Glossary Of Financial Terms starting with V

List of Financial Terms (Alphabet Wise)

Vaghul Committee A working group on the MONEY MARKET in India, appointed by the Reserve Bank of India (RBI) in 1986. It was headed by N. Vaghul, Chairman, ICICI. Some of its recommendations for developing the money market were :

• Deregulation of administered interest rates.
• Introduction of COMMERCIAL PAPER (CP) and later, CERTIFICATE OF DEPOSIT (CD).
• Activating the SECONDARY MARKET by establishing an institutional intermediary to deal in money market instruments.

As a sequel to the report, some very significant changes were ushered in by the RBI. These include the introduction of money market instruments such as CDs and CPs at market-determined rates and establishment of the DISCOUNT AND FINANCE HOUSE OF INDIA LIMITED (DFHI).

Variable Cost The expenses that vary proportionately with the level of production activities or volume of output of any business. Examples include materials, electricity, and lubricants. Hence, ordinarily, the MARGINAL COST of a unit of output is the increase in total variable cost entailed by the additional unit, i.e., direct material, direct labour, direct expenses and certain overheads.

Venture Capital The long-term financial assistance to projects being set up to introduce new products/ inventions/innovations or to employ or commercialize new technologies. Thus, venture capital entails high risk but has the promise of attractive returns. It is, therefore, also known as 'Risk Capital'. The role of venture capital institutions is very important to the economic growth of a nation. Because of their assistance, new entrepreneurs and businesses spring up and contribute significantly to the total wealth of a nation. In India, such institutions have been set up at the national and state levels. Examples include Technology Development and Information Company of India Limited (TDICI), Risk Capital and Technology Finance Corporation Limited (RCTFC) and Gujarat Venture Finance Limited (GVFL).

Working Capital The funds deployed by a company in the form of cash, INVENTORIES, CCOUNTS RECEIVABLE and other CURRENT ASSETS. The sum total of the funds so employed is termed 'Gross Working Capital'. The term 'working capital' generally means 'Net Working Capital', i.e. the excess of CURRENT ASSETS over CURRENT LIABILITIES.

Net Working Capital = Current Assets – Current Liabilities.

Current assets are built up with the help of short-term and long-term funds. Short term sources include TRADE CREDIT, bank finance and bills payable. These are current liabilities, repayable within a year. Hence working capital or better still, net working capital can be understood as the portion of current assets financed by long-term funds such as loans, SHARE CAPITAL and RETAINED EARNINGS.