Aval Ltd. is engaged in the business of export of canvas goods and bags. In the past, the performance of the company had been upto the expectations. In line with the latest demand in the market, the company decided to venture into leather goods for which it required specialised machinery. For this, the Finance Manager Prabhu prepared a financial blueprint of the organisation’s future operations to estimate the amount of funds required and the timings with the objective to ensure that enough funds are available at right time. He also collected the relevant data about the profit estimates in the coming years. By doing this, he wanted to be sure about the availability of funds from the internal sources of the business. For the remaining funds, he is trying to find out alternative sources from outside.
a. Identify the financial concept discussed in the above paragraph. Also, state the objectives to be achieved by the use of financial concept so identified. ( Financial Planning).
b. ‘There is no restriction on payment of dividend by a company’. Comment. ( Legal & Contractual Constraints)
a. Identify the financial concept discussed in the above paragraph. Also, state the objectives to be achieved by the use of financial concept so identified.
Ans. The financial concept discussed in the above paragraph is called Capital budgeting decision. It is a long term investment decision. Capital Budgeting decisions are very crucial, as they affect the earning capacity of the business in the long-run. Since, these decisions involve huge amount of investment and are irreversible, they need to be taken with utmost care.
In the above case the company wants to invest in new machinery which will affect the operation of the company that leads to affect the profitability of the company as well.
The objectives can be achieved by the use of this financial concept are:
Cash Flows of the project: When a business invests huge amount of money in a certain project, then it expects regular and reasonable cash inflows from such an investment. Cash generated from operations are analysed in selecting the desired project.
The Rate of Return: Return expected from the investment is a major determinant of investment decision. The project is selected after comparing expected returns of different projects and the degree of risk involved in them.
The Investment Criteria Involved: The decision to invest in a particular project involves a number of calculations regarding the amount of investment, interest rate, cash flows and rate of return. There are different techniques to evaluate investment proposals. These techniques are helpful in selecting a particular project.
b. ‘There is no restriction on payment of dividend by a company’. Comment.
Ans. Dividend is that part of profit, which is distributed among shareholders on regular basis. There are various factors which affect the dividend decision:
Legal Constraints: Certain provisions of the Companies Act, place restrictions on payouts as dividend. Such provisions must be adhered to, while declaring the dividend.
Contractual Constraints: While granting loans to a company, sometimes, the lender may impose certain restrictions on the payment of dividends in future. The companies are required to ensure that the dividend payout does not violate the loan agreement in this regard.
NCERT questions are designed to test your understanding of the concepts and theories discussed in the chapter. Here are some tips to help you answer NCERT questions effectively:
This question is important because it tests key concepts from the NCERT syllabus and is frequently asked in CBSE exams.
This question is based on core NCERT concepts explained in the chapter and should be revised thoroughly before exams.
Students often lose marks by skipping steps, writing incomplete explanations, or misunderstanding keywords used in the question.
a. Identify the financial concept discussed in the above paragraph. Also, state the objectives to be achieved by the use of financial concept so identified.
Ans. The financial concept discussed in the above paragraph ...
Step-by-step explanation:
• a
• Identify the financial concept discussed in the above paragraph
• Also, state the objectives to be achieved by the use of financial concept so identified
•
•
Stay updated with our latest educational content and study tips
Interest is one of the most significant ideas in maths and financial calculations. It is very common in banking, loan applications, investments, saving account and competitive exams. Simple Interest and Compound Interest make it easier to find out how much more is earned and/or paid on a principal during the period of time. These Interest … Read more
Read More
In 2026, students, professionals, and job seekers must have a high level of spoken English. Spoken English is a beginner level course to enhance learners’ communication skills in English, their pronunciation, vocabulary, grammar structure and confidence in speaking English fluently. Today, the emphasis of spoken English courses is placed on actual conversations, everyday speech practice … Read more
Read More
Artificial Intelligence (AI) and Machine Learning (ML) are two of the most sought-after technologies in today’s digital era. Although these terms are often used together, they are not the same. Machine Learning is, in fact, a component of Artificial Intelligence that enables systems to learn and enhance on their own, without direct programming. AI is … Read more
Read More
Time, Speed, and Distance are some of the most important concepts in mathematics and aptitude. These are the concepts which are used to calculate the speed of an object, time taken for an object to move and the distance traveled during the motion. Questions from this topic are frequently seen in School Tests, Competitive Tests, … Read more
Read More
Student Discussion
Be the first to comment.
ADD NEW COMMENT