Dear Readers, Here we have given Practice English Reading Comprehension quiz and questions for NIACL Assistant/IBPS/Indian Bank PO Prelims 2018 Exams with detailed explanation. Candidates those who are preparing for Upcoming Bank Exams can make use of it.[WpProQuiz 3292]
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Directions (1-10): Read the passage carefully and answer the following questions.
Financial management refers to the efficient and effective management of money (funds). Financial Management is about preparing, directing and managing the financial activities of a company such as buying, selling and using money to its best results to maximize wealth or produce best value for money. It is basically applying general management concepts to the cash of the company. Financial Management can also be defined as – The management of the finances of a business / organization in order to achieve financial objectives.
According to Dr. S. N. Maheshwari “Financial management is concerned with raising financial resources and their effective utilization towards achieving the organizational goals.”
According to Richard A. Brealey “Financial management is the process of putting the available funds to the best advantage from the long term point of view of business objectives”
It is crucial for both public and private sector organizations.
Financial management is one of the important aspects in finance. Nobody can ever think to start a business or a company without financial knowledge and management strategies.
The scope of financial management has increased greatly now. It is important to carry out the financial analysis for a company and this analysis helps in decision making process. Investment decision of the company comes under the scope of financial management.
The investment decision involves the evaluation of risk, measurement of cost of capital and estimation of expected benefits from a project. Capital budgeting and liquidity are the two major components of investment decision. Capital budgeting is concerned with the allocation of capital and commitment of funds in permanent assets which would yield earnings in future.
Capital budgeting also involves decisions with respect to replacement and renovation of old assets. The finance manager must maintain an appropriate balance between fixed and current assets in order to maximize profitability and to maintain desired liquidity in the firm.
Capital budgeting is a very important decision as it affects the long-term success. At the same time it is a very difficult decision because it involves the estimation of costs and benefits which are uncertain and unknown.
While the investment decision involves decision with respect to composition or mix of assets, financing decision is concerned with the financing mix or financial structure of the firm and it also comes under the range of financial management. The raising of funds requires decisions regarding the methods and sources of finance, relative proportion and choice between alternative sources, time of floatation of securities, etc.
The finance manager must develop the best finance mix or optimum capital structure for the enterprise so as to maximize the long- term market price of the company’s shares. A proper balance between debt and equity is required so that the return to equity shareholders is high and their risk is low. Use of debt or financial leverage affects both the return and risk to the equity shareholders. The market value per share is maximized when risk and return are properly matched.
In order to achieve the wealth maximization objective, an appropriate dividend policy which also comes under the span of financial management, must be developed. One aspect of dividend policy is to decide whether to distribute all the profits in the form of dividends or to distribute a part of the profits and retain the balance.
Working capital decision also comes under the extent of financial management, is related to the investment in current assets and current liabilities. Current assets include cash, receivables, inventory, short-term securities, etc. Current liabilities consist of creditors, bills payable, outstanding expenses, bank overdraft, etc. Current assets are those assets which are convertible into a cash within a year. Similarly, current liabilities are those liabilities, which are likely to mature for payment within an accounting year.
Financial planning is the key element of the financial management. Financial Planning is process of framing objectives, policies, procedures, programmes and budgets regarding the financial activities of a concern.
The financial planning estimates the precise requirement of funds which means to avoid wastage and over-capitalization situation.
Funds can be arranged from various sources and are used for long term, medium term and short term requirement. Financial planning is necessary for tapping appropriate sources at appropriate time as long term funds are generally contributed by shareholders and debenture holders, medium term by financial institutions and short term by commercial banks.
Financial planning suggests how the funds are to be allocated for various purposes by comparing various investment proposals. It helps in ensuring a reasonable balance between outflow and inflow of funds so that stability is maintained. It also helps in reducing the uncertainties which can be a hindrance to growth of the company and this helps in ensuring stability an d profitability in concern.
1) According to the passage, which of the followings cannot be considered as an advantage of financial planning?
a) Helps in estimating the requirement of funds
b) Helps in proper allocation of funds
c) Helps in maintaining the balance between inflow and out flow of fund
d) Helps in growth and expansion programmes
e) Helps in reducing the uncertainties
2) According to the passage, why should the finance manager develop the optimum capital structure?
a) For maintaining the liquidity in the firm
b) For maximizing the value of the firm
c) For maximizing the return to equity shareholders
d) For reducing the cost of capital
e) For maximizing the market price of share
3) According to the passage, who contributes the funds for the medium term financial requirement of an organisation?
a) Debenture holders
b) Financial institutions
c) Co-operative societies
d) Commercial bank
4) According to the passage, which of the following decisions does not come under the scope of financial management?
a) Working capital decision
b) Dividend decision
c) Acquisition decision
d) Investment decision
e) Financing decision
5) Which of the following statements is true in the context of the passage?
a) Working capital decision is related to the income and expenditure of business.
b) Current assets are those assets which are convertible into cash within a year.
c) Capital budgeting is a very important decision as it affects the short-term success.
d) None of the above
e) All are true
6) Find the incorrect statement on the basis of the given passage.
a) Financial planning helps in avoiding the over-capitalization situation.
b) The market value per share is maximised when risk and return are properly matched.
c) Financial planning helps in reducing the uncertainties which can be a hindrance to growth of the company.
d) Investment decision does not evaluate the cost of capital.
e) All are correct
7) Choose the word which as same meaning as the word crucial
8) Choose the word which as same meaning as the word renovation
9) Choose the word which as opposite meaning as the word outstanding
e) in arrears
10) Choose the word which as opposite meaning as the word precise
1). Answer: d)
“Financial planning helps in growth and expansion progamme” can be considered as the advantage of the financial planning as it is not given in the passage.
2). Answer: e)
It is clearly mentioned in the passage that finance manager must develop the best finance mix or optimum capital structure for the enterprise so as to maximize the long- term market price of the company’s shares.
3). Answer: b)
It is clearly mentioned in the passage that long term funds are generally contributed by shareholders and debenture holders, medium term by financial institutions and short term by commercial banks.
4). Answer: c)
According to the passage, acquisition decision does not come under the scope of financial management as it is not mentioned in the passage.
5). Answer: b)
According to the passage, true statement is “Current assets are those assets which are convertible into cash within a year.”
6). Answer: d)
It is mentioned in the passage that the investment decision involves the evaluation of risk, measurement of cost of capital and estimation of expected benefits from a project.
7). Answer: d)
The meaning of “crucial” is “vital / indispensable”.
8). Answer: a)
The meaning of “renovation” is “overhaul / renewal”.
9). Answer: b)
The meaning of “outstanding” is “unsettled / unpaid” and its opposite is “paid/ remunerated”.
10). Answer: d)
The meaning of “precise” is “exact/accurate” and its opposite is “vague /indistinct”.
Daily Practice Test Schedule | Good Luck
|Topic||Daily Publishing Time|
|Daily News Papers & Editorials||8.00 AM|
|Current Affairs Quiz||9.00 AM|
|Quantitative Aptitude “20-20”||11.00 AM|
|Vocabulary (Based on The Hindu)||12.00 PM|
|General Awareness “20-20”||1.00 PM|
|English Language “20-20”||2.00 PM|
|Reasoning Puzzles & Seating||4.00 PM|
|Daily Current Affairs Updates||5.00 PM|
|Data Interpretation / Application Sums (Topic Wise)||6.00 PM|
|Reasoning Ability “20-20”||7.00 PM|
|English Language (New Pattern Questions)||8.00 PM|