F. Y.

Master in Business Administration (Semester - II)

202: Financial Management (2019 Pattern)
SET- A
Time: 2 ½ Hours] [Max. Marks: 50]
_____________________________________________________________________________
Instructions to the candidates:-

1) Assume Suitable Data if necessary.

2) Black figures to the right indicate full marks.
3) All Questions are compulsory.
4) All questions have internal options.
Q1. Attempt any five questions
1. Which of the following is not a function of a finance manager?
a) Financial analysis & interpretation b) Determining financial needs
c) Working capital management. d) Manipulate share price of the company.

2. Key strategies of financial management are ___________.

a) Investment strategy b) Financial strategy c) Dividend strategy d) All of these.

3. The management of current assets is known as _______________

a) Current assets b) Working Capital Mgt. c) Both (a) & (b) d) None of these.

4. Cost of issuing new shares to the public is known as :________________.

a) Cost of equity b) Cost of Capital c) Flotation cost d) Marginal cost

5. Operating leverage arises because of ______________

a) Fixed cost of Production b) Fixed interest cost c) Variable cost d) None of these.

6. Cash inflows arise from ________ assets, __________liabilities, and _____________

stock holders’ equity.
a) Increasing; increasing; decreasing b) increasing ; decreasing ; decreasing c)
decreasing; increasing; increasing d) decreasing ; increasing; decreasing.

7. Financial management is concerned with the issues involved in __________ &

____________ of funds.
a) raising & allocation b) acquisition & allocation c) procurement & allocation
d) raising & acquisition

8. __________ decision relates to the appropriation of profits earned.

 a) Investment b) Finance c) Dividend d) All of these.

Q2. Attempt any 2 questions.

Q1. State the objectives of Financial Management.

Q2. State the difference between operating & financial leverage.
Q3. Discuss the different sources of finance.
Q4. Explain in detail the process of capital budgeting.

Q3. A Proforma cost sheet of a company provides the following particulars:

Elements of cost Amount per unit

Raw material 80
Direct labour 30
Overheads 60
Total cost 170
Profit 30
Selling price 200

The following further particulars are available:

a. Raw materials are in stock for one month
b. Credit allowed by supplier is one month
c. Credit allowed to customers is two months
d. Lag in payment of wages 1½ weeks
e. Lag is payment of overheads one month
f. Materials are in process for an average of half month (50% to be considered for
labor and other overheads)
g. Finished goods are in stock for an average of one month
h. ¼ output is sold against cash
i. Cash in hand and at bank is expected to be Rs.25, 000.

Prepare working capital needed to finance a level of activity of 1, 04,000 units of product.
You may assume that production is carried on evenly throughout the year. Wages and overheads
accrue similarly and a period of 4 weeks is equivalent to a month.

OR

Q3. In considering the most desirable capital structure for a company, the following estimates of
the cost of debt and equity capital ( after tax) have been made a various levels of debt-equity
mix:

Debt as percentage of total Cost of Debt Cost of Equity

capital employed (%) (%)
0 5.0 12.0
10 5.0 12.0
20 5.0 12.5
30 5.5 13.0
40 6.0 14.0
50 6.5 16.0
60 7.0 20.0
You are required to determine the optimal debt-equity mix for the company by calculating
composite cost of capital.

Q4. A Co. is considering an investment proposal to install new milling control. The Project
will cost Rs 50,000. The facility has a life expectancy of 5 years and no Salvage Value. The
Company tax rate is 35%. The firm uses straight line depreciation. The estimated Profit before
tax from the propose investment proposal are as follows:

Year Profit before Depreciation

(Rs)

1 10,000
2 11,000
3 14,000
4 15,000
5 25,000

Compute:
1. ARR
2. Payback period
3. NPV @ 15%
4. PI @15%
OR
Q4. A company is contemplating to raise additional fund of Rs. 20, 00,000 for setting up a
project. The company expects, EBIT of Rs. 8,00,000 from the project. Following
alternative plans are available:

(a) To raise Rs. 20,00,000 by way of equity share of Rs. 10 each

(b) To raise Rs. 10,00,000 by way of equity shares and Rs. 10,00,000 by way of
debt @ 10%.
(c) To raise Rs. 6, 00,000 by way of equity and rest Rs. 14, 00,000 by way of
preferences shares @ 14%.
(d) To raise Rs. 6,00,000 by equity shares
Rs. 6, 00,000 by 10% equity
Rs. 8, 00,000 by 14% Preference shares

The company is in 60% tax bracket which option is best?

Q5. From the following Balance Sheet, prepare Comparative Balance Sheet of Sun Ltd.:

Particulars 31st March, 2019 31st March, 2018

(Rs) (Rs)
I. EQUITY AND LIABILITIES    
1. Shareholder's Funds    
(a) Share Capital 3,50,000 3,00,000
2. Non-Current Liabilities    
Long-term Borrowings 1,00,000 2,00,000
 3. Current Liabilities :    
Trade Payables 1,50,000 1,00,000
Total 6,00,000 6,00,000
II. ASSETS    
1. Non-Current Assets    
Fixed Assets (Tangible) 4,00,000 3,00,000
2. Current Assets    
Trade Receivables 2,00,000 3,00,000
Total 6,00,000 6,00,000
     

OR

Q5. Using the following information, complete the Balance sheet of XYZ ltd.

Long- term debt to net worth 0.5 to 1

Total Assets Turnover 2.5 times
Average collection period ½ months
Inventory turnover 9 times
Gross profit margin 10%
Acid test ratio 1:1

Balance Sheet of XYZ Ltd.,

As on 31ST DECEMBER, 2020

Liabilities Rs. Assets Rs.

Equity Share Capital 1,00,000 Fixed Assets -
Retained Earnings 1,00,000 Inventory -
Long –term debt - Debtors -
Creditors - Cash -
 F. Y. Master in Business Administration (Semester - II)
202: Financial Management (2019 Pattern)
SET- B
Time: 2 ½ Hours] [Max. Marks: 50]
_____________________________________________________________________________
Instructions to the candidates:-

1) Assume Suitable Data if necessary.

2) Black figures to the right indicate full marks.
3) All Questions are compulsory.
4) All questions have internal options

Q1. Attempt any five questions