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What is capital rationing? Should a firm practice capital rationing? Why?
Capital rationing is the practice of putting dollar limits on what will be invested in new capital budgeting projects. Private corporations, partnerships and Proprietorships are in a position to do whatever the owners wish. It can be disputed, but, that for a publicly traded corporation capital rationing may not be steady with maximizing the value of the firm. This is because various value adding projects may be rejected if they would cause the firm to go beyond its self imposed capital rationing limit.
Q. Explain Inventory approach to cash management? This method analysis cash in the same way as engine inventory such that EOQ models may be employed. In such conditions cash
Preferably all customers will settle within the agreed terms of trade. If this doesn't happen a company needs to have in place agreed procedures for dealing with overdue accounts.
How are financing costs generally incorporated into the capital budgeting analysis process? Financing costs are generally captured in the discount or hurdle rate while doing NPV
CAPITALISATION RATE=0.01 EARNINGS PER SHARE(E)=10 ASSUME RATE OF RETURNS ON INVESTMENTS (R):15
In structured products like mortgage-backed and assets-backed securities, the cash flows include both principal repayment and interest. The complication arises wh
Saven Travel Corporation is considering several investment opportunities in order to diversify its operations. Mr. Saven, president, is trying to determine the firm''''s cost of ca
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Q. Advantages of Trade Credit? i) Easy Availability: Unlike other sources of finance, trade credit is relatively easy to obtain. Except in the case of financially very unsou
Which is lower for a given company: the cost of debt or the cost of equity? Explain. Ignore taxes in your answer. The cost of debt is all the time less than the cost of equi
Your family purchased a house three years ago. When you bought the house you financed it with a $160,000 mortgage with an 8.5% nominal interest rate (compounded monthly). The mortg
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