# The Knowledge Mine

Q. Who are we? A. We are the guys who are implementing a unique concept…to make people learn more and more and make themselves better individuals… after all, knowledge and intellect are what separate man from ape… So here we ar…

Q. Who are we?

A. We are the guys who are implementing a unique concept.....to make people learn more and more and make themselves better individuals... after all, knowledge and intellect are what separate man from ape.....

So here we are... like Dexter in his laboratory, trying out a novel concept, except that we Dexters work not in a 'Laboratory' but on 'Facebook' :)

Our team is growing and now comprises of, among others, an IIM Ahmedabad guy, an IIM Lucknow guy, an FMS Delhi guy, an IIFT Delhi guy and other like minded individuals.

Join us, give us your feedback... help us reach more people... a socially beneficial service such as ours deserve all the support, doesn't it?

Coming soon... a comprehensive review of all Economics, Finance and Banking topics... from scratch... let us explain these tough nuts to you as if you are a 2 year old (with all due respect) :)

- The knowledge Mine
P/E RATIOS - Post# 1 on Economics, Finance and Banking

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Q. What is the P/E Ratio?

A. P/E Ratio is the Price of a stock divided by the earnings per share of that stock.

In usage, investors use the P/E ratio to indicate how cheap or expensive a stock is. The lower the ratio, the more attractive the stock.

Consider the following example. Two similar firms each have \$1.50 in EPS. Company A's stock price is \$15.00 per share. Company B's stock price is \$30.00 per share.

Company A's P/E ratio = 15.00/1.5 = 10
Company B's P/E ratio = 30.00/1.5 = 20

Clearly, Company A is cheaper than Company B with regard to the P/E ratio because both firms exhibit the same level of earnings, but B's stock trades at a higher price. That is, Company A's P/E ratio of 10 (15/1.5) is lower than Company B's P/E ratio of 20 (30/1.5). Hence, Company A's stock is cheaper.

The terminology one hears in the market is, "Company A is trading at 10 times earnings, while Company B is trading at 20 times
earnings." Twenty times is a higher multiple, which denotes an expensive stock that nobody wants.

Hope it helped....

- The Knowledge Mine

Thanx for starting such a wonderful thread !

I am an MBA student and i feel this thread would explain a lot of basic and unexplained concepts that are normally not touched in classroom teaching but are equally important to move forward with confidence in your subject.

Looking forward to more such concepts which we will be useful not only during interviews, but in our day-to-day life too.

CURRENCY FLUCTUATIONS (With emphasis on Rupee Depreciation)

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Q1. What is depreciation?

A. In simple words. depreciation means a fall in the value of a currency. For instance, when the USD-INR exchange rate moves from Rs 45 per dollar to Rs 50 per dollar, we say that the rupee has "fallen" by 11.11% vis-a-vis the dollar.

Appreciation is the exact opposite.

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Q2. What causes depreciation/ appreciation?

A2. Lets look at the fundamentals :)

Its often a game of Demand and Supply. For example, India exports lots of products to USA. USA pays to Indian exporters in dollars. The Indian exporter collects the dollars and visits his bank to exchange the dollars for rupees. Lets say the prevailing exchange rate is INR 50 . The exporters exchanges 10,000 USD for INR 5,00,000.

But wait, something happened here. The Forex market now has an additional USD 10,000 and fewer INRs. As happens in economics, the addition of surplus USD means more supply. Reduction of INR means more demand.

Next day the same exporter visits the branch again. But the exchange rate is now INR 49.99 . The exporters exchanges 10,000 USD for INR 4,99,900 .

Now while the exporter received lesser INRs than the previous day, the bank received even more USDs. This will bring down the exchange rate further. That is, the USD is depreciating while the INR is appreciating.

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- The Knowledge Mine

- The Knowledge Mine

How much would you rate your CAT preparedness?

Inside a school classroom....

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Ravi - Hey bro, did you hear the news? The school board just made learning a third language compulsory!!! Now we need clear another exam before we get promoted to Class 10... WTF!

Subrat - Hey why are you so worried Ravi? Chill... its just another language... we are capable of learning a lot more....

