Why API Testing?

Introduction

Before dwelling into the subject of API Testing, we should understand what is the meaning of API or, Application Programming Interface. An API (Application Programming Interface) is a collection of software functions and procedures, called API calls that can be executed by other software applications. API testing is mostly used for the system which has collection of API that needs to be tested. The system could be system software, application software or libraries. API testing is different from other testing types as GUI is rarely involved in API Testing. Even if GUI is not involved in API testing, you still need to setup initial environment, invoke API with required set of parameters and then finally analyze the result. Setting initial environment become complex because GUI is not involved. It is very easy to setup initial condition in GUI, in most cases you can find out in a glance whether system is ready or not. In case of API this is not the case; you need to have some way to make sure that system is ready for testing. Initial condition in API testing also involves creating conditions under which API will be called. Probably, API can be called directly or it can be called because of some event or in response of some exception.

Output of API could be some data or status or it can just wait for some other call to complete in a-synchronized environment. Most of the test cases of API will be based on the output, if API

Return value based on input condition

This are relatively simple to test as input can be defined and results can be validated against expected return value. For example, It is very easy to write test cases for int add (int a, int b) kind of API. You can pass different combinations of int a and int b and can validate these against known results.

Does not return anything

For cases like these you will probably have some mechanism to check behaviour of API on the system. For example, if you need to write test cases for delete (List Element) function you will probably validate size of

Trigger some other API/event/interrupt

If API is triggering some event or raising some interrupt, then you need to listen for those events and interrupt listener. Your test suite should call appropriate API and asserts should be on the interrupts and listener.

Update Data Structure

This category is also similar to the API category which does not return anything. Updating data structure will have some effect on the system and that should be validated. If you have other means of accessing the data structure, it should be used to validate that data structure is updated.

Modify certain resources

If API call is modifying some resources, for example updating some database, changing registry, killing some process etc, then it should be validated by accessing those resources.

You should not get confused with API Testing and Unit Testing. API testing is not Unit testing. Unit testing is owned by dev team and API by QE team. API is mostly black box testing where as unit testing essentially white box is testing. Unit test Cases are typically designed by the developers and there scope is limited to the unit under test. In API testing, test cases are designed by the QE team and there scope is not limited to any specific unit, but it normally covers complete system.

Main Challenges of API Testing can be divided into following categories.

• Parameter Selection
• Parameter combination
• Call sequencing

Who decides the price of an issue?

Indian primary market ushered in an era of free pricing in 1992. Following

this, the guidelines have provided that the issuer in consultation with

Merchant Banker shall decide the price. There is no price formula stipulated

by SEBI. SEBI does not play any role in price fixation. The company and

merchant banker are however required to give full disclosures of the

parameters which they had considered while deciding the issue price. There

are two types of issues, one where company and Lead Merchant Banker fix a

price (called fixed price) and other, where the company and the Lead

Manager (LM) stipulate a floor price or a price band and leave it to market

forces to determine the final price (price discovery through book building

process).

What is an Initial Public Offer (IPO)?

An Initial Public Offer (IPO) is the selling of securities to the public in the

primary market. It is when an unlisted company makes either a fresh issue

of securities or an offer for sale of its existing securities or both for the first

time to the public. This paves way for listing and trading of the issuer’s

securities. The sale of securities can be either through book building or

through normal public issue.

What is the difference between public issue and private placement?

When an issue is not made to only a select set of people but is open to the

general public and any other investor at large, it is a public issue. But if the

issue is made to a select set of people, it is called private placement. As per

Companies Act, 1956, an issue becomes public if it results in allotment to 50

persons or more. This means an issue can be privately placed where an

allotment is made to less than 50 persons.

What are the different kinds of issues?

Primarily, issues can be classified as a Public, Rights or Preferential issues

(also known as private placements). While public and rights issues involve a

detailed procedure, private placements or preferential issues are relatively

simpler. The classification of issues is illustrated below:

Initial Public Offering (IPO

fresh issue of securities or an offer for sale of its existing securities or both

for the first time to the public. This paves way for listing and trading of the

issuer’s securities.

