Q1 of 18 Page 254

What is ‘Financial Risk?’ Why does it arise?

Financial risk is a situation when a company is not able to meet its fixed financial charges. The fixed financial charges are the –

● Interest that is to be paid on borrowed capital and


● Rate of dividend to be paid on preference capital.


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4

Amrit is running a ‘transport service’ and earning good returns by providing this service to industries. Giving reason, state whether the working capital requirement of the firm will be ‘less’ or ‘more’.

 5

Ramnath is into the business of assembling and selling of televisions. Recently he has adopted a new policy of purchasing the components on three months credit and selling the complete product in cash. Will it affect the requirement of working capital? Give reason in support of your answer

 2

Define ‘Current Assets’. Give four examples of such assets.

 3

What are the main objectives of financial management? Briefly explain.