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question_answer1) What is meant by working capital. How is it calculated? Discuss five important determinants of working capital requirements. Or Explain the meaning of Working Capital. Briefly explain any four factors that determine the working capital of a company. [Foreign 2007; Delhi, AI 2008C; CBSE Sample Paper 2011] Or Explain briefly any five factors to be considered at the time of determining working capital requirement. [Foreign 2006] Or You are the finance manager of a company. The board of directors have asked you to determine the working capital requirements for the company. State the factors that you would take in consideration while determining the requirements of working capital for the company. [HOTS] Or Explain any four factors which affect the working capital requirements of a business. [Delhi, Foreign 2008; Delhi AI 2009; CBSE Sample Paper 2011] Or You are the Financial Manager of a newly established company. The Directors have asked you to determine the amount of working capital requirement for the company. Explain any four factors that you will consider while determining the working capital requirement for the company. [Delhi 2011]
question_answer2) Capital structure decision is essentially optimisation of risk-return relationship. Comment.
question_answer3) A capital budgeting decision is capable of changing the financial fortune of a business. Do you agree? Why or Why not?
question_answer4) Explain factors affecting the dividend decision. Or What is meant by Dividend decision? State any four factors affecting the dividend decision. [Delhi, Foreign 2010] Or Identify the financial decision which determines the amount of profit earned to be distributed and to be retained in the business. Explain any four factors affecting this decision. [Foreign 2012] Or Explain the factors affecting the dividend policy of a company. [Delhi, Foreign 2006] Or You are the finance manager of a company. The board of directors have asked you to decide the dividend policy (i.e., how earnings will be divided into two partsretained earnings and dividends) for the company. Explain the factors that you would take in consideration while determining the dividend policy for the company. [HOTS]
question_answer5) Explain the term Trading on Equity. Why, When and How it can be used by a business organisation? Or How are shareholders likely to gain with a loan component in the capital employed? Explain with a suitable example. [AI 2011, Foreign 2011, CBSE Sample Paper 2011] Or How does 'trading on equity' increase the return on equity shares? Illustrate with a suitable example. [HOTS]
question_answer6) 'S' Limited is manufacturing steel at its plant in India. It is enjoying a buoyant demand for its products as economic 'growth is about 7%-8% and the demand for steel is growing. It is planning to set up a new steel plant to cash on the increased demand it is facing. It is estimated that it will require about ` 5000 crores to set up and about ` 500 crores of working capital to start the new plant. Questions: 1. What is the role and objectives of financial management for this company? 2. What is the importance of having a financial plan for this company? Give an imaginary plan to support your answer. 3. What are the factors, which will affect capital structure of this company? 4. Keeping in mind that it is a highly capital intensive sector what factors will affect the fixed and working capital. Give reasons with regard to both in support of your answer.
