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Study Techniques
Many of you especially the part-time student who are occupied with home,
religious, circular, academic and even recreational activities do ask how can I
pass examination with my tight schedule? A simple answer would be:

either work hard or cheat!

I do not want you to cheat because it is against the law and also a sin in the site
of GOD so you must work hard. Is that really the only answer?

I hope that I can give you better support with the following advice.

In the forth coming examination you can determine to succeed and excel in the
courses if you adopt these success nuggets below:

To get the best, you must READ, STUDY, UNDERSTAND, and MEMORIZE the
materials available to you on all the courses.

Reading
The first thing you need is a plan. Without planning with time table as a guide, you
may discover that your effort will be to no avail. While on your plan, you need to
answer some questions:
 What are my schedules during this week/period of the exam?
 When will the exam actually commence?
 Will I have any extra week before the exams to prepare or not?
 How many pages of notes are there in each of the causes?
 How many chapters do I have to read in each of the lecture notes?
 How many materials can I cover each night or day?
 How much time will I spend reading these materials?
 When will I start revision?

Reading is NOT running your eyes over a textbook/lecture note. When you read,
read actively. Read to answer questions you have asked yourself or questions the
instructor or author has asked. Also, when you read, be sure to read everything,
including tables, graphs and illustrations. Often times tables, graphs and illustrations
can convey an idea more powerfully than written text.

Studying

The Bible says STUDY TO SHOW THYSELF APPROVE

Effective study skills must be practiced in order for you to improve. It is not enough to
simply "think about" studying; you have to actually do it, and in the process use
information from what you do to get better. It a popular slogan that practice make
perfect but note that "Practice doesn't make perfect; only perfect practice makes
perfect." If you want to be an achiever, take this saying to heart.

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Before you even begin to think about the process of studying, you must develop a
schedule. If you don't have a schedule for studying, then you will not have any way
of allocating your valuable time when the unexpected comes up. A good, well
thought out schedule can be a lifesaver. It's up to you to learn how to develop a
schedule that meets your needs, revise it if necessary, and most important, follow it.

All schedules should be made with the idea that they can be revised. A good
schedule keeps you from wandering off course. A good schedule, if properly
managed, assigns time where time is needed.

The problem of when to study is critical. A good rule of thumb is that studying should
be carried out only at your convenient time perhaps after the days work/activities.
Last minute studying is usually a waste of time.

Understanding

Half of the battle with any examination is being able to understand the questions set
in order to identify what sort of answer required. Once you have a good
understanding of what the examiner need, this will give you a glimpse or clues as to
the type of answer and detail that the examiner requires.

Memorize

As you prepare for examinations, you should spend time reviewing and revising your
lecture notes. Begin the process by reviewing your notes right after you have
finished studying. If you wait too long, you may discover that the notes just don't
make sense. Don't hesitate to revise your notes based on the review process

Memorizing is the process of committing what you have red to memory. The act of
memorization is often a deliberate mental process undertaken in order to store in
memory for later recall items such as experiences, ideas and facts discovered from
the note. Memorization may also refer to the process of storing particular data into
your brain.

Some principles and techniques that have been used to assist in memorization
include:

 Rote learning, a learning technique which focuses not on understanding but

on memorization by means of repetition. For example, if words are to be
learnt, they may be repeatedly spoken aloud or repeatedly written down.
 A mnemonic, a type of memory aid. Mnemonics are often verbal, such as a
very short poem or a special word used to help a person remember
something, particularly lists. Mnemonics rely on associations between easy-
to-remember constructs which can be related back to the data that is to be
remembered. This is based on the principle that the human mind much more
easily remembers personal, or meaningful information than arbitrary
sequences.

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Study module one
(a). What part does the development banks play in enhancing effective and
smooth running of money market?

Development Banks plays an important role in efficient organization of the money

market such as:

 Provision of Capital to Industries.

