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What is Indirect method
Indirect method is what you would probably be familiar with. It requires a lot less information to produce it and hence can be argued to be easier method.
With indirect method, profit before taxation (or profit before interest and tax) is taken from income statement and adjusted for non-cash items (that is depreciation, provisions). It's also adjusted for loss or profit on disposal of assets. Other items which will be classified under financing or investing are also adjusted for. Lastly adjustments are made for changes during the period in inventories, trade and other receivables and payables. This requires looking at current and prior year's statement of financial position.
Q. Show the Advantages of IRR Method? Advantages of IRR Method:- (i) Similar to the other DCF methods IRR methods as well take into consideration the time value of money.
They are issued in the local market, by a foreign borrower are usually denominated in the local currency. For example, Yankee bonds are USD denominated bon
Convertible bonds can be classified into different types such as callable bonds and puttable bonds. These bonds are discussed as follows: Basics of Callable Bonds A callabl
Explain the factors affecting the choice of a minimum cash balance amount. The smallest cash balance amount is determined by how easy it is to raise funds when needed, how expe
For capital budgeting decision which cost is relevant For capital budgeting decision, composite cost of capital is comparatively more relevant albeit the firm may finance one p
applicability in vegetable growing
(a) Let's presume that the firm may default only on last coupon payment date and that when this take place stock price would be less than some predetermined price K at the expira
Q. Explain Present Value of a Series of Cash Flows? Present Value of a Series of Cash Flows: - In a business circumstances it is very natural that returns received by a firm ar
We have seen the valuation of bonds with embedded option using binomial model. This method can be used when cash flows do not depend on how interest rates evolve.
Your firm will produce widgets for the next 10 years (starting at t=1). Annual revenue from selling widgets is $20,000. Production requires an initial outlay (at t=0) for machin
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