Finance (Business Finance)-business finance calculation tool

Example

Evaluating the potential profitability of a new product line by estimating the expected cash flows, calculating the Net Present Value (NPV), and determining the Internal Rate of Return (IRR).

Scenario

A retail company considers launching a new clothing line. By using capital budgeting techniques, they analyze whether the projected revenues justify the initial investment and ongoing costs.

Example

Managing the balance between current assets and liabilities to ensure the company has sufficient liquidity to meet its short-term obligations.

Scenario

A manufacturing firm needs to ensure it can pay suppliers on time while maintaining enough inventory to meet customer demand. Effective working capital management ensures the firm doesn’t run out of cash or hold excessive inventory.

Example

Using financial instruments like derivatives to hedge against potential losses from currency fluctuations or interest rate changes.

Scenario

An international company with revenue in multiple currencies might use forward contracts to lock in exchange rates, minimizing the risk of adverse currency movements affecting profitability.