{"id":43379,"date":"2023-02-01T10:00:16","date_gmt":"2023-02-01T04:30:16","guid":{"rendered":"https:\/\/www.aplustopper.com\/?p=43379"},"modified":"2023-02-02T09:24:57","modified_gmt":"2023-02-02T03:54:57","slug":"plus-two-business-studies-chapter-wise-questions-answers-chapter-9","status":"publish","type":"post","link":"https:\/\/www.aplustopper.com\/plus-two-business-studies-chapter-wise-questions-answers-chapter-9\/","title":{"rendered":"Plus Two Business Studies Chapter Wise Questions and Answers Chapter 9 Financial Management"},"content":{"rendered":"

Kerala Plus Two Business Studies Chapter Wise Questions and Answers Chapter 9 Financial Management<\/h2>\n

Plus Two Business Studies Financial Management One Mark Questions and Answers<\/h3>\n

Question 1.
\n………………. is the objective of modern financial management.
\nAnswer:
\nWealth maximisation<\/p>\n

Question 2.
\nA decision to acquire a new and modern plant to upgrade an old one is a ……………..
\n(a) financing decision
\n(b) working capital decision
\n(c) investment decision
\n(d) dividend decision
\nAnswer:
\n(c) investment decision<\/p>\n

Question 3.
\nThe decision to maximise the return of equity shareholders by introducing more debt capital in the total capital structure. Identify the concept.
\n(a) Financial leverage
\n(b) Undercapitalisation
\n(c) Over capitalisation
\n(d) Fair capitalisation
\nAnswer:
\n(a) Financial leverage<\/p>\n

Question 4.
\nUse of fixed interest bearing source of funds to enhance the return of equity shareholders is called ………………
\n(a) Trading on profit
\n(b) Trading on equity
\n(c) Trading on assets
\n(d) Trading on liability
\nAnswer:
\n(b) Trading on equity<\/p>\n

Question 5.
\nIdentify the term referred here. Use of debt capital along with equity capital with total capital of a company.
\nAnswer:
\nTrading on equity<\/p>\n

Question 6.
\nThe cheapest source of finance is …………….
\n(a) Debenture
\n(b) Equity share
\n(c) Preference share
\n(d) Retained earning.
\nAnswer:
\n(d) Retained earning<\/p>\n

Question 7.
\nCurrent assets are those assets which get converted into cash ……………….
\n(a) within six month
\n(b) within one year
\n(c) between one and three year
\n(d) between three and five year
\nAnswer:
\n(b) within one year<\/p>\n

Question 8.
\nAmount invested in Fixed assets is known as ………………………
\n(a) Working capitalisation
\n(b) Circulating capital
\n(c) Fixed capital
\n(d) None of these
\nAnswer:
\n(c) Fixed capital<\/p>\n

Question 9.
\nGross Working capital means ……………
\nAnswer:
\nTotal current assets<\/p>\n

Question 10.
\n………………………….. is the excess of current asset over current liabilities.
\nAnswer:
\nWorking Capital<\/p>\n

Question 11.
\nJasim one of your classmates, confused with the two different concept of working capital. Help him.
\nAnswer:<\/p>\n

    \n
  1. Gross working capital<\/li>\n
  2. Networking capital<\/li>\n<\/ol>\n

    Question 12.
    \nGenerally, in trading concerns there is a time gap between sales of goods and their actual realisation of cash. Write down the term used to describe the time gap.
    \nAnswer:
    \nOperating cycle of working capital\/ Working capital cycle<\/p>\n

    Question 13.
    \nDecision of allocation of funds to long term assets is ………………
    \nAnswer:
    \nCapital budgeting<\/p>\n

    Question 14.
    \n………………….. is the reward of shareholders for investment made by them.
    \nAnswer:
    \nDividend<\/p>\n

    Question 15.
    \nWhich among the following is not a factor affecting dividend decision?
    \n(a) Nature of industry
    \n(b) Taxation policy
    \n(c) Competition
    \n(d) Legal restrictions
    \nAnswer:
    \n(c) Competition<\/p>\n

    Question 16.
    \nA finance manager of a firm has to take many decisions, which can be put under three main categories. Besides dividend decisions, what are the other two categores?
    \nAnswer:<\/p>\n

      \n
    1. Investment decision<\/li>\n
    2. Financing decision<\/li>\n<\/ol>\n

      Question 17.
      \nWhich among the following is not a finance function? (Investment decision, Compensation decision, Dividend decision, Financing decision)
      \nAnswer:
      \nCompensation devision<\/p>\n

