.Mr.

.Mr. Charak Ray.

Charak Ray.
ASST.
ASST. PROFESSOR (FINANCE)
PROFESSOR (FINANCE)

1
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MBA(BHU),
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ASSOCIATE((III), PGDHI(III)
SENIOR(ST.JA) PREVIOUS
BCM(BHSE),
BCM(BHSE), SENIOR(ST.JA)
FINANCIAL
MANAGEMENT
 .Mr.
.Mr. Charak Ray.
Charak Ray.
ASST.
ASST. PROFESSOR (FINANCE)
PROFESSOR (FINANCE)

2
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MBA(BHU),
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ASSOCIATE((III), PGDHI(III)
SENIOR(ST.JA) PREVIOUS
BCM(BHSE),
BCM(BHSE), SENIOR(ST.JA)
Finance

Long Term
Fixed Assets
finance

Required for
activities is Called business
Money required for Business

Short Term
Working Capital
 NEXT

PREVIOUS
Financial Management
Study of acquiring funds
Study of acquiring funds
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PAGE

And
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And
Its effective and careful utilization,
Its effective and careful utilization,
PGDHI(III)
ASSOCIATE((III), PGDHI(III)
(FINANCE)
PROFESSOR (FINANCE)

SENIOR(ST.JA)
BCM(BHSE), SENIOR(ST.JA)
MBA(BHU), ASSOCIATE((III),
Ray.
Charak Ray.

In terms of the overall objectives of the

ASST. PROFESSOR
.Mr. Charak

In terms of the overall objectives of the

firm,
BCM(BHSE),

firm,
.Mr.

MBA(BHU),
ASST.

And expectations of the providers of funds.

And expectations of the providers of funds.
3
 .Mr.
.Mr. Charak Ray.
Charak Ray.
ASST.
ASST. PROFESSOR (FINANCE)
PROFESSOR (FINANCE)

4
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MBA(BHU),
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ASSOCIATE((III), PGDHI(III)
SENIOR(ST.JA) PREVIOUS
BCM(BHSE),
BCM(BHSE), SENIOR(ST.JA)

Financial Management
What Is The Main Objective Of
 .Mr.
.Mr. Charak Ray.
Charak Ray.
ASST.
ASST. PROFESSOR (FINANCE)
PROFESSOR (FINANCE)

5
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MBA(BHU),
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ASSOCIATE((III), PGDHI(III)
SENIOR(ST.JA) PREVIOUS
BCM(BHSE),
BCM(BHSE), SENIOR(ST.JA)

Wealth
Company.

Management Is To
Maximize Shareholder’s
Primary Aim Of Financial
Share Holder Are The Owners Of The
 .Mr.
.Mr. Charak Ray.
Charak Ray.
ASST.
ASST. PROFESSOR (FINANCE)
PROFESSOR (FINANCE)

6
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ASSOCIATE((III), PGDHI(III)
SENIOR(ST.JA) PREVIOUS
BCM(BHSE),
BCM(BHSE), SENIOR(ST.JA)

Goes Up

Of Profit)
Company’s Share
Benefit

Shareholder Gets
Market Price Of The

Regular Dividend(part
Shareholder Prefers Dual
 NEXT
Possible by
• Availability of sufficient funds at a reasonable
• Availability of sufficient funds at a reasonable
PREVIOUS

cost when-ever required

cost when-ever required
HOME
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PGDHI(III)
ASSOCIATE((III), PGDHI(III)

• Effective utilization of funds to reduce wastage

• Effective utilization of funds to reduce wastage
(FINANCE)
PROFESSOR (FINANCE)

SENIOR(ST.JA)
BCM(BHSE), SENIOR(ST.JA)
MBA(BHU), ASSOCIATE((III),
Ray.
Charak Ray.
ASST. PROFESSOR
.Mr. Charak

• Safety of funds by creating reserves, reinvesting

• Safety of funds by creating reserves, reinvesting
BCM(BHSE),

profits etc
.Mr.

profits etc
MBA(BHU),
ASST.

• Sound capital structure that a balance is

• Sound capital structure that a balance is
maintained between debt and equity capital
maintained between debt and equity capital
7
 NEXT

Size as well as the composition of Fixed Assets

Capital budgeting decision involves
PREVIOUS

HOME
PAGE
Capital budgeting decision involves
EXIT

large sum of money to be invested in fixed

large sum of money to be invested in fixed
PGDHI(III)
ASSOCIATE((III), PGDHI(III)

assets
assets
(FINANCE)
PROFESSOR (FINANCE)

SENIOR(ST.JA)
BCM(BHSE), SENIOR(ST.JA)
MBA(BHU), ASSOCIATE((III),
Ray.
Charak Ray.
ASST. PROFESSOR
.Mr. Charak

BCM(BHSE),
.Mr.

may reduces the return on investment if fixed

may reduces the return on investment if fixed
MBA(BHU),

assets are not used properly

ASST.

assets are not used properly

8
 .Mr.
.Mr. Charak Ray.
Charak Ray.
ASST.
ASST. PROFESSOR (FINANCE)
PROFESSOR (FINANCE)

9
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SENIOR(ST.JA) PREVIOUS
BCM(BHSE),
BCM(BHSE), SENIOR(ST.JA)

Decision
Investment
finance

Decision
Financing
Elements/scope of business

Financial Decision

Dividend
Decision
 NEXT
Investment decision
PREVIOUS

HOME
PAGE
• Involves decision regarding short
term money required for operational
EXIT
and day-to-day activities called…… Working capital
Working capital
(short term)
(short term)
PGDHI(III)
ASSOCIATE((III), PGDHI(III)
(FINANCE)
PROFESSOR (FINANCE)

SENIOR(ST.JA)
BCM(BHSE), SENIOR(ST.JA)

• Long term investment in assets

MBA(BHU), ASSOCIATE((III),
Ray.
Charak Ray.

• Called ………………………………………………. Capital Budgeting

ASST. PROFESSOR
.Mr. Charak

Capital Budgeting
require for.. (Fixed Assets)
BCM(BHSE),

(Fixed Assets)
.Mr.

MBA(BHU),
ASST.

Machinery Tools and vehicles

10 Machinery Tools and vehicles
 NEXT

PREVIOUS
Financing decision
HOME
PAGE

• Decision related to various Sources

EXIT
Of Finance i.e.
PGDHI(III)
ASSOCIATE((III), PGDHI(III)
(FINANCE)
PROFESSOR (FINANCE)

SENIOR(ST.JA)
BCM(BHSE), SENIOR(ST.JA)
MBA(BHU), ASSOCIATE((III),

Borrowed funds Owners funds

Ray.
Charak Ray.
ASST. PROFESSOR
.Mr. Charak

BCM(BHSE),

And relative Proportion Between

.Mr.

•
them on the basis of
MBA(BHU),
ASST.

• Return Expected ,
• Cost
• Risk Associated
11
 .Mr.
.Mr. Charak Ray.
Charak Ray.
ASST.
ASST. PROFESSOR (FINANCE)
PROFESSOR (FINANCE)

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12
MBA(BHU),
MBA(BHU), ASSOCIATE((III), PGDHI(III)
ASSOCIATE((III), PGDHI(III)
SENIOR(ST.JA) PREVIOUS
BCM(BHSE),
BCM(BHSE), SENIOR(ST.JA)

the…..
Or

• It may ..….
Dividend Decision

in the business for .

• Manager has to maintain

• Profit may either reinvest

Balance
Distribute As Dividends
Growth And Expansion .
 NEXT
Investment Decision
PREVIOUS

Decisions relate to the total amount

HOME
PAGE

EXIT of funds invested in long term fixed

assets and short working capital.
Includes
PGDHI(III)
ASSOCIATE((III), PGDHI(III)
(FINANCE)
PROFESSOR (FINANCE)

SENIOR(ST.JA)
BCM(BHSE), SENIOR(ST.JA)
MBA(BHU), ASSOCIATE((III),

Research And
Ray.
Charak Ray.

Furniture Development Inventory Investment

ASST. PROFESSOR
.Mr. Charak

BCM(BHSE),
.Mr.

MBA(BHU),
ASST.

Tools And Equipments

Receivables
13
 .Mr.
.Mr. Charak Ray.
Charak Ray.
ASST.
ASST. PROFESSOR (FINANCE)
PROFESSOR (FINANCE)

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14
MBA(BHU),
MBA(BHU), ASSOCIATE((III), PGDHI(III)
ASSOCIATE((III), PGDHI(III)
SENIOR(ST.JA) PREVIOUS
BCM(BHSE),
BCM(BHSE), SENIOR(ST.JA)

Capital Budgeting
Investment Decision

Working Capital
 NEXT

PREVIOUS
Working Capital
HOME
PAGE Funds required for day-to-
day operational activity.
Like…
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PGDHI(III)
ASSOCIATE((III), PGDHI(III)

Purchase Of Raw Materials

Purchase Of Raw Materials
(FINANCE)
PROFESSOR (FINANCE)

SENIOR(ST.JA)
BCM(BHSE), SENIOR(ST.JA)
MBA(BHU), ASSOCIATE((III),
Ray.
Charak Ray.

Payment Of Wages
ASST. PROFESSOR
.Mr. Charak

Payment Of Wages
BCM(BHSE),
.Mr.

MBA(BHU),
ASST.

Day-today Expenses
Day-today Expenses

15
 .Mr.
.Mr. Charak Ray.
Charak Ray.
ASST.
ASST. PROFESSOR (FINANCE)
PROFESSOR (FINANCE)

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16
MBA(BHU),
MBA(BHU), ASSOCIATE((III), PGDHI(III)
ASSOCIATE((III), PGDHI(III)
SENIOR(ST.JA) PREVIOUS
BCM(BHSE),
BCM(BHSE), SENIOR(ST.JA)

Cash Management.
Cash Management.

