Académique Documents
Professionnel Documents
Culture Documents
Secretarial Practice
Ms. Toral Juthani
(M.Com, PGDFM)
(M.Com, C.S.)
Salient Features :
Exhaustive coverage of syllabus in Question Answer Format.
Covers answers to all Textual Questions, Board Questions
(Mar 08 Oct 12)
Relevant Marking Scheme for Each Question.
Includes Additional Important Questions, Intext Questions.
Quick Review at the end of each chapter to facilitate quick
revision.
Two Model Question Papers as per the latest paper pattern.
Simple and Lucid language.
Self evaluative in nature.
Secretarial Practice
Printed at:
India Printing Works
42, G.D. Ambekar Marg,
Wadala,
Mumbai 400 031
Published by
No part of this book may be reproduced or transmitted in any form or by any means, C.D. ROM/Audio Video
Cassettes or electronic, mechanical including photocopying; recording or by any information storage and
retrieval system without permission in writing from the Publisher.
Preface
Secretarial Practice is a subject that compiles the knowledge and skills a Company Secretary should posses. The
competency of the company secretary lies in conducting valid correspondence between the Board of Directors
and the public, thereby acts as a front face of the organization.
We present to you "Std. XII Commerce: Secretarial Practice" with a revolutionary fresh approach towards
content and thus laying a platform for an in-depth understanding of the subject.
This book has been written according to the revised syllabus and guidelines as prescribed by the state board and
covers answers to all textual questions as well as board question papers from March 2008 to October 2012.
In addition to this, the book includes additional important questions for each chapter that not only aim at
covering the entire topic but also makes students ready to face the competition.
The sub-topic wise classified question and answer format of this book helps the students in easy
comprehension.
Furthermore, we have provided model answers to each question in the form of pointers which makes it easy for
students to memorize and reproduce the answers in their examinations. The model questions are provided with
relevant marking schemes so as to highlight the importance of each question.
Every chapter ends with a Quick Review which summarizes the entire lesson through a graphic organizer.
The book also includes two model question papers as per the latest paper pattern.
We are sure this study material will turn out to be a powerful resource for students and facilitate them in
understanding the concepts of this subject in the most lucid way.
The journey to create a complete book is strewn with triumphs, failures and near misses. If you think weve
nearly missed something or want to applaud us for our triumphs, wed love to hear from you.
Please write to us on: mail@targetpublications.org
Yours faithfully
Publisher
No.
Topic Name
Page No.
Business Finance
21
52
Issue of Debentures
79
Deposits
91
102
113
126
149
10
160
11
Financial Markets
171
12
Stock Exchange
184
13.
201
14.
203
15.
205
01
Business Finance
Contents:
1.1
ii.
1.1
Introduction
1.2
1.3
Financial Planning
1.4
Capital Structure
1.5
Introduction
iii.
Definition:
i.
Ezra Soloman: Financial Management
is concerned with effective use of an
important economic resource, namely
capital funds.
ii.
Routine functions:
i.
Record keeping and reporting:
Keeping records of financial
transactions and sending the
reports to different departmental
heads.
ii.
Preparing various financial
statements: This is done to
analyze
the
position
and
performance of an organization.
iii. Cash Planning: Cash planning is
done properly as it allows the
company to plan its working
capital.
iv. Credit Management: Credit
management means managing the
funds which are due with the
creditors and accordingly deciding
the credit period that is to be
offered to the creditors.
v.
Reporting
to
Directors:
Providing accurate information to
Board of Directors on current
financial position for making
decisions of purchases, marketing,
pricing, etc.
1
Executive functions:
i.
Forecasting
financial
requirements: Forecasting of
finance means projection of
financial needs of business for
some time ahead. Forecasting
simply means budgeting financial
needs of the expected programmes.
An organization requires capital
i.e. fixed capital (long term) and
working capital (short term) for
running its business.
Forecasting not only includes the
amount of funds required but also
the duration of funds, its timing
and the kind of funds i.e. owned
or borrowed, etc.
ii.
Deciding sources of funds: After
determining the amount of finance
required, various sources of raising
of funds such as shares, debentures,
financial
institutions,
money
lenders, etc. are considered.
