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प्रश्न
What are the main objectives of financial management? Briefly explain.
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उत्तर १
The objectives of financial management can be listed as :-
- To ensure regular and adequate supply of funds
- To ensure adequate return to the shareholders
- To ensure optimum utilisation of funds
- To ensure safety of investment
- To plan sound capital structure that is to maintain of a balance between debt and equity
उत्तर २
Meaning: - Financial Management is a specialized function of general management. It refers to the management of business funds. It is mainly concerned with raising finance and its effective utilization for the achievement of goals of the organization.
Definition: -"financial Management is concerned effective use of an important economic resource, namely capital funds."
- Profit Maximisation: -
Profit Maximization is a basic principle of any business activity. According to this principle, all functions of business aim at a profit. The principle of 'profit maximization is a traditional concept. It is based on the assumption that 'profit is a tool of measuring the success of business firm'. In simple words, the business firm should undertake only such activities that increase profit. The business activities which decrease profit should be avoided.
Profit maximization is considered to be the most important business objective because of the following reasons:
- It is difficult for a business to survive without profit.
- Profit is a tool for measuring the success of a business firm.
- High-level profitability results in better returns (dividend) to the shareholders.
- High-level profitability can generate funds, which can be used for future expansion of the business firms.
- Profit maximization has to be achieved for socio-economic welfare.
- Wealth Maximization: -
According to Prof. Solomon Ezra, the ultimate goal of financial management should be the maximization of owners' wealth.
According to him, the maximization of profit is unreal and half motive. The proper aim of financial management is the wealth maximization of equity shareholders.
Wealth maximization is also known as 'value maximization'. It means maximizing the net present value of a firm.The focus of financial management is on wealth maximization of its owners' i.e. suppliers of equity capital. The wealth of shareholders is reflected in the market value of the shares. So wealth maximization means the maximization of the market price of shares. The wealth of equity shareholders is maximized only when the market value of equity shares is maximized.
संबंधित प्रश्न
| Group 'A' | Group 'B' | ||
| 1 | Financial Management | a | Distribution of profit |
| 2 | Retained profit | b | Deposits less than Rs. 20,000 |
| 3 | Debenture trustees | c | Capitalisation of profit |
| 4 | Small depositors | d | 1996 |
| 5 |
Depository Act |
e | Management of business funds |
| f | Borrowed capital | ||
| g | Protect interest of debentures holders | ||
| h | Management of business activities | ||
| i | Deposits less than Rs. 25,000 | ||
| j | 1956 |
Advice to Board of Directors in respect of financial matter is given by _______.
Normally _________ gives advice to the Board of directors in respect of financial matters.
Under which heads will the following items be shown in the Balance Sheet of a Company
(i) Bank Balance
(ii) Investments (Long-term)
(iii) Outstanding Salary
(iv) Authorised Capital
(v) Bills Payable
(vi) Unclaimed Dividents
(vii) Shares Option Outstanding Account
(viii) General Reserve; and
(ix) Subsidy Reserve?
Under which heads the following items are shown in the Balance Sheet of a company:
(i) Calls-in-Arrears
(ii) Commission Received in Advance
(iii) Debentures
(iv) Stores and Spare Parts
(v) Land and Building
(vi) Forfeited Shares Account?
From the following information extracted from the books of Howrach Ltd., prepare Balance Sheet of the company as at 31st March, 2019 as per Schedule III of the Companies Act, 2013:
| (₹ in '000) | (₹ in '000) | ||
| Long-term Borrowings | 1,000 | Fixed Assets (Tangible) | 1,600 |
| Trade Payable | 60 | Inventories | 40 |
| Share Capital | 800 | Trade Receivables | 160 |
| Reserves and Surplus | 180 | Cash and Cash Equivalents | 240 |
Prepare Balance Sheet of HP Ltd. as at 31st March, 2019 from the following information:
| ₹ | ₹ | |||
| Equity Share Capital | 20,00,000 | Surplus, i.e., Balance in Statement of Profit and Loss (Cr.) | 3,00,000 | |
| 12% Preference Share Capital | 10,00,000 | Stock | 6,00,000 | |
| Fixed Assets (At cost) | 46,60,000 | Sundry Debtors | 8,00,000 | |
| Accumulated Depreciation | 16,60,000 | Cash | 1,50,000 | |
| Investments | 4,00,000 | Loans and Advances | 50,000 | |
| Current Liabilities | 8,00,000 | Provision for Taxation | 2,00,000 | |
| 12% Debentures | 6,00,000 | Workmen Compensation Reserve | 1,00,000 |
From the following information, calculate Change in Inventory of Work-in-Progress:
Opening and Closing Work-in-Progress ₹1,50,000 and ₹1,45,000 respectively.
From the following information, calculate Change in Inventory of Stock-in-Trade: Opening and Closing Stock-in-Trade ₹5,00,000 and ₹4,50,000 respectively.
From the following information compute the amount to be shown in Note to Accounts on Employees Benefit Expenses: Wages ₹ 5,40,000; Salaries ₹ 7,20,000; bonus ₹ 1,05,000; Staff Welfare Expenses ₹ 60,000 and Business Promotion Expenses ₹ 50,000.
Out of the Following, identify the items that are shown in the Note to Accounts on Finance Costs:
(i) Interest paid on Borrowing from prince Finance Ltd.;
(ii) Interest paid on Term Loan to Bank;
(iii) Interest paid on Public Deposits;
(iv) Loss on Issue of Debentures Written off; and
(v) Bank Charges.
Under which line item (major head) of the Statement of Profit and Loss of non-financial company will the following be shown:
(i) Sale of Goods;
(ii) Revenue from Services Rendered;
(iii) Interest Earned;
(iv) Gain (Profit) on Sale of Assets;
(v) Purchases of Stock-in-Trade;
(vi) Salaries and Wages;
(vii) Interest paid to Bank;
(viii) Carriage Outward?
What is the role and function of Financial Management?
Other things remaining the same, an increase in the tax rate on corporate profit will :
'S' Limited is manufacturing steel at its plant in India. It is enjoying a buoyant demand for its products as economic growth is about 7% - 8% and the demand for steel is growing. It is planning to set up a new steel plant to cash on the increased demand. It is estimated that it will require about Rs 5000 crores to set up and about Rs 500 crores of working capital to start the new plant.
Which of the following is the role and objectives of financial management for this company.
The foremost objective of financial management is :
Which of the following statements is false regarding financial management?
