M.B.A. (Part II) (Semester III) (Old CBCS) Examination, 2018
Group-B financial management (paper II)
Paper XX Strategic Financial Management
Day and Date Tuesday 18-12-2018 Max. Marks 70
Time 10.30 a.m. to 1.00 p.m.
1. Multiple choice questions 14
Capital structure is mix of and equity.
Retained earnings Debt
Preference shares Reserve
Funds Flow Statement is also known as
Statement of funds flow
Statement of sources and application of funds
Statement of sources and uses of funds
All of the above
The measure of business risk is
Operating leverage Financial leverage
Combined leverage Working Capital Leverage
Capital Structure Total assets minus
Current assets Fixed assets
Intangible assets Current liability
S-V-EBIT
Profit Contribution Fixed cost EBT
Increase in Pre-paid expenses cash.
Increases Decreases
No effect Remain constant
Cost of capital is the required rate of return expected by
investors.
Minimum Maximum Constant Optimum
Lease installment comprises
Interest Principal and both Rent
Higher operating leverage is related to the use of additional
Fixed costs Variable costs
Debt financing Equity financing P.T.O.
Set P Seat
No.
Set P
SLR-CL 55 *SLRCL55*
10) Provision for taxation is treated as
Current Liability As an appropriation of Profits
Either or None of the above
11) NI approach proposed by
Miller Durand David Modigliani
12) An average of the cost of each source of funds employed by the firm for
capital formation is called as
Overall cost of capital Cost of equity
Cost of debt Cost of retained earnings
13) In the calculation of return on shareholders investments the referred
investment deals with
All reserves
Preference and equity capital only
All appropriations
All of the above
14) Dividing the net profit by the paid up amount of equity share capital yields

Temporary investment
Earnings per share
Rate of return on equity share capital
None of the above
2. Answer the following 14
VRS
Concept of EVA.
3. Attempt the following 14
Lease Financing V/s Hire Purchase Financing.
Arihant Ltd. has equity share capital of Rs. 5,00,000 (face value of Rs. 100).
To meet the expenditure of an expansion program, the company wishes to
raise Rs. 3,00,000 and is having following four alternative sources to raise
the funds
Plan A To have full money from the issue of Equity shares
Plan B To have Rs. 1,00,000 from equity and Rs. 2,00,000 from bank at
10% p.a.
Plan C Full money from bank at 10%
Plan D Rs. 1,00,000 in equity and Rs. 2,00,000 from preference shares
The company is having present earnings of Rs. 1,50,000. The corporate
tax is 50%. Select a suitable plan out of the above four plans to raise the
required funds.
4. Attempt any one of the followings 14
What is Compensation Management Write a brief note on Compensation
strategy and features of good wage policy.
OR
Rajnesh Ltd. wants to acquire Girish Ltd. by exchanging 0.5 of its shares for
each share of Girish. Ltd. The relevant financial data are as follows
Particulars Rajnesh Ltd. Girish Ltd.
EAT 18,00,000 3,60,000
Equity share outstanding 6,00,000 1,80,000
EPS 3 2
P/E Ratio (times) 10 7
Market Price per share 30 14
Requires
What is the number of equity shares required to be issued by Rajnesh Ltd.
for acquisition of Girish Ltd.
What is the EPS of Rajnesh Ltd. after the acquisition
Determine the equivalent earnings per share of Girish Ltd.
What is the expected market price per share of Rajnesh Ltd. after the
acquisition, assuming its P/E multiple remains unchanged
Determine the market value of the merged firm.
If the EAT increases by 20% after the merger then what will be the EPS
and market value of merged firm after merger
Set P
SLR-CL 55 *SLRCL55*
5. Case Study 14
Following are the summarized Balance Sheet of Akhilesh Ltd. as on 31st March
2014 and 31st March 2015
Balance Sheet
Liabilities 2014 2015 Assets 2014 2015
Rs. Rs. Rs. Rs.
Share Capital 2,00,000 2,50,000 Land and
General Reserve 50,000 60,000 building 2,00,000 1,90,000
Profit and Loss A/c 30,500 30,600 Machinery 1,50,000 1,68,000
Bank loan (Long term) 70,000 Stock 1,00,000 74,000
Creditors 1,40,000 1,30,000 Debtors 78,000 64,000
Outstanding exp. 10,000 5,200 Pre-paid insurance 1,800 1,200
Provision for tax 30,000 35,000 Cash 700 600
Bills receivable 8,000
Goodwill 5,000
5,30,500 5,10,800 5,30,500 5,10,800
Additional Information
Dividend of Rs. 20,000 paid.
Following assets were purchased from another company stock 10,000,
machine 35,000, cost was paid by issue of shares of Rs. 50,000.
Depreciation written on machinery Rs. 15,000.
Loss on sale of Machinery Rs. 600 was charged to general reserve.
Income tax provided during the year Rs. 32,000.
Prepare a funds flow statement and the statement showing net changes in
working capital.