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Financial Management, Finance Funtion, Working capital management, Under…
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Finance Funtion
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the future (generally after one year). Thus, capital-budgeting decision adds to the total
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certainty, investment proposals necessarily involve risk
Profit is not only an objective, but also a criterion or measuring-rod of efficient financial
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Operating leverage =
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variable cost. The option of high fixed cost is more risky, more profitable, requires
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Under Capitalization
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Over Capitalization
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(iii) Resorting to window-dressing by questionable practices. In the words of Hoagland,”
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(iv) The company may have to opt for reorganization. In case the matters go worse, the
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Cost of Capital
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capital, the project is considered acceptable. The cost of capital is an important financial
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Dividend Policy
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amongst its shareholders. It may, therefore, be defined as the return that a shareholder
gets from the company, out of its profits, on his shareholdings. According to the Institute of
Chartered Accountants of India, dividend is “a distribution to shareholders out of profits or
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Finance Funtion
- Long Term Financial Decision
- Short Term Financial Decision
Long Term
- Capital Budgeting Decision
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the future (generally after one year). Thus, capital-budgeting decision adds to the total
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the investment proposals which are: (a) Payback method, (b) Average rate of return method,
(c) Internal-rate of return method, and (d) Net present value method. A careful employment
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The next crucial financial decision of the financial manager is
the dividend decision.
This decision is the basis of dividends payment policy, reserves policy, etc. The dividends are generally paid as some percentage of earnings on the paidup capital. However, the policy pursued by management concerning dividends payment is generally stable in character
Modigilani Miller
- Perfectly efficient markets
- The cost of equity increases with leverage due to higher default risk
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Factors influencing WC
- Nature of industry
- Demand of industry
- Cash Requirements
- Nature of business
- TIme
- Volumen of sale
- Terms of purchas eand sale
- Invesntory TO
- Receivable TO
- Business TO
- Business
- Inflatio
- Seasonal
- Credit control
- Profit planning
- Repayment ability
- Cash Reserve
- Size of firm
- Firm's policies
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