Page 209 - DMGT207_MANAGEMENT_OF_FINANCES

Management of Finances

Notes (b) To issue 25,000, 8% debentures of 100 each.
(c) To issue 25,000, 8% preference shares of 100 each.
The company’s expected EBIT will be 8 lakh. Assuming a corporate tax rate of 46 percent.
Determine the EPS in each financial plan and determine the best one and why?
13. What basic principles will you advocate in the matter of deciding on a proper constitution
of capital structure for a firm?

14. Comment on the flexibility in the capital structure.
15. Examine the importance of the optimum capital structure of a firm & the ways in which
one can deduce it.

Answers: Self Assessment

1. T 2. F
3. T 4. T
5. F 6. wealth maximization
7. Flexibility 8. Equity
9. Debt finance 10. capital structure

11. T 12. F
13. F 14. T
15. T 16. T

17. F
8.15 Further Readings

Books Chandra, P., Financial Management - Theory and Practice, New Delhi, Tata McGraw
Hill Publishing Company Ltd., 2002, p. 3.
Dr Pradeep Kumar Sinha, Financial Management, New Delhi, Excel Books, 2009.

Sudhindra Bhat, Financial Management, New Delhi, Excel Books, 2008.
Van Horne, J.C. and Wachowicz, Jr, J.M., Fundamentals of Financial Management,
New Delhi, Prentice Hall of India Pvt. Ltd., 1996, p. 2.

Online links www.themanagementor.com/
www.investopedia.com/exam.../

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