Page 17 - DMGT409Basic Financial Management

Basic Financial Management

Notes 11. Profit maximisation is suitable for sole proprietorship concerns.

12. A rupee receivable today, is less valuable than a rupee receivable in future.
13. Having basic knowledge of economics is necessary for a fi nancial manager.
14. There is risk involvement in fi nancial decisions.

15. Principles of corporate finance can be applied to all types of organisations.
1.9 Review Questions

1. Write a note on the evolution of fi nance function.

2. Contrast the salient features of traditional and modern approaches to fi nancial
management.
3. Discuss in detail the scope of fi nancial management.

4. Should the goal of financial decision-making be profit maximisation or wealth maximisation?
Discuss.
5. In what respect is the objective of wealth maximisation superior to profi t maximization?
6. “The profit maximization is not an operationally feasible criterion.” Do you agree? Illustrate

your views.

7. What are the basic financial decisions? How do they involve risk return trade-off?
8. “Finance functions of a business is closely related to its other functions”. Discuss.

9. Assuming wealth maximization to be the objective of financial management, show how
the financing, investment and dividend decisions of a company can help to attain this

objective.
10. “………Finance has changed …….from a field that was concerned primarily with the

procurement of funds to one, that includes the management assets, the allocation of capital
and valuation of the fi rm” Elucidate.
Answers: Self Assessment

1. Corporate fi nance 2. Corporate
3. Shareholders wealth 4. Profi t, Wealth
5. Time value of money 6. Risk premium
7. Agency confl ict 8. True

9. True 10. False
11. True 12. False
13. True 14. True
15. True

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