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B Com Exam  >  B Com Tests  >  Accountancy and Financial Management  >  Test: Finance Functions - B Com MCQ

Test: Finance Functions - B Com MCQ


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10 Questions MCQ Test Accountancy and Financial Management - Test: Finance Functions

Test: Finance Functions for B Com 2024 is part of Accountancy and Financial Management preparation. The Test: Finance Functions questions and answers have been prepared according to the B Com exam syllabus.The Test: Finance Functions MCQs are made for B Com 2024 Exam. Find important definitions, questions, notes, meanings, examples, exercises, MCQs and online tests for Test: Finance Functions below.
Solutions of Test: Finance Functions questions in English are available as part of our Accountancy and Financial Management for B Com & Test: Finance Functions solutions in Hindi for Accountancy and Financial Management course. Download more important topics, notes, lectures and mock test series for B Com Exam by signing up for free. Attempt Test: Finance Functions | 10 questions in 10 minutes | Mock test for B Com preparation | Free important questions MCQ to study Accountancy and Financial Management for B Com Exam | Download free PDF with solutions
Test: Finance Functions - Question 1
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Which area of finance specializes in funding new companies and their expansion efforts?

Detailed Solution for Test: Finance Functions - Question 1
Venture capital is a type of finance that focuses on providing funding to new companies and supporting their growth and expansion efforts. It involves investing in start-ups and early-stage companies in exchange for equity or ownership stakes. Venture capitalists provide not only financial support but also mentorship and expertise to help these companies succeed. This type of financing is crucial for fostering innovation and entrepreneurship in the business world.
Test: Finance Functions - Question 2
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What function of a financial manager involves determining the kind and proportion of various sources of funds?

Detailed Solution for Test: Finance Functions - Question 2
Determining the capital structure is an important function of a financial manager. It involves deciding the appropriate mix of equity and debt, as well as the ratio of short-term and long-term debt, to finance the company's operations. The goal is to achieve a balance that minimizes the cost of capital and maximizes shareholders' wealth. This decision is crucial as it affects the financial stability and profitability of the business in the long run.
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Test: Finance Functions - Question 3
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What is the primary role of financial markets in the economy?

Detailed Solution for Test: Finance Functions - Question 3
Financial markets play a vital role in the economy as they create money. They provide a platform for businesses and governments to access funds by issuing stocks, bonds, and other financial instruments. Through these capital-raising activities, money is generated and made available for investment and economic growth. The creation of money in financial markets supports the functioning of businesses, the income of individuals, and the overall economic development.
Test: Finance Functions - Question 4
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What is the function of financial control in a business?
Detailed Solution for Test: Finance Functions - Question 4
Financial control is an important function of a financial manager. It involves evaluating the financial performance of a business. This evaluation is done by analyzing various financial measures and ratios, such as return on investment (ROI), profitability, liquidity, and cost control. Through financial control, the manager can assess the effectiveness of financial strategies and make necessary adjustments to ensure the company's financial health and success.
Test: Finance Functions - Question 5
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Why is the flow of finance significant for the economy?
Detailed Solution for Test: Finance Functions - Question 5
The flow of finance is significant for the economy as it supports various aspects of economic growth and stability. It assists in the formation of new businesses, which leads to job creation and the expansion of employment opportunities. Additionally, the flow of finance helps maintain the functioning of the financial system, which is essential for economic activities to continue smoothly. Overall, the flow of finance plays a vital role in driving economic development and prosperity.
Test: Finance Functions - Question 6
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What is the purpose of trade finance?
Detailed Solution for Test: Finance Functions - Question 6
Trade finance plays a crucial role in facilitating international trade. It enables companies to purchase goods from overseas suppliers by providing financial instruments such as Letters of Credit (LOC). An LOC serves as collateral for a manufacturer's loan, allowing the manufacturing of products to be funded. By providing financial support for international trade, trade finance helps businesses access global markets and expand their operations.
Test: Finance Functions - Question 7
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What is the primary function of a financial manager in estimating the amount of capital required?
Detailed Solution for Test: Finance Functions - Question 7
Estimating the amount of capital required is a key function of a financial manager. During this process, the manager assesses the financial needs of the business, both for short-term and long-term purposes. Once the capital requirement is determined, the next step is to decide on the sources of funds to fulfill those needs. This involves considering various options such as equity shareholders, preference shareholders, debenture-holders, banks, and other financial institutions. The financial manager's goal is to choose the most suitable and cost-effective sources of funds for the company.
Test: Finance Functions - Question 8
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What is the role of financial instruments in the strategic use of finance?
Detailed Solution for Test: Finance Functions - Question 8
Financial instruments play a strategic role in the use of finance by providing tools to hedge against financial risk. For example, derivatives are packaged groups of securities that help individuals and businesses protect themselves against potential losses due to fluctuations in interest rates, exchange rates, or commodity prices. These instruments allow entities to manage and mitigate financial risks, ensuring the stability and profitability of their operations. By utilizing financial instruments strategically, businesses can safeguard their financial positions and make informed investment decisions.
Test: Finance Functions - Question 9
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Why is the management of cash an important task for a financial manager?
Detailed Solution for Test: Finance Functions - Question 9
The management of cash is a crucial responsibility for a financial manager to ensure the smooth operation of the business. It involves forecasting cash inflows and outflows to ensure that there is neither a shortage nor a surplus of cash within the firm. By effectively managing cash, a financial manager can ensure that sufficient funds are available for day-to-day expenses, such as purchasing materials, paying wages, and meeting other operational costs. This helps maintain the liquidity and financial stability of the company.
Test: Finance Functions - Question 10
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What is the purpose of financial planning?
Detailed Solution for Test: Finance Functions - Question 10
Financial planning is the process of setting financial goals and developing strategies to achieve them. It involves analyzing the current financial situation, forecasting future financial needs, and creating a roadmap for allocating resources effectively. Through financial planning, a business can establish clear objectives, such as maximizing profits, improving cash flow, or expanding operations. It also helps in identifying potential risks and opportunities, enabling the management to make informed decisions and take appropriate actions to achieve financial success.
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