Finance

Definition: The Three-Bin System is like a two-bin system, wherein the third bin of inventory is reserved with the supplier. In other words, a manufacturing firm keeps a stock of inventory in two bins, and at the same time, the supplier of the inventory will keep one bin reserved at his location. The Three-bin is built on the concept of Kanban system, a system used by the … [Read more...] about Three-Bin System

Definition: The ABC Inventory Control System is applied by those firms that have to maintain several types of inventories. Ideally, it is not desirable to keep the same degree of control over all the inventory types, since each vary in terms of its value of annual consumption. Thus, the ABC Inventory Control System is used to determine the importance of each item of the … [Read more...] about ABC Inventory Control System

Definition: The Inventory control system is maintained by every firm to manage its inventories efficiently. Inventory is the stock of products that a company manufactures for sale and the components or raw materials that make up the product. Hence, an inventory comprises of the buffer of raw material, work-in-process inventories and finished goods.   Following are … [Read more...] about Inventory Control System

Definition: The Decision Tree Analysis is a schematic representation of several decisions followed by different chances of the occurrence. Simply, a tree-shaped graphical representation of decisions related to the investments and the chance points that help to investigate the possible outcomes is called as a decision tree analysis. The decision tree shows Decision Points, … [Read more...] about Decision Tree Analysis

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

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

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

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

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

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