The Efficient Markets Hypothesis(EMH) hypothesizes that stocks are always in equilibrium and that it is impossible for an investor to consistently “ beat the market.” On a norm, this theory advocates that stocks in general are neither overvalued nor undervalued namely they are fairly priced and in equilibrium. There are several degrees of EMH namely: [...]
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Below is the answer to the earlier question test paper on capital investment/budget/appraisal:-
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Below is a true or false question test paper (with answer) on simple capital budget to refresh your learning of the topic: {click here for answer}
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As head of the Finance Function, the main role of the Finance Manager is to manage the company’s funds in such a way so as to ensure their optimum utilization and their procurement in a manner that the risk, cost and control considerations are properly balanced in a given situation. Some of the functions, nature [...]
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Earlier article, we see many benefits when deploying the Economic value added computation. However, like any analytical tool, there are still some limitations/ pitfall(s) of EVA namely:- EVA is still based on an accounting based concept, hence it still suffers the following: like other accounting rate of returns for example like the ROI. Using the [...]
Some of the major advantages of using this economic value added methodology are: In my earlier article, we have compared EVA with earnings per share and return on investment/assets and found that both the traditional ratios do not reflect the true cost of capital- there is no hinge whether shareholders value have been created or [...]
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Earlier articles described the limitation of traditional financial performance metrics like earnings per share and return on assets and understanding some of the limitations of EVA. This article looks at the Economic value added formula and computation and how to further improve the performance of same. To improve EVA, let’s re-look at its formula: EVA=Net [...]
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Earnings per share, Returns on Assets are normally used as the key performance metric/indicators for measuring the financial performance of an organization. However, Economic value-added (EVA) as a financial performance indicator is showing encouraging support amongst many top-notched organization. Using the EVA analysis, management particularly the Board of Director are able to know whether shareholders [...]
Economic Value Add(EVA) As A Financial Performance Metric or Key Performance Indicator How To Improve Economic Value Added(EVA) What are the Benefits Of Using Economic Value Added Analysis Limitations/Pitfalls Of Using Economic Value Added Analysis As A Financial Performance Indicator/Metric.
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The cost of capital or weighted average cost of capital concept is nothing new as its often being used in investment appraisals exercise and in the Economic Value Added model ( for maximization of shareholders’ wealth) This article looks at what is this Cost of Capital or Weighted Average Cost Of Capital and how to [...]
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