The assets of an enterprise may be financed entirely by the owners’ funds or by an appropriate mix of owners’ funds (equity) and outsiders’ fund (debt). Debt -equity ratio indicates to what extent the assets of an entity are financed…
Debt service coverage ratio (DSCR) is a commonly used matric to ascertain the ability of a firm to service its debt obligations. It shows whether the firm has generated enough earnings to repay its debt obligations. The higher the DSCR,…
It is necessary for any business organisation to maintain adequate level of cash to operate smoothly. Cash flow occurs when net effect of a transaction either increases the cash or cash equivalent or decreases the cash or cash equivalent. If…
The pay-back period refers to the period within which the total investment made in a project pays itself back. Pay-back period method assumes that every capital expenditure pays itself back within a particular period out of the additional earnings generated…
The Net Present Value (NPV) method is a discounted cash flow technique used in capital budgeting. It recognizes time value of money. Under this method, the present value is determined by discounting the future cash flows of a project at…
The internal rate of return (IRR) is a modern technique used in capital budgeting/investment decision. It is a discount rate at which the present value of cash inflows is equal to the present value of cash outlays. IRR takes into…
Balance sheet is a statement of assets and liabilities on a particular date. It depicts what the business owns and what it owes on a given date. Balance sheet is prepared for a particular date and not for a particular…
Break-even analysis is used to examine the relationship of costs and profits to the volume of business. Break-even analysis is the most popular form of cost-volume-profit analysis. It is a technique which determines the level of operations of an organisation…