Question

Name the following :

(a) Define proportion between equity (Owners’ fund) and debt (Borrowed fund)

(b) The process of planning, raising, controlling and administering of funds used in business

(c) The process of investing long term funds

(d) Administrating of earnings

(e) Distribution of profit among shareholders​

Answer 1

Answer:

a) The ratio of borrowed funds to own funds (or debt to equity) is called the leverage ratio. Business organizations in all fields may make use of leverage. American corporations in the past overall had a leverage ratio of about 1.0; i.e., 1 to 1.

b) Financial Management is concerned with optimal procurement as well as usage of finance.

For optimal procurement, different available sources of finance are identified and compared in terms of their costs and associated risks.

Thus financial management is the activity concerned with planning, raising, controlling and administering of funds used in the business.

c) A long-term investment is an account a company plans to keep for at least a year such as stocks, bonds, real estate, and cash. ... Long-term investors are generally willing to take on more risk for higher rewards. These are different from short-term investments, which are meant to be sold within a year.

d). Earnings management refers to a company's deliberate use of accounting techniques to make its financial reports look better. Earnings management can occur when a company feels pressured to manipulate earnings in order to match a pre-determined target.

e). A dividend is a distribution of profits by a corporation to its shareholders. ... A dividend is allocated as a fixed amount per share, with shareholders receiving a dividend in proportion to their shareholding. Dividends can provide stable income and raise morale among shareholders.