Inventory Management
Inventory Management
Receivables Management
Receivables Management
Major ingredients of working capital
 Types Working Capital
NEXT

PREVIOUS

HOME

Total fund invested in the

PAGE

Gross Working
Gross Working Total fund invested in the
EXIT
Capital Current Assets
Capital Current Assets
PGDHI(III)
ASSOCIATE((III), PGDHI(III)

Gross Working Capital = Current Assets

(FINANCE)
PROFESSOR (FINANCE)

SENIOR(ST.JA)
BCM(BHSE), SENIOR(ST.JA)
MBA(BHU), ASSOCIATE((III),
Ray.
Charak Ray.
ASST. PROFESSOR
.Mr. Charak

Net Working Excess of current assets over

Excess of current assets over
BCM(BHSE),

Net Working
Capital current liabilities
.Mr.

Capital current liabilities

MBA(BHU),
ASST.

Net Working Capital = Current Assets - Current Liability

17
 .Mr.
.Mr. Charak Ray.
Charak Ray.
ASST.
ASST. PROFESSOR (FINANCE)
PROFESSOR (FINANCE)

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18
MBA(BHU),
MBA(BHU), ASSOCIATE((III), PGDHI(III)
ASSOCIATE((III), PGDHI(III)
SENIOR(ST.JA) PREVIOUS
BCM(BHSE),
BCM(BHSE), SENIOR(ST.JA)

value

stock
Current Assets

Provide Little Or Low Return

of one year without reduction in

Example Cash At Bank ,Debtors,

Converted into cash within A period
 NEXT

PREVIOUS
Current Liability
HOME
PAGE

EXIT

The Payment Which Is Due For

Payment Within One Year
PGDHI(III)
ASSOCIATE((III), PGDHI(III)
(FINANCE)
PROFESSOR (FINANCE)

SENIOR(ST.JA)
BCM(BHSE), SENIOR(ST.JA)
MBA(BHU), ASSOCIATE((III),
Ray.
Charak Ray.
ASST. PROFESSOR
.Mr. Charak

Example :-Bills Payable,

BCM(BHSE),

Example :-Bills Payable,

.Mr.

Creditors, Bank Overdraft etc.

Creditors, Bank Overdraft etc.
MBA(BHU),
ASST.

19
 .Mr.
.Mr. Charak Ray.
Charak Ray.
ASST.
ASST. PROFESSOR (FINANCE)
PROFESSOR (FINANCE)

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20
MBA(BHU),
MBA(BHU), ASSOCIATE((III), PGDHI(III)
ASSOCIATE((III), PGDHI(III)
SENIOR(ST.JA) PREVIOUS
BCM(BHSE),
BCM(BHSE), SENIOR(ST.JA)

Requirements
Working Capital
Factors Affecting The
 NEXT

N Nature Of Business
PREVIOUS

HOME
PAGE
O Operating Efficiency

EXIT C Credit Allowed

L Level Of Competition
PGDHI(III)
ASSOCIATE((III), PGDHI(III)

A Availability Of Raw Material

(FINANCE)
PROFESSOR (FINANCE)

SENIOR(ST.JA)
BCM(BHSE), SENIOR(ST.JA)

S Seasonal Factors
MBA(BHU), ASSOCIATE((III),
Ray.
Charak Ray.

S Scale Of Operations
ASST. PROFESSOR
.Mr. Charak

I Inflation
BCM(BHSE),
.Mr.

C Company Business Cycle

MBA(BHU),
ASST.

A Availability Of Credit

L Length Of Production Cycle

21
 NATURE
NEXT
OF BUSINESS
PREVIOUS

HOME
Manufacturing Retail & Services
PAGE
Business Business
EXIT
PGDHI(III)
ASSOCIATE((III), PGDHI(III)

Tata steel
No manufacturing,
(FINANCE)
PROFESSOR (FINANCE)

SENIOR(ST.JA)
BCM(BHSE), SENIOR(ST.JA)

Manufacturing raw
material needs to no distinction
MBA(BHU), ASSOCIATE((III),
Ray.
Charak Ray.

be converted into between raw

ASST. PROFESSOR
.Mr. Charak

finished goods materials

BCM(BHSE),

And finished goods

.Mr.

MBA(BHU),
ASST.

Needs More Needs Less

working capital working capital
22
 NEXT

Operating Efficiency
PREVIOUS

HOME
Operating Efficiency
• Firm capable of utilizing the resources,
PAGE

EXIT
efficiently, without wastage of materials
and idle labor can manage with lower
working capital.
PGDHI(III)
ASSOCIATE((III), PGDHI(III)
(FINANCE)
PROFESSOR (FINANCE)

SENIOR(ST.JA)
BCM(BHSE), SENIOR(ST.JA)
MBA(BHU), ASSOCIATE((III),
Ray.
Charak Ray.
ASST. PROFESSOR
.Mr. Charak

Higher stock turnover ratio High Debtors Turnover Ratio

BCM(BHSE),
.Mr.

MBA(BHU),
ASST.

Needs Less
working capital
23
 NEXT

PREVIOUS
Credit Allowed
HOME
PAGE • Liberal credit policy results in higher amount of debtors,
Increasing the requirement of working capital
EXIT

• Conservative credit policy results in lower amount of

debtors, decreasing the requirement of working capital
PGDHI(III)
ASSOCIATE((III), PGDHI(III)
(FINANCE)
PROFESSOR (FINANCE)

SENIOR(ST.JA)
BCM(BHSE), SENIOR(ST.JA)
MBA(BHU), ASSOCIATE((III),
Ray.
Charak Ray.
ASST. PROFESSOR
.Mr. Charak

Conservative credit policy Liberal Credit Policy

BCM(BHSE),

(Low Debts Collection (Low Debts Collection

.Mr.

Period) Period)
MBA(BHU),
ASST.

Needs LESS working Needs MORE

capital working capital

24
 Level Of Competition
NEXT

PREVIOUS

HOME
PAGE • Higher Competition
EXIT • Higher Stocks Of Finished Goods ,
Higher Advertisement Cost
• Needs More Working Capital
PGDHI(III)
ASSOCIATE((III), PGDHI(III)
(FINANCE)
PROFESSOR (FINANCE)

SENIOR(ST.JA)
BCM(BHSE), SENIOR(ST.JA)
MBA(BHU), ASSOCIATE((III),
Ray.
Charak Ray.
ASST. PROFESSOR
.Mr. Charak

• Lower Competition
BCM(BHSE),

• Lower Stocks Of Finished Goods , Lower

.Mr.

Advertisement Cost
MBA(BHU),
ASST.

• Needs LESS Working Capital

25
 Availability Of Raw Material
NEXT

PREVIOUS

HOME
PAGE
RAW materials are available
EXIT freely and
Continuously

&
PGDHI(III)
ASSOCIATE((III), PGDHI(III)
(FINANCE)
PROFESSOR (FINANCE)

Low Lead Time

SENIOR(ST.JA)
BCM(BHSE), SENIOR(ST.JA)

(time lag between the

MBA(BHU), ASSOCIATE((III),

placement of order and

Ray.
Charak Ray.

actual receipt of the

ASST. PROFESSOR
.Mr. Charak

materials)
BCM(BHSE),
.Mr.

MBA(BHU),
ASST.

Needs less working

capital
26
 Seasonal Factors
NEXT

PREVIOUS

Certain seasons
HOME
PAGE

EXIT
good like
PGDHI(III)
ASSOCIATE((III), PGDHI(III)

Woolen garments Crackers

(FINANCE)
PROFESSOR (FINANCE)

SENIOR(ST.JA)
BCM(BHSE), SENIOR(ST.JA)

During winters seasons During Diwali

MBA(BHU), ASSOCIATE((III),
Ray.
Charak Ray.
ASST. PROFESSOR
.Mr. Charak

Has huge demand during peak season and

BCM(BHSE),

production is carried out through out the

.Mr.

year to accumulate inventories

MBA(BHU),
ASST.

Needs MORE Working

Capital
27
 NEXT

PREVIOUS
Scale Of Operations
HOME
PAGE

Firm operating at higher scale

EXIT
requires higher inventory, high
labor cost
Higher amount of working capital is
PGDHI(III)
ASSOCIATE((III), PGDHI(III)

required
(FINANCE)
PROFESSOR (FINANCE)

SENIOR(ST.JA)
BCM(BHSE), SENIOR(ST.JA)

500 Outlets
Across India
MBA(BHU), ASSOCIATE((III),
Ray.
Charak Ray.
ASST. PROFESSOR
.Mr. Charak

Firm operating at lower scale

BCM(BHSE),

requires lower inventory, low

.Mr.

labor cost
MBA(BHU),
ASST.

Lower amount of working capital is

required Local Pizza Seller

28
 .Mr.
.Mr. Charak Ray.
Charak Ray.
ASST.
ASST. PROFESSOR (FINANCE)
PROFESSOR (FINANCE)

EXIT
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29
MBA(BHU),
MBA(BHU), ASSOCIATE((III), PGDHI(III)
ASSOCIATE((III), PGDHI(III)
SENIOR(ST.JA) PREVIOUS
BCM(BHSE),
BCM(BHSE), SENIOR(ST.JA)

capital
working
Needs MORE
Inflation

the firm is not able to revise

the selling prices, immediately
of raw material and labor and
High inflation led to high cost
 NEXT

PREVIOUS Company Business Cycle

HOME
PAGE

EXIT • In case of a Boom, sales as well

as production are higher
• Higher amount of working
PGDHI(III)
ASSOCIATE((III), PGDHI(III)

capital is required
(FINANCE)
PROFESSOR (FINANCE)

SENIOR(ST.JA)
BCM(BHSE), SENIOR(ST.JA)
MBA(BHU), ASSOCIATE((III),
Ray.
Charak Ray.
ASST. PROFESSOR
.Mr. Charak

BCM(BHSE),

• During Depression sales as

.Mr.

well as production will be low

MBA(BHU),
ASST.

• Lower amount of working

capital is required
30
 NEXT

PREVIOUS Availability Of Credit

HOME
PAGE

High credit from suppliers, and

EXIT
additional finance from bank

lower amount of working capital is

PGDHI(III)
ASSOCIATE((III), PGDHI(III)

required
(FINANCE)
PROFESSOR (FINANCE)

SENIOR(ST.JA)
BCM(BHSE), SENIOR(ST.JA)
MBA(BHU), ASSOCIATE((III),
Ray.
Charak Ray.
ASST. PROFESSOR
.Mr. Charak

Low credit from suppliers, and

BCM(BHSE),

additional finance from bank

.Mr.

