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Incremental Budgeting: 5 Advantages And 6 Disadvantages

Incremental budgeting is a form of the budgeting process that is based on the concept that a new budget can be prepared by making only some marginal changes to the current year’s budget. In other words, with incremental budgeting, the amounts of the current budget are used as a base to which incremental assumptions are … Incremental Budgeting: 5 Advantages and 6 Disadvantages Read More »

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Weighted Average Cost of Capital (WACC): Definition ...

(52 years ago) The weighted average cost of capital of a company is the cost of capital of all its equity and debt instruments proportionately weighted. These instruments may include common shares, preferred shares, and debt instruments of a company. The cost of capital is the required rate of return of a company on any project. The cost of capital of equity and debt instruments of a company can easily be found through different methods and models; however, the company can only use one rate of return when evaluating i…

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Limitations of the Weighted Average Cost of Capital ...

(52 years ago) The Weighted Average Cost of Capital (WACC) is the required rate of return on a business organization. A business organization usually compares a new project’s Internal Rate of Return (IRR) against the organization’s WACC.

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Special Revenue Fund - Definition, Example, And Journal ...

(52 years ago) Mar 26, 2021  · Definition: A Special Revenue Fund account can simply be defined as an account that is established by the government to collect money that is generally used for a specific project. The main rationale behind special revenue funds is to induce a much-needed level of transparency and accountability that the amount is used in the right … Special Revenue Fund – Definition, Example, …

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TRADITIONAL BUDGETING: OVERVIEW, ADVANTAGES, AND ...

(52 years ago) The traditional budgeting process is simple and starts from projecting the sale or revenues of a business. The process commences by considering the previous period’s budget and, afterwards, considers any changes to the expected revenues. The business can compare its budgeted revenues for the last period with its actual results to check how much the variance is. Once the variation is determined, the business can also adjust any expectations gap in the new budget. A business must first estimate its revenues an…

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Proprietary Funds: Definition, Explanation, and How do ...

(52 years ago) Mar 26, 2021  · Definition Governmental planning involves considerable budgeting and planning. In this regard, it is rudimentary to account for all the transactions that take place, so that there are no chances of fraud, or any money being lost. Proprietary Funds are created for the same reason. The main premise behind these funds is to account for the … Proprietary Funds: Definition, Explanation, and How ...

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Equity Finance – 4 Advantages and 4 Disadvantages - CFAJournal

(52 years ago) Feb 25, 2021  · Definition Equity Finance is considered to be one of the most crucial and important sources of raising finance. When it comes to external sources of finance, a lot of companies opt for equity finance, because of the fact that it helps companies to generate a considerable amount of funds for expansion and to carry out … Equity Finance – 4 Advantages and 4 Disadvantages Read More »

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Should I Buy Stock After A Reverse Split? - Explained ...

(52 years ago) Trading stocks is trickier for common investors then we think, Short-selling, arbitrage profiteering, and investing in futures to make money even gets difficult. There are Stock Market Analysts, Broker, and agents who carry out specialized tasks for investors on stock studies. Seeking specialists’ advice is never cheap, for a common investor that might be costly … Should I Buy Stock After ...

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Advantages of the Weighted Average Cost of Capital ...

(52 years ago) The weighted average cost of capital (WACC) is the rate expected to be calculated by a company in which each category of capital is weighted proportionately. Different types of sources that are included in the WACC calculation are bonds, common stock, preferred stock, warrants, options, and other long-term debts. When calculating the present value of … Advantages of the Weighted Average Cost ...

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Dividend Valuation Models: All You Need to Know - CFAJournal

(52 years ago) Jun 16, 2020  · When an investor pays for buying common stock, he expects to receive future cash flows in the form of dividends. When the stock is sold, the investor expects to receive the value of the stock. It is difficult to determine the value of the common stock because the future cash flows generated by dividends are … Dividend Valuation Models: All You Need to Know Read More »

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6 Advantages and 5 Disadvantages of Preference Shares ...

