- Jyoti
Thanks
NCERT Solutions for Class 12 Business Studies Chapter 9 Financial Management
NCERT Solutions for Class 12 Business Studies Chapter 9 Financial Management
NCERT Solutions for Class 12 Business Studies Chapter 9 Financial Management is designed and prepared by the best teachers across India. All the important topics are covered in the exercises and each answer comes with a detailed explanation to help students understand concepts better. These NCERT solutions play a crucial role in your preparation for all exams conducted by the CBSE, including the JEE.
NCERT TEXTBOOK QUESTIONS SOLVED
1. Discuss the two objectives of Financial Planning.Ans.Financial Planning strives to achieve the following two objectives
(i) To Ensure Availability of Funds whenever These are Required This includes a proper estimation of the funds required for different purposes such as for the purchase of long term assets or to meet day-to-day expenses of business etc.
(ii) To See That the Firm Does Not Raise Resources Unnecessarily
Excess funding is almost as bad as inadequate funding. Efficient financial planning ensures that funds are not raised unnecessarily in order to avoid unnecessary addition of cost.
Ans. It refers to the risk of company not being able to cover its fixed
financial costs. The higher level of risks are attached to higher degrees of
financial leverage with the increase in fixed financial costs, the company its
also required to raise its operating profit (EBIT) to meet financial charges. If
the company can not cover these financial charges, it can be forced into liquidation.
Ans. Current assets are those assets of the business which can be converted into cash within a period of one year. Cash in hand or at bank, bills receivables, debtors, finished goods inventory are some of the examples of current assets.
4. Financial management is based on three broad financial decisions. What are these?Ans. Financial management is concerned with the solution of three major issues relating to the financial operations of a firm corresponding to the three questions of investment, financing and dividend decision. In a financial context, it means the selection of best financing alternative or best investment alternative. The finance function therefore, is concerned with three broad decision which are as follows
(i) Investment Decision
The investment decision relates to how the firm's funds are invested in different assets.
(ii) Financing Decision
This decision is about the quantum of finance to be raised from various long term sources and short term sources. It involves identification of various available sources of finance.
(iii) Dividend Decision
This decision relates to distribution of dividend. Dividend is that portion of profit which is distributed to shareholders the decision involved here is how much of the profit earned by company is to be distributed to the shareholders and how much of it should be retained in the business for meeting investment requirements.
Ans. Primary aim of financial management is to maximise shareholder's wealth, which is referred to as the wealth maximisation concept. The wealth of owners is reflected in the market value of shares, wealth maximisation means the maximisation of market price of shares. According to the wealth maximisation objective, financial management must select those decisions which result in value addition, that is to say the benefits from a decision exceed the cost involved. Such value addition I increase the market value of the company's share and hence result in maximisation of the shareholder's wealth.
Ans. The working capital should neither be more nor less than ; required. Both these situations are harmful. If the amount of working capital
is more than required, it will no doubt increase liquidity but decrease profitability. For instance, if large amount of cash is kept as working capital, i then this excessive cash will remain idle and cause the profitability to fall.
On the contrary, if the amount of cash and other current assets are very ' little, then lot of difficulties will have to be faced in meeting daily expenses
and making payment to the creditors. Thus, optimum amount of both current assets and current liabilities should be determined so that profitability of the business remains intact and there is no fall in liquidity.
Ans. Capital structure refers to the mix between owners and borrowed funds. It can be calculated as Debit/Equity. Debt and equity differ significantly in their cost and riskiness for the firm. Cost of debt is lower than cost of equity for a firm because lender's risk is lower than equity shareholder's risk, since lenders earn on assured return and repayment of capital and therefore they should require a lower rate of return. Debt is cheaper but is more risky for a business because payment of interest and the return of principal is obligatory for the business. Any default in meeting these commitments may force the business to go into liquidation. There is no such compulsion in case of equity, which is therefore, considered riskless for the business. Higher use of debt increases the fixed financial charges of a business. As a result increased, use of debt increases the financial risk of a business. Capital structure of a business thus, affects both the profitability and the financial risk. A capital structure will be said to be optimal when the proportion of debt and equity is such that it results in an increase in the value of the equity share.
