2012 (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)
What do you mean by “Financial Management”? Explain the functions and
importance of financial management. 2+6+6=14
Or
(b) “Maximization
of profit is regarded as the proper objectives of investment decision but it is
not as exclusive as maximizing shareholder’s wealth.” Comment. 14
2. (a) Define the concept of “Cost
of Capital”. Explain its significance. Discuss the problems concerning the
determination of cost of capital.
3+5+6=14
Or
(b) Calculate
the operating leverage and financial leverage under situation 1 and Situation 2
and financial plan A and B respectively from the following information relating
to the operation and capital structure of a company:
Installed capacity – 2000 units
Annual Production and Sales – 50%
of installed capacity
Selling price per unit – Rs. 20
Variable cost per unit – Rs. 10
Fixed cost: Situation 1 – Rs.
4000 and Situation 2 – Rs. 5000
Financial Plan A
|
Financial Plan B
|
|
Equity
|
5000
|
15000
|
Debt (Cost 10%)
|
15000
|
5000
|
What are the combinations of
operating and financial leverage which gave highest and least value? 7+7=14
3. (a) Explain the importance of
debentures as a source of long term finance.
14
Or
(b) “Lease
financing has proved its unique adaptability to various financial problems. Its
use is being rapidly extended both to new industries as also to new
applications.” Do you agree? Discuss the merits and demerits of lease financing
as a source of finance. 8+6=14
4. (a) “Retained earnings do not
involve any cost.” Do you agree? Justify your answer. 14
Or
(b) Explain the
Walter’s approach to the theory of dividend decisions. What are the short –
comings of this theory? 10+4=14
5. (a) from the following
information, prepare a statement showing the working capital requirements: 14
Budgeted Sales – Rs. 260000 per
annum
Analysis of one rupee of sales:
Raw Material Rs. 0.30
Direct Labour Rs. 0.40
Overheads Rs. 0.20
Profit Rs. 0.10
It is estimated that
a)
Raw materials are carried in stock for 3 weeks and
finished goods for 2 weeks.
b)
Factory processing will take 3 weeks.
c)
Suppliers will give 5 week’s credit.
d)
Customers will require 8 week’s credit.
Or
(b) What do you understand by
Receivable management? Discuss the factors which influence the size of
receivables? 4+10=14