Financial Management(12th Grade > Business Studies ) Questions and Answers
Explanation:-
Answer: Option C. -> Retained earning:
C
Retained earning is a part of profit which is not distributed among shareholders as dividends but is retained in the business for future use. It is also known as self financing. It is available free of cost for the business.The cheapest source of finance is:
Explanation:-
Answer: Option A. -> ROI is higher than the cost of debt:
A
Financial leverage is the degree to which a company uses fixed-income securities such as debt. Therefore, financial leverage is favorable when the uses to which debt can be put generate returns (ROI) greater than the interest expense associated with the debt (Cost of Debt).
Explanation:-
Answer: Option A. -> pay lower dividends:
A
Companies with higher growth opportunities tend to retain more money out of their earnings so as to finance the required investments. Therefore, higher growth prospects result in lower dividend payment.
Explanation:-
Answer: Option D. -> within one year:
D
These are the assets which can be converted into cash and cash equivalents within one year in the normal routine of business. e.g. inventories, debtors, bills receivable etc.
Explanation:-
Answer: Option A. -> All of these:
A
These decisions are based on expected rate of return and risks involved from each proposal When a proposal involves huge cash flow in return it expects to generate cash flows Capital budgeting techniques are applied to each proposal before selecting a particular project. Amount of investment, interest rate etc should keep in mind.
Explanation:-
Answer: Option A. -> Gross working capital:
A
Gross working capital refers to the investment in all the current assets such as cash, bills receivable, prepaid expenses, inventories, etc. These current assets get converted into cash within a year.