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Financial Management Interview Questions & Answers - Learning Mode

Financial Management Interview Questions & Answers - Learning Mode

Financial management means the efficient and effective management of money(funds) in such a manner so as to accomplish the objectives of the organisation.It refers to that part of managerial activity concerned with the procurement and utilisation of funds for business purposes.It is the specialized function directly associated with the top management.Financial management also means the planning,directing,monitoring,organizing,and controlling of the monetary resources of an organization.

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Subcategories for Financial Management Interview Questions & Answers - Learning Mode

Following are sub categories for which Interview Questions & Answers are available under Financial Management Interview Questions & Answers - Learning Mode. Please select the appropriate sub-category:-

Dividend Decision Interview Questions & Answers (15) Learning Mode | Exam Mode

Financing Decision Interview Questions & Answers (12) Learning Mode | Exam Mode

Investment Decisions Interview Questions & Answers (31) Learning Mode | Exam Mode

Time Value of Money Interview Questions & Answers (8) Learning Mode | Exam Mode

Working Capital Management Interview Questions & Answers (50) Learning Mode | Exam Mode

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Financial Management Interview Questions & Answers - Learning Mode
Try Financial Management Interview Questions & Answers - Exam Mode
Question: State the objectives of Financial Management?

Answer: a)Profit Maximization- Earning profits by a corporate or a company is a social obligation. Profit is the only means through which an efficiency of organisation can be measured.
b) Wealth Maximization- Wealth maximization refers to the gradual growth of the value of the assets of the firm in terms of benefits it can produce. The wealth maximization attained by a company is reflected in the market value of shares. This maximizes the wealth of shareholders. Source:
Question: What is cost theory?

Answer: According to this theory, The total amount of capitalisation for a new company is arrived at, by addition up the cost of fixed assets, the amount of working capital and the cost of establishing the business( e.g., preliminary expenses, underwriting commission, expenses on issue of shares etc.) Source:
Question: State the steps in financial planning.

Answer: There are four steps in financial planning:
1. Establishing Objectives
2. Policy Formulation
3. Forecasting
4. Formulation of Procedure Source:
Question: What is the importance of Financial Management?

Answer: 1. Financial Management Helps Setting Clear Goal
2. Financial Management Helps Efficient Utilization Of Resources
3. Financial Management Helps Deciding Sources Of Financing
4. Financial Management Helps Making Dividend Decision
Question: what are the advantages and disadvantages of earnings theory?

Answer: Advantages of Earning Theory:- This method correlates the value of a company directly with its earning capacity. Earnings theory acts as a check on the costs of launching a new enterprise.
Disadvantages of Earning Theory:- In the case of new companies it may be difficult to estimate correctly the amount of future earnings. In case, earnings are not correctly estimated, the capitalisation based on earnings might prove to be risky for the company. Source:
Question: What is capitalisation?

Answer: Capitalisation is defined as the sum of the par value of the outstanding stocks and the bonds.It is the sum of a corporation's stock, long-term debt and retained earnings. Capitalization also refers to the number of outstanding shares multiplied by share price.

Question: State the advantages of wealth maximization.

Answer: 1. It considers the concept of time value of money. The present values of cash inflows and outflows helps the management to achieve the overall objective of a company.
2. The concept of wealth maximization is universally accepted because it takes care of interest of financial institution, owners, employees and society at large.
3. Wealth maximization guides the management in framing consistent strong dividend policy to reach maximum returns to the equity holders. Source:
Question: What are the guidelines for financial planning?

Answer: 1. Keep financial programmes sufficiently flexible.
2. Determine the future financial needs of the firm and see that they are met.
3. Make a judicious use of debt and equity capital.
4. Obtain funds in larger amounts rather in a series of installments.
5. Economise indirect expenditure.
6. Practice a proper policy of ploughing backof leanings so as to finance expansion of business. Source:
Question: What is the need for financial planning?

Answer: The need for financial planning arises to ensure the following:
1. To maintain the liquidity throughout the year.
2. To indicate the surplus resources available for expansion or external investments.
3. To provide for any more funds.
4. To ensure availability of sufficient cash for meeting expenditure,emergencies and fluctuations in the level of working capital.
Question: What is Financial Plan?

Answer: Financial plan implies and involves 3 major sectors , viz., capital structure, capital expenditure and cash flow. It basically refers to the reasonable mixture of owned capital and borrowed capital of a company at its very start. It also means the ways and means of making available the well thought out equity and loan capital of a company. Source:
Question: What are the objectives of Financial Management?

Answer: Profit maximization
Wealth maximization
Proper estimation of total financial requirements
Proper mobilisation
Proper utilisation of finance
Maintaining proper cash flow
Survival of company
Question: What is the meaning of Financial Planning?

Answer: Long-term profit planning aimed at generating greater return on assets, growth in market share, and at solving foreseeable problems. Source:
Question: Give the importance of Financial Planning?

Answer: a)Adequate funds have to be ensured.
b)Financial Planning helps in ensuring a reasonable balance between outflow and inflow of funds so that stability is maintained.
c)Financial Planning ensures that the suppliers of funds are easily investing in companies which exercise financial planning.
d)Financial Planning helps in making growth and expansion programmes which helps in long-run survival of the company.
e)Financial Planning reduces uncertainties with regards to changing market tre Source:
Question: What is capital budgeting?

Answer: Capital budgeting is a technique through which a finance manager evaluates the investments proposals. Pay back period, ARR, IRR, NPV are some of the modern techniques, very popular in capital budgeting. These techniques are adopted by finance manager according to the need and situation to attain financial objectives of the enterprise. Source:
Question: What are the functions of finance manager?

Answer: Functions of finance manager are as follows:
1. He anticipate and estimate the total financial requirements of the firm.
2. He should select the right sources of funds at right time and at right cost.
3. He has to administrate the activities of working capital management.
4. He should analyse financial performance and plan for its growth.
5. He has to protect the interests of creditors, shareholders and the employees.
6. He has to concentrate more on fulfilling the social oblig Source:
Question: State the decisions in financial management.

Answer: a)Investment Decision
b)Financial Decision
c)Dividend Decision
d)Liquidity Decision Source:
Question: What are investment decisions?

Answer: Investment decisions is referred to the activity of deciding the pattern of investment. It covers both short- term as well as long- term investment, in other words, capital assets and the current assets. It is a long range financial decision and deals with allocation of capital. Source:
Question: What are the principles governing a financial plan?

Answer: 1. Simplicity: The financial plan should envisage a simple financial structure capable of being managed easily.
2. Long- term view: The financial plan should be formulated and conceived by the promoters/ management keeping in view the long- term needs of the company rather than finding out the easiest way of obtaining the original capital.
3. Foresight: The financial plan should be prepared keeping in view the future requirements of capital for the business.
4. Optimum Use: The financia Source:
Question: What is the meaning of Financial Management?

Answer: Financial management refers to the efficient and effective management of money (funds) in such a manner as to accomplish the objectives of the organization. It is the specialized function directly associated with the top management.
Question: What are earnings theory?

Answer: According to this theory, the true value of an enterprise depends upon its earning capacity. In other words, the worth of a company is not measured by the capital raised but, by the earnings made out of the productive harnessing of the capital. In the earnings theory, the earnings are forecast and capitalised at a representative rate of return. Source:

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