MBA(BHU),
ASST.

higher amount of working capital is

required

31
 NEXT
Length Of Production Cycle
PREVIOUS

HOME
PAGE • Is the Length Period required to convert
EXIT
sales, after acquisition of the resources such
as materials, power etc, into cash
PGDHI(III)
ASSOCIATE((III), PGDHI(III)

Cash
Accounts
(FINANCE)
PROFESSOR (FINANCE)

SENIOR(ST.JA)
BCM(BHSE), SENIOR(ST.JA)

Receivable
MBA(BHU), ASSOCIATE((III),
Ray.
Charak Ray.

Raw
ASST. PROFESSOR
.Mr. Charak

Material
BCM(BHSE),
.Mr.

Finished
MBA(BHU),
ASST.

Goods
Work in
Process
32
 NEXT

PREVIOUS

HOME
PAGE
• Longer processing cycle high time
span between the receipt of raw material
EXIT
and their conversion into finished goods
• Higher amount of working capital is
required
PGDHI(III)
ASSOCIATE((III), PGDHI(III)
(FINANCE)
PROFESSOR (FINANCE)

SENIOR(ST.JA)
BCM(BHSE), SENIOR(ST.JA)
MBA(BHU), ASSOCIATE((III),
Ray.
Charak Ray.
ASST. PROFESSOR

• Shorter processing cycle. Low time

.Mr. Charak

span between the receipt of raw

BCM(BHSE),
.Mr.

material and their conversion into

finished goods
MBA(BHU),
ASST.

• Lower amount of working capital is

required
33
 NEXT

PREVIOUS
Capital Budgeting
HOME
PAGE

EXIT
Refers to investment in long-
term assets.
(More than one year)
PGDHI(III)
ASSOCIATE((III), PGDHI(III)
(FINANCE)
PROFESSOR (FINANCE)

SENIOR(ST.JA)
BCM(BHSE), SENIOR(ST.JA)

Affect the growth,

MBA(BHU), ASSOCIATE((III),
Ray.
Charak Ray.

profitability and risk of the

ASST. PROFESSOR
.Mr. Charak

business in the long run.

BCM(BHSE),
.Mr.

MBA(BHU),
ASST.

Must be financed through

long-term sources of capital

34
 .Mr.
.Mr. Charak Ray.
Charak Ray.
ASST.
ASST. PROFESSOR (FINANCE)
PROFESSOR (FINANCE)

EXIT
PAGE
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35
MBA(BHU),
MBA(BHU), ASSOCIATE((III), PGDHI(III)
ASSOCIATE((III), PGDHI(III)
SENIOR(ST.JA) PREVIOUS
BCM(BHSE),
BCM(BHSE), SENIOR(ST.JA)

Or

Decision
Budgeting
Importance Of Capital

Why Capital Budgeting

Decision Is Called Risky
 .Mr.
.Mr. Charak Ray.
Charak Ray.
ASST.
ASST. PROFESSOR (FINANCE)
PROFESSOR (FINANCE)

EXIT
PAGE
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36
MBA(BHU),
MBA(BHU), ASSOCIATE((III), PGDHI(III)
ASSOCIATE((III), PGDHI(III)
SENIOR(ST.JA) PREVIOUS
BCM(BHSE),
BCM(BHSE), SENIOR(ST.JA)

I
F

E
R
Importance Of
Capital Budgeting
 NEXT

Funds Involved Are Large

PREVIOUS

Involves large amount

HOME
PAGE Involves large amount
EXIT

of funds to acquires…..
of funds to acquires…..
PGDHI(III)
ASSOCIATE((III), PGDHI(III)
(FINANCE)
PROFESSOR (FINANCE)

SENIOR(ST.JA)
BCM(BHSE), SENIOR(ST.JA)
MBA(BHU), ASSOCIATE((III),
Ray.
Charak Ray.

Machinery
Machinery
ASST. PROFESSOR
.Mr. Charak

BCM(BHSE),
.Mr.

Technology
MBA(BHU),
ASST.

Technology

Tools and vehicles

Tools and vehicles
37
 NEXT Irreversible
• Decisions once taken are not Reversible
PREVIOUS
• Decisions once taken are not Reversible
without incurring heavy losses.
HOME
PAGE without incurring heavy losses.
EXIT

• Cancellation of a project is quite Costly

PGDHI(III)
ASSOCIATE((III), PGDHI(III)

• Cancellation of a project is quite Costly

in terms of waste of funds
in terms of waste of funds
(FINANCE)
PROFESSOR (FINANCE)

SENIOR(ST.JA)
BCM(BHSE), SENIOR(ST.JA)
MBA(BHU), ASSOCIATE((III),
Ray.
Charak Ray.
ASST. PROFESSOR
.Mr. Charak

BCM(BHSE),
.Mr.

MBA(BHU),
ASST.

38
 Returns requires longer period
NEXT

• Returns comes after long time which is

• Returns comes after long time which is
PREVIOUS

uncertain.
uncertain.
HOME
PAGE

• Difficult task to estimate the future

EXIT
• Difficult task to estimate the future
benefits and costs because of.
benefits and costs because of.
PGDHI(III)
ASSOCIATE((III), PGDHI(III)
(FINANCE)
PROFESSOR (FINANCE)

SENIOR(ST.JA)
BCM(BHSE), SENIOR(ST.JA)
MBA(BHU), ASSOCIATE((III),
Ray.
Charak Ray.
ASST. PROFESSOR
.Mr. Charak

Political Social
BCM(BHSE),

Economic Environment
Environment
.Mr.

Environment
MBA(BHU),
ASST.

Technological Factor
39
 NEXT
Effect On Long Term
Growth
PREVIOUS
• The direction of growth depends on quality
• The direction of growth depends on quality
HOME
of fixed assets.
PAGE
of fixed assets.
EXIT
PGDHI(III)
ASSOCIATE((III), PGDHI(III)

• IfIfdecision
decision goes in the right direction
•
goes in the right direction
(FINANCE)
PROFESSOR (FINANCE)

profitability increases.
SENIOR(ST.JA)
BCM(BHSE), SENIOR(ST.JA)

profitability increases.
MBA(BHU), ASSOCIATE((III),
Ray.
Charak Ray.
ASST. PROFESSOR
.Mr. Charak

BCM(BHSE),

• IfIfgoes
goes wrong, it is harmful for growth and
.Mr.

•
wrong, it is harmful for growth and
profits
MBA(BHU),
ASST.

profits

40
 .Mr.
.Mr. Charak Ray.
Charak Ray.
ASST.
ASST. PROFESSOR (FINANCE)
PROFESSOR (FINANCE)

EXIT
PAGE
NEXT

HOME

41
MBA(BHU),
MBA(BHU), ASSOCIATE((III), PGDHI(III)
ASSOCIATE((III), PGDHI(III)
SENIOR(ST.JA) PREVIOUS
BCM(BHSE),
BCM(BHSE), SENIOR(ST.JA)

E
I

C
R
Factor Affecting
Capital Budgeting
 Risk Involved
NEXT

• Decisions Require A Judgment Of Future Events
PREVIOUS

• Decisions Require A Judgment Of Future Events
HOME
Which Are Uncertain.
PAGE
Which Are Uncertain.
EXIT

• Difficult Task To Estimate The Future Benefits

• Difficult Task To Estimate The Future Benefits
And Costs Because Of.
And Costs Because Of.
PGDHI(III)
ASSOCIATE((III), PGDHI(III)
(FINANCE)
PROFESSOR (FINANCE)

SENIOR(ST.JA)
BCM(BHSE), SENIOR(ST.JA)
MBA(BHU), ASSOCIATE((III),
Ray.
Charak Ray.
ASST. PROFESSOR
.Mr. Charak

Political Social
BCM(BHSE),

Economic Environment
Environment
.Mr.

Environment
MBA(BHU),
ASST.

Technological Factor
42
 NEXT
Investment Criterion Involved
• Projects are to be considered on the basis of the
PREVIOUS

• Projects are to be considered on the basis of the

HOME
amount of investment, interest rate, cash flows
PAGE
amount of investment, interest rate, cash flows
and rate of return
EXIT and rate of return
• Rank the projects, according to their profitability
• Rank the projects, according to their profitability
by using various capital budgeting techniques like
by using various capital budgeting techniques like
PGDHI(III)
ASSOCIATE((III), PGDHI(III)
(FINANCE)
PROFESSOR (FINANCE)

SENIOR(ST.JA)
BCM(BHSE), SENIOR(ST.JA)
MBA(BHU), ASSOCIATE((III),
Ray.
Charak Ray.

Net Present Value (NPV)

ASST. PROFESSOR
.Mr. Charak

BCM(BHSE),
.Mr.

Payback Period
MBA(BHU),
ASST.

Internal Rate of Return (IRR)

43
 NEXT

Expected Return On Investment

PREVIOUS

• Most profitable projects are selected by

HOME • Most profitable projects are selected by
PAGE
evaluating the various projects on the basis
evaluating the various projects on the basis
of rate of return.
of rate of return.
EXIT

•
•
PGDHI(III)
ASSOCIATE((III), PGDHI(III)
(FINANCE)
PROFESSOR (FINANCE)

SENIOR(ST.JA)
BCM(BHSE), SENIOR(ST.JA)
MBA(BHU), ASSOCIATE((III),

• Project with the maximum return

Ray.
Charak Ray.

• Project with the maximum return

ASST. PROFESSOR
.Mr. Charak

BCM(BHSE),
.Mr.

MBA(BHU),
ASST.

• IsIstotobe
be selected
•
selected
44
 NEXT

PREVIOUS
Cash Flow Of The Project
HOME
PAGE

• Cash is likely to generated

EXIT
when invest in fixed assets
• Company must analysis the
duration in which the cash is
PGDHI(III)
ASSOCIATE((III), PGDHI(III)

likely to generate
(FINANCE)
PROFESSOR (FINANCE)

SENIOR(ST.JA)
BCM(BHSE), SENIOR(ST.JA)
MBA(BHU), ASSOCIATE((III),
Ray.
Charak Ray.
ASST. PROFESSOR
.Mr. Charak

BCM(BHSE),
.Mr.

