Course: FA

Instructor: Ram Kumar Kakani

IIM KOZHIKODE – EPGP-13
End-Term Exam, Time: 150 Minutes, Total Marks: 50

NAME: _________________________________
ROLL NO: ___________

INSTRUCTIONS
This tests your knowledge on financial accounting and analysis component of the course.
This is a closed book examination. You are not allowed to borrow books, calculators, etc. Answer all
questions. In case of multiple-choice questions, you are required to mark (tick) the most appropriate choice
in the question paper itself and also work out the solution (or give reasonable explanation) in the blank space
provided below or on the other side of the page.
Anyone who resorts to unfair practices, as judged by the examiner, the minimum penalty will be zero in this
segment of evaluation, while the maximum penalty could be expulsion from the institute. There will be no
further warnings.

Instructions
• All the questions are compulsory.
• You only have to enter the final answer in the space provided
• Your final answer should be correct up to two decimal places.
• This is a closed book exam

1) A profit making business operation as a separate legal entity and in which ownership is divided
in the proportion of investment is known as a: (2 mark)
a. Limited Liability Partnership
b. Partnership
c. Limited Liability Company
d. All of the above

2) Financial Accounting information is: (2 mark)

a. A summary of historical events, both financial and non-financial
b. The result obtained from appropriate measures.
c. Enhanced by management’s explanation.
d. All of the above.

3) According to which concept, tangible fixed assets are depreciated on the basis of expected life
rather than on the basis of market value. (2 mark)
a. Conservatism concept
b. Money measurement concept.
c. Going concern concept.
d. Consistency concept.

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4) Although accounting information is widely used by a variety of external parties, financial
reporting is primarily directed toward the information needs of: (2 mark)
a. Customers.
b. Employees.
c. Equity Analysts, and Credit Rating Agencies
d. Investors and creditors.

5) Which of the following you do not agree to: (2 mark)

a. The auditor is the chief information officer of a firm.
b. Book keeping involves measuring and recording business transactions.
c. Gains or a loss in a series of transaction(s) is an event.
d. SEBI is the capital market regulatory authority prescribing its own compliance guidelines to
firms under its jurisdiction.

6) Abraka Dabra … Ends Here (10 marks)

Please help Shiraz Dhaneshyar in completing the cash flow statement of T.V. Today Network by
filling the following items with figures at the appropriate blanks below:
Cash and cash equivalents at the beginning of the financial year 0.12; Cash and cash equivalents at
the end of the year 0.27; Cash generated from operations 1.06; Decrease in employee benefit
obligations (0.02); Decrease in other financial liabilities (0.06); Decrease in Trade Payables (0.06);
Decrease in Trade Receivables 0.07; Dividend distribution tax (0.03); Dividends paid to company's
shareholders (0.13); Finance Costs 0.01; Income tax paid (net of refunds) (0.76); Increase in
inventories (0.01); Increase in other current assets (0.12); Increase in other current liabilities 0.11;
Increase in other financial assets and other bank balances (1.03); Interest and other borrowing costs
paid (0.01); Interest received on bank deposits 0.22; Net cash inflow from investing activities (0.01);
Net cash inflow from operating activities 0.30; Net cash outflow from financing activities (0.14); Net
increase in cash and cash equivalents 0.15; Payment for acquisition of property, plant and equipment
(0.24); Proceeds from borrowings 0.03;Proceeds from sale of property, plant and equipment
0.01;Profit before income tax for the year 2.04; Depreciation and amortisation expense 0.32;
Allowance for doubtful debts - trade receivables 0.07; Net loss on disposal of property, plant and
equipment 0.01; Interest income (0.26)

T.V. Today Network Limited

Statement of Cash Flow for the year ended March 31, 2019 Amount in Rs. Billion
A. Cash Flow from Operating Activities
? ?
Adjustments for:
? ?
? ?
? ?
? ?
? ?
? ?
? ?

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Instructor: Ram Kumar Kakani
? ?
Changes in working capital:
? ?
? ?
? ?
? ?
? ?
? ?
? ?
? ?
? ?
? ?
? ?
? ?
Net cash generated from operating activities ?
B. Cash Flow from Investing Activities
? ?
? ?
? ?
Net cash provided by (used in) investing activities ?
C. Cash Flow from Financing Activities
? ?
? ?
? ?
? ?
? ?
? ?
? ?
Net cash provided by (used in) financing activities ?
Net Increase (Decrease) in Cash and Cash Equivalents Due to (A) +
(B) + (C) 0.15
Starting Cash and Cash Equivalents Balance 0.12
Ending Cash and Cash Equivalents Balance ?
Note: all figures are rounded off (and thus, there can be rounding off errors)

7. On 1st April, Gaana.com Limited was registered as a public company with a capital of Rs. 1
crore. How many maximum shareholders can Gaana.com have on 1st April? (2 mark)
a) 200
b) 1 crore
c) 7
d) 10 Lakhs

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8. Lawreshwar Polymers Limited is a Jaipur-based public company listed on the Bombay Stock
Exchange with an issued and fully paid up share capital of Rs. 13.6 crores (each share of Rs.
10 par value). Theoretically, the maximum number of members Lawreshwar Polymers can
have as its shareholders would be equal to:? (2 mark)
a) 13.6 crore shareholders
b) 13.6 lakh shareholders
c) 1.36 crore shareholders
d) None of the above

9. A newly formed company has had a successful first year of operations and posted net income
on its books. The accounting records reflect this fact because:? (2 mark)
a) the Retained Earnings account has a credit balance.
b) expenses are closed to the Income Summary with a credit.
c) the Retained Earnings account has a debit balance.
d) Sales Revenue is closed to the Income Summary with a debit.

