16 Questions
What does financial management involve?
Planning, organizing, directing, and controlling the financial activities
What is the scope of financial management?
Investment decisions, financial decisions, and dividend decisions
Which decision is related to the net profit distribution?
Dividend decision
What is the meaning of investment decisions in financial management?
Investment in fixed assets (capital budgeting) and investment in current assets (working capital decisions)
Which activity is part of financial management according to the text?
Acquisition and management of financial resources
What does financial management aim to achieve?
Maximize the value of stockholder’s claims
What was the main emphasis of finance function according to the traditional approach?
Raising of funds
What was the scope of financial management according to the traditional approach?
Raising of funds
What was one of the limitations of the traditional approach in financial management?
Overemphasis on the topics of securities and financial instruments
According to the traditional approach, what did the scope of finance function primarily cover?
Episodic events like mergers and acquisitions
What category of happenings did the traditional approach overemphasize in the life of an enterprise?
Episodic events like mergers and acquisitions
What did the traditional approach primarily focus on?
Investors' viewpoint and financial institutions
According to the traditional approach, what was completely ignored in the financial decision-making process?
Internal financial decision-making
What kind of approach was the traditional approach considered to be?
'Outsider-looking-in' approach
What does the term 'traditional approach' refer to in the context of finance?
'Outsider-looking-in' approach
"Corporation finance" was used to refer to which stage in the development of financial management according to the text?
$1920-1950$
Study Notes
Financial Management
- Financial management involves planning, organizing, and controlling the financial activities of an organization.
Scope of Financial Management
- The scope of financial management is broader, encompassing decisions related to procurement and utilization of funds.
Net Profit Distribution
- The decision related to the net profit distribution is a financing decision.
Investment Decisions
- Investment decisions in financial management refer to the allocation of funds into various assets, such as plant, machinery, and inventory.
Activities in Financial Management
- Financial management involves forecasting, budgeting, and analyzing financial data to make informed decisions.
Aims of Financial Management
- Financial management aims to maximize shareholder wealth by optimizing the use of financial resources.
Traditional Approach
Emphasis and Scope
- The main emphasis of the finance function according to the traditional approach was on raising and allocation of funds.
- The scope of financial management according to the traditional approach was limited to procurement and utilization of funds.
Limitations of Traditional Approach
- One of the limitations of the traditional approach was its failure to consider the overall performance of the organization.
Focus of Traditional Approach
- The traditional approach primarily focused on profitability and solvency.
Ignored Aspects
- The traditional approach completely ignored the importance of cash flows in the financial decision-making process.
Nature of Traditional Approach
- The traditional approach was considered to be a narrow and limited approach.
Definition of Traditional Approach
- The term 'traditional approach' refers to the conventional or classical approach to financial management, which focus on procurement and utilization of funds.
Corporation Finance
- The term "corporation finance" was used to refer to a stage in the development of financial management that focused on the financial activities of corporations.
Test your knowledge of the basic concepts of financial management, including planning, organizing, and controlling financial activities within an organization. This quiz covers the meaning of financial management and its application of general management principles to financial resources.
Make Your Own Quizzes and Flashcards
Convert your notes into interactive study material.
Get started for free
