Q1. What is Finance ? Answer: Finance is the Art and Science of Managing Money. Q2.

What are Financial Services ? Answer: Financial Services is concerned with the design and delivery of advice and financial products to individuals, business and government. Q3. What is Financial Management ? Answer: Financial Management is concerned with the duties of the financial managers in the business firm. Q4. What are Financial Managers ? Answer: Financial Managers are Actively manage the financial affairs of any type of business viz. financial and non-financial, private. Q5. What is ABC Analysis ? Answer: ABC analysis provides a mechanism for identifying items that will have a significant impact on overall inventory cost, while also providing a mechanism for identifying different categories of stock that will require different management and controls. 1. "A class" inventory will typically contain items that account for 80% of total value, or 20% of total items. 2. "B class" inventory will have around 15% of total value, or 30% of total items. 3. "C class" inventory will account for the remaining 5%, or 50% of total items.. Q6. What is Cost of Capital ? Answers: The cost of capital is the cost of a company's funds (both debt and equity), or, from an investor's point of view "the expected return on a portfolio of all the company's existing securities".It is used to evaluate new projects of a company as it is the minimum return that investors expect for providing capital to the company, thus setting a benchmark that a new project has to meet. Q7. What is Cost of Debt ? Answer: The cost of debt is relatively simple to calculate, as it is composed of the rate of interest paid. In practice, the interest-rate paid by the company can be modelled as the risk-free rate plus a risk component (risk premium), which itself incorporates a probable rate of default (and amount of recovery given default).

Q8. What is Debt of Equity ? Answer: the cost of equity is broadly defined as the risk-weighted projected return required by investors, where the return is largely unknown. The cost of equity is therefore inferred by comparing the investment to other investments (comparable) with similar risk profiles to determine the "market" cost of equity. Q9. What is Expected Return ? Answer: The expected return (or expected gain) is the weighted-average outcome in gambling, probability theory, economics or finance.It is the average of a probability distribution of possible returns, calculated by using the following formula: E(R)= Sum: probability * the return Q10. What is Weighted Average Cost of Capital ? Answer: The Weighted Average Cost of Capital (WACC) is used in finance to measure a firm's cost of capital. The total capital for a firm is the value of its equity (for a firm without outstanding warrants and options, this is the same as the company's market capitalization) plus the cost of its debt. Q11. What is Leverages ? Answer: Leverage is a business term that refers to borrowing. If a business is "leveraged," it means that the business has borrowed money to finance the purchase of assets. The other way to purchase assets is through use of owner funds, or equity. Q12. What is Cash Flows ? Answer: Cash flow refers to the movement of cash into or out of a business, a project, or a financial product. It is usually measured during a specified, finite period of time. It is also known as statement of cash flows Q13. What is Funds of Funds ? Answer: A "fund of funds" (FOF) is an investment strategy of holding a portfolio of other investment funds rather than investing directly in shares, bonds or other securities. This type of investing is often referred to as multi-manager investment. Q14. What is Inventory Management ? Answer: Inventory management is a very important function that determines the health of the supply chain as well as the impacts the financial health of the balance sheet.

Q15. What is Capital Budgeting ? Answer: Capital budgeting (or investment appraisal) is the planning process used to determine whether a firm's long term investments such as new machinery, replacement machinery, new plants, new products, and research development projects are worth pursuing. It is budget for major capital, or investment, expenditures. Q16. What is Net Present Value ? Answer: The net present value (NPV) of a time series of cash flows, both incoming and outgoing, is defined as the sum of the present values (PVs) of the individual cash flows. In the case when all future cash flows are incoming and the only outflow of cash is the purchase price, the NPV is simply the PV of future cash flows minus the purchase price. NPV is a central tool in discounted cash flow (DCF) analysis, and is a standard method for using the time value of money to appraise long-term projects. Q17. What Is Internal Rate Of Return ? Answer: The internal rate of return (IRR) is a rate of return used in capital budgeting to measure and compare the profitability of investments. It is also called the discounted cash flow rate of return. Q18. What is Profitability Index ? Answer: Profitability index (PI), also known as profit investment ratio (PIR) and value investment ratio (VIR), is the ratio of investment to payoff of a proposed project. It is a useful tool for ranking projects because it allows you to quantify the amount of value created per unit of investment. Q19. What is Pay back Period ? Answer: Payback period in capital budgeting refers to the period of time required for the return on an investment to "repay" the sum of the original investment. Q20. What is Risk and Return ? Answer: The principle that potential return rises with an increase in risk. Low levels of uncertainty (low risk) are associated with low potential returns, whereas high levels of uncertainty (high risk) are associated with high potential returns. According to the risk-return tradeoff, invested money can render higher profits only if it is subject to the possibility of being lost.

