List of top Business Studies Questions on Financial Management and Financial Market asked in CBSE CLASS XII

‘Ratan Ltd.’ and ‘Lara Ltd.’ are two companies with each having a capital employed of Rs. 20,00,000. ‘Ratan Ltd.’ had raised funds by issuing shares whereas ‘Lara Ltd.’s capital has 60% equity and 40% debt (8% debentures). Both have ROI of 10% and tax rate is 40%. State with reason which company will give a better return to shareholders.

‘Tangy Beverages Ltd.’ was known for its popular tangy fruit drinks. It had recently introduced a new range of fruit drinks that became an instant hit among consumers and led to a significant increase in the company’s profits. As a result, the Board of Directors wanted to declare a higher dividend for the year. The Chief Finance Officer suggested that they should evaluate the impact of dividend on the share price of previous years before taking a decision. An analysis was done, which showed how the company’s share price had risen in previous years whenever the dividend was increased. On the other hand, even a small decrease in dividend had led to a noticeable dip in the share price. Which of the following factors affecting dividend decision was suggested by the Chief Finance Officer to the Board of Directors in the above case ?

Explain the following factors affecting the working capital requirements of a company :
(a) Level of competition
(b) Inflation

Quoting lines from the above para, state any two features of nature of management identified above.

‘It is a process that allocates or directs funds available for investment into their most productive instrument opportunity’.
This is known as :

Read the following statements Assertion (A) and Reason (R). Choose the correct option from the given options.
Assertion (A) : Amount of Earnings is a major determinant of the decision about dividend.
Reason (R) : Dividends are paid out of current and past earnings.

‘Shanta Enterprises’ was in the business of manufacturing solar panels for the last fifteen years. With their expertise now they were able to manufacture good quality solar panels at lower cost. As a result ‘Shanta Enterprises’ was flooded with orders and was able to generate a good profit margin.
To motivate the employees the company decided to compensate some of them for their hard work. Arvind and Yogesh, who were working on contract basis, were absorbed permanently in the company. Both were happy as now there was stability about their future income. Ekta, a regular employee of the company, working as Research and Development Head, was awarded the ‘Best Employee of the year Award’.

(a) Explain the following factors affecting the working capital requirement of a company :
(i) Level of competition
(ii) Production cycle
(iii) Scale of operations

Read the following statements: Assertion (A) and Reason (R). Choose the correct alternative from the options given below:
Assertion (A): When the allocative function is performed well, scarce resources are allocated to those firms which have the highest productivity for the economy.
Reason (R): Allocative function allocates or directs funds into their most productive investment opportunity.

(a) Explain the following factors affecting choice of capital structure of a company:
(i) Return on Investment
(ii) Floatation Costs
(iii) Flexibility
OR
(b) Explain the following factors affecting working capital requirement of a company:
(i) Nature of business
(ii) Business cycle
(iii) Inflation

(a) Explain the following factors affecting the requirement of fixed capital of a company:

[(i)] Choice of technique
[(ii)] Financing alternatives
[(iii)] Growth prospects

OR (b) Explain the following factors affecting choice of capital structure of a company:

[(i)] Cost of equity
[(ii)] Control
[(iii)] Stock market conditions

(a)Give the meaning of ‘Contract Note’ and ‘T+2’ system in the trading procedure in a stock exchange.
OR
(b)State any three regulatory functions of Securities and Exchange Board of India.

Which of the following is not highlighting the importance of financial planning:

Statement I: The objective of financial management is to maximize shareholders’ wealth.
Statement II: The shareholders gain if the value of shares in the market increases.
Choose the correct option:

In the _________, a securities account can be opened, all shares can be deposited in it and sold/withdrawn anytime. Choose the correct option:

‘Mudro Infratech’ got a short-term contract for building two villas within a period of ten months with the expectation to earn a huge amount of profit. The profit of the company went up by 40% due to this temporary order. The Finance Manager knew that this was not a regular or sustainable source of income. So, he decided not to increase dividend per share. The factor affecting Dividend Decision being highlighted above is:

Explain the following factors affecting the dividend decision of a company: (i) Growth opportunities (ii) Cash flow position (iii) Shareholders’ preference

Explain the following factors affecting the working capital requirements of a business:
(i) Credit allowed
(ii) Production cycle
(iii) Availability of raw material

(a) Explain the following factors affecting the working capital requirements of a business :
(i) Inflation (ii) Business cycle
(iii) Nature of business
OR
(b) Explain the following factors affecting the dividend decision of a company :
(i) Access to capital market
(ii) Legal constraints
(iii) Taxation policy

State any three protective functions of 'Securities and Exchange Board of India'.

(a) Explain the following factors affecting the working capital requirements of a business:
(i) Operating efficiency
(ii) Credit availed
(iii) Level of competition

OR
(b) Explain the following factors affecting the dividend decision of a company:
(i) Stability of dividends
(ii) Contractual constraints
(iii) Stock market reaction