10. Preference shareholders enjoy certain advantages over equity shareholders. Which of the
following is not an advantage of owning a preference share? (2 mark)
a) No voting rights.
b) Dividend amounts are fixed for preference shares.
c) The right to receive assets before equity shareholders if liquidation occurs.
d) The right to receive dividends before equity shareholders.

11. Hardik Company Limited is facing losses from its business. It is bought by Bahujan Company
Limited. At the time of takeover, Bahujan Company finds that after deducting assets at its
market value from liabilities, Hardik Company has just Rs. 37 Lakhs. So, Bahujan Company
pays all Hardik Company's external liabilities and takes over all its assets. Now, Bahujan
Company has to return the share capital of Hardik Company. Suppose, there are 10
shareholders of Hardik Company owning it equally, then:? (2 mark)
a) Bahujan Company will pay only Rs. 3.70 Lakhs per shareholder
b) Hardik Company will raise a voucher in favor of its shareholders
c) Hardik Company shareholders will have voting rights in the Bahujan Company
d) All of the above

12. Listed below are nine different companies from the Bombay Stock Exchange as on 12th
January 2020 along with their financial information.

Company Industry CMP BV P/BV EPS P/E ROE

Bata India Footwear 1,755 136 13.0 28.3 62 ?
Colgate Palmolive (India) FMCG Personal Care 1,458 53 27.4 29.5 ? 55%
Infosys Technologies Computer Software 738 153 4.8 ? 21 23%
Lehar Footwears Footwear ? 19 1.3 0.8 31 4%

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Nagarjuna Fertilisers and Fertiliser 4.6 ? 0.5 Negative NA NA
Chemicals
Relaxo Footwear Footwear 639 45 14.4 ? 75 19%
Reliance Communication Telecommunications 0.9 45 ? Negative NA NA
Tata Steel Steel 487 612 0.8 78.0 ? 13%
Zee Entertainment Media & 263 93 2.8 18.7 14 ?
Enterprises Entertainment
Note: (a) all figures are in Indian Rupees; (b) CMP stands for current market price per equity share; BV stands for book value per
equity share; P/BV implies Price-to-Book Value Ratio; EPS is earnings per share using trailing twelve months; P/E implies Price -to-
EPS Ratio; and ROE indicates the Return on Equity.
Required:
(i) Compute the items that are blank there. (1 mark)
(ii) Which company has maximized the shareholder value? (1 mark)
(iii) Which one of the above has destroyed shareholder value? (2 marks)
(iv) What company has the bleakest future prospects compared to its last performance in the above table? (1 mark)
(v) What company has the brightest future prospects compared to its last performance in the above table? (2 marks)

13) Indian Accounting standards suggest that: (2 marks)

(a) Management prepares all its financial statements under the accrual basis of accounting.
(b) The notes to financial statements are supporting points to improve understanding of the same
& so these items are not an integral part of the financial statements
(c) Both (a) and (b)
(d) None of the above

14) Indian Accounting standards suggest the following in the presentation of Income Statement:
(2 marks)
(a) Any item of income or expense is not presented as extraordinary item in the statement of
profit and loss or in the notes.
(b) The expenses are classified in the statement of profit and loss based on the nature of
expense.
(c) The statement of profit and loss includes all items of income and expense and includes each
component of other comprehensive income classified by nature.
(d) All of the above

15) One can disagree on the following lines with respect to the Cost of inventory: (2 marks)
(a) It includes cost of purchase, cost of conversion and other cost in bringing the inventory into
present location and condition;
(b) It includes costs such as Import duties, non-refundable taxes, transport and handling costs
and any other directly attributable costs;
(c) It includes costs such as abnormal amount of wasted materials, storage costs, administrative
costs and selling costs.
(d) It can be measured using either standard cost method or retail price method.

15) Nolen Gurer Sandesh to catch Creative Accounting in Corporate Financial Reporting
Practices (7 mark)

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 Course: FA
Instructor: Ram Kumar Kakani
Fill the first blank with the one of the right terms (Managements personal agenda; or Off balance
sheet item) and the second blank with one of the right terms (Understating Liabilities; or Overstating
Assets; or Impact on key ratios & the big picture)

Firms that adopt wrong practices usually employ:

Example: CEO salaries are a Managements personal agenda and is used for Impact on key ratios &
the big picture

a. Capitalization of Expenses are a ______________________________ and is used for

_______________________
b. Contingent Liabilities are a ______________________________ and is used for
_______________________
c. Change to relatively unknown external auditor are a ______________________________ and
is used for _______________________
d. Discrepancy in valuing obsolete inventory are a ______________________________ and is
used for _______________________
e. Constant non-provision for advances/loans (along with a note mentioning the same) are a
______________________________ and is used for _______________________
f. Inflating Capital credit and simultaneously decrease trade Creditors are a
______________________________ and is used for _______________________
g. Inflating Revenue through tweaking revenue recognition policy are a
______________________________ and is used for _______________________

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Course: FA
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