(52 years ago) Preference Shares are shares that are issued by the company to the general public, as a token of ownership in the company, against a certain price. In this regard, it can be seen that preference shares entitle the shareholder to a fixed dividend payment. When the company issues shares, there are two main categories of shares, preference shares and common shares. As far as common shares are concerned, they do not necessarily receive dividends every year, and when they do, their dividend yield is variable…

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Limitation of Dividend Valuation Models: List ... - CFAJournal

(52 years ago) There are some drawbacks of the Dividend Valuation Models which include factors like the difficulty of perfect projections and the assumptions of income from dividend. Although the principle behind the model is simple but applying the theory is challenging. The limitations of Dividend valuation Models are described below: The reality is that in some companies … Limitation of Dividend ...

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Rolling Budgets: Definition, Purposes, Advantages, And ...

(52 years ago) A rolling budget is also referred to as a continuous budget. It is a budget that changes continuously over the course of the year. As one period, or month ends, another period is subsequently added to the budget in order to carry it forward. The reason behind rolling budgets mainly lies in the realms of constant, and concurrent updates of financial statements in order to ensure that the given timeline is maintained. For example, if a company produces a budget for the timeline between June 2020 and May 2021. As the m…

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Top-Down Budgeting: Processes, Advantages, And ...

(52 years ago) A process in which senior (top-level) management of a company is involved in the preparation of a high-level budget is termed “Top-down budgeting”. This type of budget is prepared on the basis of the company’s objectives after which it passes on the managers of different individual departments or functions for its implementation. Managers of the … Top-Down Budgeting: Processes ...

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9 THE LIMITATIONS OF CAPITAL ASSETS PRICING ... - CFAJournal

(52 years ago) The Capital Assets Pricing Model is a model used b y investors to find the relationship between their required rate of return from an investment and the systematic risk of the investment. It is a tool used by investors and companies to accurately estimate the rate of returns of investments and projects with risks involved. … 9 THE LIMITATIONS OF CAPITAL ASSETS PRICING MODELS Read More »

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4 Importance of Standard Costing with detailed explanation ...

(52 years ago) Standard costing is a branch of cost accounting or managerial accounting which is mostly used in a manufacturing concern that involves direct material, direct labour, and overheads. Standard rates are used while assigning the cost of direct labour, direct material, and overhead costs, it means that the finished goods and cost of goods sold will … 4 Importance of Standard Costing with ...

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7 Advantages of Capital Assets Pricing Models (With ...

(52 years ago) The Capital Assets Pricing Model is a finance tool that can be used to derive the cost of capital of a company. It is a tool widely used by companies to find their cost of capital for their equity and debt instruments. Investors also use this tool to find the expected rate of return of … 7 Advantages of Capital Assets Pricing Models (With Explanation) Read More »

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Types of Equipment Leases: Definition, And Explanation of ...

(52 years ago) Overview: Capital Expenditures are important for the growth and expansion of the company. They require considerable planning, and resources that need to be utilized. As a matter of fact, organizations need to ensure that they are able to finance this particular capital expenditure with relative ease. Given the fact that companies do not always have … Types of Equipment Leases: Definition ...

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Do Stocks Usually Go Up After A Split? Explanation with ...

(52 years ago) Stock split can be referred to as a division of shares into shares with a lower face value. The overall mechanics are structured in a manner in which total market capitalization of the stock post-split tends to remain the same. This means that the entire value of the total value of the holding day on the day of the split is not supposed to change with the number of shares going up. Stock splits are mainly carried with the intention of increasing liquidity. With an increase in liquidity, it can be seen that more buyers and sel…

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9 Types of Financial Services: What Are They? And How Do ...

(52 years ago) Financial services mean the services offered by financial and banking institutions. It also means the management of money by organizations like banks, investment banks, insurance companies, and stock exchanges. Financial services help individuals and organizations in the management of their finance related problems. Financial services are intangible and customer-oriented. Financial services ...

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5 Limitations of Standard Costing & Variance Analysis ...

(52 years ago) Standard costing: Standard costing is an eminent way of keeping the business costs on track. It is the process of estimating future costs and expenses and comparing them to the actual data in order to analyze how the differences can be manipulated or altered for the betterment of the company. Several budgets are prepared by … 5 Limitations of Standard Costing & Variance Analysis Read More »

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8 Characteristics & Feature of Financial Intermediaries ...

