Finance Numericals

Instalment Payment System: Under this system the purchaser or customer immediately pay some down payment of the goods and rest of the amount paid in equal instalments. In this system there is a contract between vendor and purchaser in which the amount of instalments, interest, payment period and if there is any default of payment by purchaser what action will taken by vendor etc are mention. The purchaser has right to use the goods after the down payment of that goods. The vendor has no right to take the goods back if the purchaser is unable to pay any instalment amount. The vendor can only sue on purchaser to get back his money. Example: Mr. Vijay has purchases 4 furniture under instalment system. He paid Rs. 20, 000 as down payment. He has to pay Rs. 15,000 each in 5 yearly instalments. The instalment period started from 1 st august 2018. The yearly interest charge by vendor is 6.2% p.a. Find out the interest amount in each instalment. Solution: Total cash price ...

Employee Provident Fund (EPF): This fund is governed by government bodies EPFO (Employee Provident Fund Organisation). The EPF is opened for salaried people by their employer. Total 24% amount is contributed by employer and employee in this fund. This fund is use as saving plan for retirement of employee. Public Provident Fund (PPF): This fund is opened by any individual person except Hindu Undivided Family (HUF), NRI. The amount invested in this fund for 15 years. If there is any need of cash arises then the holder of the account has to pay penalty. The Public Provident Fund is open in any bank and post offices. The minimum amount invested in Public Provident Fund (PPF) is Rs. 500. The PPF account facilities provided by bank to its customers to increases the saving habit for future by providing interest on Public Provident Fund account. Let’s find out the difference between Employee Provident Fund (EPF) and Public Provident Fund (PPF):  S.No. Point ...

Let’s find out the difference between Cheque and Promissory Note. S.No. Point of differences Cheque Promissory note 1. What is cheque and promissory note? Cheque is an instrument which is presented in bank to instruct the financial institution to pay cash to bearer of cheque or to payee name mention on it. Promissory note is a written promise given by drawer to payee which states that the drawer will pay the fixed amount in fixed future date. 2. Who can issue cheque and promissory note? A person who has a bank account can issue cheque to bank which instruct the bank to pay the cash from his account. A person who takes a loan can write promissory to lender which states that the borrower is promising to pay certain some of money to lender in certain date in future. 3. How many parties involved in cheque and promissory note? There are thre...

Modigliani and Miller’s Approach: Under this approach the dividend policy of a company does not change the value of the firm. If company give dividend or doesn’t give dividend to its shareholders it does not affect the value of the firm. The decision to give dividend in constant rate, regular rate and irregular rate to its shareholders does not change the value of the firm. Assumptions of Modigliani and Miller’s Approach in Irrelevance dividend theory: ·          There is no corporate tax. ·          There is a perfect market condition. ·          The investors are rational. ·          There is no risk or uncertainty. Formula: P 0 = D 1 + P 1 / (1+K e ) P 1 = P 0 (1+K e ) - D 1   Number of new shares: M*P 1 = I – (X – nD 1 ) Where, P 0 = Market price of shares D 1 = Dividend at the end o...