# Financial Management, Class 12 Business Studies | SwaVid

Financial Management, NCERT Class 12 Business Studies: notes with key ideas, definitions, common mistakes and 3 quick checks with worked answers.

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# Financial Management

## Key definitions

## Key ideas

## Common mistakes

## Quick checks

## Keep going

## Questions parents ask

## Class 12 Business Studies on SwaVid

### Role and objective of financial management

### Three core financial decisions

### Financial planning

### Capital structure and trading on equity

### Fixed and working capital management

### Next chapter

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SwaVid › CBSE › Class 12 › Business Studies › Financial Management

Notes written by SwaVid from the NCERT textbook.

Class 12 Business Studies, Chapter 9. Key ideas, definitions and common mistakes.

CBSE does not print marks for a single chapter.

Short answer. This chapter covers the meaning, objectives, and key decisions involved in financial management within an enterprise. Students learn how businesses plan, procure, and allocate funds across long-term and short-term assets to maximise shareholders' wealth.

Source: NCERT Business Studies Part II (Reprint 2026-27) , Chapter 9, Financial Management

Financial management is concerned with optimal procurement as well as the usage of finance. The primary objective is to maximise current market price of equity shares, also known as wealth maximisation.

Financial management revolves around three major decisions: investment decisions, financing decisions, and dividend decisions. Investment decisions involve capital budgeting, financing decisions deal with capital structure, and dividend decisions allocate profit between retained earnings and dividend payout.

Financial planning involves preparing a financial blueprint of an organisation's future operations. It ensures that funds are available whenever required and avoids unnecessary accumulation of idle resources.

Capital structure refers to the mix between owners' funds (equity) and borrowed funds (debt). Employing more debt increases earnings per share when the return on investment exceeds the interest rate on debt, a situation known as trading on equity.

Fixed capital involves investment in long-term assets, which affects the growth, profitability, and risk of the business. Working capital represents investment in current assets to ensure smooth day-to-day operations.

Try each question first. Then tap it to see the answer.

RoI = (EBIT / Total investment) × 100

RoI = (4,00,000 / 30,00,000) × 100

RoI = 13.33%

13.33%

Earnings before tax (EBT) = EBIT - Interest = 2,00,000 - 50,000 = ₹ 1,50,000

Tax = 30% of 1,50,000 = ₹ 45,000

Profit after tax (PAT) = 1,50,000 - 45,000 = ₹ 1,05,000

₹ 1,05,000

Net working capital = Current assets - Current liabilities

Net working capital = 8,00,000 - 3,50,000 = ₹ 4,50,000

₹ 4,50,000

Marketing .

Controlling .

The 11 chapters of Class 12 Business Studies .

CBSE does not give marks to one chapter. It prints marks for units or parts, and the chapter list page shows them all.

No. They are written by SwaVid from the NCERT textbook. The CBSE curriculum is the reference for what is assessed.

Marketing.

SwaVid is an AI tutor for Indian students in Classes 6 to 12. It finds the earlier ideas a child missed, then teaches today’s chapter. Start free to see how it works.

- Ch 9 NCERT book
- 80 marks, theory paper
- 3 quick checks
- Confusing the primary objective of financial management as profit maximisation instead of wealth maximisation . Remember that profit maximisation ignores the time value of money and risk, whereas wealth maximisation focuses on maximising the market value of equity shares.
- Assuming that using more debt always increases earnings per share . Check whether RoI is higher than the borrowing interest rate. If RoI is lower than the interest rate on debt, financial leverage works adversely and decreases EPS.
- Treating financial planning as synonymous with financial management . Financial planning is a part of financial management that specifically estimates fund requirements and ensures their timely availability.

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