Corporate Actions Explained: Impact on Investors and Markets

Posted on July 2, 2025July 2, 2025 by Imarticus Learning

When someone buys a stock or holds units in a mutual fund, they often focus on prices and returns. That is understandable. But there is another layer of decisions that companies take things that affect the shares themselves. These are called corporate actions. They may not get headlines every day, but their effect can be big.

Investment banking courses often focus on corporate actions early on in the curriculum. These concepts are not just theory. They affect portfolios, fund value, and investor behaviour every single day.

But, if you’re keen on acquiring a basic idea of corporate action, here’s a handy guide.

What Is Corporate Action?

A corporate action is any move that a company makes which directly changes its securities. This could be issuing more shares, giving a dividend, or merging with another firm. These decisions usually come from the board of directors and get executed at a set date.

If you hold even one share, you are part of this. These actions can change the number of shares you own, their price, or the benefits linked to them.

Some actions affect everyone automatically. Others give shareholders a choice. Either way, they always require close attention.

Watch: What are Corporate Actions? Bonus, Dividends, Stock Splits, Rights Issue and Buybacks

Common Types of Corporate Actions You Should Know

There are three broad types of corporate actions. Knowing the difference helps in reacting properly when one is announced.

1. Mandatory Corporate Actions

These apply to every shareholder. You do not need to do anything. The company simply carries them out. Examples include:

Bonus shares
Stock splits
Mergers
Dividends

If the company splits its stock or gives bonus shares, your total value may stay the same, but your number of shares will change. These may look harmless, but they still affect how investors see the stock.

2. Voluntary Corporate Actions

These need your decision. You get to choose whether you want to take part. Tender offers and buybacks fall into this group. The company may ask if you want to sell your shares at a certain price.

Here, it helps to understand both the short-term offer and the long-term value of the stock.

3. Mandatory With Choice

This one sits in the middle. Everyone is affected, but you can still make a choice. For example, a company may offer dividends either in cash or as additional shares. If you do not choose, they pick one for you by default.

Main Types of Corporate Actions and Their Meaning

Here is a list of the key types of corporate actions in an easy-to-follow tabular format:

Corporate Action	Type	Example	Impact on Investor
Dividend	Mandatory	Cash payout	Cash received, price may adjust down
Stock Split	Mandatory	2-for-1 split	More shares, lower price per share
Rights Issue	Voluntary	Discounted shares	Option to buy more shares
Share Buyback	Voluntary	Fixed repurchase price	Chance to exit at a set price
Merger or Acquisition	Mandatory	Company A merges with B	Ownership changes, tax may apply

The Real Impact of Corporate Actions on NAV

Mutual funds and ETFs deal with another metric: Net Asset Value (NAV). This is the per-unit value of all holdings in the fund. Corporate actions play a big role here too.

1. Dividends Cut the NAV

When a stock pays dividends, the fund receives money. But the stock price often falls by the same amount. So while there is income, the NAV drops on that day. This is normal.

2. Stock Splits and Bonus Shares Adjust the Unit Price

If a company issues bonus shares or splits its stock, the fund’s holding in terms of shares increases. But since the total value remains the same, the NAV per unit adjusts.

3. Rights Issues and Dilution

Sometimes companies raise money by offering shares at a discount. If a mutual fund owns those shares, it needs to decide whether to buy more or allow dilution. Either way, the NAV gets affected.

How Corporate Actions Affect NAV

Here’s an easy tabular guide on the impact of corporate actions on NAV:

Corporate Action	Direct Effect on NAV	Explanation
Dividend	NAV drops by dividend amount	Reflects payout from fund holdings
Stock Split	No major change	More shares at lower price; value unchanged
Rights Issue	May cause dip	Discounted shares reduce average share value
Buyback	NAV may rise	Reduced supply improves share value

Why Investors Should Pay Attention

It is easy to miss these events, especially if you are a passive investor. But ignoring corporate actions can lead to high tax bills, unexpected gains or losses, or changes to your ownership percentage.

Here are a few common scenarios:

If you miss a rights issue, your ownership percentage might fall
If you accept a tender offer without checking market trends, you might miss better prices
If you do not plan for tax on dividends or mergers, you may pay more than you expect

The good news is, these events are usually announced in advance. Most fund managers and brokers send alerts or list them in your account statement. The challenge is knowing what to do next. That is where courses and market knowledge help.

Conclusion

For anyone serious about understanding how the markets really move, corporate actions are something worth knowing well. They can change the number of shares in the market, affect the value of your holdings, and sometimes come with tax implications.

If someone wants to work in finance or just make sharper investment decisions, learning about corporate actions is a smart step. One good place to start is Imarticus Learning. Their Certified Investment Banking Operations Program offers deep exposure to corporate events, market operations, and how back-office roles handle these transitions.

FAQs

What is a corporate action?
It is a decision by a company that changes its securities. This includes events like dividends, splits, mergers, and share buybacks.

How do corporate actions affect individual investors?
They can change how many shares you hold, their value, or your decision to hold or sell. Some may come with tax outcomes.

What is the impact of corporate actions on NAV?
They may affect the NAV of mutual funds based on whether the value of underlying stocks shifts due to those actions.

Do investors always have to act on corporate actions?
No. Some actions are automatic, but others, like rights issues or tender offers, need you to respond if you want to take part.

Are corporate actions always good for shareholders?
Not always. Some are positive, like bonuses or dividends. Others might dilute value or signal problems.

Where can I learn more about these concepts?
Courses like the Certified Investment Banking Operations Program from Imarticus Learning offer practical lessons and case studies.

How do I track corporate actions for my stocks or funds?
You can follow company announcements, check your broker dashboard, or read your fund manager’s monthly report.

Key Techniques in Business Analysis for Effective Decision Making

Posted on July 2, 2025July 2, 2025 by Imarticus Learning

Business success often depends on the quality of decisions taken every day. A business that builds its choices on facts and strong analysis stands taller than one that relies on guesswork. This is where business analysis techniques come into play.

They allow companies to spot problems early, find better opportunities, and make smarter investments. Without these methods, even a great idea can sink under poor judgment.

Before getting into the techniques, it is worth highlighting a valuable learning opportunity. Those keen on sharpening their decision-making and analysis skills should look into a CPA course to gain practical, job-ready knowledge that builds both financial and business analysis skills.

Now, let’s move into the core discussion.

Why Business Analysis Matters

Every decision, big or small, carries weight. Businesses cannot afford to waste time or resources. A well-done analysis draws a clear map, pointing towards safer, more profitable choices. Besides improving decision-making, business analysis:

Reduces risks.
Saves money and time.
Increases stakeholder confidence.
Helps in understanding customer needs better.

Without strong analysis, companies often face late project deliveries, budget overruns, or unhappy customers.

Understanding Business Analysis Techniques

Business analysis techniques are structured ways to investigate a situation, sort facts, and reach sensible conclusions. Some are simple. Some are complex. All serve a common purpose: to help businesses act smarter.

The right technique depends on the type of problem, the size of the company, and available resources. It is wise to know a few techniques thoroughly rather than chasing every new method.

Popular Business Analysis Techniques

Some of the most popular business analysis techniques include:

1. SWOT Analysis

The SWOT (Strengths, Weaknesses, Opportunities, Threats) analysis technique is among the simplest yet strongest ways to assess any business situation. A clear SWOT lets teams see where they stand and where they must tread carefully.

2. MOST Analysis

MOST stands for Mission, Objectives, Strategies, and Tactics. When used properly, MOST avoids wasting time on actions that do not matter. It helps align activities with company goals.

Mission: What does the business want to achieve?
Objectives: Clear targets set to fulfil the mission.
Strategies: High-level plans for reaching objectives.
Tactics: Day-to-day actions for carrying out strategies.

