Vimal Ltd. Is manufacturing cotton shirts for men. It is planning to expand its
business by opening one more branch in another near by city. It has been
consistently earning good profit. So there are sufficient reserves. The finance
manager of the company prefer to use a source of finance which does not
involve any cost in the form of interest and dividend.
a. Suggest the most appropriate source of fund the finance manager of the
company can use for expansion of the business,
b. Explain any four merits of the suggested source of finance.
Answers
Explanation:
CBSE Class 12 Case Studies In Business Studies – Financial Management
FINANCIAL MANAGEMENT
Financial Management: Definition
Financial Management is concerned with optimal procurement as well as usage of finance.
Objective
The prime objective of financial management is to maximise shareholder’s wealth by maximising the market price of a company’s shares.
Financial Decisions Involved in Financial Management
Investment Decision
Financing Decision
Dividend Decision
Role of Financial Management
To determine the capital requirements of business, both long-term and short-term.
To determine the capital structure of the company and determine the sources from where required capital will be raised keeping in view the risk and return matrix.
To decide about the allocation of funds into profitable avenues, keeping in view their safety as well.
To decide about the appropriation of profits.
To ensure efficient management of cash in order to ensure both liquidity and profitability.
To exercise overall financial controls in order to promote safety, profitability and conservation of funds.