What is EVA in finance?
ECONOMIC VALUE ADDED (EVA) Economic Value Added (EVA) or Economic Profit is after-tax net operating profit (NOPAT) minus a capital charge. This measure is based on the Residual Income technique that serves as an indicator of the real profitability of business. The real profitability occurs when additional wealth is created for share shareholders and the…
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What is operating cycle of a manufacturing unit?
The operating cycle of a manufacturing unit 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 appraisal of working capital finance means the assessment of gross working capital, net- working capital and working capital gap for assessment of…
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How interest coverage ratio is calculated?
The interest coverage ratio is a debt and profitability ratio used to determine how easily an entity can pay interest on its outstanding debt. EBIT is used in calculating the interest coverage ratio. Interest coverage ratio= Earnings before Interest and taxes (EBIT) ÷Total interest expenses Whereas EBIT is the operating profit of a company and…
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How to process credit proposal?
Credit Appraisal is a knack of adapting certain precautions at the time of new sanction or renewal or enhancement of existing limit. Credit Appraisal revolves around the credit investigation to determine the economic and business environment in which prospective borrower is placed. The process involves assessment of honesty and integrity of the borrower, standing of the borrower,…
Read articleObjectives of Financial Management
Introduction Financial Management refers to the process of efficiently acquiring, utilizing, and distributing finances, followed by the disposal of surplus or profit, to ensure the smooth functioning of an organization. It involves determining the size and composition of fixed assets, the amount and structure of current assets, long-term and short-term financing needs, and maintaining an…
Explained: Financial Decision making in a Firm
A firm is a for-profit business organization—such as a corporation, limited liability company (LLC), or partnership—that provides manufacturing, distribution, marketing, and professional services. Financial decisions are the decisions that business organizations need to make about finances. There are three basic types of financial decisions companies have to make regarding; * Investment, *Financing, and * Dividend.…
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