"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?

Cash flow position

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Flexibility

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Floatation cost

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Regulatory framework

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Solution

The correct option is B
Flexibility

Flexibility: It has to maintain some flexibility such that it can afford to borrow when it is financially weak. That sort of a flexibility can be maintained if it avoids taking too much debt at a time.

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Similar questions

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?

Explain the component?

Directors of Roma Ltd. wants to use debentures for expansion plans but the finance manager wants to use retained earnings for this purpose. You as a finance manager has to convince directors how retained earning s are better than debentures.

Q. 'REI Agro Food Ltd. is a famous multinational company. Mr. S.K Nagi is its finance manager. He is making efforts to increase the market value of capital invested by the equity shareholders. He already kew it could be possible only when price of the share increases and price of shares increase only if financing, investment and dividend decisions are taken optimally. He did the same and achieved success.
Which objective of financial management has been referred here?

Explain?

As a finance manager, advise the directors about various sources of finance for financing the expansion of your company.

Classify the following into (i) Operating Acivities, (ii) Investing Activities, (iii) Financing Activities and (iv) Cash Equivalents while preparing a Cash Flow Statement:
1. Cash Sales
2. Cash Received from Trade Receivables
3. Purchase of Building
4. Sale of Building
5. Issue of Share Capital or Debentures
6. Buy- back of Equity Shares
7. Dividend Paid
8. Interest paid on Debentures or Long - term Loans by (a) Finance Company (b) Non- Finance Company
9. Cash Purchases
10. Cash paid to trade payables
11. Redemption of Debentures and Preference Shares
12. Repayment of Long - term Loan
13. Office Expenses
14. Selling and Distribution Expenses
15. Manufacturing Expenses
16. Purchase of Goodwill
17. Sale of Patent
18. Purchase of Investments
19. Sale of Investments by (a) Finance Company (b) Non- Finance Company
20. Commission and Royalty received
21. Interest received on Investments by (a) Finance company (b) Non Finance company
22. Dividend received on Shares by (a) Finance Company (b) Non - Finance company
23. Rent Paid
24. Rent received if (a) Company's main business is property business (b) Other business
25. Income Tax Paid
26. Income Tax Refund received
27. Bank Balance
28. Short- term Deposits in Bank
29. Investment in Short - term or Marketable Securities

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The correct option is B Flexibility Flexibility: It has to maintain some flexibility such that it can afford to borrow when it is financially weak. That sort of a flexibility can be maintained if it avoids taking too much debt at a time.

The correct option is B
Flexibility

Flexibility: It has to maintain some flexibility such that it can afford to borrow when it is financially weak. That sort of a flexibility can be maintained if it avoids taking too much debt at a time.