Financing Decision

Q.

What is Zero-Coupon Bond?

Q.

The cheapest source of finance is

1. equity share capital

2. preference share

3. retained earning

4. debenture

Q.

How is shareholders' wealth maximisation linked with the market price of the shares of the company?

Q.

The cheapest source of finance is:

1. Equity share capital

2. Preference share

3. Retained earning

4. Debenture

Q.

According got you, which is the cheapest source of finance?

1. Debentures

2. Bonds

3. T-Bill

4. Commercial Paper

Q.

Why is managed floating called dirty floating?

Q.

This decision is about the quantum of finance to be raised from various long-term sources:

1. Dividend decision

2. Financing decision

3. Capital budgeting decision

4. Investment decision

Q.

''A capital budgeting decision is capable of changing the financial fortunes of a business''. Do you agree? Why or why not?

Q.

The _____ decision determines the overall cost of capital and the financial risk of the enterprise.

Q.

"During annual general meeting of Prakash Ltd. Ceo, Mr. Rajesh put the expansion plan for the coming year before shareholders and asked for a suitable source of finance to finance manger. Finance manager Mr. Kant proposed the issue of debentures than equity with a plan that they can be paid back whenever requirement of funds is over." In the above paragraph, which component affecting financing decision has been highlight?

1. Cash flow position

2. Flexibility

3. Floatation cost

4. Regulatory framework

Q.

___ is the riskless source of finance, as there is no obligation on the company to pay dividends or repay the capital of the shareholders, whether they earn a profit or not.

1. Capital

2. Equity

3. Debt

4. Asset

Q.

Financial leverage is a proportion of debt in an overall capital. State whether true or false.

1. True

2. False

Q.

Financial Leverage Is Called Favourable If________

Q.

Identify the decision taken in financial management, which affects the liquidity as well as the profitability of a business.

1. Investment decision

2. Financing decision

3. Dividend decision

4. All of the above

Q.

Are Bonds Money Market Instruments?

Q. Name and explain the money-market instrument the company can use for the given purpose.

Q. A decision is taken to raise money for long term capital needs of business from certain sources. What is their decision called? Explain the three factors affecting such decision.

Q. Match the correct pairs :

Group “A”		Group “B”
a.	Life Insurance	1.	Claim made by insured
b.	Mitigation of loss	2.	Perishable goods
c.	Premium	3.	Insurable interest
d.	Cold storage	4.	Maximum loss
e.	Warehousing	5.	Transfer of goods from one place to other
		6.	To minimise the loss
		7.	Imported goods
		8.	Principle of indemnity
		9.	Storage of goods
		10.	Payment made by policy holder

Q. Explain any three disadvantages of borrowing funds from specialised financial institutions.

Q. Jai Bharat Company Ltd is an auto part supplier company in Guru Gram, Haryana. Its business is spread over several cities. The CEO of company wants to open a factory in Gujarat near Tata Motors Ltd. but due to recession for the last two years, its business is facing slow down. Company needs capital. Rakesh Gupta is CA and financial advisor of the company. He opines that during recession profit falls and investors prefer to invest in debentures to earn fixed income. Therefore, the company should issue debentures.
In this paragraph, which factor affecting financing decision has been highlighted?

Q. The concept of financial leverage has a direct relationship with ______.

1. Cost of capital
2. Capital structure management
3. Dividend policy
4. Capital bugeting

Q.

___ may be defined as the decision, which is related with deciding the amount to be raised and the source of finance.

1. Capital Structure

2. Investment Decision

3. Financial Planning

4. Financing Decision

Q.

How is liquidity used?

Q. "During annual general meeting of Prakash Ltd CEO, Mr. Rajnesh put the expansion plan for the coming year before shareholders and asked for suitable source of finance to finance manager. Finance manager Mr. Kant proposed issue of debentures than equity with a plan that they can be paid back whenever requirement of funds is over."
In the above paragraph, which component affecting financing decision has been highlighted?

Q. Financing decision involves making a judicious mix of debt and equity.

1. False
2. True

Q. Write short answer of the following.

State the demerits of proprietorship.

Q. Floatation cost affects the financial decions of a financial manager.

1. True
2. False

Q. Financing decision involves deciding the quantum of finance to be raised from various long term sources.

1. False
2. True