SECTION B —

Q9) Explain the elements of wealth maximization.

Ans) Wealth maximization is one of the modern approaches, which involves latest innovations
and improvements in the field of the business concern. The term wealth means shareholder
wealth or the wealth of the persons those who are involved in the business concern. Wealth
maximization is also known as value maximization or net present worth maximization. This
objective is an universally accepted concept in the field of business
Q10) Discuss the scope and functions of financial management.

Ans) The scope of financial management are-

1. Estimating financial requirements: Estimate short-term and long-term financial

requirements by preparing a financial plan for present and future.
2. Deciding Capital structure: The capital structure refers to the kind and proportion
of different securities for raising funds.
3. Selecting a Source of Finance: Selecting appropriate source of finance from various
available sources i.e., share capital , debentures, financial institutions, commercial
banks, etc.
4. Selecting a pattern of Investment: It is concerned with the use of funds. The
funds has to be usually spent on fixed assets retaining a part for working capital.
5. Proper cash management: Assess various cash needs at different times
6. Implementing Financial Controls: Involves the use of various financial control
devices namely, Budgetary control, Ratio Analysis, Break Even Analysis, etc
7. Proper Use of Surpluses: A judicial use of surpluses is essential for maintaining
proper growth of profit.

functions of financial management.

Financial management is one of the important parts of overall management, which is

directly related with various functional departments like human resources, marketing and
production. Financial management covers wide area.

1. Deciding the capital structure

The capital structure refers to the kind and proportion of different securities for raising
funds. After deciding the amount of finance required, it should be decided which type of
securities should be raised.

2. Proper cash management

Cash Management is also an important task and he has to access
the various cash needs at different times and to make arrangements for cash. The cash
management should be such that neither there is shortage of it nor it is idle.

3. Implementing financial controls

An efficient system of financial management facilitates the use of various control devices
Like Return on investment, Budgetary control,Break-even Analysis, Cost Analysis, Ratio
analysis etc,to evaluate the performance of the company and to take corrective measures.

4. Proper use of surpluses

The utilisation of surplus is also an important factor in financial management.
for expansion and diversification plans and also in protecting the interests of the shareholders.
5. To ensure supply of funds to all parts of the organization
It is also one of the important finance functions to ensure that the funds are available to
every part of the organization as and when it needs them so as to help in smooth operations of the
activities of the organization.

6. Evaluation of financial performance

The financial performance of the various units of the organization is to be evaluated from
time to time to detect any fault in the financial policy and take the action at appropriate time.
7. To negotiate with the bankers, financial institutions and other suppliers of
credit
Bankers, financial institutions and other suppliers of credit are the different sources of
funds. It is necessary for the company to negotiate with them so as to obtain the funds at the most
favorable terms.