(52 years ago) Generally, financial intermediaries are engaged in bringing together the ultimate borrowers and ultimate lenders of finance. They allocate the funds of companies that have a surplus of capital and lend them to production companies. In this way, their objective is to convert savings into investments. The financial intermediaries charge a fee for their service and … 8 Characteristics & Feature ...

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Types of Financial Instruments: 4 Main Types, Advantages ...

(52 years ago) Cash instruments have directly available market value and market forces directly determine their value. Cheques, shares, bonds are some examples of cash instruments. If lender and borrower agree over the transferability, deposits, and loans are also cash instruments. Debt-based financial instruments are two types – long-term and short-term. Long-term debt instruments are interest rate swaps, bonds, futures, and options. Short-term debt instruments are interest rate futures and forward rate agreements.

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WHY MIGHT A NEW BUSINESS FIND IT DIFFICULT TO RAISE ...

(52 years ago) New businesses enter the market every day with hopes to achieve success. However, most of these businesses fail to succeed and never achieve their true potential. There are many factors that decide whether a business is going to be successful or not. Among these factors, one of the biggest factors is the fact that these … WHY MIGHT A NEW BUSINESS FIND IT DIFFICULT TO RAISE EXTERNAL …

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IPO Process: 5 Key Process You Should Know - CFAJournal

(52 years ago) Initial Public Offering (IPO) An initial public offering (IPO) is the process of offering shares of a private company to the public in a new stock issuance. By this method, a company is allowed to raise capital from public investors. Process In the following five steps, the IPO process takes place. Step 1: Selection of … IPO Process: 5 Key Process You Should Know Read More »

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How to use CAPM for investment appraisal? (3 Methods ...

(52 years ago) The expected rate of return of an investment can be calculated using CAPM by calculating the sum of the risk-free rate of return and the risk premium of an investment. The above statement can be written in the form of a formula as: Expected rate of return = Risk-free rate of return + Risk premium A risk-free rate of return is the rate of return for a risk-free investment. This is a theoretical rate of return and is usually taken as the rate of return of short-term government treasury bills. While government treasury bills are …

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Capitalization of the Retained Earnings: Detail ...

(52 years ago) In a balance sheet, along with share capital, another important written value is retained earnings. Share capital and retained earnings make up the total book value of the company. These are the portion of profits that any company keeps within itself. The term Capitalization is important to understand, in financial terms, it means creating an … Capitalization of the Retained Earnings: Detail ...

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Cost of Equity: Formulas, Calculation, Advantages, and ...

(52 years ago) The Dividend Capitalization Model can be used to calculate the Cost of Equity of a company. As the name suggests, this model is based on dividends paid by the company and, therefore, can only be used for companies that pay out dividends. This model assumes any future cash inflows for investors will be in the form of dividends. Using the Dividend Capitalization Model, the Cost of Equity can be calculated as: In the above formula, calculations are based on future dividends and dividends per share is taken for the …

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Debt Covenants: Definition, Types, And How does it work ...

(52 years ago) Financial debts and loans tend to be highly common across all businesses today. As a result of this, it is highly important to note the fact that debt covenants mainly exist in the case of financial contracts, predominantly on grounds of ensuring that the receiver of the debt abides by the stated rules and regulations. It is also imperative to consider the fact that debt covenants make sure that all aspects which have been mutually decided upon by both parties are included in the stated analysis. Hence, debt cove…

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HOW TO CALCULATE SHARE PRICE AFTER BONUS ISSUE? - …

(52 years ago) The main source of finance for companies is equity finance. Companies raise equity finance by issuing shares of the company to investors. To buy these shares, investors must pay a price, which is the market value of the share at the time of issuance. All shares of a company have a par value, that is … HOW TO CALCULATE SHARE PRICE AFTER BONUS ISSUE? Read More »

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ERG Theory of Motivation: What is it? and How does it work ...

