Tuesday, February 12, 2019

Business Studies Multiple Choice Questions - Business Finance/Financial Management


Unit – IX: Business Finance
OBJECTIVE QUESTIONS (1 MARK)
1. Define Financial Management.
Ans: Financial Management is the operational activity of a business that is responsible for a) Obtaining b) effectively utilizing the funds necessary for efficient operations.

2. What is meant by Financial Planning?
Ans: Financial Planning refers to determination of firm’s financial objectives, financial policies and financial procedure.
3. What is Working Capital?
Ans: The capital required for day to day operations of the business is called Working capital.
4. State the difference between gross working capital and net working capital.
Ans: Gross working capital is the sum/ aggregate of the current assets, whereas Net working capital = Current assets – current liabilities.
5. 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.
6. What are the two types of capital?
Ans: Fixed Capital and Working Capital
7. Give the second name for fixed asset management.
Ans: Investment Decision or capital budgeting decision
8. Mention two components of ownership funds.
Ans: Share Capital and Reserve & Surplus.
9. A decision is taken to raise money for long term capital needs of the business from certain sources. What is this decision called?                               2018
Ans: Finance decision
10. Name the concept which increases the return on equity shares with a change in the capital structure of a company.
Ans: Trading on Equity
11. 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
12. 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
13. Name the financial decision which affects the liquidity as well as profitability of a business.
Ans: Short term investment decision
14. “Fixed capital decisions involve more risk”. How?                   2018
Ans: Because it is invested in depreciable fixed assets.
15. Why is working capital needed? Give any one reason.
Ans: Working capital required for day to day operations of the business
16. Which is the most costly capital for a company?
Ans: Working Capital
17. 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
18. What is the other name of long term investment decision?                
Ans: A long term Investment decision is called capital budgeting decision.
19. State the decisions involved in financial management.          2015      
Ans: a) Investment decision b) Financing decision c) Dividend decision
20. State the primary objective of financial management.
Ans: To maximize the shareholders wealth.
21. What is meant by capital budgeting decision?            2017
Ans: A long term Investment decision is called capital budgeting decision.
22. 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.
23. What is capital structure?
Ans: Capital structure is the relative proportion of different sources of long term finance.
24. What is disinvestment?        2013, 2014
Ans: Disinvestment means government selling its profit or loss making venture's stack to public through an IPO or to private company on auction basis. 

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