8. A capital budgeting decision is capable of changing the financial fortune of a business. Do you agree? Why or why not?Ans. Investment decision can be long term or short term. A long term investment decision is also called a capital budgeting decision. It involves commiting the finance on a long term basis, e.g., making investment in a new machine to replace an existing one or acquiring a new fixed assets or opening a new branch etc. These decisions are very crucial for any business. They affect its earning capacity over the long-run, assets of a firm, profitability and competitiveness, are all affected by the capital budgeting decisions. Moreover, these decisions normally involve huge amounts of investment and are irreversible except at a huge cost. Therefore, once made, it is almost impossible for a business to wriggle out of such decisions. Therefore, they need to be taken with utmost care. These decisions must be taken by those who understand them comprehensively A bad capital budgeting decision normally has the capacity to severely damage the financial fortune of a business.
9. Explain factors affecting the dividend decisionAns. Dividend decision relates to distribution of profit to the shareholders and its retention in the business for meeting the future investment requirements.
How much of the profits earned by a company will be distributed as profit and how much will be retained in the business is affected by many factors. Some of the important factors are discussed as follows
(i) Earnings Dividends are paid out of current and past year earnings. Therefore, earnings is a major determinant of the decision about dividend.
(ii) Stability of Earnings Other things remaining the same, a company having stable earning is in a position to declare higher dividends. As against this, a company having unstable earnings is likely to pay smaller dividend.
(iii) Growth Opportunities Companies having good growth opportunities retain more money out of their earnings so as to finance the required investment. The dividend in growth companies, is therefore, smaller than that in non-growth companies.
(iv) Cash Flow Position Dividends involve an outflow of cash. A company may be profitable but short on cash. Availability of enough cash in the company is necessary for declaration of dividend by it.
(v) Shareholder Preference If the shareholder in general, desire that at least a certain amount should be paid as dividend, the companies are likely to declare the same.
(vi) Taxation Policy If tax on dividend is higher it would be better to pay less by way of dividends. As compared to this, higher dividends may be declared if tax rates are relatively lower.
(vii)Stock Market Reaction For investors, an increase in dividend is a good news and stock prices react positively to it. Similarly, a decrease in dividend may have a negative impact on the share prices in the stock market.
(viii) Access to Capital Market Large and reputed companies generally have easy access to the capital market and therefore, depend less on retained earnings to finance their growth. These companies tend to pay higher dividends than the smaller companies which have relatively low access to the market.
(ix) Legal constraints Certain provisions of the Company's Act place restriction on payouts as dividend. Such provisions have to be adhered, while declaring dividends.
(x) Contractual Constraints While granting loans to a company, sometimes the lender may impose certain restrictions on the payment of dividends in future. The companies are required to ensure that the dividends does not violate the terms and conditions of the loan agreement in this regard.
Post your comments
Your mobile number will not be published.View Comments
- A.Nikhil Goud
Good wedsite nice
- Raj
Good website
- Mdiqbal Mdiqbal
Use full
- Bandapalli siva ganga Devi
Super solutions
- D BALAJI
Clear explanation
- M venkata bramha chowdhary
Results
- Dumpa snehith
Ncert to prepare for eamcet or eapcer
- Gauri
Sabse khrab
- Gauri
Sabse khrab
- Prajoal
Verry good app
- Preethi kumarK
I will very happy to sovle this mcqs
- PradeepGupta
Super
- Ashwani kumar
Nice
- Ashwani kumar
Nice
- Zyan safi
Nice
- Zyan safi
Nice
- Priyanshi
Thanks sir
- Naria
Nice
- ningu
good work sir
- hs
good
- prabhakar
How to download this
- Dharmen
How to download
- Anubhav
Math all chapter MCQ best
- NIL
GOOD
- Anjali
Ncert miscellaneous question pdf
- Manjeet manjhi
Super
- Karanveer Kaur
10 class workbook English answer
- P.Ashrafbaig
My results How to check my 10th results
- Asish Kumar sahu
Pls sir show my result my admit card is missing so I request you plz show my result
- Varsha
This app is so..good it makes is understand better as we had seen many app with only answer we will not understand the method what they have done.....
- Anupam
super
- Lavanya vishawas Sonavale
Nice
- Sudha
Super cute
- Matruprasad nath
plese give me the answer for above question
- Abhiram
8th class Telugu and maths social PDF text books
- Abhiram
8th class Telugu and maths social PDF text books
- Abhiram
8th class Telugu and maths social PDF text books
- Aman
Nice
- Patil yasvitah
S the practice question papers clasfrom foranothers districts
of Karnataka 10th MCQ pattern 2021 exam 40 marks
- Ajay
Basic questions
- Nikki
How to download this pdf
- Murali
How to get free download
- Murali
How to get free download
- Murali
How to get free download
- Kurmapu rohini
How to download
- Yashvanth
S PDF
- Bhoomi
Nice this content is very helpful ....thnx a lot ..and pls expand the question there is only 58 which is less for class 10
- Omkar
How to download
- tanya shukla
hello
thankyou so much
it really helped me in my exam...........
