CLASS XII: CHAPTER 9 QUESTION BANK
Financial Management | 10 Practice Sets (CBSE 2026-27)
📌 General Instructions for All Sets:
- Maximum Marks: 25 | Time Allowed: 45 Minutes
- Questions 1-5 are objective type carrying 1 mark each (MCQs & Assertion-Reasoning).
- Questions 6-7 are short answer type carrying 3 marks each (30-40 words).
- Questions 8-9 are short answer type carrying 4 marks each (50-80 words).
- Question 10 is a long answer type carrying 6 marks (100-150 words).
- Strictly adhere to the CBSE Competency/Case-Based format.
📄 PRACTICE PAPER - SET 1 (Level: Easy - Fundamental Concepts)
SECTION A (1 Mark Each)
1. The primary objective of Financial Management is:
[Case-Based] The Board of Directors of 'Alpha Ltd.' is deciding whether to buy a new piece of machinery worth ₹50 Crores or lease it.
2. This decision falls under which category of financial decisions?[Case-Based] A company decides to retain a large portion of its current year's profits to fund a future expansion project rather than distributing it to shareholders.
3. This refers to:4. Assertion (A): Financial Management aims at maximizing the current price of equity shares.
Reason (R): Shareholders are the real owners of a company, and any financial decision that adds value to the company will reflect in a higher market price of its shares.
Reason (R): Shareholders are the real owners of a company, and any financial decision that adds value to the company will reflect in a higher market price of its shares.
5. Assertion (A): Working capital involves decisions regarding long-term assets.
Reason (R): Working capital is the portion of capital used for the day-to-day operations of the business, such as buying raw materials and paying wages.
Reason (R): Working capital is the portion of capital used for the day-to-day operations of the business, such as buying raw materials and paying wages.
SECTION B (3 Marks Each)
6. State the meaning of 'Financial Management'. Why is the 'Wealth Maximization' objective considered superior to the 'Profit Maximization' objective?
[Case-Based] 'SuperCements Ltd.' is planning to set up a new manufacturing plant in Gujarat. The finance manager needs to raise ₹100 Crores. He is evaluating whether to issue equity shares or take a long-term bank loan.
7. Identify the financial decision being evaluated. State any two factors that will affect this decision.
SECTION C (4 Marks Each)
8. Briefly explain the three major decisions involved in Financial Management.
[Case-Based] The directors of a highly profitable company decide to declare a lower dividend this year despite having massive cash reserves. The shareholders are upset.
9. Identify the financial decision taken by the directors. State any three valid factors (reasons) that could justify the directors' decision to declare a lower dividend.
SECTION D (6 Marks Each)
[Case-Based] 'InnovateTech' has grown rapidly over the last five years. The CEO wants to double the production capacity. To do this, the finance head, Mr. Varun, prepares a blueprint of the organization's future financial operations. He accurately estimates that they will need ₹500 Crores over the next two years. He also ensures that this entire amount is not raised through high-interest debt, preventing the company from going bankrupt. By doing so, he ensures that funds are available exactly when required and that the company does not raise resources unnecessarily, avoiding wasteful interest payments.
10. Identify the specific financial concept (blueprint) prepared by Mr. Varun. By quoting lines from the paragraph, explain its **twin objectives** and **three points of its importance** to 'InnovateTech'.
📄 PRACTICE PAPER - SET 2 (Level: Moderate - Application & Analysis)
SECTION A (1 Mark Each)
1. The decision regarding the proportion of debt and equity in the capital structure of a company is known as:
[Case-Based] A company decides to invest heavily in purchasing a fleet of delivery trucks to replace its old outsourced logistics system.
2. This is an example of:3. Financial Planning arrives at:
4. Assertion (A): A capital budgeting decision is irreversible in nature.
Reason (R): It involves massive amounts of funds invested in long-term assets. Reversing the decision would mean selling the assets at a heavy loss.
Reason (R): It involves massive amounts of funds invested in long-term assets. Reversing the decision would mean selling the assets at a heavy loss.
5. Assertion (A): A company with a high growth potential usually pays a high dividend.
Reason (R): Such companies retain a large portion of their earnings to finance their expansion and growth projects.
Reason (R): Such companies retain a large portion of their earnings to finance their expansion and growth projects.
SECTION B (3 Marks Each)
6. Differentiate between 'Fixed Capital' and 'Working Capital' with one example of each.
[Case-Based] 'Bright Lights Ltd.' has an easy access to the capital market and can raise debt at any time.
