Match the items of List - I with those of List - II and indicate the correct code :List - I List - II (a) Net Income Approach (i) Working Capital Management (b) Profitability Index (ii) Over-capitalisation (c) Concentration Banking (iii) Capital Structure Planning (d) Lower Rate of Return (iv) Capital Budgeting Decision
This question requires matching financial management concepts from List - I with their corresponding applications or implications in List - II.
Matching Financial Concepts: List I and List II
(a) Net Income Approach
The Net Income Approach is a theory related to capital structure. It suggests that a firm's value and its cost of capital can be altered by changing the debt-equity mix. This directly relates to Capital Structure Planning.
- Match: (a) - (iii)
(b) Profitability Index (PI)
The Profitability Index is a capital budgeting metric. It helps evaluate investment projects by comparing the present value of future cash flows to the initial investment. It is used in Capital Budgeting Decisions.
- Match: (b) - (iv)
(c) Concentration Banking
Concentration Banking is a cash management technique where a company centralizes its banking operations to speed up the collection of receivables and improve control over cash flows. This falls under Working Capital Management.
- Match: (c) - (i)
(d) Lower Rate of Return
A sustained Lower Rate of Return compared to industry peers or historical performance, especially when a company has significant debt, can be a symptom of inefficient operations or poor financial structure, often linked to Over-capitalisation.
- Match: (d) - (ii)
Correct Code Identification
Based on the matches derived:
- (a) - (iii)
- (b) - (iv)
- (c) - (i)
- (d) - (ii)
This combination corresponds to Option 1.
Important Questions from Financial Management
- The indicator which shows how much a company managed to get out of the capital they had put in the business.
- Arrange the following steps in making a budget in a sequence :
I. Estimate the cost of desired items.
II. List down the commodities and services needed by the family.
III. Check plans to see that they have a reasonable chance of success.
IV. Estimate total expected income.
V. Bring expected income and expenditure into balance.
Codes : - Which one of the following is NOT a method of handling income ?
- One of the internal constraint in implementation of a project is:
- Operating Leverage and Financial Leverage of a firm are 3 and 2, respectively. If sales increase by 6%, then earnings before tax will rise by :
