Corporate Finance: Leverage, Capital Structure, and Investment Appraisal
1. Operational Leverage
Operational leverage refers to the degree to which a firm’s costs are fixed rather than variable. It measures the sensitivity of operating income (EBIT) to changes in sales revenue, given that fixed costs do not change with sales volume in the short run.
Explanation
Fixed vs. Variable Costs: In any business, costs can be divided into fixed costs (such as rent, salaries, machinery depreciation) and variable costs (like raw materials, direct labor that fluctuates with production
Read MoreEssential Marketing Concepts: Mix, PLC, and Consumer Goods Types
Essential Marketing Concepts and Definitions
Consumer Goods Classification
- Convenience Goods: Products ready to be purchased immediately.
- Sporadic Purchase Goods: These goods require more planning and thought during the purchasing process by consumers (e.g., electronics, furniture).
- Specialty Goods: This category is composed of goods that are deemed luxuries.
The Promotion Mix
- Advertising: A paid promotion method where a sponsor calls for public attention through paid announcements (e.g., TV, newspapers)
Mastering Core Business and Marketing Concepts
Essential Marketing Concepts
Market Sizing and Segmentation
Defining Market Potential (TAM, SAM, SOM)
- TAM (Total Addressable Market): The total possible market size.
- SAM (Serviceable Available Market): The relevant or targetable segment of the TAM.
- SOM (Serviceable Obtainable Market): The realistically reachable share of the SAM that your business can capture in the short to medium term.
Jobs to Be Done (JTBD) and Segmentation
JTBD describes what the customer wants to achieve in their life, what progress
Read MoreCore Operations Management Concepts Explained
Lean Manufacturing (TPS)
Lean Manufacturing (TPS) Lean manufacturing is a production approach focused on eliminating waste and improving efficiency. It originates from the Toyota Production System (TPS), which is based on two key principles:
- Just-in-Time (JIT): Products are made only when needed and in the exact quantities required, reducing excess inventory.
- Jidoka: Allows the production line to stop immediately when a defect appears so the problem can be corrected at the source.
Lean emphasizes continuous
Read MoreIndian Business Environment and Economic Policy
Unit 1: Business Environment Foundations
Nature and Determinants of Business Environment
The business environment refers to all external forces that influence a firm’s decisions, performance, and growth. It includes economic conditions, political stability, legal frameworks, technological changes, socio-cultural factors, and global trends. These components work together to create opportunities or threats for businesses. Determinants like government policies, market competition, resource availability,
Read MoreOperations Strategy: Fit, Performance, and Competitive Alignment
Operations Strategy Fit and Sustainability
Fit is the alignment between Market Requirements (MR) and Operations Resources (OR).
- Good fit leads to strong performance.
- Misfit leads to poor results and higher risk.
Key Concepts of Fit
- Line of Fit: The ideal balance between MR and OR.
- Tight Fit: Very efficient and low waste, but fragile if the market changes rapidly.
- Loose Fit: More flexible and adaptable, offering safety in dynamic markets.
Moving from strategy A to strategy B (improvement) temporarily causes
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