Security Analysis Theory

CHAPTER 3: THEORETICAL BACKGROUND OF THE STUDY

Security analysis: Security analysis is the valuation of the debts, assets, equities, and warrants of companies from the view point of outside investors with the help of publicly available information. As such, the ability to value equity securities requires cross-disciplinary knowledge in both finance and financial accounting. While there is much overlap between the analytical tools used in security analysis and those used in corporate finance, security analysis tends to take the perspective of potential investors, whereas corporate finance tends to take an inside perspective such as that of a corporate financial manager.

What Is a Risk?

Risks and uncertainties are an important part of an

 Commodity risk is the risk associated with the change in the prices of commodities like copper, corn crude oil etc. 3. Inflation Risk (Purchasing Power Risk)

Inflation risk is the risk of fall in the purchasing power due to the effects of inflation. Which effect the ability of buying of products. Due to the inflation the value of currency will fall which in turn result in raise in the prices of goods. The higher the rate inflation, the more is the fall in the value of money.

Unsystematic risk

1. Business risk:

It is the risk arised due to change in the operating environment of firms business. Due to this variability it will adversely effected on earnings before interest and taxes (EBIT). It is the risk associated with the operation of business rather than method of financing.

2. Financial risk:

The financial risk is caused due to the method\mode of finance adopted by the company. Due to these variation earnings before taxes (EBT) of the company gets effected.

Risk Measures:

There are five principal which are helpful in measurement of risk measures, they are as follows:

Alpha: Alpha measures the risk arises in the

The headquarter is located in Mumbai. ICICI is the Multi National Company which is operating in 17 countries including India.

3) Punjab National Bank: Punjab National Bank is the one of the largest bank in India which was incorporated in 1894. The PNB is awarded as the 248th largest bank in the world. It is the first Indian bank which started by using fully the Indian capital.

4) State Bank of India (SBI):

State Bank of India is incorporated in the year 1955. State Bank of India is the one of the largest public sector bank in India. It is having 17,000 branches out of which 190 branches are incorporated in foreign countries.

5) Axis Bank: Axis bank is formerly called as UTI bank, which was incorporated in the year 1990. The headquarter if Axis bank is located in the Mumbai. Axis bank is a India’s 3rd largest private sector