i
12.
4
15,
FINANCIAL MANAGEMENT
PART-A
Write any ten questions
Explain the meaning and importance of finance,
What are the objectives of financial management? Explain in detail
Describe the different functions of financial management.
How do the finance manager trade off between a) liquidity and profitability b) risk and return
‘What is meant by time value of money? Why itis important?
Explain the valuation concept of compounding and discounting. How are the two concepts
different from each other?
Explain a) capital structure b) patterns of capital structure ¢) optimum capital structure d) point of
indifference e) features of capital structure
Elaborate the different factors determining a company’s capital structure
Explain EBIT-EPS approach for determining capital structure of a company.
What is capital budgeting? Explain the importance and different types of capital budgeting
decisions.
Explain the different methods of capital budgeting, Write the merits and limitations of pay back
period, ARR and NPV.
‘Compare and contrast the internal rate of return with present value metho.
Explain a) working capital b) operating cyele c) permanent working capital d) temporary working
capital e) cost of retained earnings
Discuss the different factors affecting working capital management in @ company.
Explain the meaning and importance of cost of capital. Explain the different factors affecting
cost of capital.
Define leverage. Explain its types. Discuss its significance
PART-B
Solve the follo
1g case study
Krishnan & co’s existing capital structure is as follows:-
Equity shares @ Rs.10 each Rs.1,00,00,000
Retained earnings Rs. 20,00,000
9% preference shares @ Rs.10 Rs. 30,00,000
11% bank loan Rs. 50,00,000
‘The company’s existing rate of return on its capital employed is 12% and tax rate is 50%, ‘The
‘company requires a sum of RS.50,00,000 to finance an expansion program for acquiring a new
machine, for which it is considering the following options: a) 100% equity b) S0% equity and
50% debt (same rate) c) 30% equity, 25% debt and 25% preference capital (Same rates). ‘The
expansion would inerease its rate of return on capital employed by 8%.
[As a part of its expansion program, the company is contemplating the purchase of machine
Machine A and B are available. The cost of each machinery is Rs.50,00,000
“The expected cash flows after tax are as follows: