Tag: functional area of management

Questions Related to functional area of management

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".

The key word that can be used to describe the basic economic problem that all societies face is:

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

  1. Selfishness

  2. Greed

  3. Inequality

  4. Scarcity

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Correct Option: D
Explanation:
Scarcity refers to the basic economic problem, the gap between limited – that is, scarce – resources and theoretically limitless wants.
Scarcity, or limited resources, is one of the most basic economic problems we face. Scarcity arises where resources are limited and where the wants of  society are unlimited. Hence it is required that the resources are efficiently allocated.

__________ 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

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Correct Option: B
Explanation:

The Financing Decision is yet another crucial decision made by the financial manager relating to the financing-mix of an organization. It is concerned with the borrowing and allocation of funds required for the investment decisions.

The financing decision involves two sources from where the funds can be raised: using a company’s own money, such as share capital, retained earnings or borrowing funds from the outside in the form debenture, loan, bond, etc.

The objective of financial decision is to maintain an optimum capital structure, i.e. a proper mix of debt and equity, to ensure the trade-off between the risk and return to the shareholders.