CBSE Class 12 Business Studies Financial Management Worksheet Set A Solved

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Read and download free pdf of CBSE Class 12 Business Studies Financial Management Worksheet Set A Solved. Download printable Business Studies Class 12 Worksheets in pdf format, CBSE Class 12 Business Studies Chapter 9 Financial Management Worksheet has been prepared as per the latest syllabus and exam pattern issued by CBSE, NCERT and KVS. Also download free pdf Business Studies Class 12 Assignments and practice them daily to get better marks in tests and exams for Class 12. Free chapter wise worksheets with answers have been designed by Class 12 teachers as per latest examination pattern

Chapter 9 Financial Management Business Studies Worksheet for Class 12

Class 12 Business Studies students should refer to the following printable worksheet in Pdf in Class 12. This test paper with questions and solutions for Class 12 Business Studies will be very useful for tests and exams and help you to score better marks

Class 12 Business Studies Chapter 9 Financial Management Worksheet Pdf

 FINANCIAL MANAGEMENT
 
1 Define Financial Management.
Financial Management is concerned with optimal procurement as well as usage of finance.
 
2 What is wealth maximisation concept?
Primary aim of financial management is to maximise shareholder’s wealth, which is referred to as the wealth maximisation concept.
 
3 What is Financial planning? Explain its objectives.
Financial planning is essentially preparation of a financial blueprint of an organisation’s future operations.
The objective of financial planning is to ensure that enough funds are available at right time. Financial planning strives to achieve the following twin objectives.
(a) To ensure availability of funds whenever these are required
(b) To see that the firm does not raise resources unnecessarily.
 
4 State the importance of Financial planning.
(i) It tries to forecast what may happen in future under different business situations.
(ii) It helps in avoiding business shocks and surprises and helps the company in preparing for the future.
(iii) If helps in coordinating various business functions e.g., sales and production functions,by providing clear policies and procedures.
(iv) Detailed plans of action prepared under financial planning reduce waste, duplication of efforts, and gaps in planning.
(v) It tries to link the present with the future.
(vi) It provides a link between investment and financing decisions on a continuous basis.
(vii) By spelling out detailed objectives for various business segments, it makes the evaluation of actual performance easier.
 
5 Define Capital Structure.
Capital structure refers to the mix between owners funds and borrowed funds. These shall be referred as equity and debt in the subsequent text.
 
6 Define Fixed Capital.
What are the factors affecting the requirement of Fixed Capital. Fixed capital refers to investment in long-term assets.
Factors affecting the requirement of Fixed Capital
1. Nature of Business
2. Scale of Operations
3. Choice of Technique
4. Technology Up gradation
5. Growth Prospects
6. Diversification
7. Financing Alternatives
8. Level of Collaboration.
 
7 Name the three broad decisions that are part of the finance function.
a. Investment decision
b. Financing decision
c. Dividend Decision.
 
8 What is Financial Leverage?
The proportion of debt in the overall capital is called Financial Leverage.
 
9 Define Dividend Decision and what are the factors affecting it.
Dividend is that portion of profit which is distributed to shareholders.
(a) Earnings (b) Stability of Earnings (c) Stability of Dividends (d) Growth Opportunities (e) Cash Flow Position (f) Shareholder Preference (g) Taxation Policy (h) Stock Market Reaction.
 
10 Discuss the factors affecting choice of capital structure.
1. Cash Flow Position
2. Interest Coverage Ratio (ICR): The interest coverage ratio refers to the number of times earnings before interest and taxes of a company covers the interest obligation. ICR = EBIT Interest. The higher the ratio, lower is the risk of company failing to meet its interest payment obligations.
3. Debt Service Coverage Ratio (DSCR): Debt Service Coverage Ratio takes care of the deficiencies referred to in the Interest Coverage Ratio (ICR).
4. Return on Investment (RoI): If the RoI of the company is higher, it can choose to use trading on equity to increase its EPS, i.e., its ability to use debt is greater.
5. Cost of debt: A firm’s ability to borrow at a lower rate increases its capacity to employ higher debt. Thus, more debt can be used if debt can be raised at a lower rate.
6. Tax Rate: Since interest is a deductible expense, cost of debt is affected by the tax rate.
7. Cost of Equity:
8. Floatation Costs: Process of raising resources also involves some cost.
9. Risk Consideration
10. Flexibility:
11. Control: Debt normally does not cause a dilution of control.
12. Regulatory Framework
13. Stock Market Conditions:
 
11 Define Working Capital. What are the Factors affecting the requirement of Working Capital.
Working Capital refers to the capital required for day to day working of an organisation.
Working capital may be defined as the excess of current assets over current liabilities.
Factors affecting the requirement of Working Capital:
1. Nature of Business
2. Scale of Operations
3. Business Cycle
4. Seasonal Factors
5. Production Cycle
6. Credit Allowed
7. Credit Availed.
 
12 When is financial leverage favourable?
When ROI is higher than cost of Debt.
 
13 Explain how ‘cost of debt’ affects the choice of capital structure of a company.
A. If the cost of debt is low then the capital structure of the firm will be skewed towards debt.
 
14 1.'A business that doesn't grow dies', says Mr. Shah, the owner of Shah Marble Ltd. with glorious 36 months of its grand success having a capital of Rs.80 crore. Within a short span of time, the company could generate cash flow which not only covered fixed cash payment obligations but also create sufficient buffer. The company is on the growth path and a new breed of consumers is eager to buy the Italian marble sold by Shah Marble Ltd.
To meet the increasing demand, Mr. Shah decided to expand his business by acquiring a mine. This required an investment of Rs.120 crore. To seek advice in this matter, he called his financial advisor Mr. Seth who adivsed him about the judicious mix of equity (40%) and Debt (60%). Mr. Seth also suggested him to take loan from a financial institution as the cost of raising funds from financial institutions is low. Though this will increase the financial risk but will also raise the return to equity shareholders. He also apprised him that issue of debt will not dilute the control of equity shareholders. At the same time, the interest on loan is a tax deductible expense for computation of tax liability.
After due deliberations with Mr. Seth, Mr. Shah decided to raise funds from a financial institution.
(a) Identify and explain the concept of Financial Management as advised by Mr. Seth in the above situation.
(b) State the four factors affecting the concept as identified in part 'a' above which have been discussed between Mr. Shah and Mr. Seth.
Ans. (a) Capital structure.
(b) (i) Cash flow position
(ii) Floatation cost
(iii) Risk consideration
(iv) Tax rate
(v) Control.


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Chapter 01 Nature and Significance of Management
CBSE Class 12 Business Studies Nature And Significance of Management Case Studies
CBSE Class 12 Business Studies Nature and Significance of Management Worksheet Set A
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CBSE Class 12 Business Studies Nature And Significance of Management Worksheet Set I
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Chapter 02 Principles of Management
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CBSE Class 12 Business Administration Introduction To Management Worksheet Set A
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Chapter 03 Business Environment
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Chapter 04 Planning
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Chapter 05 Organising
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Chapter 06 Staffing
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Chapter 07 Directing
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Chapter 08 Controlling
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Chapter 09 Financial Management
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Chapter 10 Financial Markets
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Chapter 11 Marketing
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Chapter 12 Consumer Protection
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Practice Worksheets Class 12 Business Studies
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CBSE Class 12 Business Studies Chapter 9 Financial Management Worksheet

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