Theories of Portfolio Management Risk Aversion Theory The theory that counts for being risk aversion highlights the fact that the investors always opt for such kinds of investments which are associated with the lowest level of risk. Every individual who plans to invest in something requires the maximum possible return but with the low level… Read More »
Portfolio Risk and Return – Managing Portfolio in the Light of Returns and Constraints The objectives associated with the returns are divided in to several different needs a few of which may include the following: Capital Preservation Preservations means to maintain a certain level, so capital preservation calls for maintaining a certain level of capital… Read More »
Investment Management Approaches! Investments need to be managed accordingly in order to make things clear as well as professionally sound. The better is the management of your investment the best are the result from the investments. There are two different kinds of approaches to investment management discussed below:
Portfolio Risk and Reward Investment is always associated with two most important things namely, risks and returns and measuring both of these is always a crucial part of every investment. When it comes to the measurement of the risks and returns you may come across a number of measurement techniques of which Standard Deviation takes… Read More »
NPV vs IRR Every business comes across a number of decisions to be made on a daily basis regarding making investments in different projects. However, making these investments requires a huge analysis and consideration of a number of things.
What is Time Value of Money? Time Value of Money – A Crucial Concept Time value of money is the name which we all hear every now and then in almost all the fields. No matter you talk about investing your money somewhere, saving your money at home, initiating new projects or buying and selling… Read More »
IRR Decision Rule IRR is one among a number of capital budgeting techniques which is most commonly used by the investors for evaluating their investment decisions. What is IRR? IRR is the discount rate on which NPV of a project becomes Zero OR we can define IRR as the discount rate at which Present Value… Read More »
Credit Risk and Credit Rating Credit Risk In today’s challenging business environment, it is very crucial for financial institutions to do risk assessment. Therefore, it is very important to know exactly what Credit Risk is and why it is important to ascertain it.
Capital Structure What Is Capital Structure? When you are asking about what the capital structure is and what it relates to what you will find is that it is regarding the debt and equity within a business environment. It is the amount of debt and equity that mixes together to give the amount of return… Read More »
NPV Decision Rules – Capital Budgeting Techniques Net Present Value is defined as the present value of all expected cash flows generated by the project minus present value of the cost of the project. Net Present Value = Present value of all expected cash inflows – Present value of the cost of the project
Project Analysis – Capital Budgeting Techniques Nile’s Manufacturing is considering buying automated machinery that costs $250,000. Working capital requirement is $25,000 and they are expecting Annual cash savings of $103,000 for 5 years. The company uses straight-line depreciation method. The salvage value the machinery at the end of year 5 is expected to be… Read More »
Project Analysis – Capital Budgeting Techniques Solved example of Payback Period and ARR Steve has been appointed as finance director of a company. His only aim is to gain some experience before moving to a larger company. His intention is to work here for three years and when he would leave the company; its share price… Read More »
Project Analysis – Capital Budgeting Techniques Net Present Value Example We are considering following project for investment purpose. Initial cost of the project: $800,000 Project Life: 5 years Annual Net Operation Profit:… Read More »
Accounting Rate of Return – Capital Budgeting Techniques Accounting rate of return is the project evaluation technique which differs from other capital budgeting techniques because the focus of this technique is average annual net income or accounting income rather than cash flows. ARR is defined as the ratio of average accounting income to average investment. You will find… Read More »
Internal Rate Of Return And Mutually Exclusive Projects……. What’s the Concern? While considering the mutually exclusive projects, IRR technique can be misleading. Investment projects are said to be mutually exclusive if only one project could be accepted and others would have to be rejected. NPV and IRR methods for project evaluation leads to conflicting results… Read More »