3.1. Basics of Time Value of Money (TVM) The Time Value of Money (TVM) is the foundational financial concept that asserts a dollar today is worth more than a dollar in the future due to its potential earning capacity. This principle is vital in areas such as investment decision-making, retirement planning, loan amortization, and any […]
5.1 Definition and Significance of Cost of Capital The cost of capital refers to the rate of return that a company must earn on its investment projects to maintain its market value and attract funds. It represents the opportunity cost of utilizing capital in a particular investment and is crucial for determining whether a project
Corporate valuation is a critical process used to determine the overall worth of a company. It is essential for investors, analysts, and business owners to assess how much a company is worth in various situations, including mergers, acquisitions, financing, and investment decisions. 11.1 Valuation ConceptsValuation is the process of estimating the current worth of an
6.1 Theories of Capital StructureCapital Structure refers to the way a company finances its operations through a combination of debt and equity. Several theories have been proposed to explain how companies should structure their capital for maximum value. Modigliani-Miller Theorem (M&M): Proposed by Franco Modigliani and Merton Miller in 1958, this theory suggests that in
1.1 Definition and Scope of Financial ManagementFinancial Management is the process of planning, organizing, directing, and controlling financial resources with the goal of achieving organizational objectives. It encompasses the management of an organization’s financial activities, such as procurement of funds, effective utilization of financial resources, and investment decisions. Financial management ensures that an organization can
What is a Budget? A budget is a financial plan that outlines how you intend to allocate your income towards various expenses, savings, and investments over a specific period of time, typically monthly or annually. It helps you manage your money effectively, ensuring you don’t overspend and that you have enough to cover essential needs
