Definition: The Simulation Analysis is a method, wherein the infinite calculations are made to obtain the possible outcomes and probabilities for any choice of action. The concept of simulation analysis can be further comprehended through the following steps: The first step is to model the project. A model shows how the net present value is related to the parameters and … [Read more...] about Simulation Analysis

# Finance

## Hillier Model

Definition: According to the Hillier model, the risk associated with the project can be assessed through the standard deviation of expected cash flows. In other words, determining the viability of the project through calculating the deviations in the cash flows from the mean of expected cash flows. Thus, Hillier model asserts that the computation of standard deviations of … [Read more...] about Hillier Model

## Break-Even Analysis

Definition: The Break-Even Analysis is a method adopted by the firms to determine that how much should be produced or sold at a minimum to ensure that the project does not lose money. Simply, the minimum quantity at which the loss can be avoided is called as a break even point. The Break-even point can be defined in both the financial and accounting terms. Financial … [Read more...] about Break-Even Analysis

## Scenario Analysis

Definition: The Scenario Analysis is a method applied to determine the feasibility of the project in terms of the change in the underlying variables simultaneously. Simply, analyzing the change in multiple variables at a time and assessing their impact on the viability of the project as a whole, is called as scenario analysis. In scenario analysis, not only the sensitivity … [Read more...] about Scenario Analysis

## Sensitivity Analysis

Definition: The Sensitivity Analysis or What-if Analysis means, determining the viability of the project if some variables deviate from its expected value, such as investments or sales. In other words, since the future is uncertain and the entrepreneur wants to know the feasibility of the project in terms of its variable assumptions Viz, investments or sales change, can apply … [Read more...] about Sensitivity Analysis

## Risk Analysis Techniques

Definition: The Risk is prevalent in all the business decisions, but it is much more inherent in the capital budgeting decisions. These decisions are the long-term decisions, which involves huge cost and whose benefits are derived over a long period of time or during the lifetime of the project. The risk varies according to the nature of investments. A research and … [Read more...] about Risk Analysis Techniques

## Stock Split

Definition: A Stock Split is a method of increasing the number of outstanding shares with a proportionate reduction in its face value. With a split only the price per share reduces, the market capitalization i.e. market value of the outstanding shares and the proportionate ownership interest of the existing shareholders do not change. The stock split is generally done when … [Read more...] about Stock Split

## Types of Dividend

Definition: The Dividends are the proportion of revenues paid to the shareholders. The amount to be distributed among the shareholders depends on the earnings of the firm and is decided by the board of directors. Types of Dividend Cash Dividend: It is one of the most common types of dividend paid in cash. The shareholders announce the amount to be disbursed among the … [Read more...] about Types of Dividend

## Gordon’s Model

Definition: The Gordon's Model, given by Myron Gordon, also supports the doctrine that dividends are relevant to the share prices of a firm. Here the Dividend Capitalization Model is used to study the effects of dividend policy on a stock price of the firm. Gordon's Model assumes that the investors are risk averse i.e. not willing to take risks and prefers certain returns to … [Read more...] about Gordon’s Model

## Walter’s Model

Definition: According to the Walter's Model, given by prof. James E. Walter, the dividends are relevant and have a bearing on the firm’s share prices. Also, the investment policy cannot be separated from the dividend policy since both are interlinked. Walter's Model shows the clear relationship between the return on investments or internal rate of return (r) and the cost of … [Read more...] about Walter’s Model