Gordons model assumes a perpetual growth in dividend. As per this approach , the rate of dividend growth remains constant. Gordons model is used to calculate the intrinsic value of shares based on the future series of dividends that grow…
YTM- yield to maturity is defined as that discount rate (“k d ”) at which the present value of future cash flows from a Bond equals its Market Price. Further YTM is used for bonds or debentures. Therefore, YTM is…
Cost of capital is the return expected by the providers of capital to the business as compensation for their contribution to the capital. Content 1.What is the meaning of cost of capital? 2.What is the significance of cost of capital?…
PE ratio stands for price to earning ratio. The price earnings ratio indicates the expectation of equity investors about the earnings of the firm. Further, it relates earnings to market price and is generally taken as a summary measure of…
Capital asset pricing model provides an conceptual framework for evaluating any investment decision. And explains the relationship between expected return and risk of investing in a security. 1.What is Capital asset pricing model? The CAPM distinguishes between risk of holding…
Risk management is the art of using lessons from the past to mitigate misfortune and exploit future opportunities. In other words, the art of avoiding the stupid mistakes of yesterday while recognizing that nature can always create new ways for…
Cash flow statement provides relevant information in assessing a company’s liquidity, quality of earnings and solvency. Further, cash flow statement is a summary of cash payments and receipts. Information about cash flow is useful in providing users of financial statements…
Adjusted Present Value is used in evaluating foreign project. The adjusted present value model is additive approach to capital budgeting process . In brief, each cash flow is considered individually & discounted at a rate consistent with risk involved in…
The commercial bill is instrument drawn by a seller of goods on a buyer of goods. A Commercial bill is one which arises out of a genuine trade transaction, i.e. credit transaction. As soon as goods are sold on credit,…
Commercial paper (CP) ha its origin in the financial markets of America and Europe . The concept of CPs was originated in USA in early 19th centaury when commercial banks monopolized and charged high rate of interest on loans and…