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Liquidity Preference Theory
This theory states that short term bonds are extremely favorable than long term bonds for two (2) purposes.
1. Investors usually prefer short term bonds to long-term securities since such securities are extremely liquid in the sense such they can be converted to cash along with little danger of loss of principal. Hence - investors will agree to lower yields on short term securities.
2. At the same that time borrowers react in just the opposite way.
Usually borrowers prefer long term debt since short-term debt exposes them to the risk of having to repay the debt under adverse. In this situation, accordingly borrowers are willing to pay higher rate another things held constant for long-term procedure than short ones.
Taking together this two sets of preferences implies under such usual conditions, a positive maturity risk premium exist that increases by maturity hence the yield curve should be upward sloping. Lenders prefer liquidity like short term hands whereas borrowers prefer long term bonds and are willing to pay a "premium" for long term borrowing.
Working Capital a) Working capital or called gross working capital also, refers as current assets. b) Net working capital refers to current assets minus current liabilities
Constant payout ratio 1. This is whereas the firm will pay a fixed dividend rate as like 40 percent of earnings. The DPS would consequently fluctuate as the earnings per share
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Asset Based Valuation This method acquires into account the entire business along with reference to its assets and then divides the resultant value via the number of shares i
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