1
Seat No.: Enrolment
GUJARAT TECHNOLOGICAL UNIVERSITY
MBA SEMESTER- 5• EXAMINATION WINTER 2018
Subject Code: 4150502 Date: 29/11/2018
Subject Name: Financial Management
Time: 10:30 AM To 01:30 PM Total Marks: 70
Instructions:
1. Attempt all questions.
2. Make suitable assumptions wherever necessary.
3. Figures to the right indicate full marks.
Q.1

From the following balance sheet of A Industries Ltd., as 31st March 2014.
Liabilities
Rs.
Assets
Rs.
Equity Share Capital
10,000
Fixed assets (less depreciation Rs. 10,000)
26,000
Preference Share Capital
2,000
Current Assets:
Reserves and Surplus
8,000
Cash
1,000
Mortgage Debentures
14,000
Investments
3,000
Current Liabilities:
Sundry debtors
4,000
Creditors
1,200
Stock
6,000
Bills payable
2,000
Outstanding expenses
200
Tax Provision
2,600
40,000
40,000
Other information:
1. Net sales Rs. 60,000
2. Cost of goods sold Rs. 51,600
3. Net income before tax Rs. 4,000
4. Net income after tax Rs. 2,000
Calculate:-
Current Ratio, Liquid Ratio, Proprietary ratio, Debt-Equity ratio, Interest coverage ratio, Stock Turnover Ratio and Debtors Turnover Ratio
07

What is financial management all about? If you, as a manager, introduce financial management in your firm, which would be the key decision areas covered by it? Explain them.
07
Q.2

You borrow Rs10,000 at 14 percent compound annual interest for four years The loan is repayable in four equal annual installments payable at the end of each year. [PVIFA14%,4 2.914]
i. What is the annual payment that will completely amortize the loan over four years?
ii. Of each equal payment, what is the amount of interest and the amount of loan principal?
07

Explain any 7 factors affecting the requirement of working capital in steel industry
07
OR

What is credit rating? How does credit rating help companies? Explain any 5 advantages.
07
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Q.3

Following are the details regarding three companies X Ltd., Y Ltd., Z Ltd.
DATA
X Ltd.
Y Ltd.
Z Ltd.
r
20%
15%
10%
Ke
15%
15%
15%
EPS
Rs 4
Rs 4
Rs 4
Calculate the value of an equity share using Gordon Model if dividend payout ratio is 50 per cent and 75 per cent.
07

Explain the major sources of bonus shares for companies in India.
07
OR
Q.3

From the information below:
Sales
Rs 430,000
Less: Variable costs
Rs 107,500
Less: Fixed Costs
Rs 150,000
EBIT
Rs 172,500
Less: Interest
Rs 11,000
EBT
Rs 161,500
Less: Tax
Rs 64,600
Net Income After Tax
Rs 96,900
EPS
Rs 9.69
Calculate Degree of Operating Leverage, Degree of Financial Leverage and Degree of Combined Leverage
07

Explain the advantages and disadvantages of undercapitalization to companies.
07
Q.4

Draw and explain the Du Pont chart.
07

Differentiate the cash flow statement and the fund flow statement.
07
OR
Q.4

What are the guidelines for companies issuing commercial paper in India?
07

Factoring is very much helpful in trade financing. Explain the statement in light of benefits of factoring to business unit.
07
Q.5

From the following information, calculate the net present value of the two projects and suggest which of the two projects should be accepted.
Project X
Project Y
Initial Investment
Rs. 20,000
Rs. 30,000
Estimated Life
5 years
5 years
Scrap Value
Rs. 1,000
Rs. 2,000
The profits before depreciation and after taxation (cash flows) are as follows:
Year 1
Year 2
Year 3
Year 4
Year 5
Rs.
Rs.
Rs.
Rs.
Rs.
Project X
5,000
10,000
10,000
3,000
2,000
Project Y
20,000
10,000
5,000
3,000
2,000
Year
1
2
3
4
5
6
Factor 10%
0.909
0.826
0.751
0.683
0.621
0.564
07

Differentiate Leasing and Hire purchase. Give 7 differences.
07
OR
3
Q.5

A company has on its books the following amounts and specific costs of each type of
capital.
Type of Capital
Book Value
Market Value
Specific Costs
Rs.
Rs.

Debt
4,00,000
3,80,000
5
Preference
1,00,000
1,10,000
8
Equity
6,00,000
9,00,000
15
Retained Earnings
2,00,000
3,00,000
13
TOTAL
13,00,000
16,90,000
Determine the weighted average cost of capital using:
Book value weights, and
Market value weights.
07

State the benefits of listing ADR over listing of equity shares in the American financial markets.
07