1. Explain Profit maximisation and wealth maximisation goals. Which one is superiors in your opinion and why?

2. A person has been given the following options for the investment made by him in the past. Which one would be the most attractive option assuming a discount rate of 10.5% per annum.

Option RS 5,50,000 to be received at present time.

Option RS 16,00,000 to be received after 10th year.

Option RS 62,500 receivable per annum in perpetuity.

Option RS 90,000 receivable per annum for 10 years.

Option RS 50,000 receivable half yearly for 4 years and RS 3,50,000 after 5th year.

3. Jamuna Prasad Co. has furnished the following estimated information. Based on this, prepare a Cash Budget for three months, June, July and August 2014.

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Assumptions

Cash balance in hand as on 01/06/2014 RS 72,500.

50% of sales are cash sales.

A fixed assets has to be purchased for RS 8,000 in July 2014.

Debtor's are allowed one month's credit.

Creditors for materials grant one month's credit.

Sales Commission at on sales is paid to the salesman each month.

4. Why do we focus on cash flows rather than on profits while evaluating capital budgeting decisions? Also explain how IRR method is used in capital budgeting decision.

5. What do you mean by inadequate working capital? Discuss any two techniques/methods of calculating working capital requirement of a firm.

6. Differentiate between business risk and financing risk of a firm. How are they measured by leverage?

7. What do you understand by efficient cash management? Discuss its objectives.

8. Write short notes on any four of the following:

Under capitalisation and over capitalisation

Tools of Financial forecasting

Flexible Budget

Sensitivity analysis

Inventory turnover ratio

Average Rate of Return Method