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Seat No.: Enrolment
GUJARAT TECHNOLOGICAL UNIVERSITY
MBA SEMESTER- V• EXAMINATION WINTER 2016
Subject Code: 4150502 Date: 25 2016
Subject Name: Financial Management
Time: 02:30 pm to 05:30 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

The balance sheets and trading and profit and loss accounts for the year ended 30 June, 2015 of S Ltd are given. You are required to:
Calculate three of the following ratios:
net profit for the year as a percentage of net assets employed at 30 June, 2015;
net profit for the year as a percentage of sales;
gross profit for the year as a percentage of sales;
current assets to current liabilities at 30 June, 2015;
liquid ratio at 30 June, 2015; and
stock turnover during the year.
S Ltd
Balance Sheet
as on 30 June, 2015
S Ltd
Fixed assets at cost 60,000
Less: Provision for depreciation 20,000
40,000
Current assets
Stock 57,000
Debtors 22,000
Cash 11,000
90,000
Less: Current liabilities 30,000
Net current assets 60,000

Net assets 100,000

Paid-up share capital 95,000
Revenue reserve 5,000

100,000
S Ltd
Trading and Profit and Loss Account
for the year ended 30 June, 2015
S Ltd
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Sales 160,000
Stock at July
2015 39,000
Add: Purchases 114,000
153,000
Less: Stock at
June 30, 2015 57,000
Cost of goods sold 96,000
Gross profit 64,000
Less: General expenses 56,000
Net profit for the year 8,000
Add: Balance brought forward 3,000
11,000
Less: Dividend paid 6,000
Balance carried forward 5,000

What would be your role as a financial manager in a business unit? Explain.
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Q.2

Jai Chand is planning for his retirement. He is 45 years old today, and would like to have Rs 3,00,000 when he attains the age of 60. He intends to deposit a constant amount of money at 12 per cent at each year in the public provident fund in the State Bank of India to achieve his objective. How much money should Jai Chand invest at the end of each year for the next 15 years to obtain Rs 3,00,000 at the end of that period? [PVIFA15y,12%=37.28]
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Evaluate commercial paper as a source of short-term finance.
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OR

Explain an overview of process of credit rating in detail.
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Q.3

A company earns Rs 10 per share at an internal rate of 15 per cent. The firm has a policy of paying 40 per cent of earnings as dividends. If the required rate of return is 10 per cent, determine the price of the share under Walter's model, Gordon's model.
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What is a bonus share? What are the motives of issuing bonus shares (any 03 motives)
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OR
Q.3

A company is considering to raise Rs 200,000 to finance modernisation of its plant. The following financing alternative is feasible: The company may issue 20,000 shares at Rs 10 per share If the company's profits before interest are Rs 5,000, Rs 12,000, Rs 25,000, what are the respective earnings per share for the alternative? the corporate tax rate is 35 per cent.
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Briefly explain the symptoms of undercapitalized and overcapitalized companies.
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Q.4

Briefly explain major forms of business organisation.
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What is a cash flow statement? What are the major motives of preparing it?
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Q.4

Explain the concepts of Gross and Net working capital with respect to their calculation and what do they indicate?
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Explain motives of holding cash.
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Q.5

Consider the following two mutually exclusive investments:
Cash Flows
Projects C0 C1 C2 C3
A 10,000 +2,000 4,000 11,784
B 10,000 +10,000 3,000 2,830
Calculate the NPV for each project assuming discount rate of 20 per cent; Also, state which project would you recommend and why?
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Define leasing. Explain major differences between Operating and Financial lease.
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OR
Q.5

A firm has 8,000,000 ordinary shares outstanding. The current market price is Rs 25 and the book value is Rs 18 per share. The firm's earnings per share is Rs 3.60 and dividend per share is Rs 1.44. How much is the growth rate assuming that the past performance will continue? Calculate the cost of equity capital.
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Discuss factors influencing choice of capital structure.
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