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Course : Masters in Business
Administration (MBA 4 Sem)
Subject : Financial Management
Answer
the following question.
Q1.
How are financial trades made in an over the counter market? Discuss the role
of a dealer in the OTC market.(10 marks)
Answer: A decentralized market, without a central physical location,
where market participants trade with one another through various communication
modes such as the telephone, email and proprietary electronic trading systems.
An over-the-counter (OTC) market and an exchange market are the two basic ways
of organizing financial markets. In an OTC market, dealers act as market makers
by quoting prices at which they will buy and sell a security or currency. A
trade can be executed between two participants in an OTC market without others
being aware of the price at which the transaction was effected. In general, OTC
markets are therefore less transparent than exchanges and are also subject to
fewer regulations.
OTC markets are primarily used to
trade bonds,
Q2.
What is the basic goal of a business? (10marks)
Answer: Your business objectives are the results you hope to achieve as
you run and grow your business. As an entrepreneur, you are concerned with
every aspect of your business and need to have clear goals in mind for your
company if you are to stay on track. Having a comprehensive list of business
objectives creates the guidelines that become the foundation for your business
planning.
1. Getting and Staying Profitable
Maintaining
profitability means making sure
Q3.
What is meant by ‘Financial management’ Explain its importance.. (10marks)
Answer: Financial management is an essential action for any organization
to manage financial resources. A financial manager conducts some activity like
financial planning, organizing, directing and controlling organizational funds.
Financial management is what financial manager do to achieve organizational
goals and objectives. It is important to know the financial management
functions of a financial manager to manage resources. It helps you to take a
decision about financial planning and management using business resources. A good manager is a good planner, organizer,
director and controller of inflow and outflow of funds. The ultimate objectives
of a financial manager are to maximize organizational value.
It includes three important decisions which are investment decisions,
financing decision and dividend decision for a specified period
Q4.
Every Manager has to take three major decisions while performing the finance
function’ briefly explain them. (10 marks)
Answer: The three main financial decisions which are generally
taken by a finance manager are as under:
(i) Investment Decision: It
refers to the selection of assets in which funds will be invested by the
business. Assets which are obtained by the business are of two types, i.e.,
long-term assets and short-term assets. On this basis, investment decision is
also divided into two parts:
(a) Long-term
Investment Decision: This is referred to as the Capital Budgeting Decision. It
relates to the investment in long-term assets. For example, buying a new
machine. For the same purpose, the finance manager has to make a comparative
study
Q5.
To avoid the problem of shortage and surplus of funds, what is required in
Financial management? Name the concept and explain four points of importance.
(10 marks)
Answer: Financial Planning is required to avoid shortage or
surplus of finance.
Importance of financial planning is:
1- by planning utilization of
finance, it reduces waste ,duplication of efforts and gaps in the planning.
2- it helps in coordinating the
various business activities such as sales,purchases, production, finance etc.
Q6.
State the decisions involved in Financial management. (10marks)
Answer: Financial Management is concerned with the acquisition and
utilization of capital funds in meeting the financial needs and overall
objectives of a business enterprise. Thus the primary function of finance is to
acquire capital funds and put them for proper utilization, with which the
firm’s objectives are fulfilled. The firm should be able to procure sufficient
funds on reasonable terms and conditions and should exercise proper control in
applying them in order to earn a good rate of return, which in turn allows the
firm to reward the sources of funds reasonably, and leaves the firm with good
surplus to grow further.
Q7.
What are Strike Price and Option Price? (10marks)
Answer: A stock option gives you the option to buy shares of a
given company at a certain price, the strike price, at a later date.
If the stock price (say, $1)
rises above the strike price (say, $0.75), you can exercise your option to buy
shares at the strike price, and then turn around and sell those shares at the
stock price, making $0.25 a share.
If the option is currently
underwater (i.e. the
Q8.
Why we use WACC? (10marks)
Answer: A company is raising funds from different sources of finance and
doing business with those funds. The company has a responsibility to give a
return to its funding providers. If a company has only one source of financing,
then it is the rate at which it is required to earn from the business. However,
the company may have raised funds from more than one source of finance, in
which case WACC (Weighted Average Cost of Capital) must be found, which
indicates the minimum rate at which the company should earn from the business
in order to give a return to its finance providers, as per their expectations.
The importance and usefulness of the weighted average cost of capital (WACC) as
a financial tool for both investors
Dear students,
get fully solved assignments by professionals
Do send your
query at :
or call us at
:08263069601
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