General: The internal management of companies is carried on according to the articles of association. The articles define the relationship between members and between members and the company. On this basis, members are bound to each other but neither the company nor the members are bound to outsiders. Articles may supplement the terms of a […]

# Tag Archives | Management

## Calculation of Point of Indifference | Capital Structure

After reading this article you will learn about Calculation of Point of Indifference. The EPS, earnings per share, ‘equivalency point’ or ‘point of indifference’ refers to that EBIT, earnings before interest and tax, level at which EPS remains the same irrespective of different alternatives of debt-equity mix At this level of EBIT, the rate of […]

## Comparison between Book Value and Real Value

The over and under capitalisation situations of a company can also be ascertained by comparing the book value and real value of equity shares of the company. The book value of equity shares is calculated on the basis of net assets available for equity shareholders. It can be computed by dividing the net assets available […]

## Profit Volume Ratio (With Formula and Calculation)

After reading this article you will learn about Profit-Volume Ratio. The Profit/volume ratio, which is also called the ‘contribution ratio’ or ‘marginal ratio’, expresses the relation of contribution to sales and can be expressed as under: P/V Ratio = Contribution/Sales Since Contribution = Sales – Variable Cost = Fixed Cost + Profit, P/V ratio can […]

## Over-Capitalisation and Under-Capitalisation (Differences)

This article will help you to differentiate between Over-Capitalisation and Under-Capitalisation. 1. Over-capitalisation involves a great-strain on the financial resources of a company whereas under-capitalisation implies high rate of earnings on its shares. 2. The remedial procedure of over-capitalisation is more difficult and expensive as compared to the remedial procedure of under-capitalisation. 3. Under-capitalisation accelerates […]

## Cost Analysis and Marginal Costing

After reading this article you will learn about the Similarities and Dissimilarities between Differential Cost Analysis and Marginal Costing. Similarities: Most often, marginal costing and differential costing are used as synonymous. But the two are not exactly the same in all respects. The points of similarity and difference between the two are summarised as follows: […]

## Top 4 Significances of Cost of Capital | Financial Management

This article throws light upon the top four significances of cost of capital. The significances are: 1. As an Acceptance Criterion in Capital Budgeting 2. As a Determinant of Capital Mix in Capital Structure Decisions 3. As A Basis for Evaluating the Financial Performance 4. As a Basis for taking other Financial Decisions. Significance of […]

## 7 Main Steps for Installation of a Costing System

This article throws light upon the seven main steps for installations of a costing system. The steps are: 1. Objectives to be Achieved 2. Study the Product 3. Study the Organisation 4. Deciding the Structure of Cost Accounts 5. Selecting the Cost Rates 6. Introduction of the System 7. A Follow-up. Installation of a Costing […]

## Differential Cost: Meaning, Features and Applications

After reading this article you will learn about Differential Cost:- 1. Meaning of Differential Cost 2. Determination of Differential Cost 3. Essential Features 4. Managerial Applications. Meaning of Differential Cost: Differential costs are the increase or decrease in total costs that result from producing additional or fewer units or from the adoption of an alternative […]

## 5 Major Problems in the Determination of Cost of Capital

This article throws light upon the five major problems in determination of cost of capital. The problems are: 1. Conceptual Controversies Regarding the Relationship between the Cost of Capital and the Capital Structure 2. Historic Cost and Future Cost 3. Problems in Computation of Cost of Equity 4. Problems in Computation of Cost of Retained […]