Total Pages: 3 Post Graduate Diploma in Management (PGDM) TRIMESTER III EXAM (2011) (Model Paper) Paper: Financial

Management Time: Three Hours Instructions: 1. Each question in Part-A carries one mark. 2. Attempt any three questions from Part-B. Each question carries 10 marks. 3. Part-C carries 30 marks (Case Study) Paper Code: AIM-304 Max.Marks: 70

PART-A Q.no.1 (a) What is financial management? (b) Explain Rule of 69 and 72. (c) What is meant by optimum capital structure? (d) What is net cash inflow? (e) Find out the Operating Leverage from the following data: Sales Rs. 50,000, Variable cost 60%, Fixed cost Rs. 12,000 (f) Explain Post Pay Back Profitability. (G) What is Walter s formula? (h) What is operating cycle? (i) What do you mean by bonus share? (j) What is Economic Order Quantity? Give formula. Part B

Q.No.2 What is wealth maximization goal? How is it superior to profit maximization goal? Q.No.3 Cash inflows and outflows of a certain project are as follows:

Year

Outflows RS.

Inflows Rs. _ 50,000 70,000 1,00,000 1,20,000

Discount factor at 10% 1.000 .909 .826 .751 .683

0 1 2 3 4

2,00,000 40,000 _ _ _

Cost of capital is 10% and scrap value at the end of the 4th year is Rs.50,000. Calculate the net present value. Q.No.4 Your company s share is quoted in the market at Rs. 20 currently. The company pays a dividend of Rs.1 per share and the investors expect a growth rate 5%. Calculate :(a) (b) The company s cost of capital If the anticipated growth rate is 6%p.a., calculate the indicated market price per share

(c) If the company s cost of capital is 8% and the anticipated growth rate is 5% calculate the indicated market price if the dividend of Rs. 1 per share to be maintained. Q.No.5 Explain the term Dividend Policy and critically examine the various factors determining the sound dividend policy of a business enterprise. Q.No.6 Write short notes on followings: (a) NPV vs. IRR (b) ABC analysis (c) M. M.Hypothesis
Part-C (Case Study)

Q.No. 7 From the given information, prepare an estimate of working capital requirement by Projected Balance Sheet Method:

Issued share capital 6% Debenture Fixed assests at cost The expected ratios of cost to selling price are: Raw material Labour Oveaheads Profit 50% 20% 20% 10%

3, 00,000 2, 00,000 2,00,000

(a) Raw materials are kept in stock for an average period of two months. (b) Finished goods remain in stock for an average period of three months. (c) Production during the previous year was 1,80,000 units and it is planned to maintained the same level in the current year also. (d) Each unit of production (100% complete with regard to material, labour and overhead) is expected to be in process for half a month. (e) Credit allowed to customers is three months and given by supplier is two months. (f) Selling price is Rs. 4 per unit. (g) There is a regular production and sales cycle. (h) Calculation of debtors may be made at selling price.

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