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प्रश्न
Financial management is based on three broad financial decisions. What are these?
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उत्तर
Financial management refers to the procurement, allocation and utilisation of funds. It deals with three main decisions :-
a) Procurement decisions :- To decide the source of capital that is from where the capital should be raised so as the overall cost of capital should be at its minimum.
b) Investment decisions (Allocation of funds) :- Where the available funds should be invested so as to ensure maximum return.
c) Dividend decision :- To decide the rate of dividend to be paid to the shareholders
संबंधित प्रश्न
'Mission Coach Ltd.' is a large and creditworthy company manufacturing coaches for Indian Railways. It now wants to export these coaches to other countries and decides to invest in
new hi-tech machines. Since the investment is large, it requires long-term finance. It decides to raise funds by issuing equity shares. The issue of equity shares involves huge floatation cost. To meet the expenses of floatation cost, the company decides to tap the money market.
1) Name and explain the money-market instrument the company can use for the above
purpose
2) What is the duration for which the company can get funds through this instrument?
3) State any other purpose for which this instrument can be used.
Explain the following as factor affecting dividend decision:
Stability of earnings
Explain the following as factor affecting dividend decision:
Taxation policy
Explain the following as factor affecting dividend decision:
Stability of dividends
Explain the following as factor affecting dividend decision:
Shareholder's preferences
Explain the following as factor affecting dividend decision:
Access to capital market
Explain the following as factor affecting dividend decision:
Legal constraints
Explain the following as factor affecting 'financing decision'.
Cash flow position of the business
Explain the following as factor affecting 'financing decision'.
Level of fixed operating cost
Explain the following as factor affecting 'financing decision'.
Control consideration
Explain the following as factor affecting 'financing decision'.
State of capital markets
Give the meaning of ‘Investment’ and ‘Dividend’ decisions of financial management.
What is ‘Financial Risk?’ Why does it arise?
| 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.
|
NB Ltd. is India's largest manufacturer of cement. Its operations are spread throughout the country with 17 modern cement factories. It has a workforce of 9,000 people. Since its inception, the company has been a trendsetter in the cement industry. The company is planning to grow in the long run and wants to double its capacity in the next 3 years. For this, the Finance Manager has to decide about the quantum of finance to be raised from various long-term sources. For this, he needs to identify various available sources of funds and the proportion of funds from each source. |
- Identify the financial decision to be taken by the Finance Manager.
- State any four factors which would affect the decision identified in (i) above.
Identify the financial decision that is concerned with deciding how much of the profit earned by a company is to be distributed to shareholders and how much should be retained in the business. Also state any three factors affecting the identified decision.
