16 Financial Terms For Preparation on Interview Board

16 Financial Terms For Preparation on Interview Board

These are given below:-

1.Finance
2.Capital Budgeting
3.Capital Structure
4.Capital Rationing
5.Cost of Capital:
6. Pay Back period
7.Average Rate of Return
8.Net Present Value(NPV)
9.Internal Rate Of Return
10.Profitable Index
11.The capital asset pricing model (CAPM)
12.Risk
13.Return
14.Uncertainty
15Business Risk
16.Financial Risk 

Explanation of Financial Terms For Preparation on Interview Board

1. Finance:'Finance' has been originated from the Latin word"Finis".Finance is the combination of different activities like raising of funds, investments of funds, and management of funds to accomplish the objects of an individual or of a firm. Finance is called the lifeblood of an organization.
2.Capital Budgeting: Capital budgeting is the functions related to the long term investment decisions of a firm.
3.Capital Structure: Capital Structure is the composition of long-term liabilities, specific short-term liabilities like banknotes, common equity, and preferred equity which make up the funds with which a business firm finances its operations and its growth.
4.Capital Rationing: Capital rationing is a process of allocation of funds to viable projects to ensure the maximum utility of funds.
5.Cost of Capital: Cost of capital means the minimum required rate of return of a firm.
6. Pay Back period: Payback period is a capital budgeting technique that measures the number of years required for the CFAT to pay back the original outlay required in an investment proposal.
7. Average Rate of Return: The average rate of return(ARR), method of evaluating proposed capital expenditure, is also known as the accounting rate of return method.
Or
The average rate of return is measured to divide the average income after tax by the average investment.
8.Net Present Value(NPV): Net present value constitutes the difference between the present value of its cash inflows discounted by the firm's cost of capital and the initial investment of the firm.
9.Internal Rate Of Return

10. Profitable Index: Profitable Index, another technique of capital budgeting, is the ratio of the present value of future cash inflows at the required rate of return, to the initial outlay.
11. The capital asset pricing model (CAPM): The capital asset pricing model is a model that provides a framework to determine the required rate of return on an asset and indicates the relation between return and risk of the asset.
12. Risk: Risk can be called as the disagreement in the actual returns originating from an investment over its working life, in relation to the measured return as forecast at the time of the initial capital budgeting decision.
13.Return: Return is the expectation or the achievement from an investment over a period of time.
14.Uncertainty: Uncertainty, unavoidable, and unmeasurable, is called when the unknown accident occurs.
15 Business Risk: Business risk means the possibility to reduce future profit in business.
16. Financial Risk:  Financial risk, avoidable, and measurable, is the possibility of failing to pay interest and principal in the future for using debt.

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#16 Financial Terms For Preparation on Interview Board