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June 2026Q. 6A(iv)5 marksSyllabus 2022
(iv)One of the main objectives of a business organization is profit maximization though there are other objectives like service to society, nation's development, providing employment opportunities etc. Are there any arguments against the goal of profit maximization by business organization ?
Profit maximization objectives have been criticized on innumerable grounds. Under the changed economic and corporate environment, profit-maximization is regarded as unrealistic, difficult, and inappropriate and socially not much liked goal for business organizations. Profit maximization as an objective of financial management has been considered inadequate and rejected because of the following drawbacks.
(i)It is vague conceptually.
(ii)It ignores timing of returns.
(iii)It ignores the risk factor.
(iv)It may tempt to make such decisions which may in the long run prove disastrous.
(v)Its emphasis is generally on short run projects.
(vi)It may cause decreasing share prices.
(vii)The profit is only one of the many objectives and variables that a firm considers
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Source: ICSI Guideline Answers, June 2026, Q. 6A(iv) (Syllabus 2022).
December 2024Q. 1 (FSM)1 markMCQFinancial and Strategic Management paper, Syllabus 2017
“Shareholders’ wealth” in a firm is represented by :
(A)The number of people employed in the firm
(B)The amount of salary paid to its employees
(C)The market price per share of the firm’s common stock
(D)The book value of the firm’s assets less the book value of its liabilities
Answer: (C) The market price per share of the firm’s common stock
Source: ICSI Guideline Answers (answer key), December 2024, Q. 1 (Financial and Strategic Management paper, Syllabus 2017).
December 2024Q. 2 (FSM)1 markMCQFinancial and Strategic Management paper, Syllabus 2017
Long-run objective of the financial management is to :
(A)Maximize market share
(B)Maximize return on investment
(C)Maximize earnings per share
(D)Maximize shareholders’ wealth
Answer: (D) Maximize shareholders’ wealth
Source: ICSI Guideline Answers (answer key), December 2024, Q. 2 (Financial and Strategic Management paper, Syllabus 2017).
June 2024Q. 1 (FSM)1 markMCQFinancial and Strategic Management paper, Syllabus 2017
Financial Management is an area of financial decision-making, harmonizing individual motives and enterprise goals, ” was defined by :
(A)Erza Solomon
(B)Weston and Brigham
(C)S.C. Kuchal
(D)Joshep and Massie
Answer: (B) Weston and Brigham
Source: ICSI Guideline Answers (answer key), June 2024, Q. 1 (Financial and Strategic Management paper, Syllabus 2017).
December 2023Q. 6A(iv)5 marksSyllabus 2022
(iv)Briefly explain the emerging roles of Financial Manager.
The responsibilities of the financial manager are linked to the goal of ensuring liquidity, profitability or both and is also related to the management of assets and funds of any business enterprise. When the Financial Manager is involved in management of asset, he is performing the role of the decision-maker and when he is managing funds, he is performing the staff function. In the light of different responsibilities of the financial manager, he performs mainly the following duties:
Source: ICSI Guideline Answers, December 2023, Q. 6A(iv) (Syllabus 2022).
June 2023Q. 2 (FSM)1 markMCQFinancial and Strategic Management paper, Syllabus 2017
Wealth maximization is preferred over profit maximization as it :
(A)Considers wealth for the short term perspective
(B)Ignores risk or uncertainty
(C)Facilitates calculation of profits
(D)Considers shareholders’ returns
Answer: (D) Considers shareholders’ returns
Source: ICSI Guideline Answers (answer key), June 2023, Q. 2 (Financial and Strategic Management paper, Syllabus 2017).
June 2023Q. 3 (FSM)1 markMCQFinancial and Strategic Management paper, Syllabus 2017
Which of the following is NOT a reason for criticism of profit maximization as the basic objective of finance function ?
(A)It is vague conceptually
(B)It ignores the timing of returns
(C)Its emphasis is generally long-term
(D)None of the above
Answer: (C) Its emphasis is generally long-term
Source: ICSI Guideline Answers (answer key), June 2023, Q. 3 (Financial and Strategic Management paper, Syllabus 2017).
June 2023Q. 5 (FSM)1 markMCQFinancial and Strategic Management paper, Syllabus 2017
Failure of a firm to meet its current obligations, when its liabilities exceed its assets is :
(A)Financial uncertainty
(B)Financial insolvency
(C)Financial distress
(D)Technical insolvency
Answer: (B) Financial insolvency
Source: ICSI Guideline Answers (answer key), June 2023, Q. 5 (Financial and Strategic Management paper, Syllabus 2017).
December 2022Q. 1 (FSM)1 markMCQFinancial and Strategic Management paper, Syllabus 2017
Which of the following does not fall within the ambit of investment decisions ?
(A)Inventory Management
(B)Strategic Investment
(C)Replacement Investment
(D)None of the above
Answer: (D) None of the above
Source: ICSI Guideline Answers (answer key), December 2022, Q. 1 (Financial and Strategic Management paper, Syllabus 2017).