(52 years ago) There are three relationships among the different categories in Alderfer’s ERG theory: 1. Satisfaction- Progression This means to move into higher satisfaction needs after achieving one. For Maslow, satisfaction-progression played a very critical role. As an individual, one has to always motivate himself to move up the need hierarchy as a result of satisfying lower-order needs. The progression upward from relatedness satisfaction does not already assume the need for satisfaction from existing needs. 1. Frust…

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ACCOUNTING ENTRY FOR RIGHT SHARES ISSUE: ACCOUNTING …

(52 years ago) Equity finance is one of the most important sources of finance for a company. Equity finance can have many advantages and disadvantages for a company. One of the main disadvantages of equity finance for a company is that equity finance dilutes the ownership and control of the company. Usually, existing owners of the company may … ACCOUNTING ENTRY FOR RIGHT SHARES ISSUE: ACCOUNTING …

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Accounting for Paid-In Capital: Calculation, Example, And ...

(52 years ago) The Paid-In capital or the Contribution capital represents the shareholders’ investment in a company through cash or assets. It forms a significant portion of the Shareholders’ total equity along with Retained Earnings. It comprises two parts of the Paid-In capital at Par value plus the Additional Paid-In capital above the par value of the share. … Accounting for Paid-In Capital ...

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Equity valuation: Definition, Importance, and Process ...

(52 years ago) It is important for investors to determine the value of a stock before investing in the stock of a company. By using proper equity valuation methods, investors can find the fair value of a stock. The fair value of stock is not the real worth of the stock but an estimate of what the stock … Equity valuation: Definition, Importance, and Process (with 4 Steps) Read More »

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Letter of Credit Vs. Line of Credit: What are the key ...

(52 years ago) Financial institutions provide many types of facilities to businesses. Among these facilities are the letter of credit and line of credit. While the names may sound similar, they are different facilities. Both of them have different structures. Similarly, businesses use them for different purposes. They also span over different lengths of time. Businesses must know … Letter of Credit Vs ...

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5 Advantages of medium-term finance with detailed ...

(52 years ago) When it comes to financing for businesses, there are many options available. A business can use different sources of finance, such as equity and debt, to finance its activities. These are the two main types of finance that are available to businesses. While each source may have its advantages and disadvantages, it is for each … 5 Advantages of medium-term finance with detailed explanation ...

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Paid in capital Vs. Retained Earning? What Are the Key ...

(52 years ago) For any company, the shareholder’s equity portion of its Statement of Financial Position will consist of different equity instruments and reserves. Among these, the most common are paid-in capital, additional paid-in capital, and retained earnings. Each of these balances represents a different aspect of the equity of a company. While these are all a part … Paid in capital Vs. Retained ...

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Mixed Costs: Definition, Formula, Example, and Importance ...

(52 years ago) During the normal operation cycle, there are a number of costs that businesses normally incur. Classification of these costs tends to be important because it helps organizations make important decisions regarding pricing and product strategy. Costs within an organization are mainly divided into fixed and variable costs. As far as fixed costs are concerned, it cannot be seen that they do not change with the level of output at which the company is operating. On the other hand, variable costs change wit…

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12 Types of Financial Intermediaries - And How Do They ...

(52 years ago) A financial intermediary means an institution that acts as a middleman between two parties in order to help financial transactions. Financial intermediaries are highly specialized and they connect market participants with each other. Financial intermediaries include banks, investment banks, credit unions, insurance companies, pension funds, brokers and exchanges, clearinghouses, dealers ...

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Why Would A Company Choose Equity Financing Over Debt ...

(52 years ago) In order to finance operations, a business has two main options, equity or debt. The mixture of equity and debt finance is referred to as the Capital Structure of the company. As a matter of fact, it can be seen that capital structure is taken very seriously by companies because it has a huge impact on their profitability. Hence, it is quite important to realize the fact that this decision is taken seriously by the company in order to extrapolate the best results that can guarantee a cost-effective capital structure that is beneficial to th…

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Current Portion of Long-Term Debt – How to Calculate ...

(52 years ago) Current Portion of Long-Term Debt is defined as the long term liability that is due within a time frame of 12 months. When the company takes on long term loan, it is classified as a Non-Current Liability because of the reason that it is due at a period that is more than one year. However, in the year when this long-term debt needs to be repaid, it is important to consider the fact that these portions need to be repaid at a certain interval. In that case, it needs to be duly noted that in the year where the part (or whole) of the l…

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What is Debt Beta? - Definition, Formula, Explanation ...