7. How will this 'Access to Capital Market' affect the Dividend Decision of the company? Explain.
SECTION C (4 Marks Each)
8. Explain any four factors that affect the 'Investment Decision' (Capital Budgeting Decision) of a company.
[Case-Based] The Finance Manager of 'Zeta Corp' decides to raise ₹20 Crores purely through issuing new equity shares instead of taking a bank loan, because the company is currently facing a severe cash shortage and low profits.
9. Identify the financial decision taken. Explain the two factors (Cash flow position and Risk) that justify the manager's choice of equity over debt.
SECTION D (6 Marks Each)
[Case-Based] 'FashionHub' operates a chain of retail clothing stores. The management wants to open 50 new stores. To do this, they need massive fixed capital. The Finance Head analyzes the situation. He notes that the nature of their business is trading, not manufacturing. Secondly, he realizes the scale of operations will become enormous. Thirdly, instead of buying the shops, he successfully negotiates a 10-year lease for the new storefronts. Lastly, he acknowledges that the fashion industry operates in a highly dynamic environment where technology and trends change rapidly.
10. By quoting lines from the text, identify and explain the **four factors affecting the Fixed Capital requirements** of 'FashionHub'.
📄 PRACTICE PAPER - SET 3 (Level: Moderate-High - Nuanced Competency)
SECTION A (1 Mark Each)
1. 'Trading on Equity' refers to the use of:
[Case-Based] A company has a very long operating cycle (the time taken to convert raw materials into finished goods and then into cash).
2. This company will require:3. The proportion of debt and equity used for financing the operations of a business is called:
4. Assertion (A): Debt is considered a cheaper source of finance than equity.
Reason (R): Interest paid on debt is a tax-deductible expense, whereas dividends paid on equity are not tax-deductible.
Reason (R): Interest paid on debt is a tax-deductible expense, whereas dividends paid on equity are not tax-deductible.
5. Assertion (A): If the Return on Investment (ROI) of a company is less than the Rate of Interest on debt, the company should use more debt.
Reason (R): Using more debt when ROI is less than the interest rate will lead to a decrease in the Earning Per Share (EPS), which is unfavorable.
Reason (R): Using more debt when ROI is less than the interest rate will lead to a decrease in the Earning Per Share (EPS), which is unfavorable.
SECTION B (3 Marks Each)
6. Define 'Capital Structure'. State the formula to calculate the Debt-Equity Ratio.
[Case-Based] A bakery requires raw materials like flour, sugar, and eggs daily. These items are easily available in the nearby wholesale market throughout the year without any shortage.
7. How will the 'Availability of Raw Material' affect the working capital requirement of the bakery? Explain.
SECTION C (4 Marks Each)
8. Explain how 'Floatation Costs' and 'Control Considerations' affect the financing decision (choice between debt and equity).
[Case-Based] 'Alpha Cements' wants to declare a high dividend to keep its shareholders happy. However, the company has taken a massive long-term loan from a bank, and the bank has placed a restriction on the maximum dividend the company can pay.
9. Identify and explain the factor affecting the dividend decision in this case. State any two other factors affecting the dividend decision.
SECTION D (6 Marks Each)
[Case-Based] 'Global Logistix' needs to determine its Working Capital requirements. The Finance Manager observed several key points. First, the nature of their business is providing a service (transportation), not manufacturing. Second, they have a highly liberal credit policy, allowing their corporate clients to pay invoices after 90 days. Third, the business faces severe seasonal fluctuations, with massive demand during the Diwali and Christmas festive seasons. Finally, inflation in the country has been steadily rising, increasing the daily cost of fuel and labor.
10. By quoting lines from the paragraph, identify and explain the **four factors affecting the Working Capital requirements** of 'Global Logistix'.
📄 PRACTICE PAPER - SET 4 (Level: Hard - Analytical Competency)
SECTION A (1 Mark Each)
1. Which of the following statements is true regarding Financial Leverage?
[Case-Based] An established software firm has an incredibly stable and predictable cash flow throughout the year.
2. This stability allows the firm to:3. Working capital refers to the excess of current assets over:
4. Assertion (A): A company with a higher Business Risk (operating risk) should use more debt in its capital structure.
Reason (R): Using more debt increases the Financial Risk (risk of default on interest payments). If Business Risk is already high, adding high Financial Risk can push the company into bankruptcy.
