Tag: Finance

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 Risk Management Theory?

Risk Management Theory focuses on identifying, assessing, and prioritising potential threats to organisational objectives. It emphasises analysing likelihood…
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 is Free Cash Flow?

Key takeaway: Free cash flow represents the cash a company generates after covering operating expenses and capital investments.…