Ind AS 102, Share-based Payment, provides guidance on the accounting treatment for transactions in which an entity issues equity instruments as part of its employee compensation arrangements or in exchange for goods or services. Under Ind AS 102, share-based payment transactions are recognized as expenses in the financial statements based on their fair value at …
Ind AS 101, First-time Adoption of Indian Accounting Standards, provides guidance on how entities should prepare and present their financial statements when transitioning from previous accounting practices to Indian Accounting Standards (Ind AS). Under Ind AS 101, entities are required to apply Ind AS retrospectively, meaning that financial statements must be restated as if Ind …
Ind AS 101 First-time Adoption of Indian Accounting Standards: Read More »
Ind AS 41, Agriculture, provides guidance on the recognition, measurement, and disclosure of agricultural activities and agricultural produce. The standard applies to entities that engage in agricultural activities, which involve the management of biological transformation and the harvest of biological assets for sale or for conversion into agricultural produce. Under Ind AS 41, biological assets …
Ind AS 38, Intangible Assets, provides guidance on the recognition, measurement, and disclosure of intangible assets. Intangible assets are identifiable non-monetary assets without physical substance that are controlled by an entity and have the potential to generate future economic benefits. Under Ind AS 38, an intangible asset is recognized if it meets certain criteria, including …
Ind AS 40, Investment Property, outlines the accounting treatment and disclosure requirements for investment properties, which are properties held to earn rental income, capital appreciation, or both. The standard applies to all entities that hold investment properties, regardless of whether the properties are owner-occupied or leased out to others. Under Ind AS 40, investment properties …
Ind AS 36, Impairment of Assets, provides guidelines for assessing and recognizing impairment losses on assets. The standard applies to all assets, except for certain financial assets and assets covered by other Ind AS standards. Under Ind AS 36, entities are required to test their assets for impairment whenever there is an indication of potential …
Ind AS 34, Interim Financial Reporting, sets out the requirements for preparing and presenting interim financial statements, which provide condensed financial information for an entity’s financial performance, position, and cash flows during a shorter reporting period such as a quarter or half-year. The standard requires entities to prepare interim financial statements that include, at a …
Ind AS 33, Earnings per Share (EPS), sets out the principles for calculating and presenting earnings per share, which is an important financial indicator used by investors and analysts to assess the profitability of a company on a per-share basis. The standard requires entities to calculate basic EPS and, if applicable, diluted EPS. Basic EPS …
Ind AS 24, Related Party Disclosures, establishes the requirements for disclosing information about relationships and transactions with related parties. The standard aims to enhance transparency and ensure that financial statements provide relevant and reliable information about an entity’s relationships with related parties and the potential impact of these relationships on its financial position and performance. …
Ind AS 23, Borrowing Costs, provides guidance on the accounting treatment of borrowing costs incurred by an entity. The standard aims to ensure that borrowing costs directly attributable to the acquisition, construction, or production of qualifying assets are appropriately capitalized. According to Ind AS 23, borrowing costs that are directly attributable to the acquisition, construction, …
Ind AS 8, Accounting Policies, Changes in Accounting Estimates, and Errors, provides guidance on the selection and application of accounting policies, as well as the treatment of changes in accounting estimates and correction of errors. The standard aims to enhance the reliability and comparability of financial statements by ensuring consistent and appropriate accounting practices. Ind …
Ind AS 8 Accounting Policies, Changes in Accounting Read More »
Ind AS 7, Statement of Cash Flows, provides guidance on the presentation and disclosure of cash flows from operating, investing, and financing activities in the financial statements. The standard aims to enhance the usefulness and comparability of financial statements by providing users with information about an entity’s liquidity, solvency, and financial adaptability. Ind AS 7 …
Ind AS 2, Inventories, provides guidance on the accounting treatment and valuation of inventories. It applies to all entities that hold inventories for sale, production, or use in the ordinary course of business. The standard defines inventories as assets held for the purpose of being sold, used in production, or consumed in the process of …
