x after completing her MBA realized that her family needs extra income as her father was about to retire. So, she decided to set up a garment manufacturing unit. She received orders for 500 shirts. x started purchasing raw material from local suppliers to complete the order of shirts. As she completed the order on time the other purchasers also started giving orders to x on a regular basis. Her hard work and sincerity resulted in huge profits and led to the growth of the business. After two years, there were communal riots in her city due to which her profits were adversely affected. The availability of labour became a problem and x started suffering a loss. After analyzing the situation for a few months she decided to shut down her business.
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.
INVESTMENT DECISION
It seeks to determine as to how the firm’s funds are invested in different assets
It helps to evaluate new investment proposals and select the best option on the basis of associated risk and return.
Investment decision can be long-term or short-term.
A long-term investment decision is also called a Capital Budgeting decision