Financial Management

The correct option is A) Voluntary

Key Information:
For a joint stock company, the payment of dividends is voluntary. A company is not legally bound to pay dividends every year. Dividend is paid only when the company has sufficient profits and when the Board of Directors recommends it, followed by approval in the general meeting. The company may decide to retain profits for future expansion, reserves, or financial stability instead of distributing them as dividends. Therefore, payment of dividends depends on the discretion and financial condition of the company.

Additional Information:

B. Compulsory (Incorrect)
Payment of dividends is not compulsory. Even if the company earns a profit, it may choose not to declare a dividend.

C. Necessary (Incorrect)
Dividend is desirable for shareholders, but it is not necessary in every year.

Correct Answer: (C) both (A) and (B)

Explanation of the correct option:
The modern approach of financial management covers both the procurement (raising) of funds and the utilisation of funds. It is not limited only to arranging finance, but also focuses on using the funds efficiently and optimally to maximise the value of the firm. Under the modern approach, financial management involves decisions related to investment, financing, and dividends, ensuring that funds are raised at minimum cost and utilised in the most profitable manner. Therefore, the modern approach includes both procurement and utilisation of funds, making option (C) correct.

Explanation of incorrect options:
(A) procurement of funds— This is incorrect because procurement of funds alone represents the traditional approach of financial management, which mainly focused on raising finance and ignored efficient utilisation of funds.

(B) utilisation of funds — This is incorrect because the modern approach is not limited only to the utilisation of funds. It also includes proper procurement and management of finance.

(D) none of these — This is incorrect because the modern approach clearly includes both procurement and utilisation of funds.

Conclusion:
Thus, the modern approach of financial management is broader in scope and includes both raising funds and their effective utilisation for maximising the value and profitability of the firm. Hence, the correct answer is (C) both (A) and (B).