Working Capital: Meaning, Types, Differences, Components, Methods, Advantages, and Disadvantages
What is Working Capital? Working capital is part of the firm’s capital that is required for financing short-term or current assets such as stock, receivables, marketable securities, and cash. Money invested in these current assets keeps revolving with relative rapidity and is being constantly converted into cash. These cash flows rotate again in exchange for […]
Leverage in Financial Management: Types, Importance
What is Leverage? Leverage can be defined as “the employment of an asset or source of funds for which the firm has to pay a fixed cost or fixed return”. Because of the incurrence of fixed costs, the net income and the earnings available to the equity shareholders as well as the risk get affected. […]
Theories of Capital Structure
The capital structure is how a firm finances its overall operations and growth by using different sources of funds. It refers to how much of each type of funds a company holds as a percentage of its total financing. In other words, Capital Structure is referred to as the ratio of different kinds of securities […]
24 Major Characteristics of Financial Plan
Characteristics of Financial Plan Every concern had to formulate a financial plan that would suit the specific circumstances in which it is operating. A concern should bear in mind certain considerations or principles while formulating or devising its financial plan: The following are the characteristics of financial plan: Simplicity of Purpose A financial plan should […]
Capital Structure: Meaning, Definitions, Differences, Factors, Qualities of Optimum
What is Capital Structure? Capital structure is the composition of different types of capital or financing a company employs to acquire resources necessary for its business operations and growth. Commonly, the capital structure comprises stockholders’ investments (equity capital) and long-term loans (loan capital). Meaning of Capital Structure Capital structure decision is concerned with the decision-making […]
Capitalization: Over and Under, Causes and Effects
What is Capitalization? Capitalization is that which “comprises of a company’s own capital which includes capital stock and surplus in whatever form it may appear and borrowed capital which consists of bonds or similar evidence of long-term debt”. The total amount of funds available for an undertaking is broadly divided into owned capital and borrowed […]
Cash: Meaning, Nature, Characteristics, Factors, Budget, Process
What is Cash? Cash is the money that a firm can disburse immediately without any restriction. In cash management, the term cash is used in both narrow and broad senses. In the narrow sense, it includes coins, currency, cheques, drafts held by the firm, and demand deposits in its bank accounts. In the broader sense, […]
Cash Management: Meaning, Objectives, Cash Flows, Importance, Methods, Strategies
What is Cash Management? Cash management is one of the key areas of working capital management. Apart from the fact that it is the most liquid current asset, cash is the common denominator to which all current assets can be reduced because the other major liquid assets; i.e. receivable and inventory get eventually converted into […]
Factors Affecting Cash Requirements
Factors Affecting Cash Requirements A firm must have so much cash balance, that daily requirements and unexpected demands can be met out. The factors affecting cash requirements and their effect on cash management are as follows: Credit Position of Firm Firms with good and sound credit standing and goodwill need not maintain separate cash for […]
Capital Budgeting: Meaning, Definitions, Nature, Importance, Components, Scope, Process, Methods, Problems
What is Capital Budgeting? Capital budgeting involves the planning of expenditures for assets, the returns from which will be realized in the future time periods. The word Capital refers to the total investment of a company in money, tangible and intangible assets. Whereas budgeting defined by “Rowland and William” it may be said to be […]
