Financial Management – Semester II

Theory Questions from University question papers

Chapters covered: - Introduction to FM & importance and functions of FM

Financial system

Financial services

Time value of money

Cost of capital and capitalization

Leverages

Introduction to capital structure theories

Instructions:

• Students have to write the points to be covered in the answer for the questions given
below (write points in the notebook). This has to be brought to the class on 9th Feb in
regular class schedule.

• Nine questions of the following are star marked. These questions will have to be
submitted as assignment by 16th Feb 2011 (Wednesday) in the class.

• Any late submission will not be accepted.

• Assignments have to be handwritten on assignment papers and stapled together. No

folders of whatever reason is allowed.

1. What do you mean by optimal capital structure? What is its link with cost of capital?***

2. Explain the factors that affect the planning of the capital structure of the organization.

3. Explain the merits and limitations of raising funds by way of following:***

• Equity shares

• Debentures

• Preference shares
4. “As between under and over capitalization, the former is the lesser evil of the two but still
both should be discouraged and the ideal should be fair capitalization”. Comment.

5. What is over-capitalization? Why does it arise? Explain the corrective remedies for over
capitalization.

6. Differentiate between over and under capitalization. Explain the concept of trading on
equity.***

7. What are the characteristics of various forms of business organization? ***

8. Explain the role of a finance executive.

9. Define financial planning. State its objectives. Explain the various factors which are
required to be considered while preparing financial plan.***

10. Discuss in detail the functions and duties of finance department of a multi-national
company. ***

11. Explain in detail the role and functions of finance manager of a globally diversifies
corporate entity.

12. What is importance of leverage to management decision making? Differentiate between

financial and operating leverage.

13. Write short notes on Financial and Operating leverage. ***

14. Explain the role of players in financial system.

15. Explain factoring and hire purchase and venture capital. ***

16. Write a short note on time value of money. ***