Ind AS 1, Presentation of Financial Statements, sets the guidelines for the preparation and presentation of financial statements in accordance with the Indian Accounting Standards. This standard serves as a comprehensive framework to ensure that financial statements provide relevant, reliable, comparable, and understandable information to users. Ind AS 1 begins by establishing the overall framework …
An increase in accounts receivable could be driven by various factors within a company’s operations, financial management, or external environment. Here are some possible drivers of an increase in accounts receivable: Sales Growth: If the company is experiencing higher sales or increased business activity, it may lead to a larger volume of credit sales and …
If accounts receivable are going up, what could be the possible driver? Read More »
Forecasting costs involves estimating future expenditures that a company will incur as part of its operations. This process is essential for budgeting, financial planning, and decision-making. Here’s a detailed approach to forecasting costs, along with examples of various types of costs: 1. Historical Data Analysis: Gather historical cost data over a defined period. Analyze trends, …
A “good” budget is one that serves as an effective financial planning and management tool, aligns with an organization’s goals, and provides a clear roadmap for allocating resources. It should help the organization achieve its objectives, manage its finances efficiently, and adapt to changing circumstances. Here are the key attributes that make a budget “good”: …
Modeling working capital for a company involves projecting and managing the company’s short-term assets and liabilities, such as accounts receivable, accounts payable, and inventory. The goal is to ensure that the company has sufficient liquidity to cover its operational needs. Here’s a step-by-step approach to modeling working capital: Understand Components: Familiarize yourself with the key …
The hallmarks of a good FP&A financial model: Accuracy and Reliability: The model should produce accurate and reliable results. It should be free from errors and able to handle complex calculations while maintaining data integrity. Flexibility and Scalability: The model should be adaptable to changes in business conditions, assumptions, and scenarios. It should easily accommodate …
What are the features of a good FP&A financial model? Read More »
Note: Students are advised to go through the Financial Statements and Annual reports of the specific company beforehand. Let’s start with the Profit and Loss (P&L) statement, also known as the income statement. The P&L statement provides a summary of the company’s revenues, expenses, and profits over a specific period, typically a quarter or a …
Can you walk us through the P&L and Balance sheet of our company? Read More »
Revenue Forecasting for Telecom Industry: Key Drivers/Metrics: Subscriber Growth: The number of new subscribers and the churn rate (subscriber attrition) directly impact revenue. Average Revenue Per User (ARPU): Calculated by dividing total revenue by the number of subscribers, ARPU reflects the average revenue generated from each customer. Data Usage: As data consumption increases, revenue from …
Variance commentaries are essential for explaining the reasons behind deviations between actual financial results and the budget or forecast. They help stakeholders understand the factors contributing to performance variations. Some common types of variance commentaries include: Volume Variance Commentary: This type of commentary explains variances resulting from differences in sales volumes or production quantities. It …
A general answer and a structured answer are given below – General Answer: Improving margins and profits is an important goal for any business, and there are several strategies that can be implemented to achieve this. Increase sales: One of the most straightforward ways to improve margins and profits is to increase sales. This can …
How can you improve margins/profits? Give an example. Read More »
Variance analysis is a technique used in financial and managerial accounting to analyze the difference between planned or budgeted figures and actual performance. It helps organizations understand the reasons behind variations and deviations from expected outcomes, allowing them to make informed decisions and take corrective actions. Variance analysis is widely used to assess performance, identify …
What is Variance analysis and some typical variances Read More »
ERP systems that are commonly used for budgeting and forecasting by organizations: SAP ERP: SAP offers a range of modules, including SAP Financials and SAP Business Planning and Consolidation (BPC), which can be used for budgeting and forecasting. Oracle ERP Cloud: Oracle provides cloud-based ERP solutions, including modules for financial planning and budgeting. Microsoft Dynamics …
Mention the ERP you have used in budgeting and forecasting? Read More »
Past data is usually the best starting point for both forecasting and budgeting. An exception is zero based budgeting (where past data is not used). While building a budget, following steps can be followed: a) Reviewing and understanding all the required inputs for your budget. b) Analyzing previous budgets and other historical data. This will …