3. PESTLE Analysis

External factors can hit businesses hard. PESTLE checks Political, Economic, Social, Technological, Legal, and Environmental influences. Keeping an eye on outside factors means fewer nasty surprises.

Key Business Analytics Tools

Modern tools have made business analysis techniques quicker and more accurate. Choosing the right tool depends on budget, team skills, and project needs.

Here are some trusted business analytics tools:

Microsoft Power BI: Brilliant for easy-to-read dashboards.
Tableau: Strong visual reporting.
SAS Business Analytics: Good for complex, predictive work.
QlikView: Sharp for discovering hidden trends.
Google Data Studio: Great free option for small teams.

Each of these business analytics tools has their own strength. Pick one that matches company size and goals rather than chasing trends.

Watch: Escape the Rat Race: How Imarticus Learning Can Transform Your Finance Career

Strategic Business Analysis: Thinking Long-Term

Short-term wins feel good. Yet, without long-term planning, businesses crumble. Strategic business analysis focuses on:

Setting 3 to 5 year goals.
Studying market movements carefully.
Preparing for economic changes.
Building flexible processes.

It often involves regular reviews, checking progress, and adjusting plans smartly. Skipping strategic analysis leaves businesses vulnerable during downturns or when new competitors enter.

Steps to Apply Business Analysis Techniques

Here is a detailed step-by-step guide on how to successfully apply strategic business analysis techniques:

Define the problem: No good analysis starts without a clear problem statement. Be specific. Vague questions like “Why are sales down?” must become “Which regions show declining sales and why?”
Gather data: Look at sales reports, customer feedback, and market research. Both numbers and opinions matter.
Choose the technique: Pick based on the time and data available and the problem’s complexity. No need to overcomplicate simple problems.
Analyse thoroughly: Use checklists, diagrams, mind maps — whatever suits the situation.
Recommend actions: Business analysis without action is wasted effort. Always finish with clear next steps.

Watch: Business Analysis Explained – Imarticus Learning

Tips to Strengthen Business Analysis

A business analyst’s real skill lies in making the complicated simple.

Question assumptions: Never trust unverified ‘facts’.
Stay unbiased: Avoid favouring one outcome over another.
Update knowledge: New tools and methods appear often.
Communicate clearly: Good analysis must be easy to understand.

Challenges in Business Analysis

Good analysis takes effort and handling the challenges requires patience, clear communication, and sometimes tough conversations with leadership. Here are some key pitfalls you should look out for:

Incomplete or poor-quality data.
Lack of stakeholder support.
Time pressure leads to rushed analysis.
Ignoring early warning signs.

How Business Analysis Helps Different Industries

Every sector benefits from business analysis techniques, though the ways may differ.

Retail: Understand customer buying patterns.
Healthcare: Improve patient care with data.
Finance: Manage risks better.
Manufacturing: Improve supply chain efficiency.

The basic goal stays the same: better decisions based on a clearer understanding.

Conclusion

With artificial intelligence and automation rising, future analysis will get even sharper. Still, human judgment will remain vital. Machines can spot patterns. Only people can understand the meaning. Investing in strong analysis skills today ensures better business health tomorrow.

Mastering business analysis techniques separates successful businesses from struggling ones. It is not a field reserved for large companies or tech experts. Anyone willing to think clearly, question smartly, and act wisely can use these techniques to improve their decisions.

For those aiming to build strong careers in finance and analysis, the Certified Public Accountant programme by Imarticus Learning is worth considering.

FAQs

What are the top business analysis techniques everyone should know?
SWOT, PESTLE, and MOST analysis are basic must-knows. Each offers a strong starting point for tackling different types of problems.

How do business analytics tools support business analysis?
They make it quicker to spot patterns, build reports, and test ideas with real-world data, leading to smarter decisions.

What is the difference between business analytics and strategic business analysis?
Business analytics focuses on data-driven insights for today, while strategic business analysis looks at shaping the company’s future.

Can small businesses use business analysis techniques too?
Yes. In fact, smaller businesses often benefit even more because every decision matters to survival.

How often should companies do a SWOT analysis?
At least once a year. More often during times of big change.

What skills does a business analyst need?
Clear communication, strong critical thinking, understanding of business structures, and good technical ability with analysis tools.

Is a CPA course helpful for business analysts?
Yes. A CPA course builds strong financial and business skills valuable for better analysis and decision-making.

Entity Tax Planning: Key Considerations for Entrepreneurs

Posted on July 2, 2025July 2, 2025 by Imarticus Learning

Starting a business may be daunting, but it sure is an exciting feat. It brings energy, ideas, and a lot of decisions. One of the biggest ones is how to handle tax planning from the very beginning. Get it wrong, and it can cost more than just money.

Proper tax planning is vital for entrepreneurs who want to protect profits, keep operations legal, and prepare for long-term growth. Without a strong plan, even a brilliant venture can run into trouble.

For those who want to seriously sharpen their knowledge about this, taking up a CPA course can be a smart move if you want to learn everything needed to make the best financial decisions.

However, let’s move on to the key points every entrepreneur should understand in this guide.

Why Is Tax Planning Important for Entrepreneurs?

At its simplest, tax planning means figuring out how much tax to pay, how to pay less where legal, and when to pay it. Entrepreneurs, especially in India, face choices that will affect them for years to come.

A strong start with tax planning makes later stages much smoother. Good tax planning helps:

Protect cash flow
Reduce tax liabilities legally
Budget and forecast with precision
Attract investors by showing solid financial health

Tax Planning for Entrepreneurs: Early-Stage Mistakes to Avoid

A little professional advice early on can save a huge amount of stress later. Many entrepreneurs rush into setting up their company without giving serious thought to tax matters.

Here are some common beginner-level mistakes in tax planning for entrepreneurs:

Choosing the wrong business structure
Ignoring compliance deadlines
Poor bookkeeping
Not planning for GST and indirect taxes
Missing out on startup tax benefits India offers

Choosing the Right Entity for Tax Planning

Entity choice can change everything about tax planning. Each structure has different benefits and risks.

Entity Type	Key Features	Tax Treatment
Sole Proprietorship	Simple setup, one-person control	Taxed as personal income
Partnership	Shared control, simple agreements	Taxed at partner level
Private Limited Co	Separate legal entity, stricter rules	Corporate tax rates apply
LLP	Mix of partnership and company benefits	Taxed like a partnership

Each entity comes with different responsibilities, too. A private limited company, for example, brings better credibility but also tighter compliance. Entrepreneurs need to balance their business goals with the right tax planning approach.

Startup Tax Benefits, India: What Founders Must Know

The Indian Government offers various tax incentives for startups under the Startup India initiative. Correct use of these can make a massive difference.

Understanding eligibility rules is crucial. Even a small misstep can cost founders the benefits they deserve. Here are some key startup tax benefits (India) offers the following:

Startup India Recognition: Eligible startups can claim a 100% tax exemption for 3 years out of the first 10. This applies only if turnover is under Rs 100 crore. It must be incorporated as a private limited company or LLP.
Capital Gains (Section 80-IAC) Exemption: Investment in eligible funds can reduce capital gains tax. However, this only applies to companies recognised by DPIIT. The exemption under this section gives a big boost in the early years.
Angel Tax Exemption (Section 56(2)(viib)): DPIIT-recognised startups are exempt from tax on share premium. This helps startups raise funds without getting taxed unnecessarily.

