Companies opt for short-term financing to address their current cash requirements which are to be paid within a financial year or 12 months. Short-term finance measures for an organization includes Commercial Papers, Secured Short-term loans, Trade Credit, Unsecured Bank Loan and Bank Over-draft.

Trade credit refers to credit purchases based on mutual trust, done by the buyer of goods or services and which are paid at a later date.

A bank overdraft is a credit facility from the bank, in which the company has an account. The credit facility is provided for short term on basis of bank's regulations so that the company can withdraw more cash as available in its account for short term needs.

Unsecured bank loans are provided by banks without any collateral against it but for short term, usually 12 months.

The cash flow statement enlists the flow of cash going in or out of the company. It is prepared in Direct or indirect method. In direct method which is usually followed by companies involves starting with adding up all the cash collected from customers then from interests and dividends and finally deducting any cash amount which was paid against interest paid, taxes or to suppliers. Indirect method starts with net income and adding up all the non-cash charges and then adding up the working capital changes.

Cash Flow from Operations is a part of cash flow statement which refers to all cash being generated by company’s operations or the cash which is spent on the company’s operations.

Cash Flow from Investing is a part of cash flow statement which refers to all cash flows by the company against investments made like purchase or sale of equipment, property, etc.

Cash Flow from Financing is a part of cash flow statement which refers to all cash flows realized due to financing activities like bond issuance or closure of debt.

EPS in corporate finance expands to Earnings per Share of the company and refers to earnings against per-share of the company. It is a good pointer for a company's profitability. It is calculated by reducing amount for preferred dividends from net income and divided the resultant by the number of shares outstanding

If more than one sign change in the CF stream then IRR will be unreliable

Sensitivity analysis in corporate finance refers to analyzing % changes in NPV due to change in a single input

Scenario Analysis in corporate finance refers to analyzing % changes in NPV due to change in multiple or more than one input

The required rate of return for the stock is 18% p.a.

The debt equity ratio of the company will improve.

The present value of future amount for the investment will rise

It is the period in which a project will start generating the necessary cash flow to cover the initial investment.

The IRR is 8%

% years, is the payback period.

The discounted payback period is 3 yrs 9 months.

The discounted rate should be adjusted downwards.

A main factor in the debt capital usage is the security of assets.

Convertible bonds are superior to the ordinary bonds for their sale ability.

The book value method of valuation is based on the Going concern concept

The P/E ratio indicates the amount that investors will pay against per unit of company's earnings.

The P/E ratio is very important for the investors as it indicates if the company's shares are underpriced or overpriced

A high P/E ratio indicates that the shares of the company are overpriced

The P/E ratio for the company is 30

No, increasing EPS does not relates to increasing the net income

Yes, the profitability index for the project will exceed 1

The wealth of shareholders wealth increases with increase in market value of the company whose shares they hold.

Average rate of return uses net profit is used as the basis for calculation

No, NPV does not use net profit as the basis for calculation

The Book value of assets includes the fixed assets, current asset and the intangible asset.

An unlisted company is valued by using the net asset method

The P/E ratio for the company is 50.

No, projects can have same IRR

No, IRR considers the time value of money

A high P/E ratio indicates quick grow of the company in future

Cash System of Accounting records only cash receipts and payments. Cash system of Accounting assumes that there are no credit transactions. In this system of accounting, expenses are considered only when they are paid and incomes are considered when they are actually received. Cash System of Accounting is used by the organizations that are established for non-profit purpose. This system is considered to be defective in nature as it does not show the actual profits earned and the current state of affairs of the organization

Share Capital is defined as that portion of a company's equity that has been obtained by issuing share to a shareholder. Such that the amount of share capital increases as new shares are sold to public in exchange for cash. On the other hand Reserves and Surpluses indicates that portion of the earnings, receipt or other surplus of the organization appropriated by the management for a general or specific purpose other than provisions for depreciation or for a known liability.

A company can manipulate cash flow in the following ways - 1. Using revenue and expense recognition: In this case the management can either defer or accelerate certain expenses and revenues based on cash vs accrual method of accounting (for example: sales contracts, deferred taxes, bad debt expense, warranty expense, returns). 2. Using depreciation expense: The management can decide on useful life and ending salvage value 3. By capitalizing expenses as oppose to expensing them this affects balance sheet and income statement.

When we want to assess the health of a company we must look at 3 years of balance sheet data. As it is simpler to derive the income statements from 3 years of Balance Sheet data than going the other way. Also with balance sheet data we can calculate all sorts of ratios and measures indicating the financial health of a company. Using Balance Sheet data will give a clear picture of whether you are using the assets efficiently.

When we capitalize these costs as opposed to expensing them then the - 1. Net income (1st year) is higher as capitalizing costs only delays expense recognition for future periods. 2. Net income (future years) is lower as overall net income for both capitalizing and expensing is the same. 3. Book Value of equity is higher as book value equity is affected from retained earnings from income statement. 4. Cash flow from operating activities is higher 5.Cash flow from investing activities is lower We must note that certain investments may increase the intangible value of assets of the company. For instance we might have to perform a marketing campaign that might not make any money, but helps to create brand awareness and identity which will help boost sell products in the future. I will convince my senior that future benefits will outweigh current costs because of new expanding markets that haven't developed yet.

Reduces the value of capital by the same absolute amount each year.

Pays a lump sum and in return receives regular fixed amounts over a specified time period.

The weighted average cost of capital consists of the cost of debt, the cost of preferred stock and the cost of equity.

Increased use of debt financing will lead to increased fluctuations in the return on equity and increase in the interest rate on debts.

Interest rate Risk is a type of systematic risk, refers to the uncertainty of future market values and of the size of future income, caused by fluctuations in the general level of interest rates.

The internal rate of return

When a single project is evaluated.