 Lending of money to small scale industries (provision of medium – and long-
term loans.)
 Services of Mutual Funds
 Funding of enterprises in various forms such as equity participation, ,
subscription to bonds issued by client company, under writing of securities
and loan guaranteed.
 Provision of different kinds of technical, managerial and Consultancy services
 Market surveys to determine the feasibility and viability of the proposed
project.
 It provides technical assistance for the preparation and execution of
development projects and programs.
 It promotes investment of public and private capital for development
purposes.
 It assists in coordinating development policies and plans

(b). What do you think is the main objectives of privatizing Government owned
industries and explain the demerit of embarking on this action?

It is possible that some of these popular and critical perceptions and assertions
about privatization are accurate. There is no doubt that mistakes have been made in
the past and that promises have not been kept, for instance the incidence of
interference from political office holders. However, it may turn out to be a mistake to
judge privatization from a limited perspective. The set of objectives privatization
programs are meant to achieve is broad and involved; it has many fundamental
components that can act together for the enhancement of microeconomic efficiency.
There are, indeed, some critical long run objectives to be achieved through
privatization including the following:

 increasing productive efficiency;

 strengthening the role of the private sector in the economy, which will
guarantee employment and higher capacity utilization;
 improving the financial health of public services with savings from suspended
subsidies;
 freeing more resources for allocation to other needy areas of governmental
activities (for example, finances that would have been applied for subsidies
should now be channeled to the development of rural communities); and
 reducing corruption because interference by politicians will cease.

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Invariably, a privatization program ought to be judged and assessed by the extent to
which the stated objectives have been met. Furthermore privatization could take a
slow but steady developmental speed.

Demerits of privatization

 Rising Prices - Opponents fear that the private sector will exploit consumers
where there is monopoly or oligopoly power such as by raising the prices of
goods.
 Creating Poverty - At the heart of the criticism of privatization is the
perception that it has not been fair - hurting the poor and the vulnerable work
force, while benefiting the rich, the powerful, and the privileged - thereby
perpetrating poverty.
 Breaking of Unions - Workers dismissed as a result of privatization have
great difficulty finding other work; the large number of people out of jobs is
forced to accept jobs with lower pay, less security, and fewer benefits. They,
therefore, believe that the aims of privatization are to reduce labor costs and
numbers, and to break union power.
 Corruption - There is this argument that even if privatization contributes to
improved efficiency and financial performance, it has a negative effect on the
distribution of wealth perhaps arising from corruption. Corruption is the single
most destructive factor responsible for the pitiable state of affairs in many
developing countries. It distorts the economy through waste and misallocation
of resources and creates need for external assistance. Transparency
International has for a long time decried the evil consequences of corruption
and has identified acute corruption in many developing countries. For
example, in 1997, its Annual Corruption Index rated Nigeria as the most
corrupt country on earth, followed by Pakistan and Kenya. By 1998, the index
moved and Cameroon displaced Nigeria as number one. Some misguided
Nigerians have argued thus “…after all, corruption is everywhere, including
industrialized countries.” It is true that corruption is a worldwide phenomenon,
and so are industrial development and technological advancement. Why is it
then that when industrialized countries are pushing for technological
invention, African countries are busy expanding only the frontiers of corruption
and poverty-prone ventures?
 Public Enterprises Should Stay - There is this strong belief that privatization
is not necessary. Public enterprises need not run at a loss; all they require is
good managers, less political interference, competent boards of directors, and
especially more rational pricing policies.
 Injustice - There is an assertion that it is the politicians and bureaucrats that
caused the public enterprises to perform poorly but only labor is asked to
carry the burden of reform. Critics view this as injustice.
 Exploitation by Capitalist Countries - Privatization is seen as an imposition
by foreign capitalists and agencies like the IMF and the World Bank;
therefore, privatization must be meant to exploit the developing countries.
 Privatization Is Foreign - Some critics have argued that privatization is neo-
colonialism since the policy is being pushed by International Monetary Fund,
World Bank, and their agencies. It is not an indigenous idea; therefore, it will
not work.