) is when an unlisted company makes either a

A follow on public offering (Further Issue)

company makes either a fresh issue of securities to the public or an offer for

sale to the public, through an offer document.

is when an already listed

Rights Issue

securities to its existing shareholders as on a record date. The rights are

normally offered in a particular ratio to the number of securities held prior to

the issue. This route is best suited for companies who would like to raise

capital without diluting stake of its existing shareholders.

is when a listed company which proposes to issue fresh

A Preferential issue

listed companies to a select group of persons under Section 81 of the

Companies Act, 1956 which is neither a rights issue nor a public issue. This

is a faster way for a company to raise equity capital. The issuer company

has to comply with the Companies Act and the requirements contained in

is an issue of shares or of convertible securities by

18

the Chapter pertaining to preferential allotment in SEBI guidelines which

inter-alia include pricing, disclosures in notice etc.

Why do companies need to issue shares to the public?

Most companies are usually started privately by their promoter(s). However,

the promoters’ capital and the borrowings from banks and financial

institutions may not be sufficient for setting up or running the business over

a long term. So companies invite the public to contribute towards the equity

and issue shares to individual investors. The way to invite share capital from

the public is through a

to the public to subscribe to the share capital of a company. Once this is

done, the company allots shares to the applicants as per the prescribed

rules and regulations laid down by SEBI.

‘Public Issue’. Simply stated, a public issue is an offer

What is meant by Face Value of a share/debenture?

The nominal or stated amount (in Rs.) assigned to a security by the issuer.

For shares, it is the original cost of the stock shown on the certificate; for

bonds, it is the amount paid to the holder at maturity. Also known as par

value or simply par. For an equity share, the face value is usually a very

small amount (Rs. 5, Rs. 10) and does not have much bearing on the price

of the share, which may quote higher in the market, at Rs. 100 or Rs. 1000

or any other price. For a debt security, face value is the amount repaid to

the investor when the bond matures (usually, Government securities and

corporate bonds have a face value of Rs. 100). The price at which the

security trades depends on the fluctuations in the interest rates in the

economy.

What is the role of the ‘Primary Market’?

The primary market provides the channel for sale of new securities. Primary

market provides opportunity to issuers of securities; Government as well as

corporates, to raise resources to meet their requirements of investment

and/or discharge some obligation.

They may issue the securities at face value, or at a discount/premium and

these securities may take a variety of forms such as equity, debt etc. They

may issue the securities in domestic market and/or international market.

What is SEBI and what is its role?

The Securities and Exchange Board of India (SEBI) is the regulatory

authority in India established under Section 3 of SEBI Act, 1992. SEBI Act,

1992 provides for establishment of Securities and Exchange Board of India

(SEBI) with statutory powers for (a) protecting the interests of investors in

securities (b) promoting the development of the securities market and (c)

regulating the securities market. Its regulatory jurisdiction extends over

corporates in the issuance of capital and transfer of securities, in addition to

all intermedia ries and persons associated with securities market. SEBI has

been obligated to perform the aforesaid functions by such measures as it

thinks fit. In particular, it has powers for:

§

markets

Regulating the business in stock exchanges and any other securities

§

etc.

Registering and regulating the working of stock brokers, sub–brokers

§

Promoting and regulating self-regulatory organizations

§

Prohibiting fraudulent and unfair trade practices

§

inquiries and audits of the stock exchanges, intermediaries, self –

regulatory organizations, mutual funds and other persons associated

with the securities market.

Calling for information from, undertaking inspection, conducting

Which are the securities one can invest in?

§

Shares

§

Government Securities

§

Derivative products

§

securities market can invest in.

Units of Mutual Funds etc., are some of the securities investors in the

What is the function of Securities Market?

Securities Markets is a place where buyers and sellers of securities can enter

into transactions to purchase and sell shares, bonds, debentures etc.

Further, it performs an important role of enabling corporates, entrepreneurs

to raise resources for their companies and business ventures through public

issues. Transfer of resources from those having idle resources (investors) to

others who have a need for them (corporates) is most efficiently achieved

through the securities market. Stated formally, securities markets provide

channels for reallocation of savings to investments and entrepreneurship.

