DISTANCE EDUCATION
M.B.A. DEGREE EXAMINATION, MAY 2017.
Third Semester
FINANCIAL MANAGEMENT
(Upto 2012-2013 Academic Year and 2013 Calendar Year)
Time Three hours Maximum 100 marks
SECTION A — 8 40 marks)
Answer any FIVE questions.
1. How do you analyse and interpret the financial
statements?
2. State the differences between Fund Flow Statement and
Cash Flow Statement.
3. Enumerate the various methods of ranking investment
proposals.
4. Discuss the limitations of Ratio Analysis.
5. Explain the procedure for calculating working capital
forecasting.
6. Elucidate the managerial uses of marginal costing.
7. Explain the factors which determine the requirements of
working capital.
8. How do you manage the accounts receivables?
Sub. Code
31
DE-366
2
wk12
SECTION B — 15 60 marks)
Answer any FOUR questions.
9. Explain briefly the functions of Financial Management.
10. With the help of the following ratios regarding Ram Co.,
draw up the Balance sheet of the company for the year
2014.
Current ratio 2.5
Liquidity ratio 1.5
Networking capital Rs. 3,00,000
Stock turnover ratio (cost of sales/
closing stock) 6 times
Gross profit ratio 20%
Fixed assets turnover ratio (on cost
of sales) 2 times
Debt collection period 2 months
Fixed assets to shareholders' networth 0.80
Reserves and surplus to capital 0.50
11. Kittu Ltd. has under consideration, the following two
projects the details which are given below
Project A Project B
Cost of investments Rs. 1,00,000 Rs. 1,50,000
Working capital Rs. 50,000 Rs. 50,000
Economic life 4 years 6 years
Salvage value 10% 10%
Tax rate 50% 50%
Profit before depreciation
and tax
Rs. Rs.
1 80,000 1,50,000
2 80,000 90,000
3 80,000 1,50,000
4 80,000 80,000
5 60,000
6 30,000
You are required to calculate the Average Rate of Return
and suggest which project is to be preferred.
DE-366
3
wk12
12. From the following information you are required to
calculate operating leverage financial leverage and
combined leverage under situation I and II and
financial plans A and B.
Installed capacity 4,000 units; Actual production and
sales 75% of the capacity; Selling price Rs. 30 per unit;
Variable cost Rs. 15 per unit.
Fixed Cost: Situation-I Rs. 15,000 and Situation-II
Rs. 20,000.
Capital structure: Financial Plan
A B
Equity Rs. 10,000 Rs. 15,000
Debt interest) Rs. 10,000 Rs. 5,000
Total Rs. 20,000 Rs. 20,000
13. From the following estimates, calculate the average
amount of working capital required.
Average amount locked up in stock of
finished goods and work in progress Rs. 10,000 p.a
Average amount locked up in stock
of stores and material etc. Rs. 8,000 p.a
Average credit given: for local sales
2 week's credit Rs. 1,04,000 p.a
Average credit given: for outside the
state 6 week's credit Rs. 3,12,000 p.a
Time available for payment of purchase
4 weeks Rs.78,000 p.a
Time available for payment of wages
2 weeks Rs. 2,60,000 p.a
Add 10% to allow for contingencies.
DE-366
4
wk12
14. Assuming that the cost structure and selling prices
remain the same in periods I and II find out
Profit volume ratio
Break even point
Profit when sales volume is Rs. 1,00,000
Sales required to earn a profit of Rs. 20,000; and
Margin of safety in II period.
Period Sales Profit
I Rs. 1,20,000 Rs. 9,000
II Rs. 1,40,000 Rs. 13,000
15. A firm has cash Rs. 25,000 in hand on 1.5.2012. Prepare a
cash budget for 3 months May, June and July.
Months Sales Purchases Wages Office
expenses
Production
expenses
Selling
expenses
Rs. Rs. Rs. Rs. Rs. Rs.
March 50,000 30,000 6,000 4,000 5,000 3,000
April 56,000 32,000 6,500 4,000 5,500 3,000
May 60,000 35,000 7,000 4,000 6,000 3,500
June 80,000 40,000 9,000 4,000 7,500 4,500
July 90,000 40,000 9,500 4,000 8,000 4,500
Other informations
20% of sales for cash, balance will be collected in the
following month.
Creditors are allowed a period of 2 months.
Wages and other expenses are paid in the following
month.
Dividend and bonus to workers are due respectively
on May Rs. 10,000 and Rs. 15,000.
Payment for plant is due on June for Rs. 80,000.
Income tax is payable of July Rs. 25,000.