The main differences are as follows: 1 A cash flow statement is concerned only with the change in cash position while a fund flow analysis/statement is concerned the change in working capital position 2 Cash is part of working capital and an improvement in cash position results in improvement in funds position but the reverse … Read more
Cash management originated as a means of dealing with float. Incidentally, the first modern cash management technique, lockbox banking was an attempt to reduce both mail and processing times in order to make incoming funds more quickly available to the company. So what is float? Float, for the PAYER refers to the time that elapses … Read more
There are two means of getting finance from common stocks namely: Retained earnings or internal common equity(Ke) External common equity (Kne)- the issuance of NEW common stocks. Let’s see how we can compute the aforesaid’s cost of capital Method To Compute Of Cost Of EXTERNAL Common Equity The cost of issuing new common stock(Kne) is … Read more
There are two means of getting finance from common stocks namely: Retained earnings or internal common equity(Ke) External common equity (Kne)- the issuance of NEW common stocks. Let’s see how we can compute the aforesaid’s cost of capital Methods To Compute Of Cost Of INTERNAL Common Equity Dividend Growth Model Capital Asset Pricing Model (CAPM) … Read more
Some of the major factors which affect a firm’s cost of capital are: 1.0 Dependent on the overall country’s economic conditions When inflation rate is increasing, cost of doing business is more expensive hence investors and lenders will demand a higher rate of return which results in a higher cost of capital When the economy … Read more
Very often, we heard of the terms “cost of capital” and or weighted average cost of capital (WACC) used in maximization of shareholders’ wealth or in the Economic value added methodology. What is this Cost of Capital or Weighted Average Cost Of Capital? Firstly let’s look at what’s Cost of Capital: It is the required … Read more
From Finance’s stand-point there are two main goals: a. Profit Maximization b. Shareholders’ Wealth Maximization Let’s look at what is PROFIT MAXIMIZATION: Simply a single-period or a short-term goal to be achieved within one year Management mainly focus on efficient utilization of capital resources to maximize profits WITHOUT considering the consequences of its actions towards … Read more
It is very normal for students of financial management being asked question on the effect of extending credit terms to increase sales. Append below is a simple illustration for a better understanding of investment in receivables or extension of credit terms: Illustration: Company ABC Ltd has a current sales of $2.6 million. It wants to … Read more
Cash Management:- Is the maintaining of liquidity of a firm to minimize the risk of insolvency. ( An insolvent company is one where it is unable to meet its maturing liabilities on time because it has inadequate liquidity to meet its debt obligation) Cash Management is also about the proper balancing of keeping cash without … Read more
The main objective of the Finance Manager is to manage funds in such a way so as to ensure their optimum utilization and their procurement in a manner that the risk, cost and control considerations are properly balanced in a given situation. To achieve the objective the Finance Manager performs the following functions in the … Read more