Q21. What is Gross Working Capital ? Answer: GWC refers to the firms total investment in current assets. Current assets are the assets which can be converted into cash within an accounting year (or operating cycle) and include cash, short-term securities, debtors, (accounts receivable or book debts) bills receivable and stock (inventory). Q22. What is Net Working Capital ? Answer: NWC refers to the difference between current assets and current liabilities. Current liabilities (CL) are those claims of outsiders which are expected to mature for payment within an accounting year and include creditors (accounts payable), bills payable, and outstanding expenses. NWC can be positive or negative. Positive NWC = CA > CL Negative NWC = CA < CL

Q23. What is Operating Cycle ? Answer: Operating cycle is the time duration required to convert sales, after the conversion of resources into inventories, into cash. The operating cycle of a manufacturing company involves three phases: Acquisition of resources such as raw material, labour, power and fuel etc. Manufacture of the product which includes conversion of raw material into work-in-progress into finished goods. Sale of the product either for cash or on credit. Credit sales create account receivable for collection. Q24. What is Permanent and Temporary Working Capital ? Answer: Permanent or fixed working capital :A minimum level of current assets, which is continuously required by a firm to carry on its business operations, is referred to as permanent or fixed working capital. Fluctuating or Temporary working capital :The extra working capital needed to support the changing production and sales activities of the firm is referred to as fluctuating or variable working capital.

Q25. Discuss the Working Capital Finance Policies ? Answer: Long-term Short-term Spontaneous

Q26. What is Accounts Receivables Management ? Answer: A firm grants trade credit to protect its sales from the competitors and to attract the potential customers to buy its products on favorable terms. Trade credit creates receivables or book debts. It has three features An element of risk which should be carefully analyzed It is based on economic value buyer- immediately passed; seller later on It implies futurity

Q27. What is Financial Distress ? Answer: Financial distress arises when a firm is not able to meet its obligations to debt-holders. Q28. What is Opportunity Cost of Capital ? Answer: The opportunity cost is the rate of return foregone on the next best alternative investment opportunity of comparable risk. Q29. What is Financial Analysis ? Answer: Financial analysis is the process of identifying the financial strengths and weaknesses of the firm by property establishing relationships between the item of the balance sheet and the profit and loss account. Q30. Discuss types of Financial Ratios ? Answer: Liquidity ratios Solvency ratios Turnover ratios Profitability ratios Equity-related ratios

Q31. What is Liquidity ratio ? Answer: Liquidity ratios measure a firms ability to meet its current obligations. Liquidity Ratios are Current ratio, Quick ratio and cash ratio. Q32. What is Solvency ratio ? Answer: Solvency ratios measure the dependence of a firm on borrowed funds. Solvency ratios are Debt-equity ratio, debt ratio and Interest Coverage ratio. Q33. What is Turnover ratio ? Answer: Turnover or activity ratios measure the firms efficiency in utilizing its assets. Turnover ratios are Invertory Turnover, Days of Inventory holding, Debtors Turnover, Collection Period, Current assets Turnover, Net Current assets Turnover, Fixed assets Turnover and Net assets Turnover. Q34. What is Profitability rato ? Answer: Profitability ratios measure a firms overall efficiency and effectiveness in generating profit. Profitability ratios are Magin, Net Margin, Before Tax return on Investment and Retun on Equity. Q35. What is Equity-related ratios ? Answer: Equity-related ratios measure the shareholders return and value. These are Earning per share (EPS), Dividend per share (DPS), Payout ratio and Dividend Yield ratio. Q36. Discuss Utility of Ratio Analysis ? Answer: Assessment of the firms financial conditions and capabilities. Diagnosis of the firms problems, weaknesses and strengths. Credit analysis Security analysis Comparative analysis