Reason (R): Using more debt increases the Financial Risk (risk of default on interest payments). If Business Risk is already high, adding high Financial Risk can push the company into bankruptcy.
5. Assertion (A): Capital budgeting decisions do not affect the risk profile of the business.
Reason (R): These decisions involve long-term investments that determine the future growth and profitability of the business.
Reason (R): These decisions involve long-term investments that determine the future growth and profitability of the business.
SECTION B (3 Marks Each)
6. Explain 'Financial Leverage' with its formula.
[Case-Based] 'SkyHigh Ltd.' has a high proportion of debt in its capital structure. The top management argues that debt is cheaper because of 'Tax Deductibility'.
7. Explain how 'Tax Deductibility' makes debt a cheaper source of finance compared to equity.
SECTION C (4 Marks Each)
8. Explain the concept of 'Trading on Equity'. Under what condition does trading on equity become unfavorable for the shareholders?
[Case-Based] The tax rate in a country was suddenly increased by the government. The finance manager of 'Delta Corp' noticed this and suggested that the company should now prefer issuing debentures over equity shares for its new project.
9. Identify and explain the factor affecting the financing decision highlighted here. Do you agree with the finance manager's suggestion? Give a reason.
SECTION D (6 Marks Each)
[Case-Based] 'PureMetals Ltd.' is planning to raise ₹50 Crores to upgrade its machinery. The Finance Manager, Ms. Riya, is deciding the Capital Structure. She notes that the company's current cash flow position is excellent and highly predictable. However, she also observes that the stock market is currently in a 'bearish' phase (depressed market conditions). The current shareholders have strictly warned her that they do not want to lose their voting control over the company to outsiders. Finally, she checks the 'Interest Coverage Ratio' (ICR) and finds it to be very high, indicating the company can comfortably pay interest.
10. By quoting lines from the paragraph, identify and explain the **four factors affecting the Capital Structure decision** of 'PureMetals Ltd.' Based on these factors, should Ms. Riya choose Debt or Equity?
📄 PRACTICE PAPER - SET 5 (Level: Advanced - Evaluation Competency)
SECTION A (1 Mark Each)
[Case-Based] A company wants to raise funds. However, the cost of issuing a prospectus, advertising, and paying underwriters is extremely high right now.
1. These costs are known as:2. A higher 'Interest Coverage Ratio' (ICR) means:
[Case-Based] An FMCG company sells its products strictly on a 'Cash and Carry' basis. No credit is allowed.
3. This policy will result in:4. Assertion (A): A manufacturing organization requires more working capital than a trading organization.
Reason (R): Manufacturing involves a longer operating cycle as raw materials have to be converted into finished goods before they are sold.
Reason (R): Manufacturing involves a longer operating cycle as raw materials have to be converted into finished goods before they are sold.
5. Assertion (A): Financial planning is the same as financial management.
Reason (R): Financial management is a broader concept that involves making financial decisions, whereas financial planning is the preparation of a financial blueprint for the future.
Reason (R): Financial management is a broader concept that involves making financial decisions, whereas financial planning is the preparation of a financial blueprint for the future.
SECTION B (3 Marks Each)
6. Explain how 'Growth Prospects' and 'Level of Collaboration' affect the Fixed Capital requirements of a business.
[Case-Based] The management of 'QuickServe Restaurants' decides to declare a stable, consistent dividend every year, even if profits fluctuate slightly. They believe this keeps retired shareholders happy.
7. Identify the factor affecting the dividend decision. Why do shareholders prefer stability of dividends?
SECTION C (4 Marks Each)
8. Explain any four objectives of Financial Planning.
[Case-Based] 'Zeta Ltd.' has a Return on Investment (ROI) of 15%. They need ₹10 Lakhs. They can either issue equity shares or take a bank loan at 10% interest.
9. If the company wants to maximize the Earning Per Share (EPS) for its shareholders, which source of finance should they choose? State the concept that supports your answer.
SECTION D (6 Marks Each)
[Case-Based] Mr. Amit wants to set up a factory to manufacture heavy industrial machinery. He meets a financial consultant. The consultant advises him that his working capital requirements will be enormous. He points out that heavy machinery takes months to manufacture, locking up cash for long periods. Secondly, industrial buyers rarely pay in cash; they demand a 6-month credit period. Thirdly, Mr. Amit will be importing special steel from Germany, and the shipment takes 4 months to arrive, forcing him to keep a massive inventory in his warehouse at all times. Lastly, the consultant warns that the steel market is facing heavy inflation, making daily purchases more expensive.
