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Chapter III Basic Financial Concepts
Three Daunting Tasks of Finance Manager A. Measurement of Income (Return) B. Measurement of Risk C. Risk-Return Trade-Off
A.Measurement of Income Return On Investment: Relation between Operating Profit(EBIT) to Capital Employed EBIT=Sales-Variable Cost-Fixed Cost Capital Employed=Shareholders Funds + Loan Funds –Investment-Fictitious Assets
Probability and Expected Rate of Return Standard Deviation Sensitivity Analysis B. Measurement of Risk
Systematic Risk Unsystematic Risk Risk-Return Trade-Off: Measurement of Beta Factor and Alpha Co-efficient Risk-Return Trade-Off

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Basic Financial Concepts-B.V.Raghunandan

  • 1. Chapter III Basic Financial Concepts
  • 2. Three Daunting Tasks of Finance Manager A. Measurement of Income (Return) B. Measurement of Risk C. Risk-Return Trade-Off
  • 3. A.Measurement of Income Return On Investment: Relation between Operating Profit(EBIT) to Capital Employed EBIT=Sales-Variable Cost-Fixed Cost Capital Employed=Shareholders Funds + Loan Funds –Investment-Fictitious Assets
  • 4. Probability and Expected Rate of Return Standard Deviation Sensitivity Analysis B. Measurement of Risk
  • 5. Systematic Risk Unsystematic Risk Risk-Return Trade-Off: Measurement of Beta Factor and Alpha Co-efficient Risk-Return Trade-Off