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Q. Explain about Baumol Model?
Baumol Model: - Baumol model is a mechanism of cash management which is used to determine optimum cash balance. Optimum cash balance is resolute by establishing a balance between liquidity and profitability.
Higher liquidity or else higher cash balance signifies excessive cash is kept in business which results in loss of interest which can be earned by investing this excessive cash in marketable securities. In contrast lower liquidity or a very low cash balance means no idle cash as well as interest is being earned by investing the excess cash into securities. However in this case also additional costs are incurred such as brokerage of converting securities into, accounting costs of securities, cash, cost of registration of securities etc.
What is meant by the terms that an option is in-, at-, or out-of-the-money? Answer: A call or put option with S t > E (E > S t ) is considered to as trading in-the-money. If
Essential of sound capital mix
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How do we estimate expected incremental cash flows for a proposed capital budgeting project? We calculate expected incremental cash flows for a planned project by estimating the
Carrefour & Tesco
(a) Presume we have a portfolio of n names with some default correlation ρ . The risk of the complete portfolio moves according to the change in default correlation. Alternative
Functions of Financial Management Traditional function of financial management has been limiting the role of finance toraising and administrating of funds required by the compa
Explain Vernon’s product life-cycle theory of FDI. What are the strength and weakness of the theory? Answer: As to the product life-cycle theory, companies undertake FDI at a ce
how do legal consideration affect a firms credit policy
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