) DIFF. B/W PROFIT AND WEALTH MAXIMIZATION PROFIT MAXIMIZATION Ambiguity-i.e., maximization of EBIT, EBT, PAT etc.

Timing of benefits Quality of benefits-risk involved WEALTH MAXIMIZATION Ambiguity-maximize shareholders wealth i.e., maximize share prices. Timing of benefits is considered as time value is factored in. Quality of benefits is considered in the discount rate.

2) FINANCIAL PLANNING Financial planning is a process of setting objectives, assessing assets and resources, estimating future financial needs, and making plans to achieve monetary goals. Many elements may be involved in financial planning, including investing, asset allocation, and risk management. Tax, retirement, and estate planning are typically included as well. 3) Effects of Overcapitalization On Shareholders- The over capitalized companies have following disadvantages to shareholders: Since the profitability decreases, the rate of earning of shareholders also decreases. The market price of shares goes down because of low profitability. The profitability going down has an effect on the shareholders. Their earnings become uncertain.

With the decline in goodwill of the company, share prices decline. As a result shares cannot be marketed in capital market. On CompanyBecause of low profitability, reputation of company is lowered. The companys shares cannot be easily marketed. With the decline of earnings of company, goodwill of the company declines and the result is fresh borrowings are difficult to be made because of loss of credibility. In order to retain the companys image, the company indulges in malpractices like manipulation of accounts to show high earnings. The company cuts down its expenditure on maintainance, replacement of assets, adequate depreciation, etc. 4) OPTIMUM CAPITAL STRUCTURE It may be defined as,capital structure or combination of debt and equity that leads to the maximum value of the firm. 5) TYPES OF LEVERAGES Operating leverages Financial leverages Composite leverages

6) WORKING CAPITAL The funds required by the organization to meet its day-to-day expenditure is called working capital. The components of the working capital are:

Current assets Current liabilities 7) INVENTORY MANAGEMENT Inventories are stock accounts kept in the business and meant either for production or for resale. The components of inventory are: Raw materials Work-in-progress Finished goods 8) DIFF. B/W SHARES AND DEBENTURES SHARES Shares are instruments to raise capital. Share capital is the back bone of the companys financial structure. Share capital represents ownership of the company. Shareholders collectively own the company. DEBENTURES Debenture/bond is a debt instrument indicating that a company has borrowed certain sum of money and promises to repay it in future under clearly defined terms. 9) STABILITY OF DIVIDEND The term stability of dividends means consisting or lack of variability in the stream of dividend payments. It means payment of certain minimum amount of dividend regularly. A stable dividend policy may be established in any of the following 3 forms:

Constant dividend per share Constant payout ratio Stable rupee dividend plus extra dividend