The profitability and performance of a business concern can be calculated through various measures, which helps in comparing various companies operating in the same industry or sector. EBIT and EBITDA are the examples of such measures. EBIT or Earnings before interest and tax takes into account depreciation and amortisation while calculating the earnings of the company. Conversely, EBITDA or Earnings before interest and tax, depreciation and amortisation, is reckoned by adding back, the … [Read more...]

The interest rate is the rate at which the money is borrowed. Many of us think that the interest cost is greatest, but there are some implied costs included in the cost of borrowing which we don't notice. On the other extreme, APR or Annual Percentage Rate is an example of such cost, that is described as the overall borrowing cost. Nowadays, loan and mortgage are considered as one of the best means to fulfil the monetary requirement of businesses and individuals, for which they need to pay a … [Read more...]

Basic Earning Per Share is the ratio, that is reckoned to know the earnings available to each equity share. It is calculated by considering company's ordinary shares. On the other extreme, diluted earnings per share are computed when there are potential shares, i.e. convertible securities, in the company's financial structure. Earning per share (EPS) as its name suggests, it is that portion of the profit which is attributable to the shares outstanding. Financial Accounting Standard Board … [Read more...]

The primary function of the financial manager is to ensure availability of finance, to fulfill different purposes such as initial promotion, fixed capital, and working capital. Fixed Capital refers to the capital, which is invested in procuring fixed assets for business. On the other hand, working capital represents the amount of money utilized for financing day to day business operations. It is required to support the proper functioning of the company's business operations. Fixed Capital and … [Read more...]

Budget implies a formal quantitative statement of income and expenditure for a certain period. It is a plan for the resources allocated for the completion of the activities, that requires to be followed, to achieve the desired end. It is not exactly same as forecast, which is a simple estimation of the future course of event or trend. It is a forward looking activition, which encompasses projection. Forecast can be understood as the evaluation and interpretation of the conditions that are … [Read more...]

Economies of Scale and Economies of scope are two important strategies used by most of the organizations to gain cost effectiveness. The economies of scale, represents the savings in cost of production by increasing the scale of production or the size of the plant. On the other hand, economies of scope refer to the benefits obtained due to producing multiple products using the same operations efficiently. Economies of scope, is nothing but the savings in cost received by producing two or more … [Read more...]

Have you ever thought of investing your money in the funds like ETF and index fund? As both are collective investment tools, people get frequently confused amidst the two investment vehicles. Nevertheless, they are different in the sense that an  Exchange Traded Fund (ETF) is a kind of Index fund which is a basket of securities traded on an exchange. But an index fund is a form of mutual fund, which attempts to track the performance of a specific index. Since last few years, the stock market … [Read more...]

Economics is a science as well as art. But which type of science is a big question here, i.e. positive or normative? Positive economics is related to the analysis which is limited to cause and effect relationship. On the other hand, normative economics aims at examining real economic events from the moral and ethical point of view. It is used to judge whether the economic events are desirable or not. While Positive economics is based on facts about the economy. Normative economics is value … [Read more...]

Since the last few decades, factoring and forfaiting have gained immense importance, as one of the major sources of export financing. For a layman, these two terms are one and the same thing. Nevertheless, these two terms are different, in their nature, concept, and scope. Factoring is a financial affair which involves the sale of firm's receivables to another firm or party known as a factor at discounted prices. On the other hand, On the other hand, forfaiting simply means relinquishing the … [Read more...]

Every country requires capital for its economic growth and the funds cannot be raised alone from its internal sources. Foreign Direct Investment (FDI) and Foreign Portfolio Investment (FPI) are the two ways through which foreign investors can invest in an economy. FDI connotes a cross-border investment, by a resident or a company domiciled in a country, to a company based in another country, with an objective of establishing a lasting interest in the economy. On the contrary, FPI connotes a … [Read more...]