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Financial Management

What is a Finance Charge? Finance charge refers to the fee charged by your credit card issuer for the delay you made in payment of the balance amount. In other words, it is the fee charged for the borrowings. It applies to all the borrowings that you have not paid...
What is Cash Conversion Cycle? Cash Conversion cycle is a process which shows how fast company can convert accounts receivables and sales back to cash and cash into inventory and accounts payable. Cash management involves following steps -Flow of cash into and out of the firm. Inflow of cash...
What is Trade Credit? Trade Credit refers to the credit that the customer gets from suppliers of goods in the normal course of business. Buying firms do not requires to pay the cash immediately for the purchases they made. This delaying in payment is a short - term financing called...
What is a Finance Lease? Long term and non- cancellable lease contract is known as finance lease. In India, this type of lease contract is highly popular in terms of high technology equipment with high cost. It amortizes the cost of the asset over the term of lease. Hence, it...
What is a Hedge Fund? Hedge Fund is a is fund which takes long and short positions, uses arbitrage, buys and sells undervalued securities, trade options or bonds and invest in almost all the opportunity arises in any market where it sees impressive gains at reduced risk. The most attractive aspect...
What is a Term Loan? Term Loan represents the long term debt having the maturity period of more than one year. Companies either obtained them from banks or especially created financial institutions for the same purpose. The purpose of the term loan is to finance the company's capital expenditure. Debt Capital...
What is Commercial Paper? Commercial paper is a short term unsecured promissory note issued by the firm to raise the short term finance. It is an important money market instrument. However, only high creditworthy company can issue it. In India, on the recommendation of Vaghul Working Group, RBI comes up...
What is Venture Capital? Venture capital means the early stage financing of new and young enterprises seeking to grow rapidly. It usually involves an involvement of venture capitalist in the manage of the the firm. Some also associate venture financing with financing of high and new technology based enterprises. So,...
What is Weighted Average Cost of Capital (WACC)? WACC is the overall cost of capital in which cost of each source is multiplied by its proportion in the capital structure and then weighted components are added. The proportion of cost of capital must be based upon the target capital structure....
What is Cost of Equity? Cost of Equity is the shareholder's required rate of return which makes market value of share equals to expected dividends. In other words, it is the cost of capital that the company pays to its shareholders for the funds they have provided in the business. Firms...
What is Forex? Forex or Foreign exchange market is the market where the currency of one country is exchanged for the currency of another. It is world's largest traded market with the turnover of $5.1 trillion. Almost all the currency transactions are channeled through the worldwide inter bank market. Inter bank...
What is Present Value? Present value of a future cash flow is the amount of current cash that is of equivalent to the decision maker. Compounding techniques is commonly used for adjusting for the time value of money. It increases an investor's analytical power to compare cash flows that are separated...