KSLU Solved Question Papers
Financial Management
Previous Year Question Paper with Solution
B.Com. LL.B. (Five Years) · Sem 4
2019 Jun (70 marks) Examination
munotes.in
Mumbai
B.Com. LL.B. (Five Years) Sem 4 Financial Management 2019 Jun (70 marks) Question Paper with Solutions
First published on munotes.in on 2 November 2026.
Published by munotes.in, Mumbai.
Model answers written and edited by the munotes.in editorial desk.
Passages from this volume may be quoted, in print, online or by an AI system, with credit: name munotes.in and link to this volume's page. The volume may not be reproduced as a whole. Full terms at munotes.in/content-license.
munotes.in is an independent study resource for students of Karnataka State Law University. It is not affiliated with Karnataka State Law University, and is not endorsed by it.
The University does not publish an official answer key for this paper. The answers in this volume are model answers, written to show how a full-mark answer is built. They are a study aid, not an authority on what an examiner marked.
The question paper reproduced here is the paper as set by Karnataka State Law University at the 2019 Jun (70 marks) examination.
Contents
The questions below are the paper as Karnataka State Law University set it at the 2019 Jun (70 marks) examination, in the order it was set.
MarksPage
MarksPage
The Paper as Set
The questions in this volume are the questions asked at the 2019 Jun (70 marks) examination, reproduced as Karnataka State Law University set them, in the order it set them. Long reading passages are shortened to their first and last lines and our summary; the original paper prints them in full. Only the answers are ours. See the original question paper.
Total marks 70 · 12 questions answered
How to use this volume
Solve the paper first, under exam conditions and against the clock. Then read the answers here and mark your own. Reading a solution before attempting the question feels productive and teaches very little, because recognising an answer is not the same as being able to write one.
Q1Define financial management. Explain the functions of financial management.[10]
Answer
For full marks, cover: the meaning of financial management, seen as the procurement, use and control of funds; its aim; the functions in the order a business meets them (estimating needs, deciding the capital structure, choosing sources, investing, managing working capital, distributing profit, controlling performance), each briefly explained; a small worked example of the first three functions; the routine functions; and a conclusion.
What do we mean by financial management?
Financial management is the management of the money of a business. It covers three things:
- Procurement of funds: finding out how much money is needed and raising it from suitable sources at a reasonable cost.
- Utilisation of funds: putting the money into assets and activities that earn a good return.
- Control of funds: watching that the money is used as planned and that the business stays able to pay its debts.
Its aim is to raise the value of the business for its owners, that is, to maximise the wealth of the shareholders. It must also keep the business solvent.
Functions of financial management
The functions can be followed in the order in which a business meets them.
1. Estimating the capital required. Before anything else, the finance manager estimates how much money the business needs. Part is for land, buildings and machinery (fixed capital), and part for stock, debtors and cash (working capital). A careful estimate avoids both a shortage that halts work and an excess that lies idle.
2. Deciding the capital structure. Once the total is known, the finance manager decides how much should come from owners, through equity shares and retained profit. The rest comes from preference shares and borrowing. The mix affects the cost of funds, the risk and the control of the business.
3. Choosing the sources of funds. The finance manager compares the possible sources: a public issue of shares, a rights issue, debentures, term loans from banks, public deposits or internal profits. Each differs in cost, risk, time taken and conditions.
4. Investing the funds. The money raised must be put into the most profitable uses. Long-term proposals are tested by methods such as payback, net present value and internal rate of return. The finance manager accepts only those that earn more than the cost of capital.
5. Managing working capital. The finance manager fixes how much stock, credit and cash the business should keep. Receipts and payments are planned through a cash budget, and surplus cash is invested for short periods.
6. Distributing the profit. The finance manager advises the board on how much profit to pay as dividend and how much to retain for growth. The advice must stay within the limits of company law.
7. Financial control. Actual results are compared with budgets and standards. Ratio analysis, cost control and internal audit show where action is needed.
8. Dealing with the financial world. The finance manager keeps good relations with banks, investors, stock exchanges and tax authorities, and keeps them informed through accounts and reports.
A small worked example
A new company plans the following investment.
| Use of funds | Amount (Rs lakh) |
|---|---|
| Land and buildings | 25 |
| Plant and machinery | 15 |
| Working capital | 10 |
| Preliminary and issue expenses | 2 |
| Total funds needed | 52 |
The finance manager then decides the structure and the sources.
| Source of funds | Amount (Rs lakh) |
|---|---|
| Equity shares | 30 |
| 10% debentures | 15 |
| Term loan from a bank | 7 |
| Total funds raised | 52 |
The funds needed, 25 + 15 + 10 + 2 = 52 lakh, equal the funds raised, 30 + 15 + 7 = 52 lakh. Debt forms 22 / 52 × 100, or about 42 per cent, of the total. The finance manager would check that the expected profit covers the interest on this debt comfortably before going ahead.
How the functions are linked
The functions form a chain. The estimate of capital needed decides how much must be raised. The capital structure and the choice of sources decide the cost of that money, which becomes the minimum return the investments must earn. The investments produce the profit, part of which is paid out and part kept. The kept part reduces the need for outside funds next time. Control closes the chain by showing whether the plans were met. A weak link anywhere, such as a poor estimate or a costly source, weakens the whole chain.
Routine functions
Alongside these managerial functions are routine tasks, usually done by staff under the finance manager. They include keeping accounts, handling cash and bank work and the safe custody of securities. Preparing reports and following up with debtors and creditors are also routine tasks.
Conclusion. Financial management is the procurement, use and control of the funds of a business, with the aim of maximising the wealth of its owners. Its functions are to estimate the capital needed, decide the capital structure, choose the sources and invest the funds. It also manages working capital, decides on the distribution of profit, controls performance and deals with the financial world. Routine functions such as accounting and cash handling support them.
The rest of the answers
The first answer is free. The rest come with the KSLU B.Com. LL.B. Semester 4 solved papers.
You have read the question paper and its first answer in full. Buy the solved papers once and you can read every answer of every solved paper in this semester.
Solved papers: ₹499 Already bought it? Sign in
Kannada medium? These answers are in the Kannada Semester 4 pass too, with the other subjects in Kannada. The Financial Management solved papers are in English, because they have not been translated into Kannada. See Kannada Semester 4
The question paper itself stays free, and so does the syllabus.
What should we fix or add?
Found an error in this volume? Report it and we will check it against the paper.