Financial Planning and Management — Flashcards
NIOS · Class 12 · Business Studies
30 flashcards for Financial Planning and Management (NIOS Class 12 Business Studies) to test yourself on key terms and facts.
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What is Financial Management and what are its three main decisions?
Answer
Financial Management is the process of procuring funds economically and deploying them profitably while planning future operations and controlling performance. The three main decisions are: 1. Investm…
Explain the Investment Decision in Financial Management with examples.
Answer
Investment Decision involves careful selection of viable and productive assets. It comprises: 1. Capital Budgeting Decision - Long-term investment in fixed assets (e.g., buying machinery, constructing…
What is the primary objective of Financing Decision?
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The Financing Decision aims to procure funds in an economic and prudent manner while maintaining an optimal capital structure. Key objectives include: 1. Minimizing overall cost of capital 2. Maintain…
Define Dividend Decision and explain its importance.
Answer
Dividend Decision involves determining how much of the net profit to distribute to shareholders and how much to retain in the business for growth. It balances: 1. Shareholder expectations for current …
What is Profit Maximization and why is it not always the best objective?
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Profit Maximization is the objective of maximizing a business firm's profit for its owner. Limitations: 1. Vague - Doesn't specify 'how much' profit or time frame 2. Ignores Timing of Returns - Treat…
Why is Wealth Maximization superior to Profit Maximization?
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Wealth Maximization (maximizing market value of shareholders' shares) is superior because it: 1. Considers Time Value of Money - ₹100 today is worth more than ₹100 tomorrow 2. Accounts for Risk - Dif…
What is Financial Planning and what facets does it involve?
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Financial Planning is the process of framing financial policies for procuring funds, investing them, and administering funds to achieve business objectives. Key Facets: 1. Estimating current financia…
List and explain the five essential characteristics of a sound financial plan.
Answer
A sound financial plan must have: 1. Simplicity - Use simple, well-known securities (equity shares, debentures, loans) rather than complex derivatives 2. Long-term View - Consider not just today's c…
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