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Depending on the level of risk the investors want to take, they are divided into three categories. These three categories offer a view of risk attitudes the investors are willing to pursue. Although there is no straightforward method to describe a quantity to the investments in each category, these categories are broadly divided depending on the probability of risks they entail in the long run. Here are the three categories of investors depending on the risk attitudes.Risk-averse AttitudeRisk-averse attitude is shown by investors who want to avoid risk. They will go for fewer returns rather than going for high returns.As ... Read More
One of the most commonly used methods for the valuation of capital structure is the analysis of cash flows from the operations of the business. Cash flows are of the following three types −Operating Cash FlowsNon-operating Cash FlowsFinancial FlowsOperating Cash FlowsThese are related to the operations of a firm and can be obtained from the profit and loss statements of the firm. To calculate operating cash flows, net operating volume, sales, and the input/output prices over a given period are used.Non-operating Cash FlowsIt generally includes working capital changes and capital expenditure. For example, in times of recession, the firms may ... Read More
Operating risk is associated with a company’s cost structure. It is the risk a company faces due to the level of fixed costs in the company’s operations. As the name suggests, operating risks are associated with the operations of the business. This may include risks due to failure of fixed assets or unpredictable operational risks that cannot be foreseen.Business risks are of two types − Operating risk and Sales risk.Operating risk is related to the cost structure and fixed costs of a company.Sales risk is the risks associated with the loss of revenue due to fewer goods and services sold.Fixed ... Read More
Operating leverage is a tool that measures a company’s fixed costs as a percentage of its overall costs. It is often used to evaluate the breakeven point of a business and the profit from overall sales. When expressed as the degree of operating leverage (DOL), it represents a financial ratio that calculates the sensitivity of a company’s operating income to its sales. As such, the DOL is a financial metric that shows how a change in the company’s sales will affect the company’s operating income.High Operating LeverageIn the case of high operating leverage, a large portion of a company’s costs ... Read More
Financial risk refers to a condition where a company with a certain amount of debt will fail to repay them in a given time period. In other words, financial risk means the risk of losing money by investing it in a lossmaking company.Investors usually remain averse to risky companies and hence calculating the financial risk is of paramount importance to them. In general, the more debt a company has, the more will be its financial risk.Types of Financial RisksFinancial risks can lead to loss of shareholders’ income, as the money is lost while carrying on with a loss-making company. However, ... Read More
Meaning of Capital StructureCapital Structure is the ratio of different types of securities raised by a firm as its long-term finance. Capital structure decision involves two philosophies −Type of securities to be issued in capital structures must be equity shares, preference shares, and long-term borrowings (Debentures).Relative ratio of the securities can be obtained by the process of capital gearing. On the basis of gearing, the companies are divided into two categories −Highly geared companies – The companies which have a proportion of equity capitalization that is small.Low geared companies – The companies the equity capital of which is high in ... Read More
Payback period or simply payback in capital budgeting refers to the time required for the ROI (Return on Investment) to repay the original sum of investment.Payback is a preferred tool because it is easy to understand and apply, irrespective of whether the manager is aware of financial calculations or not.Payback is an effective tool to derive the worth of an investment when similar projects are compared.The payback method is a simple tool to measure the months or years it takes to repay the initial investment of a project.The payback method doesn’t have any specific criteria for the evaluation of investments ... Read More
Dynamic TestingIn software testing, dynamic testing is a method or technique performed to test the dynamic behavior of the software code. This testing is performed mainly to test the behavior of the software product with dynamic variables or variables that are not constant and to detect the weak or vulnerable areas in the software runtime environment. The software code should be executed to test the dynamic behavior of the software product.Testing takes 2 Vs to complete the testing process and combines verification and validation. Of these 2 Vs, verification is known as static testing, and validation is referred to as ... Read More
The Software Testing Life Cycle (STLC) is a term that refers to the process of testing software.The Software Testing Life Cycle (STLC) is a set of actions that are carried out during the testing process to guarantee that software quality objectives are satisfied. Both verification and validation are part of the STLC process. Software testing is not merely a single/isolated operation, contrary to the common notions. It comprises a set of operations that are carried out in a methodical manner to assist with the certification of your software product. Software Testing Life Cycle (STLC) is an acronym for Software Testing ... Read More
What is a Project Management Life Cycle?The Project Management Life Cycle is a set of tasks that must be completed in order for a project's goals or targets to be met. It's a structure that outlines the steps involved in turning an idea into a reality. Projects may have various dimensions and degrees of complexity, but they can all be mapped to the Project Management life cycle framework, regardless of their size.What is a Project Management Life Cycle, and how does it work?Phases of the Project Management Life CyclePhase One: BeginPhase of PreparationPhase of ExecutionPhases of monitoring, controlling, and closingPhases ... Read More