MBA(BHU),
ASST.

Projects Like Hydro-power, Service Sector Health And

Telecom takes Longer Time Education Generate Quick Cash

45
 .Mr.
.Mr. Charak Ray.
Charak Ray.
ASST.
ASST. PROFESSOR (FINANCE)
PROFESSOR (FINANCE)

EXIT
PAGE
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HOME

46
MBA(BHU),
MBA(BHU), ASSOCIATE((III), PGDHI(III)
ASSOCIATE((III), PGDHI(III)
SENIOR(ST.JA) PREVIOUS
BCM(BHSE),
BCM(BHSE), SENIOR(ST.JA)

P
P
C
C

T
S

T
S

D
A
U
U

N
N
Factors Affecting The
Capital Budgeting Requirements
 Collaboration Level
NEXT

• Some organizations SHARE each other’s

PREVIOUS

• Some organizations SHARE each other’s

facilities
HOME

facilities
PAGE

EXIT

•
•
PGDHI(III)
ASSOCIATE((III), PGDHI(III)

• Collaboration reduces the amount of

• Collaboration reduces the amount of
(FINANCE)

investment ( Banks share common ATM

PROFESSOR (FINANCE)

SENIOR(ST.JA)
BCM(BHSE), SENIOR(ST.JA)

investment ( Banks share common ATM

machines)
MBA(BHU), ASSOCIATE((III),

machines)
Ray.
Charak Ray.
ASST. PROFESSOR
.Mr. Charak

BCM(BHSE),
.Mr.

MBA(BHU),
ASST.

• Needs less fixed assets

• Needs less fixed assets

47
 NEXT

PREVIOUS
Upgrading Of Technique

• InInsome
some industries, assets become Outdated
•
HOME
industries, assets become Outdated
after some time
PAGE

EXIT
after some time
PGDHI(III)
ASSOCIATE((III), PGDHI(III)

• Such organisation require higher fixed

• Such organisation require higher fixed
(FINANCE)
PROFESSOR (FINANCE)

SENIOR(ST.JA)
BCM(BHSE), SENIOR(ST.JA)

capital. example
capital. example
MBA(BHU), ASSOCIATE((III),
Ray.
Charak Ray.
ASST. PROFESSOR
.Mr. Charak

BCM(BHSE),
.Mr.

MBA(BHU),
ASST.

Computers hardware's
48
 Prospectus Of Growth
NEXT

Organisation having Higher Growth plans

PREVIOUS

Organisation having Higher Growth plans

HOME
requires higher investment in fixed assets.
requires higher investment in fixed assets.
PAGE

EXIT
PGDHI(III)
ASSOCIATE((III), PGDHI(III)

Needs more fixed assets

(FINANCE)
PROFESSOR (FINANCE)

SENIOR(ST.JA)
BCM(BHSE), SENIOR(ST.JA)
MBA(BHU), ASSOCIATE((III),
Ray.
Charak Ray.
ASST. PROFESSOR
.Mr. Charak

Acquired Jaguar
BCM(BHSE),

Acquired Jaguar
And Land Rover
.Mr.

And Land Rover

MBA(BHU),
ASST.

Mr. TATA
49
 NEXT

PREVIOUS
Scale Of Operations
HOME
PAGE

Firm operating at higher scale

EXIT
requires more machinery, building
to meet big orders
Higher amount of fixed capital is
PGDHI(III)
ASSOCIATE((III), PGDHI(III)

required
(FINANCE)
PROFESSOR (FINANCE)

SENIOR(ST.JA)
BCM(BHSE), SENIOR(ST.JA)

500 Outlets
Across India
MBA(BHU), ASSOCIATE((III),
Ray.
Charak Ray.
ASST. PROFESSOR
.Mr. Charak

Firm operating at lower scale

BCM(BHSE),

requires few equipment,

.Mr.

machinery, plant etc

MBA(BHU),
ASST.

Lower amount of fixed capital is

required Local Pizza Seller

50
 NEXT
Technology Choice
PREVIOUS

HOME
PAGE
• Capital-intensive organisation requires
higher investment in plant and
EXIT
machinery
• Relies less on manual labor.
PGDHI(III)
ASSOCIATE((III), PGDHI(III)

• Higher amount of fixed capital is

required
(FINANCE)
PROFESSOR (FINANCE)

SENIOR(ST.JA)
BCM(BHSE), SENIOR(ST.JA)
MBA(BHU), ASSOCIATE((III),
Ray.
Charak Ray.
ASST. PROFESSOR
.Mr. Charak

• Labor-intensive organisation requires

less investment in fixed assets
BCM(BHSE),
.Mr.

• Relies more on labor workforce.

MBA(BHU),
ASST.

• LOWER amount of fixed capital is

required

51
 NEXT

Alternatives Finance
PREVIOUS

HOME
PAGE
• Companies getting alternatives of fixed
EXIT assets does not requires to invest in certain
assets like machinery, land, building.
PGDHI(III)
ASSOCIATE((III), PGDHI(III)
(FINANCE)
PROFESSOR (FINANCE)

SENIOR(ST.JA)
BCM(BHSE), SENIOR(ST.JA)

• Example :- availability of leasing/rental

facilities
MBA(BHU), ASSOCIATE((III),
Ray.
Charak Ray.
ASST. PROFESSOR
.Mr. Charak

BCM(BHSE),
.Mr.

MBA(BHU),
ASST.

• Required Less Funds in fixed assets

52
 NATURE
NEXT
OF BUSINESS
PREVIOUS

HOME
Manufacturing Retail & Services
PAGE
Business Business
EXIT
PGDHI(III)
ASSOCIATE((III), PGDHI(III)

No manufacturing,
(FINANCE)
PROFESSOR (FINANCE)

SENIOR(ST.JA)
BCM(BHSE), SENIOR(ST.JA)

Manufacturing raw
material needs to no distinction
MBA(BHU), ASSOCIATE((III),
Ray.
Charak Ray.

be converted into between raw

ASST. PROFESSOR
.Mr. Charak

finished goods materials

BCM(BHSE),

And finished goods

.Mr.

MBA(BHU),
ASST.

Needs More Needs less

fixed assets fixed assets
53
 .Mr.
.Mr. Charak Ray.
Charak Ray.
ASST.
ASST. PROFESSOR (FINANCE)
PROFESSOR (FINANCE)

EXIT
PAGE
NEXT

HOME

54
MBA(BHU),
MBA(BHU), ASSOCIATE((III), PGDHI(III)
ASSOCIATE((III), PGDHI(III)
SENIOR(ST.JA) PREVIOUS
BCM(BHSE),
BCM(BHSE), SENIOR(ST.JA)
Diversification

capital is required
Higher amount of fixed
A firm if chooses to enter
into New Sector/Business
 NEXT

PREVIOUS
Financing decision
HOME
PAGE

• Decision related to various Sources

EXIT
Of Finance i.e.
PGDHI(III)
ASSOCIATE((III), PGDHI(III)
(FINANCE)
PROFESSOR (FINANCE)

SENIOR(ST.JA)
BCM(BHSE), SENIOR(ST.JA)
MBA(BHU), ASSOCIATE((III),

Borrowed funds Owners funds

Ray.
Charak Ray.
ASST. PROFESSOR
.Mr. Charak

BCM(BHSE),

And relative Proportion Between

.Mr.

•
them on the basis of
MBA(BHU),
ASST.

• Return Expected ,
• Cost
• Risk Associated
55
 .Mr.
.Mr. Charak Ray.
Charak Ray.
ASST.
ASST. PROFESSOR (FINANCE)
PROFESSOR (FINANCE)

EXIT
PAGE
NEXT

HOME

56
MBA(BHU),
MBA(BHU), ASSOCIATE((III), PGDHI(III)
ASSOCIATE((III), PGDHI(III)
SENIOR(ST.JA) PREVIOUS
BCM(BHSE),
BCM(BHSE), SENIOR(ST.JA)

Owners Fund (Equity)

Sources Of Finance

Borrowed Fund (Debts)

 NEXT

PREVIOUS
Equity Debts
Basis
HOME
PAGE

Type of Part Of Owned Capital Part Of Loan Capital

EXIT
capital
PGDHI(III)

Dividend Depends On Interest is fixed

ASSOCIATE((III), PGDHI(III)

Return Profits irrespective of profits

(FINANCE)
PROFESSOR (FINANCE)

SENIOR(ST.JA)
BCM(BHSE), SENIOR(ST.JA)
MBA(BHU), ASSOCIATE((III),
Ray.

Enjoy Voting Rights No Voting Rights

Charak Ray.

Voting rights
ASST. PROFESSOR
.Mr. Charak

BCM(BHSE),

Not Redeemed During The Redeemed at the end of

.Mr.

Redemption Life Of Company. the specified period.

MBA(BHU),
ASST.

Dividend Is Not Tax Interest paid is tax

Cost Deductible. Floatation deductible. Floatation
Costs High costs low
57
 NEXT
Capital Structure
PREVIOUS

HOME
PAGE
• Refers to the mix of different sources of long-term
funds such as
EXIT

• Equity share , preference share (owners fund /equity) ,

• Long-term loans, debentures (borrowed fund/debts)
PGDHI(III)
ASSOCIATE((III), PGDHI(III)
(FINANCE)
PROFESSOR (FINANCE)

SENIOR(ST.JA)
BCM(BHSE), SENIOR(ST.JA)

Debt
Capital structure =
MBA(BHU), ASSOCIATE((III),
Ray.
Charak Ray.

Equity
ASST. PROFESSOR
.Mr. Charak

Or
BCM(BHSE),
.Mr.

Debt
MBA(BHU),
ASST.

Capital structure =
Equity + Debt
58
 NEXT

PREVIOUS Financial risk.