Ravi - Maybe yes, but where is the time? School, tuitions, homework... and now this...

Subrat - This is nothing yet... I have heard Class 11th is a pressure cooker.... kids have to join a coaching class for some IITEE, AIJEE something... dont remember the exact names but they had lots of Es in them....

Ravi - Oh crap! How are we ever gonna manage? Anyways I am opting for Sanskrit as the third language... We have already studied it for 3 years... its supposed to be easy.. just cram up all the verbs and nouns and you are good to go....

Subrat - Good strategy man... But I am gonna opt for German I think...

Ravi - German? But its a totally new subject for you... why dont you choose Sanskrit which is far easier to score in?

Subrat - Whats the fun in scoring free marks bro? I would rather choose something new and learn to be good at it, than to repeat the things already learned and waste my time....

Ravi - ?

Subrat - Isnt it true that opting for the tried and tested subject won't add any value to your "School" experience? On the other hand, opting for something new may cost me a few marks, but at least I will get an opportunity to learn....

Ravi - ???

Subrat - When it comes to learning, never take the easy way out bro... Yes there is lots of pressure on us... the pressure to score more... the pressure to top the class... the pressure to get 85 plus so that we can opt of Science in class 11... but, what kind of students are we if we can't take a little extra pressure? Even a rubber tyre can carry 4 tonnes, at least we humans only need to carry knowledge....

:)

The Knowledge Mine Attitude
Hot Topic – Globalisation

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Volume of global exports in 1970 – USD 0.4 Trillion (10% of world GDP)

Volume of global exports in 2004 – USD 10.8 Trillion (25% of world GDP)

Quite a big jump. No?

Reason for this jump – Globalisation!

Definition of Globalisation – Globalisation refers to the gradual interlinking of economies on a global level powered by reduction of barriers to international trade such as tariffs, export fees, and import quotas.

Impact – Globalisation almost always results in an increased volume and value of exports and imports. This helps in the following ways (listing just the top 5 reasons):

1. It makes locally unavailable goods available through imports. Example , India imports crude oil.
2. It provides a source of income through exports – Example . China has become “CHINA!” through rapid export led growth.
3. Provides employment to crores in India, crores outside.
4. Earns FOREX for the country.
5. Helps build international reputation and clout.

Hope it helped....

- The Knowledge Mine

An economics professor at a local college made a statement that he had never failed a single student before, but had recently failed an entire class. That class had insisted that Obama's socialism worked and that no one would be poor and no one would be rich, a great equalizer.
The professor then said, "OK, we will have an experiment in this class on Obama's plan". All grades will be averaged and
everyone will receive the same grade so no one will fail and no one will receive an A.... (substituting grades for dollars - something closer to home and more readily understood by all).
After the first test, the grades were averaged and everyone got a B. The students who studied hard were upset and the students who studied little were happy. As the second test rolled around, the students who studied little had studied even less and the ones who studied hard decided they wanted a free ride too so they studied little..
The second test average was a D! No one was happy. When the 3rd test rolled around, the average was an F. As the tests proceeded, the scores never increased as bickering, blame and name-calling all resulted in hard feelings and no one would study for the benefit of anyone else. To their great surprise, ALL FAILED and the professor told them that socialism would also ultimately fail because when the reward is great, the effort to succeed is great, but when government takes all the reward away, no one will try or want to succeed. It could not be any simpler than that.
Remember, there IS a test coming up. The 2014 elections.

These are possibly the 5 best sentences you'll ever read and all applicable to this experiment:
1. You cannot legislate the poor into prosperity by legislating the wealthy out of prosperity.
2. What one person receives without working for, another person must work for without receiving.
3. The government cannot give to anybody anything that the government does not first take from somebody else.
4. You cannot multiply wealth by dividing it!
5. When half of the people get the idea that they do not have to work because the other half is going to take care of them, and when the other half gets the idea that it does no good to work because somebody else is going to get what they work for, that is the beginning of the end of any nation.

Not sure of the original source of this post....