10. By quoting lines from the paragraph, identify and explain the **four factors affecting the Working Capital requirements** of Mr. Amit's factory.
📄 PRACTICE PAPER - SET 6 (Level: Expert - Complex Case Studies)
SECTION A (1 Mark Each)
[Case-Based] A company has heavy fixed operating costs like rent, insurance, and permanent staff salaries.
1. This indicates the company has a high:2. Which of the following factors favors a higher dividend payout?
[Case-Based] If the stock market is bullish (optimistic and rising), companies generally prefer to raise capital through:
3.
4. Assertion (A): Shareholders prefer capital gains over higher dividends if the company has high-growth projects.
Reason (R): Reinvesting the profits into high-growth projects will increase the overall market value of the shares (Wealth Maximization), providing long-term benefits to shareholders.
Reason (R): Reinvesting the profits into high-growth projects will increase the overall market value of the shares (Wealth Maximization), providing long-term benefits to shareholders.
5. Assertion (A): Trading on equity is successful when the rate of interest on debt is higher than the ROI.
Reason (R): Earning Per Share (EPS) increases when a company employs cheaper debt to finance a project that yields a higher return than the cost of that debt.
Reason (R): Earning Per Share (EPS) increases when a company employs cheaper debt to finance a project that yields a higher return than the cost of that debt.
SECTION B (3 Marks Each)
6. Explain the term 'Capital Budgeting Decision'. State any two reasons why it is considered crucial for a business.
[Case-Based] The government recently reduced the corporate tax rate significantly.
7. How will this reduction in the corporate tax rate affect the 'Financing Decision' (Debt vs. Equity) of a company? Explain.
SECTION C (4 Marks Each)
8. Explain how 'Scale of Operations' and 'Nature of Business' affect the Fixed Capital requirements of a company.
[Case-Based] 'Alpha Ltd.' has an EBIT (Earnings Before Interest and Taxes) of ₹10 Lakhs. Total capital is ₹50 Lakhs. It is considering raising ₹20 Lakhs as debt at 10% interest.
9. Calculate the Return on Investment (ROI). Will 'Trading on Equity' be favorable for 'Alpha Ltd.' in this situation? Show the reasoning.
SECTION D (6 Marks Each)
[Case-Based] The Board of Directors of 'StarPharma' is meeting to finalize the annual dividend. The CEO suggests retaining maximum profits because they have discovered a formula for a groundbreaking new medicine and need massive funds to build a specialized lab. The CFO agrees, adding that the stock market is currently crashing (Bearish market), making it impossible to issue new equity shares to raise funds. Furthermore, the company's major shareholders are highly wealthy individuals in the highest tax bracket who prefer capital gains over dividend income. However, the legal advisor reminds them that under the Companies Act, they cannot declare dividends out of their core capital reserves.
10. By quoting lines from the paragraph, identify and explain the **four factors affecting the Dividend Decision** of 'StarPharma'. Based on these factors, should the company declare a high or low dividend?
📄 PRACTICE PAPER - SET 7 (Level: Expert - Integrated Concepts)
SECTION A (1 Mark Each)
[Case-Based] 'Company X' has an ROI of 12%. It borrows funds at an interest rate of 15%. What will be the impact on the Earning Per Share (EPS)?
1.
2. The twin objectives of Financial Planning are to ensure availability of funds whenever required and:
3. Assertion (A): A company dealing in seasonal goods requires higher working capital during the peak season.
Reason (R): During the peak season, a higher level of inventory must be maintained to meet the surge in demand, locking up more funds.
Reason (R): During the peak season, a higher level of inventory must be maintained to meet the surge in demand, locking up more funds.
4. Assertion (A): An established company with a strong brand name requires more fixed capital than a new startup.
Reason (R): Brand name and goodwill are intangible assets and do not require heavy investments in fixed assets like land and machinery.
Reason (R): Brand name and goodwill are intangible assets and do not require heavy investments in fixed assets like land and machinery.
5. Which of the following factors affects both the Capital Budgeting Decision and the Capital Structure Decision?
SECTION B (3 Marks Each)
6. Explain how 'Risk Consideration' affects the Financing Decision of a firm.
[Case-Based] 'SuperTech' manufactures high-end laptops. The technology changes every 6 months, rendering old machinery completely obsolete.
