Article Categories
- All Categories
-
Data Structure
-
Networking
-
RDBMS
-
Operating System
-
Java
-
MS Excel
-
iOS
-
HTML
-
CSS
-
Android
-
Python
-
C Programming
-
C++
-
C#
-
MongoDB
-
MySQL
-
Javascript
-
PHP
Finance Management Articles
Page 87 of 96
Write about cost of capital in financial management.
Cost of capital is an alternative investment that an investor can invest to get equal rate of return. In other words, it is the opportunity cost that an investor can invest the same money in another investment which is having similar risk and other characteristics. It plays an important role in capital budgeting decisions. It provides guidelines to determine optimal capital structure for a company.Significance of cost of capital is mentioned belowHelpful in making capital budgeting decisions by using discount rates to calculate future cash flow using present values.Helpful in making capital structure decisions by raising its source of funds ...
Read MoreWhat are importance and limitations of financial ratios?
Importance of financial ratios is as follows −By analysing and inspecting the previous results, ratio analysis can relate between different items.Ratio analysis can be used to prepare budget, can formulate policies and also used to plan future.Ratio analysis tells whether the firm is improving or not.Ratio analysis act as surveyor of efficiency.Inter firm comparison can be made.Tells about short term liquidity position.Long term solvency can be measured.With the help of ratio analysis, investors can analyse company’s financial statements to their interest.Determines profitability of a company.Operational efficiency can be analysed.Helps in understanding the business and financial risks of a company.Advantages of ...
Read MoreDifferentiate between temporary working capital and permanent working capital.
The major differences between temporary working capital and permanent working capital are as follows −Temporary working capitalIt’s the additional working capital to permanent working capital.Variable working capital.Dependent on variable factors.Sometimes increase/decreases (fluctuates from time to time) in nature.Financed through short term funds.Categorised into seasonal working capital and special working capital.Permanent working capitalIt’s the minimum capital to maintain in order to meet operational levels.Fixed working capital.Independent of variable factors.Stable in nature.Financed through long term funds.Categorised into Regular working capital and reserve working capital.
Read MoreDifferentiate between Net working capital and Gross working capital.
The major differences between net working capital and gross working capital are as follows −Net working capitalQualitative in nature.Tells about whether company can meet its operating expenses and its current liability.Net working capital is result of difference between current and current liability.Concept used in accounting system.Suitable for partnership firms and sole traders.Reveals company’s financial position.Companies net working capital increases when, there is increase in retained profits and sale of assets.Gross working capitalQuantitative in nature.Tells about overall amount at hand for financing current assets.Gross working capital is the result of sum of all current assets.Concept used in financial management.Suitable for companies.Financial ...
Read MoreDistinguish between profitability and liquidity.
The major differences between profitability and liquidity are as follows −ProfitabilityProfit made by the company in a period/during a year.May not have enough liquidity.A company which is profitable can go for bankrupt if it does not have liquidity in short term.Present in income statement.Determines Gross profit margin, net profit margin, EBIDTA margin, EBIT margin, CAGR.Measures financial performances.Tells about how good is company is able to generate margins form its business.Long term.LiquidityHow much of cash is available by a company at point of time.May not be profitability.A company which has liquidity but nor profitable can’t go for bankrupt.Present in balance sheet.Determines ...
Read MoreCompare corporation and incorporation.
The major differences between corporation and incorporation are as follows −CorporationIncorporationIt’s an entity to run a business.First process in registration as corporation.It is termed as CORP.It is termed as INC.Second stage of business.Takes place incorporation register process.Holds liabilities on personal assets.Limited liability.Outcome of incorporation process.Should follow legal process.Don’t get funds for company.Act as pool to get funds.Relates to day to day activities of business.Safeguards the interests and personal assets of owners/shareholders.Will have almost same functioning, features and goals.Process differ from country to country.Formed to carry out specific operations.Helps entity to become a corporation by series of steps.
Read MoreWrite the difference between dividend and growth.
The major differences between dividend and growth are as follows −DividendShorter time horizon (cash inflow is regular).Cash flow (stocks) at periodic intervals.Release of excess return.Tax free (money received).Less risk (money will get at regular intervals).Outperform growth stocks.Less volatile.Capital appreciation and cash flows (upside).Usually perform even in bear market.Investors will look for low market value than intrinsic value.Investors will look at dividend yields, pay-out ratio.GrowthLonger time horizon (cash inflow is end of period).Cash flow at redemption/sale only.Re-investment of excess return.Tax free (money received), only for some schemes of mutual funds.Higher returns for investors.Underperform than dividends stocks.More volatile.Only capital appreciation (upside).Poorly perform ...
Read MoreCompare asset purchase and stock purchase.
The major differences between asset purchase and stock purchase are as follows −Asset PurchaseStock PurchaseTransfer of ownership is not possible.Transfer of ownership is available.Can claim tax benefits.Can’t claim tax benefits.Less complexity.More complex.Re-negotiation on employee agreement is available.Re-negotiation of employee agreement is not available.Buyers can choose risk and liabilities to bear.Buyers absorb risk and liabilities.Ownership can’t be lost and can’t exchange hands.Ownership can be lost, exchange hands.Less prevalent in market.More prevalent in markets.Retitling of asset is required.Retitling assets in not required.Minority shareholders don’t create problems.Minority shareholders can create problems.
Read MoreWrite the difference between short term capital gain and long term capital gain.
The major differences between short term capital gain and long term capital gain are as follows −Short term capital gainsHeld for less than a year or a period and then sold off.Difference between consideration received and cost basis (short term asset).If the asset is owned for less than 24 months it is considered as immovable property and if it is owned for less than 36 months it is termed movable property.Easily tradable and liquid assets.Short term view of market.Lesser profits compared to long term gains.Less risk.Tax rates are same as income tax for individuals.Taxes may be reduced by including short ...
Read MoreWhat are liabilities in accounting?
According to International Financial Reporting standards (IFRS), Liabilities are present obligations of the enterprises arising from past events, the settlement of which is expected to result in an outflow from the enterprises of resources embodying economic benefits.In simple words, it is amount owned by the company to the creditors.Classification of liabilities is as follows −Current liabilities − Payment period is less than one year. It is also called as short term liability.Examples − Accounts payable, interest payable, income tax payables, bills payable, bank account overdrafts, accrued expenses, short term loans.Non – current liabilities − Payment period is more than one ...
Read More