Class 12 Business Studies - Chapter Financial Management NCERT Solutions | Ramnath is into the business of assembli

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%).

Aval Ltd. is engaged in the business of export of canvas goods and bags. In the past, the performance of the company had been upto the expectations. In line with the latest demand in the market, the company decided to venture into leather goods for which it required specialised machinery. For this, the Finance Manager Prabhu prepared a financial blueprint of the organisation’s future operations to estimate the amount of funds required and the timings with the objective to ensure that enough funds are available at right time. He also collected the relevant data about the profit estimates in the coming years. By doing this, he wanted to be sure about the availability of funds from the internal sources of the business. For the remaining funds, he is trying to find out alternative sources from outside.

a. Identify the financial concept discussed in the above paragraph. Also, state the objectives to be achieved by the use of financial concept so identified. ( Financial Planning).

b. ‘There is no restriction on payment of dividend by a company’. Comment. ( Legal & Contractual Constraints)

Amrit is running a ‘transport service’ and earning good returns by providing this service to industries. Giving reason, state whether the working capital requirement of the firm will be ‘less’ or ‘more’.

‘S’ Limited is manufacturing steel at its plant in India. It is enjoying a buoyant demand for its products as economic growth is about 7–8 per cent and the demand for steel is growing. It is planning to set up a new steel plant to cash on the increased demand. It is estimated that it will require about `5000 crores to set up and about `500 crores of working capital to start the new plant.

a. Describe the role and objectives of financial management for this company.
b. Explain the importance of having a financial plan for this company. Give an imaginary plan to support your answer.
c. What are the factors which will affect the capital structure of this company?
d. Keeping in mind that it is a highly capital-intensive sector, what factors will affect the fixed and working capital. Give reasons in support of your answer.

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

Explain the factors affecting dividend decision?

What is financial risk? Why does it arise?

“A capital budgeting decision is capable of changing the financial fortunes of a business.” Do you agree? Give reasons for your answer?

“Capital structure decision is essentially optimisation of risk-return relationship.” Comment.

Name the concept of financial management which increases the return to equity shareholders due to the presence of fixed financial charges.

How does planning provide direction?

What is meant by staffing?

Identify the network of social relationships which arises spontaneously due to interaction at work.

What is informal communication?

State the meaning of controlling.

What is meant by management?

What is a Treasury Bill?

State any two advantages of branding to marketers of goods and services?

What makes principles of management flexible?

Under which consumer right does a business firm set up consumer grievance cell?

Distinguish between convenience product and shopping product.

‘Bhasin’ limited was engaged in the business of food processing and selling its products under a popular brand. Lately the business was expanding due to good quality and reasonable prices. Also with more people working the market for processed food was increasing. New players were also coming to cash in on the new trend. In order to keep its market share in the short run the company directed its existing workforce to work overtime. But this resulted in many problems. Due to increased pressure of work the efficiency of the workers declined. Sometimes the subordinates had to work for more than one superior resulting in declining efficiency. The divisions that were previously working on one product were also made to work on two or more products. This resulted in a lot of overlapping and wastage. The workers were becoming indisciplined. The spirit of teamwork, which had characterized the company, previously was beginning to wane. Workers were feeling cheated and initiative was declining. The quality of the products was beginning to decline and market share was on the verge of decrease. Actually the company had implemented changes without creating the required infrastructure.

a. Identify the Principles of Management (out of 14 given by Henry Fayol) that were being violated by the company.
b. Explain these principles in brief.
c. What steps should the company management take in relation to the above principles to restore the company to its past glory?

Which style of leadership does not believe in use of power unless it is absolutely essential?

Neha runs a factory wherein she manufactures shoes. The business has been doing well and she intends to expand by diversifying into leather bags as well as western formal wear thereby making her company a complete provider of corporate wear. This will enable her to market her business unit as the one stop for working women. Which type of structure would you recommend for her expanded organisation and why?

Explain the importance of controlling in an organisation. What are the problems faced by the organisation in implementing an effective control system?

Mrs. Mathur sent a jacket to a laundry shop in January 2018. The jacket was purchased at a price of ₹4,500. She had previously sent the jacket for dry cleaning with Shine Dry Cleaners and the jacket was cleaned well. However, she noticed that her jacket had white discoloration marks when she collected the jacket this time. On informing the dry cleaner, Mrs. Mathur received a letter confirming that discolouration indeed appeared after the jacket was dry cleaned. She contacted the dry cleaner multiple times and requested for compensation for discoloured jacket but to no avail.

Upon Consumer court’s intervention, Shine Dry Cleaners agreed to compensate ₹2,500 to Mrs. Mathur for the discoloured jacket.

a. Which right was exercised by Mrs. Mathur at the first instance.
b. Name and explain the right which helped Mrs. Mathur to avail the compensation.
c. State which consumer responsibility has been fulfilled by Mrs. Mathur in the above case.
d. State any other two responsibilities to be assumed by the consumers.

Discuss the differences between the contributions of Taylor and Fayol.

SanakLal and Gagan started their career in Wales Limited (a printing press) after going through a rigorous recruitment process. Since they had no prior work experience, the firm decided to give them one year to prove themselves. Name the principle of management followed by Wales Limited.

A company ‘M’ limited is manufacturing mobile phones both for domestic Indian market as well as for export. It had enjoyed a substantial market share and also had a loyal customer following. But lately it has been experiencing problems because its targets have not been met with regard to sales and customer satisfaction. Also mobile market in India has grown tremendously and new players have come with better technology and pricing. This is causing problems for the company. It is planning to revamp its controlling system and take other steps necessary to rectify the problems it is facing.

a. Identify the benefits the company will derive from a good control system.
b. How can the company relate its planning with control in this line of business to ensure that its plans are actually implemented and targets attained.
c. Give the steps in the control process that the company should follow to remove the problems it is facing.

Management is a series of continuous interrelated functions. Comment.