7. How will this 'Technology Upgradation' factor affect the Fixed Capital requirement of 'SuperTech'? Explain.
SECTION C (4 Marks Each)
8. What is 'Wealth Maximization'? How do the three financial decisions (Investment, Financing, Dividend) contribute to achieving this objective?
[Case-Based] Two companies, 'Alpha' and 'Beta', are in the same industry. Alpha manufactures its own components, whereas Beta simply assembles components bought from suppliers.
9. Compare the Fixed Capital and Working Capital requirements of both companies based on their operations.
SECTION D (6 Marks Each)
[Case-Based] 'Global Airways' is planning to expand its fleet by adding 10 new airplanes. The CEO, Mr. Kapoor, is confused about how to arrange the massive funds required. His financial advisor points out that 'Global Airways' already has a very high burden of fixed operating costs (salaries of pilots, hanger rents, insurance). He also notes that the company's Cash Flow Position has been very erratic due to recent fuel price hikes. However, he highlights that the stock market is booming (Bullish phase), and investors are eager to invest in aviation stocks. Lastly, he calculates that the Debt Service Coverage Ratio (DSCR) of the company is extremely poor.
10. By quoting lines from the text, identify and explain the **four factors affecting the Capital Structure decision** of 'Global Airways'. Based on these factors, should Mr. Kapoor issue Equity Shares or Debentures? Give a clear reason.
📄 PRACTICE PAPER - SET 8 (Level: Advanced Board Mock 1)
SECTION A (1 Mark Each)
1. The concept that dictates the overall financial health and survival of a firm through the proper management of daily cash receipts and payments is:
[Case-Based] A company's suppliers strictly demand advance payments, but the company's customers take 3 months to pay their bills.
2. This situation will lead to:3. Assertion (A): A higher dividend is declared if a company has high liquidity.
Reason (R): Dividends are paid in cash. Even if a company has huge profits, it cannot pay dividends if it does not have sufficient cash reserves.
Reason (R): Dividends are paid in cash. Even if a company has huge profits, it cannot pay dividends if it does not have sufficient cash reserves.
4. Assertion (A): Taking a bank loan dilutes the control of existing shareholders.
Reason (R): Lenders and banks do not get voting rights in the management of the company, unlike equity shareholders.
Reason (R): Lenders and banks do not get voting rights in the management of the company, unlike equity shareholders.
5. The cost of debt is typically lower than the cost of equity because:
SECTION B (3 Marks Each)
6. State any three reasons why Capital Budgeting decisions are considered highly crucial for a business.
[Case-Based] A company has consistently generated a profit of ₹10 Crores every year for the last five years and expects to do the same in the future.
7. How will this 'Stability of Earnings' affect the dividend decision? Explain.
SECTION C (4 Marks Each)
8. Explain the following factors affecting Working Capital: (a) Operating Cycle, (b) Credit Allowed.
9. "A capital structure will be considered optimal when the proportion of debt and equity minimizes the overall cost of capital and maximizes the value of the firm." Explain this statement with reference to Financial Leverage.
SECTION D (6 Marks Each)
[Case-Based] 'PureWater Ltd.' is planning to expand its manufacturing capacity. The Finance Manager has to decide between two machines: Machine X and Machine Y. Machine X requires an initial investment of ₹50 Lakhs and generates a steady cash flow of ₹10 Lakhs every year for 7 years. Machine Y requires ₹60 Lakhs, generates ₹15 Lakhs for 5 years, but involves complex technology that requires expensive maintenance. The manager must strictly analyze the expected rate of return from each machine. Furthermore, he has to consider the exact timing and amount of daily cash inflows and outflows generated by these machines over their entire lifetime.
10. Identify the specific financial decision being evaluated by the Finance Manager. By quoting lines from the paragraph, identify and explain the **three factors affecting this specific decision** that the manager is considering.
📄 PRACTICE PAPER - SET 9 (Level: Advanced Board Mock 2)
SECTION A (1 Mark Each)
[Case-Based] If an organization collaborates with another firm to share a costly research laboratory, its need for:
1.
2. The risk of default on payment of fixed interest and repayment of the principal amount is called:
3. Assertion (A): Higher floatation costs make a source of finance less attractive.
Reason (R): Floatation costs are the expenses incurred while issuing securities (like underwriting commission, printing prospectus). High costs reduce the actual funds available to the company.
Reason (R): Floatation costs are the expenses incurred while issuing securities (like underwriting commission, printing prospectus). High costs reduce the actual funds available to the company.
