Tag: organisation of commerce and management

Questions Related to organisation of commerce and management

_________ term investment decision are concerned with the decisions about the levels of cash, inventories and debtors.

functional area of management financial management nature and significance of management organisation of commerce and management business studies

  1. Long

  2. Short

  3. Medium

  4. Both a and c

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Correct Option: B
Explanation:
The investment made in the current assets or short term assets is termed as Working Capital Management. The working capital management deals with the management of current assets that are highly liquid in nature.
The investment decision in short-term assets is crucial for an organization as a short term survival is necessary for the long-term success. Through working capital management, a firm tries to maintain a trade-off between the profitability and the liquidity.
Short-term investments are part of the account in the current assets section of a company's balance sheet. This account contains any investments that a company has made that is expected to be converted into cash within one year. 

An expansion of business which is a result of capital budgeting decision is likely to affect virtually all items in the __________ account of the business.

functional area of management financial management nature and significance of management organisation of commerce and management business studies

  1. Balance sheet

  2. Trading

  3. Profit and loss

  4. Trading and profit and loss

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Correct Option: C
Explanation:

All items in the Profit and Loss Account, e.g., Interest, Expense, Depreciation, etc. and an expansion of business which is a result of capital budgeting decision is likely to affect virtually all items in the profit and loss account of the business.

The quantum of ________ assets as well as its break-up is an aspect affected by finance.

functional area of management financial management nature and significance of management organisation of commerce and management business studies

  1. current

  2. non-current

  3. tangible

  4. intangible

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Correct Option: A
Explanation:

The above statement is used to describe the function of financial management. The quantum of current assets and its breakup into cash, inventory and receivables means financial management decisions regarding how much to invest in current assets and its breakup into cash, inventory i.e stock, debtors.

Under the risk factor of financing decision, the risk associated with different sources is _________.

functional area of management financial management nature and significance of management organisation of commerce and management business studies

  1. same

  2. different

  3. higher

  4. lower

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Correct Option: B
Explanation:

The primary goal of both investment and financing decisions is to maximize shareholder value. Investment decisions revolve around how to best allocate capital to maximize their value. Financing decisions revolve around how to pay for investments and expenses. Companies can use existing capital, borrow, or sell equity.

Risk factor for financing decision, the risk associated with different sources is different because every source is different with diff interest, payback period,profitability index etc.

Under the amount of long term and short term financing to be used, the underlying assumption is that current liabilities cost _______ than long term liabilities.

functional area of management financial management nature and significance of management organisation of commerce and management business studies

  1. more

  2. less

  3. equal

  4. nil

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Correct Option: B
Explanation:

Current liabilities have high interest rates with shorter duration to pay off hence,

Under the amount of long term and short term financing to be used, the underlying assumption is that current liabilities cost less than long term liabilities.

Market price of equity shares ________ if the benefits from a decision exceed the cost involved.

functional area of management financial management nature and significance of management organisation of commerce and management business studies

  1. increases

  2. decreases

  3. equalizes

  4. both a and c

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Correct Option: A
Explanation:

Market price of equity shares will increase because if benefit from a decision exceeds the cost involved, wealth maximization will increase hence if revenue covers the cost then ultimately earning per share will increase.

The size as well as the composition of _______ assets of the business is an aspect affected by finance.

functional area of management financial management nature and significance of management organisation of commerce and management business studies

  1. current

  2. fixed

  3. non-current

  4. tangible

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Correct Option: B

'Financial management is the activity concerned with planning, raising, controlling and administering of funds used in the business' are the words of ________.

functional area of management financial management nature and significance of management organisation of commerce and management business studies

  1. J. F. Brandley

  2. Guthmann and Dougall

  3. Massi

  4. Howard and Upton

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Correct Option: B
Explanation:
According to the Guthmann and Dougall, “Business finance can broadly be defined as the activity concerned with planning, raising, controlling, administering of the funds used in the business”.

Which of the following is False

functional area of management financial management nature and significance of management organisation of commerce and management business studies

  1. Financing Decision comprises of Financial Planning Capital Structure Decision

  2. Investment Decision comprises of Fixed Capital Management and Working Capital Management

  3. Dividend Decision includes Dividend Payment Policy Decision

  4. None

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Correct Option: D
Explanation:

Financing Decisions. Decisions concerning the liabilities and stockholders' equity side of the firm's balance sheet, such as a decision to issue bonds.

The Investment Decision relates to the decision made by the investors or the top level management with respect to the number of funds to be deployed in the investment opportunities.
The Dividend decision refers to the policy that the management formulates in regard to earnings for distribution as dividends among shareholders. The decision, in Corporate finance, is a decision made by the directors of a company about the amount and timing of any cash payments made to the company's stockholders.

"Finance may be defined as that administrative area or set of administrative functions in an organization which relates with the arrangement of each and credit so that the organisation may have the means of carrying out its objectives as satisfactorily as possible."

functional area of management financial management nature and significance of management organisation of commerce and management business studies

  1. B.O Wheeler

  2. J.F. Brandley

  3. Howard and Upton

  4. William J. Stanton

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Correct Option: C
Explanation:
According to Howard and Upton, “finance may be defined as that administrative area or set of administrative functions in an organization which relates with the arrangement of each and credit so that the organization may have the means to carry out the objectives as satisfactorily as possible".