Financial Management - Questions
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Short Questions
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1. Define average rate of return.
2. What are the demerits of the payback period?
3. What are the merits of payback period method? Payback method has the following merits:
4. What is the relation between the pay back period and the quality of project?
5. Write the formula for determining payback period of a cash flow project.
6. Define terminal cash flows.
7. What do you understand by operational cash flows?
8. What are initial cash flows?
9. Describe net capital investment as a component of investment analysis
10. What is the significance of investment analysis in the capital budgeting process?
11. What is post completion audit in the process of capital budgeting?
12. Describe some measures which are relevant for the successful implementation of a project in the process of capital budgeting.
13. Why are the capital investments important? Capital investments are important for three reasons:
14. What is capital budgeting? What steps are involved in the process of capital budgeting?
15. What points should be taken into consideration in order to calculate the cost of capital?
16. Describe the correct capital structure of a firm for obtaining the weights to work out the weighted average.
17. How many approaches are there for estimating cost of equity? There are four different approaches for estimating cost of equity:
18. What does the cost of equity capital indicate?
19. What is the importance of cost of equity capital?
20. Illustrate the method of computing cost of preference shares with the help of an example.
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