Net Present Value (NPV) and Internal Rate of Return (IRR) are two fundamental tools used to evaluate a project’s profitability. NPV is an absolute measure of the difference between the present value of cash inflows and the present value of cash outflows over a specific period of time. It considers the time value of money, which […]
NPV and IRR in Capital Investment and Financing Decisions Read More »
During employment, many employees tend to focus mainly on their monthly take-home salary. However, an equally important aspect of compensation lies in retirement benefits such as Provident Fund (PF), Gratuity, Pension, Commuted Pension, and Leave Encashment. Under the provisions of the Income Tax Act, these benefits are taxed under the head “Income from Salary”, though
A Conceptual Overview of Retirement Benefits under the Head “Income from Salary” Read More »
Present Value (PV) and Discounted Cash Flow (DCF) are terms we frequently hear in the financial world. They are widely used in corporate finance, banking, valuation, and even personal investment planning. But why are they so important? Let us begin with a very simple question. Suppose you invest in an LIC policy today and receive
Discounted Cash Flow and Present Value in Investment Decisions Read More »
When you receive your first appointment letter, you will often find several components listed in your salary structure—basic pay, allowances, perquisites, reimbursements, and other benefits. For many fresh professionals, the terms “allowances” and “perquisites” can be confusing. It is important not to overlook these terms. Understanding them properly helps you interpret your salary structure, estimate
Allowances and Perquisites under Income from Salary Read More »
Accounting Standard AS 3 and its converged version Ind AS 7, which is aligned with IAS 7 under IFRS, are very important for students to understand the concept of cash flow. Cash flow is not the same as accounting profit. In many situations, the cash generated by a business may be higher or lower than
Profit is Not Cash: Understanding the Real Cash Flow in a Business Read More »
The Capital Asset Pricing Model (CAPM) is an equation that describes the relationship between the expected return of an investment and its risk. CAPM quantifies investment risk through beta, allowing investors to compare the volatility of an asset to the market. If you need to clear your concept of CAPM, let’s go through this classroom
Understanding CAPM in the World of Returns and Wealth Building Read More »
A letter of credit is essentially a financial document issued by a bank that guarantees payment to a seller on behalf of a buyer. Normally, the bank’s customer is the importer, or the buyer of the goods. They work with the bank to issue the letter of credit to the exporter/seller. The importer/buyer is the
Letter of Credit (LC) in International Transactions Read More »
Accrual Basis of accounting is a fundamental accounting assumption for the preparation and presentation of financial statements as per Accounting Standard (AS) 1, disclosure of Accounting Policies. Additionally, Section 128 of the Companies Act,2013 requires maintenance of books of accounts by Companies on the Accrual Basis. Many businesses prefer to use cash accounting because the
Understanding Accrual and Cash Basis of Accounting under PGBP Read More »
Cost of Capital is the minimum rate of return or profit a company must earn. It is extremely important to investors and analysts. It’s the cost of obtaining funds, whether through equity or debt and includes the returns expected by shareholders and the interest expenses on debt. Companies look for the optimal mix of financing that provides adequate funding and minimizes the
Cost of Capital and EVA: Tools for Strategic Financial Decisions Read More »
Section 43B of the Income Tax Act provides a list of expenses can be claimed as deductions from business income only in the year of actual payment and not in the year when the liability to pay such expenses is incurred. Section 40A (3) disallows tax deductions on expenses above Rs. 10,000 made in cash in a
PGBP vs Book Profit – Including Cash Disallowance –Section 40A (3) Read More »
