Ratio analysis is a very important tool for financial analysis. It is the process of establishing a significant relationship between the items of financial statements to provide a meaningful understanding of the performance and financial position of a firm.
Financial Management
What is Profit Maximization? Definition, Meaning, Features & Limitations
Profit maximization is the traditional and narrow approach. As per traditional theories, maximization of profit is considered to be the sole objective of a business organization. This theory is also called as cashing per share maximization. As per the requirement of the firm, the product price and output are placed under competition to maximize profit. Profit maximization is said to be the maximization of returns by the firm in terms of monetary resources and increasing the earnings per share of the shareholders.
What is Payback Period? Meaning, Method, Formula, Calculation & Example
The number of years required for the proposal’s cumulative cash inflows to be equal to its cash outflows is called ‘Payback Period’. It is “the length of time (indicated as the number of years) to recover the initial cost of the project”.
What is Wealth Maximization? Definition, Meaning, Example, Features & Limitations
Wealth maximization is also known as Value Maximization or net Present Worth Maximization. Wealth maximization has all the features of certainty, quality benefits, and timing benefits. The goal of wealth maximization is the widely accepted goal of the business as it reconciles the varied, often conflicting interest of the stakeholders. Also, it is free from the limitations that other objectives are faced with.
