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Financial Management - Coggle Diagram
Financial Management
3. Cost of Capital (Financing Decisions
Operating Leverage (Fixed vs. Variable Costs)
Impacts project risk, affecting Risk Analysis in Capital Budgeting.
Financial Leverage (Debt Proportion)
Affects Dividend Policy (high debt = lower dividends).
EBIT-EPS Analysis
Helps decide best financing method (debt or equity), influencing Capital Structure.
Weighted Average Cost of Capital (WACC)
Affects project selection in Capital Budgeting (higher WACC = fewer profitable projects).
Sources of Finance (Debt, Equity, Preference Capital)
4. Capital Structure & Dividend Policy
Capital Structure Theories (NI, NOI, MM Approach)
Influence how firms balance debt & equity, affecting Cost of Capital.
Dividend Policy (Stable, Regular, Residual)
Retained earnings impact Capital Budgeting (internal funding vs. external financing).
Debt vs. Equity Financing
Impacts firm’s risk, linking back to Risk-Return Tradeoff (from Financial Management).
Dividend Decisions
[Affect stock valuation (Valuation of Bonds & Shares) & investor perception of risk.]
2. Capital Budgeting (Investment Decisions)
Capital Rationing
Limited funds force a choice between projects, influenced by Capital Structure (availability of debt & equity).
Risk Analysis in Capital Budgeting
Connected to Risk-Return Relationship (from Financial Management).
Investment Appraisal Methods (NPV, IRR, Payback, ARR)
Depend on the Cost of Capital to decide if projects are viable.
Valuation of Bonds & Shares (from Unit 1)
Helps determine project returns & expected capital gains from investments.
1. Introduction to Financial Management
Risk-Return Tradeoff
Affects investment selection (Capital Budgeting) & financing choices (Capital Structure).
Valuation of Bonds & Shares
Determines expected returns, impacting both Capital Budgeting (investment viability) & Cost of Capital (required return on financing)
Time Value of Money (TVM)
Affects investment decisions in Capital Budgeting (NPV, IRR).
Role of SEBI in Capital Issues
Regulates stock market activities, affecting valuation & capital raising (Capital Structure).