Advertisements
Advertisements
Question
Explain the following as factor affecting 'financing decision'.
Control consideration
Solution
Control consideration: A firm may prefer borrowed fund securities to meet the fund requirement as the existing shareholders tend to retain complete control of a business. On the other hand, a firm may prefer owner’s fund securities as they are ready to lose control of the business.
Retention of Control: Debt
Sharing the Control: Equity
APPEARS IN
RELATED QUESTIONS
'Mission Coach Ltd.' is a large and creditworthy company manufacturing coaches for Indian Railways. It now wants to export these coaches to other countries and decides to invest in
new hi-tech machines. Since the investment is large, it requires long-term finance. It decides to raise funds by issuing equity shares. The issue of equity shares involves huge floatation cost. To meet the expenses of floatation cost, the company decides to tap the money market.
1) Name and explain the money-market instrument the company can use for the above
purpose
2) What is the duration for which the company can get funds through this instrument?
3) State any other purpose for which this instrument can be used.
Explain the following as factor affecting dividend decision:
Stability of earnings
Explain the following as factor affecting dividend decision:
Growth opportunities
Explain the following as factor affecting dividend decision:
Cash flow position
Explain the following as factor affecting dividend decision:
Shareholder's preferences
Explain the following as factor affecting dividend decision:
Access to capital market
Explain the following as factor affecting dividend decision:
Legal constraints
Explain the following as factor affecting 'financing decision'.
Cash flow position of the business
Explain the following as factor affecting 'financing decision'.
State of capital markets
Give the meaning of ‘Investment’ and ‘Dividend’ decisions of financial management.
Explain the factors affecting the dividend decision.
| Ananta Ltd. is a company dealing in ready-made garments for the last many years. Recently the profit of the company has started increasing. The finance manager decided to retain the profit instead of distributing it among shareholders. |
- Identify and state the financial decision taken by the finance manager in the above case.
- State any three factors affecting the decision identified in (i) above.
| Ravi has joined as a finance manager at MTA Ltd. He had to arrange funds of rupees one crore for the company. The Chief Executive Officer of the company wants to arrange the funds by a public issue whereas the finance manager wants to have a mix of debt and equity as this will determine the overall cost of capital and the financial risk of the enterprise. |
- Identify and give the meaning of the financial decision suggested by the finance manager in the above case.
- State any three factors affecting the decision identified in (i) above.
|
NB Ltd. is India's largest manufacturer of cement. Its operations are spread throughout the country with 17 modern cement factories. It has a workforce of 9,000 people. Since its inception, the company has been a trendsetter in the cement industry. The company is planning to grow in the long run and wants to double its capacity in the next 3 years. For this, the Finance Manager has to decide about the quantum of finance to be raised from various long-term sources. For this, he needs to identify various available sources of funds and the proportion of funds from each source. |
- Identify the financial decision to be taken by the Finance Manager.
- State any four factors which would affect the decision identified in (i) above.
Identify the financial decision that is concerned with deciding how much of the profit earned by a company is to be distributed to shareholders and how much should be retained in the business. Also state any three factors affecting the identified decision.
