Financial Management - Important Terms and Keywords
Financial Management:
It is concerned with the optimum procurement as well as the usage of finance.
Financial decision:
These are decisions which are concerned with three aspects – viz. investment, financing and dividend.
Investment Decision:
It is concerned with investment of firm’s funds in different assets.
Short Term Investment Decisions:
Decisions affecting liquidity and profitability of a business.
Dividend Decision:
A Decision is taken to distribute certain parts of profit to shareholders after paying tax.
Fixed Capital:
It is the money invested in fixed assets like land, machinery, etc., which is to be used over a long period of time.
Capital Structure Decisions:
Decisions affecting financial risk and profitability of a business.
Management of Fixed Capital:
It involves allocation of firm’s capital to different projects or assets with long-term implications for the business. These are called investment decisions or capital budgeting decision.
Capital Structure:
Proportion of debt and equity
Debt:
Cheapest source of finance
Equity:
Riskfree source of finance
Working Capital:
It is the money invested in current assets like stock, debtors, etc. to facilitate smooth day-to-day operations of the business. It is the excess of current assets over current liabilities.
Financial Planning:
It is the process of estimating the fund requirement of a business and specifying the sources of funds.
Production cycle:
Time span between the receipt of raw material and their conversion into finished goods.
Financial risk:
Risk of inability to meet fixed financial charges.
Business risk:
Risk of inability to meet fixed operating costs as well as fixed financial charges.
Financial leverage:
Most suitable combination of owners funds and borrowed funds to generate higher EPS.
Floatation Cost:
The cost involved in issuing securities such as brokers commission, under writer’s fees, cost of prospectus etc. is called floatation cost.
☛See also:
CH9: Financial Management (V Short Q&A)
CH10: Financial Markets (V Short Q & A)
Capital Market vs Money Market
Instruments of Money Market
Business Studies Sample Q Paper with Marking Scheme (2016-17)
Business Studies Question Paper (Delhi Region - 2016-17) and (Q Paper Solutions)
Business Studies Sample Question Paper (2017-18)
Business Studies Sample Question Paper (2018-19) + Marking Scheme
