What are the main objectives of financia | Class 12 Business Studies Chapter Financial Management, Financial Management NCERT Solutions

Welcome to the NCERT Solutions for Class 12 Business Studies - Chapter Financial Management. This page offers a step-by-step solution to the specific question from Exercise 2, Question 3: . With detailed answers and explanations for each chapter, students can strengthen their understanding and prepare confidently for exams. Ideal for CBSE and other board students, this resource will simplify your study experience.

Question 3:

What are the main objectives of financial management? Briefly explain.

Answer:

The two main objectives of financial management are:

  1. Primary objective: The primary objective of financial management is maximization of shareholder’ wealth, which is achieved by increase in value of shares or the market price of the shares.

  2. Secondary objectives: In order to achieve the primary objective of wealth maximization, financial management should aim to the following objectives:

    1. Profit maximization/effective utilization of fund: Effective utilization of funds, by ensuring that benefits of an investment exceeds its cost.

    2. Availability of funds at reasonable costs: To raise funds at minimum cost and minimum risk, through effective financing decision.

    3. Ensure safety of funds: To ensure safety of funds by creating reserves, reinvesting profits etc.

    4. Maintaining adequate liquidity: To maintain financial liquidity and profitability through working capital decision.

    5. Avoiding idle finance: Idle finance not only adds to the cost of funds but also encourages wasteful expenditure. Therefore, financial management avoids over capitalization.


Study Tips for Answering NCERT Questions:

NCERT questions are designed to test your understanding of the concepts and theories discussed in the chapter. Here are some tips to help you answer NCERT questions effectively:

  • Read the question carefully and focus on the core concept being asked.
  • Reference examples and data from the chapter when answering questions about Financial Management.
  • Review previous year question papers to get an idea of how such questions may be framed in exams.
  • Practice answering questions within the time limit to improve your speed and accuracy.
  • Discuss your answers with your teachers or peers to get feedback and improve your understanding.

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Welcome to the NCERT Solutions for Class 12 Business Studies - Chapter . This page offers a step-by-step solution to the specific question from Excercise 2 , Question 3: What are the main objectives of financial management? Briefly explain.....