      Question 18.
      \nComplete the diagram.
      \n\"Plus
      \nAnswer:<\/p>\n

        \n
      1. Financing decision<\/li>\n
      2. Investment decision<\/li>\n
      3. Dividend decision<\/li>\n<\/ol>\n

        Question 19.
        \nChoose any two factors which affect the working capital. <0>6)sn$aKO)3<e>.
        \n(a) Tax policy
        \n(b) Credit policy
        \n(c) Pcocurement of fixed assets
        \n(d) Dividend policy
        \n(e) Seasonal factors
        \n(f) Investment ratio
        \nAnswer:
        \n(b) Credit policy
        \n(e) Seasonal factors<\/p>\n

        Question 20.
        \nEnsuring the availability of fund from different sources is called …………….
        \nAnswer:
        \nFinancial planning<\/p>\n

        Plus Two Business Studies Financial Management Two Mark Questions and Answers<\/h3>\n

        Question 1.
        \nMoli, the finance manager of Chikk Ltd, has to take the following decisions in connection with expansion of appropriate heads. What decisions are they?<\/p>\n

          \n
        1. Amount to be spent on current assets.<\/li>\n
        2. Sharing profits to shareholder.<\/li>\n
        3. Raising funds through issue of debenture.<\/li>\n
        4. Determining the proportion of owned fund and borrowed fund.<\/li>\n<\/ol>\n

          Answer:<\/p>\n

            \n
          1. Investment decision<\/li>\n
          2. Dividend decision<\/li>\n
          3. Finance decision<\/li>\n
          4. Finance decision<\/li>\n<\/ol>\n

            Question 2.
            \nWhen is a capital structure said to be optimum?
            \nAnswer:
            \nA capital structure is said to be optimum when the proportion of debt and equity is such that it results in an increase in the value of the shares.<\/p>\n

            Plus Two Business Studies Financial Management Three Mark Questions and Answers<\/h3>\n

            Question 1.
            \nThe primary objective of financial management is to maximise shareholders wealth. Explain.
            \nAnswer:
            \nThe primary aim of financial management is to maximise shareholder\u2019s wealth, which is referred to as the wealth maximisation concept . It means maximisation of the market value of equity shares.<\/p>\n

            The shareholders are the owners of the company. So it is the responsibility of the company to pay reasonable dividend and also to maximize the value of its shares. All financial decisions aim at ensuring that each decision is efficient to increase the market price of shares.<\/p>\n

            Question 2.
            \nExplain the term \u2018Trading on Equity or Capital gearing\u2019
            \nAnswer:
            \nFactors Affecting Capital Structure:
            \n1. Trading on Equity (Financial Leverage):
            \nIt refers to the use of fixed income securities such as debentures and preference capital in the capital structure so as to increase the return of equity shareholders.<\/p>\n

            2. Stability of Earnings:
            \nIf the company is earning regular and reasonable income, the management can rely on preference shares or debentures. Otherwise issue of equity shares is recommended.<\/p>\n

            3. Cost of Debt:
            \nA firm\u2019s ability to borrow at lower rate, increases its capacity to employ higher debt.<\/p>\n

            4. Interest Coverage Ratio (ICR):
            \nThe interest coverage ratio refers to the number of times earnings before interest and taxes of a company covers the interest obligation. Higher the ratio, better is the position of the firm to raise debt.<\/p>\n

            5. Desire for control:
            \nIf the management has a desire to control the business, it will prefer preference shares and debentures in capital structure because they have no voting rights.<\/p>\n

            6. Flexibility:
            \nCapital structure should be capable of being adjusted according to the needs of changing conditions.<\/p>\n

            7. Capital Market Conditions:
            \nIn depression, debentures are considered good. In a booming situation, issue of shares will be more preferable.<\/p>\n

            8. Period of Finance:
            \nIf funds are required for short period, borrowing from bank should be preferred. If funds are required for longer period company can issue shares and debentures.<\/p>\n

            9. Taxation Policy:
            \ninterest on loan and debentures is deductible item under the Income Tax Act whereas dividend is not deductible. In order to take advantage of this provision, companies may issue debentures.<\/p>\n

            10. Legal Requirements:
            \nThe structure of capital of a company is also influenced by the statutory requirements. For example, Banking Regulation Act, Indian Companies Act, SEBI, etc.<\/p>\n

            Question 3.
            \nDistinguish between fixed capital and working capital.<\/p>\n

            Fixed Capital:<\/p>\n