Why are accruals called spontaneous sources of funds, what are their costs, and why don’tfirms use more of them?

Q: What is a benchmark and why is there a need to compare the fund's return vis-a-vis a benchmark?

A: Benchmark is considered as a standard against which the actual performances of the securities are…

Q: Why are accruals called spontaneous sources of funds, what are their costs, and why don't firms use…

A: Under the business setting, the spontaneous funds source states to the financing that arises from…

Q: Why is it important to match your funding with economic life of corresponding asset?

A: The use of assets economic life matching with funding can be an integral tool for financial…

Q: Are there sources of value in an investment? what they are? and give an example for both?

A: Yes, there are various sources of value in an investment. An investment is a stock or a bond. People…

Q: What is the main disadvantage of discountedpayback? Is the payback method of any realusefulness in…

A: The discounted payback method is a method of evaluating the payback period of the investment carried…

Q: The importance of cash flow management when evaluating proposals for capital expenditure?

A: All investments in capital assets are expected to earn a return, which is evaluated by comparing the…

Q: Is capital budgeting decisions can be reversed

A: In capital budgeting we review different projects to determine their financial feasibility and…

Q: Explain this concept: “The cost of capital depends primarily on the use of the funds, not the…

A: A company’s cost of capital can be said to be that minimum rate of return that the company or the…

Q: Is it always necessary to adjust projects’ cash flows when different projects haveunequal lives?…

A: EAA or Equivalent annual annuity is a methodology utilized in capital budgeting to pick between…

Q: In order to overcome the differences in the preferences of surplus units and deficit usnits, it may…

A: The large institution takes funds from the small investors and they prepare large amount of funds…

Q: Explain why the same company can be savers and user of funds

A: The lenders of funds are considered as savers and they provide funds to those in need whereas the…

Q: In a capital budgeting study, explain why sunk costs should not be included, but opportunity costs…

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Q: Explain and critically evaluate advantages and disadvantages of fiat money.

A: US dollar, Australian dollar, New Zealand dollar,..... are all fiat currencies , meaning that the…

Q: Cost of Money is influenced by different factors”. What are those? How the cost of money is…

A: The cost of money or cost of capital is the minimum return a project has to generate for being…

Q: How are cashflows important to capital budgeting?

A: Capital Budgeting process is a way for business to decide the long term economic and financial…

Q: Who are the providers (savers) and users (borrowers) of capital?

A: The providers are known as savers and the users are known ad borrowers of capital are given below…

Q: Sinking Fund under Cash and Cash Equivalents?

A: Sinking Fund is a fund that contains cash which is set aside to pay off a  long term debt or bonds…

Q: What are funds transfer pricing?

A: Funds transfer pricing (FTP): It is a method used to estimate how financing/funding improves a…

Q: What is the major advantage of using a fee-only financialplanner?

A: There are different types of financial planners to help investors plan their finances. Majorly,…

Q: What is the effective utilization of funds

A: Introduction: While all aspects of money planning are critical, special emphasis is placed on fund…

Q: Discuss, using practical example how revenue expenditure should not be capitalized?

A: SOLUTION- Thus, a revenue expenditure which increases the utility or productive capacity of an…

Q: The cost of capital depends primarily on the use of the funds, not the source. True or False

A: The cost of capital is the minimum return required by the company to satisfy their equity…

Q: Why might DCF techniques not lead to proper capital budgeting decisions?

A: Introduction: Capital budgeting is an investment criterion or decision making mechanism for…

Q: Explain the differences between Restricted investment account (RIA) and Unrestricted investment…

A: Islamic accounting can be defined as the process of accounting based on  Islamic law that is…

Q: Why can closed-end funds sell at prices that differ from net asset value while open-end funds do…

A: An open-ended fund is the investment vehicle in which assets are pooled from diversified investors…

Q: What is funding strategy?

A: Introduction: Strategy usually entails setting targets and objectives, defining steps to meet the…

Q: What is the sinking-fund factor? How and why is it used?

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Q: WHAT ARE THE PROBLEMS WITH IRR APPROACH TO CAPITAL BUDGETING?

A: IRR internal rate of return is very common method of capital budgeting decisions making.

Q: What are the advantages of the PI method of capital budgeting?

A: The ratio that evaluates the profitability of the investment is term as the profitability index…

Q: In capital budgeting, the Payback Method suffers from the problem of: No consideration to sunk costs…

A: Traditional methods: Payback period: This method is used to calculate how many years a project will…

Q: What are the benefits of Relevant Cash-Flow Information?

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Q: in your own perspective explain why the same company can be a saver and a user of funds

A: Funds are like blood for any institution or entity and some institutions earn through the exchange…

Q: Does the concept of revenue less expense equaling an increase in equity or fund balance make sense…

A: The answer for the question on the concept of revenue less expense is discussed hereunder : Every…

Q: What are the difficulties and problems when it comes to using the free cash flow valuation model

A: The free cash flow valuation model is one of the most used and one of the most popular valuation…

Q: why is that the same company can be a savers and a user of funds?

A: Savers of Funds: Savers of funds are also called lenders. They give means to those who require them.…

Q: What are three variables that the firm does not control when it seeks to raise funds; indicate the…

A: when raising funds there are some factors which are beyond control of firms.There are many factors…

Q: How do you find historical returns and benchmarks on different funds?

A: Historical returns are based on the historical data of the company which portrays how the security…

Q: Why should companies use a project’s cash flows rather thanaccounting income when determining a…

A: Net Present Value is the difference between the current value of cash inflow and cash outflow for a…