Micro Link Information Technology & Business College

Postgraduate Program
Masters of Business Administration (MBA)
Advanced Financial Management
Chapter-3

Dear readers/ students, in order to check your understanding of the course Financial Management
(FM), you are expected to answer the following questions correctly and submit your answer
accordingly through Online in softcopy. Perform each questions according to their instructions.

Type of Assessment: Assignment-3

Part-I- True or False Item Questions

Instruction:
Read the Questions Carefully and if the Statement is Correct Write “True” Otherwise False.

1. The financial market consists of both the capital market and money market.
2. Capital market is defined as a complex of institutions, instruments and practices which
establish a link between the demand for and the supply of different types of capital funds.
3. Secondary markets are those where securities are offered for the first time to potential
investors.
4. According to sectorial classification, a capital market can be a primary or a secondary
market, as far as the functional classification is concerned.
5. Primary markets are those where currently outstanding securities of companies are traded.
6. Over-the-counter markets do not provide actual physical facilities for conducting securities
transactions in any one place.
7. Financial institutions act as a channel (middlemen) through which scattered savings are
collected and then invested in business firms.
8. An acquisition is a contractual agreement in which the owner of an asset (Lessor) grants the
use of his property to another party (Lessee) under specified certain conditions and for a
specified period in consideration of periodic payments.

1
 9. Operating lease is a source of short-term financing while the financial lease is a long-term
financing source.
10. Foreign capital assumes direct investment, equity capital, and loans and grants as sources
(forms) of capital.
11. Retained earnings are that part of the total profits of a firm which is distributed among the
shareholders and is taken away from the business.
12. Amount of net profit, working capital requirements, & replacement and modernization needs
are some of the internal determinants of retained earnings.

Part-II- Discussion Questions

Instruction:
Write the correct answer in a short and precise ways for the following questions

1. Discuss the various sources to meet financial needs of an organization.

2. Describe capital markets, specialized institutions and their role in supply of finance.
3. Discuss lease financing and foreign sources as sources of raising finance.
4. Discuss the role of retained earnings as an internal source of financing.
5. Describe the determinant of retained earnings in practice.
6. Explain the various sources of financing.
7. What is meant by security financing?
8. What is debt financing?
9. Critically examine the advantages and disadvantages of equity shares.
10. Discuss the features of equity shares.
11. Explain the merits and demerits of preference shares?
12. How internal sources of finance is used in the industrial concern?
13. What is retained earnings?
14. Evaluate the advantages and disadvantages of retained earnings.
15. Evaluate the overall structure of the loan financing?