Archive about 'Financial management'

What are the advantages and disadvantages of using Stock Financing from the viewpoint of the Corporation

Tweet The advantages of using stock financing are: Common stock does not obligate the firm to make fixed payments to stockholders Common stock carries no fixed maturity date Common stock increases the creditworthiness of the firm thus increasing the future availability of debt at a lower cost Common stock can often be sold more easily […]

What are the advantages and disadvantages of using the Periodic Review Inventory control system

Tweet   ADVANTAGES DISADVANTAGES 1 All stock items are reviewed periodically so that there is likely to be less obsolete stocks 1 In general larger stocks are required, as re-order quantities must take account of the period between reviews as well as lead times 2 Economies in placing orders may be gained by spreading the […]

What are the advantages and disadvantages of using the Re-order Level Inventory control system

Tweet   ADVANTAGES DISADVANTAGES 1 Lower stocks on average 1 Many items may reached re-order level at the same time, thus overloading the re-ordering systems 2 Items ordered in Economic quantities via the EOQ calculation 2 Items come up for re-ordering in a random fashion so that there is no set sequence 3 Somewhat more […]

In Inventory control, what the assumptions underlying the Economic Order Quantity(EOQ)

Tweet Economic order quantity is defined as the ordering quantity which minimises the balance of cost between inventory holding costs and re-order costs.Underlying assumptions in an Economic Order Quantity model are: That there is a known, constant stockholding cost That there is a known, constant ordering cost, That rates of demand are known, That there […]

In Inventory control, explain what are stock-out costs and give examples of stock-out costs

Tweet Stock-out costs are costs associated with running out of stock Examples of stock-out costs are: Lost contribution through the lost sale caused by the stockout Loss of future sales as customers go elsewhere Loss of customer goodwill Cost of production stoppages caused by stock-out of  work-in-progress or raw materials Labour frustration over stoppages Extra […]

Briefly explain the different types of Dividend-payout policies

Tweet The different type of Dividend Pay-out policies can be roughly categorized as follows: The “bird-in-the-hand view, whereby the shareholders  or owners prefer to be paid high dividend. Here, the shareholders only think of getting immediate dividends over less certain and more distant capital gain. Pay a low payout ratio as shareholders prefer capital gains […]

The Importance or Benefits From Having Established A Capital Expenditure Budget

Tweet I work in a medium size company. It is budget time. Is it necessary for me to prepare a Capital Expenditure Budget. Can you tell me the importance the benefits derived from preparing such budget? Answer: As we understand that the role of a capital expenditure budget is to take account of all expenditures […]

How To Improve Tight Liquidity Or Cash Flows Situation of a business

Tweet My company is in very tight cash flow situations. Can you tell me how to improve the company’s present tight cash flow situations? Without the right level of liquidity ( cash is not equal to profit), a company might be not able to survive. Hence, the company’s first task is to improve its cash […]

What Are The Reasons For The Decrease or Depletion Of Working Capital?

Tweet The company I am working in has Working Capital problems. My accountant told me the working capital problems are due to the decrease or lack or depletion of working capital. Can you please tell what could have caused such depletion or decrease in working capital? Answer: The lack or depletion of working capital are […]

List Of Topics Under The Heading Working Capital Management/Control

Tweet   It Is critical to manage the company’s working capital as cash generated from the working capital cycle is not synonymous with profit generated from the business. Without adequate cash/liquidity, profitable companies can not survive as they need to pay their liabilities from cash and not from profit. Some examination questions test the candidates […]