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Chapter 9 Financial Management Solutions

Question - 11 : - Are the share holders of a company likely to gain with a debt component in the capital employed ? Explain with the help of an example?

Answer - 11 : -

 The shareholders of a company are very likely to gain with debt component in the capital employed by way of trading
On equity as it increases the earning per share(EPS) of the share holders[( Explain trade on equity with one example)].

Question - 12 : -
State whether the working capital requirements of business manufacturing the following items are big or small. Justify your statement.
(a) Coolers (c) Sugar (b)bread (d) Locomotives (e) Furniture manufacturing against orders.

Answer - 12 : -

Requirements of working capital for the mentioned business will be:
(a) Bread Requirements of working capital will be less because it has quick cash turnover.
(b) Sugar;- working capital required for manufacturers will be more as ration of raw material cost to total cost is more.
(c) Coolers:- working capital required for manufacturers of cooler will be more because it is a seasonal product.
(d) Furniture:- Requirements of working capital for a manufacturer of furniture manufactured against specific order is less as it doesn’t requires large stock.
(e) Motor car;- Requirements of working capital for a manufacturer of locomotives will be more because gestation period is more.

Question - 13 : - What do you mean by floatation cost?

Answer - 13 : - Cost uncured for raising funds.

Question - 14 : -
Name any 2 sources of long term fund?

Answer - 14 : -

 (a) Debt.
(b) Equity

Question - 15 : - What is Business Finance?

Answer - 15 : - Money required for carrying out business activities is called business finance.

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