Financial Management : Part-3

Short Notes: Financial Management (Part- 3)

» What is decision tree approach?
Answer: A decision tree is a graphic presentation of the relationship of the present decision with future events and decision.

»What is scenario analysis?
Answer: Scenario analysis is a risk analysis technique in which the best an worst case are compared with the projects expected NPV.

» What is simulation analysis?
Answer: Simulation is a statistical technique employed to have an insight into risk in a capital budgeting decisions. This technique applies predetermines probability distributions and random numbers of estimate risky outcomes.

» What is Indifference point?
Answer: Indifference point is the level of EDIT where EPS is the same of two alternatives.

» What is miller Model?
Answer: Merton Miller introduced a model designed to show how leverage affect firm values when both personal and corporate taxes are taken into account.

» What is optimum capital structure?
Answer: Capital structure that minimizes the firm cost of capital and thereby minimizes the value of the am.

» What is personal tax?
Answer: Tax paid on personal income as distinct form the tax paid on the firm earnings. In an incorporated firm, the owners (shareholders) pay taxes on both their income (salary or dividend form the firm) firm s income (profits). In partnership, the tax is paid once on the firm s profit.

» What is dividend yield?
Answer: anticipated annual dividend by the market price of the stock.

» What is flotation cost?
Answer: The costs associated with issuing secrities ‘such as underwriting’ legal, listing and printing fees.

» What is stock repurchase?
Answer: Stock repurchase is a program by which a company buys back its own shares from the marketplace reducing the number of outstanding shares.

You can also read: Financial Management : Part-2