Profit maximization and wealth maximization are two different financial strategies that aim to increase a company’s value, but they do so in different ways. In economics, profit maximization is a term which denotes the maximum profit to be earned by a company in given period of time. The concept of profit maximization focuses generally on…
The term working capital means the sum of the funds invested at various current assets used in the operating cycle, by the industrial and trading establishments. Operating cycle means the length of time required to convert ‘Non-Cash current assets’, (like raw material (RM), work in process (WIP), finished goods (FG), and receivables) into cash. The types…
Solvency is defined as the ability of an individual or entity to meet long-term financial commitments. A solvency certificate is a most important document that provides information about the financial stability of an individual or partnership firm or company. A solvency certificate is required for applying for tenders, obtaining contracts, Visa interviews, Legal/court matters like…
Commercial Banks extend varieties of credit facilities to different types of customer viz. Individual, Sole Proprietor, Partnership firm, HUF, Trust, Club, Societies, Association, Limited Company, Public Sector Undertaking, Consortium advance etc. Depending upon type of borrower and nature of credit facilities required, bank will call for certain non-financial papers to examine along with financial papers.…
The slippage ratio in banking is a measure of the rate at which a bank’s good loans turn into non-performing assets (NPAs). It is the ratio of new NPAs to the standard advances at the beginning of a year. Fresh accretion of NPAs during the year or a falling below the current position of standard…
The term ratio means a simple division of one number by another. It is measured by the number of times one number is contained by the other, either integrally or in fraction. The ratio analysis of financial statement means the process of calculating structural relations of different items and groups in the financial statements. Generally,…
‘Capital Instruments’ means monetary instruments in capital markets such as equity shares, debentures, preference shares and share warrants issued by a company. Indian companies are permitted to raise money by way of capital instruments for their operational purposes. The instruments issued in capital markets are listed below: Equity shares: Equity shares are the shares joint-stock…
[Cash Budget pattern of financing seasonal productions like sugar, tea, and construction activities] The request for financial assistance from business enterprises dealing in seasonal products like sugar, tea, construction activities, film industries, order-based activities, etc. is facilitated by the banks through Cash Budget financing plans. In such a pattern of business dealings, the requirement of…
Scenario Analysis Scenario Analysis is a financial process through which investors & business managers can determine the amount of risk they are taking before making the investment or starting a new project. It is a way of structured thinking in which the earnings or value impact is computed for different interest rate scenario that may…
Introduction Ratios are essential tools for assessing the earning capacity, financial soundness, and operational efficiency of a business organization. Accounting ratios, a group of metrics derived from financial statements, are widely used to measure management’s aptitude, efficiency, and profitability. By expressing relationships between various accounting data points, these ratios form the basis of ratio analysis.…