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प्रश्न
Explain the following as factor affecting 'financing decision'.
Control consideration
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उत्तर
Control consideration: A firm may prefer borrowed fund securities to meet the fund requirement as the existing shareholders tend to retain complete control of a business. On the other hand, a firm may prefer owner’s fund securities as they are ready to lose control of the business.
Retention of Control: Debt
Sharing the Control: Equity
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संबंधित प्रश्न
'Abhishek Ltd'. is manufacturing cotton clothes. It has been consistently earning good profits for many years. This year too, it has been able to generate enough profits. There is the availability of enough cash in the company and good prospects for growth in future. It is a well-managed organisation and believes in quality, equal employment opportunities and good remuneration practices. It has many shareholders who prefer to receive a regular income from their investments. It has taken a loan of Rs 50 lakhs from I.C.I.C.I. Bank and is bound by certain restrictions on the payment of dividend according to the terms of the loan agreement.
The above discussion about the company leads to various factors which decide how much
of the profits should be retained and how much has to be distributed by the company.
Quoting the lines from the above discussion, identify and explain any four such factors.
Vasvi was a student of Commerce in class XII. Her father was a farmer, who grew different varieties of wheat and was well versed about various aspects of wheat cultivation. He was also selected by the government for a pilot-project on wheat cultivation. As a project, she decided to study the feasibility of marketing good quality wheat at the reasonable price. Her father suggested to her to use the internet to gather customers’ views and opinions. She found that there was a huge demand for organic packed wheat. She knew that there were no pre-determined specifications in case of wheat, because of which it would be difficult to achieve uniformity in the output. To differentiate the product from its competitors, she gave it the name of ‘Mahan-organic wheat’ and classified it into three different varieties namely — Popular, Classic and Supreme, based on the quality. She felt that these names would help her in product differentiation.
Explain the three functions of marketing, with reference to the above paragraph
Explain the following as factor affecting dividend decision:
Cash flow position
Explain the following as factor affecting dividend decision:
Stability of dividends
Give the meaning of ‘Investment’ and ‘Dividend’ decisions of financial management.
Financial management is based on three broad financial decisions. What are these?
| Ananta Ltd. is a company dealing in ready-made garments for the last many years. Recently the profit of the company has started increasing. The finance manager decided to retain the profit instead of distributing it among shareholders. |
- Identify and state the financial decision taken by the finance manager in the above case.
- State any three factors affecting the decision identified in (i) above.
| Ravi has joined as a finance manager at MTA Ltd. He had to arrange funds of rupees one crore for the company. The Chief Executive Officer of the company wants to arrange the funds by a public issue whereas the finance manager wants to have a mix of debt and equity as this will determine the overall cost of capital and the financial risk of the enterprise. |
- Identify and give the meaning of the financial decision suggested by the finance manager in the above case.
- State any three factors affecting the decision identified in (i) above.
Besides the total amount of long-term finance required, what must a business identify?
What combination must a firm select when choosing between debt and equity?
What is the nature of equity in a debt-and-equity comparison?
Which statement describes the general cost of debt compared with equity?
What is financial risk?
Which statement about the cost of sources of finance is correct?
Which expenses are examples of floatation costs?
How does lower cost affect the attractiveness of a source of finance?
What financing choice do high fixed operating costs generally favour?
