Narsee Monjee College of Comm. & Eco.

BMS (V) Financial Management (Paper I)

Oct 04

N.B. (1) The paper is divided into 2 sections i.e. section A and B. Answers for both the sections to be written in same answer sheet. (2) Section A has 3 questions which should be compulsorily answered. In Section B out of 5 questions (4-8) any 3 needs to be answered. (3) Show all your workings and state assumptions clearly. Section A (Compulsory) Marks: 30

(1) Discuss wealth maximization and shareholder value maximization as objectives

of financial management.

(2) Calculate from the following details furnished by Pardeshi Ltd :

1) 2) 3) 4) 5)

(7) (16)

Current Ratio Liquid Ratio Creditor turnover ratio and average payment period Debtor turnover ratio and age of debtors Stock Turnover Ratio Rs. Stock 1, 00,000 Debtors 1, 40,000 Cash 60,000 Creditors 1, 60,000 Bank overdraft 30,000 Outstanding expenses 10,000 Total Purchases 6, 60,000 Cash purchases 20,000 Gross Profit ratio 33 1/3 %

Offer your overall comments on short term financial/solvency/liquidity/credit position of the company. (3) What are advantages and shortcomings of trend analysis statements? Section B Marks: 30 4. The following are the balance sheets of Sharang Ltd as on 31st March, 2003 and 31st March 2004. (10)
Liabilities Equity shares Capital Capital Reserve General Reserve Profit & Loss Account Debenture Outstanding Exp. Provisions for Income Tax Proposed Dividend Unpaid Dividend 31.3.03 Rs 360,000 204,000 72,000 240,000 144,000 108,000 36,000 1,164,000 31.3.04 Assets Rs 480,000 Machinery Investments(Long 12,000 Term) 240,000 Stock 90,000 Debtors Debenture 168,000 Discount 156,000 102,000 43,200 4,800 1,296,000 31.3.03 Rs 684,000 120,000 64,800 271,200 24,000 1,164,000 31.3.04 Rs 792,000 96,000 150,000 246,000 12,000 1,296,000

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Prof. Pawan Jhabak

38043830

Narsee Monjee College of Comm. & Eco.

Oct 04

The following further for the year ending 31st March 2004 is given: a) Debentures were redeemed at 5 % premium. b) Profit on sale of investments is transferred to capital reserve. c) Stock on 31.3.03 was valued at 10 % below cost but stock on 31.03.04 was valued at cost. It was decided that both opening and closing stock should be valued at cost. d) Machinery having written down value of Rs.35, 000 was sold for Rs.30, 000. Depreciation on machinery for year ending 31.03.04 was Rs.1, 15,000. Prepare a statement showing sources & application of funds for year ending 31.03.04 5. From the following information prepare a statement of working capital of FENNER Ltd. A safety margin of 5 % should be added to the figure of working capital (10) (1) Sales to customer (on cash) Rs. 12, 00, 000 p.a. Goods are sold at cost plus 50 %. (2) Sales to retailers Rs. 6, 00,000 p.a. Goods are sold at Cost plus 33-1/3 %. Retailers are given one months credit. (3) Sales to wholesalers Rs.10, 62,500 p.a. Goods are sold at cost plus 25 %. Wholesalers are given 2 months credit. (4) Total cost is Rs. 20 per unit. Materials constitute 50 % of total cost; wages constitute 30 % of total cost and overheads 20 %. (5) Raw materials remain in stock for 2 months. (6) Work in progress takes 1 month. Valuation to be made at material cost plus 50 % each of labour and overheads. (7) FG stock to be maintained for 2 months. (8) Suppliers of RM will give 1 month credit. (9) Time lag in payment of wages and overhead is 1 month. (10) Bank balance is to be maintained at Rs.1, 00,000. 6. What do you understand by combined leverage? 7. What are the mechanisms to monitor receivables? Write a short note on each of them. 8. Explain advantages and disadvantages of inter corporate deposits. (10) (10) (10)

Prof. Pawan Jhabak

38043830