BA9258 Merchant Banking & Financial Services MBA Question Bank : sriengg.com
Name of the College : Srinivasan Engineering College
University : Anna University
Department : Management Studies
Degree : MBA
Subject Code/Name : BA9258 Merchant Banking & Financial Services
Year : 2nd
Semester : 3rd
Document Type : Question Bank
Website : sriengg.com
Download Model/Sample Question Paper :
Question Bank Part-A : https://www.pdfquestion.in/uploads/sr…-TWO-MARKS.pdf
Question Bank Part-B : https://www.pdfquestion.in/uploads/sr…MBFS-16MKS.pdf
Merchant Banking & Financial Services Question Paper
1.What is merchant banking: :
A bank that deals mostly in (but is not limited to) international finance, long-term loans for companies and underwriting. Merchant banks do not provide regular banking services to the general public.
Related : Srinivasan Engineering College BA9254 Advertising & Sales Promotion MBA Question Bank : www.pdfquestion.in/3235.html
2.What is OTCEI: :
‘Over-The-Counter Exchange of India an electronic stock exchange based in India that is comprised of small- and medium-sized firms looking to gain access to the capital markets. Like electronic exchanges in the U.S. such as the Nasdaq, there is no central place of exchange and all trading is done through electronic networks
3. What do you mean by private placement: :
The sale of securities directly to an institutional investor, such as a bank, mutual fund, insurance company, pension fund, or foundation. Does not require SEC registration, provided the securities are bought for investment purposes rather than resale, as specified in the investment letter.
4. How is forfeiting different from export factoring: :
Forfeiting and factoring are services in international market given to an exporter or seller. Its main objective is to provide smooth cash flow to the sellers. The basic difference between the forfeiting and factoring is that forfeiting is a long term receivables (over 90 days up to 5 years) while factoring is short termed receivables (within 90 days) and is more related to receivables against commodity sales.
5. Define green shoe :
A provision contained in an underwriting agreement that gives the underwriter the right to sell investors more shares than originally planned by the issuer. This would normally be done if the demand for a security issue proves higher than expected. Legally referred to as an over-allotment option. A green shoe option can provide additional price stability to a security issue because the underwriter has the ability to increase supply and smooth out price fluctuations if demand surges
6. What is book building: :
The process of determining the price at which an Initial Public Offering will be offered. The book is filled with the prices that investors indicate they are willing to pay per share, and when the book is closed, the issue price is determined by an underwriter by analyzing these values.
7.Who is an issue manager: :
The issue can be through offer of sale or private placements, prospectus, and so on. The issue management includes the following functions with respect to issue through prospectus :
** To obtain approval for the issue from the SEBI.
** To arrange underwriting for the proposed issue.
** To draft and finalise the prospectus and to obtain clearance from the stock exchange, auditors, underwriters and registrar of companies.
** To select registrar of the issue, advertising agencies, underwriters, bankers and brokers to the issue and finalise the charges to be paid to the registrar.
** To arrange press conferences, and investors and brokers through advertising agency.
8.What do you know about the IPO method of marketing securities :
IPO (Initial Public Offer) is a type of public issue of securities where an unlisted company makes a fresh issue of securities or an offer for sale of its existing securities for the first time to the public.
9. Define underwriting :
A significant intermediary in issue market is the underwriters to issue of capital who take up securities which are not fully subscribed. Underwriter is a person who agrees to take up shares specified in the underwriting agreement of the public, who fails to subscribe them. SEBI has allowed merchant bankers and registered underwriters to act as underwriters. To act as underwriter, a certificate of registration must be obtained from SEBI. The underwriter makes profit on the difference between the public offering price and the price paid to the issuer; and that is called the underwriting spread or price spread. Underwriters are appointed by the issuing companies after consulting with the merchant bankers to the issues
10. Write short note on bankers to an issue :
The bankers to an issue engage in activities such as acceptance of applications along with the application money from the investors with respect to issues of capital and refund application of money. Bankers to an issue accept applications with the subscriptions offered at their designated branches and forward them to the registrar in agreement with instructions issued to them. They undertake publicity to the issue by distributing publicity material, prospectus and application forms. They are entitled for brokerage on shares allocated against applications bearing their stamps. In case of large issues, sufficient numbers of banks with branches at major centres are appointed. According to SEBI regulations, registration of bankers to issues with SEBI is compulsory. Under the regulations, inspection of bankers to an issue is done by Reserve Bank on request from SEBI.
11.Write short note on brokers to an issue :
Brokers are mainly concerned about obtaining the subscription to the issue from the prospective investors. The appointment of brokers is not compulsory. Members of established stock exchange are appointed as brokers to issue. Companies are permitted to appoint any number of brokers. The official brokers together with the managers to the issue coordinate the preliminary distribution of securities and acquire direct subscription from many investors. The stock exchange laws prohibit the members from acting as brokers to the issue. The stock exchange grants permission to the members if the members give their approval and the company conforms to the requirements and undertakes to have its securities listed on a recognized stock exchange. The company appoints the broker to the issue at every centre where stock exchanges are located.
12.Securities underwriting :
Securities underwriting refers to the process by which investment banks raise investment capital from investors on behalf of corporations and governments that are issuing securities (both equity and debt capital). This is a way of selling a newly issued security, such as stocks or bonds, to investors. A syndicates of bank (the lead managers) underwrite the transaction, which means they have taken on the risk of distributing the securities. Should they not be able to find enough investors, they will have to hold some securities themselves. Underwriters make their income from the price difference (the “underwriting spread”) between the price they pay the issuer and what they collect from investors or from broker-dealers who buy portions of the offering.
13.Risk, exclusivity, and reward :
Once the underwriting agreement is struck, the underwriter bears the risk of being unable to sell the underlying securities, and the cost of holding them on its books until such time in the future that they may be favorably sold. If the instrument is desirable, the underwriter and the securities issuer may choose to enter into an exclusivity agreement. In exchange for a higher price paid upfront to the issuer, or other favorable terms, the issuer may agree to make the underwriter the exclusive agent for the initial sale of the securities instrument. That is, even though third-party buyers might approach the issuer directly to buy, the issuer agrees to sell exclusively through the underwriter.
14.Bank underwriting :
In banking, underwriting is the detailed credit analysis preceding the granting of a loan, based on credit information furnished by the borrower, such as employment history, salary and financial statements; publicly available information, such as the borrower’s credit history, which is detailed in a credit report; and the lender’s evaluation of the borrower’s credit needs and ability to pay. Examples include mortgage underwriting. Underwriting can also refer to the purchase of corporate bonds, commercial paper, government securities, municipal general-obligation bonds by a commercial bank or dealer bank for its own account or for resale to investors. Bank underwriting of corporate securities is carried out through separate holding-company affiliates, called securities affiliates or Section 20 affiliates.
15.Insurance underwriting :
Insurance underwriters evaluate the risk and exposures of potential clients. They decide how much coverage the client should receive, how much they should pay for it, or whether even to accept the risk and insure them. Underwriting involves measuring risk exposure and determining the premium that needs to be charged to insure that risk. The function of the underwriter is to protect the company’s book of business from risks that they feel will make a loss and issue insurance policies at a premium that is commensurate with the exposure presented by a risk.