An utmost care is to be taken
while selecting the funds as there
needs to be a proper balance
between long term funds and short
term funds.
iii. Investment Decisions:
Investment
decision
ensures
effective utilization of funds
raised by the organization in
a.
long term assets or fixed
assets such
as land,
building,
machinery,
furniture, etc.
b.
short term assets or current
assets
such
as
cash
requirement,
account
receivables and inventory.
iv. Dividend policy: A finance
manager has to decide the
proportion of profit that it is to be
retained in the business for future
expansion and the proportion that
is to be distributed as dividend
among shareholders. It is the
prime duty of the finance manager
to
balance
the
investors
expectations and use of retained
earnings for future expansion or
acquisition of additional assets.
vi.
Wealth Maximization:
a.
According to Prof. Soloman
Ezra, the ultimate goal of
financial management should be
maximization of owners wealth.
b.
Wealth maximization is also
known as value maximization
i.e. maximizing net present value
of a firm.
c.
The
focus
of
financial
management is on wealth
maximization of its owners i.e.,
equity shareholders. The wealth of
shareholders is reflected in market
value of shares. Thus, wealth
maximization
means
the
maximization of market price of
shares.
d.
The wealth of equity shareholders
is maximized only when market
value of equity shares is
maximized.
iii.
Social satisfaction:
a.
Business firms now-a-days not
only think about investors, but
also consider welfare of people in
general.
b.
As a business firm operates in
society, hence it is responsible
towards the society.
c.
They do so by protecting the
interests of suppliers, customers,
creditors, employees of the
company and government.
Q.4. Write short notes on.
[5 marks each]
*i. Role of Financial Management.
Ans: Refer Q.2.
ii.
Investment decisions.
Ans: a.
Investment decision basically
ensures effective utilization of the
funds raised by the organization in
1.
Long term assets or fixed
assets.
2.
Short term assets or
current assets.
b.
Fixed assets i.e. land, building,
machinery,
equipment
and
furniture, etc. forms a large
portion of funds raised and
includes a major portion of
investment decision.
d.
e.
iii.
Profit Maximization
Maximization.
Wealth
Ans:
Profit Maximization Wealth Maximization
Meaning
a. Profit maximization Wealth maximization
is based on the is also known as
assumption
that value maximization.
profit is a tool of It aims to maximise
measuring
the net present value of
success of any the firm.
business
firm
thereby it aims at
maximization
of
profit.
Objective
Wealth maximization
b. Profit
on
maximization helps focuses
in growth and maximizing wealth of
expansion of any equity shareholders
business firm as by increasing market
of
equity
high
level value
profitability results shares.
in better returns to
shareholders
and
surplus
funds
which can be used
for future projects
and activities of the
firm.
Advantages
c. Profit measures the Wealth maximization
financial progress takes into account
of a firm.
risks and uncertainty
involved in business
activities.
Dis-advantages
Wealth maximization
d. Profit
maximization
is is a vague concept.
short
term
in Merely an increase in
nature.
It
is shareholders wealth
uncertain and the does not lead to
timing of return is wealth maximization
not considered.
as there are number
of factors that affect
wealth requirement.
6
1.3
Financial Planning
iii.
iv.
v.
vi.
vii.
c.
d.
Financial
planning
helps
in
eliminating wasteful expenditure of
the firm.
Ans: This statement is TRUE.
Reasons:
a.
Financial planning helps in
forecasting the needs of an
organization whether current or
futuristic.
b.
Financial planning is analytical
planning as it considers several
factors such as change in
government policy on taxes,
fluctuating interest rates, etc.
c.
These events can be timely
anticipated and tackled with the
help of financial planning.
Hence, financial planning assists in
avoiding wasteful expenditure which
would otherwise become a huge loss
and cause an irreversible damage to the
organization.
8
Capital Structure
the
OR
*Write a short note on: Capital Structure
and its components.
[5]
Ans: Capital structure:
i.
ii.
iii.
iv.
v.
iv.
Retained Earnings:
The part of the profit retained by the
company for meeting future financial
needs and for expansion of the firm is
known as retained earnings. In simple
words, it is ploughing back of profits.
Borrowed Capital:
It consists of the following:
a.
Debentures:
A debenture is a certificate of loan
evidencing the fact that the
company is liable to pay a
specified amount with interest at
an agreed rate.
b.
Term Loans:
Term loans are provided by bank
and other financial institutions at a
fixed rate of interest.
c.
Internal factors:
a.
Requirement of Capital:
1.
In the initial stages of
business, a company cannot
issue varieties of securities
as there is considerable risk
involved and hence, it is
preferable to raise capital
through equity shares.
2.
Later on for expansion or
modernisation, the company
may issue other types of
securities such as shares,
debentures, etc.
b.
Size and nature of business:
1.