Budgeting – Budgeting creates a baseline to compare actual results to determine how the results vary from the expected performance. It is setting a target. It is more relevant for items that are under your control such as costs Forecasting- Forecasting estimates a company’s future outcomes. Financial forecasting allows management teams to anticipate …
RTGS (Real Time Gross Settlement) and NEFT (National Electronic Funds Transfer) are both electronic payment systems used in India, but they differ in terms of transaction processing, settlement timings, and transaction limits. Here are the key differences between RTGS and NEFT: Transaction Processing: RTGS enables real-time and immediate transfer of funds on a gross basis, …
Accounts payable (AP) and accounts receivable (AR) are two types of financial transactions that businesses engage in. Accounts payable (AP) represents the amount of money a company owes to its suppliers or vendors for the goods or services they have provided. In other words, it is the amount of money that a business owes to …
What is the difference between accounts payable and accounts receivable? Read More »
Accruals refer to expenses or revenues that have been recognized in the accounting records before they have been paid or received, respectively. They are recorded to reflect the economic activity of a business accurately, even if the cash transactions have not yet taken place. There are two types of accruals: Accrued expenses (Accrued liabilities): These …
Prepaid expenses are expenses that have been paid in advance but have not yet been used or consumed. They represent costs that are paid for upfront but will be recognized as expenses over a future period. Examples of prepaid expenses include: Rent: If a company pays rent for the next six months in advance, it …
The principles of accounting are the basic guidelines and concepts that underlie the preparation and presentation of financial statements. These principles include the accrual basis of accounting, the consistency principle, the materiality principle, the going concern principle, the entity principle, the historical cost principle, the matching principle, the full disclosure principle, the conservatism principle, and …
Accounting concepts are ideas, assumptions and conditions based on which a business entity records its financial transactions and organises its bookkeeping. It helps a business interpret and integrate a financial transaction into the accounting process. There are several accounting concepts that are important to understand: Entity concept: This concept states that the business entity should …
Clarify from the interviewer what they mean. Are they asking you for specific directions of Ind AS 108, or a general discussion on policies. If the former, check the detailed answer on Ind AS 108. Else use this answer. As per Ind AS 108, the accounting policies used for segment reporting should be consistent with …
What accounting policies are used for segment reporting? Read More »
Impairment of an asset occurs when the carrying amount of an asset on the balance sheet exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and its value in use. Impairment indicates that the asset’s value has declined significantly and may not be recoverable in …
What is impairment of an asset? How is it treated in a accounting? Read More »
Accounting conventions are standards, customs or guidelines associated with the practical application of accounting principles, and are aimed at bringing about consistency in the maintenance of accounts. Accounting conventions are generally accepted principles and are not considered legally binding. Here are some common accounting conventions along with examples: Conservatism Convention: This convention suggests that accountants …
Cash equivalents are highly liquid short-term investments that are readily convertible into known amounts of cash and have a very short maturity period, typically three months or less from the date of acquisition. They are considered to be highly secure and easily marketable, allowing companies to maintain liquidity and meet short-term cash needs. The technical …
The effective tax rate (ETR) is a financial metric that represents the average rate at which a company’s pre-tax profits are taxed. It provides insight into the company’s overall tax liability as a percentage of its taxable income. The effective tax rate takes into account various tax incentives, deductions, credits, and other factors that impact …
Securities Transaction Tax (STT) is a type of tax levied by the Indian government on the purchase or sale of securities such as stocks, mutual funds, and futures and options contracts traded on recognized stock exchanges in India. The tax is collected by the stock exchanges and helps to fund the government’s social welfare programs. …
Financial risk management is the process of identifying, assessing, and managing various types of financial risks that a company may face in its operations. Financial risks can arise from a variety of sources such as market fluctuations, credit risks, liquidity risks, interest rate risks, currency risks, and commodity price risks. Effective financial risk management involves …
