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NCERT solutions for Class 12 Business Studies chapter 1 - Financial Management

Business Studies Part - 2 Business Finance and Marketing for Class - 12

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NCERT Business Studies Part - 2 Business Finance and Marketing Class - 12

Business Studies Part - 2 Business Finance and Marketing for Class - 12 - Shaalaa.com

Chapter 1: Financial Management

Very Short AnswerShort AnswerLong Answer

Chapter 1: Financial Management Exercise Very Short Answer solutions [Pages 253 - 254]

Very Short Answer | Q 1 | Page 253

What is meant by capital structure?

Very Short Answer | Q 2 | Page 253

State the two objectives of financial planning.

Very Short Answer | Q 3 | Page 253

Name the concept of financial management which increases the return to equity shareholders due to the presence of fixed financial charges.

Very Short Answer | Q 4 | Page 253

Amrit is running a ‘transport service’ and earning good returns by providing this service to industries. Giving reason, state whether the working capital requirement of the firm will be ‘less’ or ‘more’.

Very Short Answer | Q 5 | Page 254

Ramnath is into the business of assembling and selling of televisions. Recently he has adopted a new policy of purchasing the components on three months credit and selling the complete product in cash. Will it affect the requirement of working capital? Give reason in support of your answer.

Chapter 1: Financial Management Exercise Short Answer solutions [Page 254]

Short Answer | Q 1 | Page 254

What is ‘Financial Risk?’ Why does it arise?

Short Answer | Q 2 | Page 254

Define current assets? Give four examples of such assets.

Short Answer | Q 3 | Page 254

What are the main objectives of financial management? Briefly explain.

Short Answer | Q 4 | Page 254

Financial management is based on three broad financial decisions. What are these?

Short Answer | Q 5 | Page 254

Sunrises Ltd. dealing in readymade garments, is planning to expand its business operations in order to cater to international market. For this purpose the company needs additional Rs. 80,00,000 for replacing machines with modern machinery of higher production capacity. The company wishes to raise the required funds by issuing debentures. The debt can be issued at an estimated cost of 10%. The EBIT for the previous year of the company was Rs. 8,00,000 and total capital investment was Rs. 1,00,00,000. Suggest whether issue of debenture would be considered a rational decision by the company. Give reason to justify your answer. (Ans. No, Cost of Debt (10%) is more than ROI which is 8%).

Short Answer | Q 6 | Page 254

How does working capital affect both the liquidity as well as profitability of a business?

Short Answer | Q 7 | Page 254

Aval Ltd. is engaged in the business of export of canvas goods and bags. In the past, the performance of the company had been upto the expectations. In line with the latest demand in the market, the company decided to venture into leather goods for which it required specialised machinery. For this, the Finance Manager Prabhu prepared a financial blueprint of the organisation’s future operations to estimate the amount of funds required and the timings with the objective to ensure that enough funds are available at right time. He also collected the relevant data about the profit estimates in the coming years. By doing this, he wanted to be sure about the availability of funds from the internal sources of the business. For the remaining funds, he is trying to find out alternative sources from outside.

a. Identify the financial concept discussed in the above paragraph. Also, state the objectives to be achieved by the use of financial concept so identified. ( Financial Planning).

b. ‘There is no restriction on payment of dividend by a company’. Comment. ( Legal & Contractual Constraints)

Chapter 1: Financial Management Exercise Long Answer solutions [Page 255]

Long Answer | Q 1 | Page 255

What is working capital? Discuss five important determinants of working capital requirement?

Long Answer | Q 2 | Page 255

“Capital structure decision is essentially optimisation of risk-return relationship.” Comment.

Long Answer | Q 3 | Page 255

“A capital budgeting decision is capable of changing the financial fortunes of a business.” Do you agree? Give reasons for your answer?

Long Answer | Q 4 | Page 255

Explain the factors affecting the dividend decision.

Long Answer | Q 5 | Page 255

Explain the term ‘Trading on Equity’? Why, when and how it can be used by company.

Long Answer | Q 6 | Page 255

‘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 to 8 per cent 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 `5000 crores to set up and about Rs. 500 crores of working capital to start the new plant.

a. Describe the role and objectives of financial management for this company.

b. Explain the importance of having a financial plan for this company. Give an imaginary plan to support your answer.

c. What are the factors which will affect the capital structure of this company?

d. Keeping in mind that it is a highly capital-intensive sector, what factors will affect the fixed and working capital. Give reasons in support of your answer.

Chapter 1: Financial Management

Very Short AnswerShort AnswerLong Answer

NCERT Business Studies Part - 2 Business Finance and Marketing Class - 12

Business Studies Part - 2 Business Finance and Marketing for Class - 12 - Shaalaa.com

Textbook solutions for Class 12






















NCERT solutions for Class 12 Business Studies chapter 1 - Financial Management

NCERT solutions for Class 12 Business Studies chapter 1 (Financial Management) include all questions with solution and detail explanation. This will clear students doubts about any question and improve application skills while preparing for board exams. The detailed, step-by-step solutions will help you understand the concepts better and clear your confusions, if any. Shaalaa.com has the CBSE Business Studies Part - 2 Business Finance and Marketing for Class - 12 solutions in a manner that help students grasp basic concepts better and faster.

Further, we at Shaalaa.com provide such solutions so that students can prepare for written exams. NCERT textbook solutions can be a core help for self-study and acts as a perfect self-help guidance for students.

Concepts covered in Class 12 Business Studies chapter 1 Financial Management are Financial Decisions - Financing and Dividend, Concept of Financial Planning, Importance of Financial Planning, Concept of Capital Structure, Concept of Fixed and Working Capital, Factors Affecting Fixed and Working Capital Requirements, Concept of Financial Management, Role and Objectives of Financial Management, Financial decisions - investment.

Using NCERT Class 12 solutions Financial Management exercise by students are an easy way to prepare for the exams, as they involve solutions arranged chapter-wise also page wise. The questions involved in NCERT Solutions are important questions that can be asked in the final exam. Maximum students of CBSE Class 12 prefer NCERT Textbook Solutions to score more in exam.

Get the free view of chapter 1 Financial Management Class 12 extra questions for Business Studies and can use Shaalaa.com to keep it handy for your exam preparation

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