4. Assertion (A): A company with an erratic and unpredictable cash flow should rely heavily on debt.
Reason (R): Debt requires a mandatory, fixed payment of interest irrespective of the company's cash position. Erratic cash flows can lead to bankruptcy if debt is high.
Reason (R): Debt requires a mandatory, fixed payment of interest irrespective of the company's cash position. Erratic cash flows can lead to bankruptcy if debt is high.
5. Which of the following determines the overall Cost of Capital of a firm?
SECTION B (3 Marks Each)
6. Explain how 'Inflation' affects the Working Capital requirement of a business.
[Case-Based] 'Zeta Corp' is issuing new shares. However, the existing shareholders protest, fearing that issuing shares to the public will dilute their voting power.
7. Identify the factor affecting the financing decision. How does the issue of debt solve this problem?
SECTION C (4 Marks Each)
8. Explain the following factors affecting the Dividend Decision: (a) Preference of Shareholders, (b) Contractual Constraints.
9. "Financial Planning is not a substitute for Financial Management, but a part of it." Explain the twin objectives of financial planning to justify this statement.
SECTION D (6 Marks Each)
[Case-Based] 'Omega Steel' needs ₹100 Crores for expansion. The CEO is considering issuing 10% Debentures. The CFO presents a report. He calculates the company's 'Debt Service Coverage Ratio' (DSCR) and finds it is extremely strong, meaning they generate enough cash not just to pay interest, but also to repay the principal amount easily. However, he warns that 'Beta Steel', their biggest rival, recently went bankrupt because their 'Financial Risk' became too high due to excessive loans. He also points out that the current corporate tax rate is a massive 35%. Finally, he observes that the overall 'Cost of Debt' in the economy has fallen to an all-time low of 8%.
10. By quoting lines from the paragraph, identify and explain the **four factors affecting the Financing Decision** of 'Omega Steel'. Based on these factors (DSCR, Tax Rate, Cost of Debt), is debt a favorable option for them?
📄 PRACTICE PAPER - SET 10 (Level: Ultimate Board Challenger)
SECTION A (1 Mark Each)
1. Which formula correctly represents the Debt Service Coverage Ratio (DSCR)?
[Case-Based] An established, top-tier FMCG company has a predictable demand curve and stable sales. A new AI-startup has highly volatile sales depending on venture capital.
2. Which company requires a higher safety margin of working capital?3. Assertion (A): Higher dividend payout ratio decreases the retained earnings available for future growth.
Reason (R): Retained earnings and dividends are two mutually exclusive parts of the total Net Profit. What is distributed cannot be retained.
Reason (R): Retained earnings and dividends are two mutually exclusive parts of the total Net Profit. What is distributed cannot be retained.
4. Assertion (A): The objective of wealth maximization contradicts the objective of profit maximization.
Reason (R): Wealth maximization implies increasing the market price of shares, which can only happen if the company is generating consistent, sustainable profits over the long term.
Reason (R): Wealth maximization implies increasing the market price of shares, which can only happen if the company is generating consistent, sustainable profits over the long term.
5. The decision that determines the overall financial risk and the cost of capital of a firm is:
SECTION B (3 Marks Each)
6. Differentiate between 'Business Risk' and 'Financial Risk'.
[Case-Based] A company's ROI is 8%. It decides to finance its new project by issuing debentures at an interest rate of 12%.
7. Is this a financially sound decision? Explain the concept of 'Trading on Equity' to justify your answer.
SECTION C (4 Marks Each)
8. "A company's dividend policy is influenced by taxation policy and legal constraints." Explain this statement.
9. Explain how 'Scale of Operations' and 'Business Cycle' affect the Working Capital requirement of a firm.
SECTION D (6 Marks Each)
[Case-Based] 'Vanguard Automotives' is expanding into electric vehicles. The CFO has to make critical decisions. First, he has to select the best robotic assembly line out of three international tenders based on their expected cash flows. Second, he has to determine the exact proportion of debt and equity to raise the ₹1,000 Crores needed for these robots. Third, he has to convince the Board of Directors that instead of paying their usual 20% annual dividend to the shareholders, they should pay only 5% this year and retain the rest of the profits to fund the EV battery research internally, as taking a bank loan right now would be too expensive.
10. Identify and explain the **three different Financial Decisions** taken by the CFO of 'Vanguard Automotives'. For the third decision (Dividend), identify and explain the specific **factor** that motivated the CFO to reduce the dividend payout.
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