Financial Management

1. Defining Finance Finance is broadly defined as the art and science of managing money. It encom...

Let's explore the specific nature of financial management through the following key characteristi...

1. Introduction Financial management, as an integral part of overall management, is not a complet...

1. Introduction Financial management provides a framework for making sound financial decisions. I...

1. Introduction The primary goal of financial management is to guide a firm's investment and fina...

5.1. Definition Wealth maximization focuses on improving the value or wealth of the shareholders....

Feature Profit Maximization Wealth Maximization Focus Short-term earnings Long-term value ...

1. Introduction Effective financial management requires making sound choices in three key areas: ...

1. Introduction In finance, a fundamental principle is that higher potential returns are generall...

1. Introduction The organizational structure of the finance function varies across companies, inf...

1. Introduction The time value of money (TVM) is a core concept in finance. It essentially means ...

1. Introduction Capital budgeting, also known as investment appraisal, is a crucial process that ...

1. Principles of Capital Budgeting Capital budgeting decisions are guided by several core princi...

1. Payback Period (PB) 1.1. Definition The payback period is a method that determines the number ...

1. Introduction The Net Present Value (NPV) method is a discounted cash flow (DCF) technique used...

1. Introduction The Profitability Index (PI) is a discounted cash flow (DCF) technique that measu...

Internal Rate of Return (IRR) and Modified Internal Rate of Return (MIRR) Internal Rate of Retur...

1. Introduction Net Present Value (NPV) and Internal Rate of Return (IRR) are two widely used dis...

1. Introduction The Terminal Value (TV) method evaluates investments by explicitly considering th...

1. Introduction The cost of capital is a crucial concept in financial management, serving as a be...

1. Introduction The cost of capital, as a decision criterion, is an overall or combined cost, rep...

1. Introduction Companies raise debt through various channels, including financial institutions, ...

1. Introduction The cost of preference shares represents the return expected by investors who hol...

1. Introduction The cost of equity capital is the return that a company must provide to its equit...

1. Introduction Retained earnings, the portion of a company's profits not distributed as dividend...

1. Introduction The overall cost of capital (WACC) is a composite or average cost, derived by com...

What is Capital Structure? Capital structure refers to how a company finances its assets, speci...

The Net Income (NI) Approach, proposed by Durand, suggests that a company's capital structure (th...

The Net Operating Income (NOI) Approach, also suggested by Durand, presents a contrasting view to...

The Traditional Approach to capital structure sits between the two extremes of the Net Income (NI...

The Modigliani-Miller (MM) approach provides a fundamental framework for understanding how capita...

Determining the "optimal" capital structure (the ideal mix of debt and equity financing) is a com...

Leverage is a financial strategy where a company uses fixed costs to potentially amplify returns ...

Operating leverage arises when a company has fixed operating expenses that remain constant regard...

Financial leverage focuses on how a company's financing decisions impact its earnings available t...

EBIT-EPS analysis is a tool to help companies compare different financing options (equity, debt, ...

Combined leverage examines the total effect of both operating and financial leverage on a company...

Distributing Profits vs. Reinvesting in the Business Dividends represent a portion of a company's...

Balancing Profits and Shareholder Value A company's dividend policy – the decisions it makes abou...

Dividend Policy Theories: Relevance vs. Irrelevance The impact of dividend policy on a firm's val...

Walter's Model, proposed by Professor James E. Walter, argues that dividend policy always affects...

I. Modigliani and Miller (MM) Approach: Dividend Irrelevance Revisited Modigliani and Miller (MM)...

Dividends as a Message to Investors Signaling Theory recognizes that corporate actions, including...

Companies have several options for distributing value to shareholders, with cash dividends being ...

Ensuring Short-Term Financial Health Working Capital Management (WCM) is a vital aspect of financ...

Finding the Right Mix of Short-Term and Long-Term Funds A key decision in working capital managem...

Balancing Sales and Timely Collections Receivables Management is a critical aspect of working cap...

Credit Policy, Discounts, and Analysis Effective receivables management relies on several key com...

Efficient receivables management isn't just about maximizing collections; it's also about minimiz...

Optimizing Liquidity and Minimizing Idle Funds Cash management is a critical aspect of working ca...

Optimizing Stock Levels for Efficiency Inventory management is a critical process focused on cont...