NISM Series XV flashcards
NISM Series XV · Build recall with a focused review session.
33 cards. Read the term and the definition here. The deck at the top of this page is optional.
- Research analyst registration
- SEBI requires registration under the Research Analysts Regulations, 2014 before an individual or firm can issue research reports or recommendations for consideration by clients or the public.
- Net worth requirement
- Individual research analysts and partnership firms need at least INR 1 lakh net worth; bodies corporate and LLPs need at least INR 25 lakh.
- Record retention period
- Research analysts must preserve research reports, recommendations, and supporting records for at least five years after publication, available to SEBI on request.
- Front-running prohibition
- Research analysts must not trade in securities they cover before publishing a recommendation, and must not trade against their own published advice.
- Chinese wall
- An internal information barrier separating research from investment banking and other functions to prevent conflicts of interest from influencing recommendations.
- Current ratio
- Current assets divided by current liabilities; a liquidity measure showing the ability to meet short-term obligations from short-term assets.
- Quick ratio
- Current assets minus inventory, divided by current liabilities; a stricter liquidity measure excluding the least liquid current asset.
- Return on equity
- Net income divided by average shareholders' equity; measures the profit generated per unit of equity capital invested.
- DuPont analysis
- ROE decomposed into net profit margin multiplied by asset turnover multiplied by equity multiplier, revealing the drivers of return on equity.
- Free cash flow to firm
- EBIT times (1 minus tax rate), plus depreciation, minus capital expenditure, minus the increase in working capital; cash available to all capital providers.
- WACC
- Weighted average cost of capital; the blended cost of debt and equity used to discount free cash flows in a DCF valuation.
- Gordon growth model
- Terminal value equals free cash flow times (1 plus growth rate) divided by (WACC minus growth rate); requires growth below the discount rate.
- EV/EBITDA multiple
- Enterprise value divided by earnings before interest, tax, depreciation, and amortisation; a relative valuation multiple neutral to capital structure.
- Price-to-earnings ratio
- Market price per share divided by earnings per share; indicates how much investors pay for each rupee of earnings.
- GDP expenditure approach
- GDP equals consumption plus investment plus government spending plus net exports; a measure of aggregate demand in the economy.
- Repo rate
- The rate at which the RBI lends funds to banks against government securities; a key monetary policy tool influencing liquidity and interest rates.
- Fiscal deficit
- Total government expenditure minus total receipts excluding borrowings; indicates the extent of government borrowing required.
- Porter's five forces
- Industry rivalry, threat of new entrants, threat of substitutes, buyer bargaining power, and supplier bargaining power; a framework for assessing industry attractiveness.
- Beta
- Covariance between a security's returns and market returns divided by the variance of market returns; measures systematic risk relative to the market.
- CAPM
- Expected return equals risk-free rate plus beta times the market risk premium; the security market line plots this relationship.
- Sharpe ratio
- Portfolio return minus risk-free rate, divided by standard deviation of returns; measures excess return per unit of total risk.
- Treynor ratio
- Portfolio return minus risk-free rate, divided by beta; measures excess return per unit of systematic risk.
- Systematic risk
- Market-wide risk that cannot be eliminated through diversification; measured by beta and driven by macroeconomic factors.
- Correlation coefficient
- A measure ranging from minus one to plus one of the linear relationship between two return series; minus one enables a zero-variance portfolio.
- Net present value
- Present value of cash inflows minus the initial investment; a positive NPV indicates the project adds value at the given discount rate.
- Insider trading prohibition
- SEBI regulations bar trading on unpublished price-sensitive information and bar communicating such information to others.
- Rating definitions
- Research analysts must define the criteria for buy, hold, and sell ratings and apply them consistently across reports and time.
- Target price horizon
- A research report must state the time horizon and methodology behind a target price so clients can interpret the recommendation correctly.
- T+1 settlement
- Indian equity trades settle on the next trading day after the trade date, with the clearing corporation guaranteeing settlement.
- Option contract
- A derivative giving the buyer the right, but not the obligation, to buy or sell an underlying at a specified price before expiry.
- Mutual fund NAV
- Total assets minus total liabilities, divided by the number of units outstanding; the per-unit value used for open-ended fund transactions.
- Efficient market hypothesis
- Prices reflect available information; weak form covers past prices, semi-strong covers public information, and strong form covers all information.
- Confirmation bias
- The tendency to seek and interpret information that supports existing beliefs; analysts must actively seek disconfirming evidence to counter it.