• The risk of default on payment of debt.
• The risk of default on payment of debt.
HOME
PAGE

EXIT
PGDHI(III)
ASSOCIATE((III), PGDHI(III)

• Higher use of debt increases the financial risk

(FINANCE)
PROFESSOR (FINANCE)

SENIOR(ST.JA)
BCM(BHSE), SENIOR(ST.JA)

• Higher use of debt increases the financial risk

of a business
of a business
MBA(BHU), ASSOCIATE((III),
Ray.
Charak Ray.
ASST. PROFESSOR
.Mr. Charak

BCM(BHSE),
.Mr.

MBA(BHU),
ASST.

59
 .Mr.
.Mr. Charak Ray.
Charak Ray.
ASST.
ASST. PROFESSOR (FINANCE)
PROFESSOR (FINANCE)

EXIT
PAGE
NEXT

HOME

60
MBA(BHU),
MBA(BHU), ASSOCIATE((III), PGDHI(III)
ASSOCIATE((III), PGDHI(III)
SENIOR(ST.JA) PREVIOUS
BCM(BHSE),
BCM(BHSE), SENIOR(ST.JA)

Debentures are to
obligation, even if the
Interest paid is a legal

period(outflow of cash)
company is not in profits
Debt is a burden

redeemed after a specified

 .Mr.
.Mr. Charak Ray.
Charak Ray.
ASST.
ASST. PROFESSOR (FINANCE)
PROFESSOR (FINANCE)

EXIT
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61
MBA(BHU),
MBA(BHU), ASSOCIATE((III), PGDHI(III)
ASSOCIATE((III), PGDHI(III)
SENIOR(ST.JA) PREVIOUS
BCM(BHSE),
BCM(BHSE), SENIOR(ST.JA)

???
debts.
When debts is burden

Why company raises the

 .Mr.
.Mr. Charak Ray.
Charak Ray.
ASST.
ASST. PROFESSOR (FINANCE)
PROFESSOR (FINANCE)

EXIT
PAGE
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HOME

62
MBA(BHU),
MBA(BHU), ASSOCIATE((III), PGDHI(III)
ASSOCIATE((III), PGDHI(III)
SENIOR(ST.JA) PREVIOUS
BCM(BHSE),
BCM(BHSE), SENIOR(ST.JA)

Cheaper Source Of Finance

Interest Paid Is Tax Deductable

Do Not Leads To Control Dilution

Structure
Why Debts In Capital

Debenture Holder Do Not Have Voting Rights

 NEXT PROBLEM

PREVIOUS

HOME
• How are the shareholders of a company likely
to gain with a debt component in the capital
PAGE

EXIT
employed? Explain with the help of an
example
PGDHI(III)
ASSOCIATE((III), PGDHI(III)

or
(FINANCE)
PROFESSOR (FINANCE)

SENIOR(ST.JA)
BCM(BHSE), SENIOR(ST.JA)

• What do you mean by trading on equity.

MBA(BHU), ASSOCIATE((III),
Ray.
Charak Ray.
ASST. PROFESSOR
.Mr. Charak

BCM(BHSE),
.Mr.

MBA(BHU),
ASST.

63
 NEXT

PREVIOUS
Trading On Equity/Financial Leverage
Refers to the Increase In Profit of the
HOME
Refers to the Increase In Profit of the
equity shareholders due to the Presence Of
PAGE

equity shareholders due to the Presence Of

EXIT
Debt by making equity as base.
Debt by making equity as base.
PGDHI(III)
ASSOCIATE((III), PGDHI(III)
(FINANCE)
PROFESSOR (FINANCE)

SENIOR(ST.JA)
BCM(BHSE), SENIOR(ST.JA)
MBA(BHU), ASSOCIATE((III),
Ray.
Charak Ray.
ASST. PROFESSOR
.Mr. Charak

BCM(BHSE),
.Mr.

MBA(BHU),
ASST.

64
 ItIs
IsPossible
PossibleWhen
When
NEXT

PREVIOUS It
HOME
PAGE

The Return Than The

The Return Than The
On Capital Rate Of
EXIT

On Capital
Employed
> Rate Of
Interest
Employed Interest
PGDHI(III)
ASSOCIATE((III), PGDHI(III)
(FINANCE)
PROFESSOR (FINANCE)

SENIOR(ST.JA)
BCM(BHSE), SENIOR(ST.JA)

Theearnings
The earningsareareStable
Stableand
and
MBA(BHU), ASSOCIATE((III),
Ray.
Charak Ray.

Regulartotopay
Regular paythe
theinterest
intereston
on
ASST. PROFESSOR
.Mr. Charak

debts
debts
BCM(BHSE),
.Mr.

MBA(BHU),
ASST.

Sufficient Fixed Assets To

Sufficient Fixed Assets To
Mortgage
Mortgage
65
 NEXT

PREVIOUS
EXAMPLE
HOME
PAGE

• Total Funds used • Rs. 30 Lakh

EXIT
• Interest rate on debts • 10% p.a.
• Tax rate • 30%
Earning before interest and tax Rs. 6 Lakh
PGDHI(III)

• •
ASSOCIATE((III), PGDHI(III)
(FINANCE)
PROFESSOR (FINANCE)

SENIOR(ST.JA)
BCM(BHSE), SENIOR(ST.JA)

Debt
Situation I Nil
MBA(BHU), ASSOCIATE((III),
Ray.
Charak Ray.

Situation II Rs. 10 Lakh

ASST. PROFESSOR
.Mr. Charak

Situation III Rs. 20 Lakh

BCM(BHSE),
.Mr.

MBA(BHU),
ASST.

66
 NEXT

Situation Situation Situation 3rd

PREVIOUS
1st 2nd
HOME
PAGE
Profit Before Interest And
EXIT Tax 6,00,000 6,00,000 6,00,000
Less:-Interest(10%) NIL -1,00,000 -2,00,000
PGDHI(III)
ASSOCIATE((III), PGDHI(III)

Profit After Interest 6,00,000 5,00,000 4,00,000

(FINANCE)
PROFESSOR (FINANCE)

SENIOR(ST.JA)

-1,80,000 -1,50,000 -1,20,000

BCM(BHSE), SENIOR(ST.JA)

Less:- Tax(30%)
MBA(BHU), ASSOCIATE((III),

Profit After Tax 4,20,000 3,50,000 2,80,000

Ray.
Charak Ray.
ASST. PROFESSOR

3,00,000 2,00,000 1,00,000

.Mr. Charak

No Of Equity Shares
BCM(BHSE),

Earning Per Share 1.4 1.75 2.8

.Mr.

MBA(BHU),
ASST.

Net profit after tax

E.P.S
= No of equity shares

67
 NEXT

Situation Situation Situation 3rd

PREVIOUS
1st 2nd
HOME
PAGE
Profit Before Interest And
EXIT Tax 6,00,000 6,00,000 6,00,000
Less:-Interest(10%) NIL -1,00,000 -2,00,000
PGDHI(III)
ASSOCIATE((III), PGDHI(III)

Profit After Interest 6,00,000 5,00,000 4,00,000

(FINANCE)
PROFESSOR (FINANCE)

SENIOR(ST.JA)

-1,80,000 -1,50,000 -1,20,000

BCM(BHSE), SENIOR(ST.JA)

Less:- Tax(30%)
MBA(BHU), ASSOCIATE((III),

Profit After Tax 4,20,000 3,50,000 2,80,000

Ray.
Charak Ray.
ASST. PROFESSOR

3,00,000 2,00,000 1,00,000

.Mr. Charak

No Of Equity Shares
BCM(BHSE),

Earning Per Share 1.4 1.75 2.8

.Mr.

MBA(BHU),
ASST.

Third case is most

profitable as EPS is highest.
68
 .Mr.
.Mr. Charak Ray.
Charak Ray.
ASST.
ASST. PROFESSOR (FINANCE)
PROFESSOR (FINANCE)

EXIT
PAGE
NEXT

HOME

69
MBA(BHU),
MBA(BHU), ASSOCIATE((III), PGDHI(III)
ASSOCIATE((III), PGDHI(III)
SENIOR(ST.JA) PREVIOUS
BCM(BHSE),
BCM(BHSE), SENIOR(ST.JA)

Capital Structure
Factors affecting the Choice of
 .Mr.
.Mr. Charak Ray.
Charak Ray.
ASST.
ASST. PROFESSOR (FINANCE)
PROFESSOR (FINANCE)

EXIT
PAGE
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70
MBA(BHU),
MBA(BHU), ASSOCIATE((III), PGDHI(III)
ASSOCIATE((III), PGDHI(III)
SENIOR(ST.JA) PREVIOUS
BCM(BHSE),
BCM(BHSE), SENIOR(ST.JA)

E
R
R

E
R
R

T
I

S
S

T
I

S
S
F
F

O
O
 NEXT

PREVIOUS Floatation Costs

HOME
PAGE

• The costs incurs when company makes

EXIT • The costs incurs when company makes
a New Issue of either stocks or debentures
a New Issue of either stocks or debentures
• Costs of printing the certificates, paying
• Costs of printing the certificates, paying
PGDHI(III)
ASSOCIATE((III), PGDHI(III)

the underwriters, government fees etc.

the underwriters, government fees etc.
(FINANCE)
PROFESSOR (FINANCE)

SENIOR(ST.JA)
BCM(BHSE), SENIOR(ST.JA)
MBA(BHU), ASSOCIATE((III),

High
Ray.
Charak Ray.

• Issue of equity involves

• Issue of equity involves
ASST. PROFESSOR
.Mr. Charak

• flotation cost
• flotation cost
BCM(BHSE),
.Mr.

MBA(BHU),
ASST.

• Issue of debenture involves

• Issue of debenture involves Low
• flotation cost
• flotation cost
71
 NEXT

PREVIOUS
Interest Coverage Ratio
• Refers to the number of times
HOME
PAGE • Refers to the number of times
earnings of a company covers the
earnings of a company covers the
EXIT
interest responsibility.
interest responsibility.

