2014 (November)
COMMERCE (Speciality)
Course: 302 (Financial Management)
Full Marks: 80
Pass Marks: 32
Time: 3 hours
The figures in the margin
indicate full marks for the questions.
1. (a)
Write ‘True’ or ‘False’: 1x4=4
(i)
The cost of capital is minimum rate of return
expected by its investors.
(ii)
Financial leverage is also known as composite
leverage.
(iii)
Leasing benefits both the lessee as well as the
lessor.
(b) Choose the appropriate answer from the given
alternatives: 1x2=2
(i) The prime objective of an
enterprise is
a)
maximization of sales
b)
maximization of owner’s equity
c)
maximization of profit
(ii) Non-members can trade in
securities at stock exchanges with the help of
a)
jobbers
b)
brokers
c)
authorized clerk
(c) Fill in the blanks: 1x3=3
1)
Corporation finance is a wider term than _____
finance.
2)
Degree of financial leverage = _____.
3)
The volume of sales is influenced by _____
policy of a firm.
2. Write short notes
on (any four): 4x4=16
a)
Profit maximization
b)
Trading on equity
c)
Sweat equity shares
d)
Dividend payout ratio
e)
Working capital
3. (a) Define ‘finance
function’. Explain its role in a business firm. Discuss some of the crucial
financial problems that a decision maker faces today. 2+4+6=12
Or
(b) “Finance
function of a business is closely related to its other functions.” Discuss. 12
4. (a)
A company is considering an investment proposal to purchase a machine costing Rs.
2,50,000. The machine has a life expectancy of 5 years and no salvage value. The
company’s tax rate is 40%. The firm uses straight-line method for providing depreciation.
The estimated cash flows before tax after depreciation (CFBT) from the machine
are as follows.
|
Year
|
CFBT Rs.
|
|
1
|
60,000
|
|
2
|
70,000
|
|
3
|
90,000
|
|
4
|
1,00,000
|
|
5
|
1,50,000
|
Calculate:
a)
payback period;
b)
average rate of return;
c)
net present value at 10% discount rate. 3+4+4=11
You may use the following table:
|
Year
|
1
|
2
|
3
|
4
|
5
|
|
PV
Factor at 10%
|
0.909
|
0.826
|
0.751
|
0.683
|
0.621
|
Or
(b) What
is ‘financial leverage’? How does it magnify the revenue available for equity shareholders?
Discuss the relationships between financial leverage and debt financing. 2+41/2+41/2=11
5. (a) What are the
main sources of finance available to industries for meeting long-term financial
requirements? Discuss. 11
Or
(b) Comment on accounting policies and disclosures in relation
to finance leases and operating leases prescribed in AS-19. 11
6. (a)
Explain the various factors which influence the dividend decision of a firm. 11
Or
(b) What
do you mean by ploughing back of profit? What are the purposes of ploughing
back?Discuss the different factors that influence the ploughing back of
profits. 2+4+5=11
7. (a)
What do you understand by receivable management? Discuss the factors which influence
the size of receivables. 3+8=11
Or
(b)The
Board of Directors, Jonaki Engineering Co. Pvt. Ltd., requests you to prepare a
statement showing the working capital requirements for a level of activity of 156000
units of production. The following information are available for your
calculations: 11
|
Particulars
|
Per unit
(Rs.)
|
|
Raw
materials
Direct
labour
Overheads
|
90
40
75
|
|
Total
Profit
|
205
60
|
|
Selling Price
|
265
|
i.
Raw materials are in stock on an average one
month.
ii.
Materials are in process on an average two
weeks.
iii.
Finished goods are in stock on an average one
month.
iv.
Credit allowed by suppliers- one month.
v.
Credit allowed to debtors- two months.
vi.
Lag in payment of wages- 11/2 weeks.
vii.
Lag in payment of overheads- one month.
20% of the output is sold against
cash. Cash in had and at bank is expected to be Rs. 60,000. It is to be assumed
that production is carried on evenly throughout the year, wages and overheads
accrue similarly and a time period of 4 weeks is equivalent to a month.
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