True/False

Question 11 Mark

The working capital requirements of a company is affected by inflation. (True/ False)

Answer

True.Explanation:
As with rising prices, larger amount of funds are required to maintain the constant volume of production and sales.

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Question 21 Mark

Dividend decisions are affected by legal and contractual constraints. (True/ False)

Answer

True.
Explanation:
As a company must adhere to the constraints laid down by provisions of the Companies Act and by the lender of loans before declaring dividend to its shareholders.

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Question 31 Mark

'Production cycle' does not affect the requirement of working capital of a company. (True/ False)

Answer

False.Explanation:
As working capital requirement is higher in firms with longer production cycle and lower in firms with shorter production cycle.

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Question 41 Mark

Capital budgeting decisions are very crucial for a business. (True/ False)

Answer

True.
Explanation:
As these decisions affect its earning capacity in the long run.

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Question 51 Mark

Current Assets = Current Liabilities - Working Capital. (True/ False)

Answer

False.Explanation:
As Current Assets = Working Capital - Current Liabilities.

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Question 61 Mark

'Cost of debt affects the choice of capital structure of a company. (True/ False)

Answer

True.
Explanation:
As if a company can raise debt at a lower rate of interest, it may employ higher debt.

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Question 71 Mark

'Optimum utilisation of funds' is an objective of financial management. (True/ False)

Answer

False
Explanation:
As 'wealth maximisation' is an objective of financial management.

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Question 81 Mark

'Choice of technique’ affects the requirement of fixed capital of a company. (True/False)

Answer

True.Explanation:
As requirement of fixed capital is more for capital intensive organisations as compared to labour intensive organisations.

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