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Net Operating Income Approach (in Hindi)
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The probable questions which can be asked in NET exam. This lesson will teach you every bit information to understand the NOI approach

Indresh Pratap SINGH
I have done MBA and teaching since last 2 years! I work on 3 things-: 1)Building Interest, 2)Concreting knowledge base, 3)Concept wise focus

Unacademy user
Very clearly explained each topic... Thanku. 😊
😊👍
sir, kindly tell about overall capitalization.
Ok👍 I will, please wait for time😊
Sumedha Dikshit
2 months ago
okay sure sir.
  1. What done in previous class? Capital structure meaning, concept and feature of appropriate structure Sources of finances Basic assumptions of Capital structure theories NI approach and its assumptions


  2. Net Operating Income Approach (NOI) It was discovered by David Durand This capital structure theory is opposite of what he said in IN approach This approach represent another view " that Capital structure and the value of the firm are IRRELEVANT" Capital structure of the firm does not influence by the debt proportion in it and lead to decrease the cost of capital and the value of the firm Value effect because of market trends


  3. According to David, " the use of the less costly debt increases the risk to equity shareholders, this cause ke to increase as a result the low cost advantage of debt is exactly offset by increase in the capitalization rate" Thus the overall capitalization rate (ko) remain same and value of the firm does not change


  4. 0 Degree of Leverage


  5. Assumption of NOI The market capitalizes the value of the firm as whole. The split between debt and equity is not important. . Business risk remain same. No corporate taxes. Debt capitalization rate (kd) is constant.


  6. Theories of Capital Structure .Net income Approach (NI) .Net operating income Approach (NOI) Traditional theory of capital structure MM Approach (MODI MILLER) . Trade-off theory


  7. Relevance Impact Irrelevance Impact Net Income Approach Trade-off Theory Net Operating Income Approach MM Approach TRDITIONAL THEORY OF CAPITAL STRUCTURE


  8. Basic assumptions of all theories 1. Firms employee only debt and equity capital 2. Total assets of the firm are given 3. The firm has 100% payout ratio 4. The operating earnings of the firm are not expected to grow, it means EBIT remain same for all the years 5. Business risk remains constant 6. No corporate and personal taxes 7. We assume to be no transaction costs