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Profit maximisation criterion
Profit maximisation criterion is unsuitable and inappropriate as an operational objective of financing, investment and dividend decisions of a firm. It isn't only vague and time value of money. It follows from the above that a suitable operational decision criterion for financial management should
(i) be exact andprecise,
(ii) be based on "bigger the better" principal,
(iii) consider both quantity and quantity dimensions of benefits
(iv) recognise the time value of money. Alternative to profit maximisation that is wealth maximisation is one such measure.
Matching or Accrual The accrual concept makes a distinction among the receipt of cash and the right to receive it, and the payment of cash and legal obligation to pay it.
How does the market determine the fair value of a bond? The fair value of a bond is a present value of the bond's coupon interest payments plus the present value of the face va
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the nu-nu brothers inc. (NNBI) has the following capital structure,
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