In business practices, finance-related functions and management-related functions usually overlap each other. The finance function and the management function go hand-in-hand in most cases. For example, the Operations Managers looking to install a new machine (the Management Function) must get the money which is part of the Finance Function.Usually, the finance function is the backbone of all management functions.Without financial functions, most and marketing operations will become redundant. Still, there is a fine line that separates management functions and financial functions. However, it is more important to study the overlapping situation than to look at the differences.Note − Financial and ... Read More

Financial Managers take investment decisions for the well-being of the company. Every company seeks the best outcome from their decisions and hence every company strives to strike the best cord in terms of financial management.However, there are certain natures of investments every manager should be aware of. Finance Managers usually pay much attention to investment decisions, as these are some of the basic decisions businesses must make to survive and grow.Here are some of the characteristic features of Investment Decisions.Investment Decisions Are Long-term in NatureInvestments are meant for the long term and they have a future probability of profits or ... Read More

Although Profit and Wealth Maximization sound pretty similar, there are some major differences between them. While profit maximization aims at increasing the profit of a firm, wealth maximization has a larger role to play and it deals with the wellbeing of the stakeholders as a whole.Profit Maximization Vs Wealth MaximizationHere are some major differences between profit maximization and wealth maximization in brief.Profit and wealth maximization deal in different subjects and hence they are defined differently. Profit maximization refers to the management of a firm's resources and utilities to maximize profit. On the other hand, wealth maximization refers to managing the ... Read More

When compounding is applied to an investment for an indefinite period and interests are added to the principal amount + interest on each period, it is called continuous compounding. In such an arrangement interest is added after each period and interest is compounded on the total amount in the next period (balance).Continuous Compounding may be done on a regular basis, such as monthly quarterly, semi-annually and annually. The process goes on for indefinite number of periods and interest may be earned forever too. Thus banks and financial institutions prefer such kinds of investments.One may seek Continuous Compounding for a variety ... Read More

A Finance Manager is a professional who manages the financial functions of an organization. As such, the financial manager is a top-ranking official in the business and he or she plays a vital role in making the business become successful. In the past, financial managers were not considered for the top-ranking or decision-making roles, but with time, the perceptions have changed.A modern financial manager is a top boss who knows much about the company's financial procedures. He or she is considered a vital employee of the organization and he plays a key role in managing the finances of the company. ... Read More

There is more than one definition of capital recovery in finance. When someone makes an investment on a company or an asset, he or she gets a negative return until the whole amount is returned. The RIO (Return on Initial Investment) made in such cases is called capital recovery.There can be other definitions too. For example, capital recovery occurs when a company sells its machinery and recollects the money invested in them. In broad terms, capital recovery is the money that is the investment or money gained back from a project. Capital recovery is applicable to the asset's life span ... Read More

Many businesses in the corporate world tie too much of their value in assets which are inventory, real estate and equipment of the firm. Although, having assets is an important part of organizations, having too low cash in hand could be catastrophic for all businesses. This, short term cash held for sudden and smaller necessities is known as liquidity of a firm.As is obvious, managing liquidity is a separate process or financial function organizations have to deal with on a day to day basis. And though it seems like a child's play, in reality managing liquidity is one of the ... Read More

Net Present Value (NPV) is the value of a fund that would mature in the future. The NPV method is used for financial analysis and to determine the feasibility of a project. It is the value of future cash inflows and outflows in relation to initial investments made by an individual or a firm.What is NPV?An organization needs to take very conscious and wise decisions about growth and expansion. In many cases, huge amounts of funds are involved. So, the organizations need to do capital budgeting. NPV is a good option to calculate the capital budgets to find the most ... Read More

Agency costs are costs incurred to handle agency problems. These problems occur due to conflicts between the shareholders (principal) and managers (agents). The agency costs are used to mitigate the conflicts. Usually, there should be no conflicts between principals and agents in a company setting but if shareholders think that managers are utilizing too many funds for their self-interest agency problems may arise.Types of Agency CostsThere are two broad categories of agency costs. The first arises when the managers use the company's resources for self-benefits and the second when shareholders spend money to discipline the managers.There are two sub-types of ... Read More

Firms raise funds for a variety of reasons, such as growth, expansion and research, and development. Some firms also raise funds to pay the debts back to the creditors and to fend off competition. Seeking lenders and investors to invest in the company is far more favorable than using the profits from ongoing operations. Companies may require funds to carry on with the operations too.Public companies raise money by sharing their shares in an Initial Public Offering (IPO). The IPO lists the company's shares in the stock market and it is traded in the exchange. Companies may also raise debt ... Read More