Savings are linked to investments by a variety of intermediaries, through a

range of financial products, called ‘Securities’.

What is meant by ‘Securities’?

The definition of ‘Securities’ as per the Securities Contracts Regulation Act

(SCRA), 1956, includes instruments such as shares, bonds, scrips, stocks or

other marketable securities of similar nature in or of any incorporate

company or body corporate, government securities, derivatives of securities,

units of collective investment scheme, interest and rights in securities,

security receipt or any other instruments so declared by the Central

Government.

What is a Mutual Fund?

A Mutual Fund is a body corporate registered with SEBI (Securities Exchange

Board of India) that pools money from individuals/corporate investors and

invests the same in a variety of different financial instruments or securities

such as equity shares, Government securities, Bonds, debentures etc.

Mutual funds can thus be considered as financial intermediaries in the

investment business that collect funds from the public and invest on behalf

of the investors. Mutual funds issue units to the investors. The appreciation

of the portfolio or securities in which the mutual fund has invested the

money leads to an appreciation in the value of the units held by investors.

The investment objectives outlined by a Mutual Fund in its prospectus are

binding on the Mutual Fund scheme. The investment objectives specify the

class of securities a Mutual Fund can invest in. Mutual Funds invest in

12

various asset classes like equity, bonds, debentures, commercial paper and

government securities. The schemes offered by mutual funds vary from fund

to fund. Some are pure equity schemes; others are a mix of equity and

bonds. Investors are also given the option of getting dividends, which are

declared periodically by the mutual fund, or to participate only in the capital

appreciation of the scheme.

What is a Derivative?

Derivative is a product whose value is derived from the value of one or more

basic variables, called underlying. The underlying asset can be equity, index,

foreign exchange (forex), commodity or any other asset.

Derivative products initially emerged as hedging devices against fluctuations

in commodity prices and commodity-linked derivatives remained the sole

form of such products for almost three hundred years. The financial

derivatives came into spotlight in post-1970 period due to growing instability

in the financial markets. However, since their emergence, these products

have become very popular and by 1990s, they accounted for about twothirds

of total transactions in derivative products.

What is a Derivative?

Derivative is a product whose value is derived from the value of one or more

basic variables, called underlying. The underlying asset can be equity, index,

foreign exchange (forex), commodity or any other asset.

Derivative products initially emerged as hedging devices against fluctuations

in commodity prices and commodity-linked derivatives remained the sole

form of such products for almost three hundred years. The financial

derivatives came into spotlight in post-1970 period due to growing instability

in the financial markets. However, since their emergence, these products

have become very popular and by 1990s, they accounted for about twothirds

of total transactions in derivative products.

What is a ‘Debt Instrument’?

Debt instrument represents a contract whereby one party lends money to

another on pre-determined terms with regards to rate and periodicity of

interest, repayment of principal amount by the borrower to the lender.

In the Indian securities markets, the term ‘

instruments issued by the Central and State governments and public sector

organizations and the term ‘

private corporate sector.

bond’ is used for debtdebenture’ is used for instruments issued by

What is an ‘Equity’/Share?

Total equity capital of a company is divided into equal units of small

denominations, each called a share. For example, in a company the total

equity capital of Rs 2,00,00,000 is divided into 20,00,000 units of Rs 10

each. Each such unit of Rs 10 is called a Share. Thus, the company then is

11

said to have 20,00,000 equity shares of Rs 10 each. The holders of such

shares are members of the company and have voting rights.

What are various Long-term financial options available for

investment?

Post Office Savings Schemes, Public Provident Fund, Company Fixed

Deposits, Bonds and Debentures, Mutual Funds etc.

Post Office Savings:

risk saving instrument, which can be availed through any post office.

It provides an interest rate of 8% per annum, which is paid monthly.

Minimum amount, which can be invested, is Rs. 1,000/- and

additional investment in multiples of 1,000/-. Maximum

amount is Rs. 3,00,000/- (if Single) or Rs. 6,00,000/- (if held

Jointly) during a year. It has a maturity period of 6 years. Premature

withdrawal is permitted if deposit is more than one year old. A

deduction of 5% is levied from the principal amount if withdrawn

prematurely.

