Found 1015 Articles for Finance Management

Equity shareholders are real owners of the company and have control over the management. Liabilities of the equity shareholders is the value of unpaid value of shares. They can’t be redeemed during the life time of the company.Features of equity sharesFollowing are the features of equity shares −Maturity of the shares − There is no maturity period for equity shares.Residual claim on income − They get their income left after paying dividend to preference shares. Their earnings equal to profit after tax minus preference dividend.Residual claims on assets − They have right to claim right to get claims on assets.Right ... Read More

Security finance is also called corporate securities. In this, funds are mobilised through shares and debentures. These kinds of funds play an important role in capital structure of a company.Characters of security finance are as followsLong term source of finance.Corporate securities.Repayment of finance is very limited.Plays major role in capital structure of a company.It includes both shares and debentures.Major role in company’s capitalisation.Types of security financesThe types of security finances are as follows −Ownership securities or capital stockCommonly called as shares. Shares are most common method of raising finance by a firm.Equity shares.Preference shares.No par stock.Deferred shares.Creditors’ securities or debt ... Read More

Finance is the major part in running a firm. Distribution of finance to each and every department is based upon the requirements of that department and the situation of the business. Requirement of finance can be broadly classified into following −Long term or fixed capital financial requirement.Short-term or working capital requirement.Sources of finance shows the mobilization of funds for their requirement. To meet their long term and short term requirements firm needs amounts to meet their requirements. Based on mobilization of funds various sources are classified as belowBased on the periodLong term financeShort term financeBased on ownershipAn ownership source of ... Read More

Funds require to meet day to day operations are called short term finance. It is also called working capital. Temporary working capital is termed as short term. Some of them are as follows −Trade creditThe credit, which extended by manufacturer in producing its product is called trade credit. In this period, the purchaser has a debt outstanding to supplier as payment became due.In buyer balance sheet, it is recorded as creditors and in supplier balance sheet, it is recorded as debtors. New and small firms will depend more on trade credit.Accrued expensesAccrued expenses generally refers to services availed by the ... Read More

Long term financial requirement is also called as fixed capital requirement. It is the capital required to purchase fixed assets like building, furniture, land, plant and machinery etc. These are also called as long term financial requirements of a firm. Repayable period in long term is more than five years. Long term financial sources include the following −Equity sharesEquity share represents ownership interest in a company. In this, no compulsion to pay dividend and it does not have any maturity. Capital provided by these funds is more or less on permanent basis. It also creates base for debt and loan ... Read More

The two main regulatory authorities are Securities Exchange Board of India (SEBI) and Reserve Bank of India (RBI).Given below are the regulatory compliance −Raising finance through IPO or SPO.Capital structure changes.Credit rating.Foreign exchange transactions.Derivative transactions.Project financing.Raising finance through IPO or SPOIPO − Initial public offering (first time company comes to public to rise money)SPO − Seasonal public offering (subsequent time a company raises money from the public directly)SEBI prescribed regulatory guidelines regarding the entire process of going public which includes, disclosure to public regarding the potential use of cash, financial projections, etc. Every time company wants a company to access ... Read More

Finance plays an important role in economic and business of a country. System and effective flow is needed for effective management used for business concern. Indian financial system has developed constantly to infuse the new blood to the economic development of the country.If a country has to be economically strong and developed, it depends on how well its financial system is regulated. Financial systems are concerned about money, loan and finance and they are interrelated with each other.Important components of Indian financial system in India are as follows −Financial institutionsThese provides various services to the economic development with the help ... Read More

Payback period allude to the amount of time it takes to reach the cost of an investment. In simple terms, it is time taken for a firm to reach breakeven point.AdvantagesA short payback period can improve the liquidity of the business quickly.Shorter paybacks mean more attractive investments.Payback is easy to compute.DisadvantageIt does consider time value of money.FormulaPay back (even cash flows) =$\frac{investment\:required}{Net\:(annual\:cash\:inflows}$Pay back (uneven cash flows) =$cummulative\:cash\:flow(near\:to\:investment)\:+\:\frac{remaining\:amount\:at\:the\:start\:of\:year}{cash \:flow\:during\:the\:year}$ExamplesCompany A is considering to purchase a new equipment to increase its production and revenue. Useful life of the equipment is 10 years and the company’s maximum desired payback is 4 years.Initial cost ... Read More

Profitability index (PI) measures the ratio between the present value of future cash flow and the initial investment. This is used for ranking investment projects and value created per unit of investment. PI is also known as profit investment ratio (PIR) or the value investment ratio (VIR).PI >1 (project generates value and the company may go with the project).PI=1 (project breaks even and the company is indifferent between proceeding or not proceeding with the project).PI1)Therefore, project generates value and the company may go with the project.

ARR stands for Accounting Rate of Return. It is one of the Non- Discounted cash flow techniques used for calculating capital budgeting.ARR is the average net income of an asset (anticipated) divided by its average capital cost. It is generally expressed as an annual percentage. ARR does not take in account the time value of money or cash flows, which are integral part of maintaining a business.ARR is useful for a quick calculation of an investments probability.ARR is mainly used for comparison between multiple projects to determine the ARR for each.ARR is mainly used for comparison between multiple projects to ... Read More