ASSINGMENT OF MFM

SUBMITED BY: SHWETA GUPTA 10MBA 32

SUBMITED TO: MISS SUMA ARORA

ASSINGMENT OF MFM

SUBMITED BY: ANKIT BANSAL 10 MBA 02

SUBMITED TO: MISS SUMAN ARORA

Q1.Can stocks be traded on more than one exchange such as, for ex both the NASDAQ & the NYSE? ANS.A stock can trade on any exchange on which it is listed. And to be listed it must meet all of the exchange's listing requirements and pay for any associated fees. If it chooses to do so, a company can list its shares on more than one exchange, which is referred to as dual listing - although few companies do. However, there are some companies that are listed on both the NYSE and Nasdaq Charles Schwab, Hewlett-Packard and Walgreens, for instance, all have dual listings on both exchanges. One reason for listing on several exchanges is that it increases a stock's kfv allowing investors to choose from several different markets in which to buy or sell shares of the company. Along with the increased liquidity and choice, the bid-ask spread on the stock tends to decrease, which makes it easier for investors to buy and sell the security in the market at any time. Multinational corporations also tend to list on more than one exchange. They will list their shares on both their domestic exchange and the major ones in other countries. For example, the multinational British Petroleum trades on the London Stock Exchange as well as the NYSE. The increasing use and popularity of depositary receipts has helped raise the number of companies trading on exchanges in different countries. These investment products, which represent a company's stock deposited at a domestic bank, can be issued by that bank on a foreign exchange with or without the endorsement of the company being traded. Depositary receipts allow investors around the world to purchase and sell large international companies' stock.

Q2.What are the listing requirements of the NASDAQ? Major stock exchanges, like the Nasdaq, are exclusive clubs - their reputations rest on the companies they trade. As such, the NASDAQ won't allow just any company to be traded on its exchange. Only companies with a solid history and top-notch management behind them are considered. The NASDAQ has three sets of listing requirements. Each company must meet at least one of the three requirement sets, as well as the main rules for all companies. Listing Requirements for All Companies Each company must have a minimum of 1,250,000 publicly-traded shares upon listing, excluding those held by officers, directors or any beneficial owners of more than 10% of the company. In addition, the minimum bid price at time of listing must be greater than five dollars, and there must be at least three market makers for the stock. Each listing firm is also required to follow NASDAQ corporate governance rules 4350, 4351 and 4360. Companies must also have at least 450 round lot (100 shares) shareholders, 2,200 total shareholders, or 550 total shareholders with 1.1 million average trading volumes over the past 12 months. In addition to these requirements, companies must meet all of the criteria under at least one of the following standards. Listing Standard No. 1 The company must have aggregate pre-tax earnings in the prior three years of at least $11 million, in the prior two years at least $2.2 million, and no one year in the prior three years can have a net loss. Listing Standard No. 2 The Company must have a minimum aggregate cash flow of at least $27.5 million for the past three fiscal years, with no negative cash flow in any of those

three years. In addition, its average market capitalization over the prior 12 months must be at least $550 million, and revenues in the previous fiscal year must be $110 million, minimum. Listing Standard No. 3 Companies can be removed from the cash flow requirement of Standard No. 2 if the average market capitalization over the past 12 months is at least $850 million, and revenues over the prior fiscal year are at least $90 million. A company has three ways to get listed on the NASDAQ, depending on the underlying fundamentals of the company. If a company does not meet certain criteria, such as the operating income minimum, it has to make it up with larger minimum amounts in another area like revenue. This helps to improve the quality of companies listed on the exchange. It doesn't end there. After a company gets listed on the market, it must maintain certain standards to continue trading. Failure to meet the specifications set out by the stock exchange will result in its delisting. Falling below the minimum required share price, or market capitalization, is one of the major factors triggering a delisting. Again, the exact details of delisting depend on the exchange.

Q3.DEPSITORY RECIEPTS?

A depositary receipt (DR) is a type of negotiable (transferable) financial security that is traded on a local stock exchange but represents a security, usually in the form of equity that is issued by a foreign publicly listed company. The DR, which is a physical certificate, allows investors to hold shares in equity of other countries. One of the most common types of DRs is the American depositary receipt (ADR), which has been offering companies, investors and traders global investment opportunities since the 1920s. How Does the DR Work? The DR is created when a foreign company wishes to list its already publicly traded shares or debt securities on a foreign stock exchange. Before it can be listed to a particular stock exchange, the company in question will first have to meet certain requirements put forth by the exchange. Initial public offerings, however, can also issue a DR. DRs can be traded publicly or over-the-counter.

The Benefits of Depositary Receipts The DR functions as a means to increase global trade, which in turn can help increase not only volumes on local and foreign markets but also the exchange of information, technology, regulatory procedures as well as market transparency. Thus, instead of being faced with impediments to foreign investment, as is often the case in many emerging markets, the DR investor and company can both benefit from investment abroad. Let's take a closer a look at the benefits: For the Company A company may opt to issue a DR to obtain greater exposure and raise capital in the world market. Issuing DRs has the added benefit of increasing the share's liquidity while boosting the company's prestige on its local market ("the company

is traded internationally"). Depositary receipts encourage an international shareholder base, and provide expatriates living abroad with an easier opportunity to invest in their home countries. Moreover, in many countries, especially those with emerging markets, obstacles often prevent foreign investors from entering the local market. By issuing a DR, a company can still encourage investment from abroad without having to worry about barriers to entry that a foreign investor might face. For the Investor Buying into a DR immediately turns an investors' portfolio into a global one. Investors gain the benefits of diversification while trading in their own market under familiar settlement and clearance conditions. More importantly, DR investors will be able to reap the benefits of these usually higher risk, higher return equities, without having to endure the added risks of going directly into foreign markets, which may pose lack of transparency or instability resulting from changing regulatory procedures. It is important to remember that an investor will still bear some foreign-exchange risk, stemming from uncertainties in emerging economies and societies. On the other hand, the investor can also benefit from competitive rates the U.S. dollar and euro have to most foreign currencies. Conclusion Giving you the opportunity to add the benefits of foreign investment while bypassing the unnecessary risks of investing outside your own borders, you may want to consider adding these securities to your portfolio. As with any security, however, investing in ADRs requires an understanding of why they are used, and how they are issued and traded.

Q4 .Difference between IAS and GAAP? ANS .The acronym "IAS" stands for International Accounting Standards. This is a set of accounting standards set by the International Accounting Standards Committee (IASC), located in London, England. The IASC has a number of

different bodies, the main one being the International Accounting Standards Board (IASB), which is the standard-setting body of the IASC. The acronym "GAAP" stands for Generally Accepted Accounting Principles. The IASC does not set GAAP, nor does it have any legal authority over GAAP. The IASC can be thought of as merely a very influential group of people who love making up accounting rules. However, a lot of people actually do listen to what the IASC and IASB have to say on matters of accounting. When the IASB sets a brand new accounting standard, a number of countries tend to adopt the standard, or at least interpret it, and fit it into their individual country's accounting standards. These standards, as set by each particular country's accounting standards board, will in turn influence what becomes GAAP for each particular country. For example, in the United States, the Financial Accounting Standards Board (FASB) makes up the rules and regulations . 1. GAAP are the more generic accounting rules that every country holds, and are directly influenced by the different accounting boards of each jurisdiction, whereas, IAS is the specific set of internationally recognized accounting standards, set by the IAS Committee. 2. GAAP, in itself, is locally based, while the IAS is globally recognized, and some of its rules or standards are incorporated in the GAAPs of many countries.