• The higher the ratio, higher the

PGDHI(III)
ASSOCIATE((III), PGDHI(III)

• The higher the ratio, higher the

debts can be raised
debts can be raised
(FINANCE)
PROFESSOR (FINANCE)

SENIOR(ST.JA)
BCM(BHSE), SENIOR(ST.JA)
MBA(BHU), ASSOCIATE((III),
Ray.
Charak Ray.
ASST. PROFESSOR
.Mr. Charak

BCM(BHSE),
.Mr.

Profit before interest

Interest coverage
=
MBA(BHU),
ASST.

ratio Interest

72
 NEXT

Risk Consideration
PREVIOUS

HOME
PAGE

EXIT
DebtIncreases
• •Debt Increasesthethefinancial
financialrisk
risktoto
meetFixed
meet Fixedinterest
interestpayment,
payment,and
and
Repaymentobligations.
obligations.
PGDHI(III)
ASSOCIATE((III), PGDHI(III)

Repayment
(FINANCE)
PROFESSOR (FINANCE)

SENIOR(ST.JA)
BCM(BHSE), SENIOR(ST.JA)
MBA(BHU), ASSOCIATE((III),
Ray.
Charak Ray.

• •IfIfa abusiness
businessrisk
riskisisLower,
Lower,its
itscapacity
capacity
ASST. PROFESSOR
.Mr. Charak

totouse
useDebt
Debtisishigher
higherandandvice-versa.
vice-versa.
BCM(BHSE),
.Mr.

MBA(BHU),
ASST.

73
 NEXT

Stock Market Conditions

PREVIOUS

HOME
PAGE

EXIT
• During depression(earning During boom
are low) investors are period(high learning),
cautious and do not want
equity shares are
to take risk.
PGDHI(III)
ASSOCIATE((III), PGDHI(III)

more easily sold even

• They prefer investment in at a higher price.
(FINANCE)
PROFESSOR (FINANCE)

SENIOR(ST.JA)
BCM(BHSE), SENIOR(ST.JA)

Debts as the risk is Less

MBA(BHU), ASSOCIATE((III),
Ray.
Charak Ray.
ASST. PROFESSOR
.Mr. Charak

BCM(BHSE),
.Mr.

MBA(BHU),
ASST.

74
 NEXT

PREVIOUS Tax Rate

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PAGE

• High corporate tax rate force the

EXIT
• High corporate tax rate force the
companies to raise funds through debt as
companies to raise funds through debt as
interest on debt is expenditure.
interest on debt is expenditure.
PGDHI(III)
ASSOCIATE((III), PGDHI(III)
(FINANCE)
PROFESSOR (FINANCE)

SENIOR(ST.JA)
BCM(BHSE), SENIOR(ST.JA)
MBA(BHU), ASSOCIATE((III),
Ray.
Charak Ray.
ASST. PROFESSOR
.Mr. Charak

BCM(BHSE),
.Mr.

• Taxable profits would be low.

• Taxable profits would be low.
MBA(BHU),
ASST.

75
 NEXT

Situation of Cash Flow and sales

PREVIOUS

HOME
PAGE

EXIT
Companyhas
• •Company hasStable
StableSales
Salesand
and
regularsInflow
regulars Inflowofofcash.
cash.
PGDHI(III)
ASSOCIATE((III), PGDHI(III)
(FINANCE)
PROFESSOR (FINANCE)

SENIOR(ST.JA)
BCM(BHSE), SENIOR(ST.JA)
MBA(BHU), ASSOCIATE((III),
Ray.
Charak Ray.
ASST. PROFESSOR

• •ItItcan
canRaise
RaiseDebts
Debtssosothat
thatfixed
fixed
.Mr. Charak

BCM(BHSE),

interestand
interest andrepayment
repaymentcan
canbebe
.Mr.

made.
made.
MBA(BHU),
ASST.

76
 NEXT

Cost Of Debt
PREVIOUS

• Cost of the debt is the fixed interest

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PAGE
• Cost of the debt is the fixed interest
charges
EXIT
charges
PGDHI(III)
ASSOCIATE((III), PGDHI(III)
(FINANCE)
PROFESSOR (FINANCE)

• IfIfthe
the rate of interest on debts is higher
SENIOR(ST.JA)

•
BCM(BHSE), SENIOR(ST.JA)

rate of interest on debts is higher

debts can be avoided
MBA(BHU), ASSOCIATE((III),

debts can be avoided

Ray.
Charak Ray.
ASST. PROFESSOR
.Mr. Charak

BCM(BHSE),
.Mr.

• And equity can be raised or vice-versa

MBA(BHU),

• And equity can be raised or vice-versa

ASST.

77
 NEXT

PREVIOUS
Other Companies Capital Structure

HOME

Debtequity
equityratios(Capital
ratios(CapitalStructure)
Structure)
PAGE

• •Debt
ofofOther
OtherCompanies
Companiesininthe
the
EXIT
PGDHI(III)
ASSOCIATE((III), PGDHI(III)

SameIndustry
• •Same Industrymay
maybe
beused
usedififthat
that
companyisis
(FINANCE)
PROFESSOR (FINANCE)

SENIOR(ST.JA)
BCM(BHSE), SENIOR(ST.JA)

company
MBA(BHU), ASSOCIATE((III),
Ray.
Charak Ray.

doinggood
• •doing goodininthat
thatsector
sector
ASST. PROFESSOR
.Mr. Charak

BCM(BHSE),
.Mr.

MBA(BHU),
ASST.

78
 .Mr.
.Mr. Charak Ray.
Charak Ray.
ASST.
ASST. PROFESSOR (FINANCE)
PROFESSOR (FINANCE)

EXIT
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NEXT

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79
MBA(BHU),
MBA(BHU), ASSOCIATE((III), PGDHI(III)
ASSOCIATE((III), PGDHI(III)
SENIOR(ST.JA) PREVIOUS
BCM(BHSE),
BCM(BHSE), SENIOR(ST.JA)

• Can
• IfIfthe
the

its EPS. Must

its EPS. Must
Return on Investment

ROI higher

Issue Debts.
to use trading on equity to increase
• Can to use trading on equity to increase
 Extent of Control
NEXT

PREVIOUS

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PAGE
• Company wants
• Company wants
EXIT

Retain Control
PGDHI(III)
ASSOCIATE((III), PGDHI(III)
(FINANCE)
PROFESSOR (FINANCE)

SENIOR(ST.JA)
BCM(BHSE), SENIOR(ST.JA)
MBA(BHU), ASSOCIATE((III),
Ray.
Charak Ray.

Issue Debts.
ASST. PROFESSOR
.Mr. Charak

BCM(BHSE),
.Mr.

• Equity may Reduce The Managements holding

• Equity may Reduce The Managements holding
MBA(BHU),
ASST.

in the company and may cause.

in the company and may cause.

Takeover Threat
80
 NEXT
Factors Affecting Financing
PREVIOUS
Decision
HOME
PAGE
C
C Cash Flow Position of the Business
EXIT

H
H Higher Fixed Operating Costs
PGDHI(III)
ASSOCIATE((III), PGDHI(III)

O
O Other Floatation Costs
(FINANCE)
PROFESSOR (FINANCE)

SENIOR(ST.JA)
BCM(BHSE), SENIOR(ST.JA)

II Issue of Cost
MBA(BHU), ASSOCIATE((III),
Ray.
Charak Ray.

C
C
ASST. PROFESSOR

Control Considerations
.Mr. Charak

BCM(BHSE),

E
E Extent of Risk
.Mr.

MBA(BHU),
ASST.

S State of Capital Markets

S

81
 NEXT

Cash Flow Position of the Business

Companyhas
hasStable
StableSales
Salesand
and
PREVIOUS

HOME • •Company
regularsInflow
Inflowofofcash.
cash.
PAGE

EXIT
regulars
PGDHI(III)
ASSOCIATE((III), PGDHI(III)
(FINANCE)
PROFESSOR (FINANCE)

SENIOR(ST.JA)
BCM(BHSE), SENIOR(ST.JA)

• •ItItcan
canRaise
RaiseDebts
Debtssosothat
thatfixed
fixed
MBA(BHU), ASSOCIATE((III),
Ray.
Charak Ray.

interestand
andrepayment
repaymentcan
canbebe
ASST. PROFESSOR

interest
.Mr. Charak

made.
BCM(BHSE),

made.
.Mr.

MBA(BHU),
ASST.

82
 NEXT

Higher Fixed Operating Costs

PREVIOUS

• Cost of the debt is the fixed interest

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PAGE
• Cost of the debt is the fixed interest
charges
EXIT
charges
PGDHI(III)
ASSOCIATE((III), PGDHI(III)
(FINANCE)
PROFESSOR (FINANCE)

• IfIfthe
the rate of interest on debts is higher
SENIOR(ST.JA)

•
BCM(BHSE), SENIOR(ST.JA)

rate of interest on debts is higher

debts can be avoided
MBA(BHU), ASSOCIATE((III),

debts can be avoided

Ray.
Charak Ray.
ASST. PROFESSOR
.Mr. Charak

BCM(BHSE),
.Mr.

• And equity can be raised or vice-versa

MBA(BHU),

• And equity can be raised or vice-versa

ASST.

83
 Other Floatation Costs
NEXT

PREVIOUS

HOME

• The costs incurs when company makes

PAGE

• The costs incurs when company makes

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a New Issue of either stocks or debentures
a New Issue of either stocks or debentures
• Costs of printing the certificates, paying
• Costs of printing the certificates, paying
PGDHI(III)
ASSOCIATE((III), PGDHI(III)

the underwriters, government fees etc.

the underwriters, government fees etc.
(FINANCE)
PROFESSOR (FINANCE)

SENIOR(ST.JA)
BCM(BHSE), SENIOR(ST.JA)
MBA(BHU), ASSOCIATE((III),

• Issue of equity involves High

Ray.
Charak Ray.

• Issue of equity involves

ASST. PROFESSOR

• flotation cost
.Mr. Charak

• flotation cost
BCM(BHSE),
.Mr.

• Issue of debenture involves

MBA(BHU),
ASST.

