Mba Financial Management Questions And Answers Pdf - FINANCIAL MANAGEMENT For M.Com /B.Com Part A Questions and Answers INTRODUCTION TO FINANCIAL MANAGEMENT 1. What is financial management?
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Mba Financial Management Questions And Answers Pdf
1 FINANCIAL MANAGEMENT For M.Com /B.Com Part A Questions and Answers INTRODUCTION TO FINANCIAL MANAGEMENT 1. What is financial management? This is the implementation of planning and control of financial activities. 2. What do you mean by profit maximization? This means increasing the company's revenue or profit. 3. What is wealth maximization? It means increasing the wealth of the shareholders. 4. Define financing decisions. It is about deciding the source of funds to finance the investment. 5. Explain the concept of wealth. The totality of all assets in an economic unit that generate current income or may generate income in the future. 6. Explain the concept of profit. Profit is the difference between income and expenses. Profit is the amount of money a business earns after accounting for all expenses. 7. State the limits of profit maximization? The concept is very vague. It ignores the time value of factors, risk and uncertainty. 8. What is the purpose of financial services? Obtaining Adequate and Adequate Funds: Proper Use of Funds: Maximizing Profits: Maximizing Business Value: 9. What are Investment Decisions? The investment decision involves deciding the total assets to be held in the company and its structure.
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2 10. What is trade return risk? High risk is associated with high return potential and low risk is associated with low return potential. Mutual funds can provide high profits if there is a risk of loss. VALUE OF MONEY 1. Define the value of money? The value of cash received now is greater than the value of the same cash received in future years. 2. What is compound value? It is the future value of the present value using the interest rate. 3. What is the present value? Amount on one payment date or a series of payments at another time. 4. What is NPV? This is more than the present value of the project's inflows due to outflows. 5. What is the discount? It reduces the value of future cash flows or returns to a direct comparison with present value. 6. What is the reason for the choice of currency? Risk, consumption preferences and investment opportunities. 7. What is the cost of capital asset model of security risk? The Capital Asset Pricing Model (CAPM) is a linear model that describes the relationship between risk and expected return on risky assets. O Security risk and expected return,
3 8. How do you value the deposit? Average Method (Fair Value) Method of Earning (Capitalization) Method of Production of Dividends Methods Net Assets Value (NAV) Method 9. What is financial risk? This is the difference in EPS resulting from the use of the investment. 10. What is business/systemic risk? reason. Total risk is included as a result of general economic conditions during 11. What is idiosyncratic/unsystematic risk? It is the part of the risk that arises due to specific business or security reasons 12. What is absolute risk? It is a combination of market risk and individual risk. 13. What is a portfolio? A collection of securities is called a portfolio. 14. What is portfolio return? This is the weighted average of each bond's return. 15. Define double time period? This is the time it takes to double your investment. 16. Define age? It refers to a series of equal annual payments made at the end of the year for a specified period of time
4 17. What is a product? The yield refers to the income from the investment. 18. What are the risks? It indicates the degree to which the actual return varies from the expected return. 19. What are the benefits of debt? This is the rate of return on the proceeds of the debenture. 20. What is the return holding period? HPR is the sum of revenue and profit divided by the value of assets at the beginning of the period, usually expressed as a percentage. 21. What are the effects of maturity? maturity. The rate of return earned by an investor who buys a bond and holds it until OVERALL STRUCTURE 1. What is meant by capital structure? It means the share of long-term financial resources in the working capital of the company. 2. Explain the revenue strategy? The capital structure is related to the valuation of the company. A company can reduce its total cost of capital by increasing the use of debt in its capital structure. 3. Explain the operating income strategy? According to this theory, the capital structure does not affect the total cost of capital and the value of the company.
5 4. Explain MM approach under capital system? This theory states that the market value of the firm and the total cost of capital are independent of the capital structure. 5. What is the usual procedure? This is a compromise between income and financial practices. The capital structure will be optimal at this level of debt mix. (The amount of debt is good up to a certain point and beyond that it will affect the value of the company) 6. What is the financial system? This is the total liability balance sheet 7. What does capitalization mean? It means the total long-term capitalization used by the company 8. What is total capitalization? It indicates the real capitalization is higher than the guaranteed income or the capitalization is higher than the normal capitalization. 9. What is capitalization? This means that the actual capitalization is lower than the average capitalization. 10. What is financial planning? It is estimated at the cost of the capital and the total. 11. What are the different patterns of capital structure? Equity shares Preference shares Debentures / long term loan bonds
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6 12. What is participation? The difference between sales and expenses is called participation. 13. What is EBIT? This is the difference between a contribution and a fixed fee. These are earnings before interest and taxes. 14. What does EPS mean? It represents earnings per share which shows the relationship between earnings per share and the number of shares. 15. Explain two factors that affect capital structure Business risk management practices Growth rate Market conditions COST OF CAPITAL 1. What is the cost of capital? This is the lowest rate of return investors can expect. 2. What is the real cost of capital? The Real Cost of Capital describes the major issues in understanding and using the current cost of capital, taking concepts from the world of financial management and placing them within area of investment decisions. 3. What are the components of the cost of capital? Amount of Debt Amount of Preference Share Amount of Equity Amount of Retained Earnings
7 4. What is meant by preferred cost of capital? This is a function of the investor's expected dividend. 5. What is the cost of equity capital? The rate of return that shareholders expect on the company's stock. 6. Define the cost of debt capital? This is the interest rate charged on the loan. 7. What is the amount of cash held? These are the profits that the shareholders have forgotten. 8. What is meant by equity capital? This is the weighted average of the values of the different resources. 9. Explain the two factors that affect the cost of capital? General economic conditions Market conditions Operational and financial decisions. Cost of financing 10. What are fixed costs? This is the cost of each resource. 10. a. What is the price involved? This is a direct payment to others for business management. 11. What is the total cost? It is the combined or weighted average value of the company's capital.
8 12. What is the price of history? The investment proposal is an expected price that has already been spent on financing. 13. What is the future price? This is money expected to be raised in future fundraisers. LEVERAGES 1. What is leverage? It is the use of assets or funds for which the company pays a fixed fee or a fixed return. 2. Explain the types of leverage? Financial development Integrated investment 3. What is investment? It refers to the use of cash for operating the business. 4. What is financial leverage / equity trading? This refers to the use of long-term debt and preference capital along with the owner's equity in the capital structure (business transactions use debt capital in the capital structure). 5. What is a partnership? It measures the results of investment and investment that shows the impact of
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