Post Office Monthly Income Scheme is a low

Public Provident Fund:

maturity of 15 years and interest payable at 8% per annum

compounded annually. A PPF account can be opened through a

nationalized bank at anytime during the year and is open all through

the year for depositing money. Tax benefits can be availed for the

amount invested and interest accrued is tax-free. A withdrawal is

permissible every year from the seventh financial year of the date of

opening of the account and the amount of withdrawal will be limited

to 50% of the balance at credit at the end of the 4th year

immediately preceding the year in which the amount is withdrawn or

at the end of the preceding year whichever is lower the amount of

loan if any.

A long term savings instrument with a

Company Fixed Deposits:

medium-term (three to five years) borrowings by companies at a

fixed rate of interest which is payable monthly, quarterly, semiannually

or annually. They can also be cumulative fixed deposits

These are short-term (six months) to

10

where the entire principal alongwith the interest is paid at the end of

the loan period. The rate of interest varies between 6-9% per annum

for company FDs. The interest received is after deduction of taxes.

Bonds:

more than one year with the purpose of raising capital. The central or

state government, corporations and similar institutions sell bonds. A

bond is generally a promise to repay the principal along with a fixed

rate of interest on a specified date, called

It is a fixed income (debt) instrument issued for a period ofthe Maturity Date.

Mutual Funds:

which raises money from the public and invests in a group of assets

(shares, debentures etc.), in accordance with a stated set of

objectives. It is a substitute for those who are unable to invest

directly in equities or debt because of resource, time or knowledge

constraints. Benefits include professional money management,

buying in small amounts and diversification. Mutual fund units are

issued and redeemed by the

the fund's net asset value (NAV), which is determined at the end of

each trading session. NAV is calculated as the value of all the shares

held by the fund, minus expenses, divided by the number of units

issued. Mutual Funds are usually long term investment vehicle

though there some categories of mutual funds, such as money

market mutual funds which are short term instruments.

These are funds operated by an investment companyFund Management Company based on

What are various Short-term financial options available for

investment?

Broadly speaking, savings bank account, money market/liquid funds and

fixed deposits with banks may be considered as short-term financial

investment options:

Savings Bank Account

use, which offers low interest (4%-5% p.a.), making them only

marginally better than fixed deposits.

is often the first banking product people

Money Market or Liquid Funds

funds that invest in extremely short-term fixed income instruments

and thereby provide easy liquidity. Unlike most mutual funds, money

market funds are primarily oriented towards protecting your capital

and then, aim to maximise returns. Money market funds usually yield

are a specialized form of mutual

9

better returns than savings accounts, but lower than bank fixed

deposits.

Fixed Deposits with Banks

and minimum investment period for bank FDs is 30 days. Fixed

Deposits with banks are for investors with low risk appetite, and may

be considered for 6-12 months investment period as normally

interest on less than 6 months bank FDs is likely to be lower than

money market fund returns.

are also referred to as term deposits

What are various options available for investment?

One may invest in:

§

and/or

Physical assets like real estate, gold/jewellery, commodities etc.

§

instrume nts with post offices, insurance/provident/pension fund etc.

or securities market related instruments like shares, bonds,

debentures etc

Financial assets such as fixed deposits with banks, small saving

What care should one take while investing?

Before making any investment, one must ensure to:

1. obtain written documents explaining the investment

2. read and understand such documents

3. verify the legitimacy of the investment

4. find out the costs and benefits associated with the investment

5. assess the risk-return profile of the investment

6. know the liquidity and safety aspects of the investment

7. ascertain if it is appropriate for your specific goals

8. compare these details with other investment opportunities available

9. examine if it fits in with other investments you are considering or you

have already made

10. deal only through an authorised intermediary

11. seek all clarifications about the intermediary and the investment

12. explore the options available to you if something were to go wrong,

and then, if satisfied, make the investment.

These are called the

Twelve Important Steps to Investing.

What is Investment?

The money you earn is partly spent and the rest saved for meeting future

expenses. Instead of keeping the savings idle you may like to use savings in

order to get return on it in the future. This is called Investment.