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Capital Budgetting Decision

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Introduction Capital budgeting is primarily concerned with sizable investments in long-term assets. These assets may be tangible items such as property, plant, or equipment or intangible ones such as new technology, patents, or trademarks. Capital Budgeting can be defined the planning and management of expenditures on long-term assets. It is the decision making process for investing the capital into various sizable or long-term assets. Examples of projects include investments in property, plant and equipment, research and development projects, large advertising campaigns, or any other project that requires a capital expenditure and generates a future cash flow.  Basically there are six different types or natures of capital projects include independent projects, contingent projects, mutually exclusive projects, replacement projects, expansion of the business projects and diversification projects. The capital budgeting decision is important (significance) for the various purpose
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Introduction to Financial Management

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What is Management? Management is the process of planning, organizing, staffing, leading and controlling the resources (include human, physical, financial, and information) of an organization to achieve its goals efficiently and effectively. What is Financial Management? Finance is the branch of management. It is an art and science of managing money. The proper management of money is called Finance. Finance refers to funds needed by individuals, businesses and government. Finance studies money and its management. Financial management is the process of planning, organizing, directing and controlling the financial activities in an organization.  Importance of Financial Management Financial management is importance for various reasons of the company they include: It provides guidelines of financial planning It helps to identify the sources of funds It helps to allocate the resources properly It increases the efficiency It reduces the costs It provides information though financial re
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Measuring Risks

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Meaning of Risk The term 'risk' can be defined as the probability of something bad happening. In other words, it is an actual outcome or investment's return that differ from expected outcome or return. It includes the possibility of losing all or some of an original investment. Mathematically, Risk = Sum [Actual Return - Expected Return] i.e. Risk = Sum [R- R Bar] Risk is a condition in which there is a possibility of an adverse deviation from a desired outcome that is expected or hoped for- Emmet J. Vaughan and Theres Vaughan In finance, it is generally representing by sigma i.e. standard deviation of various outcomes. Types of Risk There are various kinds of risk that can be categorized into the following basis: Based on Chance of Occurrence: Pure and Speculative Based on Flexibility: Static and Dynamic Based on Measurability: Financial and Non-Financial Based on Coverage: Fundamental and Particular Based on Behavior: Subjective and Objective Based on Diversifica
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