M.Com. DEGREE EXAMINATION, NOVEMBER/DECEMBER 2017.
FIRST SEMESTER
FINANCIAL MANAGEMENT
(Common for M.Com (Professional and General)
2 1730113
Time 3 Hours Max. Marks 70
SECTION — A
Answer any FIVE questions. 4 20 Marks)
Each question carries 4 marks.
1. Maximizing Vs Satisfying.
2. What is improved payback period?
3. Explain the importance of cost of capital.
4. Risk adjusted cut-off rate.
5. Degree of operating leverage.
6. Agency Relationship.
7. What is indifference level of EBIT?
8. Rationale of time preference for money.
SECTION — B
Answer all FIVE questions. 10 50 Marks)
Each question carries 10 marks.
9. Explain the evolution of finance. What are the objectives of finance function?
Or
What is the charging role of finance manager in the organisation.

10. Illustrate the discounting cash flow methods of capital budgeting.
Or
Elaborate certainty equivalent method with an example also explain its
advantages and disadvantages.
11. Rishita Ltd., intends to set up a project with capital cost of Rs. 40,00,000. It is
considering the three alternation proposals of financing.
Alternative I 100% Equity financing
Alternative II 50% debt and 50% equity
Alternative III 75% debt and 25% equity
The estimated annual net cash inflow is 24% i.e. Rs. 12,00,000 on the
project. The rate of interest on debt is 15%. Calculate the weighted average
cost of capital for three different alternative and analyse the capital structure
decision.
Or
Discuss the concept and financial effect of leverage in detail.
12. Arun Ltd. belongs to a risk class for which the appropriate capitalization rate
is 10%. It currently has outstanding 5,000 shares selling at Rs. 100 each. The
firm is contemplating the declaration of dividend of Rs. 6 per share at the end
of the current financial year. The company expects to have a net income of
Rs. 50,000 of and has a proposal for making new investments of Rs. 1,00,000.
Show that unde3r MM hypothesis, the payment of dividend does not effect
the value of the firm.
Or
Define dividend and what are the major forms of dividend?
13. Define working capital. What are characteristics of working capital
management?
Or
From the following information, you are required to make are assessment of
average amount of working capital requirement of Asray Ltd.
Particulars Average period of credit Estimate for 1st year
Purchase of material 6 weeks 13,00,000
Wages 1.5 weeks 9,75,000
Overheads
Rent, Rates
Salaries
6 months
1 month
50,000
4,00,000
Other overheads
Cash sales
2 months

3,75,000
1,00,000
1730113
3
Ws 3
Credit sales 2 months 30,00,000
Average amount of stock and work 2,00,000
Average amount of undrawn profit 1,50,000
It is assumed that all expenses and income were made at even rate for the year.
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