Define financial management 

1

(a)

Financial management is the activity concerned with the planning, raising, controlling and administering of funds used in the business

Identify the decision taken in financial management,which affects the liquidity as well as the profitability of business.

1

(a)

Financing decision. 

What is the other name used for long-term investment decision?

1

(a)

The other name for long-term investment decision is capital budgeting decision.

What is dividend?

1

(a)

Dividend is that part of profit, which is distributed among shareholders.

What do you mean by dividend decision?

1

(a)

Dividend decision relates to how much of the company's after tax profit is to be distributed to the shareholders and how much of it should be retained in the business for meeting the investment requirements.

List out two factors affecting dividend decision.

1

(a)

Two factors affecting dividend decision are:
(i) Earnings of the company 
(ii) Cash flow position of the company

 

State the major determinant of dividend decision

1

(a)

Amount of earnings.

What do you understand by floatation cost?

1

(a)

Floatation cost means the cost of raising funds.e.g. various expenses that have to be borne on advertising, printing, prospectus, underwriting commission,etc.

According to you, which is the cheapest source of finance?

1

(a)

Debt instruments like debentures, long-term loans, etc prove to be the cheapest source of finance since interest paid on them is tax deductible expense.

State any two decisions which can be taken by a manager in a financial plan.

1

(a)

Two decisions taken by a manager in a financial plan are:
(i) Decisions regarding issue of equity and preference shares.
(ii) Decisions regarding ploughing back of profits.

How is shareholders'wealth maximisation linked with the market price of the shares of the company? 

4

(a)

Discuss in brief the importance of financial management.

4

(a)

Every manager has to take three major decisions while performing the finance functions.Explain them.

4

(a)

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

4

(a)

Explain any four factors of 'dividend decision' of a company

6

(a)

You are the finance manager of a company.Your board of directors have asked you to decide the dividend policy of a company.Explain the factors which you will consider while determining the dividend policy.

6

(a)

Explain the following as factors affecting the choice of Capital Structure.
(i) Cash flow position
(ii) Cost of equity
(iii) Floatation costs
(iv) Stock market conditions

6

(a)

What is working capital? How is it calculated? Discuss five important determinants of working capital requirement.

6

(a)