Read the following statements : Assertion (A) and Reason (R).
Assertion (A) : Financial planning makes the firm better prepared to face the future.
Reason (R) : It helps in forecasting what may happen in future under different business situations.
Choose the correct alternative from the following :
Read the following statements : Assertion (A) and Reason (R).
Assertion (A) : Financial planning makes the firm better prepared to face the future.
Reason (R) : It helps in forecasting what may happen in future under different business situations.
Choose the correct alternative from the following :
Show Hint
- Assertion (A) is true, but Reason (R) is false.
- Assertion (A) is false, but Reason (R) is true.
- Both Assertion (A) and Reason (R) are false.
- Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A).
The Correct Option is D
Solution and Explanation
Financial planning means estimating the funds needed and deciding how to raise them.
Assertion (A) says it prepares the firm for the future. Reason (R) says it forecasts future situations.
Step 2: Test Assertion (A):
A plan shows how much money will be needed and when. The firm can arrange funds in time and avoid shocks.
So a firm with financial planning is better prepared to face the future. (A) is TRUE.
Step 3: Test Reason (R):
Financial planning looks ahead and forecasts what may happen under different business situations. It helps the firm get ready for each case.
So (R) is TRUE.
Step 4: Check if R explains A:
The firm is better prepared because the plan forecasts different situations in advance.
So (R) is the correct explanation of (A).
This is option (D). Options (A), (B) and (C) each call at least one statement false, so they are wrong.
Final Answer:
Both (A) and (R) are true and (R) explains (A), option (D).
Top CBSE CLASS XII Business Studies Questions
What is the Planning Process?
- ................ is one of the most important attitudes of an entrepreneur, which is defined as the ability to continue to do something, even when it is difficult.
(A) Decisiveness
(B) Interpersonal skills
(C) Perseverance
(D) Taking initiative - Mention any four most common environmental barriers which an entrepreneur may face while running his/her venture.
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‘Vishesh Constructions’, a construction company, decided to strictly implement ‘No Helmet, No Entry’ and put the following sign at their construction sites :
Identify the type of plan indicated by the above sign :
Top CBSE CLASS XII Financial Management Questions
Read the following statements : Assertion (A) and Reason (R).
Assertion (A) : The cost of debt is higher than the cost of equity for a firm.
Reason (R) : The lender’s risk is lower than the equity shareholder’s risk, since the lender earns an assured return and repayment of capital.
Choose the correct alternative from the options given below :
‘The larger the lead time, the larger the quantity of material to be stored, and the larger shall be the amount of working capital required.’
The factor affecting the requirement of working capital discussed in the above statement is :
Explain how the following factors affect the requirements of fixed capital of a company :
(i) Nature of the business
(ii) Technology upgradation
(iii) Level of collaboration
‘Quality Foods Ltd.’, a company manufacturing packaged snacks has been in business for the last 10 years. It enjoys a good reputation and has a loyal customer base. This financial year, the profits of the company increased manifold as the company introduced a new range of baked snacks that became very popular. As the year came to an end, the company had to decide how much dividend to pay to its shareholders. In view of the above and with the understanding that investors, in general, view an increase in dividend as good news and stock prices react positively to it, the Board of Directors were keen on declaring a high dividend. However, the Chief Finance Officer of the company pointed out that they need to keep many considerations in mind before declaring dividend. He drew the attention of the Board of Directors to the loan that the company has taken, containing a clause that imposes restriction on the payment of dividend. Further, he pointed out that even though the profits were high, a large amount of money was tied to the amounts receivables from the debtors. Without enough cash in hand, announcing a high dividend may not be practical. He also reminded the Board of Directors that ‘Quality Foods Ltd.’ was planning to expand into the breakfast cereal market. Since this new project will require a huge investment, the company will need to retain more money out of their earnings to finance it.
(a) Identify and explain any two factors affecting dividend decision that would have influenced the decision of the Board of Directors to pay a high dividend.
(b) Identify and explain any two factors to which the Chief Finance Officer drew the attention of the Board of Directors.
A position when a company is unable to meet its fixed financial charges like interest payment, dividend on preference shares and repayment obligations is referred to as ______ .
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