Book value per equity and book value per share; its importance

 In accountancy 'book value' is the value of an asset as per balance sheet. It is also called carrying value or net asset value, which is equal to the original cost of the asset less any accumulated depreciation, amortization or impairment costs made against the asset.
 In share market traders use book value to determine the safety level of shares after the payment of all debts.
 Total Book value of an equity is the value that the equity worth after the repayment of all debts and liquidation of all assets.
 Total Book value of equity is calculated by the following formula,
 Total Book value of an equity= Book value of assets- Book value of liabilities

 Book value of all Common shares is calculated as
 Book Value of Equity- Book Value of Preferred Stocks

Book value per share is defined as the value, that share worth after repaying all debts and liquidating all its assets.
  Book value per Common share is calculated by using the following formula
 Book Value per Common Share = (Total stock holder's equity- Preferred Equity)/(Total Number of outstanding Shares)

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Short selling in Stock, Commodity and Forex markets

In finance We can define short selling as the practice of selling securities (stocks, commodities, currencies or other financial instruments) which are not currently owned by the seller. When a trader or investor anticipating a decrease in share price, goes short but it is promised to be delivered. Shot selling is also known as shorting or going short.
 The purchasing of the stock after short selling is called 'Short Covering', 'covering the short' or 'covering the position'. If the price of the scrip declines at the time of short covering, the short seller will get profit as the cost of repurchase is less than the price of selling.If the price of a scrip increases prior to repurchase the short seller will incur a loss. The risk in short selling is that the potential loss of a short sale is unlimited. The short seller requires to keep a minimum margin to cover losses and keep the position. If the trader fails to keep the margin the broker or counter party may liquidate the position.
 On speculative markets traders uses the fluctuations to short a scrip to quickly make big profits.It is like gambling and in some cases it may result in heavy losses and as I mentioned above the loss of a short is theoretically unlimited.So one must keep strict stop loss to restrict the losses.
  In short selling, when you sell a financial instrument the broker will lend it to you from their own account or from some body else account (who is a customer of the firm) or from another brokerage to you.That is, you are borrowing the scrip and selling to some body else.You can hold the short as long as you want by keeping the margin. Some times interest may be charged to margin accounts. If the lender wants the stock back you borrowed from him you may either have to cover the short or borrow from another lender.
 In short, You are not the owner of the financial instruments you have sold. You must have to pay the dividends* or rights declared during the period of short to the  lender. In case of a stock split you must have to return the increased number of shares at lower price. That is if the stock splits in a ratio 2:1 you have to return twice the number of shares at half the price.
 Short selling plays a big role in day trading and it safer than short term short selling as the over nigh risk is not present. Hedge funds and large institutions also uses short selling to make some money. Some wealthy investors also uses short selling to make profit. How ever a short trader must be a dedicated person and he must be aware of the market condition and general conditions to avoid possible losses.
*The actual dividend paid by the company goes to the new buyer. The lender of the financial instrument who holds the shares in margin account also expects dividend (He is unlikely to be aware that his shares are lent out for short selling). There fore the short seller have to pay the dividend amount to compensate.

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PAN Card; its importance and how to get a PAN card

Permanent Account Number (PAN) is an unique alphanumeric combination consists of ten characters (6 letters and four numbers) issued to all juristic entities identifiable under the Indian Income Tax Act 1961.It is almost equivalent to a national identification number. One can not open demat account with out PAN card.So it is necessary for trading in Stock Market.
 PAN is issued in the form of a laminated card, by the Income-tax department under the auspices of the Central Board for Direct Taxes (CBDT). One person can apply and obtain only for one PAN. Obtaining or possessing more than one Permanent Account Number is against the law.

 How to get a PAN card?
  You can get PAN card by applying at UTI website or NSDL website.
In order to apply for a PAN one must fill in one of the following forms.
If you are an Indian citizen, you have to submit your ‘Application for allotment of new PAN’ in Form 49A and if you are a foreign citizen you will have to submit your ‘Application for allotment of new PAN’ in Form 49AA.

