files (one for each stock) and one word file with the discussion on the findings and analysis.

Q13: What do "1B:4,1R:2", "5%(1B:20)" and "35%B,1R:2" mean? I know what individually 1B:4 means and what 30%B means, but i don't know what the "R" term means and how to interpret them together.

Ans: They mean the same thing together. For example, "1B:4,1R:2" means 1 bonus share against 4 shares (or 25% bonus share) and 1 right share for 2 shares (or 50% right share). When the companies announce this type of declaration, they also announce different record dates for bonus and right shares to be effective. To learn more you may browse through the news section of DSE website.

Q14: What do you think about my stock .........? I am having this type of problem with it? What to do with it?

Ans: Please don't use the blog to ask me specific share related problem. In that case, email me directly. It's not practical to post solutions to hundreds of such individual stock related problems here. Hope you would understand. Thank you.

Q15: Sir, I am facing problem regarding the word report file. Can you send a sample please?

Ans: There is no such sample. This is a subjective part of your project. You are independent to discuss about your findings in any way you feel appropriate. This is your own findings. Use your imagination, please!!! 

I provided answer to a similar questions earlier. Here is additional guideline… You may talk about your investments in five companies. Compare the performances of the companies you invested in. Tell me which companies gave you better returns and what may be reasons (probably they gave higher dividend regularly etc.) and which companies could not give a decent return and why (may be they were irregular in their dividend payments or they never gave any dividends at all etc). What may be your recommendation (choosing a right company for investment) to a new investor in the capital market based on your findings and learning from this project?

Q16: Though I have office 2007, I am not being able to open the Xl files.

Ans: I don't know why you are having problem with the project files. Make sure you have MS Excel 2007 installed in your computer. You may also try downloading the files again. If you still face the problem get the files from the resource drive.

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