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Monday, February 26, 2018

Business Studies Objective Type Questions

CHAPTER – 9: FINANCIAL MANAGEMENT

1. How is working capital determined?
Ans: Working Capital is calculated as: Net working capital= current assets – current liabilities. If current liabilities are more than current assets then working capital becomes negative.

2. What are the two types of capital?
Ans: Fixed Capital and Working Capital

3. Give the second name for fixed asset management.
Ans: Investment Decision or capital budgeting decision

4. Mention two components of ownership funds.
Ans: Share Capital and Reserve & Surplus.

5. A decision is taken to raise money for long term capital needs of the business from certain sources. What is this decision called?
Ans: Finance decision

6. Name the concept which increases the return on equity shares with a change in the capital structure of a company.
Ans: Trading on Equity

7. State why working capital needs for a ‘service industry’ are different from that of a manufacturing industry?
Ans: Service industry need short term capital while manufacturing industry need long term capital

8. A decision is taken to distribute a certain portion of the profit after tax among the shareholders. What is this decision called?
Ans: Dividend decision

9. Name the financial decision which affects the liquidity as well as profitability of a business.
Ans: Short term investment decision

10. “Fixed capital decisions involve more risk”. How?
Ans: Because it is invested in depreciable fixed assets.

11. Why is working capital needed? Give any one reason.
Ans: Working capital required for day to day operations of the business

12. Which is the most costly capital for a company?
Ans: Working Capital

13. A decision is taken to raise money for long term capital needs of the business from certain sources. What is this decision called?
Ans: Capital Structure Decision

14. What is the other name of long term investment decision?                
Ans: A long term Investment decision is called capital budgeting decision.

15. State the decisions involved in financial management.         
Ans: a) Investment decision b) Financing decision c) Dividend decision

16. State the primary objective of financial management.
Ans: To maximize the shareholders wealth.

17. What is meant by capital budgeting decision?
Ans: A long term Investment decision is called capital budgeting decision.

18. State twin objectives of financial planning.
Ans: a) to ensure availability of fund whenever required. b) To see that the firm does not raise funds unnecessarily.

19. What is capital structure?
Ans: Capital structure is the relative proportion of different sources of long term finance.

20. What is disinvestment?

Ans: Disinvestment means government selling its profit or loss making venture's stack to public as an IPO and an or to private company on auction basis. 

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