• NCERT Solutions
    • NCERT Library
  • RD Sharma
    • RD Sharma Class 12 Solutions
    • RD Sharma Class 11 Solutions Free PDF Download
    • RD Sharma Class 10 Solutions
    • RD Sharma Class 9 Solutions
    • RD Sharma Class 8 Solutions
    • RD Sharma Class 7 Solutions
    • RD Sharma Class 6 Solutions
  • Class 12
    • Class 12 Science
      • NCERT Solutions for Class 12 Maths
      • NCERT Solutions for Class 12 Physics
      • NCERT Solutions for Class 12 Chemistry
      • NCERT Solutions for Class 12 Biology
      • NCERT Solutions for Class 12 Economics
      • NCERT Solutions for Class 12 Computer Science (Python)
      • NCERT Solutions for Class 12 Computer Science (C++)
      • NCERT Solutions for Class 12 English
      • NCERT Solutions for Class 12 Hindi
    • Class 12 Commerce
      • NCERT Solutions for Class 12 Maths
      • NCERT Solutions for Class 12 Business Studies
      • NCERT Solutions for Class 12 Accountancy
      • NCERT Solutions for Class 12 Micro Economics
      • NCERT Solutions for Class 12 Macro Economics
      • NCERT Solutions for Class 12 Entrepreneurship
    • Class 12 Humanities
      • NCERT Solutions for Class 12 History
      • NCERT Solutions for Class 12 Political Science
      • NCERT Solutions for Class 12 Economics
      • NCERT Solutions for Class 12 Sociology
      • NCERT Solutions for Class 12 Psychology
  • Class 11
    • Class 11 Science
      • NCERT Solutions for Class 11 Maths
      • NCERT Solutions for Class 11 Physics
      • NCERT Solutions for Class 11 Chemistry
      • NCERT Solutions for Class 11 Biology
      • NCERT Solutions for Class 11 Economics
      • NCERT Solutions for Class 11 Computer Science (Python)
      • NCERT Solutions for Class 11 English
      • NCERT Solutions for Class 11 Hindi
    • Class 11 Commerce
      • NCERT Solutions for Class 11 Maths
      • NCERT Solutions for Class 11 Business Studies
      • NCERT Solutions for Class 11 Accountancy
      • NCERT Solutions for Class 11 Economics
      • NCERT Solutions for Class 11 Entrepreneurship
    • Class 11 Humanities
      • NCERT Solutions for Class 11 Psychology
      • NCERT Solutions for Class 11 Political Science
      • NCERT Solutions for Class 11 Economics
      • NCERT Solutions for Class 11 Indian Economic Development
  • Class 10
    • NCERT Solutions for Class 10 Maths
    • NCERT Solutions for Class 10 Science
    • NCERT Solutions for Class 10 Social Science
    • NCERT Solutions for Class 10 English
    • NCERT Solutions For Class 10 Hindi Sanchayan
    • NCERT Solutions For Class 10 Hindi Sparsh
    • NCERT Solutions For Class 10 Hindi Kshitiz
    • NCERT Solutions For Class 10 Hindi Kritika
    • NCERT Solutions for Class 10 Sanskrit
    • NCERT Solutions for Class 10 Foundation of Information Technology
  • Class 9
    • NCERT Solutions for Class 9 Maths
    • NCERT Solutions for Class 9 Science
    • NCERT Solutions for Class 9 Social Science
    • NCERT Solutions for Class 9 English
    • NCERT Solutions for Class 9 Hindi
    • NCERT Solutions for Class 9 Sanskrit
    • NCERT Solutions for Class 9 Foundation of IT
  • CBSE Sample Papers
    • Previous Year Question Papers
    • CBSE Topper Answer Sheet
    • CBSE Sample Papers for Class 12
    • CBSE Sample Papers for Class 11
    • CBSE Sample Papers for Class 10
    • Solved CBSE Sample Papers for Class 9 with Solutions 2024-2025
    • CBSE Sample Papers Class 8
    • CBSE Sample Papers Class 7
    • CBSE Sample Papers Class 6
  • Textbook Solutions
    • Lakhmir Singh
    • Lakhmir Singh Class 10 Physics
    • Lakhmir Singh Class 10 Chemistry
    • Lakhmir Singh Class 10 Biology
    • Lakhmir Singh Class 9 Physics
    • Lakhmir Singh Class 9 Chemistry
    • PS Verma and VK Agarwal Biology Class 9 Solutions
    • Lakhmir Singh Science Class 8 Solutions