question_answer7) Explain the meaning of Fixed Capital. Briefly explain any four factors that determine the fixed capital of a company. [Delhi, AI 2008; CBSE Sample Paper 2011] Or Explain the factors affecting requirements of fixed capital of a business. [AI 2008] Or How do 'Choice of Technique' and 'Nature of Business' affect the 'Fixed Capital' requirements of a company? Explain. [Foreign 2012]
question_answer8) A businessman who wants to start a manufacturing concern approaches you to suggest him whether the following manufacturing concerns would require large or small working capital: (a) Bread (b) Sugar (c) Coolers (d) Furniture manufacturing against specific orders, and (e) Motorcars give your view point with reasons in each of the above cases. [HOTS]
question_answer9) Radhika and Vani who are young fashion designers, left their job with a famous fashion designer chain to set - up a company Fashionate Pvt. Ltd. they decided to run a boutique during the day and coaching classes for the entrance examination of National Institute of Fashion Designing in the evening. For the coaching centre, they hired the first floor of a nearby building. Their major expenses was the money spent on photocopying of notes for their students. They thought of buying a photocopier knowing fully that their scale of operations was not sufficient to make full use of photocopier. In the basement of the building of Fashionate Pvt. Ltd, Praveen and Ramesh were carrying on a printing and stationery business in the name of Neo Prints Pvt. Ltd. Radhika approached Praveen with the proposal to by a photocopier jointly which could be used by both of them without making separate investment. Praveen agreed to this. Identify the factor affecting the fixed capital requirements of Fashionate Pvt. Ltd. [Delhi 2016]
question_answer10) Rizul Bhattacharya, after leaving his job, wanted to start a Private Limited Company with his son. His son was keen that the company may start manufacturing mobile phones with some unique features. Rizul Bhattacharya felt that mobile phones are prone to quick obsolescence and a heavy fixed capital investment would be required regularly in this business. Therefore, he convinced his son to start a furniture business. Identify the factor affecting fixed capital requirements which made Rizul Bhattacharya choose the furniture business over mobile phones. [AI 2016]
question_answer11) Amit is running as 'Advertising agency' and earning a lot by providing this service to big industries. State whether the working capital requirement of the firm will be 'less' or 'more'. [CBSE Sample Paper 2014 -15] Give reason in support of your answer.
question_answer12) Aarohan Ltd. an automobile manufacturer was diversifying into manufacturing two wheelers. They knew that India is on a growth path and a new breed of consumer is eager for a first vehicle. The market responded very well to the new product. The company did not have to allow credit, as it had advance orders from four to six months with deposits paid. Also, due to efficiency in managing their operations as soon as a vehicle was off the assembly line, it was out to the dealers. Give any one reason discussed above which helped the firm in managing its working capital efficiently. [CBSE Sample Paper 2017-18]
question_answer13) Somnath Ltd. is engaged in the business of export of garments. In the past, the performance of the company had been upto the expectations. In line with the latest technology, the company decided to upgrade its machinery. For this, the Finance Manager, Dalmia estimated the amount of funds required and the timings. This will help the company in linking the investment and the financing decisions on a continuous basis. Dalmia therefore, began with the preparation of a sales forecast for the next four years. He also collected the relevant data about the profit estimates in the coming years. By doing this, he wanted to be sure about the availability of funds from the internal sources of the business. For the remaining funds he is trying to find out alternative sources from outside. Identify the financial concept discussed in the above para. Also state the objectives to be achieved by the use of financial concept, so identified. [Delhi 2017]
question_answer14) Ramnath Ltd. is dealing in import of organic food items in bulk. The company sells the items in smaller quantities in attractive packages. Performance of the company has been up to the expectations in the past. Keeping up with the latest packaging technology, the company decided to upgrade its machinery. For this, the Finance Manager of the company Mr. Vikrant Dhull, estimated the amount of funds required and the timings. This will help the company in linking the investment and the financing decisions on a continuous basis. Therefore, Mr. Vikrant Dhull began with the preparation of a sales forecast for the next four years. He also collected the relevant data about the profit estimates in the coming years. By doing this, he wanted to be sure about the availability of funds from the internal sources. For the remaining funds he is trying to find out alternative sources. Identify the financial concepts discussed in the above paragraph. Also state any two points of importance of the financial concept, so identified. [AI 2017]
question_answer15) Amar is doing his transport business in Delhi. His buses are generally used for tourists going to Jaipur and Agra. Identify the working capital requirements of Amar. Give reasons to support your answer. Further, Amar wants to expand and diversify his transport business. Explain any two factors that will affect his fixed capital requirements. [AI 2012]