Benefit	Condition
Tax Holiday	DPIIT recognition and turnover limit
Capital Gains Exemption	Reinvestment into startup fund
Angel Tax Exemption	Registered startups only

Tax Planning for Entrepreneurs: Common Strategies

Every business is different, but some strategies work almost universally when it comes to tax planning. Some smart tactics include:

Separating personal and business expenses
Using available deductions smartly
Planning asset purchases to use depreciation benefits
Timing income and expenses for optimal tax treatment
Reviewing tax laws annually

When it comes to numbers, using the following techniques of tax planning for entrepreneurs regularly can also help transform a startup’s finances.

Consult a tax advisor early
Register for GST if turnover crosses the threshold
Track eligible business expenses
Invest profits wisely to lower taxable income
Keep personal and business banking separate

International Tax Planning: Important for Startups Going Global

Many Indian startups now serve global markets. With this growth comes complicated tax challenges. However, ignoring international tax laws can attract penalties. Entrepreneurs must get expert help early when looking abroad.

Some key points in international tax planning include:

Double Taxation Avoidance Agreements (DTAA)
Transfer pricing rules
GST on export services

Tax Planning and Raising Capital

The funding market is quite competitive, and smart tax planning can tip the scales in a startup’s favour.Investors like startups that manage their taxes well. Good tax planning gives a clear view of financial health, which boosts investor confidence. Entrepreneurs must:

Structure equity carefully to avoid unnecessary tax
Be transparent about tax filings
Use the available startup tax benefits India offers to show stronger post-tax profits

Watch: Master’s Level Banking & Finance Management Program – Imarticus Learning

How Accounting Software Helps Tax Planning

Modern accounting software is no longer optional. Choosing the right tool reduces manual errors and makes tax planning easier.

These tools help in:

Accurate record keeping
Quick GST calculations
Timely filing reminders
Budget forecasting

Here’s a handy reference table:

Software	Key Feature	Cost Range
Tally	Popular for Indian businesses	Moderate
QuickBooks	Cloud-based, GST-ready	Higher
Zoho Books	Affordable, GST-compliant	Low to Moderate

Building a Tax Planning Calendar

Entrepreneurs have a thousand things on their minds. A tax calendar helps by keeping critical dates visible.

Here are some noteworthy must-have dates on your tax calendar:

Income Tax Return (ITR) deadlines
GST return dates
Advance tax payment due dates
TDS filing dates

Make sure you don’t miss out on any of these as they can result in penalties. Setting reminders well in advance is a simple but powerful move.

Watch: What is Financial Modeling by Reshma – Imarticus Learning

Conclusion

Entrepreneurs in India have a lot of opportunities, but taxes are one area where mistakes can have major consequences. Start early, get professional advice, and use tools smartly. Always remember that good tax planning not only saves money but also protects the business.

Staying organised with records makes filing faster and less stressful. The right approach to taxes can free up more time to focus on growth. Courses like the Certified Public Accountant (CPA) Program by Imarticus Learning are designed to equip future business leaders with financial wisdom. Being tax-ready today!

FAQs

What is tax planning for entrepreneurs?
Tax planning for entrepreneurs means organising finances and operations to legally reduce tax liabilities and make better financial decisions.

What are the startup tax benefits India offers?
Startup India offers tax holidays, capital gains exemptions, and relief from angel tax for eligible startups, helping them grow faster.

Why is entity choice important for tax planning?
Entity choice affects the way a business is taxed, the deductions it can claim, and its long-term compliance burden.

How can tax planning attract investors?
Clear, clean financial records created through good tax planning boost investor confidence and make due diligence easier.

Which accounting software is best for startup tax planning?
Popular choices include Tally for Indian businesses, QuickBooks for global startups, and Zoho Books for affordability.

What happens if a startup ignores tax deadlines?
Missing tax deadlines can lead to penalties, legal troubles, and a bad reputation with investors and banks.

How does international tax planning affect startups?
Startups selling internationally must deal with double taxation, GST on exports, and transfer pricing rules to stay compliant.

Introduction to Currency Management for Investors

Posted on July 2, 2025July 2, 2025 by Imarticus Learning

Currency movement plays a vital role in influencing investment outcomes in today’s globalised financial markets. You could be investing in international stocks, bonds or real estate, but your returns are not immune to fluctuations in exchange rates. That’s where currency management comes into the picture.

So what exactly does currency management for investors look like?

For investors, currency management is about analysing, monitoring and managing currency exposure in their portfolio. You may ask why. Of course, to optimise returns on their investment and minimise risks.

In this blog, we’ll walk you through the basics of currency management, its importance for investors and practical strategies for risk management. You can also take the CFA course by Imarticus Learning to learn more about investments and finance.

Watch: Chartered Financial Analyst: Introduction Video

Why Currency Management Matters

There are two things investors must keep in mind when investing internationally: the performance of the underlying asset and the denomination currency.

Let’s say you invest in European stocks from India. A strong euro relative to the Indian rupee could increase your returns when you convert your profits into INR, even if the investment brings modest gains in euros. On the other hand, your returns could decrease if the euro weakens, even if the stocks did well in Europe.

Whether you’re a finance professional or a retail investor, currency management is necessary.

Active management of exchange rate exposure lets investors:

Minimise the risks of currency fluctuations
Protect international investments
Get more predictable and stable returns

Understanding Currency Risk

When you are engaged with investing in international stock markets, there can be an exchange rate risk or currency risk. This risk is actually the potential loss that a company or investor may suffer because of sudden changes that take place in the currency exchange rates. For example, let’s say, you invest in US stock, and then, due to some circumstances, the dollar value drops. If that happens, despite the stock’s performance, your returns in the home currency will be affected and go down.

Currency risk can be of several types:

Economic risk: This long-term risk results from currency fluctuations and impacts market value.

Transaction risk: This risk is associated with financial transitions involving foreign currency.

Translation risk: Also known as accounting risk, this type of risk occurs when financial statements from foreign assets are converted into the parent company’s home currency.

Key Currency Risk Management Techniques

With so much risk threatening your international investments, the question arises: How do I protect my foreign investments in a volatile environment?

Needless to say, this is where currency risk management strategies come into play.

Managing currency risk means identifying exchange rate exposure and employing strategies to reduce possible losses. Here’s an overview of some common currency risk management techniques for investors with a global portfolio:

Options and futures

Currency options and futures help manage exposure. Currency options give investors the right to buy or sell at a specific rate on or before a particular expiration date. However, this is not an obligation. On the other hand, futures are standardised contracts traded on exchanges. They obligate investors to exchange currencies at a predetermined price at a future date.

Hedging with forward contracts

Currency forward contracts are another option to minimise currency risk. Forward contracts help in setting a predetermined exchange rate between two parties and even if there is a exchange rate change in the future. Institutional investors and companies can use forward contracts for hedging.

Natural hedging

Another popular currency risk management technique is natural hedging, where revenue and costs are matched in the same currency to balance currency exposure. For example, a business operating in a foreign country can open production facilities in the foreign country. This allows the business to generate revenue and expenses in the foreign currency. Thus, currency fluctuations have minimal impact on the bottom line.

Operational diversification

A company can reduce its overall portfolio risk by spreading business operations across multiple currencies and countries. However, diversifying operations only lowers but does not mitigate currency risk.

Watch: CFA Certification: 5 Surprising Benefits for Your Finance Career

Currency Trading Strategies for Investors

The high liquidity of the currency market causes value fluctuations, which, if capitalised, can create profit opportunities for investors.

So, as an investor, if you are actively trading in the foreign market, you should have a strong understanding of currency trading strategies. You might think that this knowledge is more suited for experienced professionals and investors, but now, with trading made easy via mobile apps, managing a diverse portfolio can benefit from this knowledge.

Let’s give you some idea about some standard currency trading strategies:

Carry trade strategy

A carry trade strategy is where an investor borrows in a low-interest-rate currency and reinvests in one with a higher rate. The interest rate differential accounts for the profit.

