Risk and uncertainty are often used interchangeably in financial management literature. However, there are differences between the two and they represent strictly different ideologies. In this brief article, we will highlight the points that differentiate these two terms, risk and uncertainty, when they are used in Finance parlance.The Concept of ... Read More

The concept of block of assets can be considered under the concept of depreciation of assets under the Indian Tax rules. Let’s go through the concept of depreciation under income tax rules to understand the concept of ‘block of assets’ better.Depreciation under Indian Income Tax RulesDepreciation under Indian Income Tax ... Read More

A simulation is basically a computer model that attempts to replicate a reallife situation. In Finance, simulation analysis is a model that is applied to analyze large projects and determine how target variables are affected based on changes in input variables. The model uses simulations to predict how the outcome ... Read More

The only thing certain in life is uncertainty. Scenario analysis is a powerful tool to handle business uncertainty in a scientific and appropriate manner. It is done by analyzing the future events and their impacts on the business and considering the alternative possible outcomes. Companies normally use a broad range ... Read More

When risk premium is added with risk-free rate to get the present value of a risky investment, it is called risk-adjusted discount rate (RADR). A risky investment refers to any investment that has a higher risk than normal investments. For example, high-risk investments may include real estate and other such ... Read More

M&M TheoremThe first version of the M&M theorem (or M&M Theorem I) considers a perfect and hypothetical market condition. In such a case, the market is completely efficient, which implies the markets are working smoothly with all information being conveyed to the investors taking part in it. The theorem also ... Read More

What is Strategy?Strategy is specifically an action the managers of a company take to attain a specific goal. It can also be defined as a general direction set for the company and its various departments to attain a desired state in the future. To apply a strategy, a company must ... Read More

Businesses often need to source funds through debt and equity. Since equity cost is more than debt costs, organizations tend to choose debt over equity in their capital structure. Debt comes with a cost though because the companies need to pay interest to the lenders when they acquire debt. The ... Read More

A company’s interest payments are tax deductible. That is, the interest expense paid by a company can be subject to tax deductions. Such a deductibility in tax is known as interest tax shield. For example, there are some cases where mortgages have an interest tax shield for the buyers as ... Read More

What is Financial Leverage?Financial leverage is the use of increasing debt to purchase more assets. Leverage is usually employed to increase the return on equity (ROE). However, an excess of financial leverage magnifies the risk of failure, as it becomes increasingly difficult to repay the debt by the borrower.Financial leverage ... Read More