Scope and Objectives of Financial Management

Correct answer B: Investment.

Investment concerns allocation of funds to assets; its funding still requires a separate linked decision.

Correct answer B: Financing decision.

It concerns sources and funding composition.

Correct answer B: It is a dividend decision with a linked internal-financing effect.

Retained funds and payout affect the resources available for growth.

Correct answer A: That cheap borrowing alone proves effective financial management.

Procurement is only one aspect; evaluate justified use/reserve needs.

Correct answer C: Balance cost, payment risk and control against business needs.

Funding suitability requires several linked factors.

Correct answer B: Operating working-capital requirements.

Operating assets/cash timing need financing as well as fixed assets.

Correct answer D: Traditional phase.

The traditional description emphasises occasional procurement and outsiders.

Correct answer A: Transitional phase.

The transitional phase widens focus to recurring problems.

Correct answer A: The objective measure is ambiguous and not comparable.

A profit objective needs clarity about meaning/time/measure.

Correct answer A: Timing and time value, not nominal total alone.

Timing must be assessed on a comparable basis.

Correct answer D: Assess appropriate compensation/risk treatment; no guaranteed realised profit follows.

Risk-return trade-off concerns expected compensation, not certainty.

Correct answer B: Rs 11 lakh.

58 - 47 = 11; do not discount already adjusted PVs again.

Correct answer C: The Rs 10 lakh project.

Choose higher comparable value, not arbitrary scale preference.

Correct answer C: Rs 60 lakh.

300000 x 20 = 6000000 rupees = 60 lakh; debt is not included.

Correct answer A: Rs 95 lakh.

70 + 25 = 95; no unstated cash-adjusted convention is imposed.

Correct answer B: The modern role extends beyond traditional reporting to business advice.

Strategic participation adds to, rather than erases, core finance responsibilities.

Correct answer A: Scale, asset/working-fund needs and feasible funding before commitment.

Growth can consume funds before collections.

Correct answer D: Rs 2 lakh.

4 + 7 - 9 = 2.

Correct answer C: Rs 3 lakh.

5 - 2 = 3; profit or unarranged borrowing is not available cash.

Correct answer D: Use cash forecasts for decisions without rewriting valid accrual recognition.

Accounting provides inputs; cash timing supports finance planning.

Correct answer C: This can indicate financial distress; it is not itself a statutory insolvency judgment.

Cash insufficiency and legal adjudication are distinct.

Correct answer D: Later collections and increased funding/collection risk.

Commercial decisions affect cash requirements.

Correct answer A: Assess operating continuity against funds tied up and stock risks.

Adequate working funds are not necessarily minimum or maximum.

Correct answer C: Manager-owner agency conflict.

The stated personal-interest conflict differs from mere prediction error.

Correct answer C: Rs 1.8 lakh.

4 - 1.4 - 0.8 = 1.8.

Correct answer D: Combine long-term aligned incentives with appropriate monitoring.

Incentive design must address long-run consequences and manipulation.

Correct answer A: It constrains feasible financing and needs contractual compliance/consent assessment.

Covenants can address lender agency risk; actual scope matters.

Correct answer B: All debenture interest is tax-free to lenders and universally deductible by borrowers.

Module tax shorthand is not a universal legal rule.

Correct answer B: Review cash/value evidence and market signals; the price move alone does not prove causation.

There is no automatic one-decision/one-price-move correspondence.

Correct answer D: A separate liquidity/funding schedule is still needed.

Value and timing of available cash are linked but distinct.