Archive | Financial Management

4 Main Types of Financial Ratios | Financial Management

In general, financial ratios can be broken down into four main categories: 1. Profitability Ratios 2. Liquidity Ratios 3. Leverage Ratios 4. Activity Ratios. Type # 1. Profitability Ratios: The main objective of any organization is to earn profit. Profit is both a means and end to the organization. The profitability ratios are used to […]

Financial Management: Problems and Solutions

Here is a compilation of various financial management problems along with its relevant solutions. Problem 1: From the following project details calculate the sensitivity of the: (a) Project Cost, (b) Annual Cash Flow, and (c) Cost of Capital. Which variable is most sensitive? Project Cost Rs. 12,000 Life of the project 4 years Annual cash […]

Problems and Solutions on Financial Management

Here is a compilation of various financial management problems along with its relevant solutions. Problem 1: ABC Ltd. is considering a project with following cash flows:     Solution: Problem 2: ABC Ltd. has a choice between three projects: X, Y, Z. The following information has been estimated: Problem 3: XYZ Ltd. company has estimated […]

Capital: Meaning, Types and Features | Industries

After reading this article you will learn about:- 1. Meaning and Concept of Capital 2. Types of Capital 3. Features. Meaning and Concept of Capital: Capital is the life-blood of a business enterprise. It is a universal lubricant which keeps enterprise dynamic. Capital designates physical sources when applied to production and (it means) money when […]

Treatment of Reserve and Surplus

After reading this article you will learn about the treatment of reserve and surplus. Treatment of Reserve: Setting up of reserves for working capital are very necessary for sound financial administration in order: i. To cover credit losses; ii. To liquidate debts; iii. To offset price fluctuations on inventories; iv. To provide for improvement and […]

Sources of Finance for a Company | Financial Management

This article throws light upon the top twenty sources of finance for a company. The sources are: 1. Preference Shares 2. Debentures 3. Ordinary Shares 4. Non-Voting Ordinary Shares 5. Redeemable Equity Shares 6. Stock 7. Retained Profits 8. Loan Capital 9. Sale and Lease Back 10. Equipment Leasing 11. Hire Purchase 12. Term Loans […]

How to Calculate Return on Investment ?

This article will guide you about how to calculate return on investment with the help of an example. Investment may refer to capital employed, total assets or owner’s equity or net worth. Again capital employed may be gross capital employed or net capital employed. Also, return may be pre-tax return or after-tax return. Return may […]

4 Main Types of Financial Ratios (With Formula)

This article throws light upon the four main types of financial ratios. The types are: 1. Liquidity Ratios 2. Activity Ratios 3. Leverage Ratios 4. Profitability Ratios. Type # 1. Liquidity Ratios: Liquidity ratios reflect the firm’s ability to meet scheduled short-term obligations. For the firm to remain alive, it must be able to pay […]

Sources of Finance: Internal and External | Industries

In this article we will discuss about the internal and external source of finance for Industries. Internal Source of Finance: 1. Retained Equity Earnings: This implies retaining the earnings of the shareholders for internal reinvestment. Every rupee retained is a rupee with-held from distribution to existing shareholders. While doing so, management must do something to […]

Over and Under Capitalization of Company

After reading this article you will learn about over and under capitalisation of a company. Over-Capitalization of a Company: An over capitalized firm can be compared to a (fat) man who has got fat more than required and suffers from variety of diseases. Over-capitalization implies that the total capital of the company (owned capital plus […]