NIFTY and SENSEX are stock market indices in India. NIFTY represents the National Stock Exchange of India’s 50 largest companies by market capitalization, while SENSEX represents the Bombay Stock Exchange’s 30 largest and most actively traded companies. They are used as barometers to measure the overall performance of the Indian stock market and provide investors …
The differences between EBIT and EBITDA: 1.EBIT stands for Earnings Before Interest and Taxes, while EBITDA stands for Earnings Before Interest, Taxes, Depreciation, and Amortization. 2.EBIT is calculated by subtracting the company’s operating expenses from its revenue, while EBITDA is calculated by adding back depreciation and amortization expenses to EBIT. 3.EBIT represents the amount of …
What is difference between EBIT and EBITDA? Can EBIT be greater than EBITDA? Read More »
The inventory turnover ratio is a financial metric that shows how efficiently a company is managing its inventory. It measures the number of times a company sells and replaces its inventory during a given period, typically one year. The ratio is calculated by dividing the cost of goods sold by the average inventory for the …
The process involves the following steps: 1.Identify the subsidiaries to be included in the consolidation and gather their financial statements. 2.Adjust the subsidiary financial statements to conform to the accounting policies of the parent company, such as depreciation methods, inventory valuation, and revenue recognition. 3.Eliminate any intercompany transactions and balances between the parent and subsidiary …
How to consolidate a subsidiary while preparing consolidated financial statement? Read More »
To make a reconciliation statement, follow these general steps: Identify the items to be reconciled: Determine the two sets of data or accounts that need to be reconciled. For example, it could be bank statements, intercompany balances, or accounts receivable/payable. Gather the relevant data: Collect the necessary information, such as the balances or transactions for …
The first step of taking a loan is to assess the need for borrowing and determine the amount needed. This involves evaluating the purpose of the loan and identifying the specific financial requirements to achieve the intended goal. Once the amount needed has been determined, the borrower should assess their ability to repay the loan, …
Currency swap is a financial contract between two parties to exchange principal and interest payments denominated in two different currencies. In a currency swap, each party borrows and lends in a different currency. The purpose of a currency swap is to manage currency risk and reduce the cost of borrowing in a foreign currency. Interest …
The classification of deferred tax liability as current or non-current depends on the timing of the reversal of the underlying temporary differences that gave rise to the deferred tax liability. If the underlying temporary differences are expected to reverse within 12 months from the end of the reporting period, then the deferred tax liability is …
Deferred tax liability is current or non current in nature? Read More »
Ind AS 103 defines control as the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. Examples of control include: 1.Ownership of more than 50% of voting rights: When an entity owns more than 50% of the voting rights in another entity, it is presumed …
How control has been defined under Ind As 103. Explain by giving examples? Read More »
Yes, LLP (Limited Liability Partnership) can be a subsidiary under Ind AS, provided that it meets the definition of a subsidiary as per Ind AS 110. Ind AS 110 defines a subsidiary as an entity that is controlled by another entity (the parent), which is a shareholder or group of shareholders who have the power …
Under Ind AS 23, borrowing costs that are directly attributable to the acquisition, construction, or production of a qualifying asset are required to be capitalized as part of the cost of that asset. A qualifying asset is an asset that takes a substantial period of time to get ready for its intended use or sale. …
Conditions for recognizing revenue over time: 1.The customer simultaneously receives and consumes the benefits of the seller’s performance. 2.The seller’s performance creates or enhances an asset that the customer controls. 3.The seller can measure the progress of the performance obligation towards completion. 4.The customer consumes the benefits of the seller’s performance as it is performed. …
As per Ind AS 115, Revenue from Contracts with Customers, volume-based discounts should be accounted for as variable consideration, which means that the discount should be estimated at the time of sale based on the expected volume of goods or services to be purchased by the customer. The expected discount amount should then be subtracted …
What is the treatment of volume based discount as per Ind As 115? Read More »
Ind AS 2, “Inventories,” provides guidance on the valuation of inventory in an entity’s financial statements. Inventory, also known as stock, refers to goods held by a company for the purpose of resale, production, or supply in the normal course of business. The standard outlines how to determine the cost of inventory and the subsequent …
