CAIIB ABFM By Ashish Sir Class 3
Chapter notes, video classes, MCQ practice tests and quick-revision one-liners for Advanced Business and Financial Management — CAIIB.
One-liners from this chapter
Free sample — 8 of 65 rapid-fire Q&A cards.
What is the primary objective of Advanced Business and Financial Management in the context of CAIIB?
ABFM aims to equip bankers with advanced skills in financial decision-making, risk management, and strategic business analysis to enhance managerial competence at senior levels.
What is 'Capital Rationing' and why do firms practice it?
Limiting capital expenditure when funds are scarce to maximize returns.
What does the concept of 'Economic Value Added' (EVA) measure in financial management?
EVA measures the value a company generates above its required return on capital; it is calculated as Net Operating Profit After Tax (NOPAT) minus the product of invested capital and the weighted average cost of capital (WACC).
What is 'Profitability Index' (PI) and how is it used in project selection?
PI = PV of cash inflows / Initial investment; projects with PI > 1 are accepted.
How is the Weighted Average Cost of Capital (WACC) used in capital budgeting decisions?
WACC serves as the discount rate (hurdle rate) to evaluate investment projects; a project is accepted only if its Internal Rate of Return (IRR) exceeds the WACC, ensuring value creation for shareholders.
What is 'Internal Rate of Return' (IRR) and when is a project accepted using this criterion?
Discount rate making NPV zero; project accepted if IRR exceeds cost of capital.
What is the difference between systematic risk and unsystematic risk in portfolio management?
Systematic risk (market risk) affects the entire market and cannot be diversified away, while unsystematic risk (specific risk) is firm-specific and can be eliminated through portfolio diversification.
What is 'Dividend Discount Model' (DDM) used for in financial analysis?
Valuing a stock based on present value of expected future dividends.
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