- The Knowledge Mine

What are repo and reverse repo rates?

Repo rate is the rate of interest charged by the central bank when banks borrow money from it. It is the tool through which the RBI in-fuses funds into the system by lending to banks against pledging of securities.The reverse repo is the rate the RBI offers to banks when they deposit funds with it. The RBI drains out liquidity from the financial system through reverse repo by releasing bonds to the banks. This is a daily operation by the central bank to manage liquidity Over a longer time, the RBI can also manage liquidity through open market operations.

What is an interest rate corridor?

Interest rate corridor refers to the window between the repo rate and the reverse repo rate wherein the reverse repo rate acts as a floor and the repo as the ceiling. Ideally, rates in the overnight interbank call money market, where lending and borrowing is unsecured, should move within this corridor. However, when banks are short of funds and the overnight call money rates are high and above the repo rate, banks approach the RBI to borrow under the repo window.

Therefore, the repo rate becomes an effective policy tool as it would help bring down the rates in the overnight market . The reverse hap-pens when money market rates fall below the reverse repo rate. Banks then park surplus funds with the RBI through a reverse repo trans-action. As a result, when there is excess liquidity in the system, the reverse repo is more effective. When liquidity is tight and banks need short-term funds from the RBI to manage mismatches, then the repo rate emerges as the effective policy rate. But if liquidity returns to the system the reverse repo would become the operative policy rate as the RBI would be draining out funds from the system.

Why is a narrow rate corridor desirable?

A narrow rate corridor means that short-term interest rates in the call money market will move within that band. This band was earlier 150 basis points, which has now been lowered to 125 basis points. Effectively, the narrower rate corridor will mean there will be less volatility in short term rates.

Do other central banks also have rate corridors?

Many developing countries have the rate corridors but central banks in developed and deeper financial markets have a single rate. In the US, for instance, the Fed Fund rate is the key interest rate. Short term funds are available at this rate to the eligible borrowers.

@[514501:sudipto792], thanks buddy! Great info... please get in touch with me on FB (search for "The Knowledge Mine" Page)

*** BLACK MONEY***

"There is no uniform definition of black money in the literature or economic theory. In fact, several terms with similar connotations have been in popular fashion, including 'unaccounted income', 'black income', 'dirty money', 'black wealth', 'underground wealth', 'black economy', 'parallel economy', 'shadow economy', and
'underground' or 'unofficial' economy. All these terms u
sually refer to any income on which the taxes imposed by government or public authorities have not been paid.

Such wealth may consist of income generated from legitimate activities or activities which are illegitimate per se, like smuggling, illicit trade in banned substances, counterfeit currency, arms trafficking, terrorism, and corruption.

For the purpose of this document, 'black money' can be defined as assets or resources that have neither been reported to the public authorities at the time of their generation nor disclosed at any point of time during their possession.

This definition of black money is in consonance with the definition used by the National Institute of Public Finance and Policy (NIPFP). In its 1985 report on Aspects of Black Economy, the NIPFP defined
'black income' as 'the aggregates of incomes which are taxable but not reported to the tax authorities'.

Further, black incomes or unaccounted incomes are 'the extent to which estimates of national income and
output are biased downwards because of deliberate, false reporting of incomes, output and transactions
for reasons of tax evasion, flouting of other economic controls and relative motives. "

This detailed definition of BLACK MONEY has been picked out of the White Paper tabled by our former Finance Minister Pranab Mukherjee on 16th May, 2012 in the Parliament of India.
The white paper which was tabled then comprises of 87 pages with many necessary details.

Hope it Helped

-The Knowledge Mine

Library is the heart of every organization. For a learning place, a resourceful library is must for the learners. No institution can be dreamt of without a library. The more resourceful the library the more knowledgeable the students. In this manner GLA University has done a lot for its students. The central library of the University is a sea of knowledge for the students. With a hub of more than 1,00,499 books, over 2,250 CD-ROMs and subscription to more than 145 national and international journals/magazines in print. Not only this a large number of e-journals are also available in the library. The library is highly resourceful and researchfull and is helping the students in each and every phase of learning.