1) Implicit cost
It is the rate of return which is available on other investment in addition to what is being to considered @ present
2) Explicit cost – it is the cost of any source of capital which the discount rate that equates the present value of cash inflows that are incremental to the taking of the financing opportunity with the present value of the incremental cash out flow. In other words when the firm raises funds by way of borrowing there is 1st an inflow cash when the amnt is recived this is followed by cash outflows when ever the intrest is paid or a portion of the principal amnt of the loan is repaid.
3) Future cost – these are those expected cost of funds for financing a particular project in future
4) Historical cost - They are those cost which hav alredy incurred in order to finance a project in the past. We use the historical cost to project the future cost.
5) Average cost – it is the weighted average cost of each component of the funds invested by the firm for a particular project the weights are in propotion to the shares of each component of capital in the total structure
6) Marginal cost – it is defined as the cost optaining another rupee of new capital. In other words, it arrises when additional capital is to be raised (eg. Under writing commission remuneration paid to investment bankers and merchant bankers etc
7) Specific cost – it is the cost through which the capital can be raised from diff sources and each source has a diff n a specific cost
8) Composite or combined cost – it is the cost of various sources of capital which is the total of the specific cost of each component in the capital structure and it is also known as the overall cost of capital
THE HINDU * Business line – Monday aug 9 2010
Profit = wealth creation = increase of net worth/ capital
Cash rich observation – current assets, loans advances
Cash rich = cash in hand + cash in bank (current + deposit)
Wat can b subtracted = salary etc + unclaimed divivdent +share holders
Liablites + overdraft
Transaction motive
Speculate
Conclusion –
The analist has to specifically consider the speculative the transaction & the precautionary motive of the company along with the payment of liabilities and other borrowings which are held the company and the cash balance and the bank balance should be considered after taking into account the above factors and then n declaring weather the company or cash deficient
It is the rate of return which is available on other investment in addition to what is being to considered @ present
2) Explicit cost – it is the cost of any source of capital which the discount rate that equates the present value of cash inflows that are incremental to the taking of the financing opportunity with the present value of the incremental cash out flow. In other words when the firm raises funds by way of borrowing there is 1st an inflow cash when the amnt is recived this is followed by cash outflows when ever the intrest is paid or a portion of the principal amnt of the loan is repaid.
3) Future cost – these are those expected cost of funds for financing a particular project in future
4) Historical cost - They are those cost which hav alredy incurred in order to finance a project in the past. We use the historical cost to project the future cost.
5) Average cost – it is the weighted average cost of each component of the funds invested by the firm for a particular project the weights are in propotion to the shares of each component of capital in the total structure
6) Marginal cost – it is defined as the cost optaining another rupee of new capital. In other words, it arrises when additional capital is to be raised (eg. Under writing commission remuneration paid to investment bankers and merchant bankers etc
7) Specific cost – it is the cost through which the capital can be raised from diff sources and each source has a diff n a specific cost
8) Composite or combined cost – it is the cost of various sources of capital which is the total of the specific cost of each component in the capital structure and it is also known as the overall cost of capital
THE HINDU * Business line – Monday aug 9 2010
Profit = wealth creation = increase of net worth/ capital
Cash rich observation – current assets, loans advances
Cash rich = cash in hand + cash in bank (current + deposit)
Wat can b subtracted = salary etc + unclaimed divivdent +share holders
Liablites + overdraft
Transaction motive
Speculate
Conclusion –
The analist has to specifically consider the speculative the transaction & the precautionary motive of the company along with the payment of liabilities and other borrowings which are held the company and the cash balance and the bank balance should be considered after taking into account the above factors and then n declaring weather the company or cash deficient