Valuation is an effective management tool, which helps the business in achieving the business objective by showing the value of business in its life cycle. In general valuation is done to resolve tax/legal issues; however it is also performed for various reasons like selling a business or acquiring a business.Valuation has a set of procedures which are set to estimate the economic value of an owner's interest in a business. Valuation is done by a qualified person, they first analyse the company's financial statements and consider both quantitative information and qualitative information.Then the necessary adjustments are made to benchmark. Sometimes ... Read More

Before going for difference, let us understand the meaning of price, value and cost in simple wordsPrice is what you payCost is what you expendValue is what you getThere is confusion between words price, cost and value. Many people think all the threewords are more or less same but there is some difference between them. Before going for differences lets we try to understand the overview of these three wordsPriceIn commercial terms, price is the amount charged by the seller from the buyer in exchange for any product/service. Price includes both cost and profit. When commercial transaction is good then ... Read More

Exchange ratio tells about the shares, which has to be issued to each individual share (target firm) by acquiring the company. Exchange ratio is an important metric in mergers and acquisitions.FormulaThe formula for exchange ratio in mergers and acquisitions is as follows −ER = OP/SPHere ER = Exchange ratio, OP = offer price (target share). SP = share price (Acquirer's)TypesThe types of exchange ratios are as follows −Fixed exchange ratio − It tells about the amount of ownership and dilution of earnings. Acquirers prefer this.Floating exchange ratio − It tells about the deal value. Sellers prefer this.Combination − a combination ... Read More

Financial decisions will vary from company to company and sometimes from department to department in the same company. These factors are classified into Internal and external factors.Internal factorsThe internal factors influencing the financial decisions are explained below −Nature of business − If a company is in manufacturing services, it invests largely in fixed assets. Its capital structure has more shares in long-term capital. If a company is in trading, it invests more in current assets.Size of business − Financial decisions vary from large firms to small firms. Large firms need large capital to run their operations, whereas small firms need ... Read More

Whether it's about company survival or it is about the company's growth, financial performance plays an important role. Financial performances are influenced by many known factors called organizational factors.Some may have positive influence and some may have negative influence. So, before going for those factors, examining these factors have immense value for corporations.Understanding these factors will also minimize negative influence and increase positive influence on performance.Managers use both financial and non-financial performance in measuring organizational or firm performance and their ability to move towards their financial performance.The main objective is to increase shareholders value which increases market price and firm ... Read More

Liquidity and solvency are two important factors to be known before making any investment. When my investments maintain liquidity or make my investment in the solvency of the company intact.LiquidityIt is the ability of a company or firm to meet current liabilities with current assets it has. Liquidity is the short term concept and helps in paying off companies immediate liabilities.It also measures a company's extent to meet their financial obligations, if they fall due to payment with the help of stocks, cash, securities, certificate of deposit etc. cash is a very important liquid asset and it easily turned into ... Read More

In a differential pricing method, the price of the same product is set differently based on customers, location, product form etc. The main objective of this method is profit maximization. This pricing is also called as discriminatory or multiple pricing.Price is set based on the following factors −Customer segment pricing − Different people will pay different prices for the same product based on the segment they live in. For example, examination fees.Image pricing − Based on the image of the product in the market, companies will charge differently in the market for the same product. For example, clothes.Product form pricing ... Read More

In simple words, merger and acquisition is nothing but combining two or more companies to form a single company. Merger and acquisitions help in achieving strategic goals, alternative to organic growth. In sellers prospective Merger and acquisitions gives cash out or to get more risk and reward in newly formed companies.Mergers and acquisitions enhance values for both buyer and user. For buyer merger and acquisitions accelerate with new channels and products, decrease or reduction in competition, effective supply chain management.Unsuccessful mergers and acquisitions hurt both buyer and seller. Some of the reasonsfor unsuccessfulness are integration mismanagement, poor due diligence, over ... Read More

When general management principles are applied to enterprise financial resources then it is called financial management. That means it involves planning, directing, controlling and organizing financial activities.Elements of financial management are investment decisions, financial decisions and dividend decisions.ObjectivesThe objectives of financial management are as follows −Ensures adequate and regular supply of funds.Ensures adequate returns to their shareholders.Optimum utilization of funds.Ensures investment safety.Strong capital structure is planned.FunctionsThe functions of financial management are as follows −Finance manager is responsible for estimation of companies capital requirements.Capital structure has to be decided. This may involve short term, long term or combination of both equity ... Read More

In perceived value pricing method, price is set based on the customer willingness to pay and what he thinks about the product. The value is decided on factors like product experience, support to service, warranty, reputation, trustworthiness etc.Company explains its customers about their offerings, product aspects, services and asks them to evaluate the price. This method measures accurate market perception.FormulaThe formula for perceived value pricing method is as follows −PP = PV * KHere PP = Product value, PV = Product Perceived value, K = Adjustment factorCase − 1 − If product value is very low to customer expectations, customers ... Read More