- Ranjith
Good
- R sudha
Good
- Urvi
Teacher
- Rohit
Nice
- HARSH RAJPUT DEVSARIYA ðŸ™ðŸ™ðŸ™ðŸ™
Thanku for giving All chapter MCQ thanku you very much
- Rakesh
I need 2019 10 Class Batch Results
- Daripalli ramu
Super
- Subash Gond
McQ question all chapter
- Vandna
What,where and how lesson 1 class 6 pdf
- Yuvraj yadav
Hi
- Manasa
Good
- Gundi.sonia
Hii
- Dhanam jay
Very nice
- Tanveer
Political Science question solution
- Trilok
I like
- Anshu poonia
Superb
- Ranjan Baruah
Thank sir
- MATHURAM
Need notes
- Yadnyesh ubhad
So nice answer
- Anusha chettri
Hello
- Anusha chettri
Hello
- Jasmita Naik
Thank you very much....
Sir we need more help from you....
From other subject also we need like this questions.. So please sir kindly help us through uploading questions from science...
Please sir
- Jasmita Naik
Thank you very much....
Sir we need more help from you....
From other subject also we need like this questions.. So please sir kindly help us through uploading questions from science...
Please sir
- Mohini
Kitne time se
- Rajudutta
Excellent and reliable apps
- SALMAN
I WANT 2019 ENGLISH CBSC CLASS 3RD COURSE BOOK SYLLABUS AND SOLUTIONS
- ULRICA
It
- Rishabh Kumar
Please give me
- Chandra shekar
Mandasa
- p.harshavardhan
Ok
- Charchit
Yes they are all question are main
- Muthalagu
10 A class
- Vadde madhu
Hallo
- Veeranna
1:1 2004
- Eslavath Kalyan
Komatipalli kesamudram
- Gumma pavan kalyan
Hall ticket
- Rajudutta
Excellent solutions and easy to learn.
- VAGEESHA
NICE JOB
- Syed sayeed saaqib
10 th class marks
- P.fairoz khan
My SSC result
- Gangavarapu Ashok Reddy
10 the class 2020 markas
- Kusi Mani kumaR
2008125010
- suhailhajam
plz kindly MCQ question s
- suhailhajam
plz kindly MCQ question s
- Koripalli. Bindu ramya
Inter results second year
- Faizan
Beautiful
- K. Umesh Chandra
Please release 10th results
- Surra naidu
S me result
- Lakpathi
Cbse resuls
- S.sravani
CBSE 10th class result
- Gundrathi Mohan
S me results
- Gundrathi Mohan
S me results
- suhailhajam
plz kindly MCQ question s
- chandar
chan
- suhailhajam
plz kindly MCQ question s
- Kaustab Roy
I want to explore everything
- Anup
Workbook unit 1 exercise solution
- Khushdeep Kaur
I want pdf of MCQ class 10th C.B.S.E
- Saddam
Kindly s me 10 maths mcq question answer
- SADDAM
SEND ME
- Bed prakash
Mera result
- palla sivaram
haiii
- Dany
NCERT Solutions Very Good I Like It
- laxman
good
- Bhanusam.manjula
Ssc 2007batch regular halltichet number
- Ramu
NCERT Solutions
- Kalamata gowriswari
Open 10th result 2019ap
- Nagra rayal
Yappudu 10th reselts
- Yanati nagarani
10th result
- NAGESWARA
How can see ssc ap 10th results
- m.kalyani
10th result
- Naveen
10th results
- Sri kesav
Please tell me the correct date of AP ssc results
- K. Sudhakar
Plz 10th result
- V pawan durga sriniva
Please 10th cbsc results
- V pawan durga sriniva
Please 10th cbsc results
- Charan
Result ssc
- Ayesha
At. What time did exam results will come?
- Vadithya suresh
Results
- VANKUDOTH pavan kalyan
Results
- C H VAISHAVI
Cbse result by name
- varunsai sanne
Xth results 2018
- varunsai sanne
Xth results 2018
- Yalagala Srihari
Exam results
- Alpesh Dhamale
Nice article my baby wait for exam result i hope this year pass percentage may be increase
- m. mohan rao
hi, s me cbse 10 class 2018 results
- akshaya
at what time resilts are going to today
- Velupala Ashwarya
My result
- Ramu
good information