DISTANCE EDUCATION
M.B.A. DEGREE EXAMINATION, DECEMBER 2017.
Third Semester
FINANCIAL MANAGEMENT
(2012-2013 Academic Year and 2013 Calendar Year only)
(English Medium only)
Time Three hours Maximum 100 marks
SECTION A — X 8 40 marks)
Answer any FIVE questions.
All questions carry equal marks.
1. Discuss the significance of financial management.
2. What do you mean by Tax avoidance and Tax evasion?
Differentiate both.
3. Briefly explain the term Bridge finance.
4. Write a detailed note on Book Building.
5. Explain the concept of cost of capital.
6. Discuss Net Operative income theory.
7. What do you mean by Decision tree analysis?
Sub. Code
31
DE-3198
2
SP 5
8. Sales Rs. 80,000, Variable cost 60% of sales, fixed cost
Rs. 20,000, debentures Rs. 44,000, 10% preference
capital Rs. 25,000, Tax rate 50%. Calculate DOL, DFL
and DCL and interpret the results.
SECTION B — × 15 60 marks)
Answer any FOUR questions.
All questions carry equal marks.
9. Discuss in detail the objectives of Financial Management.
10. Differentiate between Shares and Debentures.
11. A Company issues 1000 equity shares of Rs. 100 each at a
premium of 10%. The Company has been paying 20%
dividend to equity shareholders for the past five years
and expects to maintain the same in the future also.
Compute the cost of equity capital. Will it make any
difference if the market price of equity share is Rs. 160?
12. The firms A and B are identical in all respects including
risk factors except for debt equity mix. Firm A has issued
12% debentures of Rs. 15 lakhs while B has issued only
equity. Both the firms earn 30% before interest and taxes
on their total assets of Rs. 25 lakhs.
Assuming a tax rate of 50% and capitalisation rate of 20%
for an all equity company, you are required to compute
the value of the two firms using net income approach
and net operating income approach.
13. Elaborately explain the determinants of dividend policy.
14. Discuss in detail the factors determining the working
capital requirement.
DE-3198
3
SP 5
15. Traders Ltd, are engaged in large scale retail business.
From the following information, you are required to
forecast their working capital requirements.
Projected annual sales Rs. 130 lakhs.
of net profit on cost of sales 25%
Average credit period allowed to debtors 8 weeks
Average credit period allowed by creditors 4 weeks
Average stock carrying (in terms of sales requirement)
8 weeks
Add 10% to compute figures to allow for contingencies.