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  Labor’s Demands for Job Protection -Right from the onset, the most
publicly persistent and organized opposition of privatization in Nigeria has
come from the labor movement. There always have been strikes and
counterstrikes against any decision to privatize a government agency.
Sometimes workers have succeeded in blocking or slowing down the
privatization of specific enterprises. In other cases the government simply has
brushed aside the labor opposition leaving a legacy of anger and political
tension. What is obvious is that workers are reacting against threatened jobs
or the possibility that benefits might be jeopardized under new management.

C. Companies A and B both earn N100, but company A has 10 shares

outstanding, while company B has 50 shares outstanding. Which
company’s stock do you want to own?

EPS = Net Earnings / Outstanding Shares

With the question above,

Company A had earnings of N100 and 10 shares outstanding,

Which equals an EPS of 10 shares = (N100 / 10) = 10.

Company B had earnings of N100 and 50 shares outstanding,

Which equals an EPS of 50 shares = (N100/50) = 2.

Study module two

a). Investment portfolio of JONATHAN ASSOCIATES need diversification and the

group managing director is not very clear about investment in treasury bill which they
agreed to commence on the beginning of the next financial period. Analyze in detail
how to invest in treasury bills.

Solution

INVESTMENT IN TREASURY BILLS

A Treasury Bill is a Federal Government short-term debt instrument, usually issued

for up to 91 days. It is a discountable instrument, which means you earn interest up-
front. These are presently the most secure instruments in the market as they are
rediscountable with the CBN, at any point in time through any authorized dealer
(banks and discount houses). Thus liquidity is guaranteed with minimum risk to the
purchaser that chooses to sell.

How to invest in Treasury Bills

Investment in Treasury Bills can be effected in either the primary market or the
secondary market.

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Primary Market

This is where Treasury Bills with 91 days tenor are sold to investors at rates
investors bid, while the stop rate (maximum selling rate ) is determined by the CBN.
The CBN conducts auction weekly and payments for the bills are on discounted
value. On maturity the face value is paid to the investor, on presentation of the
physical treasury bill certificates for redemption by EDL, an authorised dealer.

Results are released on Thursdays (auction day) and the treasury bills are allocated
to successful bidders for which payments must be made on that day.

For an investor to participate in the primary market through EDL, the following
procedures would apply:

 Write a letter to EDL authorising the firm to purchase primary market treasury
bills on anyone behalf stating the face value, bid rate, and the auction date.
 Forward the cheque for the discounted amount, plus the commission of
0.125% flat (based on the face value) to EDL (allow for the normal 4 working
days clearing of the cheque).
 Immediately the physical treasury bills certificates are received by EDL, they
will be forwarded to the client for safe keeping.

EDL is also placed to offer custodial services at a minimal charge should the client
so desire.

Redemption

Redemption will only be entertained by the CBN on presentation of the physical bills
at their office.

It is therefore advisable that clients forward their physical bills to EDL at least two (2)
days before the maturity date to enable the firm process for redemption on the
maturity date. Funds received will be forwarded to the client once CBN credits EDL’s
account with same.

Rediscounting

If the investor cannot hold the bills to maturity, EDL can purchase such bills at rates
agreeable to both parties, thereby providing the client with the required liquidity. The
CBN provides benchmark rates for rediscounting treasury bills.

However, the original certificates must be endorsed and given to EDL to enable the
house present these to the CBN for rediscounting. Payment will be made to the
client the next day on confirmation of receipt of funds from the CBN.

Secondary Market

This is the market where pre-issued Treasury Bills are sold. There are two segments
of the secondary market.

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  Buying from EDL as a discount house. You can buy whatever tenor suits your
investment needs. However, by its nature as secondary bills, physical
certificates are not available. EDL shall give you a contract letter evidencing
the purchase. Rates will be agreed in line with CBN’s rates.
 Buying from the Open Market Operation. Like the primary market, the Open
Market Operation popularly called (OMO) is an auction-based system.

