Category Archives: Financial Management Interview Questions

Explain the concept of Debt securitization? | Financial Management Questions

Debt securitization is a method of recycling of funds. It is especially beneficial to financial intermediaries to support the lending volumes. Assets generating steady cash flows are packaged together and against this assets pool, market securities can be issued. The … Continue reading

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Explain the methods of venture capital financing? | Financial Management Questions

Some Common Methods of Venture Capital Financing: (a) Equity financing: The venture capital undertaking requires long-term funds but is unable to provide returns in initial stage so equity capital is the best option. (b) Conditional Loan: A conditional loan is … Continue reading

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Discuss the features of deep discount bonds? | Financial Management Questions

Features of Deep Discount Bonds: Deep discount bonds are a form of zero-interest bonds. These bonds are sold at discounted value and on maturity; face value is paid to the investors. In such bonds, there is no interest payout during … Continue reading

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Explain the term ‘Ploughing back of Profits’? | Financial Management Questions

Ploughing back of Profits: Long-term funds may also be provided by accumulating the profits of the company and by ploughing them back into business. Such funds belong to the ordinary shareholders and increase the net worth of the company. A … Continue reading

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Differentiate between Business risk and financial risk? | Financial Management Questions

Business Risk and Financial Risk: Business risk refers to the risk associated with the firm’s operations. It is an unavoidable risk because of the environment in which the firm has to operate and the business risk is represented by the … Continue reading

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Explain the principles of “Trading on equity”? | Financial Management Questions

The term trading on equity means debts are contracted and loans are raised mainly on the basis of equity capital. Those who provide debt have a limited share in the firm’s earning and hence want to be protected in terms … Continue reading

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Explain the assumptions of Net Operating Income approach (NOI) theory of capital structure. | Financial Management Questions

Assumptions of Net Operating Income (NOI) Theory of Capital Structure According to NOI approach, there is no relationship between the cost of capital and value of the firm i.e. the value of the firm is independent of the capital structure … Continue reading

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What is optimum capital structure? Explain. | Financial Management Questions

Optimum Capital Structure: Optimum capital structure deals with the issue of right mix of debt and equity in the long-term capital structure of a firm. According to this, if a company takes on debt, the value of the firm increases … Continue reading

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Explain in brief the assumptions of Modigliani-Miller Theory? | Financial Management Questions

Assumptions of Modigliani – Miller Theory (a) Capital markets are perfect. All information is freely available and there is no transaction cost. (b) All investors are rational. (c) No existence of corporate taxes. (d) Firms can be grouped into “Equivalent … Continue reading

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What do you understand by Weighted Average Cost of Capital? | Financial Management Questions

Weighted Average Cost of Capital: The composite or overall cost of capital of a firm is the weighted average of the costs of various sources of funds. Weights are taken in proportion of each source of funds in capital structure … Continue reading

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