2011 (November)
(Financial Management)
The figures in the margin indicate full marks for the questions
(New Course)
Full Marks: 80
Pass Marks: 32
Time: 3 hours
1.
(a) profit maximization is not the adequate
criterion to judge the efficiency of a firm. Explain the statement. What should
be the right criterion and why?
Or
(b) Critically analyze the
function of a financial manager in a large –scale industrial establishment.
What are the responsibilities of the financial manager in a modern business
organisation?
2. (a) (i) X LTD. Issues Rs 2, 00,000 80% debentures
at a discount of 5% the tax rate is 50% compute the cost of debt capital.
(ii) Y LTD. Issues RS 2, 00,000
9% debentures at a premium of 10% the cost of floatation is 2% the tax rate
applicable is 60% compute cost of debt capital.
(iii) A company issues Rs. 10,
00,000 10% redeemable debentures at a discount of 5% the cost of floatation
amounts to Rs 30,000. The debentures are redeemable after 5 years. Calculate
before-tax and after-tax costs of debt assuming a tax rate of 50%.
Or
(b) what do you mean by the term
leverage? How would you compute the degree of operating and financial leverage?
Explain with suitable example.
3. (a) what are the main source
of finance available to industries for meeting their long ---term financing
requirements? Discuss. Name any four financing institutions that provide long---
term finance to industrial undertakings in our country
Or
(b) Define capital market. What
are the important features of Indian capital market? Also distinguish between
organised capital market and unorganized capital market.
4. (a) Explain various factors that
influence the dividend of a firm.
Or
(b)There is a strong view
prevailing among financial experts that the irrelevant hypothesis underlying
the MM theory of dividend distribution is outdated and unsuitable to present
condition. Do you agree with this view? Discuss.
5.(a)the management of Brahmaputra LTD. Has called for a statement showing the
working capital needed to finance a
level of activity of 300000 units of output for the year. The cost structure of
the company‘s product, for the above mentioned activity level, is detailed
below:
|
Particulars
|
Cost per unit (Rs.)
|
|
Raw
Materials
Direct
Labour
Overheads
|
20
5
15
|
|
Total Cost
Profit
|
40
10
|
|
Selling
Price
|
50
|
(i) past experience indicates that raw
materials are held in stock on an average for two months.
(ii) work –in process (100%
complete in regard to materials and 50% for labour and overhead) will approximately
be half a month’s production
(iii) Finished goods remain in
warehouse on an average for a month
(iv) suppliers of materials
extend a month’s credit
(v)Two months credit is allowed
to debtors, calculation of debtors may be made at selling price
(vi)A minimum cash balance of
RS 25,000 is expected to be maintained
(vii) The production pattern is
assumed to be even during the year
You are required to prepare the statement
of working capital Requirements.
Or
(b) what is cash management?
Explain various methods of investing surplus cash. What criteria should a firm use
for investing idle cash in marketable securities?