Learn CBSE

NCERT Solutions for Class 6, 7, 8, 9, 10, 11 and 12

Financial Management – CBSE Notes for Class 12 Business Studies

January 11, 2024 by Bhagya

Financial Management –  CBSE Notes for Class 12 Business Studies

CBSE NotesCBSE Notes Business StudiesNCERT Solutions Business Studies

1. Business Finance Money required for carrying out business activities is called Business Finance.
2. Financial Management It refers to efficient acquisition of finance, efficient utilisation of finance and efficient distributing and disposal of surplus for smooth working of company.
According to Howard and Upton, “Financial management involves the application of general management principles to a particular financial operation.
3. Role of Financial Management
(i) Size and composition of fixed assets
(ii) Amount and composition of current assets
(iii) The amount of long term and short financing
(iv) Fixing debt equity ratio in capital
(v) All items in Profit and Loss account
4. Objectives of Financial Management
Financial Management CBSE Notes for Class 12 Business Studies img-1
5. Financial Decisions
The financial functions relate to three major decisions which every finance manager has to take
(i) Investment decision
(ii) Financing decision
(iii) Dividend decision
6. Investment Decision (Capital Budgeting Decision)
This decision relates to careful selection of assets in which funds will be invested by the firms.
Factors affecting investment/capital budgeting decisions are
(i) Cash flow of the project (ii) Return on investment
(iii) Risk involved (iv) Investment criteria
7. Financing Decision This relates to composition of various securities in the capital structure of the company. Mainly sources of finance can be divided into two categories
(i) Owners fund
(ii) Borrowed fund
Factors affecting financing decisions are
(i) Cost (ii) Risk
(iii) Cash flow position (iv) Control consideration
(v) Floatation cost (vi) Fixed operating cost
(vii) State of capital market
8. Dividend Decision This relates to distribution of profit earned. The major alternatives are to retain the earnings or to distribute to the shareholders.
Factors affecting dividend decisions are
(i) Earning
(ii) Stability of earning
(iii) Cash flow position
(iv) Growth opportunities
(v) Stability of dividend
(vi) Preference of shareholders
(vii) Taxation policy
(viii) Access to capital market consideration
(ix) Legal restrictions
(x) Contractual constraints
(xi) Stock market reaction
9. Financial Planning It means deciding in advance how much to spend, on what to spend according to the funds at your disposal.
10. Objectives of Financial Planning
(i) To ensure availability of funds whenever these are required,
(ii) To see that firm does not raise resources unnecessarily.
11. Importance of Financial Planning
(i) It facilitates collection of optimum funds.
(ii) It helps in fixing the most appropriate capital structure.
(iii) Helps in investing finance in right projects.
(iv) Helps in operational activities.
(v) Base for financial control.
(vi) Helps in proper utilisation of finance.
(vii) Helps in avoiding business shocks and surprises.
(viii) Link between investment and financing decisions.
(ix) Helps in co-ordination.
(x) It links present with future.
12. Capital Structure Capital structure means the proportion of dept and equity used for financing the operations of business.
Capital Structure =Debt/Equity
13. Financial Leverage It refers to overall capital
Financial Leverage = E/D
Where, D = Debt, E = Equity
14. Factors Determining the Capital
(i) Cash flow position
(ii) Interest Coverage Ratio (ICR) = EBIT/Interest
(iii) Debt Service Coverage Ratio (DSCR)
(iv) Return on investment
(v) Cost of debt
(vi) Tax rate
(vii) Cost of equity
(viii) Floatation cost
(ix) Risk consideration
(x) Flexibility
(xi) Control
(xii) Regulatory framework
(xiii) Stock market condition
(xiv) Capital structure of other companies
15. Fixed Capital Fixed Capital involves allocation of firm’s capital to long-term assets or projects.
16. Importance or Scope of Capital Budgeting Decision
(i) Long term growth (ii) Large amount of funds involved
(iii) Risk involved (iv) Irreversible decision
17. Factors Affecting Requirement of Fixed Capital
(i) Nature of business (ii) Scale of operation
(iii) Technique of production (iv) Technology up gradation (v) Growth prospects (vi) Diversification
(vii) Availability of finance and leasing facility (viii) Level of collaboration/joint ventures
18. Working Capital
Working Capital refers to excess of Current assets over Current liabilities.
There are two types of working capital
(i) Gross working capital (ii) Net working capital
19. Operating Cycle
Financial Management CBSE Notes for Class 12 Business Studies img-2
20. Factors Affecting the Working Capital
(i) Length of operating cycle
(ii) Nature of business
(iii) Scale of operation
(iv) Business cycle fluctuation
(v) Seasonal factors
(vi) Technology and production cycle
(vii) Credit allowed
(viii) Credit avail
(ix) Operating efficiency
(x) Availability of raw materials
(xi) Level of competition
(xii) Inflation
(xiii) Growth prospects