• Issue of debenture involves

• flotation cost Low
• flotation cost
84
 NEXT
Extent of Control
PREVIOUS

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PAGE
• Company wants
• Company wants
EXIT
Retain Control
PGDHI(III)
ASSOCIATE((III), PGDHI(III)
(FINANCE)

Issue Debts.
PROFESSOR (FINANCE)

SENIOR(ST.JA)
BCM(BHSE), SENIOR(ST.JA)
MBA(BHU), ASSOCIATE((III),
Ray.
Charak Ray.

• Equity may Reduce The Managements holding

• Equity may Reduce The Managements holding
ASST. PROFESSOR
.Mr. Charak

in the company and may cause.

in the company and may cause.
BCM(BHSE),
.Mr.

MBA(BHU),
ASST.

• Takeover Threat
•
85
 Extent of Risk
NEXT

DebtIncreases
Increasesthethefinancial
financialrisk
risktoto
PREVIOUS

HOME • •Debt
meetFixed
Fixedinterest
interestpayment,
payment,and
and
PAGE

meet
EXIT
Repaymentobligations.
Repayment obligations.
PGDHI(III)
ASSOCIATE((III), PGDHI(III)
(FINANCE)
PROFESSOR (FINANCE)

SENIOR(ST.JA)
BCM(BHSE), SENIOR(ST.JA)
MBA(BHU), ASSOCIATE((III),
Ray.
Charak Ray.

•
• IfIfa abusiness
businessrisk
riskisisLower,
Lower,its
itscapacity
capacity
ASST. PROFESSOR
.Mr. Charak

totouse
useDebt
Debtisishigher
higherandandvice-versa.
vice-versa.
BCM(BHSE),
.Mr.

MBA(BHU),
ASST.

86
 NEXT

State of capital Market

PREVIOUS

HOME
PAGE

EXIT
• During depression(earning During boom
are low) investors are period(high learning),
cautious and do not want
equity shares are
to take risk.
PGDHI(III)
ASSOCIATE((III), PGDHI(III)

more easily sold even

• They prefer investment in at a higher price.
(FINANCE)
PROFESSOR (FINANCE)

SENIOR(ST.JA)
BCM(BHSE), SENIOR(ST.JA)

Debts as the risk is Less

MBA(BHU), ASSOCIATE((III),
Ray.
Charak Ray.
ASST. PROFESSOR
.Mr. Charak

BCM(BHSE),
.Mr.

MBA(BHU),
ASST.

87
 .Mr.
.Mr. Charak Ray.
Charak Ray.
ASST.
ASST. PROFESSOR (FINANCE)
PROFESSOR (FINANCE)

EXIT
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88
MBA(BHU),
MBA(BHU), ASSOCIATE((III), PGDHI(III)
ASSOCIATE((III), PGDHI(III)
SENIOR(ST.JA) PREVIOUS
BCM(BHSE),
BCM(BHSE), SENIOR(ST.JA)

Dividend

shareholders.
Dividend Decision

• Portion of profit which is Distributed to

 NEXT
Profits
PREVIOUS

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PAGE
Dividends
EXIT
PGDHI(III)
ASSOCIATE((III), PGDHI(III)

How much of the profit earned by company (after

(FINANCE)
PROFESSOR (FINANCE)

SENIOR(ST.JA)
BCM(BHSE), SENIOR(ST.JA)

paying tax) is to be Distributed to the

MBA(BHU), ASSOCIATE((III),

shareholders
Ray.
Charak Ray.
ASST. PROFESSOR
.Mr. Charak

BCM(BHSE),
.Mr.

How much should be Retained in the business for

MBA(BHU),
ASST.

meeting the Future Investment requirements.

89
 .Mr.
.Mr. Charak Ray.
Charak Ray.
ASST.
ASST. PROFESSOR (FINANCE)
PROFESSOR (FINANCE)

EXIT
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90
MBA(BHU),
MBA(BHU), ASSOCIATE((III), PGDHI(III)
ASSOCIATE((III), PGDHI(III)
SENIOR(ST.JA) PREVIOUS
BCM(BHSE),
BCM(BHSE), SENIOR(ST.JA)

Factor Affecting
Dividend Decision
 NEXT L
L Legal constraints
PREVIOUS

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A
A Access to capital market
PAGE

S
S Stock market reaction
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T
T Taxation policy
PGDHI(III)
ASSOCIATE((III), PGDHI(III)
(FINANCE)
PROFESSOR (FINANCE)

SENIOR(ST.JA)
BCM(BHSE), SENIOR(ST.JA)

S
S Shareholder preference
MBA(BHU), ASSOCIATE((III),
Ray.
Charak Ray.

C Contractual constraints
ASST. PROFESSOR

C
.Mr. Charak

BCM(BHSE),

O Opportunity of growth
.Mr.

O
MBA(BHU),
ASST.

P
P Position of cash flow

E
E Earning and stability of earning
91
 NEXT

Legal Constraints
PREVIOUS

HOME
PAGE
• Certain provisions of the
EXIT
• Company’s act 1956,
• SEBI guidelines,
PGDHI(III)
ASSOCIATE((III), PGDHI(III)

• Stock exchange
(FINANCE)
PROFESSOR (FINANCE)

SENIOR(ST.JA)
BCM(BHSE), SENIOR(ST.JA)
MBA(BHU), ASSOCIATE((III),
Ray.
Charak Ray.
ASST. PROFESSOR
.Mr. Charak

Place restrictions
BCM(BHSE),
.Mr.

• On Giving dividend.
MBA(BHU),
ASST.

• These must be consider while

declaring the dividends

92
 NEXT
Access to capital market/Ability to borrow
PREVIOUS

• Well established and large firms have

HOME
PAGE

EXIT better access to the capital market

PGDHI(III)
ASSOCIATE((III), PGDHI(III)

• Can pay higher dividend

(FINANCE)
PROFESSOR (FINANCE)

SENIOR(ST.JA)
BCM(BHSE), SENIOR(ST.JA)
MBA(BHU), ASSOCIATE((III),
Ray.
Charak Ray.
ASST. PROFESSOR

• New and small companies find difficult to

.Mr. Charak

borrow funds from the external sources

BCM(BHSE),
.Mr.

• May pay less dividend

MBA(BHU),
ASST.

93
 .Mr.
.Mr. Charak Ray.
Charak Ray.
ASST.
ASST. PROFESSOR (FINANCE)
PROFESSOR (FINANCE)

EXIT
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94
MBA(BHU),
MBA(BHU), ASSOCIATE((III), PGDHI(III)
ASSOCIATE((III), PGDHI(III)
SENIOR(ST.JA) PREVIOUS
BCM(BHSE),
BCM(BHSE), SENIOR(ST.JA)

dividend.
Positively
Stock Market Reaction

Declaration of dividend

Or may Negatively Respond to it

May be consider while paying the

As a good news and Stock Prices React
 .Mr.
.Mr. Charak Ray.
Charak Ray.
ASST.
ASST. PROFESSOR (FINANCE)
PROFESSOR (FINANCE)

EXIT
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95
MBA(BHU),
MBA(BHU), ASSOCIATE((III), PGDHI(III)
ASSOCIATE((III), PGDHI(III)
SENIOR(ST.JA) PREVIOUS
BCM(BHSE),
BCM(BHSE), SENIOR(ST.JA)

better to
Taxation Policy

Pay Less Dividends.

If tax on dividend is higher it would be
 NEXT

PREVIOUS
Shareholder Preference
HOME
PAGE

EXIT
• Large Investors (shareholder)
wants growth in the companies may
not prefer dividend for some time.
PGDHI(III)
ASSOCIATE((III), PGDHI(III)

No Dividend
(FINANCE)
PROFESSOR (FINANCE)

SENIOR(ST.JA)
BCM(BHSE), SENIOR(ST.JA)
MBA(BHU), ASSOCIATE((III),
Ray.
Charak Ray.
ASST. PROFESSOR
.Mr. Charak

• Small investor ( shareholders)

BCM(BHSE),

may prefer regular dividend as

.Mr.

regular Income from their

MBA(BHU),
ASST.

investments.
Pay us dividend
96
 Contractual Constraints
NEXT

PREVIOUS

HOME

• While giving loans to a company

PAGE

EXIT
,the lender may impose
PGDHI(III)
ASSOCIATE((III), PGDHI(III)

• Restrictions on the payment of

(FINANCE)

dividends for certain years.

PROFESSOR (FINANCE)

SENIOR(ST.JA)
BCM(BHSE), SENIOR(ST.JA)
MBA(BHU), ASSOCIATE((III),
Ray.
Charak Ray.
ASST. PROFESSOR
.Mr. Charak

BCM(BHSE),

• And as per terms company does

.Mr.

Not Pay the dividends for that

MBA(BHU),
ASST.

period.

97
 NEXT
Opportunity Of Growth
PREVIOUS

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PAGE
• Companies having good
EXIT
PGDHI(III)

Growth Opportunities
ASSOCIATE((III), PGDHI(III)

Growth Opportunities
(FINANCE)
PROFESSOR (FINANCE)

SENIOR(ST.JA)
BCM(BHSE), SENIOR(ST.JA)

• Keep more money out of their.

MBA(BHU), ASSOCIATE((III),
Ray.
Charak Ray.
ASST. PROFESSOR
.Mr. Charak

BCM(BHSE),
.Mr.

Reserves
Reserves
MBA(BHU),
ASST.

• So as to make the required

investment may pay
Less Dividend
98 Less Dividend
 NEXT Position Of Cash Flow
PREVIOUS

HOME • Dividends involve an.

PAGE

EXIT

Outflow Of Cash
PGDHI(III)
ASSOCIATE((III), PGDHI(III)

• A company may be Profitable but leads

(FINANCE)
PROFESSOR (FINANCE)

SENIOR(ST.JA)
BCM(BHSE), SENIOR(ST.JA)

to Outflow of cash(capital expenditure)

MBA(BHU), ASSOCIATE((III),
Ray.
Charak Ray.
ASST. PROFESSOR
.Mr. Charak

BCM(BHSE),

Purchase of building
.Mr.

MBA(BHU),
ASST.

• Company may Not Able to pay dividend in

spite of profits.

