M.B.A. DEGREE EXAMINATION, APRIL 2016
Banking and Insurance
FINANCIAL MANAGEMENT
(Common for CS/B
(CBCS 2012 onwards)
Time 3 Hours Maximum 75 Marks
Part A 3 15)
Answer all questions.
All questions carry equal marks.
1. What are the goals of financial management?
2. What are the long term financing sources and relevant
instruments?
3. Explain any one theory of capital structure.
4. What do you mean by payback period? What are it types?
5. State the objectives of ploughing back of earnings.
Sub. Code
622206/
632206/
641206/
643205
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Part B 10 50)
Answer all questions.
All questions carry equal marks.
6. Explain the functions of financial management in
detail.
Or
The financial data of a firm is given as follows
10,000 Equity shares of Rs. 100 Rs. 10,00,000
12% Pref. shares of Rs. 10 Rs. 5,00,000
Profit after Tax Rs. 4,00,000
Equity dividend paid Rs. 20,000
Market price of Equity share Rs. 120
Calculate the following ratios.
Dividend yield on equity shares.
Cover for preference and equity dividend.
EPS for equity shares.
Price-Earning ratio.
7. What do you understand by capital issue
management? What are its functions and
functionaries?
Or
Prepare an estimate of working capital
requirements from the following information of a
trading concern.
Expected annual sales 1,00,000 units
Selling Price Rs. 10/unit
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Cost of production and sales Rs. 7,50,000
Average credit allowed to customers 10 weeks
Average credit allowed by suppliers 5 weeks
Average stock holding (at cost price) 8 weeks
Consider 10% contingencies in your estimate.
8. Discuss the factors determining the cost of capital.
How do they influence the planning of capital
structure?
Or
Pushpakanthi Ltd. sells goods at a gross profit of
125%. Depreciation is considered in cost of
production.
Sales months credit) Rs. 18,00,000.
Material consumed month credit) Rs. 50,000.
Wages paid month delay) Rs. 3,60,000.
Administration Expenses month lag)
Rs. 1,20,000.
Sales promotion expenses paid quarterly in
advance: Rs. 60,000.
Income Tax payable in 4 equal instalments
of which one falls due in the next year
Rs. 1,50,000.
The company also keeps one month's stock of
each of raw material and finished goods.
It also keeps cash of Rs. 1,00,000. Assuming
15% safety margin compute the working
capital requirement on cash basis.
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9. What is capital rationing? How does it influence
capital investment proposals positively?
Or
The directors of Balamurali Enterprises Ltd ask you
to ascertain
Proprietor's fund
Fixed Assets
Closing Debtors
Closing Creditors
Closing Stock
Share Capital
Cash and Bank Balance
From the following information
Inventory turnover ratio is 6 times. Year
end debtors are outstanding for
2 months. Year end creditors are
outstanding for 73 days.
Ratios of cost of goods sold to
Proprietor's funds is 2:1
Fixed Assets is 4:1.
Ratio of gross profit to sales is 20%
Closing stock is greater than opening
stock by Rs. 10,000.
The gross profit for the year ended
31st March 2011 is Rs. 1,20,000.
Reserves and surplus appearing in the
Balance sheet as at 31st March 2011
total to Rs. 40,000.
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10. What are the factors affecting dividend decisions of
a company, with long term goals for diversification
and modernization?
Or
Calculate operating, financial and combined
leverage under financial Plan X and financial
Plan Y when the fixed costs are Rs. 50,000 and
Rs. 1,00,000 in two different situations.
The information regarding capital structure and
other data are as under.
Total Assets Rs. 5,00,000
Total Assets turnover based on sales 2
Variable cost as percentage of sales 60
Financial Plan Financial Plan
Rs. Rs.
Equity 5,00,000 1,00,000
10% debenture 1,00,000 5,00,000
Part C 10 10)
Case study — Compulsory
11. Agalya Pvt. Ltd. company is to start a new project which
is having cost of Rs. 50,000 and life of 5 years. Salvage
value is nil, tax rate for the company is 55% and it follows
S.L.M. method of depreciation. The Cash Flows Before
Tax (CFBT) are as follows:
Year 1 2 3 4 5
CFBT: 10,000 11,000 20,000 30,000 35,000
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Compute the following
Payback period
Average rate of return
Internal rate of return.