Learn how to calculate amortisation and sinking fund during valuation of a firm. Calculation of Amortisation: Amortisation is the gradual and systematic writing off of an asset or an account over a period. The amount on which amortisation is provided is referred to as “amortizable amount”. Depreciation accounting is form of amortisation applied to depreciable assets. Depletion is a form [...]
The following points highlight the seven main approaches to the capital structure of a firm. The approaches are: 1. Net Income Approach 2. Net Operating Income Approach 3. WACC Approach (Traditional View) 4. Modigliani and Miller Approach (Modern View) 5. Debt-Equity Ratio Approach 6. EBIT-EPS Approach 7. Financial and NEDC Risks Trade-Off Approach. 1. Net Income Approach: This approach is [...]
EFR is calculated with the help of following formula, when other ratios remain constant: Where, A/S = Total assets/Sales L/S = Current liabilities and provisions/Sales ∆S = Expected increase in sales over current year (S-S1) S = Sales of current year S1 = Projected sales of next year D = Dividend payout ratio M = Net profit margin The expected [...]