OMO is conducted weekly by the CBN, purchases are recorded in favour of the
successful banks in their Treasury Bills account with the apex bank. Non-banks do
not have such accounts therefore their purchases of OMO bills are held on their
behalf by discount houses or banks.

Rediscounting

If for any reason the investor cannot hold the bills to maturity, EDL can purchase
such bills at rates agreeable to both parties, thereby providing the client with the
required liquidity.

b). Unveil the role of information technology on Nigeria stock exchange

Information Technology has been seen in the NSE (Nigerian Stock Exchange) in the
following forms –

1. introduction of Central Securities Clearing System Limited (CSCS);

2. introduction of the trade alert in 2006,

3. launching of official websites (www.nigerianstockexchange.com &

www.nigerianstockexchange.biz)

It won’t suffice to mention how IT has manifested on the floor of the NSE without
expatiating on their roles in the working of the exchange.

 CSCS,

IT has had a profound impact on the stock exchange. And without it (Information
Technology), the phenomenal leap in the activities of the exchange in the recent past
won’t just be possible. CSCS, short for Central Securities Clearing System Ltd is a
few years old but it’s effect is known even beyond the shores of our country. Just as
its name implies, it’s a private limited company operating under the NSE. A careful
look at its name also gives away its main function – acting as a clearing/settlement
machine for all transactions on the floors of the exchange. It’s a securities clearing
system which implies that it records all transactions and acts as a bridge between
the NSE and the investing public.

In other words, it is to the NSE what a registrar’s office is to a university. Every

record of what happens in the stock exchange is kept there. Once a transaction has
been certified completed by the CSCS, it is completed truly and cannot be disputed
by any other personnel of the NSE. That is to show the level of responsibility vested

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in the CSCS platform.

The CSCS is hugely, if not wholly IT-based. The CSCS is like a central hub
(Computer Server in a network of computers) which connects and co-ordinates
buying and selling of stocks at the NSE. It (CSCS) makes use of computer and
telecommunications infrastructures to contact or receive information from players on
the market, mainly stockbrokers are stored in the CSCS database. As a result, every
stockbroker registers any transaction he makes with the CSCS memory and it is then
the duty of the CSCS to verify if the necessary approval has been obtained and
thereafter effect the purchase or sale.

All facilities like CSCS database, computer systems, phone networks are all IT-
based and they quicken transactions time.

Another area where IT is evident in the NSE is:

 Trade alert.

Though this programme met with stiff opposition when it was introduced, it has come
to be the toast of investors. This phone-based alert programme ensures that
investors know when their shares are bought or sold by sending them SMS.

With GSM phones almost everywhere (Teledensity in Nigeria is over 15%-Africa

Report Magazine, April/May 2008 edition), trade alert is very feasible and about the
fastest mode of getting any investor (fewer people use e-mail addresses).

 The last evidence to show change at the NSE as a result of IT is websites that
are linked to the stock market.

At the moment, NSE has two official web addresses –

www.nigerianstockexchange.com and www.nigerianstockexchange.biz. These
websites can give any visitor any information about the operations of the exchange.
Market capitalization, all share index, value & volume of stock traded and bulls &
bears can all be obtained from these websites, they are the “mirrors” with which the
NSE sees itself.

In a world that is becoming IT – based by the minute, these websites together with
that of CSCS and stockbrokers and banks will in future play more useful roles in the
operations of the stock market. The CSCS website www.cscsltd.com has structures
which can enable a registered web user to view his CSCS account online! You can
learn if a stock you paid for has been bought or not. That is the power of IT in making
investment on the exchange easier.

