Scope of financial management

Jun 18th, 2015
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Business finance : Meaning:-Every enterprise, whether big, medium or small, needs finance to carry on its operation and achieve its targets. Without adequate finance m no enterprise can possibly accomplish its objectives. Finance refers to the management of flow of money in an organization.

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UNIT -3: FINANCING AND DIVIDEND DECISIONLEVERAGES1. Give the meaning of the term leverage.It refers to the employment of an asset or funds for which the firm pays a fixed costor fixed return.2. Define composite Leverage.It is combination of both operating and financial leverages. It expresses the effect ofchange in sales over change in taxable profit.3. Define Financial Leverage.The tendency of the residual net income to vary disproportionately with operatingprofit.4. What is the significance of financial leverage?Financial leverage is having the following significances:Planning and designing of capital structureProfit planning.5. Define Leverage.James Horne has defined leverage as the employment of an asset or funds for whichthe firm pays a fixed cost or fixed return. The fixed cost indicates fixed operatingcost, and fixed return indicates financial cost it should remain constant irrespectiveof changes in the volume of output or sales.6. List out the types of Leverage.Leverages can be classified into following four types: Financial leverage Operating leverage Composite leverage Working capital leverage.7. What is meant by operating leverage?Operating leverage indicates any changes in the sales may related to change inrevenue. It may be defined as the tendency of operating profit to varydisproportionately with the sales. Simply said when a firm has to pay fixed costregardless of volume of output or sales. In any f

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