Consider the following statements about financial management:
(A) Financial management is concerned with optimal procurement as well as the usage of finance.
(B) For optimal procurement, the available sources of finance are compared in terms of their costs and associated risks.
(C) Good financial management aims at mobilisation of financial resources at a lower cost and their deployment in the most liquid assets.
(D) The overall financial health of a business is determined by the quality of its financial management.
Which of the statements given above are correct?
Choose the correct answer from the options given below:
Answer & explanation
Correct answer: option 4
The correct answer is Option (4) → (A), (B) and (D) only
(A) Financial management is concerned with optimal procurement as well as the usage of finance. — Correct. Financial management covers both sides: getting funds on the best terms and using them well.
(B) For optimal procurement, the available sources of finance are compared in terms of their costs and associated risks. — Correct. The possible sources are listed and compared by their cost and risk, and the best mix is chosen.
(C) Good financial management aims at mobilisation of financial resources at a lower cost and their deployment in the most liquid assets. — Incorrect. Good financial management puts funds into the most lucrative, that is the most profitable, activities. Funds kept in the most liquid assets earn little and lie nearly idle.
(D) The overall financial health of a business is determined by the quality of its financial management. — Correct. Past and present financial decisions shape the financial statements. So the quality of financial management decides the financial health of a business.
NCERT (2026-27 Edition): “Financial Management All finance comes at some cost. It is quite imperative that it needs to be carefully managed. Financial Management is concerned with optimal procurement as well as the usage of finance. For optimal procurement, different available sources of finance are identified and compared in terms of their costs and associated risks. Similarly, the finance so procured needs to be invested in a manner that the returns from the investment exceed the cost at which procurement has taken place. Financial Management aims at reducing the cost of funds procured, keeping the risk under control and achieving effective deployment of such funds. It also aims at ensuring availability of enough funds whenever required as well as avoiding idle finance. Needless to emphasise, the future of a business depends a great deal on the quality of its financial management.” “Importance: … It can, thus, be stated that the financial statements of a business are largely determined by financial management decisions taken earlier. Similarly, the future financial statements would depend upon past as well as current financial decisions. Thus, the overall financial health of a business is determined by the quality of its financial management. Good financial management aims at mobilisation of financial resources at a lower cost and deployment of these in most lucrative activities.” |