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Financial Management means planning, organizing, directing and controlling the financial activities such as procurement and utilization of funds of the enterprise. It means applying general management principles to financial resources of the enterprise.
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From Financial Management
MM (no tax) assumptions (any three):
Conclusion: firm value is independent of capital structure and WACC remains constant (irrelevance proposition).
Walter model says dividend policy depends on relationship between return on investment r and cost of equity k:
Thus, if reinvestment earns more than required return, retention adds value.
EBIT–EPS analysis compares alternative financing plans (more debt vs more equity) by computing EPS at different EBIT levels.
EBIT → Less: Interest → EBT → Less: Tax → EAT → Divide by equity shares → EPS
It helps select a capital structure that balances risk–return and improves EPS for expected operating performance.