99
 .Mr.
.Mr. Charak Ray.
Charak Ray.
ASST.
ASST. PROFESSOR (FINANCE)
PROFESSOR (FINANCE)

EXIT
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10
HOME
MBA(BHU),
MBA(BHU), ASSOCIATE((III), PGDHI(III)
ASSOCIATE((III), PGDHI(III)
SENIOR(ST.JA) PREVIOUS
BCM(BHSE),
BCM(BHSE), SENIOR(ST.JA)
Earning

Earning

only pay higher dividends

• Companies having sufficient

• Out of current and previous years can

 .Mr.
.Mr. Charak Ray.
Charak Ray.
ASST.
ASST. PROFESSOR (FINANCE)
PROFESSOR (FINANCE)

EXIT
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10
HOME
MBA(BHU),
MBA(BHU), ASSOCIATE((III), PGDHI(III)
ASSOCIATE((III), PGDHI(III)
SENIOR(ST.JA) PREVIOUS
BCM(BHSE),
BCM(BHSE), SENIOR(ST.JA)

• Companies having
Stability Of Earning

Stable earning

Irregular earning
• May pay More Dividend than those having an .
 .Mr.
.Mr. Charak Ray.
Charak Ray.
ASST.
ASST. PROFESSOR (FINANCE)
PROFESSOR (FINANCE)

EXIT
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10
HOME
MBA(BHU),
MBA(BHU), ASSOCIATE((III), PGDHI(III)
ASSOCIATE((III), PGDHI(III)
SENIOR(ST.JA) PREVIOUS
BCM(BHSE),
BCM(BHSE), SENIOR(ST.JA)

funds
fund requirement

For a given period

Process of estimating the

And specifying the sources of

Financial Planning
 NEXT
Objectives Of Financial Planning
PREVIOUS

Ensure Availability Of Funds

HOME
PAGE

Estimation of the funds required for

Estimation of the funds required for
EXIT

different purposes such as for the

different purposes such as for the
purchase of long-term assets or to meet
purchase of long-term assets or to meet
PGDHI(III)
ASSOCIATE((III), PGDHI(III)

day to-day expenses

day to-day expenses
(FINANCE)
PROFESSOR (FINANCE)

SENIOR(ST.JA)
BCM(BHSE), SENIOR(ST.JA)
MBA(BHU), ASSOCIATE((III),
Ray.
Charak Ray.
ASST. PROFESSOR
.Mr. Charak

Effective Utilization Of Funds

BCM(BHSE),
.Mr.

Put the best possible use of financial

Put the best possible use of financial
MBA(BHU),
ASST.

resources so that funds are not left

resources so that funds are not left
idle
idle
10
 Importance Of Financial
NEXT

PREVIOUS
Planning
HOME
PAGE

F
EXIT
Finance In Right Projects
PGDHI(III)

A Avoiding Business Shocks And

ASSOCIATE((III), PGDHI(III)

Surprises.
(FINANCE)
PROFESSOR (FINANCE)

SENIOR(ST.JA)
BCM(BHSE), SENIOR(ST.JA)
MBA(BHU), ASSOCIATE((III),

L
Ray.
Charak Ray.

Link Present With The Future.

ASST. PROFESSOR
.Mr. Charak

BCM(BHSE),

S Setting Up The Most Appropriate

.Mr.

Capital Structure
MBA(BHU),
ASST.

E Estimating Of Optimum Funds

10
 Finance In Right Projects
NEXT

PREVIOUS

HOME
PAGE
Proposes how the funds are to be allocated
Proposes how the funds are to be allocated
for various projects
for various projects
EXIT

by comparing their
by comparing their
PGDHI(III)
ASSOCIATE((III), PGDHI(III)
(FINANCE)

advantages and
PROFESSOR (FINANCE)

SENIOR(ST.JA)
BCM(BHSE), SENIOR(ST.JA)

advantages and
risks associated
MBA(BHU), ASSOCIATE((III),

risks associated
Ray.
Charak Ray.
ASST. PROFESSOR
.Mr. Charak

BCM(BHSE),
.Mr.

MBA(BHU),
ASST.

10
 NEXT

Avoiding Business Shocks And Surprises

PREVIOUS

Anticipating the financial requirement to avoid

HOME
PAGE
Anticipating the financial requirement to avoid
EXIT

Business shocks(reduction in sales and profits)

Business shocks(reduction in sales and profits)
PGDHI(III)
ASSOCIATE((III), PGDHI(III)
(FINANCE)
PROFESSOR (FINANCE)

SENIOR(ST.JA)
BCM(BHSE), SENIOR(ST.JA)
MBA(BHU), ASSOCIATE((III),
Ray.
Charak Ray.
ASST. PROFESSOR
.Mr. Charak

BCM(BHSE),
.Mr.

and helps the company in preparing for the

and helps the company in preparing for the
MBA(BHU),
ASST.

future
future

10
 .Mr.
.Mr. Charak Ray.
Charak Ray.
ASST.
ASST. PROFESSOR (FINANCE)
PROFESSOR (FINANCE)

EXIT
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10
HOME
MBA(BHU),
MBA(BHU), ASSOCIATE((III), PGDHI(III)
ASSOCIATE((III), PGDHI(III)
SENIOR(ST.JA) PREVIOUS
BCM(BHSE),
BCM(BHSE), SENIOR(ST.JA)
Link Present With The Future

growth plans of the company

growth plans of the company
Anticipates the future sales and
Anticipates the future sales and
 NEXT

Setting Up The Most Appropriate Capital Structure

PREVIOUS

Preparing most appropriate capital structure

HOME
PAGE

Preparing most appropriate capital structure

EXIT

by mixing the right combination of

by mixing the right combination of
PGDHI(III)
ASSOCIATE((III), PGDHI(III)
(FINANCE)
PROFESSOR (FINANCE)

SENIOR(ST.JA)
BCM(BHSE), SENIOR(ST.JA)
MBA(BHU), ASSOCIATE((III),
Ray.
Charak Ray.

Debts
Debts
ASST. PROFESSOR
.Mr. Charak

BCM(BHSE),
.Mr.

MBA(BHU),
ASST.

equity
equity

10
 .Mr.
.Mr. Charak Ray.
Charak Ray.
ASST.
ASST. PROFESSOR (FINANCE)
PROFESSOR (FINANCE)

EXIT
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10
HOME
MBA(BHU),
MBA(BHU), ASSOCIATE((III), PGDHI(III)
ASSOCIATE((III), PGDHI(III)
SENIOR(ST.JA) PREVIOUS
BCM(BHSE),
BCM(BHSE), SENIOR(ST.JA)

exact

totoavoid
Estimates
Estimatesthe
the

avoidwastage
exactrequirement

wastageofoffunds
funds
requirementofoffunds
Estimating Of Optimum Funds

funds
 NEXT
Role of financial management or financial management have
PREVIOUS direct bearing on the financial health of a business
HOME
PAGE
A
Amount of long term and short term financing.
EXIT

C
Composition of Current Assets
PGDHI(III)
ASSOCIATE((III), PGDHI(III)
(FINANCE)
PROFESSOR (FINANCE)

SENIOR(ST.JA)
BCM(BHSE), SENIOR(ST.JA)

I
I
Items in the Profit and Loss Account
MBA(BHU), ASSOCIATE((III),
Ray.
Charak Ray.
ASST. PROFESSOR
.Mr. Charak

D
BCM(BHSE),

Division of long term financing into debt, equity

.Mr.

MBA(BHU),
ASST.

S
Size as well as the composition of Fixed Assets

11
 Amount of long term and short term financing.
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Short term and long term sources
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Short term and long term sources
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affects the liquidity and profitability of the

affects the liquidity and profitability of the
PGDHI(III)
ASSOCIATE((III), PGDHI(III)
(FINANCE)
PROFESSOR (FINANCE)

SENIOR(ST.JA)
BCM(BHSE), SENIOR(ST.JA)
MBA(BHU), ASSOCIATE((III),
Ray.
Charak Ray.

business which may affect profit and loss

ASST. PROFESSOR
.Mr. Charak

business which may affect profit and loss

account.
BCM(BHSE),

account.
.Mr.

MBA(BHU),
ASST.

11
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Composition of Current Assets
Working capital decisions about
Working capital decisions about
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credit policy,
EXIT credit policy,

inventory management
PGDHI(III)
ASSOCIATE((III), PGDHI(III)

inventory management
(FINANCE)
PROFESSOR (FINANCE)

SENIOR(ST.JA)
BCM(BHSE), SENIOR(ST.JA)
MBA(BHU), ASSOCIATE((III),
Ray.
Charak Ray.
ASST. PROFESSOR
.Mr. Charak

affects the profitability and liquidity of the

affects the profitability and liquidity of the
BCM(BHSE),

business
.Mr.

business
MBA(BHU),
ASST.

11
 Items in the Profit and Loss Account
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Higher interest expense and higher payment
Higher interest expense and higher payment
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of dividends
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of dividends
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PGDHI(III)
ASSOCIATE((III), PGDHI(III)

affect the profit and loss account of company

(FINANCE)

affect the profit and loss account of company

PROFESSOR (FINANCE)

SENIOR(ST.JA)
BCM(BHSE), SENIOR(ST.JA)

which is taken under financial decision

which is taken under financial decision
MBA(BHU), ASSOCIATE((III),
Ray.
Charak Ray.
ASST. PROFESSOR
.Mr. Charak

BCM(BHSE),
.Mr.

MBA(BHU),
ASST.

11
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Division of long term financing into debt, equity
Debt and equity increased or decrease
Debt and equity increased or decrease
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the risk reward return which

the risk reward return which
PGDHI(III)
ASSOCIATE((III), PGDHI(III)
(FINANCE)
PROFESSOR (FINANCE)

SENIOR(ST.JA)
BCM(BHSE), SENIOR(ST.JA)
MBA(BHU), ASSOCIATE((III),
Ray.
Charak Ray.
ASST. PROFESSOR
.Mr. Charak

BCM(BHSE),
.Mr.

may affect its balance sheet is taken under

MBA(BHU),
ASST.

may affect its balance sheet is taken under

financial decision
financial decision

11