CBSE Class 12 Business Studies HOTs - Financial Management

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CBSE Class 12 Business Studies HOTs - Financial Management. Higher Order Thinking Skills (HOTS) download and print

FINANCIAL MANAGEMENT

HIGH ORDER THINKING SKILLS QUESTIONS

Q. 1 Write the full form of the terms :-

a) EBIT b) ROI (1)

Q.2 State which type of capital structure (more equity based or debt based) would a company adopt when.

a) The stock market is bullish b) The stock market is bearish. (1)

Q.3 Seema is a manufacture who deals in bakery products. Reena also a manufacturer deals in stainless steel ware. Based on length of operating cycle state who would require more working capital? (1)

Q.4 State the foremost objective of financial management. (1)

Q.5 “Ploughing back of profits holds the key to success of a business enterprises”. Do you agree. Give two reasons.

SUGGESTED ANSWER FOR HOTS QUESTION

TOPIC – FINANCIAL MANAGEMENT

 

Ans.1 EBIT refers to earnings before interest & taxes. ROI refers to return on investment. (½x2=1)

Ans.2 a) When the stock market is bullish equity based capital structure can be easily raised .

b) When the stock market is bearish a company must go in for more of loans or debt in its capital structure.(½x2=1)

Ans.3 The length of operating cycle of Reena’s firm stainless steel ware is longer i.e.

The conversion time for raw material to stainless steel product may require more time in case of Reena’s firms. Hence Reena would require more working capital as compared to Seema. (1)

Ans.4 The foremost objective of financial management is “maximization of share holder’s wealth. (1)

Ans.5 Yes, agree. (1)

This is because

(i) the company need not raise finance from other sources

hence cost of financing of the Co. is kept at minimum.

ii) When retained earnings are ploughed back business this greatly enhances prestige of Co. in the eyes of shareholder and the general public. (1)

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