Found 96 Articles for Academic Content

Financial statements are the reports prepared by a firm to represent their financial activities in an accounting year. These gives how the firm carries its activities, maintain its cash flows and how well the firm is doing in the market.Nature of financial statements includes −Recording facts.Accounting conversions.Assumptions.Personal judgements.Objectives of financial statements are as follows −To provide information about economic resources of a firm.To provide information about changes in economic resources of a firm.To provide information about net resources of a firm.To provide information about estimation of earning potential of a firm.Types of financial statements includes −Balance sheetAssetsLiabilitiesEquityIncome statementIncomeExpensesProfit or lossCash ... Read More

Money is an important factor in the business. A firm should maintain a clear record about income and outing of money to evaluate and estimate their performance. A cash flow statement is a record, which records firms in and out flow of cash in detail. Monitoring, analysing and optimising the cash flow is called cash flow management.Importance of cash flow management is explained below:Solvency and credit worthiness.CAPEX and investment.Improves vendor ad employee relationships.Indicators of cash flow management are as follows −EBIT − It tells about earnings after leverage and tax expenses which are deducted. EBITDA tells about operating efficiency of ... Read More

The term forecasting refers to predication of future with the given circumstances. In forecasting, both macro and micro economic factors will be considered. Financial forecasting tells about company’s future action.Financial forecasting made through projected financial statements (income statements, balance sheets and cash flows). It helps to make decisions like capital investments, requirement of working capital, funds requirement etc.Features of forecasting include −Relates to future events.Depends on historical and current events.Predication of future events.Forecasting techniques.Quantitative and qualitative techniques are two types of financial forecasting techniques, which are explained below in detail.Quantitative techniquesCasual methods.Simple linear and multiple regression.Days sales technique.Percentage of sales ... Read More

Financial modelling is a process of creating company’s financial performances in a spread sheet or excel sheet. It is created based on historical performances and assumptions about future. Various numerical models and theories will be used by the financial analyst to forecast the future earnings of the company.Objectives of financial modelling are as follows −Valuing a business.Raising capital.Growing the business.Acquisition.Selling/divesting assets and business unit.Capital allocation.Budget and forecasting.Types of financial modelling are given below −Three statement model − Income statement, balance sheet and cash flow are called three statements. All the related formulas are linked in excel to create a financial ... Read More

Non-financial performances have great impact on non – tangibles of a firm. Many of these performances will not focus on the money generation, but they will have positive impact on finances related to business organisations.Some of them are explained below −Developments of new services/productsResearch and development goals will help goals of innovation, new product creation or improvements in existing products.Customer serviceFinding new ways to expand customer service by new way will yield customer appreciation, through which it will result in customer retention or addition of new customers.Training programsEmployee training programs helps in work performances, which creates effective and motivated staff. ... Read More

Organisations need different set of objectives, to attain their success. These objectives give a plan or directions to the organisation to meet their long term goal.Some of the objectives are explained below −RevenueRevenue generation is the main objective of an organisation. It plays an important role in project life cycle. Revenue generation helps an organisation to plan its marketing and other necessary things in the business.MarginsAfter all sales and expenses, money left after is called profit. Profit plays an important role in business cycle as they generate money for next projects and developments of business.Operational activitiesOperational activities keep business running. ... Read More

William Sharpe, a financial economist developed Capital asset pricing, model in 1970. According to his book, “portfolio theory and capital markets”, he defined risk as systematic risk and unsystematic risk.Systematic risk is related to interest rates, recessions etc., where perils of investing can’t be diversified. Whereas, unsystematic risk is related to stocks.Capital Asset pricing model states relationship between systematic risks and expected returns. It based on mean variation concept. Formula is as follows −$$R_{a}=R_{rf}+\beta_{a}\ast(R_{m}-R_{rf})$$$R_{a}= expected\:return\:on\:a\:security, R_{rf}= risk\:free\:rate, R_{m}=expected\:return\:of\:the\:market$$$\beta_{a}=the\:beta\:of\:the\:security, (R_{m}-R_{rf})=equity\:market\:premium$$Assumptions are mentioned below −Preference of investors for risk return.Investors’ expectations of risk and return.Depending on their assessments of risk and return, ... Read More

Financial strategy tells about how to gather funds and how to utilise the funds. The main purpose is adequate supply of funds to meet present and future needs of business activities. The main aim is to maximise financial value of a firm.Evaluating financial performances − Firm financial performances can be measured by analysing financial ratios of the firm.Financial forecasting − By analysing financial needs, funds will be allocated accordingly. By using scientific techniques accurate forecasts are made, which provides basis to strategic decisions.Capital structure planning − Capital structure decisions will be made on reasonable debt and equity capital. Capital structure ... Read More

There are 3 types of accountsReal account − It relates assets and liabilities; it does not include people accounts. They carry forword every year.Personal account − Connects individuals, firms and associations accounts.Nominal account − Relates all income, expenses, losses and gains accounts.Golden rules of accountingDebit the receiver, credit the giverIf a person gives something to a firm, it must be recorded as credit in the books of accounts. It is used as in personal accounts.If anything coming then Debit, if anything goes out then credit.Real accounts consist of machinery, land and building etc. debit what comes in means it will ... Read More

ADR means American Depository Receipt. ADR is a certificate issued by an American Bank which states that number of shares of another country firm can be traded in U.S. markets. JPMorgan a British departmental store created first ADR in 1927. According to Securities and Exchange Commission (SEC), instead of foreign stock, ADR is more convenient because they have more protection and transparency.ADR Process includes −Domestic company already in local stock exchange sell the shares in bulk to U.S. bank and listed on U.S. exchange.After bank accepts the shares it will issue ADR to interested investor.Selling of ADR shares will be ... Read More