Ind As 2 : How Inventory is valued as per Ind AS 2 ? Read More »
The concept of Component Accounting under Ind AS 16, “Property, Plant and Equipment,” allows entities to account for significant components of an item of property, plant, and equipment separately when those components have different useful lives. This approach recognizes that certain assets are made up of distinct parts or components that may have varying economic …
Ind AS 16, “Property, Plant and Equipment,” is an accounting standard that provides guidance on the recognition, measurement, depreciation, and disclosure of property, plant, and equipment in an entity’s financial statements. The “deemed cost exemption” is a provision in Ind AS 16 that allows entities to measure an item of property, plant, and equipment at …
Ind AS 16 : What is the Deemed cost exemption as per Ind AS 16 ? Read More »
To record a share-based payment transaction under IndAS 102 in your books: Determine Fair Value: Calculate the fair value of the equity instruments being granted at the grant date. This is usually done using valuation methods like the Black-Scholes model for options or other appropriate techniques. Recognize Expense: Recognize the fair value of the equity …
Commercial bank: accepts deposits from customers (retail depositors, commercial depositors etc. and makes consumer and commercial loans using these deposits. It may also offer anciliary services like credit cards Investment bank: acts as an intermediary between companies and investors. Does not accept deposits, but rather sells investments, advises on M&A, etc. Loans and debt/equity issues …
What is the difference between commercial and investment banking? Read More »
The Cost of Equity is always higher than Cost of Debt. Note that we have used the word ALWAYS not USUALLY. This is because for any given company, equity will always be riskier than debt, and hence costlier. Risk is the main reason why equity is more expensive – the equity investor faces an uncertainty …
Working capital is the amount of a company’s current assets minus the amount of its current liabilities. The adequacy of a company’s working capital depends on the industry in which it operates, its relationship with its customers and suppliers, its inventory levels and more. Working Capital and Net Working Capital are usually interchangeable – Current …
What is working capital and what is net working capital? Read More »
Profitability ratio: Profitability ratios measure a company’s ability to generate profits from its operations. 1.Gross Profit Margin = (Revenue – Cost of Goods Sold) / Revenue x 100% 2.Net Profit Margin = Net Profit / Revenue x 100% 3.Return on Equity = Net Income / Shareholders’ Equity x 100% Valuation ratio: Valuation ratios assess a …
Dividend models are used to estimate the value of a company’s stock based on its expected dividend payments. Two commonly used dividend models are the Dividend Discount Model (DDM) and the Gordon Growth Model (GGM). Dividend Discount Model (DDM): The DDM values a stock by discounting its expected future dividend payments to their present value. …
Note: This is assuming all transactions are in the same period. If Fire is in Year 1 and Recovery is in Year 2, impairment will be done in Year 1 For the sale of scrap and receivable from Insurance company the entry is Bank a/c Dr 10,000 Insurance Receivable/ Bank a/c Dr 30,000 Loss on …
Ther will be no direct impact in cash flow statement either in Investing activity or financing activity as there is no cash flow. However the tax sheid on depreciation which is added back to net income and it also impacts the tax paid with affects the balance of CFO. Favorite
Dividend should be declared based on future needs of the organisation. If the company has positive NPV projects available do not declare dividend, else do. Alternatives to distribution of dividend: Buy back of shares: This comes out with advantages such as a. When the growth potential is limited they use unused cash to buy back …
How much dividend should we declare? Is there an alternative? Read More »
It’s not enough to simply know the financial controller role. There are clear ways to be more efficient and effective in this position, and to move from simple data processing to trusted business partners. Here are some keys to doing this. a. Automate, automate, automate! As every accountant is well aware, recording financial transactions still …
Research is original and planned investigation undertaken with the prospect of gaining new scientific or technical knowledge and understanding. Development is the application of research findings or other knowledge to a plan or design for the production of new or substantially improved materials, devices, products, processes, systems or services before the start of commercial production …
The controller is intricately involved in the company accounting process. And in many cases, they will do a lot of accounting day to day. But in larger finance teams, there’s a clear distinction between the two. Accounting Accounting is the act of recording the company’s transaction data. This includes money coming both in and out …
