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Business Studies · 2024 · 4 marks
CBSE 2024 · Region 2 · Set 1 · Q27
27. (a) Explain the following factors affecting the requirements of fired capital: (i) Scale of operations (ii) Financing alternatives
27. (a) Explain the following factors affecting the requirements of
fired capital:
(i)
Scale of operations
(ii)
Financing alternatives
OR
(b)
Explain the following factors affecting dividend decision:
(i)
Cash flow position
(ii)
Growth Opportunities
Marking-scheme solution
(i)
Scale of operations
A larger organisation operating at a higher scale needs bigger plant,
more space etc. and therefore, requires higher investment in fixed
assets when compared with the small organisation.
(ii)
Financing Alternatives
Availability of leasing facilities, may reduce the funds required to
be invested in fixed assets, thereby reducing the fixed capital
requirements. When an asset is taken on lease, the firm pays lease
rentals and uses it. By doing so, it avoids huge sums required to
purchase it.
Explain the following factors affecting dividend decision:
(i)
Cash flow position
(ii)
Growth Opportunities
. (i) Cash flow position
The payment of dividend involves an outflow of cash. A company may be
earning profit but may be short on cash. Availability of enough cash in the
company is necessary for declaration of dividend.
(ii)
Growth opportunities
Companies having good growth opportunities retain more money out of
their earnings to finance the required investment. The dividend in growth
companies is, therefore, smaller, than that in the non-growth companies.
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CBSE Class 12 Business Studies past-paper question from the 2024 board exam, with the answer as CBSE’s own marking scheme gives it. Where our answers come from.