The decisions taken by financial managers on behalf of an organization for the long term are known as financing decisions. These decisions are important because every department is related to the finance department in one way or the other. Therefore, care must be taken related to the nature of financial matters of the company.The nature of financing decisions is dynamic and there are some distinct differences among the major types of decisions.Investment DecisionsInvestment decisions are related to total assets to be held, the risk composition, and the mix of the total assets of the company.The nature of investment decisions depends ... Read More

Finance functions are divided into two broad functions − Long-term decisions and Short-term decisions. Long-term decisions are applicable to a tenure of more than one year, while short-term decisions are meant for one year or less.Note − Finance functions or decisions are broadly divided into long-term and short-term decisions.Long-term DecisionsLong-term Decisions include: Investment Decision, Financing Decision, and Dividend Decision.Investment DecisionA company's investment decision must consider long-term budgeting or capital expenditure. This decision, therefore, is known as a capital budgeting decision. Capital budgeting consists of allocating the funds and investment decisions in general for future profits. The two major aspects of ... Read More

Treasurers and Controllers are designations essentially related to the US and the UK corporate. In those markets, the roles and responsibilities are clearly defined. Although some Indian companies also have them, the number of such companies is very limited.The duties in the US contextThe major responsibility of the treasurer usually is to manage and look after the funds of the company. the duties of the treasurer include managing the cash flow, credit management, forecasting financial needs, and maintaining relationships with financial institutions, etc. the treasurer also looks after protecting securities and cash, etc.The duties of controllers include management and supervision ... Read More

The Time Value for Money is usually expressed by an interest rate that remains positive even without any risk. This rate is therefore called risk free rate. An individual or a company may agree to receive a payment if the risk-free rate is applied to his investment.For example, suppose an investor has invested INR 100 in a project and the risk-free rate is 5%. Now if he is offered INR 105 after one year, he may choose to receive the money later as he might consider the value of money received after one year equal to the money without a ... Read More

There are two types of assets associated with a company - Real Assets and Financial Assets. Real assets are needed to continue operations and financial assets are non-physical assets that can be converted to cash easily. Real assets are called real because they often have a real form that can be touched or felt. Financial assets on the other hand are mostly found only as records.Real Assets and Financial AssetsReal assets help companies to generate revenue and are important because they have an intrinsic value related to them. The intrinsic value depends on the substance and properties of the assets. ... Read More

Planning the future profits is a good decision because it keeps organizations away from overspending. Moreover, as earning profits is the ultimate aim of all companies, being able to foresee the profit is very valuable for a firm. However, it is easier said than done.Managers often have no control over future shocks and natural disasters.There are other factors that affect the organization's decisions too.Financial managers' duty is to calculate the profits after deduction or paying insurance for these risk factors.Note − The financial managers must be able to find the rate of future profit for the betterment of the financials ... Read More

Perpetuity is an annuity that lasts forever. It consists of several cash flows in a series where the period between two payments is equal. Moreover, in the case of perpetuity, the amount paid after each period remains the same. The periodic cash flows occurring in perpetuity are of utmost importance because they provide the structure of the perpetuity.Perpetuities are very common in finance. For example, if a government creates a fund for scholarships to girls paying INR 1 crore every quarter, it is perpetuity. Here the payments are fixed and will be made forever after a period of three months.Irredeemable ... Read More

Compounding is a process of calculating interesting rates. Unlike simple interest rates where interest rates remain the same over a period, in the case of compound interest, the interest rate goes on increasing with passing time. In the case of compounding, therefore, the wealth grows at a faster rate than in the case of simple interest.For example, a person who has invested INR 100 in a project where the interest rate is 10% would get INR 110 at the end of the first year. At the end of the second year, he should get returns for the amount of INR ... Read More

Mutual funds are of various nature depending on the needs and requirements of investors. However, the most common factor that separates them is their risk appetite. The riskier firms offer better returns on investment while the less risky ones provide fewer returns.There are predominantly two types of funds: Debt Funds and Equity Funds.Debt FundsDebt funds usually invest the cumulative investment of the investors in money market instruments. Some examples of money market instruments are Treasury bills, G-Secs, Non-convertible debentures, and Commercial Papers, etc. Debt funds have much lesser risk than equity funds but their return is low too.Equity FundsThese funds ... Read More

A Capital Market is a place where investors and borrowers deal with each other. So, a finance manager must be aware of the markets. The value of securities and how they're traded in the markets should also be in the knowledge of the manager.Capital markets are where the securities are traded and companies can invest in prospective companies that have chances to become successful in the future. However, although it might sound easy, it is a complex process altogether.Note − Capital Markets can provide good returns on investment but no one can guess it 100% right.It is complex because no ... Read More