Trend following strategy

The trend following strategy relies on momentum and market patterns. Investors use technical indicators to identify and follow currency trends.

Range trading

Currencies usually move within certain price limits. Investors gain from short-term price changes by buying when the price is low and selling when the price is high.

Currency Management for Different Types of Investors

A one-size-fits-all approach does not work in currency management because it depends on the investor’s profile. Let’s look at some examples:

Businesses

Businesses can use both financial and operations hedges to manage foreign currency exposure.

Individual investors

These investors can use ETFs or mutual funds that have built-in currency hedging.

Institutional investors

Institutional investors often apply advanced hedging techniques using derivatives.

Common Mistakes in Currency Management

As essential currency management is for investors, they must also know where to draw the line to avoid losses. Avoiding these mistakes is key to successful currency management:

Ignoring currency risk

Many new investors completely overlook currency risks and assume exchange rates will remain stable.

Over-hedging

Investors must be cautious of over-hedging since too much hedging can eat into potential gains.

Not reviewing strategies

Currency markets are dynamic, so should be strategies. Strategies must be reviewed and adjusted regularly as the market changes.

Conclusion

When investors deal with foreign market exchanges, sometimes, they do not get into the nitty-gritty of how currency management for investors can actually affect returns. As an investor, you should know the risks associated with currency exposure and then, use the right techniques to protect your portfolios to maximise returns in the home currency.

Moreover, knowing currency management gives you more direction into risk-management. However, if you’re a student learning the ropes or a working professional diversifying your portfolio, you can sign up for the CFA course by Imarticus Learning to gain deep expertise in investments and finance.

FAQs

How does currency affect investment?

Currency affects investment since changes of currency value can determine what value of returns you are getting when you sell a good-performing foreign stock. Exchange rates can often be sudden and may not even favour your returns, making an investment not as fruitful as planned.

Why is currency risk management important?

It protects investors from losses resulting from changes in currency exchange rates.

Are currency trading strategies suitable for beginners?

Most strategies, like carry trade or trend following, are recommended for experienced investors due to their higher risks.

Is currency management necessary for domestic investors?

While currency management is primarily for international investments, domestic investors may still be exposed if the companies they invest in have global operations.

What are the three types of FX risks?

Economic, transaction and translation are the three types of foreign exchange (FX) risks.

How to calculate currency risk?

Currency risk is often calculated by measuring the difference between the current exchange rate and probable future rates. Then, it is estimated how these changes can affect returns.

Top Options Trading Strategies for Beginners

Posted on July 2, 2025July 2, 2025 by Imarticus Learning

Getting into options trading can feel overwhelming, especially when faced with complicated charts and industry jargon. For beginners, the trick is not to rush. Start with easy-to-follow trading strategies and grow skills over time.

Options can be powerful when used correctly. They offer flexibility, lower upfront costs compared to stocks, and the chance to profit whether prices rise or fall. However, without the right plan, they can also go wrong very quickly.

For those aiming to build strong fundamentals, learning about structured trading strategies early on is key. And if someone wants a professional edge, considering a CFA course will help you develop serious finance skills that apply directly to options and many other investments. Let’s now jump into the best methods that suit beginners.

Understanding the Basics of Options

Before touching real trades, it’s important to understand how options work. An option gives the right, but not the obligation, to buy or sell an asset at a fixed price before a certain date.

There are two types:

Call options (betting prices will go up)
Put options (betting prices will go down)

Simple enough, right? Now let’s move into the real action.

1. Covered Call: A Safe Start

The covered call strategy is where most new traders begin. Here’s the idea: if someone already owns a stock, they sell a call option on it to collect a premium.
If the stock price stays flat or goes a little up, they keep the premium and their stock.

Quick Pros:

Easy to understand
Reduces risk slightly
Works best in sideways markets

Possible Cons:

Profit is capped
Need to already own the stock

2. Protective Put: Insurance for Beginners

Think of this as buying car insurance. When someone buys a put option while owning a stock, they limit how much money they could lose.

Good Points:

Caps downside
Peace of mind during uncertain markets

Negatives:

Premium cost eats into profits if stock doesn’t fall

Many experienced traders recommend using this method when holding stocks over earnings season.

3. Long Call: Simple Bullish Bet

For those who think a stock will go up, buying a long call option is the easiest way to play that belief. It’s one of the cheaper trading strategies compared to buying the actual shares. However, timing matters, and the stock must rise before the option expires.

Remember:

Risk is limited to the premium paid.
Profit potential is unlimited.

Best Option Trading Strategy: Bull Call Spread

The bull call spread could be the best option trading strategy for cautious optimists. Here’s how it works: buy a call at a lower strike and sell another at a higher strike.

Lower cost than buying just a call
Risk is limited
Rewards are capped

Steps to set up:

Pick a stock you believe will rise moderately.
Buy a call at a strike price near the current price.
Sell a call at a higher strike price.

This method fits people who like calculated risks, not gambling moves.

4. Cash-Secured Put: Earning While Waiting

If someone wants to buy a stock at a cheaper price, selling a cash-secured put is a clever method. They get paid for promising to buy the stock if it falls to their target price.

Main Benefits:

Collect a premium
End up owning stock at a discount

Of course, they must have enough cash in the account in case they have to actually buy the stock.

Quick Summary of Beginner Strategies

Strategy	Best For	Risk Level
Covered Call	Reducing risk while holding stock	Low
Protective Put	Insurance during volatility	Moderate
Long Call	Bullish bets with limited risk	High
Bull Call Spread	Calculated upward bets	Moderate
Cash-Secured Put	Buying stocks cheaper	Low

Intraday Option Trading Strategy: Quick Money Tactics

Intraday options trading means buying and selling within the same day. It’s risky, fast, and not for the faint-hearted. Still, with a proper intraday option trading strategy, there’s good potential.

Top Intraday Techniques:

Momentum Trading: Jump on stocks showing strong movement.
Breakout Trading: Trade options when stocks break key levels.
Scalping: Take small profits repeatedly throughout the day.

Pro Tips:

Stick to liquid options (high volume).
Never risk more than 1–2% of total capital per trade.
Always have stop-loss orders in place.

Watch: Imarticus Learning – Top must have skills to become CFA or ACCA?

Common Mistakes Beginners Should Avoid

These are the common mistakes you should look out for as a beginner in trading:

Overtrading: Fewer, quality trades work better.
Ignoring expiry dates: Options lose value fast.
Lack of strategy: Random trades usually end badly.
Emotional trading: Fear and greed kill portfolios.
Not studying volatility: High volatility changes everything.

A slow and steady mindset always beats trying to hit jackpots overnight.

Quick Checklist for Picking the Right Trading Strategies

Choosing the best option trading strategy is bound to become much easier if you have this checklist in hand:

How confident are you about the stock movement?
What’s your risk appetite?
Are you trading intraday or long term?
Do you prefer income generation or capital gain?
How much can you afford to lose?

Watch: Imarticus Learning – Top 10 Reasons to Pursue US CMA Course | Why Choose US CMA?

Final Word

Trading options can offer a real edge when done thoughtfully. Choosing beginner-friendly trading strategies builds a strong foundation for future success. By using the best option trading strategy and smart intraday option trading strategy techniques, new traders can step into the market with better confidence.

For those serious about building a full-time career in finance, the Chartered Financial Analyst Certification Program gives a rock-solid base in investment analysis, portfolio management, and professional ethics. It’s worth checking out if options trading is more than just a hobby.

FAQs

What are the easiest trading strategies for beginners?
The covered call is often considered the easiest trading strategies. It provides steady income with lower risk.

How can I pick the best option trading strategy for my goals?
Think about risk appetite, market view, and whether you want income or capital growth.

