PDF Notes: UNIT I Notes

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    What does Financial Management involve?

    It applies general management principles to financial resources.

    What is the primary goal of Financial Management?

    Maximizing shareholders' wealth.

    What is capital budgeting?

    Intelligent allocation of capital to long-term assets.

    How does risk factor into investment decisions?

    It affects the calculation of expected returns.

    What is the significance of the cut-off rate?

    It helps evaluate new investments against existing ones.

    What is the role of a financial manager in financing decisions?

    To determine the optimal mix of equity and debt.

    What is an optimum dividend policy?

    It maximizes the market value of the firm.

    Why is liquidity important for a firm?

    To avoid insolvency and maintain operations.

    What does profit maximization ignore?

    Time value of money and quality of benefits.

    How does shareholders' wealth maximization differ from profit maximization?

    It considers time value and quality of benefits.

    What is the formula for calculating shareholders' wealth?

    SWt = NS * MPt.

    What are equity shares?

    They represent ownership and variable income security.

    How do preference shares differ from equity shares?

    Preference shares have fixed dividends and no voting rights.

    What is a debenture?

    A security acknowledging a debt owed by the company.

    What is the main characteristic of a bond?

    It is a debt security with a fixed maturity date.

    What are public deposits?

    Fixed deposits accepted directly from the public.

    What does ploughing back of profits mean?

    Reinvesting surplus earnings into the business.

    What is lease financing?

    Using an asset without ownership through periodic payments.

    What is hire purchase?

    Acquiring an asset through installments with an option to buy.

    What is venture capital financing?

    Equity finance for high-risk, young private businesses.