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Financial Management Test - 23

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Financial Management Test - 23
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  • Question 1
    1 / -0
    Financial planning provides a link between _________ and ________ decisions on a continuous basis.
    Solution
    Financial Planning provides a link between investing and financing decisions on a continuous basis. Financial planning deals with preparation of the financial blueprint of the organisations future operations. It includes the matter relating to investing and financing on a continuous basis.
  • Question 2
    1 / -0
    Which of the following consumer organisations and NGO engaged in protecting and promoting consumers' interests?
    Solution
    The organizations that are engaged in protecting consumer's interests are Consumer Coordination Council Delhi, Common Cause Delhi, Consumer Education and Research Center Ahmadabad.
  • Question 3
    1 / -0
    What are the twin objectives of financial planning?
    Solution
    Financial planning strives to achieve the following twin objectives.
    a) To ensure availability of funds whenever required: This include a proper estimation of the funds required for different purposes such as for the purchase of longterm assets or to meet day-to-day expenses of business etc. Apart from this, there is a need to estimate the time at which these funds are to be made available. Financial planning also tries to specify possible sources of these funds.
    (b) To see that the firm does not raise resources unnecessarily: Excess funding is almost as bad as inadequate funding. Even if there is some surplus money, good financial planning would put it to the best possible use so that the financial resources are not left idle and don’t unnecessarily add to the cost.
  • Question 4
    1 / -0
    Avoiding business shocks and surprises and helping the company in preparing for the future is the _________ of financial planning.
    Solution
    Importance of financial planning
    1. Income: It's possible to manage income more effectively through planning. Managing income helps you understand how much money you'll need for tax payments, other monthly expenditures and savings.
    2. Cash Flow: Increase cash flows by carefully monitoring your spending patterns and expenses. Tax planning, prudent spending and careful budgeting will help you keep more of your hard earned cash.
    3. Capital: An increase in cash flow, can lead to an increase in capital. Allowing you to consider investments to improve your overall financial well-being.
    4. Family Security: Providing for your family's financial security is an important part of the financial planning process. Having the proper insurance coverage and policies in place can provide peace of mind for you and your loved ones.
    5. Investment: A proper financial plan considers your personal circumstances, objectives and risk tolerance. It acts as a guide in helping choose the right types of investments to fit your needs, personality, and goals.
    6. Standard of Living: The savings created from good planning can prove beneficial in difficult times. For example, you can make sure there is enough insurance coverage to replace any lost income should a family bread winner become unable to work.
    7. Financial Understanding: Better financial understanding can be achieved when measurable financial goals are set, the effects of decisions understood, and results reviewed. Giving you a whole new approach to your budget and improving control over your financial lifestyle.
    8. Assets: A nice 'cushion' in the form of assets is desirable. But many assets come with liabilities attached. So, it becomes important to determine the real value of an asset. The knowledge of settling or canceling the liabilities, comes with the understanding of your finances. The overall process helps build assets that don't become a burden in the future.
    9. Savings: It used to be called saving for a rainy day. But sudden financial changes can still throw you off track. It is good to have some investments with high liquidity. These investments can be utilized in times of emergency or for educational purposes.
    10. Ongoing Advice: Establishing a relationship with a financial advisor you can trust is critical to achieving your goals. Your financial advisor will meet with you to assess your current financial circumstances and develop a comprehensive plan customized for you.
  • Question 5
    1 / -0
    ________ is the activity concerned with planning, raising, controlling and administering of funds used in the business.
    Solution
    • Financial Management is concerned with optimal procurement as well as usage of finance.
    • For optimal procurement, different available sources of finance are identified and compared in terms of their costs and associated risks.
    • Thus financial management is the activity concerned with planning, raising, controlling and administering of funds used in the business.
  • Question 6
    1 / -0
    The twin objective to ensure availability of funds whenever required, includes a proper estimation of the funds required for different purposes such as for the purchase of _______ assets or to meet day-today expense of business.
    Solution
    Financial management involves decision about the proportion of long term and short term finance. An organisation wanting to be more liquid would raise relatively more amount of long term bass and vice versa. There is a choice between liquidity and profitability. The underlying assumption here is that the current liability cost less than long term liability. 
  • Question 7
    1 / -0
    The process of estimating the fund requirement of a business and specifying the sources of funds is called ____________.
    Solution
    Financial Planning is the process of estimating the capital required and determining it’s competition. It is the process of framing financial policies in relation to procurement, investment and administration of funds of an enterprise.
  • Question 8
    1 / -0
    Financial planning usually begins with the preparation of a _______ forecast.
    Solution
    Financial planning usually begins with the preparation of a sales forecast.
    It starts with an estimate of the sales which are likely to happen in the next five years. Based on these, the financial statements are prepared keeping in mind the requirement of funds for investment in the fixed capital and working capital. Then the expected profits during the period are estimated so that an idea can be made of how much of the fund requirements can be met internally i.e. through retained earnings. This results in an estimation of the requirement for external funds. Further, the sources from which the external funds requirement can be met are identified and cash budgets are made, incorporating these factors.
  • Question 9
    1 / -0
    Financial planning is done for ______ to _______ years.
    Solution
    Financial planning is done for three to five years. For longer periods it becomes more difficult and less useful. Plans made for periods of one year or less are termed as budgets. Budgets are example of financial planning exercise in greater details. They include detailed plan of action for a period of one year or less.
  • Question 10
    1 / -0
    Which of the following is False
    Solution
    Financing Decisions. Decisions concerning the liabilities and stockholders' equity side of the firm's balance sheet, such as a decision to issue bonds.
    The Investment Decision relates to the decision made by the investors or the top level management with respect to the number of funds to be deployed in the investment opportunities.
    The Dividend decision refers to the policy that the management formulates in regard to earnings for distribution as dividends among shareholders. The decision, in Corporate finance, is a decision made by the directors of a company about the amount and timing of any cash payments made to the company's stockholders.
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