DISTANCE EDUCATION
M.Com. (Finance and Control) DEGREE EXAMINATION,
MAY 2017.
FINANCIAL MANAGEMENT AND CONTROL
(2005 Onwards)
Time Three hours Maximum 100 marks
SECTION A — 8 40 marks)
Answer any FIVE questions.
1. What is finance function? State its aims.
2. Examine the merits and demerits of 'Debentures' as the
instrument of raising finance.
3. Narrate the recommendations of Tandan Committee.
4. Summarise the factors determing capital structure of an
enterprise.
5. The capital structure and after tax cost of different
sources of funds are given below
Sources of funds Amount

Proportion to
total
After tax
cost
Equity share
capital
7,20,000 0.30 15
Retained earnings 6,00,000 0.25 14
Preference share
capital
4,80,000 0.20 10
Debentures 6,00,000 0.25 8
You are required to compute weighted average cost of
capital.
Sub. Code
21
DE-392
2
Sp 6
6. Explain Miller Orr cash management model with a
diagram.
7. Define leasing. Why is it important?
8. Explain the assumptions and implications of Gordon's
dividend model.
SECTION B — × 15 60 marks)
Answer any FOUR questions.
9. Discuss the relationship between risk and return.
10. Explain the significance of convertible issues.
11. How are working capital management policies affected
the profitability, liquidity and structural health of the
organisation?
12. 'Cost of preference capital is generally lower than the cost
of equity'. State the reasons.
13. Discuss the various tools and techniques used in
inventory management.
14. Z Ltd is considering relaxing its present credit policy and
is in the process of evaluating two proposed policies.
Given the following information, which is a better option?
Present
policy
Option I Option
II
Credit sales 5,00,000 6,00,000 6,75,000
Accounts receivable
turnover (times)
4 3 2.4
Bad debts 15,000 30,000 45,000
The company's variable costs are 70% of sales. Required
rate of return is 25%.
15. Discuss the determinants of dividend policy of corporate
enterprises.