Arts (English Medium) Class 12 - CBSE Important Questions

What is meant by Trading on Equity?

'Indian Logistics' has its own warehousing arrangements at key locations across the country. Its warehousing services help business firms to reduce their overheads, increase efficiency and cut down distribution time.

A state with reason, whether the working capital requirements of 'Indian Logistics' will be high or low.

How does cost of equity affect the choice of capital structure of a company? Explain

'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.

'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.

How do ‘Floatation costs’ affect the choice of capital structure of a company? State

‘Reliable Transport Services Ltd.’ specialises in transporting fruits and vegetables. It has a good reputation in the market as it delivers the fruits and vegetables at the right time and at the right place.
A state with reason whether the working capital requirements of ‘Reliable Transport Services’ will be high or low.

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

How does 'Inflation' affect the working capital requirements of a company? State.

Explain the following as factor affecting the requirements of fixed capital:

Choice of technique

Explain the following as factors affecting the requirements of fixed capital:

Technology upgradation

Explain the following as factors affecting the requirements of fixed capital:

Financing alternatives

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 the requirements of working capital:

Operating efficiency

What is meant by Financial Risk?

Answer the following question.
State the objective of ' Financial Management '.

Give the meaning of 'Investment' and 'Financing' decisions of financial management.