question_answer16) Manish is engaged in the business of manufacturing garments. Generally, he used to sell his garments in Delhi. Identify the working capital requirements of Manish giving reasons in support of your answer. Further, Manish wants to expand and diversify his garments business. Explain any two factors that will affect his fixed capital requirements. [Delhi 2012]
question_answer17) Harish is engaged in the warehousing business and his warehouses are generally used by businessmen to store fruits. Identify the working capital requirements of Harish giving reasons in support of your answer. Further, Harish wants to expand and diversify his warehousing business. Explain any two factors that will affect his fixed capital requirements. [Delhi 2012]
question_answer18) Saksham Ltd. a firm manufacturing textiles, wished to diversify their business. They were considering two options, either to diversify into manufacturing tooth-paste or switches. They wanted to invest in the purchase of land, to set up a manufacturing unit in the backward areas of Gujarat, which would also lead to the generation of employment opportunities in the area, but only after fulfilling all legal requirements and taking appropriate steps to ensure that the environment was not polluted. The finance manager of the company, Mr. Rama Kant was asked by the management to prepare a report on the factors which should be considered while making the above investment decision. (a) State any two factors that Mr. Rama kant would give in his report. (b) Also state any one reason which makes it important for the above decision to be made carefully. (5) (c) And state two values being fulfilled by Saksham Ltd. [CBSE Sample Paper 2017-18]
question_answer19) A business that doesn't grow dies, says Mr. Shah, the owner of Shah Marble Ltd. with glorious 36 months of its grand success having a capital base of ` 80 crores. Within a short span of time, the company could generate cash flow which not only covered fixed cash payment obligations but also create sufficient buffer. The company is on the growth path and a new breed of consumers eager to buy the Italian marble sold by Shah Marble Ltd. To meet the increasing demand, Mr. Shah decided to expand his business by acquiring a mine. This required an investment of ` 120 crores. To seek advice in this matter, he called his financial advisor Mr. Seth who advised him about the judicious mix of equity (40%) and Debt (60%). Mr. Seth also suggested him to take loan from a financial institution as the cost of raising funds from financial institutions is low. Though this will increase the financial risk but will also raise the return to equity shareholders. He also apprised him that issue of debt will not dilute the control of equity shareholders. At the same time, the interest on loan is a tax deductible expense for computation of tax liability. After due deliberations with Mr. Seth. Mr. Shah decided to raise funds from a financial institution. (a) Identify and explain the concept of Financial Management as advised by Mr. Seth in the above situation. (b) State the four factors affecting the concept as identifier in part (a) above which have been discussed between Mr. Shah and Mr. Seth. [CBSE Sample Paper 2017]
question_answer20) Shalini, after acquiring a degree in Hotel Management and Business Administration, took over her family food processing company of manufacturing pickles, jams and squashes. The business had been established by her great grandmother and was doing reasonably well. However, the fixed operating costs of the business were high and the cash flow position was weak. She wanted to undertake modernization of the existing business to introduce the latest manufacturing process and diversify into the market of chocolates and candies. She was very enthusiastic and approached a finance consultant, who told her that approximately ` 50 lakh would be required for undertaking the modernization and expansion programme. He also informed her that the stock market was going through a bullish phase. (a) Keeping the above considerations in mind, name the source of finance Shalini should not chose for financing the modernization and expansion of her food processing business. Give one reason in support of your answer. (b) Explain any two other factors, apart from those stated in the above situation, which Shalini should keep in mind while taking this decision. [CBSE Sample Paper 2016]
question_answer21) Vivo Ltd. is a company manufacturing textiles. It has a share capital of ` 60 lakhs. The earnings per share in the previous year was ` 0.50. For diversification, the company requires an additional capital of ` 40 lakh. The company raised funds by issuing 10% debentures for the same. During the current year, the company earned a profit of ` 8 lakhs on the capital employed. It paid tax @ 40%. (a) State whether the shareholders gained a lost, in respect of earning per share on diversification. Show your calculations clearly. (b) Also, state any three factors that favour the issue of debentures by the company as part of its capital structure. [Delhi 2016]
question_answer22) Yogesh, a businessman, is engaged in the purchase and sale of ice - creams. Identify his working capital requirements by giving reasons to support your answer. Now, he is keep to start his own ice - cream factory. Explain any two factors that will affect his fixed capital requirements. [AI 2012]
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