financial management
Financial Management
MM.100
Subject Code: B-103
Part One:
1. Question :The approach focused mainly on the financial problem of corporate enterprises
Ans: (a)Ignored non-corporate enterprise.
2. Question :These are those shares, which can be redeemed or repaid to the holders after a lapse of the stipulated period
Ans: (c) Redeemable preference shares
3. Question: This type of risk arises from changes in environment regulations, zoning requirements, fees, licenses and most frequently taxes.
Ans: (b)Domestic risk
4. It is the cost of capital that is expected to raise funds to finance a capital budget or investment proposal
Ans: (a)Future Cost
5. This concept is helpful in formulating a sound & economical capital structure for a firm.
Ans: (c)Designing optimal corporate capital structure.
6. It is the minimum required rate of return needed o justify the use of capital
Ans: (b)Firms Point
7. It arises when there is a conflict of interest among owners , debentures holders and the management.
Ans: (d)Agency Costs
8. Some guidelines on shares & debentures issued by government that are very important for the constitution of the capital structure are :
Ans: (a)Legal requirement
9. It is that portion of an investment total risk that results from change in the financial integrity of the investment
Ans: (b)Default Risk
10. -----------Measure the systematic risk of a security that cannot be avoided through diversification.
Ans: (a)Beta
Part Two:
Question 1: What do you understand by wealth maximization?
Ans:
Wealth maximisation is one of the 3 objectives of any financial management
It is also called a value maximisation.
It is the difference between the present value of expected cash benefits and the amount of capital investment required to achieve the benefits.
i.e. NPV=GPC of benefits -Investment
Positive NPV adds to the existing wealth of the organisation.
Negative NPV reduces the existing wealth.
Significance of Wealth Maximization
MM.100
Subject Code: B-103
Part One:
1. Question :The approach focused mainly on the financial problem of corporate enterprises
Ans: (a)Ignored non-corporate enterprise.
2. Question :These are those shares, which can be redeemed or repaid to the holders after a lapse of the stipulated period
Ans: (c) Redeemable preference shares
3. Question: This type of risk arises from changes in environment regulations, zoning requirements, fees, licenses and most frequently taxes.
Ans: (b)Domestic risk
4. It is the cost of capital that is expected to raise funds to finance a capital budget or investment proposal
Ans: (a)Future Cost
5. This concept is helpful in formulating a sound & economical capital structure for a firm.
Ans: (c)Designing optimal corporate capital structure.
6. It is the minimum required rate of return needed o justify the use of capital
Ans: (b)Firms Point
7. It arises when there is a conflict of interest among owners , debentures holders and the management.
Ans: (d)Agency Costs
8. Some guidelines on shares & debentures issued by government that are very important for the constitution of the capital structure are :
Ans: (a)Legal requirement
9. It is that portion of an investment total risk that results from change in the financial integrity of the investment
Ans: (b)Default Risk
10. -----------Measure the systematic risk of a security that cannot be avoided through diversification.
Ans: (a)Beta
Part Two:
Question 1: What do you understand by wealth maximization?
Ans:
Wealth maximisation is one of the 3 objectives of any financial management
It is also called a value maximisation.
It is the difference between the present value of expected cash benefits and the amount of capital investment required to achieve the benefits.
i.e. NPV=GPC of benefits -Investment
Positive NPV adds to the existing wealth of the organisation.
Negative NPV reduces the existing wealth.
Significance of Wealth Maximization