Also known as trading on equity. Refers to a firm’s use of fixed-charge securities like debentures and preference shares in its plan of financing the assets. It helps in determining financial risk of a firm.
Month: July 2019
Corporate Social Responsibility (CSR)
Responsibility to shareholders Recognise the investments Protect the interests of the shareholders Provide a reasonable dividend Strengthen and consolidate position of the company. Responsibility to employees – success of an organisation depends to a large extent on the morale of the employees and their wholehearted cooperation. Payment of fair wages Provision of best possible working […]
Who are stakeholders of business and what are their roles?
Stakeholders are the people or organisations who may have a material, professional, legal or political interest in the activities and performance of the organisation.There are three main types of stakeholders: Internal Employees Other departments Managers External Government Suppliers Press groups Activists Competitors Community Interface – stakeholders who function both internally and externally. Shareholders Clients Trade […]
What are the economic roles of a government?
Regulatory role Covers a broad spectrum – entry to the business to the final result of business The reservation of industries to small scale, public and cooperative sectors. Licensing system Regulation of entry Regulation of product mix, promotional activities etc. Regulate relationship between organizations. Promotional role Building infrastructure – power, transport etc. Financial support Institutions […]
What is Triple Bottom Line (TBL) concept?
A new framework to measure performance in corporate world which went beyond the traditional measures of profits, ROI etc to include environmental and social dimensions. An important tool to support sustainability goals. It is based on the pillars – People, Planet and Profit. An accounting framework that incorporates three dimensions of performance: social, environmental and […]
NGO
NGO Any non-profit, voluntary citizens’ group which is legally constituted, organized and operated on a local, national or international level. They are task oriented and driven by people with a common interest. An organization that is neither part of a government not a conventional for-profit organization May be funded by governments, foundations, schools, businesses or […]
Operating Leverage in Finance
Refers to the use of fixed cost in the operation of a firm. OL may be defined as the tendency of the operating profit to vary disproportionately with sales. OL is firm’s ability to use fixed operating cost to magnify the effect of change in sales on its EBIT. OL = Contribution/Operating profit OL is […]
What are the causes of Under Capitalisation?
The main causes of under capitalisation are: Acquisition of assets during recession Under estimation of capital requirements Conservative dividend policy – higher rate of ploughing back of profits Efficient management Creation of secret reserves
What are the remedies for Over Capitalisation?
Remedies for Over Capitalisation To have efficient management Redemption of preference shares Reduction of funded debts Reorganisation of equity share capital – face value of the equity shares may be reduced – utilised for writing off the fictitious assets and other over-valued assets.
What are the effects of Under Capitalisation?
The effects of under capitalisation are: On shareholders Rate of EPS will go up. The value of equity share in the market will go up. Financial reputation of the company will increase. Can expect higher dividends regularly. On company Market value of company shares will go up – increase in reputation of the company. The […]