Filed Under: CBSE Tagged With: Business Studies, Business Studies Class 12, cbse notes, class 12 notes, ncert notes, Revision Notes

LearnCBSE.in Student Education Loan
  • Student Nutrition - How Does This Effect Studies
  • Words by Length
  • NEET MCQ
  • Factoring Calculator
  • Rational Numbers
  • CGPA Calculator
  • TOP Universities in India
  • TOP Engineering Colleges in India
  • TOP Pharmacy Colleges in India
  • Coding for Kids
  • Math Riddles for Kids with Answers
  • General Knowledge for Kids
  • General Knowledge
  • Scholarships for Students
  • NSP - National Scholarip Portal
  • Class 12 Maths NCERT Solutions
  • Class 11 Maths NCERT Solutions
  • NCERT Solutions for Class 10 Maths
  • NCERT Solutions for Class 9 Maths
  • NCERT Solutions for Class 8 Maths
  • NCERT Solutions for Class 7 Maths
  • NCERT Solutions for Class 6 Maths
  • NCERT Solutions for Class 6 Science
  • NCERT Solutions for Class 7 Science
  • NCERT Solutions for Class 8 Science
  • NCERT Solutions for Class 9 Science
  • NCERT Solutions for Class 10 Science
  • NCERT Solutions for Class 11 Physics
  • NCERT Solutions for Class 11 Chemistry
  • NCERT Solutions for Class 12 Physics
  • NCERT Solutions for Class 12 Chemistry
  • NCERT Solutions for Class 10 Science Chapter 1
  • NCERT Solutions for Class 10 Science Chapter 2
  • Metals and Nonmetals Class 10
  • carbon and its compounds class 10
  • Periodic Classification of Elements Class 10
  • Life Process Class 10
  • NCERT Solutions for Class 10 Science Chapter 7
  • NCERT Solutions for Class 10 Science Chapter 8
  • NCERT Solutions for Class 10 Science Chapter 9
  • NCERT Solutions for Class 10 Science Chapter 10
  • NCERT Solutions for Class 10 Science Chapter 11
  • NCERT Solutions for Class 10 Science Chapter 12
  • NCERT Solutions for Class 10 Science Chapter 13
  • NCERT Solutions for Class 10 Science Chapter 14
  • NCERT Solutions for Class 10 Science Chapter 15
  • NCERT Solutions for Class 10 Science Chapter 16

Free Resources

RD Sharma Class 12 Solutions RD Sharma Class 11
RD Sharma Class 10 RD Sharma Class 9
RD Sharma Class 8 RD Sharma Class 7
CBSE Previous Year Question Papers Class 12 CBSE Previous Year Question Papers Class 10
NCERT Books Maths Formulas
CBSE Sample Papers Vedic Maths
NCERT Library

NCERT Solutions

NCERT Solutions for Class 10
NCERT Solutions for Class 9
NCERT Solutions for Class 8
NCERT Solutions for Class 7
NCERT Solutions for Class 6
NCERT Solutions for Class 5
NCERT Solutions for Class 4
NCERT Solutions for Class 3
NCERT Solutions for Class 2
NCERT Solutions for Class 1

Quick Resources

English Grammar Hindi Grammar
Textbook Solutions Maths NCERT Solutions
Science NCERT Solutions Social Science NCERT Solutions
English Solutions Hindi NCERT Solutions
NCERT Exemplar Problems Engineering Entrance Exams
Like us on Facebook Follow us on Twitter
Watch Youtube Videos NCERT Solutions App