Subject : Financial Management Attend any 4 questions. Each question carries 25 marks (Each answer should be of minimum 2 pages / of 300 words) 1. Explain the objectives of financial management,...

Subject: Financial Management
2. Explain the Indian Financial Systems.
The financial system of a country is an important tool for the economic development of the country as It
helps in the creation of wealth by linking savings with the investments. It is the process of making reach
the excess of the funds to those who need funds.
Indian Financial System is divided into four parts:-
1. Financial Institutions:-
The institutions act as an intermediary between the individual having excess funds and
making it reach to the companies or the individual who are in need of the funds. They
charge certain amount as fees to provide such services. They provide interest to the
individuals who deposit and charge fees and interest to whom the funds are lend.
In India, there are two types of financial institution Banks and Non Banking institutions.
2. Financial Markets:-
It is the place where all the buyers , sellers and traders participate in the trading of the
assets such as shares, bonds , cu
encies and other derivatives. It is further divided into
capital market for long term instruments and money market for short term instruments
with maturity less than one year.
3. Financial Instruments:-
Financial instruments are the instruments used to raise funds or deposit funds. Like for
deposits, it is fixed deposit, invest in shares, account receivable, loans that provide a
specific amount that will be paid in future for a specific interest rate.
4. Financial Services
Financial services are designed to provide the delivery of the financial instruments in an
organized manner by a financial institution.
The major regulartory bodies in the Indian Financial System is the RBI (Reserve Bank of India), SEBI
(Securities Exchange Board of India) to ensure smooth functioning of the financial transactions.
Before the early 1990’s the major role of Indian Financial System was very restricted to provide funds
from the surplus to the deficit sectors. With the globalization, this role had been very restricted and the
ules to trade outside the globe was quite stringent. Due to which the major banks suffered from lack of
competition, low productivity and high intermediation cost. It was in the late 1991, the liberalization
movement came, which became the major part of the financial system. The new banks were introduced
, the interest rate regime has been deregulated with a view to have a better price discovery and efficient
esource allocation. The interest rate on government securities was raised. The RBI has also deregulated
the long time Cash reserve ratio (CRR) and Statutory Liquidity Ratio (SLR) which was quite high for banks
to maintain. Due to major changes, the Indian Financial System has acquired strength, stability and
efficiency by the combined effect of competition, regulatory changes and a policy environment.
3. Explain debentures as instruments for raising long-term debt capital.
Long term debt financing can be categorized into two major parts either a term loan or a debenture.
Term Loan is a loan raised by the company for its long term requirement from the banks and other
financial instruments. While on the other hand, debenture is a debt instrument issued by the company
to raise debt from public.
Debenture is a debt instrument used by the companies to raise the fund for long term and medium term
purpose from the public ....