Question

'S' Limited is manufacturing steel at its plant in India. It is enjoying a buoyant demand for its products as economic growth is about 7% - 8% and the demand for steel is growing. It is planning to set up a new steel plant to cash on the increased demand. It is estimated that it will require about Rs 5000 crores to set up and about Rs 500 crores of working capital to start the new plant.

Which of the following is the role and objectives of financial management for this company.

Options

• The amount and structure of fixed assets:

• The composition of funds used

• The proportion of debt, equity, etc. in long-term financing

• All of the above

Answer 1

All of the above

Explanation - 

In this company, finance management's job is to make sure that :

1. The volume and structure of fixed assets : Increasing investment in a certain type of fixed asset would raise its percentage of the total fixed asset composition. A choice by financial management to invest more in fixed assets, for example, would directly increase the amount of the business's fixed assets.
2. The money that were used : The short- and long-term financing sources employed by a corporation are referred to as the composition of funds used by that company. It is decided by the company's liquidity and profitability decisions. A corporation seeking greater liquidity, for example, would rely more on long-term borrowing, and vice versa.
3. The percentage of debt, equity, and other forms of long-term financing : Choosing whether to raise long-term funds through debt or equity is a financial choice that is part of financial management.