December 2022Q. 8 (FSM)1 markMCQFinancial and Strategic Management paper, Syllabus 2017
Which of the following statements is false ?
(A)There is an inverse relationship between Liquidity and Profitability and these two are competing goals for a finance manager
(B)While the immediate survival of a firm depends on profitability, its long term survival depends on liquidity
(C)Liquidity and Profitability both are important for a firm to survive
(D)A firm should maintain a trade-off situation where it maintains its optimum liquidity for greater profitability, and the finance manager has to strike a balance between two conflicting objectives.
Answer: (B) While the immediate survival of a firm depends on profitability, its long term survival depends on liquidity
Source: ICSI Guideline Answers (answer key), December 2022, Q. 8 (Financial and Strategic Management paper, Syllabus 2017).
December 2022Q. 10 (FSM)1 markMCQFinancial and Strategic Management paper, Syllabus 2017
Which of the following statements is False ?
(A)A Finance Manager can take the financial decisions of the firm by considering the return dimension only
(B)Usually, as the return from an investment increases, the risk associated with it also increases, and in his attempt to increase the return, the finance manager will also have to undertake greater degree of risk
(C)At the time of taking financial decisions, the finance manager tries to achieve proper balance between consideration of risk and return to maximize the market value of the firm
(D)All the above are true
Answer: (A) A Finance Manager can take the financial decisions of the firm by considering the return dimension only
Source: ICSI Guideline Answers (answer key), December 2022, Q. 10 (Financial and Strategic Management paper, Syllabus 2017).
June 2022Q. 1 (FSM)1 markMCQFinancial and Strategic Management paper, Syllabus 2017
Investment Decisions help in achieving which of the following long-term objectives of the company ?
(A)Survival and Growth
(B)Preserving Market Share
(C)Retaining Leadership in Activity
(D)All of the above
Answer: (D) All of the above
Source: ICSI Guideline Answers (answer key), June 2022, Q. 1 (Financial and Strategic Management paper, Syllabus 2017).
June 2022Q. 3 (FSM)1 markMCQFinancial and Strategic Management paper, Syllabus 2017
Relationship between Liquidity and Profitability is :
(A)Direct
(B)Inverse
(C)Both are mutually exclusive
(D)None of the above
Answer: (B) Inverse
Source: ICSI Guideline Answers (answer key), June 2022, Q. 3 (Financial and Strategic Management paper, Syllabus 2017).
December 2021Q. 6 (FSM)1 markMCQFinancial and Strategic Management paper, Syllabus 2017
The finance manager of the company can take care of duties such as :
(1)Forecasting of sales
(2)Raising funds
(3)Managing funds
(4)Managing board of directors meeting
Correct combinations of emerging roles of finance manager are :
(A)1, 2 and 3
(B)1, 2 and 4
(C)2 and 3
(D)2, 3 and 4
Answer: (C) 2 and 3
Source: ICSI Guideline Answers (answer key), December 2021, Q. 6 (Financial and Strategic Management paper, Syllabus 2017).
December 2021Q. 19 (FSM)1 markMCQFinancial and Strategic Management paper, Syllabus 2017
Source: ICSI Guideline Answers (answer key), December 2021, Q. 19 (Financial and Strategic Management paper, Syllabus 2017).
June 2021Q. 2 (FSM)1 markMCQFinancial and Strategic Management paper, Syllabus 2017
..................... means the management of an organization maximizes the present value not only for shareholders but for all including employees, customers, suppliers and community at large.
(A)Profit Maximisation
(B)Wealth Maximisation
(C)EVA
(D)MVA
Answer: (B) Wealth Maximisation
Source: ICSI Guideline Answers (answer key), June 2021, Q. 2 (Financial and Strategic Management paper, Syllabus 2017).
June 2021Q. 4 (FSM)1 markMCQFinancial and Strategic Management paper, Syllabus 2017
Which of the following need not be followed by the finance manager for measuring and maximising shareholders’ wealth ?
(A)Accounting profit analysis
(B)Cash Flow approach
(C)Cost benefits analysis
(D)Application of time value of money
Answer: (A) Accounting profit analysis
Source: ICSI Guideline Answers (answer key), June 2021, Q. 4 (Financial and Strategic Management paper, Syllabus 2017).
December 2020Q. 1 (FSM)1 markMCQFinancial and Strategic Management paper, Syllabus 2017
Find the correct statement regarding the profit maximisation :
(A)Profit maximization considers the firm’s risk level.
(B)Profit maximization will not lead to increasing short-term profits at the expense of lowering expected future profits.
(C)Profit maximization does consider the impact on individual shareholder’s EPS.
(D)Profit maximization is concerned more with maximizing net income than the stock price.
Answer: (D) Profit maximization is concerned more with maximizing net income than the stock price.
Source: ICSI Guideline Answers (answer key), December 2020, Q. 1 (Financial and Strategic Management paper, Syllabus 2017).
December 2020Q. 3 (FSM)1 markMCQFinancial and Strategic Management paper, Syllabus 2017
...................... is the most appropriate goal of the firm.
