Q3 of 18 Page 254

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

The objectives of financial management can be listed as –

● To ensure regular and adequate supply of funds


● To ensure adequate return to the shareholders


● To ensure optimum utilisation of funds


● To ensure safety of investment


● To plan sound capital structure that is to maintain of a balance between debt and equity


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1

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

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

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Financial management is based on three broad financial decisions. What are these?

 5

Sunrises Ltd. dealing in readymade garments, is planning to expand its business operations in order to cater to international market. For this purpose the company needs additional `80,00,000 for replacing machines with modern machinery of higher production capacity. The company wishes to raise the required funds by issuing debentures. The debt can be issued at an estimated cost of 10%. The EBIT for the previous year of the company was `8,00,000 and total capital investment was `1,00,00,000. Suggest whether issue of debenture would be considered a rational decision by the company. Give reason to justify your answer. (Ans. No, Cost of Debt (10%) is more than ROI which is 8%).