business studies - financial management

Class 12 - Business Studies

Financial Management

Q&A
Question:

What is the main objective of financial management? Explain briefly.

Answer:

Primary aim of financial management is to maximise shareholder's wealth, which is referred to as the wealth maximisation concept. The wealth of owners is reflected in the market value of shares, wealth maximisation means the maximisation of market price of shares.
According to the wealth maximisation objective, financial management must select those decisions which result in value addition, that is to say the benefits from a decision exceed the cost involved. Such value addition I increase the market value of the company's share and hence result in maximisation of the shareholder's wealth.



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Questions and Answers


Financial Management - Questions
1.

What is meant by capital structure?


Answer
2.

Discuss the two objectives of Financial Planning.


Answer
3.

Discuss about working capital affecting both the liquidity as well as profitability of a business.


Answer
4.

What is meant by working capital? How is it calculated?
Discuss five important determinants of working capital requirements.


Answer
5.

Capital structure decision is essentially optimisation of risk-return relationship. Comment.


Answer
6.

A capital budgeting decision is capable of changing the financial fortune of a business. Do you agree? Why or why not?


Answer
7.

Explain factors affecting the dividend decision.


Answer
8.

Explain the term ‘trading on equity’. Why, when and how it can used by a business organisation?


Answer
9.

‘S’ Limited is manqufacturing steel at its plant in India. It is enjoying a buoyant demand for its products as economic growth is about 7%-8% and the demand for steel is growing. It is planning to set up a new steel plant to cash on the increased demand it is facing. It is estimated that it will require about ? 5,000 crores to set up and about t 500 crores of working capital to start the new plant.

 What is the role and objectives of financial management for this company?


Answer
10.

Explain the importance of having a financial plan for this company. Give an imaginary plan to support your answer.


Answer
11.

Keeping in mind that it is a highly capital intensive sector what factors will affect the fixed and working capital. Give reasons with regard to both in support of your answer.


Answer
12.

What is ‘financial risk? Why does it arise?


Answer
13.

Define a ‘current assets’ and give four examples.


Answer
14.

Financial management is based on three broad financial decisions. What are these?


Answer
15.

What are the factors which will affect the capital structure of this company?


Answer
16.

What is the main objective of financial management? Explain briefly.


Answer
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