Is intraday option trading strategy profitable?
It can be, but it’s highly risky. Beginners should practice with virtual accounts first.

How much money do I need to start options trading?
It depends, but starting with at least £500–£1000 gives some flexibility without too much risk.

Why do options lose value over time?
Options suffer from something called time decay. Every day that passes makes options slightly less valuable if the stock price stays the same.

What is the most common mistake beginners make?
Trading without a clear plan and letting emotions take over

Are online courses worth it for learning options trading?
Yes, structured courses like those from Imarticus Learning can speed up understanding and avoid expensive mistakes.

Cost Variance Analysis: Techniques for Performance Management

Posted on July 2, 2025July 2, 2025 by Imarticus Learning

When it comes to managing a business, numbers speak louder than words. And cost variance analysis is one of those numbers-based tools that can actually tell you what’s going right and what’s costing you more than it should.

In this blog piece, I’ll walk you through what this analysis really means, how it ties into everyday performance decisions, and why finance professionals (and future leaders) can’t afford to ignore it.

But before we go deep, let me drop this in: if you’re looking to sharpen your financial management skills and want to truly understand tools like these inside out, check out the US CMA course by Imarticus Learning. It goes into detail about budgeting, cost controls, variance analysis—you name it.

What is Variance Analysis in Cost Accounting?

Variance analysis in cost accounting is basically the process of comparing what you planned to spend versus what you actually spent. If your actual costs are higher or lower than expected, that difference is the variance. Simple, right?

But the trick is in understanding “why” the variance happened and what it means.

Maybe your raw material costs shot up. Maybe your team overspent on overtime. Or maybe things just didn’t go to plan. The point is: this analysis helps you spot those issues early so you can fix them.

This isn’t just bookkeeping. It’s performance management in real time.

How Cost Variance Analysis Powers Performance Management

A lot of people think cost variance is just about balancing the books. It’s not. It’s a performance management tool that helps leaders figure out:

Which departments are spending smart
Where targets are being missed
If strategies are working or not

Let’s break it down a bit more.

1. Sets a Baseline for Accountability

Budgets are commitments. Variances tell you who’s keeping theirs and who’s drifting off course.

2. Highlights Operational Bottlenecks

If you’re seeing consistent cost overruns in the same department or process, that’s your cue to investigate.

3. Enables Evidence-Based Decisions

With real-time data in hand, you can shift from “I think we’re overspending” to “Here’s exactly where and why we’re off.”

4. Improves Forecasting

The more accurately you can predict cost patterns, the better you can plan for the future. Variance trends show you where your assumptions are off.

Types of Cost Variances

There’s more than one kind of cost variance. Let’s make it practical. Here’s a breakdown:

Type	What It Means	How It Helps
Material Cost Variance	Difference between expected and actual cost of materials	Checks supplier performance or waste issues
Labour Cost Variance	Difference between planned and actual labour costs	Highlights inefficiencies or overstaffing
Overhead Variance	Difference in allocated vs actual overheads	Reveals poor planning or equipment issues
Sales Variance	Difference in budgeted and actual revenue	Ties directly to market demand and pricing
Efficiency Variance	When more/less resources are used than expected	Shows process performance

Each variance gives you insight into how people and processes are performing.

Budget vs Actual Variance: The True Performance Scorecard

When you put budget vs actual variance on paper, it shows you the cold, hard truth about performance.

Let’s say your marketing team spends 30% more than planned. But revenue doesn’t increase. That’s not a budgeting issue. That’s a performance issue.

Or flip it: your operations team spends 10% less, and output stays the same. That’s a strong performance. They found efficiencies.

Budget vs actual comparisons are your scorecard. They help you ask:

Did we hit our goals without overspending?
Are we using money where it matters?
Which teams are actually delivering value?

Without this, you’re flying blind. And worse, you’re making decisions based on suppositions, not data.

Real Life Example

Say your production team had a ₹1,25,000 unfavourable material variance. That doesn’t just mean someone spent too much.

You investigate and find:

Supplier prices quietly increased.
Some raw materials were wasted due to poor storage.
Forecasts weren’t updated for current market rates.

Now, here’s how you manage performance:

Negotiate new contracts.
Improve inventory controls.
Train staff on procurement systems.

Next quarter? The variance drops to ₹25,000. That’s not just tighter budgeting. That’s better performance.

Variance vs Performance Impact

Here’s a table explaining how cost variance becomes performance management. You look at the why, take action, and measure improvement.

Cost Variance	Performance Trigger	Management Response
High labour variance	Inefficient shift scheduling	Redesign rosters, track overtime
Overhead cost overrun	Unplanned equipment maintenance	Adjust maintenance contracts
Material usage variance	Higher scrap rate	Retrain production teams

Why Cost Variance Analysis is a Must for Managers

You don’t need to be a CFO to use this. In fact, every manager who handles a budget should know how to:

Read variance reports
Ask the right follow-up questions
Spot patterns across periods
Link variance trends to actual operational behaviour

Whether you’re in HR, IT, marketing, or operations—it’s all about spending smart and performing smarter.

Tools That Make Budgeting Easier

You can go old school with Excel. But honestly? Most teams use budgeting and performance tools like:

SAP or Oracle for enterprise-level variance tracking
QuickBooks or Xero for SMEs
Power BI for custom dashboards

The key is not which tool but how often you look at the data and how well your team understands what it means.

External Resources Worth Bookmarking

Cost variance analysis definition (AccountingTools)
Analysis of Variances (ANOVA): What it Means, How it Works (Investopedia)
Managerial Accounting Made Easy (NetSuite)
Seven Best Practices For 2024 Budgeting And Planning (Forbes)

Useful Videos to Watch

Conclusion

Cost variance analysis is how smart businesses measure effort against outcome. When used right, it becomes your cheat sheet for figuring out what’s working, what’s wasting money, and where to tighten things up.

If you want to seriously upskill and actually use all this in real business settings, I highly recommend the Certified Management Accountant Programme – Imarticus Learning. This programme covers budgeting, forecasting, and yes—variance analysis—in a way that sticks. Definitely worth checking out.

FAQs

Can cost variance analysis help set future budgets more accurately?
Yes. Analysing past variances improves forecasting and helps create budgets that are more grounded in actual conditions.

Why is cost variance analysis important in performance management?
Because it gives real feedback on how teams are managing resources, meeting goals, and adjusting to change.

How can cost variance analysis drive cross-department collaboration?
By revealing where costs are connected across teams—like procurement and production—it encourages shared accountability and joint problem-solving.

How can I reduce cost variances?
Better forecasting, tighter controls, and quicker reporting cycles help reduce variances over time.

What tools are used for cost variance analysis?
Excel, SAP, Oracle, Power BI, and cloud accounting platforms all support this.

How is budget vs actual variance used in decision-making?
It tells you if spending matches expectations and whether performance targets were realistically set.

Is there a difference between cost variance and performance variance?
Yes. Cost variance focuses on financial deviations, while performance variance can include non-financial KPIs, too.

Understanding Financial Markets: A Beginner’s Guide

Posted on July 2, 2025July 2, 2025 by Imarticus Learning

Have you ever asked why stock prices jump, why the rupee fluctuates, and how banks earn?

The fundamentals of financial markets are never explained to many people in an easy-to-understand way. You may read about IPOs, interest rates, and inflation, but where do you start?

This guide is for the curious student, for the learner considering an MBA in Fintech, and for the professional wishing to renew her or his basics of financial markets.

Basics of Financial Markets: What you need to know

The financial markets are not only about purchasing shares. They also associate individuals, firms, and even governments with money and risk. You can imagine them in the form of huge systems that allow the flow of cash.

