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Explain the following as factors affecting the requirement of working capital:
The credit allowed and availed
Concept: Concept of Fixed and Working Capital
Explain the following as factors affecting the choice of capital structure:
Return on Investment
Concept: Concept of Capital Structure
Explain the following as factors affecting the choice of capital structure:
Flexibility
Concept: Concept of Capital Structure
Explain the following as factors affecting the choice of capital structure:
Risk Consideration
Concept: Concept of Capital Structure
Explain the following as factors affecting the choice of capital structure:
Control
Concept: Concept of Capital Structure
Varunica Ltd., a reputed truck manufacturing company, needs rupees twenty crores as additional capital to expand its business. Mr. Alind Jindal, the CEO of the company, wants to raise funds through equity. The Finance Manager, Mr. Nikhil Sachdeva, suggests that the existing shareholders be offered the privilege to subscribe to new issue of shares as per the terms and conditions of the company which was agreed by Mr. Alind Jindal.
Name the method through which the company decided to raise additional capital.
Concept: Concept of Fixed and Working Capital
Explain any four factors that affect the choice of capital structure of a company.
Concept: Concept of Capital Structure
Explain the twin objectives of financial planning.
Concept: Concept of Financial Planning
Answer the following question.
'Determining the relative proportion of various types of funds depends upon various factors.' Explain any six such factors.
Concept: Concept of Capital Structure
Krish limited is in the business of manufacturing and exporting carpets and other home decor products. It has a share capital of ₹ 70 lacs at the face value of ₹ 100 each. Company is considering a major expansion of its production facilities and wants to raise ₹ 50 lacs. The finance manager of the company Mr. Prabhakar has recommended that the company can raise funds of the same amount by issuing 7% debentures. Given that earning per share of the company after expansion is ₹ 35 and tax rate is 30%, did Mr. Prabhakar give a justified recommendation?
Show the working.
Concept: Concept of Capital Structure
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.
Concept: Financial Decisions - Financing and Dividend
State any three factors determining the choice of an appropriate capital structure of a company.
Concept: Concept of Capital Structure
What is meant by ‘Investment Decision’?
Concept: Financial decisions - investment
State how 'Long term Investment Decision' and 'Short term Investment Decision' affect the business.
Concept: Financial decisions - investment
The Board of directors of Medex Pharma Ltd. decided to issue debentures worth ₹ 40 lakhs in order to finance a major Research and Development project. This would increase the Debt Equity ratio from 1:1 to 2:1.However, at the same time it would increase the Earnings per share.
The reason that will justify the above situation is ______.
Concept: Concept of Capital Structure
Dhaval Acharya, after acquiring a bachelor’s degree in Hotel Management joined his father’s chain of vegetarian restaurants in Ahmednagar. Being young and enterprising, he suggested his father to add a new section of vegetarian bakery items which required an investment of ₹ 5 crores. His father Mr. Aariketh Acharya suggested him to take the decision with caution and understood everything comprehensively as bad decision may damage the financial fortune of business.
Identify the decision suggested by Mr. Aariketh Acharya. State by giving any three reasons as to why he must have advised his son to take decision with caution.
Concept: Concept of Fixed and Working Capital
State any four functions of 'Secondary - Market'.
Concept: Types of Financial Markets
Lalita wants to buy shares of Akbar Enterprises, through her broker Kushvinder. She has a Demat Account and a bank account for cash transactions in the securities market. Discuss the subsequent steps involved in the screen-based trading for buying and selling of securities in this case.
Concept: Securities and Exchange Board of India (SEBI)
‘MYKAA Limited ‘is dealing in all types of cosmetic products. It is enjoying increased demand for its product during the last few years. For the purpose of expansion the company needs ₹ 100 crores as additional capital. The company decides to raise funds through equity shares. Chirag Kapoor, the finance manager of the company recommended that the shares may be sold through issuing houses or brokers. Identify and explain the method recommended by Mr.Kapoor through which the company can raise additional funds for expansion purposes.
Concept: Securities and Exchange Board of India (SEBI)
Vedansh Limited has a share capital of ₹10,00,000 divided into shares of ₹100 each.For expansion purposes, the company requires additional funds of ₹ 5,00,000. The management is considering the following alternatives for raising funds :
Alternative 1: Issue of 5000 Equity shares of ₹100 each
Alternative 2: Issue of 10% Debentures of Rs. 5,00,000
The company’s present Earnings Before Interest and Tax ( EBIT) is ₹4,00,000 p.a. Assuming that the Rate of Return of Investment remains the same after expansion, which alternative should be used by the company in order to maximise the returns to the equity shareholders. The Tax rate is 50%. Show the working.
Concept: Types of Financial Markets