This is another interesting dynamic. In smaller finance teams, the controller and CFO may even be the same person.The CFO is both the leader of the finance team and a member of the executive leadership. On the one hand, they have to ensure that the finance team is well run and that everyone has all …
The FC is a senior leader in the finance team. For this reason, it’s usually expected that job applications show significant experience in accounting and tax issues, plus the ability to guide others and take ownership of the company’s books.This requires more than simply a gift for numbers. Controllers need to be organized self-managers, with …
The term “narrow money” typically covers the most liquid forms of money, i.e. currency (banknotes and coins) as well as bank-account balances that can immediately be converted into currency or used for cashless payments (overnight deposits, checking accounts, etc). Broad Money is M3 M0 is the sum of Currency in Circulation, Bankers’ Deposits with RBI, …
Difference between broad money and narrow money? Read More »
A financial controller essentially is a company’s lead accountant. They oversee accounting activities and ensure that ledgers accurately reflect money coming in and out of the company. Strategic controllers also impact decision making, forecasting, and budgeting at the company level, based on accounting data. “A controller is responsible for the accounting and record keeping of …
What is a Controller in Finance? OR What is Finance Controller? Read More »
Generally, a period of 12 months is considered as a substantial period unless a shorter or longer period can be justified based on facts and circumstances of the case. Borrowing costs are capitalized in the books of accounts with the qualifying assets when it is certain that it will have future economic benefits. Favorite
CRR is a reserve maintained by banks with the RBI. It is a percentage of the banks’ deposits maintained in cash form. SLR is an obligatory reserve that commercial banks must maintain themselves. It is a percentage of commercial banks’ net demand and time liabilities, maintained as approved securities. These are defined liquid securities. Repurchase …
Each major part of an item of PPE with cost being significant in relation to total cost of the item, should be depreciated separately, even though it may not have different useful life, but may be grouped for determining depreciation charge. Component accounting requires a company to identify and depreciate significant components with different useful …
As per Ind AS 101, the deemed cost exemption is applicable to PPE as defined under Ind AS 16 and recognised as Fixed Assets in the financial statements at the transitional date irrespective of whether these were disclosed separately. Favorite
IAS 40 permits treatment of property interest held in an operating lease as investment property, if the definition of investment property is otherwise met and fair value model is applied. In such cases, the operating lease would be accounted as if it were a finance lease. Favorite
The Indian Accounting Standard (Ind AS) 19 aims to prescribe accounting and disclosure for employee benefits. It requires recognition of the liability by an entity when an employee provides services for employee benefits to be paid in the future, and recognition of expenses when the entity utilises the economic benefit arising from service given by …
• Detailed guidance available for accounting and disclosures of equity-settled and cash-settled transactions in Ind AS 102 • Ind AS 102 also covers share based payment transactions with non-employees as well. Favorite
What is Window Dressing? Window dressing is actions taken to improve the appearance of a company’s financial statements. Window dressing is particularly common when a business has a large number of shareholders, so that management can give the appearance of a well-run company to investors who probably do not have much day-to-day contact with the …
Sales to Related Parties Sale to fictitious entities Prepone booking of sales Recording Sales gross of massive discounts, and recording the discount as expense Sales done to uninterested parties asking them to do sales returns after the cut-off Favorite
Corporate Social Responsibility (CSR) implies a concept, whereby companies decide voluntarily to contribute to a better society and a cleaner environment – a concept, whereby the companies integrate social and other useful concerns in their business operations for the betterment of their stakeholders and society in general in a voluntary way. Basically, “Corporate Social Responsibility” …
An initial public offering (IPO) is the first time that the stock of a private company is offered to the public. (HDFC Standard life Insurance) (Biggest IPO – COAL INDIA – 15200cr) Book building is the process by which an underwriter attempts to determine at what price to offer an initial public offering (IPO) based …
Let’s assume three months, the goods were purchased in January of rupees 5 and February of rupees 10, in March it was all sold. Suppose we are following FIFO and there is an inflationary environment so we first sold the stock of rupees 5, and then of rupees 10, and so we can conclude that …
