BUSINESS FINANCE

Time : 1 hr
Marks
Objective type questions

The cheapest source of finance is

a.
debenture
b.
equity share capital
c.
preference share
d.
retained earning

A decision to acquire a new and modern plant to upgrade an old one is a

financing decision

working capital decision

investment decision

dividend decision

Other things remaining the same, an increase in the tax rate on corporate profits will

make debt relatively cheaper

make debt relatively less cheap home

no impact on the cost of debt

we cant say
Companies with higher growth paternal are likely to

pay lower dividends

pay higher dividends

dividends are not affected by growth considerations

none of the above

5.

Higher working capital usually results in

higher current ratio, higer risk and higher profits

lower current ratio, higher risk and profits

higher equitably, lower risk and lower profits

lower equitably, lower risk and higher profits

6.

Current assets are those assets which get converted into cash

a.
within six month
b.
within one year
c.
between one and three year
d.
between three and five year

7.

Financial planning arrives at

minimising the external borrowing by resorting to equity issues

entering that the firm always have sinthicicanlty more fund than required so that there is no pancity of
funds

ensuring that the firm paces neither a shortage nor a glut of unusable funds

doing only what is possible with the funds that the firms has at its disposal

8.

Higher dividends per share is associated with

high earnings, high cash flows, unusable earnings and higher growth opportunities

high earnings, high cash flows, stable earnings and high growth opportunities

high earnings, high cash flows, stable earnings and lower growth opportunities

high earnings, low cash flows, stable earnings and lower growth opportunities

9.

A fixed asset should be financed through

a. a long-term liability

b. a short-term liability

c. a mix of long and short-term liabilities

10.

Current assets of a business firm should be financed through

a. current liability only b. long-term liability only

c. partly from both types i.e. long and short term liabilities

Short answer questions

What is Financial Risk? Why does it arise?

Define a Current Assets and gave four examples?

Financial management is based on three broad financial decisions. What are these?

3X3=9

Long answer questions

2X 4=8

What is meant by working capital. How is it calculated. Discuss five important determinants of working
capital requirements.

Explain factors affecting the dividend decision.