There are many different sources of finance that businesses can use to fund their operations. The main types of finance that they may use include equity and debt. However, each type of finance may come with its costs for the business. Usually, equity is more expensive because it is long-term and, therefore, the business must […]
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The capital structure of a company represents the combination of equity and debt it uses to finance its operations and growth. Equity mainly comes from the payments received from shareholders. These shareholders receive shares in exchange, which gives them ownership of a specific portion of the company. Debt, on the other hand, is the finance
How to Calculate Weighted Average Cost of Capital (WACC)? Read More »
Companies have to make different decisions regarding their operations during their lifetime. Some of these decisions may relate to the projects that they should undertake, while some may relate to strategies and operations. Decisions regarding the projects and investments of a company fall under capital budgeting. Capital budgeting is the process of evaluating different projects
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In this article, we will cover the degree of operating leverage. This includes the key definition, how to calculate the degree of operating leverage as well as example and analysis. Before, jumping into detail, let’s understand some key relevant definitions. Definition Let’s understand some key definition of operating leverage as well as the degree of
Degree of Operating Leverage (DOL): Definition, Formula, Example and Analysis Read More »
Gearing ratios are the measure of a company’s capital structure. It provides information about a company’s leverage including operational and financial gearing. A business can fund its projects by either debt or equity financing. The proportion of each financing option will affect the cost of capital and the returns of the company. Gearing ratios can
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In this article, we will cover how to prepare a cash budget. Typically, cash plays a critical part in every business. Having enough cash enables a business to optimize its operation; especially it helps in the investing activities. In order to help for a business to manage its cash for both investing and financing activities,
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In this article, we will cover how to calculate modified internal rate of return (MIRR). This includes the overview, key definition, formula, example calculation as well as advantages and limitations of MIRR. Overview The conventional method of internal rate of return IRR assumes all cash flows arising from a project to be reinvested in the
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Introduction The accounts receivable balance of business represents all its credit sales to customers for which it hasn’t received cash. Usually, businesses will have credit policies that will influence their account receivable balances. Different factors influence these policies. For example, it may depend on the credit terms of the industry or competitors of the business.
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Introduction There are many resources that businesses use to generate profits. These resources are known as assets. Some of these assets are long-term while some are short-term. Examples of long-term assets also called fixed assets or non-current assets, are property, plant and equipment. Businesses use these assets for more than a single period to generate
Cash Management: Definition, Objectives, Models, Strategies and Limitation Read More »
There are many different sources of finance that businesses can use to meet their needs. These sources of finance may include capital invested by the owners or debt received from third parties. In the case of companies, it also includes any equity finance raised through the issue of shares and equity instruments. Businesses need to
Capital Budgeting Techniques for Project Appraisal: The Ultimate Guide Read More »
