CONDITION AND WARRANTIES Every contract is made up of stipulations which are divided into two categories, namely, conditions and warranties. Condition- condition is a stipulation essential to the main purpose of the contract, breach of which give rises to treat the contract repudiated. Eg Warranty- is a stipulation collateral to the main purpose of the contract, breach of which cannot treat the contract repudiated but give right to claim for damages. Eg Distinction between condition and warranty It is essential to the main purpose of the contract On breach of condition contract may be repudiated On breach of condition buyer may reject the goods In breach of condition aggrieved party is not bound to perform the contract The buyer may treat the breach each of the conditions as breach of the warranty only It is collateral to the main purpose of contract On breach of warranty contract cannot be repudiated, but only damages c...
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Divide the following items as Fixed Asset, Current asset, long term liabilities, current liabilities, direct expenses, indirect expenses, direct income, indirect income also write the balances Cash in hand Cash at Bank Cash at Bank (overdrawn) Bank Overdraft Capital Opening stock Wages Purchase Carriage Inwards f freight Royalty on production Gas, Water, Fuel Motive Power Import Duty Sales ...
Working capital management Every business needs funds for two purposes- for its establishment and to carry out its day-to- day operations. Long-term funds are required to create production facilities through purpose of fixed assets such as plant and machinery, land, building, furniture etc. Investment in these assets represents that part of firm’s capital which is blocked on a permanent or fixed basis and is called fixed capital. Funds also needed for short-term purpose for the purchase of raw materials, payment of wages and other day to day expenses is called working capital. Gross concept:- represents the amount of funds invested in current assets. Net concept :- represents current assents – current liabilities Current assets- cash in hand, cash at bank, debtors, stock, temporary investment, prepaid expenses, accrued incomes. Current liabilities – bills payable, creditors, bank overdraft, provision for taxation, outstanding expens...
Dividend theory James E Walter (1963) is an advocate of the dividend relevance theory. This theory states that the retention of earnings of dividend payment influence shareholders’ wealth differently. He assumes three cases that are 1. When the return on new investment is greater than the market capitalization rate, it is the retention of earnings and their investment that will raise the value of shares. 2. When the return on new investment is equal to the market capitalization rate, both the retention of earnings and dividend payment will have the same impact on the value of shares. 3. When the return on new investment is lower than the market capitalization rate, it is the dividend payment, and not the retention of earnings, that will raise the value of shares. Walters formula P= D+(E- D)r/k K P= Price per equity share, D= dividend E= earnings per share, r= rate of return on investment k= cost of...