FINANCIAL MANAGEMENT

  What are the assumptions of WALTER'S DIVIDEND MODEL? WALTER'S MODEL OF DIVIDEND POLICY WALTER'S MODEL says that dividend policy and value of firm is directly related. Dividend policy affects the market price of the share and the relevance of dividend policy for valuation of the firm. Walter's model of the firm is based on the following assumptions:- ASSUMPTION OF WALTER'S MODEL: 1. All investment proposals of the firm are to be financed through retained earning only and no exter- -rnal financing is available to the firm.  2.The business-risk complexion of the firm remains same even after fresh investment decision are taken. In other words, the rate of return on investment i.e..."r" and the cost of capital of the firm  i.e.....Ke are constant. 3. The firm has infinite life. This model state that firm's dividend decision is based on the principle that if a firm has investment opportunities available to invest the retained earnin...

 DIVIDEND DECISION  A financial Manager has to take three important decision.These are:-                       1.  INVESTING DECISION                       2. FINANCING DECISION                       3  DIVIDEND DECISION DIVIDEND DECISION is the third important area of  financial management.This decision specifies that how much of profit should be kept for reinvestment opportunities and how much to be distributed as dividend to shareholders.Dividend is appropriation of profit as against interest which is charge against profit.This is the most important area of decision making for finance manager.This decision can be effectively taken by formulating a dividend policy.   FACTORS THAT AFFECTS DIVIDEND DECISION ARE: - 1 . Investment opportunities available .-If good investme...

OPERATING AND FINANCIAL LEVERAGE OPERATING  LEVERAGE Operating leverage establishes a relationship between contribution and EBIT ( earning before interest and taxes). It is the measurement of degree to which a firm incurs a combination of fixed and variable costs. A business that makes sales providing a very high gross margin and fewer fixed costs and variable costs has much leverage FORMULA =            CONTRIBUTION                   EBIT DEGREE OF OPERATING LEVERAGE The degree of operating leverage (DOL) is a measure used to evaluate how a company's operating income changes with respect to a percentage change in its sales.A company with a high degree of operating leverage has high fixed costs relative to its variable costs. FINANCIAL LEVERAGE Financial leverage establishes relationship between EBIT (earning before interest and taxes) and EBT (earning before tax). Financial leverag...

DEAR READERS , THE SYLLABUS OF COMMERCE NET IS VERY VAST BUT FOR YOUR QUICK REFERENCE I AM PROVIDING SUMMARY OF FINANCIAL MANAGEMENT IN BULLET FORM HERE UNDER : TOPICS   CAPITAL STRUCTURE  FINANCIAL AND OPERATING LEVERAGE COST OF CAPITAL CAPITAL BUDGETING WORKING CAPITAL MANAGEMENT DIVIDEND POLICY ADDITIONAL TOPIC IN ELECTIVE-I  MONEY AND CAPITAL MARKET WORKING OF STOCK EXCHANGES IN INDIA NSE ,OTCEI ,NASDAQ DERIVATIVES AND OPTIONS  REGULATORY AUTHORITIES: SEBI, RATING AGENCIES  NEW INSTRUMENTS: GDRs , ADRs VENTURE CAPITAL FUNDS  MERGERS AND AQUISITIONS MUTUAL FUNDS LEASE FINANCING FACTORING MEASUREMENT OF RISK AND RETURNS SECURITIES AND PORTFOLIOS COMPUTER APPLICATION IN ACCOUNTING AND FINANCE.