Tag: financial management

Questions Related to financial management

Minimum cash reserves fixed by law is a percentage of _________.

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

  1. capital and reserves

  2. securities held

  3. aggregate deposit of the bank

  4. aggregate loans and advances

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Correct Option: C
Explanation:
The aggregate banking deposit is a calculation which determines if your money is federally insured from loss or can determine how much of your money is at risk with that financial institution.
Therefore, minimum cash reserves are a percentage of the aggregate deposits of the bank, by law. 

Mutually exclusive projects can be more accurately ranked as per:

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

  1. Internal rate of return method

  2. Net Present Value Method

  3. Modified Internal Rate of Returns Method

  4. Accounting or Average Rate of Return Method

Show answer
Correct Option: B
Explanation:

Projects with a positive $NPV$ are expected to increase the value of the firm. Thus, the $NPV$ decision rule specifies that all independent projects with a positive $NPV$ should be accepted. When choosing among mutually exclusive projects, the project with the largest (positive) $NPV$ should be selected.

Advantages of Regular dividend payments:
I. It establishes a healthy record for corporation
II. It aids in long-run financing and makes financing easier 
III. It improves the credit base of a corporation
IV. It stabilises the market value of securities
Of these

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

  1. I and II are correct

  2. II and III are correct

  3. I, II and IV are correct

  4. All are correct

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Correct Option: D

_______comprises two decisions, viz., (i) Financial Planning; and (ii) Capital structure decision.

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

  1. Investment decisions

  2. Financing decisions.

  3. Dividend decisions

  4. All of above

Show answer
Correct Option: B
Explanation:
Financial decision is yet another important function which a financial manger must perform. It is important to make wise decisions about when, where and how should a business acquire funds. Funds can be acquired through many ways and channels. Broadly speaking a correct ratio of an equity and debt has to be maintained. This mix of equity capital and debt is known as a firm’s capital structure.

A firm tends to benefit most when the market value of a company’s share maximizes this not only is a sign of growth for the firm but also maximizes shareholders wealth. On the other hand the use of debt affects the risk and return of a shareholder. It is more risky though it may increase the return on equity funds.

A sound financial structure is said to be one which aims at maximizing shareholders return with minimum risk. In such a scenario the market value of the firm will maximize and hence an optimum capital structure would be achieved. Other than equity and debt there are several other tools which are used in deciding a firm capital structure.

_____is nothing but management of limited financial resources the organization has, to its utmost advantage.

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

  1. Material management

  2. Cash management

  3. Customer management

  4. Financial management

Show answer
Correct Option: D
Explanation:

Financial Management means planning, organizing, directing and controlling the financial activities such as procurement and utilization of funds of the enterprise. It means applying general management principles to financial resources of the enterprise.

Investment decisions includes investment in fixed assets (called as capital budgeting). Investment in current assets are also a part of investment decisions called as working capital decisions.
Financial decisions - They relate to the raising of finance from various resources which will depend upon decision on type of source, period of financing, cost of financing and the returns thereby.
Dividend decision - The finance manager has to take decision with regards to the net profit distribution. Net profits are generally divided into two:
Dividend for shareholders- Dividend and the rate of it has to be decided.
Retained profits- Amount of retained profits has to be finalized which will depend upon expansion and diversification plans of the enterprise.

Financial Management is concerned with -
A.Investment decisions.
B. Labour turnover decisions.
C. Financing decisions.
D.Personnel policy decisions.
E.Dividend decisions.
Select the correct answer from the options given below.

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

  1. D B & C

  2. A C B & E

  3. A and C only

  4. E C & A

Show answer
Correct Option: D
Explanation:
  1. Investment decisions includes investment in fixed assets (called as capital budgeting). Investment in current assets are also a part of investment decisions called as working capital decisions.
  2. Financial decisions - They relate to the raising of finance from various resources which will depend upon decision on type of source, period of financing, cost of financing and the returns thereby.
  3. Dividend decision - The finance manager has to take decision with regards to the net profit distribution. Net profits are generally divided into two:
  • Dividend for shareholders- Dividend and the rate of it has to be decided.
  • Retained profits- Amount of retained profits has to be finalized which will depend upon expansion and diversification plans of the enterprise.

Which of the following is an aspect of financial management?

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

  1. The quantum of current assets as well as its break-up into cash, inventories and receivables

  2. The size as well as the composition of fixed assets of the business

  3. The amount of long-term and short-term financing to be used

  4. All of the above

Show answer
Correct Option: D
Explanation:

The financial management aspect of planning involves accurately forecasting the company's revenues, expenses, and resulting net profit. The business owner uses the budget, sometimes called a forecast, as a tool to manage the company.

The aspects are:
1. Investment Decision
2. Financing Decision
3. Dividend Policy Decision

The amount of debt, equity share capital, preference share capital are __________ by financial decisions, which is a part of financial management.

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

  1. affected

  2. not affected

  3. minutely affected

  4. largely affected

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Correct Option: A
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.

The amount of debt, equity share capital, preference share capital are affected by financial decisions, which is a part of financial management.

Short term investment decisions are also called as __________ decisions. 

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

  1. capital budgeting

  2. wealth maximization

  3. working capital

  4. both a and b

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Correct Option: C
Explanation:

Working capital is the amount of liquid assets which an organization has at its disposal. Working capital investments are required to pay for unexpected and unplanned expenses to build a business and meet the business’s short-term duties and obligations. 

The _________ decision relates to how the firm's funds are invested in different assets.

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

  1. profit

  2. invetment

  3. financing

  4. dividend

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Correct Option: B
Explanation:

Investment Decision relates to the determination of total amount of assets to be held in the firm, the composition of these assets and the business risk of the firm as perceived by its investors. It is the most important financial decision. Since funds involve cost and are available in a limited quantity, its proper utilization is very necessary to achieve the goal of wealth maximization.

Investment decisions includes investment in fixed assets (called as capital budgeting). Investment in current assets are also a part of investment decisions called as working capital decisions.