Capital Fund Management (CFM) refers to the professional management of a pool of capital from investors to achieve specific financial objectives. This management typically involves investment strategies designed to maximize returns while managing risks. CFM can include various approaches such as quantitative analysis, tactical asset allocation and systematic trading. By leveraging advanced financial models and market insights, CFM aims to optimize investment performance and provide a structured way for investors to grow their wealth.
Definition An Accounts Payable Ledger is a vital financial record-keeping tool that tracks a company’s outstanding liabilities to suppliers and creditors. It reflects all amounts owed by the business for goods and services received but not yet paid. This ledger forms a part of the broader accounts payable system, contributing to a business’s overall financial health and cash flow management.
Components of Accounts Payable Ledger Vendor Information: This includes the names and addresses of the suppliers, along with contact information for effective communication.
Definition The Accounts Receivable Ledger is a crucial component of a company’s financial management system. It serves as a detailed record of all amounts that customers owe the business for goods sold or services rendered but not yet paid for. This ledger helps organizations manage their cash flow effectively and provides insight into customer payment behavior.
Components of an Accounts Receivable Ledger Customer Details: Each entry in the ledger includes pertinent information about the customer, such as name, address and contact information.
Definition Capital structure refers to the way a corporation finances its assets through a combination of debt, equity and hybrid financing. It’s essentially the framework that dictates how a firm raises funds to support its operations and growth. A well-structured capital system balances risk and return while ensuring that the corporation can meet its obligations.
Components of Capital Structure Equity: This represents ownership in the company and consists of common equity and preferred equity.
Definition The Cash Flow Statement (CFS) is a financial statement that shows the inflow and outflow of cash during a specific period. It tracks how cash is generated and used in a business through its operational, investing and financing activities. Unlike the Income Statement, which focuses on profitability, the Cash Flow Statement emphasizes the actual cash position of a company, providing stakeholders with insight into its liquidity and financial health.
Definition The Current Ratio is a key financial metric that assesses a company’s capacity to meet its short-term liabilities with its short-term assets. It is an essential indicator of liquidity, allowing stakeholders to gauge the financial health of an organization over a specific period. The formula to calculate the Current Ratio is as follows:
\(\text{Current Ratio} = \frac{\text{Current Assets}}{\text{Current Liabilities}}\) Components Understanding the components of the Current Ratio is critical:
Definition The Debt to Equity Ratio (D/E Ratio) is a key financial metric used to assess a company’s financial leverage by comparing its total liabilities to its shareholder’s equity. It provides insight into the proportion of debt financing used by a company relative to its equity, reflecting its ability to cover debts with its own assets.
Components The Debt to Equity Ratio is calculated using the following components:
Total Liabilities: This includes all financial obligations the company owes, such as loans, mortgages and other debts.
Definition ESG stands for Environmental, Social and Governance, three critical factors used to evaluate the sustainability and ethical impact of an investment in a company or business. These criteria help to better determine the future financial performance of companies (return and risk).
Environmental criteria consider how a company performs as a steward of nature.
Social criteria examine how it manages relationships with employees, suppliers, customers and the communities where it operates.
Definition In finance, equity refers to ownership interest in an entity, represented by the shareholders’ claim on the company’s assets after all liabilities have been subtracted. It’s a measure of the residual interest in a firm’s assets, providing a foundation for assessing a company’s financial health and the value accorded to shareholders. Equity can manifest in various forms, including stocks in publicly traded companies, private ownership shares or equity in real estate after accounting for mortgages or loans.
Definition Estate planning is the process of arranging the management and disposal of a person’s estate during their life and after death. It involves the preparation of tasks that serve to manage an individual’s asset base in the event of their incapacitation or death. The planning includes the bequest of assets to heirs and the settlement of estate taxes. Most estate plans are set up with the help of an attorney experienced in estate law.