(A)Shareholder wealth maximization
(B)Profit maximization
(C)Stakeholder maximization
(D)EPS maximization
Answer: (A) Shareholder wealth maximization
Source: ICSI Guideline Answers (answer key), December 2020, Q. 3 (Financial and Strategic Management paper, Syllabus 2017).
December 2020Q. 5 (FSM)1 markMCQFinancial and Strategic Management paper, Syllabus 2017
Investment Decision in Financial Management does not include :
(A)Dividend Payout Decision
(B)Capital Budgeting Decision
(C)Working Capital Management
(D)Re-allocation of Capital
Answer: (A) Dividend Payout Decision
Source: ICSI Guideline Answers (answer key), December 2020, Q. 5 (Financial and Strategic Management paper, Syllabus 2017).
December 2020Q. 6 (FSM)1 markMCQFinancial and Strategic Management paper, Syllabus 2017
The main function of a financial manager include the following except :
(A)Asset Management
(B)Capital Structure Planning
(C)Fund Management
(D)Internal Control and Audit
Answer: (D) Internal Control and Audit
Source: ICSI Guideline Answers (answer key), December 2020, Q. 6 (Financial and Strategic Management paper, Syllabus 2017).
December 2020Q. 44 (FSM)1 markMCQFinancial and Strategic Management paper, Syllabus 2017
Before taking investment decision, an investor makes a comparison of the ...................... available from each avenue and elements of ...................... involved in it.
(A)Gross profit, Management
(B)Returns, Management
(C)Returns, Risk
(D)Risk, Returns
Answer: (C) Returns, Risk
Source: ICSI Guideline Answers (answer key), December 2020, Q. 44 (Financial and Strategic Management paper, Syllabus 2017).
December 2019Q. 1 (FSM)1 markMCQFinancial and Strategic Management paper, Syllabus 2017
Which of the followin is true regarding financial decisions of a firm ?
(A)Investment Decisions are dependent on Financing Decisions.
(B)Financing Decisions are dependent on Dividend Decisions.
(C)Dividend Decisions are dependent on Investment Decisions.
(D)All the three decisions are inter-related.
Answer: (D) All the three decisions are inter-related.
Source: ICSI Guideline Answers (answer key), December 2019, Q. 1 (Financial and Strategic Management paper, Syllabus 2017).
December 2019Q. 3 (FSM)1 markMCQFinancial and Strategic Management paper, Syllabus 2017
The competing objectives of financial management have been :
(A)Profit Maximization and Wealth Maximization
(B)Profit Maximization and Economic Value Maximization
(C)Economic Value Maximization and Wealth Maximization
(D)EPS Maximization and Economic Value Maximization
Answer: (A) Profit Maximization and Wealth Maximization
Source: ICSI Guideline Answers (answer key), December 2019, Q. 3 (Financial and Strategic Management paper, Syllabus 2017).
June 2019Q. 1(a) (FSM)5 marksFinancial and Strategic Management paper, Syllabus 2017
Comment on the following :
(a)Investment, financing and dividend decisions are inter-related finance functions.
Financial Management is concerned with investment, financing and dividend decisions in relation to objectives of the company. Investment ordinarily means utilisation of money for profits or returns. Investment decisions are concerned with addition to capital assets in view to increase the net worth of the firm. Financing decision is the next step in financial management for executing the investment decision once taken. Financial decisions encompass determination of the proportion of equity capital to debt to achieve an optimal capital structure, and to balance the fixed and working capital requirements in the financial structure of the company. The dividend decision is another major area of financial management. The financial manager must decide whether the firm should distribute whole profits/part profits or retain them.
Source: ICSI Guideline Answers, June 2019, Q. 1(a) (Financial and Strategic Management paper, Syllabus 2017).
December 2018Q. 1(a) (FSM)5 marksFinancial and Strategic Management paper, Syllabus 2017
Comment on the following :
(a)Profit maximization is the sole objective of Financial Management.
Profit maximisation is considered as an important goal in financial decision-making in an organisation. It ensures that firm utilizes its available resources most efficiently under conditions of competitive markets. But in recent years, under the changed corporate environment, profit maximisation is regarded as unrealistic, difficult, inappropriate and socially not much preferred goal for business organisation. It is mainly criticized because its emphasis is generally on short run projects and it ignores risk factor. Further it may cause decreasing share prices in the long run. Shareholder wealth maximization on the other hand is more preferred objective as it focuses on maximization of present value (or wealth) of an enterprise. Wealth maximization is preferred for the following reasons :
(i)it is consistent with the object of maximising owners economic welfare, (ii) It focuses
on the long run picture and considers risk, (iii) It takes into account time value of money and (iv) helps in avoiding volatility in the market price of shares. The wealth maximization strategy takes into consideration the timing and uncertainty and managers are willing to give up short-term profits for long term value of the firm.
Source: ICSI Guideline Answers, December 2018, Q. 1(a) (Financial and Strategic Management paper, Syllabus 2017).