Elective: Financial Management (Part - 2)

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Elective: Financial Management (Part - 2)

Attend any 4 questions.  Each question carries 25 marks

(Each answer should be of minimum 2 pages / of 300 words)

1.Discuss the main sources of capital to finance capital expenditure.

Answer : Working capital refers to the funds needed by a business to conduct its daily operations, such as payment of wages, purchase of raw material, covering overhead costs and offering credit services. Working capital can be subdivided into two areas: regular working capital that provides a steady base for overall business objectives; and short-term working capital used to facilitate the day-to-day business operations. Sources of finance for working capital include bank loans, retained earnings, credit from suppliers, long-term loans from financial institutions, or proceeds from sale of assets.

2.Explain the factors considered as regards to a company’s decision to use debt or equity.

Answer : DEBT or EQUITY?

Business owners contemplate this critical question as they look for financing to grow their business. Which alternative is best? The answer depends on multiple factors, including:

·         Ownership strategy

·         Life-cycle stage of company and industry

·         Pace of growth

·         Company profitability

·         Balance sheet strength

Start by asking yourself this fundamental question – Would I ever consider giving up ownership and possibly control of my company in exchange for financing?

3.Describe the advantages of Leasing.

Answer : Leasing is a process by which a firm obtains the use of a certain fixed asset for which it must pay a series of contractual, periodic, tax deductible payments.

In these arrangements there is a lessee and a lessor. The lessee is the receiver of the services or the assets under the lease contract while the lessor is the owner of the assets.

5.Explain the techniques designed to accelerate the collection of accounts receivable.

Answer :

6.Write a detailed account on Holding Company Accounts.

Answer :

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25 x 4=100 marks