BBA/BA (IV) Sem MGMT 202

BBA/BA (FOURTH SEMESTER) EXAMINATION MAY-2022

PAPER- BASICS OF FINANCIAL MANAGEMENT (MGMT202)
Maximum Marks: 60
Instructions: Attempt Five Questions in all, selecting One Question from each Unit

Unit-I

Q 1.Effective financial management is the most prominent function of the company’s management. All
other functions of the organization are based on financial management. The Government of India also
manages its financials, and provides a blueprint in the form of budget every year. Comment on the
financial management strategies adopted by the Government of India in past 5 years. (12 Marks)
OR
Q 2. ONGC has recently raised funds from the equity market through offer for sale option (OFS).
Usually companies raised the funds through OFS by offering shares at discount. Comment on the
financial planning of ONGC in the view of need of funds, and why ONGC has raised the funds through
OFS only. (12 Marks)

Unit-II
Q 3. A has a daughter of 10 years old. A wants to secure his daughter’s future, and plans to invest 40%
of his monthly income for next 10 years on regular basis. A is working in a multinational company and
earns Rs. 12,00,000 p.a. A invests 50% of his savings in a tax saving investment option @ 12% p.a.
return, 30% in mutual fund @ 16% p.a. return, and the remaining amount in post office deposit @ 9%
p.a. Compute the total corpus available with A after 10 years. (12 Marks)
OR
Q4. B is working in a small private firm and will retire after 10 years. He will get a pension of Rs. 1500
per month for next 15 years. How much can B borrow now at 12 percent interest so that the borrowed
amount can be paid with 30 percent of the pension amount? The interest will be accumulated till the first
pension amount becomes receivable. (12 Marks)
Unit-III
Q 5. The following information is available for ABC Ltd.
Net profit margin ratio – 4%
Current ratio – 1.25
Return on net worth – 15.23 %
Total debt to total assets ratio – 0.40
Inventory turnover ratio – 25
Operating expenses – 700
Interest expenses – 45
Current assets – 180
Cash receivables – 60
Long term debt @15%
Tax provision – 50%
Calculate current liabilities, long term debt, total assets, net worth, fixed assets, tax amount, profit before
tax, EBIT, sales, COGS, inventory and cash balances. (12 Marks)
OR
Q 6. ABC Ltd. has estimated that the company will employ total assets of Rs 8,00,000; 50% of the
assets being financed by borrowing capital at an interest rate of 8% p.a. The direct cost for the year is
estimated at Rs 480000 and all other operating expense is at Rs 80000. The goods will be sold to
customers at 150% of the direct costs. Tax rate is assumed to be 50%. Compute net profit margin, return
on assets, assets turnover and return on owner’s equity. (12 Marks)

Unit-IV
Q 7. AAA Ltd has furnished the following information. Calculate working capital requirement. (12
Marks)
Production 30,000 units per month
Operating cycle:
Raw material 2 month
WIP 1 month
Finished Goods 1 month
Creditors 1 month
Receivables 1 month
Wages 1 month
Overheads 1 month
Cash sales 20%
Min. cash balance Rs. 5,00,000
Raw material price per unit Rs. 30
Wages per unit Rs. 10
Overhead per unit Rs. 20
Total cost per unit Rs. 120
OR
Q 8. Excessive working capital hampers the organization’s profitability as well as investor’s interest.
Companies usually maintain adequate working capital for smooth functioning of the business. Comment
on the working capital management strategies of the business organization in view of liquidity,
profitability and non-stop production process through some real examples. (12 Marks)

Unit-V
Q 9. ZZZ Ltd. is considering investment in a project that requires an initial investment of Rs. 5,00,000
for some machinery. There will be net inflows of Rs. 90,000 for the first two years, Rs. 1,00,000
in years three and four, and Rs. 2,30,000 in year five. Discount rate is 10%. Calculate payback
period, NPV. (12 Marks)
OR
Q 10. ABC Ltd. manufactures products usually by manual labour and is now considering to replace it
by a new machine. There are 2 alternative models available i.e. X and Y. Prepare a probability
statement showing payback period using the following information: (12 Marks)
Machine X Machine Y
Estimated life of machine 8 10
Cost of machine Rs. 1,80,000 Rs. 3,60,000
Estimated savings in Scrap Rs. 10,000 Rs. 16,000
Estimated savings in direct wages Rs. 1,20,000 Rs. 1,60,000
additional cost of maintenance Rs. 16,000 Rs. 20,000
Additional cost of Supervision Rs. 24,000 Rs. 36,000