B.B.A. (Semester VI) (CGPA) Examination Nov/Dec-2018
FINANCIAL MANAGEMENT II
Time: 2½ Hours Max. Marks: 70
Instructions: All questions are compulsory.
Use of calculator is allowed.
Q.1 Choose correct alternatives: 07
In Net Profit Ratio, the denominator is
Net Purchases Net Sales
Credit Sales Cost of goods sold
Inventory Turnover measures the relationship of inventory with
Average Sales Cost of goods sold
Total Purchases Total Assets
A current ratio of less than one means
Current liabilities Current Assets
Fixed Assets Current Assets
Current Assets Current Liabilities
Share Capital Current Assets
Return on Assets and Return on Investment Ratios belong to
Liquidity Ratios Profitability Ratios
Solvency Ratios Turnover Ratios
Secondary Market in India is regulated by
Reserve Bank of India
Securities Exchange Board of India
Ministry of Finance
Forward Market
Depreciation is incorporated in cash flows because it
is unavoidable cost is a cash flow
reduces Tax Liability involves an outflow
A firm has capital of Rs.1000000; Sales of Rs. 500000; Gross Profit of
Rs. 200000 and Expenses of Rs. 100000. What is the Net Profit Ratio?
20% 50%
10% 40%
State whether the statement are True or False. 07
Debt-Equity Ratio is a measure of long term solvency of a firm.
Money Market deals in long term funds.
Current ratio is calculated as current assets divided by current liabilities.
Capital Market and Money Market are both synonymous.
Current Assets are those assets which get converted into cash between
three and five years.
Stock Exchange is the barometer of a country's prosperity.
Current Assets of a business firm should be financed through Long term
liability only.
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SLR-CI-41
Q.2 Solve any two questions from the following: 14
Functions of Stock Exchange
Meaning and importance of Capital Budgeting
Limitations of Ratio Analysis
Q.3 Solve any two questions from the following: 14
Find:
Fixed Assets
Inventories
Debtors
Other Current Assets
Current Liabilities
Equity
Debt
Sales Rs. 36 Lakhs Sales Debtors 120
Sales Total Assets 9 Current Ratio 0.8
Sales Fixed Assets 12 Total Assets Equity 2
Sales Current Assets 36 Debt Equity 0.375
Sales Inventories 60
A company's share is quoted in the market at Rs. 20 currently. The company
had paid a dividend of Re.1 per share last year and the investor expects a
growth rate of 5 per cent per year.
Compute the company's cost of equity capital
If the company's cost of capital is 8 per cent and the anticipated growth rate
is 5 per cent, calculate the indicated market price, if the dividend of Re.1
per share is to be maintained.
Factors affecting retained earnings.
Q.4 A Ltd. proposes to buy a machine for Rs.100000 having a working life of 4
years. The machine can be sold for Rs.20000 after 4 years. It will increase the
annual sales by Rs.200000 but cost of sales and other operating expenses will
also increase by Rs.150000. If the corporate tax rate is compute NPV at
12% and 15% discount rate.
14
OR
Define the term Pay Back Period 14
Explain the computation of Pay Back Period
When CFAT are constant every year
ii) When CFAT are not constant every year
Compute Pay Back Period of Project U V from the details
provided below. Which project should be accepted under PBP method?
Justify your answer with the decision making criterion.
Particulars P Q R S T U V
Initial Investment 500000 600000 550000 575000 600000 800000 750000
CFAT p.a. 125000 100000 100000 110000 80000 175000 125000
Project Life Years 6 10 8 6 15 8 10
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SLR-CI-41
Q.5 From the given information, draw up the Balance Sheet: 14
Liquid Ratio 1.25
Current Ratio 1.75
Gross Profit Ratio 20%
Fixed Assets to Net Worth 0.8
Net Working Capital Rs. 225000
Long Term Borrowings Rs. 125000
Reserves and Surplus to Capital 0.5
Cost of Sales of Fixed Assets 1.5 times
Average Debt Collection Period 2.4 months
Stock Turnover Ratio (Based on Closing Stock) 4 times
OR
The CMD Ltd has the following specific cost of capital along with the indicated
book and market value weights:
14
Type of Capital Cost Book Value Weights Market Value Weights
Equity 0.18 0.50 0.58
Preference Shares 0.15 0.20 0.17
Long Term Debt 0.07 0.30 0.25
1.00 1.00
Calculate the weighted cost of capital using
Book value weights
Market value weights