A financial market is an exchange where individuals purchase and sell shares, bonds, and contracts termed as derivatives. Such trades mostly occur at low prices. Raw materials and metals such as gold or oil are also found in the market, and so people call them commodities.

How Trades Actually Happen

Financial markets don’t all work the same way. They use different systems to match buyers with sellers:

· Auction markets – People buy and sell orders, and trades happen when prices match. This is how most stock exchanges work.

· Dealer markets – Here, dealers (or market makers) quote the prices they’re willing to buy or sell at. They help keep the market moving by always being ready to trade.

How Financial Instruments Work Behind the Scenes

Markets run on instruments. Equities build ownership. Bonds raise capital with promises to repay. Derivatives protect against risk. Understanding these is more than memorising terms.

The National Statistics Office expects GDP to grow by 6.4% during the 2025 financial year. This means growth may reach 6.7% in the second half, up from 6% in the first half.

Imagine you’re designing a fintech product. Without basic knowledge of financial markets, you won’t understand the risks users face.

Also, global shifts constantly affect local instruments. Knowing how to interpret those signals gives you the upper hand in strategy, development, and even regulation.

Break Down the Market Structure: From Participants to Products

At the centre are two markets: primary and secondary.

One helps companies raise new funds. The other allows buyers and sellers to trade existing assets.

Now, who takes part?

Institutional investors
Retail investors
Brokers and market makers
Regulatory bodies and fintech firms

These players each affect how transactions happen. Understanding their roles makes market behaviour easier to predict. This is why every student who joins the MBA in Fintech by Imarticus Learning studies these layers before they work on real capstone projects.

Your awareness of structure creates sharper decision-making. Whether you want to launch a new tool or enter investment banking, knowing who’s involved gives you direction.

What You Learn vs. What It Builds

Concept	Skill Gained	Relevance to Career
Basics of financial markets	Clear understanding of instruments	Required in any finance-related decision
Risk and return fundamentals	Better judgment on investment choices	Needed for fintech product planning
Market structure and roles	Strategic analysis of stakeholder impact	Useful in consulting and investment roles
Global vs. local market trends	Scenario thinking and adaptive planning	Key for regulatory and policy roles
Data-backed financial modelling	Accuracy in forecasting	Core to all financial job roles

Imarticus Learning’s MBA in Fintech: Practical Skills for a Digital Future

Imarticus Learning, in partnership with KL University, offers a full-time MBA in Fintech designed to create future-ready fintech professionals. The programme is hands-on and built around the industry’s real needs.

Learners take part in live fintech workshops with PwC Academy, gain exposure to cloud computing and cybersecurity, and solve real business problems with capstone projects. What makes this programme unique is how it blends theory with live practice.

Imarticus Learning ensures every learner gets to work with real businesses across India, gaining experience in how fintech truly works. This MBA in Fintech is for those who want more than just theory; it’s for learners who want skills that match the fintech world we live in today.

Students in this MBA programme at fintech also undergo PwC-led workshops. These sessions simulate live problem-solving. The market is asking for future-ready professionals, and this course trains you to be just that.

Imarticus Learning focuses not just on textbooks but also on market behaviour. It connects theory to tools you’ll actually use.

The curriculum spans:

Cloud-based finance systems
Cybersecurity fundamentals
Behavioural finance modules
Regulatory compliance

And with fintech growing faster in India than almost anywhere else, this structure matters. Imarticus Learning believes your knowledge must work in the field.

Join the MBA in Fintech programme by Imarticus Learning and KL University and start building your future from day one.

FAQ

1. What are the basics of financial markets?

Financial markets entail knowledge of shares, bonds, currencies, and commodities, including how to purchase and sell them.

2. What is the sense of practicing the elementary knowledge of financial markets?

All financial aspects, such as savings, investments, and debts, can be easily traced to the behavior of markets.

3. Is financial market learning hard?

Not if you follow the right learning path and use simple, real examples.

4. What makes a Fintech MBA different from a traditional MBA?

It includes fintech tools, digital banking, data analytics, and modern payment systems, not just traditional finance.

5. Do I have to learn coding to work in fintech?

Not always. Most jobs require business people who know technology and do not necessarily construct it.

6. Is it possible to get fintech employment without an MBA?

Yes, although an MBA in fintech will provide a sharp advantage in the competitive job market.

Final Words

Understanding the basics of financial markets isn’t just for finance students; it’s for anyone who earns, saves, borrows, or invests. And today, with the rise of fintech, there’s even more reason to take charge of your financial learning journey.

First of all, learn the basic knowledge of financial markets. Grow your knowledge step by step.

And if you’re looking for a guided, hands-on, industry-connected programme, the MBA in Fintech by Imarticus Learning gives you that platform.

Apply now and be part of the next wave of fintech leadership!

AI in Finance: Revolutionising the CFO Role

Posted on July 2, 2025July 2, 2025 by Imarticus Learning

Do you feel like most of your time as a CFO goes into collecting scattered data, running outdated models, or putting out fires from finance teams?

Do you often wonder if there’s a smarter way to do it all without burning out?

Welcome to the new age of AI in finance, not just hype but a real solution for overloaded CFOs. From automating month-end reporting to forecasting market shifts before they hit the books, AI is quietly but firmly rewriting what it means to lead finance today.

But this transformation isn’t without confusion. Many leaders ask: Where do I even begin? Or will AI take away my control?

Why AI in Finance?

India’s finance sector is evolving faster than ever. Regulation is shifting, fraud risks are multiplying, and digital expectations from boards are skyrocketing. CFOs can no longer just manage books; they must predict them.

Here comes AI in accounting and finance. It introduces precision into predictions, analyses anomalies more promptly, and allows cost controls on a larger scale.

However, in contrast, Indian CFOs play with an additional level of pressure, unorganised data, outdated systems and processes involving people. This does not make AI a luxury but a need.

What are Some Issues that AI can Address with CFOs today?

Artificial intelligence (AI) allows computer systems to execute the tasks typically associated with human intelligence, such as learning, reasoning, problem-solving, perception, and decision-making.

What Problems Can AI Solve for CFOs Today?

Unlimited data crunching: AI accelerates the same process, liberating teams to work in the sphere of strategy.
Ineffective sales and cost forecasting: Machine learning also forecasts sales and cost patterns more effectively than legacy tools.
Delayed reporting: Automation reduces close time from weeks to days.
Fraud risks: AI-based anomaly detection flags suspicious activity before it spreads.

Whether you’re in manufacturing, BFSI, or retail, these are pain points you know all too well.

Where CFOs Are Already Using AI

Banking institutions are driving this surge in investment, allocating 31.3 billion U.S. dollars in 2024, up sharply from 20.65 billion the year before.

Let’s look at how AI is already used in key finance areas:

Finance Function	Traditional Approach	AI-Powered Approach
Forecasting	Excel + Past Trends	Predictive models + Real-time data
Risk Management	Manual Audits	Pattern recognition & anomaly alerts
Compliance	Static Checks	Dynamic rule engines
Budgeting	Historical Allocation	Scenario analysis via AI tools
Cash Flow Management	Manual Adjustments	Real-time liquidity tracking

This is not future talk. It’s already in motion.

Is AI a Threat or an Edge for CFOs?

Honestly, both depends on how you approach it. Some finance leaders fear AI will make roles redundant. In reality, it’s the opposite.

CFOs who adapt will delegate routine tasks to machines and focus more on growth decisions, M&A, ESG metrics, and board reporting.

You’ll move from controller to strategic navigator.

And that’s where AI in finance courses can help.

What You Must Learn as a Modern CFO?

AI isn’t just about tools. It’s about how you lead with them.

