B.B.A. (Semester (CGPA) Examination, 2017
FINACIAL MANAGEMENT I
Day Date: Monday, 17-04-2017 Max. Marks: 70
Time: 10.30 AM to 01.00 PM
N.B. All questions are compulsory.
Figures to the right indicate full marks.
All questions carry equal marks.
Use of calculators is allowed.
Q.1 Choose correct alternatives: 07
Internal sources of capital are those that are
Generated through outsiders such as suppliers
Generated through loans from commercial banks
Generated through issue of shares
Generated within the business
An increase in the firm's receivable turnover ratio means that

It is collecting credit sales more quickly than before
Cash sales have decreased
It has initiated more liberal credit terms
Inventories have increased
EOQ is the order quantity that our planning horizon.
Minimizes total ordering costs
Minimizes total carrying costs
Minimizes total inventory costs
The required safety stock
Increasing the credit period from 30 to 60 days, in response to a
similar action taken by our competitors, would likely result in

An increase in average collection period
A decrease in bad debt losses
An increase in sales
Higher profits
The long-run objective of financial management is to
Maximize earnings per share
Maximize the value of firm's common stock
Maximize return on investment
Maximize market share
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SLR-SINA 34
Shareholders wealth in a firm is represented by
The number of people employed in the firm
The amount of salary paid to its employees
The book value of firms assets less the book value of its
liabilities.
The market price per share of the firm's common stock
The market price of a share of common stock is determined by

The board of directors of the firm.
The chief executive officer of the company.
The president of the company.
Individuals buying and selling the stock.
Q.1 Fill in the blanks. 07
If Annual Demand= 10800 units, holding cost Rs.3 per unit
per year and ordering cost Rs.50 per order, then EOQ
Equity Shareholders are of the company.
If average inventory is Rs.50000, value of opening stock is
Rs.35000, then value of closing stock is
motive is the need to hold cash to meet contingencies
in the future.
refers to the period for which credit is granted to
customers as per credit policy.
is also known as ploughing back of profits.
Debentures are capital for the company.
Q.2 Solve any two from the following:
Explain the concepts of working capital. 07
A large bakery buys flour in 25 pound bags. The bakery uses an
average 4,860 bags a year. Preparing an order and receiving a
shipment of flour involves a cost of $10 per order. Annual carrying
costs are $75 per bag.
i. Determine the economic order quantity.
ii. How many orders per year will there be?
iii. Compute the cost of ordering flour, the cost of carrying the
inventory.
07
State the objective of Cash Management. 07
Q.3 Solve from the following: (any two)
State the objectives of Financial Management. 07
Calculate the amount of Cash Sales and Collection from Debtors for
the months: April to June from the information provided.
I. Sales (Units)
07
January February March April May June
1000 2000 3000 4000 5000 6000
ii. 20% of the sales are on cash basis and the balance on credit
basis.
iii. Uniform Selling Price- Rs.20 per unit.
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SLR-SINA 34
iv. 40 of credit sales are collected in the month of sales and the
balance in the month following.
Explain the functions of Finance Manager. 07
Q.4 Solve any one from the following: 14
X Ltd has decided to raise Rs.55 Lakhs by issuing equity shares
and Rs.5 lakhs by issuing Debentures on 1st January 2016.
i. Initial outlay consist of Fixed Assets Rs.40,00,000 and Stock
Rs.6,00,000 (Payment to be made in the month of January).
ii. Sales during the six months are estimated as January Rs.14
Lakhs, February Rs.15 Lakhs, March Rs.18.50, April Rs.25
Lakhs, May Rs.26.50 Lakhs and June Rs.28 Lakhs.
iii. Lag in payment by Debtors 2 months; Creditors 1 month.
iv. General Expenses Rs.50,000 per month are paid from March
onwards.
v. Monthly wages and salaries (payable on the first day of the
next month) Rs.80,000 for the first three months and
Rs.95,000 thereafter.
vi. Gross Profit rate is expected to be 20% on sales.
vii. The stock level throughout is to be the same as the outlay.
Prepare Cash Budget for the six months from January June 2016.
Explain the features of Equity Shares. 14
Q.5 Solve any one from the following: 14
State the determinants of Working Capital in detail.
On 1st January, the Managing Director of Naureen Ltd. wishes to
know the amount of working capital that will be required during the
year. From the following information prepare the working capital
requirements forecast.
Production during the previous year was 60,000 units. It is planned
that this level of activity would be maintained during the present
year. The expected ratios of the cost to selling prices are Raw
Materials Direct Wages 10% and Overheads 20%.
Raw materials are expected to remain in store for an average of 2
months before issue to production. Each unit is expected to be in
process for one month, the raw materials being fed into the
pipeline immediately and the labour and overhead costs accruing
evenly during the month. Finished goods will stay in the warehouse
awaiting dispatch to customers for approximately 3 months.
Credit allowed by creditors is 2 months from the date of delivery of
raw materials. Credit allowed to debtors is 3 months from the date
of dispatch. Selling price is Rs. 5 per unit. There is a regular
production and sales cycle. Wages and overheads are paid on the
1st of each month for the previous month. The company normally
keeps cash in hand to the extent of Rs.20000.