Found 1623 Articles for Growth & Empowerment

How are Financial Goals related to a firm's mission and objective?

Probir Banerjee
Updated on 13-Aug-2021 14:31:48
A company's objectives and mission affect all departments of a company, such as marketing, technology, and HR. Objectives and missions broadly state the aim of an organization and financial goals. Since the major aim of a company is to produce quality goods it is imperative that the finances provide the necessary funds required for producing the goods and/or services. In such a case the financial goals are related to the firm's mission and objective.The role of finance in an organization does not stop in merely supporting the production of goods. Finance is related to all other organizational functions. For example, ... Read More

How would you differentiate Opportunity Cost of Capital from Required Rate of Return (RRR)?

Probir Banerjee
Updated on 13-Aug-2021 14:30:07
In the calculation of Required Rate of Return (RRR), if the risks are comparable, then it is called the opportunity cost of capital. The equation for calculation of RRR is given by: RRR = Risk-Free Rate + Risk PremiumHere, risk-free rate refers to the time value and risk premium adjusts the risks. The individuals choosing an investment that will pay in the future there are some risks inherent in them. The managers usually invest in investment vehicles that offer more than their cost of capital.Note − The RRR is related to the time value of money.The cost of the capital ... Read More

What is meant by Time Preference or Time Value of Money?

Probir Banerjee
Updated on 13-Aug-2021 14:28:43
Organizations and individuals usually prefer to receive money on an earlier date than receiving an equal sum on a later date. It is considered that the value of money goes through erosions with passing periods of time. That is why organizations try to receive payments as soon as possible.Note − Organizations seek to receive payments now than in the future if the amount is the same.Time Value of Money refers to this philosophy and considers the value of money received now to be superior to the same amount of money on a later date. It is based on three factors ... Read More

What are the differences between Objective and Decision Criteria?

Probir Banerjee
Updated on 13-Aug-2021 14:26:58
While we discuss wealth maximization the concepts of objective and decision criteria must be differentiated. At the first sight, the two criteria look similar. However, there are some inherent differences between the two. Knowing the differences is important because the companies deal with these criteria day in and day out.What is Objective Criterion?The objective criterion is the aim or goal the company wants to achieve in the longer term. The objectives guide the overall operations and decision-making processes of the firm. Mission and vision are included in the objective criteria. The importance of objective criterion is the most for managers ... Read More

Types of Financing Decisions - Investment Decisions, Dividend Policy Decisions

Probir Banerjee
Updated on 13-Aug-2021 14:24:28
The decisions taken by financial managers on behalf of an organization for the long term are known as financing decisions. These decisions are important because every department is related to the finance department in one way or the other. Therefore, care must be taken related to the nature of financial matters of the company.The nature of financing decisions is dynamic and there are some distinct differences among the major types of decisions.Investment DecisionsInvestment decisions are related to total assets to be held, the risk composition, and the mix of the total assets of the company.The nature of investment decisions depends ... Read More

What are the types of Finance Functions?

Probir Banerjee
Updated on 13-Aug-2021 14:23:16
Finance functions are divided into two broad functions − Long-term decisions and Short-term decisions. Long-term decisions are applicable to a tenure of more than one year, while short-term decisions are meant for one year or less.Note − Finance functions or decisions are broadly divided into long-term and short-term decisions.Long-term DecisionsLong-term Decisions include: Investment Decision, Financing Decision, and Dividend Decision.Investment DecisionA company's investment decision must consider long-term budgeting or capital expenditure. This decision, therefore, is known as a capital budgeting decision. Capital budgeting consists of allocating the funds and investment decisions in general for future profits. The two major aspects of ... Read More

What are the functions of Treasurers and Controllers?

Probir Banerjee
Updated on 13-Aug-2021 14:19:36
Treasurers and Controllers are designations essentially related to the US and the UK corporate. In those markets, the roles and responsibilities are clearly defined. Although some Indian companies also have them, the number of such companies is very limited.The duties in the US contextThe major responsibility of the treasurer usually is to manage and look after the funds of the company. the duties of the treasurer include managing the cash flow, credit management, forecasting financial needs, and maintaining relationships with financial institutions, etc. the treasurer also looks after protecting securities and cash, etc.The duties of controllers include management and supervision ... Read More

What is Required Rate of Return (RRR)?

Probir Banerjee
Updated on 13-Aug-2021 14:17:25
The Time Value for Money is usually expressed by an interest rate that remains positive even without any risk. This rate is therefore called risk free rate. An individual or a company may agree to receive a payment if the risk-free rate is applied to his investment.For example, suppose an investor has invested INR 100 in a project and the risk-free rate is 5%. Now if he is offered INR 105 after one year, he may choose to receive the money later as he might consider the value of money received after one year equal to the money without a ... Read More

Real Assets and Financial Assets - What are the differences?

Probir Banerjee
Updated on 13-Aug-2021 14:15:45
There are two types of assets associated with a company - Real Assets and Financial Assets. Real assets are needed to continue operations and financial assets are non-physical assets that can be converted to cash easily. Real assets are called real because they often have a real form that can be touched or felt. Financial assets on the other hand are mostly found only as records.Real Assets and Financial AssetsReal assets help companies to generate revenue and are important because they have an intrinsic value related to them. The intrinsic value depends on the substance and properties of the assets. ... Read More

What is Profit Planning and how is it related to Finance Function?

Probir Banerjee
Updated on 13-Aug-2021 14:13:02
Planning the future profits is a good decision because it keeps organizations away from overspending. Moreover, as earning profits is the ultimate aim of all companies, being able to foresee the profit is very valuable for a firm. However, it is easier said than done.Managers often have no control over future shocks and natural disasters.There are other factors that affect the organization's decisions too.Financial managers' duty is to calculate the profits after deduction or paying insurance for these risk factors.Note − The financial managers must be able to find the rate of future profit for the betterment of the financials ... Read More