Here’s what’s essential:

Understand data science basics
Learn how machine learning applies to forecasting
Know how AI systems make decisions (transparency is key)
Build ethics into finance models
Align tech investments with board strategy

You don’t need to code. But you must understand how these technologies support finance decisions.

AI won’t solve every problem, but it gives CFOs the speed, precision, and space to solve the right ones.

What’s Holding CFOs Back?

Fear of change
Lack of AI knowledge
Concern over team acceptance
Unclear ROI

However, the right CFO course and leadership approach can break these barriers without harming the business.

How CFO Decision-Making Evolves with AI

The role of a CFO is no longer limited to managing budgets or financial compliance. With the arrival of AI in finance, decision-making has shifted from reactive to proactive and from gut feel to data-backed clarity.

Real-Time Data Integration
Automated Reports & Dashboards
Predictive Forecasting with Machine Learning
Scenario Modelling & Risk Analysis
Strategic, Forward-Looking Decisions

Lead Finance in the AI Era with the CFO (India) Programme

The Chief Financial Officer (India) Programme, delivered by London Business School in collaboration with Imarticus Learning, offers a world-class pathway for finance leaders ready to adopt AI and digital transformation. This isn’t a generic management course. It’s focused specifically on the challenges Indian CFOs face in high-growth markets.

The programme helps you blend AI understanding with practical financial leadership. You’ll learn in London and Mumbai, interact with global experts, and gain alumni status from one of the top finance schools globally.

If you’re serious about redefining your role in 2025 and beyond, the Chief Financial Officer (India) Programme is your gateway.

Apply Imarticus Learning to start your transformation!

FAQ

1. What is artificial intelligence in finance?

Artificial intelligence in finance uses artificial intelligence to manage activities such as forecasts, detection of frauds, and budgeting uses them more efficiently and quickly.

2. What role does AI play in finance and accounting now?

Finance teams apply it in real-time data analysis, transaction categorisation, compliance checks, and financial planning.

3. Are those AI in finance classes useful to CFOs?

Yes, they do make the finance leaders smarter in tech-led decision-making without turning into a tech specialist.

4. Will AI be the new CFO?

No, AI assists the CFO by doing line items, which is repetitive work. A human CFO brings judgement, leadership, and vision to the role.

5. Does it have a good AI-based CFO course?

Yes. Digital transformation and AI readiness are part of the Chief Financial Officer (India) Programme by the London Business School and Imarticus Learning.

6. Is it possible to use AI to make financial forecasts more accurate?

Yes. Machine learning models make predictions on real-time and historical trends, using which they provide better results compared to manual predictions.

7. What is the first step to learning AI in finance when having no tech background?

Begin with the classes that describe AI in layman’s terms. You do not have to code but should know how systems run.

The Final Words

Let’s be honest. The CFO role is no longer about managing numbers; it’s about managing what’s next.

AI in finance is not a trend. It’s a shift. Either you build your edge or risk falling behind.

Whether you’re ready to explore AI in finance courses, apply AI to your forecasts, or lead a digital-first finance team, the first step is understanding what’s changing.

What Are Accounting Conventions and Why Do They Matter in 2025?

Posted on July 2, 2025July 2, 2025 by Imarticus Learning

Have you ever looked at a company’s financial statement and wondered, “How do they decide what to report and what to leave out?”

You’re not the only one. Every number in a financial report follows certain unwritten guidelines. These are basically called accounting conventions, and yes, they still matter in 2025 more than ever.

If you’re a business owner, finance student, or working in accounts, you’ve probably asked, What is accounting conventions, or heard terms like materiality or conservatism without clarity. This blog is here to understand all of that. In fact, if you’re taking a financial management course, this should be your base before anything else.

Why 2025 Demands More Clarity in Financial Reporting

With startups scaling faster, taxes changing every year, and AI entering accounting software, reporting in 2025 is a basic routine. But even with all this change, consistency and trust remain key. That’s where accounting conventions quietly do their job, making sure every report stays fair and easy to follow.

While laws give the basics, accounting conventions fill the gaps. They help accountants make the same kinds of decisions across companies and years. This saves time, builds trust, and avoids confusion.

The Basics: What Is Accounting Conventions?

Accounting standards set out in clear detail which accruals must be made, how financial statements should be well presented, and what extra disclosures are necessary. The term ‘generally accepted accounting principles’ (GAAP) became widely used in the late 1930s. Accounting conventions are rules that are not legally enforced but are widely followed in practice.

Let’s break it down further.

Laws = Mandatory.
Accounting standards = Official rules.
Accounting conventions = Unofficial but accepted norms.

You’ll see these in every business, big or small.

Types of Accounting Conventions Used Today

The Ministry of Corporate Affairs (MCA) has made important changes to the Companies (Indian Accounting Standards) Rules, 2015, which came into effect on 1 April 2024. These changes affect Ind AS 117 (Insurance Contracts) and Ind AS 116 (Leases).

The most commonly used conventions are:

Consistency
Full Disclosure
Materiality
Conservatism

How Each Accounting Convention Works

Understanding the Four Main Accounting Conventions

Convention	How It Works	Why It’s Followed
Consistency	Accountants stick to the same methods each year.	It helps compare results over time without confusion.
Full Disclosure	All important financial details are clearly mentioned in the reports.	It ensures transparency so nothing important is hidden from stakeholders.
Materiality	Tiny amounts that don’t change decisions can be left out.	It saves time by ignoring things that won’t affect overall understanding.
Conservatism	When in doubt, they show lower profits and higher expenses.	It avoids overstating the company’s position and keeps expectations realistic.

This table simplifies four major accounting conventions.

So, when a company suddenly changes how it values stock or assets, analysts will look for proper disclosures; that’s where these conventions protect both the company and its audience.

Who Needs to Know This?

You do, if you are:

A finance student wondering what is accounting conventions in practice.
A small business owner maintains books in Excel.
A finance executive plans to join a financial management course.
A startup founder presenting statements to a VC.
Or even someone in taxation, compliance, or internal audits.

Real-Life Example: Where Things Go Wrong Without Conventions

Imagine a company that changes its depreciation method every year. One year it uses the straight-line method, and the next year it shifts to the reducing balance method.

What happens?

It gets harder to understand their asset value, and profits vary too much.

That’s why accounting principles concepts and conventions exist: to keep things real and comparable.

Flowchart: Accounting Conventions in Use

Business records a transaction
↓
Accountant chooses how to report it.
↓
Refers to standards
↓
Look at accounting conventions to see if the rules are unclear.
↓
Applies consistency, materiality, or conservatism
↓
Prepares final report

As seen above, every accountant uses these conventions even if they don’t realise it.

Evolving With Time: What Changes in 2025?

Not the conventions themselves, but how they are basically applied.

For example:

Materiality thresholds change as businesses grow.
Full disclosure now includes ESG reporting.
Conservatism becomes harder to judge with intangible assets.
AI now flags inconsistencies, but it still depends on human judgment.

So, while tech supports accounting, the final call often needs human logic, powered by these conventions.

Imarticus Learning’s Financial Analysis Prodegree

If you’re looking to move into corporate finance, investment banking, or private equity, the Financial Analysis Prodegree by Imarticus Learning, developed in collaboration with KPMG, offers a smart head start.

It’s a four-month, part-time course conducted on weekends via live virtual sessions. This financial management course builds solid skills in financial analysis, reporting, and valuation. You’ll learn directly from KPMG experts, work on real case studies, and get trained in tools used by top firms today.

By registering in the Financial Analysis Prodegree, you not only earn a prestigious certification but also gain access to resume-building support and premium job platforms like IIMJobs Pro.

Enrol now and build your career the smart way, with Imarticus Learning.

