Financial Management

Financial Management Topics
last updated on 21-Dec-2017
Key Decisions of Financial Management Financial management is the important topic of the business. It is the backbone of any success in the business. This is the way business plans for the growth, acquire financing to apply the plan and distribute the profit earned to the shareholders. In order to b...
last updated on 21-Dec-2017
Reasons to Expand into Global Markets The important decision of financial management is the investment decision. Entity may do business outside of the national border. It all depends upon how the management views the option to expand in international markets. Usually, entity thinks of moving outside...
last updated on 21-Dec-2017
This is the most important topic in financial management. By Capital budgeting we mean the long term decisions for investment. Should we invest money into the long term project or not, this all decision making, analysis and conclusion is well covered under the umbrella of capital budgeting. Whenever...
last updated on 22-Dec-2017
Net Present Value - NPV One of the most popular tool for evaluating the feasibility of the capital budgeting is the Net Present Value (NPV) method. As the project under consideration gives rise to cash flows in more than 01 years, so in such a long period of time, the money losses its value, to whic...
last updated on 22-Dec-2017
IRR is the discount rate at which the NPV (net present value) of the project under consideration becomes zero. Another definition is the rate at which project cash flows are recovered. It is clearly no profit no loss situation or break-even point. So, we can say it is the rate of return of the proje...
last updated on 22-Dec-2017
In order to analyze whether the investments projects are worthwhile from financial point of view, we use various investment appraisal techniques and Payback period is one of them. PBP actually calculates how many periods, the projects takes to repay its initial investment. How to Calculate PBP The p...
last updated on 22-Dec-2017
Profitability Index is another most important capital investment evaluation method. It is denoted by PI. It takes into account present value of future cash flows and compares it with the initial amount of investment. That is why; it makes this ratio popular among financial analyst because you can co...
last updated on 22-Dec-2017
IRR (Internal rate of return) is the valuable technique to evaluate capital intensive project. This is useful when the cash flows are following the conventional pattern of cash flows. Be conventional pattern, we mean that in initial years, cash outflows are incurring while in rest of the years, cash...
last updated on 22-Dec-2017
Projects with Unequal Lives In practical life, an enterprise has many options to invest in long term projects. These projects have different life span. For financial analyst to evaluate various projects with unequal lives, the solution is not easy. He cannot compare NPV or IRR of the projects with u...
last updated on 22-Dec-2017
It is a modified form of payback period method that we have discussed. As you know that PBP ignores time value of money and this is the main reason, analyst tries to avoid this method. However, they prefer to use discounted payback period as it is one of the most valuable technique for long term pro...
last updated on 22-Dec-2017
It is one of the methods of evaluating projects. In simple words, we can define ARR as return on capital employed (ROCE). It is input output ratio of the project under consideration. That is; how much money is invested and how much money in return the company gets. The business accepts the projects ...
last updated on 22-Dec-2017
There are circumstances where a company cannot invest in more than one project either due to scarce resources or it does not want to go for more than one option. Under these circumstances, it becomes very difficult to choose which project to invest in. If there is no limitation and company can choos...
last updated on 24-Dec-2017
Most of the countries in the world allow depreciation over the fixed asset in tax regime. This is called Capital Allowances and is a saving from paying more tax to the tax authorities. Capital allowances can be claimed for properties, cars, machinery and fixtures etc. But for the purpose of NPV (Net...
last updated on 24-Dec-2017
Taxes and NPV NPV calculation is not simple one. Complexities arise when the matter of taxation comes into the analysis. When doing DCF (Discounted Cash Flows) exercises, it is necessary to take effect of the taxes and for this, it is necessary to understand which cash flows get affected with the ta...
last updated on 24-Dec-2017
Inflation is usually defined as the general rise in the price of the goods and services. So, it has huge impact over the Net Present Value analysis because we use nominal rate of return in discounting cash flows to the present value. Nominal rate of return is the rate which your investment yields wi...
last updated on 24-Dec-2017