Power of attorney
POA is authority granted to an agent by the principal to make decisions on his or her behalf. The agent may be given limited or absolute authority to act on the principal’s behalf on health, property, or financial decisions.  In the stock market, a POA is a document signed by an investor and a stockbroker. A power of attorney is not required to purchase stock. When you sell a stock on the stock exchange, the POA document gives the stockbroker limited authority to debit the shares from your Demat account.

Preferred stocks
Preferred shares / Preferred stocks are special stocks that hold the special right of getting dividends before any dividend is issued to common equity stocks on the distribution of profit sharing. If a going concern company files for bankruptcy, then preferred shares are given preferential rights on residual company assets and dividends as compared to common stock equity shares. The dividends are fixed for preferred shares and they don’t have any voting right in the business proceedings.

A put options contract grants the buyer the right, but not the obligation, to sell a specific quantity of underlying assets at a specific price (strike price) by a specified date (known as the expiration date).  Put options can be purchased on a variety of assets, including stocks, indexes, commodities, and currencies. Changes in the underlying asset’s price, the option strike price, time decay, interest rates, and volatility all have an impact on put option prices. They gain value as the underlying asset’s price falls, volatility of the underlying asset price rises, and interest rates fall. It loses value as the underlying asset’s price rises, the volatility of the underlying asset’s price decreases, interest rates rise, and the expiration date approaches.

Petty cash
It is a small sum of cash kept on hand to cover minor expenses where handing out a cheque would be inconvenient and costly due to the inconvenience and costs of writing, signing, and cashing the cheque. The amount of money that a company considers petty can range between Rs. 5000 and Rs. 20000.

Some of the transactions for which petty cash is used are as follows:

  • Office stationeries
  • Office supplies
  • Refreshments for clients who come to the office on business meets.
  • Reimbursing employees who have spent a nominal amount on the company’s behalf.

Pro forma
The term “pro forma” refers to the process of presenting financial projections in a standardised format for a specific time period. Pro forma statements are used by businesses to make decisions in planning and control, as well as for external reporting to shareholders and stakeholders. The statements can be used to provide shareholders and stakeholders with a sense of the specific nature of a company’s financial structure under various conditions. It is crucial in the planning process because it can help to reduce the risks associated with starting and running a new business. Statements like these can also persuade lenders and investors to fund a new venture.

However, the statements must be based on valid and reliable information in order to create an accurate projection of a small business’s profits and financial needs for the first year and beyond.

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