(52 years ago) Beta can simply be defined as a measure of volatility, or systematic risk of an underlying security, or portfolio. It is used in Capital Asset Pricing Model which mainly describes the existing relationship between systematic risk as well as expected return for assets. There are two main kinds of beta, levered beta, and unlevered beta. Levered Beta measures the market risk. It is also referred to as equity beta. In this regard, both debt and equity are factored in when a company’s risk profile is assessed. On the othe…

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DO SCRIP DIVIDENDS GO ON TAX RETURN? (Explained) - …

(52 years ago) Scrip dividends are certificates paid to the shareholders of a company. These certificates are given to the shareholders instead of cash dividends. The certificate allows the shareholders of the company to receive their dividends as either cash dividends or stock dividends. This means when a scrip dividend is paid, the shareholders of the company decide … DO SCRIP DIVIDENDS GO ON TAX RETURN ...

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Plain Vanilla Bonds: Meaning, Example, Features, And ...

(52 years ago) Meaning of Bonds Bonds are financial instruments used to raise debts from the open market. One of the most common types of bonds is plain vanilla bonds. These are the most basic bonds. Going by the name, if 100 customers go to the ice cream store, most of them would order vanilla-flavored ice cream. Further, … Plain Vanilla Bonds: Meaning, Example, Features, And Advantages Read More »

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Weight of Debt: Definition, Formula And How to How to ...

(52 years ago) The capital structure of the company comprises both debt and equity. It is defined as the combination of debt and equity in the company, which is incorporated in the formation of the company. Both these components are used hand in hand in order to determine the number of liabilities that are owed by the company, and what needs to be done in order to ensure an optimal capital structure that minimizes the cost of capital for the firm. From an investor’s perspective too, having insights regarding the capital stru…

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WHAT IS THE DIFFERENCE BETWEEN SCRIP AND DRIP DIVIDENDS ...

(52 years ago) Scrip dividends of a company are paid in the form of a certificate to the shareholders. The certificate is an offer to the shareholders of the company, which gives them the option to either receive their dividends in the form of cash, in the future or in the form of stocks of the company. The shareholders do not have to pay for the stocks if they select the latter option. This type of dividend is used by companies to avoid paying cash to their shareholders. This can be used in circumstances when the company does not hav…

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A standby letter of credit (SBLC) vs Bank guarantee (BG ...

(52 years ago) Introduction Standby letter of credit is the guarantee provided by the issuer bank or financial institution that the responsibility of payment will be transfer upon the non-payment of party to the contract. In this type of instrument, the issuing bank will have to follow all the banking protocols followed by the bank. However, in case … A standby letter of credit (SBLC) vs Bank guarantee (BG ...

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Letter of Credit Vs. A Standby Letter of Credit (SBLC ...

(52 years ago) A letter of credit is the instrument in which a bank guarantees the payment to the alternative party in case of default by the account holder to the issuing bank. In other words, it provides a guarantee to the other bank involved in the transaction as well as his client that it assures the full payment to the transaction by its customer, in case of any default the bank or other financial institution will come forward to fulfill all the terms and conditions and will exactly act as a party to the contract. It can also be concluded in a manne…

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What is a redeemable debt? Definition, Advantages ...

(52 years ago) Definition: A redeemable debt, or callable debt, is a bond that an issuer can repay before its maturity. The issuer usually pays a premium to the investor when a debt is redeemed. The borrower generally has to pay a premium or fee to the holder of bonds on the redemption of debt. A callable bond … What is a redeemable debt? Definition, Advantages, Disadvantages, Pro and Con Read More »

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What is Financial Budget? - Types and Why do Businesses ...

(52 years ago) A budget is a quantitative plan or forecast for the future of a business in which the business allocates its resources to different departments or activities. Businesses mostly use budgets to plan for the future. Businesses use budgets as a monitor and control tool to control their actual performance according to the set budget. There … What is Financial Budget? – Types and Why do ...

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