Finance

Asset side of the balance sheet

Understanding the Asset Side: Linking Investment Decisions with Financial Ratios

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Having examined the funding side of the Balance Sheet in our last blog, it is equally important to understand how these funds are deployed within the business. This tells us that whatever funds a business raises—whether from owners (equity) or borrowings (debt) must be fully utilised in acquiring assets. But the real question is: how […]

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Understanding the Funding Side of the Balance Sheet: A Gateway to Connected Ratio

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When we analyze the liability side of the Balance Sheet, we are essentially looking at the sources of funds—primarily shareholders’ equity and borrowings. However, the Balance Sheet presents only a snapshot at a point in time. To truly understand how these funds are raised, repaid, or managed over a period, we must look beyond and

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Asset side of the balance sheet

Debt–Equity & Interest Coverage Ratio: Linking Lending Decisions with Ind AS 23

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In today’s competitive business environment, companies frequently rely on external financing to support expansion, manage working capital, or undertake capital-intensive projects. Financial institutions, however, do not extend credit based solely on growth prospects—they closely evaluate a company’s financial stability and repayment capacity before making lending decisions. Two of the most critical metrics in this evaluation

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Understanding Debt Service Coverage Ratio (DSCR) from a Lending Perspective

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Lending institutions use this ratio as a key measure of a company’s ability to pay off the principal and interest on a loan. Before granting a loan, the bank will calculate your company’s debt service coverage ratio. If it’s good, the bank will consider that you should be able to meet your repayment obligations. If

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NPV and IRR

NPV and IRR in Capital Investment and Financing Decisions

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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

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Discounted Cash Flow and Present Value in Investment Decisions

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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

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Understanding CAPM in the World of Returns and Wealth Building

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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

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Cost of capital and EVA

Cost of Capital and EVA: Tools for Strategic Financial Decisions

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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

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Equity or Debt? Understanding Financial Breakeven and Indifference Point

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The students were settling into the Corporate Finance class, some eagerly taking the front seats while many quietly occupied the back benches. The room buzzed with low conversations as notebooks and laptops came out. The professor stood calmly in front of the smart board, glanced around the classroom, and smiled. He wrote a few key

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