Accounting rate of return

The accounting rate of return also known as the return an investment (ROI) uses accounting information as revealed by analytical, statement to measure the profitability of an investment.   The accounting rate of an return is the ratio of the average after tax profit divided by the average investment. The average investment would be equal… Continue reading Accounting rate of return

Inflation

Inflation as essentially a situation in which the general price level was rising very rapidly and so the value of money declining precipitously.   Type of inflation 1)Demand pull inflation 2)Cost-push inflation 3)Built in inflation 4) Creeping inflation 5) Moderate inflation 6) Suppressed inflation 7) Hyper inflation            Cause of inflation… Continue reading Inflation

Depository Institutions

Depository Institution are financial intermediaries that accept deposit. They include commercial banks (or simply bank) saving and loan association and credit union. It is common to refer to the depository institutions other than banks as  depository institutions  are highly related and supervised because of the important role that they play in the financial system. Checking… Continue reading Depository Institutions

Investment decisions rule under inflation

A common problem, which complicates the practical investment decision-making , is inflation, to be consistent in treating inflation in the cash flows and the discount rate. Inflation is fact of life all over the world.A double -digit rate of inflation is a common feature in developing countries. Because the cash flows of an investment project… Continue reading Investment decisions rule under inflation

Corporate restructuring

Activities related to expansion of a firm’s operations or changes in its assets or financial or ownership structure are referred to as corporate restructuring. The most common forms of corporate restructuring are mergers/amalgamation and acquisitions. Conceptual framework Profitable growth constitutes one of the prime objective of most of the business firms. It can be achieved… Continue reading Corporate restructuring

Cash management

Cash is the important current asset for the operations of the business. Cash is the basic input needed to keep the business running on a continuous basis.It is also the ultimate output expected to be realised by selling the service or product manufactured by the firm. The firm should keep sufficient cash neither more or… Continue reading Cash management

Volatility smiles

A plot of the implied volatility of an option as a function  of its strike price is known as a volatility smile. Describe volatility smiles in different way.       Put call parity   Put-call parity provides a good starting point for understanding volatility smiles. It is an important relationship between the price,c, of a… Continue reading Volatility smiles

Cost of debt

A company may raise debt in a variety of ways. It may borrow funds from financial institutions or public either in the form of public deposit or debentures (bonds) for a specified period of time at a certain rate of interest. A debenture or bond may be issued at par or at a discount or… Continue reading Cost of debt