Definition: The Capital Asset Pricing Model predicts the relationship between the risk of an asset and its expected returns. The capital asset pricing model asserts that the investor should be compensated in two ways: Time value of money and the Risk. The time value of money means, the value of money today worth more than the value of the same amount in the future. Thus, … [Read more...] about Capital Asset Pricing Model
Finance
Profitability Ratios
Definition: The Profitability Ratios measure the overall performance of the company in terms of the total revenue generated from its operations. In other words, the ratios that measure the capacity of a firm to generate profits out of the expenses and the other cost incurred over a period are called the profitability ratios. Profit Margin Ratios and the Rate of Return Ratios … [Read more...] about Profitability Ratios
Turnover Ratios
Definition: The Turnover Ratios measure the efficiency of investments made by the firm in the form of revenues and the cost of sale generated during a period of time. These ratios show the relationship between the revenues or cost of sales generated due to the investment activities undertaken. Some important Turnover Ratios are: Inventory Turnover Ratio Debtors … [Read more...] about Turnover Ratios
Liquidity Ratios
Definition: Liquidity Ratios are calculated to determine the capacity of a firm to pay off its short-term obligations when they become due. In other words, firm’s cash balance or the readiness to convert its asset into cash, to pay off its current debt is called as liquidity and the ratios that compute it are called as liquidity ratios. Following are the Important liquidity … [Read more...] about Liquidity Ratios
Dividend Decision
Definition: The Dividend Decision is one of the crucial decisions made by the finance manager relating to the payouts to the shareholders. The payout is the proportion of Earning Per Share given to the shareholders in the form of dividends. The companies can pay either dividend to the shareholders or retain the earnings within the firm. The amount to be disbursed depends on … [Read more...] about Dividend Decision
Financing Decision
Definition: The Financing Decision is yet another crucial decision made by the financial manager relating to the financing-mix of an organization. It is concerned with the borrowing and allocation of funds required for the investment decisions. The financing decision involves two sources from where the funds can be raised: using a company’s own money, such as share capital, … [Read more...] about Financing Decision
Investment Decision
Definition: The Investment Decision relates to the decision made by the investors or the top level management with respect to the amount of funds to be deployed in the investment opportunities. Simply, selecting the type of assets in which the funds will be invested by the firm is termed as the investment decision. These assets fall into two categories: Long Term … [Read more...] about Investment Decision
Income Tax Return (ITR)
Definition: An Income Tax Return (ITR), is a form submitted to report the annual income and taxes payable for the previous year of the taxpayer. The taxpayers file ITR with the Income Tax Department. The assessee needs to furnish the details of taxable income or loss to the Income Tax Department. Such details are conveyed by way of return of income. With this form, the … [Read more...] about Income Tax Return (ITR)
Income Tax
Definition: In the simplest sense, income tax is a tax imposed on the income of persons, earned by them in the previous year. It is a composite tax on the total of income derived from multiple sources. To compute the tax, income is classified into different slabs and tax is charged as per the rate of the concerned slab. It is majorly classified into: Personal Income Tax: … [Read more...] about Income Tax