Financial Management : Part-5

Short Notes: Financial Management (Part-5)

» What is capital market?
Answer: Capital market is the market for long-them debt, bond and stock. The distinguishing feature of the securities that traded in capital markets is their life of longer than one year and common stock that has no maturity period.

» What is wealth maximization?
Answer: Wealth maximization means maximization the net present value or wealth of a course of action to shareholders.

» What are best efforts offering?
Answer: Best efforts offering Instead of underwriting a securities issue, investment bankers may sell the issue on a best efforts offering basis.

»What is the profitability index?
Answer: The ratio of the present value of a project’s future net cash flows to the project’s initial cash outflows.

»What is coefficient of variation?
Answer: The ratio of the standard deviation of a distribution to the mean of that distribution. It is a measure of relative risk.

» What is a zero NPV deal okay?
Answer: The discount rate reflects the opportunity cost of capital; it includes the necessary expected return on the investment.

» What is arbitrage?
Answer: Arbitrage means finding two assets that are essentially the same, buying the cheaper and selling the more expensive.

» What is the origin of the word finance?
Answer: Lain word finis is the origin of finance.

» What is the formula of CAPM or RADR?
Answer: RADR=R

» What is cash conversion cycle (CCC)?
Answer: The amount of time a firm’s resources are tied up. Calculated by subtracting the average payment period from the operating cycle.

You can also read: Financial Management : Part-1