What is the primary objective of 'financial management'?Or State the objective of Financial Management.

2

(a)

The primary objective of financial management is to maximise shareholder's wealth which is also known as wealth maximisation concept.

Wealth maximisation objective of financial management leads to achievement of other objectives too.List any two such objectives.

2

(a)

Two such objectives  are:
(i) Profit maximisation  
(ii) Maintenance of liquidity

Name the financial decision which will help a businessman in opening a new branch of its business. Or A company wants to establish a new unit and purchases a machinery of worth Rs 10 lakh.Identify the type of decision involved

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(a)

Capital Budgeting Decision/Investment Decision

State the major determinant of dividend decision

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(a)

Amount of earnings.

State two objectives of financial planning

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(a)

Objectives of financial planning are:

(i) To ensure availability of funds whenever required.

(ii) To see that firm does not raise resources unnecessarily. 

Which component of capital structure determines the overall financial risk in an organisation?

2

(a)

Debt determines the overall financial risk in an organisation.

'EPS will always rise with the increase in the debt'.Comment.

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(a)

No, Eps rises with increase in debt, only when the return on investment is more than the cost of debt.

A company is planning to expand. The Return on investment (ROI) is below the industry average.Cash flow position is also not good.
(i)  Suggest the finance, it must choose to go ahead with its plan.
(ii) If it chooses to raise funds by debt, what values are lacking in it.

 

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(a)

(i) Equity.
(ii) Responsibility, honesty and transparency.

Name any two essential ingredients of sound working capital management.

2

(a)

The two essential ingredients of sound working capital management are inventory management and receivable management.

Define a 'current assets'.Give four examples of such assets?

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(a)

Current assets are those assets of the business which can be converted into cash within a period of one year. Cash in hand or at bank,
bills receivables, debtors, finished goods inventory are some of the examples of current assets.

What are the main objectives of financial management? Briefly, explain.

4

(a)

When can a capital structure be considered optimum and what kind of capital structure is best for a firm?

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(a)

What is meant by working capital?

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(a)

Identify the financial decision which determines the amount of profit earned to be distributed and to be retained in the business.Explain any four factors affecting this decision.

6

(a)

Explain the term 'trading on equity'. Why when and how can it be used by a business organisation?

6

(a)

Explain the following as factors affecting the requirements of working capital.
(i) Nature of business                
(ii)Scale of operations
(iii) Seasonal factors                    
(iv) production cycle 

6

(a)