Uses of PAN
It is used as an important Identity proof.PAN is Mandatory for financial transactions such as opening bank account, to file income tax returns and to purchase assets above specified limits.The primary aim of PAN is to bring a universal identification key factor for all financial transactions.It indirectly prevent tax evasion by keeping a track of monetary transactions of high net worth individuals.

Features
PAN is unique and permanent.Address change inside the country will not affect PAN.

The other areas where PANCARD is useful
 Earlier I have mentioned in this post PANCARD is must for trading in Stock markets.There are many other areas where Pan Card is mandatory or useful.
1. Pan card is necessary for filing Income tax return online (E-Filing).
2.Pan Card is useful for bank transactions.If you have a fixed deposit on a Bank that exceeds RS 50,000, a copy of PAN card needs to be given. If you are not submitting a copy of PAN card, the bank will deduct TDS of 20% or at the prevailing rate (whichever is higher).
3. It is useful in the purchase of real estate and vehicles.
4. In hotels, restaurants and travel agencies if your bill exceeds RS 25,000 you may have to produce a copy of PAN Card.
5. Jewellery Purchase- For Higher value jewellery purchasing Pan Card is essential.
For tele phone installation, Visa and other credit cards, and in some purchasing Pan card is necessary.
 To invest and file tax returns in India NRI's also need PAN Cards.

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Inflation; Types and measures

 Inflation is a term used in Economics which is used to measure the rise in general level of prices for a bunch of goods and services over a period of time.When the price of a commodity or service increases the purchasing power of currency decreases.It results in the loss of value of money.Then each unit of currency can buy only fewer goods and services.
 Inflation can affect the economy of a country, positive and negative, in various ways.Economic experts are of the view that higher inflation is caused by the excessive growth of the money supply.
 If inflation gets totally out of control it affects the normal workings of the economy.This is called hyper inflation. Hyperinflation can lead to the abandonment of the use of the country's currency.
 There are two types of inflation
1. Demand Pull inflation- When there are less goods and more buyers, the demand increases.If the supply can not expand to meet the demand inflation occurs.This type of inflation is called demand Pull inflation.
2. Cost Push Inflation- Due to rise in input costs such as rapid wage increases,increase in corporate taxes and rise in imported raw material prices due to weak currencies the cost push inflation occurs.
 Inflation Rate
The inflation rate is the percentage rate of change of the overall price level of an economy over time.
 Measures of Inflation
  Inflation is usually estimated by calculating the inflation rate of a price index. usually Consumer Price Index or Wholesale price Index (WPI) is used to measure Inflation. In addition to this there are seven other important measures.producer price index (PPI), personal consumption expenditure (PCE) deflator, and gross domestic product (GDP) deflator, and a core version of each, which excludes food and energy.
Consumer Price Index (CPI)
The Consumer Price Index (CPI) measures the prices of a bunch of goods and services purchased by a 'typical consumer'. In other words, the Consumer Price Index measures the changes in the cost of living.Some economists are of the view that the CPI overestimates true inflation by up to 1 per cent.
Producer Price Index (PPI)
The producer price index (PPI) measures the average change in the selling prices received by domestic producers to consumers and other businesses.Several products are sold to other businesses rather than consumers.So it differs from the CPI. producer price index measures both changes in revenue and changes in output.
Personal Consumption Expenditure (PCE) Deflator
The Personal Consumption Expenditure (PCE) measures the average change of price paid for all domestic purchases by all consumers.It measures the actual and imputed expenditures of households which also includes data pertaining to durable and non-durable goods and services.PCE deflator is also known as the PCE price index (PCEPI), 'PCE price deflator', and the 'Implicit Price Deflator'.
 The Personal Consumption Expenditure (PCE) is a volatile measure. Core PCE (CPCE) price index is less volatile than PCE Deflator which excludes the seasonal food and energy prices.
GDP Deflator
 In Ecocomics, the gross domestic product (GDP) deflator is used to measure the average change over time in the level of prices of all new, domestically produced, final goods and services.
It is calculated by using the following formula

GDP Deflator= Nominal GDP/Real GDP*100

Core Indexes
In addition to cite inflation numbers the economists usually refer to the Core version of that index.The core version excludes some volatile data.For example, In calculation of PCE the economist uses the oil and energy prices.But in Core PCE they exclude food and energy prices.

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