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NCERT Textbook - Financial Management | Business Studies (BST) Class 12 - Commerce PDF Download

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FAQs on NCERT Textbook - Financial Management - Business Studies (BST) Class 12 - Commerce

1. What is financial management?
Ans. Financial management refers to the process of planning, organizing, directing, and controlling the financial activities of an organization. It involves making financial decisions and managing resources effectively to achieve the organization's financial goals.
2. What are the objectives of financial management?
Ans. The main objectives of financial management are: - Maximizing shareholder wealth: Financial management aims to increase the value of the organization's shares, which benefits the shareholders. - Ensuring profitability: Financial management focuses on generating profits and maintaining a sustainable level of profitability. - Liquidity management: It involves managing the organization's cash and other liquid assets to meet short-term obligations. - Risk management: Financial management aims to identify and mitigate financial risks to protect the organization from potential losses.
3. What are the different sources of finance for a business?
Ans. Some common sources of finance for a business include: - Equity financing: This involves raising funds by issuing shares or ownership stakes in the company. - Debt financing: It refers to borrowing money from external sources, such as banks or financial institutions, and promising to repay it with interest. - Internal financing: This involves utilizing the organization's retained earnings or profits to finance its activities. - Venture capital: It involves raising funds from venture capitalists who invest in high-risk, high-potential startups or businesses. - Trade credit: This refers to purchasing goods or services on credit from suppliers and paying for them at a later date.
4. What is capital budgeting?
Ans. Capital budgeting is the process of evaluating and selecting long-term investment projects or assets that are expected to yield future cash flows. It involves assessing the profitability, risk, and feasibility of investment opportunities to determine their value and potential impact on the organization's financial position. Capital budgeting techniques like net present value (NPV), internal rate of return (IRR), and payback period are commonly used to analyze investment projects.
5. How does financial management contribute to business growth?
Ans. Financial management plays a crucial role in driving business growth by: - Ensuring effective allocation of resources: Financial management helps in identifying and allocating resources to the most profitable and growth-oriented areas of the business. - Facilitating strategic decision-making: It provides financial insights and analysis that aid in making informed business decisions and formulating growth strategies. - Managing cash flow: Financial management ensures that the business has sufficient cash flow to meet its operational and growth requirements. - Securing external funding: It involves raising capital from external sources to fund expansion plans, research and development, and other growth initiatives. - Monitoring and controlling financial performance: Financial management provides tools and techniques to monitor and control the financial performance of the business, enabling timely corrective actions and facilitating sustainable growth.
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