FAQ

1. What is accounting conventions?
They generally followed rules that help accountants prepare financial statements clearly and fairly.

2. How do accounting conventions differ from accounting standards?
Standards are formal rules issued by authorities. Conventions are practices followed by most professionals for consistency.

3. Are accounting principles, concepts, and conventions still relevant in 2025?
Yes. Even with digital tools, accountants use these to guide judgment calls when rules aren’t clear.

4. Why are financial management course options taught this early on?
Understanding these concepts is key to analysing financial reports in any role or industry.

5. Which are the most used accounting conventions in India?
Consistency, full disclosure, materiality, and conservatism in that order.

6. Can small businesses ignore these conventions?
Not if they want to scale or raise funding. Even VCs expect basic reporting standards.

7. Do accounting software follow these rules?
Yes. Most platforms have these conventions built into their system logic.

8. Where can I learn about accounting principles concepts and conventions in depth?
A structured financial management course like the one offered by Imarticus Learning can help you learn them the right way.

The Final Words

Accounting conventions may not be official laws, but without them, finance would be chaos. They introduce sanity, transparency, and credibility in any financial statement. It is essential that you have the proper insights into all the concepts and the conventions of accounting principles, whether you are preparing or analysing the reports, as proper insight will enable you to make the right decisions.

That is why the next time you see a balance sheet, you will realise that there is a rule behind every number, and behind every rule, there is a reason.

Measuring Risk-Adjusted Performance: Key Metrics

Posted on July 2, 2025July 2, 2025 by Imarticus Learning

Are you earning enough for the risks you’re taking?

That’s the one question every investor, portfolio manager, or finance student needs to answer. You might have posted a great return.

But what if the market handed you that on a silver plate? What if your portfolio took twice the risk of another for the same return? Without the right metrics, you wouldn’t even know.

This is where the risk adjusted return comes into play.

In this post, we’ll break down what is risk adjusted return, the formulas that matter, and how professionals use these metrics to judge whether the returns are worth the risk.

What Is Risk Adjusted Return?

Risk-adjusted return on capital (RAROC) is a method of determining the profitability of a certain entity after considering the risk. It is, therefore, useful to help assess financial performance because the returns are basically compared to risk exposure, providing a consistent and clear analysis of profitability within various divisions of a business.

Why Simple Returns Are Not Enough

A 15% return looks great until you realise the market did 20%, and your portfolio took double the risk. Or worse, it had huge ups and downs along the way.

Most basic return figures ignore volatility, market sensitivity, or downside risks. That’s where risk-adjusted return shines.

It lets you:

Compare apples to apples, even if risk levels differ.
Reward consistency over just high numbers.
Identify which fund managers add actual skill, not just luck.

Without these adjustments, performance reviews are incomplete. And for those in financial risk management courses, mastering these measures is a must-have skill.

Popular Risk Adjusted Return Formula

In India, there isn’t a single fixed figure for the risk-adjusted return on capital (RAROC) in 2025. Still, market trends and sector-specific performance offer useful context. Small-cap mutual funds have faced notable losses this year, with some dropping by as much as 18%.

Each formula highlights different kinds of risks: total risk, downside risk, market risk, etc.

Here are the most widely used ones.

1. Sharpe Ratio

Formula:
(Return – Risk-Free Rate) ÷ Standard Deviation of Return
Best for comparing portfolios or funds, assuming returns are normally distributed.
A higher Sharpe Ratio means better returns for each unit of risk. It’s perfect when you want a quick overview of performance vs volatility.

2. Sortino Ratio

Formula:
(Return – Risk-Free Rate) ÷ Downside Deviation
Focuses only on bad volatility (losses).
Investors care more about downside risk than upside volatility. The Sortino Ratio makes this distinction.

3. Treynor Ratio

Formula:
(Return – Risk-Free Rate) ÷ beta
Good for portfolios with systematic risk exposure. It uses beta (market risk), unlike Sharpe, which uses total risk. Especially useful when portfolios are well-diversified.

4. Jensen’s Alpha

Formula:
Actual Return – Expected Return (via CAPM)

Helps understand a manager’s value over market movements. Alpha shows how much return is due to skill, not market movement.

Metric	How It’s Calculated	Type of Risk Considered	Common Use
Sharpe Ratio	(Portfolio Return – Risk-Free Rate) ÷ Standard Deviation of Return	Overall (Total) Risk	Comparing general portfolio performance
Sortino Ratio	(Portfolio Return – Risk-Free Rate) ÷ Downside Deviation	Downside (Negative) Risk	Analysing performance with a focus on losses
Treynor Ratio	(Portfolio Return – Risk-Free Rate) ÷ beta	Market Risk (Systematic)	Evaluating portfolios exposed to the market
Jensen’s Alpha	Portfolio Return – [Risk-Free Rate + Beta × (Market Return – Risk-Free Rate)]	Market vs Actual Return Gap	Measuring fund manager’s added value

When and How to Use These Metrics

Each formula serves a different purpose.

Here’s how professionals use them practically:

Sharpe Ratio: Ideal for mutual funds or comparing ETFs.
Sortino Ratio: Used when investments are highly volatile or focused on capital protection.
Treynor Ratio: Used by hedge funds or managers handling high-beta portfolios.
Alpha: Used by firms to evaluate whether active managers justify their fees.

Comparing Risk-Adjusted Metrics

Here’s a quick bar chart comparing sample values for each metric to help you visualise how they stack up:

The bar chart shows how different funds or portfolios might score differently based on the metric used, even if they deliver the same raw return.

Build a Career in Financial Risk: Join the FRM® Course

Are you looking to build a career in portfolio risk management?

Understanding these metrics is step one. However, mastering them and applying them in live markets requires expert-led training.

That’s where the Financial Risk Manager (FRM®) Certification by Imarticus Learning comes in.

Recognised globally, this certification builds your credibility across finance, risk, and investment domains. With over 90,000 professionals certified across 190+ countries, FRM opens doors in banks, investment firms, and consulting roles. You’ll learn real-world risk-adjusted return analysis, valuation techniques, and decision-making under uncertainty.

At Imarticus Learning, the FRM® course includes:

Access to GARP-approved AnalystPrep platform
4000+ practice questions & 8 mock tests
300+ hours of expert-led sessions
1-on-1 doubt resolution and career bootcamp

FRM certification holders are often hired by Big 4 firms, global banks, and top asset managers. If you’re serious about becoming a risk leader, this course will set you apart.

Take the next step in your financial career.

Join the FRM® Certification by Imarticus Learning and gain the skills hiring managers seek in risk professionals.

FAQ

Q1. What is risk adjusted return?
Risk adjusted return is the profit earned relative to the level of risk taken, helping compare investments on a like-for-like basis.

Q2. Which is the best risk adjusted return formula?
There isn’t one best formula. The Sharpe Ratio is common, but Sortino and Treynor work better in specific contexts.

Q3. Why is risk adjusted return important in financial risk management courses?
It shows the quality of return, not just quantity, which is something every FRM candidate must know.

Q4. Where is the Treynor Ratio used?
In portfolios exposed to systematic (market) risk where beta plays a role.

Q5. What is Jensen’s Alpha used for?
It evaluates fund manager performance after adjusting for market movements.

Q6. Can I calculate risk adjusted return in Excel?
Yes. Most formulas require historical returns and standard deviation or beta inputs.

Q7. Is risk adjusted return included in the FRM exam?
Yes, it’s a core topic in portfolio risk and performance analysis modules.

The Final Words

Knowing your return is only half the story. It is knowledge of the risk of that particular return that makes a smart investor and a lucky one.

It does not matter whether you are dealing with your personal money, doing a financial risk management course, or planning to do the FRM exam. You need to have control over risk adjusted return.