Study module three

a) Resolution on Investment of Surplus Funds and Policy of OLOKO GROUP OF

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 COMPANIES is seen below. (A case study)

1. OBJECTIVES
To ensure that surplus funds are invested appropriately.

(2) PRINCIPLE
Maximise return on investment funds without placing those funds at risk.

(3) ISSUES
The higher the return, the greater the risk of loss of investments.
Although the objective of an investment policy should be to achieve a high rate of
return, this should not result in funds being placed where there is a risk that a loss of
capital may occur.

(4) POLICY
(a) The Manager, Corporate Services be authorised to invest surplus funds in the
following "Trustee" investments:
(i) In any of the Public Funds or Government Securities of the Commonwealth or any
State;
(ii) In any security in respect of which payment of the amount secured and payment
of interest on that amount is guaranteed by the Commonwealth or a State;
(iii) With any dealer in the short term market approved by the Security and Exchange
Commission as an authorised dealer, that has established lines of credit with that
bank as a lender of last resort;

(iv) In Central Bank of Nigeria issued Bill of Exchange which at the time of
acquisition has a maturity date of not more than 180 days and which if purchased for
value, confers on the holder in due course, a right of recourse against a bank as the
acceptor of the bill, so long as the acceptance by the bank is a general acceptance;

(v) In any negotiable interest bearing deposit in a bank, or in certificates of deposit

issued by a bank.

(b) Investments be made after consideration has been given to the interest rate on
offer, the amount already held with the institution, the timing of the investment, and
with due regard to the scheduled expenditures of the Council.

Question: With the above analysis of the resolution taken by the company, why do
you think it’s necessary to invest companies surplus funds?
What are the various sources by which these funds could be disposed?

Permanent investments of surplus funds are essential for:

a) Expansion of business
b) Obtaining control of allied activities
c) Buying over competitors
d) Replacement of assets.

Sources for disposal of surplus funds

a) Treasury Bills: These are designed to meet the short term financial needs of

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 the government which issues them. They are sold mainly to the discount
houses and banks that will receive suitable rate of interest. The banks can
acquire the bills for companies wishing to invest in this way. The bills are
issued monthly with a normal maturity period of 91 days. Their interest rate is
very low but they are liquid and can easily be sold.
b) Tax Reserve certificates: The total amount held by companies fall in the first
or last quarter of each year as the certificates is surrendered in payment of
the tax bill.
c) Loans to or bonds of local Authorities: These can be purchased with a period
of maturity of anything from two days to five years. The company would buy a
bond with a life span correlating as closely as possible to that if its surplus
funds.
d) Deposits with Commercial Banks: This is the commonest form of short-term
investment. Whereas deposits on current account earn no interest, money
placed on deposit account does earn interest. This form of investment is easy
to undertake; it is extremely liquid (only a short period of notice is required
before the withdrawal of the funds) and any amount can be deposited.

Study module four

Corporate diversification strategies (case study)

In corporate portfolio models, diversification is thought of as being vertical or

horizontal. Horizontal diversification is thought of as expanding a product line or
acquiring related companies. Vertical diversification is synonymous with integrating
the supply chain or amalgamating distributions channels.

Stronger diversification...non-incremental diversification is a strategy followed by

conglomerates, where the individual business lines have little to do with one another,
yet the company is attaining diversification from exogenous risk factors to stabilize
and provide opportunity for active management of diverse resources.

On a particular area the entire economy consists of two companies: one that sells
umbrellas and another that sells sunscreen. If a portfolio is completely invested in
the company that sells umbrellas, it will have strong performance when it rains, but
poor performance when the weather is sunny. The reverse occurs if the portfolio is
only invested in the sunscreen company, the alternative investment: the portfolio will
be high performance when the sun is out, but will be poor when clouds roll in. To
minimize the weather-dependent risk in the example portfolio, the investment should
be split between the companies. With this diversified portfolio, returns are decent no
matter the weather, rather than alternating between excellent and terrible.

Why should a company a company diversify?

What is investment portfolio diversification?

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