Archive | Financial Management

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 […]

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 […]

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 […]

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 […]

Capital Gearing: Concept and Factors Affecting It

After reading this article you will learn about the concept of capital gearing and factors affecting it. Concept of Capital Gearing: Assume that a company can issue three types of securities, i.e., equity shares, preference shares and debentures. But what should be the proportion of these securities. For this purpose, we shall study Capital Gearing. […]

Over-Capitalisation and Under-Capitalisation: Comparison

This article will help you to make comparison between over-capitalisation and under-capitalisation. Comparison # Over-Capitalisation: This state of affairs for a concern occurs where the amount of the shares issued is much in excess of actual requirement, and thus the rate of profit, i.e., the dividend rate will be too low to allow the shares […]

Raising of Finance for a Company: 12 Methods

This article throws light upon the top twelve methods used for raising finance for a company. The methods are: 1. Shares 2. Debentures 3. Public Deposits 4. Managing Agents 5. Loans from Banks 6. Ploughing Back of Earnings 7. Hire Purchase 8. Leasing 9. Profit Flowback 10. Credit Facilities 11. Trade Credit 12. Short Term […]