Month: February 2021

INTRODUCTION A lease is a contract between a lessor (bank/finance house) and a lessee (person/company to whom the asset is leased) for the hire of a specific asset.  The lessor retains ownership but gives the lessee the right to use Read More …

INTRODUCTION Dividends are paid from retained earnings Retained Earnings – -One of the most important sources of “new” equity funds for companies.  The more funds retained, the less available for the payment of dividends and vice versa. Prime Objective – Read More …

INTRODUCTION Many new business ventures are considered too risky for traditional bank lending (term loans, overdrafts etc.) and it is this gap that Venture Capital usually fills. Venture Capital could be described as a means of financing the start-up, expansion Read More …

SHARE CAPITAL Ordinary Shares The main features are: Issued to the owners of the company (equity). Nominal or “face” value (e.g. 1000rwf.). Market value moves with market‟s view of the company‟s performance/prospects. Shareholders are not liable for the company‟s debts Read More …

INTRODUCTION Capital Markets are markets where long-term instruments are traded e.g. equities, preference shares, debentures etc. A good example of a Capital Market is the Stock Exchange. The Rwanda Stock Exchange was incorporated as a limited company 7 October 2005 Read More …

OVERVIEW OF WORKING CAPITAL MANAGEMENT Definition of Working Capital Working Capital (Net Current Assets) = Excess of Current Assets over Current Liabilities. Current Assets: Stock (Finished Goods, WIP and Raw Materials), Debtors, Marketable Securities and Cash/Bank. Current Liabilities: Creditors Due Read More …

INTRODUCTION Capital Rationing is a situation where a company has insufficient capital to complete all projects which it would like to undertake (e.g. those with a positive NPV). Broadly, Capital Rationing can be described as: Soft Capital Rationing – due Read More …

INTRODUCTION An organisation may be faced with a decision on the best policy regarding the replacement of assets.  If the asset is to be replaced with an “identical asset” the question is how long to retain the asset and the Read More …

INTRODUCTION To illustrate how inflation should be handled in Investment Appraisal we shall take a simple example, under two different scenarios – an environment with no inflation and an environment where inflation is present: No Inflation – suppose you are Read More …

INTRODUCTION To appraise fully an investment, management must take account of the impact of taxation, as it is the after-tax cash flows that are relevant to decision making. As a result of accepting a project tax payments or savings will, Read More …