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significance of cost of financethe cost of capital is significance since of its application in the following areas asi long-term investment decisions
cost of finance - capital structurethis is the price the company pays to retail and acquire finance to get finance a company will pay implicit costs
factors of capital structure1 availability of securities - this influences the companys employ of debt finance that means such if a company has
proforma balance sheetthis refers to the projected balance sheet at the finish of forecasting period the items in the proforma balance that vary
example of sales methodthe balance sheet of xyz ltd as on date 31st december 2002 is as following net fixed
assumptions underlying percentage of sales methodthe fundamental supposition underlying the use of of sales method is such there is no inflation in
percentage of sales method a express the various balance sheet items varying along with sales as percentage of sales as assume for year 2002 stock
percentage of sales method - financial forecastingthis method includes expressing various balance sheet items such are directly concerned to sales as
methods or techniques of financial forecasting1 use of cash budgetsa cash budget is a financial statement showing asa sources of capital and revenue
financial forecastingfinancial forecasting refers to determination of the firm of financial requirements in advance financial forecasting is needs
limitations of ratioratios have weaknesses as following like1 they avoid the size of the firm being compared as in cross-sectional analysis the firm
uses and application of ratiosratios are required in the following ways via managers in different firms1 evaluating the efficiency of assets
book value and market to book value per sharebook value per share bvps net worth equityno of ordinary shares it is called also liquidity ratio
dividend payout ratiodividend payout ratio dpseps x
dividend cover ratiodividend cover eps dps earning to ordinary sharesdividend paid this signifies the number of times
price earnings ratioprice earnings pe or ratio market price per share mpsearnings per
growth and valuation ratiothis ratio indicates the growth potential of the firm in addition to determining the value of the firm and investment made
profitability in relation to investment - profitability ratioa return on investment roi or return on total asset rota net profit total asset x 100the
profitability ratiothese ratios signify the performance of the firm in relation to its capability to derive returns or profit from investment or from
leverage or gearing ratiosleverage or gearing ratios are as followa debt ratio total debtstotal assetswhereas total debt fixed charge capital
capital structure ratiogearingleveragecapital structure ratio the ratio signifies the extent whether the firm has borrowed fixed charge capital to
important points for working capital cyclea lengthy working capital cycle is a sign of poor management of debtors and stock reflecting low turnover
fixed asset and total asset turnover ratiofixed asset turnover annual sales fixed assets this ratio indicate the efficiency along with which the
creditors payment period ratiocreditors payment period 365 creditors
accounts payable turnover ratioratio for account payable turnover is as followcreditorsaccounts payable turnover annual credit purchases average