Chapter 9: Financial Management

Important Questions

1. Explain the term financial management?

2. List any 5 factors determining the capital structure?

3. Distinguish between over – capitalisation and under capitalisation?

4. “One of the effects of under – capitalisation is that the market value of shares goes up. But still under capitalisation is not considered good for the company”. Do you agree with this statement?
Give reasons in support of your answer.

5. You are the finance manager of a newly established company. The directors have asked you to determine the amount of working capital requirements for the company. State any 5 factors that you would take into consideration while determining the amount of working capital requirements of the company.

MCQ

1. Financial management is concerned with managerial activities relating to

(a) Planning
(b) Procurement and administration of funds
(c) Optimum utilization of funds
(d) All of the above

2. Which of the following factors affect financial decision?

(a) Cost
(b) Risk
(c) Cash flow position
(d) All of the above

3. _________ refers to planning regarding financial needs of the enterprise various sources of raising funds and their optimum utilization.

(a) Financial planning
(b) Capital structure
(c) Financial management

4. Which of the following is not a feature of a financial plan?

(a) Simplicity
(b) Cost
(c) Flexibility
(d) Foresight

5. _____ is the decision related to composition of capital structure & also depends upon ability of the business to generate cash.

(a) Market condition
(b) Flexibility
(c) Cash flow ability
(d) Control