The size of business has
great impact on its capital
structure.
2.
Trading concerns raise
capital by issue of equity as
well as preference shares as
they require more working
capital.
d.
e.
g.
h.
10
ii.
Attitude of management:
1.
Capital structure is influenced
by the attitude of the persons
in the management.
2.
If the management wishes
to have exclusive control,
they raise capital through
preference shares and debt
capital. Since the holder of
such shares do not enjoy
any voting rights, thereby
cannot interfere in the
management
of
the
company.
External Factors:
a.
Market Conditions:
1.
Various
methods
of
financing
should
be
considered depending upon
the
prevailing
market
conditions.
2.
If the share market is in a
declining situation, the
company should raise funds
by issuing debts.
3.
On the other hand, during
the period of boom in the
share market, the company
should raise funds by
issuing equity shares.
b.
Attitude of investors:
1.
Attitude of investors also
plays an important role in
determination of capital
structure.
2.
If the investors prefer to
take risk and expect higher
returns, they invest in the
equity shares.
3.
If the investors prefer to earn
safe and assured income and
are not ready to take risk,
they invest in preference
shares and debentures.
c.
Cost of capital:
1.
Cost of capital is the
minimum return expected
by its supplier.
2.
In case of debt holder, rate
of interest is fixed and the
loan is repaid within the
prescribed period.
d.
e.
f.
g.
h.
ii.
iii.
iv.
v.
b.
ii.
iii.
iv.
v.
vi.
vii.
*8.
9.
12.
13.
16
2.
i.
ii.
iii.
iv.
v.
[1 mark each]
Debt
b.
equity ratio
Trading on c.
equity
Interest
d.
Capital
gearing
e.
h.
i.
j.
Group B
Use of equity capital
for
financing
business.
Tax
deductable
expenditure
Ratio between income
and expenditure.
Non tax deductable
expenditure
Provides advice to
secretary on financial
matters.
2:1
Use of borrowed
capital.
1:2
Provides advice to
Board of Directors on
financial matters.
Ratio between debt
capital and equity
capital.
Group A
Group B
i.
Financial
a. Minimise market value
management
of equity shares
ii. Wealth
b. Investment in fixed
maximization
assets
iii. Financial plan c. Ratio of buying and
selling
iv. Capital
d. Management
of
structure
business funds
v. Fixed capital e. Ad hoc programming
of finance
f. Investment in current
assets
g. Management of
business activities
h. Maximise market
value of equity shares
i. Ratio of different
securities in capital
j. Advance programming
of financial
management.
a.
f.
g.
Group A
Finance
Manager
2.
3.
4.
5.
6.
Financing mix is
_______.
7.
8.
9.
was
also known as
17
11.
12.
13.
14.
15.
16.
17.
18.
19.
20.
Ans: 1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
17.
18.
19.
20.
18
*3.
The
principle
which
means
maximization of market price of equity
shares.
*4.
*5.
6.
7.
*8.
*9.
capital
for
Financial management
Profit maximization
Wealth maximization
Financial planning
Capital structure
Equity share capital
Term loans
Trading on equity
Capital gearing
Fixed capital
Working capital
Net working capital
OBJECTIVES
FUNCTIONS
IMPORTANCE
Profit
Social
Wealth
Maximization Maximization Satisfaction
Routine
i.
Executive
Elimination of waste
expenditure
ii. Co-ordination
i.
Record keeping
and reporting
i.
Forecasting financial
requirements
iii. Dynamism
iv. Communication
ii. Preparation of
various financial
statements
vi. Integration
vii. Futuristic
v. Decision making
CAPITAL STRUCTURE
INFLUENCING FACTORS
COMPONENTS
Owned funds
OR
Shareholders funds
Owed funds
OR
Borrowed funds
i.
i.
Debentures
ii.
ii.
Term loans
Internal
Factors
External
Factors
i.
Requirement of
capital
i.
Market
conditions
ii.
ii.
Attitude of
investors
iii. Growth of
business firm
iv.
Adequate earning
and cash position
v.
Period of finance
vi.
Future plan
and development
Government rules
and regulations
v.
Attitude of
financial institutions
vi.
Rate of interest
vii. Taxation
viii. Competition
Attitude of
management
19
FIXED CAPITAL
WORKING CAPITAL
i.
i.
Nature of business
ii.
Size of business
Production cycle
v.
Business cycle
vi.
Terms of purchase
and sales
Nature of business
v. Business cycle
Management ability
x.
External factors
xi.
Requirement of cash
20