Should short-term

Q: What is capital rationing?

A:

Q: Why might the weights of capital be different depending on whether book values,market values, or…

A: The weights of the capital should be different for book values of a equity, market value of a…

Q: How does sales stability affect the target capital structure?

A: Target capital structure: Target capital structure is defined as the combination of debt, preferred…

Q: What role do interest rates play in allocating capital to different potential borrowers?

A: Rate of interest : It is the amount paid by a borrower to use the capital borrowed from the…

Q: What basic principle of finance can be applied to thevaluation of any investment asset?

A: Investor invests in any investment to earn the returns from it. As per the risk and return analysis,…

Q: Why is the distinction between paid-in capital andretained earnings important?

A:

Q: Critically discuss over-investment and under-investment problems due to debt usage. What kinds of…

A: Capital structure means the amount of debt and equity which the firm has as its capital. The company…

Q: Why should a firm's investments always exceed its cost of capital?

A: The main aim behind any investment is to generate returns for the company. These projects help the…

Q: The cost of capital includes the cost of equity, the cost of long-term debt and the cost of accounts…

A: The capital of a corporation is the amount of money or funds that a corporation uses for operating…

Q: How is working capital calculated? Define Liquidity.

A: The working capital refers to the part of the capital that requires to meet the day-to-day…

Q: What would you choose? Other investment assets or Alternatives to fixed income and equities

A: Allocation of the investment is a much wider and troublesome task. the proper allocation may lead to…

Q: company's cost of debt capital?

A: Cost of debt is the amounts of the cost which are required by the company to pay have to pay to the…

Q: What approach banks may take to determine adequate capital?

A: For a bank it is highly important to ensure capital adequacy. Capital adequacy leads to stability of…

Q: Explain what is capital or capital financing? Examples

A: capital financing is the form of business finance that is raised through equity funds and lenders…

Q: What is the Cost of Equity Capital?

A: Companies’ capital structure may contain debt and equity. It is not necessary for a company to have…

Q: What is capital rationing, what conditions lead toit, and how should it be dealt with?

A: Capital budgeting is a process in which capital projects are assessed in terms of their viability…

Q: why is Capital Asset Pricing Model relevant

A: The Capital Asset Pricing Model, popularly known as CAPM, is an important model that is often used…

Q: How do the attitudes of lenders and rating agencies affect capital structure?

A: Capital structure of a company plays an important role in its decision making & it is based on…

Q: Explain the process of Return on Invested Capital?

A: It represents the amount of return earned by all the investors. It can be calculated by dividing…

Q: The cost of capital is a hurdle rate. Is this statement true? Why or why not?

A: The question is based on the concept of minimum required rate for any project . Hurdle rate is the…

Q: Why do we use the overall cost of capital for investment decisions even when only one source of…

A: The question is based on the concept of Financial planning.

Q: What are the principal objections to the use of the average rate of return method in evaluating…

A: Average rate of return: Under this method, the average net income is used in evaluating the capital…

Q: What is net operating working capital? Why does it exclude mostshort-term investments and notes…

A: Introduction: Working capital is the capital of company that is used in its day-to-day operational…

Q: How can the Calculation of capital-recovery cost (with return)be done?

A: Capital Recovery Cost: When a company purchases or invest in some assets for the business…

Q: Explain the concept of “working capital” in finance

A: The investment decision made in financial management is classified into two categories as…

Q: As per which approach of the capital structure, the overall cost of capital is unchanged because of…

A: As per the net operating income approach, the firm's overall cost of capital is not affected by the…

Q: Explain the difficulties for determining the cost of capital in the short term decision making.

A: Introduction: Capital structure relates to financing of the overall activities and development of a…

Q: How does the capital asset pricing model (CAPM) influence financial decisions regarding risk and…

A: CAPM is related to the connection between the securities and their expected returns. CAPM is…

Q: What is one classification scheme that firms often use to obtain risk-adjusted costsof capital?

A: The question is based on the concept of risk-adjusted costs of capital with consideration of…

Q: Why should both quantitative and qualitative factors be considered in capital investment decisions?

A: The Investment commitment on any project is based on many factors which are classified as…

Q: What do we call the cost that a borrower must payto use debt capital?

A: Debt capital is the capital that is borrowed from various financial institutions or other lenders…

Q: Why is working capital part of cash payouts in a capital investment, and what is its makeup?

A: The investment is an allocation and the commitment of the specific amount of funds to get the…

Q: What is the actual cost of capital to the borrower?

A: The cost of capital to the borrower is the weighted average cost of capital from all sources of…

Q: Why is the cost of capital sometimes referred to as a “hurdle rate”?

A: Cost of capital is the cost of financing a business, investment or a project. Cost of capital is…

Q: Why is the compressed adjusted present value approachappropriate for situations with a changing…

A: Compresses Adjusted Present Value shows Net Present Value(NPV) of a project after considering the…

Q: What effect would a decreased cost of capital have on a firm's future investments?

A: Cost of capital of the firm is its weighted average cost of capital. It considers the weighted…

Q: What is a good capital structure? Are low debt ratios always favorable?

A: The capital structure of a corporation is the exact combination of debt and equity used to support…

Q: What would you choose? OTHER INVESTMENT ASSETS or ALTERNATIVES TO FIXED INCOME AND EQUITIES

A: Portfolio investments: Portfolio investment is the type of investment in which various types of…

Q: What is the Return on Invested Capital?

A: Return on invested capital is calculated or determined to know the efficiency of the company on…

Q: purpose for capital analysis

A: Capital analysis is the study of capital structure of a business entity.

Q: How is the CAPM (Capital Asset Pricing Model) related to valuation?

A: The relationship between systematic risk and expected return on assets, particularly equities, is…

Q: What is the payback method of analyzing capital investments?

A: Formula: Payback period = Initial Investment / annual cash inflows

Q: Explain the term Return on Invested Capital?

A: The formula used to compute return on invested capital:

Q: What is Capital gearing and how might it be calculated?

A: Meaning of Capital Gearing  Capital gearing is the ratio between total equity and total debt ( Fixed…