Cost of Inventory includes:The costs of purchase of inventories include: 1. Cost of purchase 2. Cost of conversion 3. Other cost to bring the inventory to the present location and condition Cost of Purchase: a) the purchase price, b) import duties and other taxes (other than those subsequently recoverable by the entity from the taxing …
The main difference between EBITDA and cash flow from operation is working capital changes and taxes. In EBITDA, it is before tax and in cash flow from operations, it is after tax. The second difference is that EBITDA is on an accrual basis and cash flow from operations is on cash basis. Favorite
As per 2(76) of Companies Act: a. a director or his relative; b. a key managerial personnel or his relative; c. a firm, in which a director, manager or his relative is a partner; d. a private company in which a director or manager or his relative is a member or director; e. a public …
What is related party as per various laws? – Companies Act, Ind AS, GST, Income Tax Read More »
Treatment in Final accounts: (i) Loss of goods due to fire, the theft or accident is known as an abnormal loss of goods. If such goods were insured by the firm, then an insurance claim may be received in full or part from the insurance company. Effect of this adjustment on final accounts will be …
An operating segment is a component of an entity: (a) that engages in business activities from which it may earn revenues and incur expenses (b) whose operating results are regularly reviewed by the entity’s chief operating decision maker (CODM) to make decisions about resources to be allocated to the segment and assess its performance; and …
Financial analysts can evaluate a corporation in a variety of ways. The discounted cash flow (DCF) approach and the relative valuation method are the two most popular methods of valuation. In the first approach, we must first determine the free cash flow before determining the present value of a company. In the second approach, we …
We take cash flows for each year and discount them with either cost of equity or WACC depending upon which cash flows we are using. Favorite
The payback period is the length of time required to recover the cost of an investment. The payback period of a given investment or project is an important determinant of whether to undertake the position or project, as longer payback periods are typically not desirable for investment positions.The discounted payback period is a capital budgeting …
What is payback period and discounted payback period? Read More »
A discounted cash flow (DCF) is a valuation method used to estimate the attractiveness of an investment opportunity. DCF analysis uses future free cash flow projections and discounts them to arrive at a present value estimate, which is used to evaluate the potential for investment. If the value arrived at through DCF analysis is higher …
The most common capital investment evaluation tools are the Payback Period (PP), Return on Investment (ROI), Net Present Value (NPR), and Internal Rate of Return (IRR). Each method can provide insight into investment options, but each also has limitations. If net present value is positive, the project should be accepted. If internal rate of return …
How to evaluate investment in the concept of capital budgeting? Read More »
Capital budgeting is the process a business undertakes to evaluate potential major projects or investments. Construction of a new plant or a big investment in an outside venture are examples of projects that would require capital budgeting before they are approved or rejected. As part of capital budgeting, a company might assess a prospective project’s …
What is Capital budgeting? Give an example of a capital budgeting decision. Read More »
• Payback Period. • Discounted Payback Period. • Net Present Value • Internal Rate of Return. Favorite
Securitization is the process of taking an illiquid asset, or group of assets, and through financial engineering, transforming it (or them) into a security. Securitization is the financial practice of pooling various types of contractual debt such as residential mortgages, commercial mortgages, auto loans or credit card debt obligations (or other non-debt assets which generate …
NPV assumes that the cash flows come in equal time intervals. XNPV assumes that the cash flows don’t come in equal time intervals. Favorite
Loan syndication is the process of involving several different lenders in providing various portions of a loan. Loan syndication most often occurs in situations where a borrower requires a large sum of capital that may be too much for a single lender to provide or outside the scope of a lender’s risk exposure levels. Thus, …
Ind AS 110 defines Non Controlling Interest (earlier called Minority Interest) – NCI is Equity in a subsidiary not attributable, directly or indirectly, to a parent. Minority Interest also referred to as non-controlling interest (NCI), is the share of ownership in a subsidiary’s equity that is not owned or controlled by the parent corporation. Favorite
