Category: Accounting and Financial Management

What are Generally Accepted Accounting Principles (GAAP)?

Key takeaway: Generally Accepted Accounting Principles (GAAP) are the standard rules and guidelines governing financial reporting in the…
What is Pecking Order Theory (POT)?

Key takeaway: Pecking Order Theory, introduced by Donaldson and later formalised by Myers and Majluf, explains how firms…
What is Efficient Market Hypothesis (EMH)?

Key takeaway: The Efficient Market Hypothesis (EMH) argues that financial markets quickly incorporate all available information into asset…
What is Modern Portfolio Theory (MPT)?

Key takeaway: Harry Markowitz’s Modern Portfolio Theory argues that investors can maximise returns for a given level of…
What is Internal Rate of Return (IRR)?

Key takeaway: The Internal Rate of Return is the discount rate that makes a project’s net present value…
What is Net Present Value (NPV)?

Key takeaway: Net Present Value calculates the value of future cash flows discounted back to today, minus the…
What is Capital Asset Pricing Model (CAPM)?

Key takeaway: CAPM explains the relationship between risk and expected return by linking an asset’s required return to…
What is Return on Investment (ROI)?

Key takeaway: Return on Investment measures the financial gain generated relative to the cost of an investment. Expressed…
What is Dividend Irrelevance Theory?

Key takeaway: Dividend Irrelevance Theory argues that a firm’s dividend policy does not affect its overall value in…
What are Mergers and Acquisitions?

Mergers and Acquisitions (M&A) allow companies to expand and improve competitiveness but come with risks like cultural integration…