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Financial Management
FM Important Questions
( Both for Inter / IPCC )

ABC ANALYSIS OF CHAPTERS

CATEGORY CHAPTERS
o Working capital management
o Cost of capital
A o Capital Structure Theory
o Capital Budgeting
o Risk Analysis in Capital Budgeting (NS)
o Source of finance
B o Scope and objectives of FM
o Lease Finance ( only Theory alone)
o Leverage Analysis
C o Financial analysis
o Dividend Policy (NS)

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EXAMINATION TIPS
FM = COMPLICATION OR COMMON SENSE?
Is FM paper a complicated one? Why because most of the CA Inter & Final students are facing
problem either by way of conceptual understanding of the problem or by way time management
(completing all the questions within 3 hours)

What is there in a FM paper, after all some additions, subtractions, multiplications & division. Yes of
course some time square roots too.

Is it really that much difficult paper?

Students may say ´hmm’.. come & write a CA exam then u will know FM is better or bitter paper!!!”

Ok no violence between us….. let us see how to prepare for costing paper for the forthcoming CA
exams to score more marks.

Either Inter or Final, the weightage given for the Costing / FM theory is 25 marks. Failure in FM is
mainly because students don’t concentrate much on theory. Without studying theory possibility of
clearing FM paper is very very remote. Even though I am starting in a pessimistic manner it is the
fact. If you are strong in theory, minimum you can score 60 marks. All theory questions are direct
questions and all the questions are available in our Institute Study material itself and unlike income
tax or law paper there are no amendment in FM theory.

Studying theory alone is not important you have to understand properly. On the top of it mere
understanding alone is not important, you should remember it. Unless otherwise you remember,
recollect & write sufficient points in the examination you won’t get marks. Systematic/ planned study
is important to remember all the points.

“Failure to plan is equal to planning to fail”. Planning is important, at the same time execution is still
more important. If you spend absolute two hours per day with full concentration for three months
you can finish the Inter/Final Costing / FM paper very easily. Refer one book, reading more than one
book is not advisable. How many books you read is not important, how many time you revise one
particular book is more important.

Practical problems should be worked out at least once as if you are taking up your final examination, instead of
auditing the questions with solutions by way of ticks. Improve your analytical skills. Practice makes perfection
and unless otherwise there is adequate practice nothing will come. While working out the problems avoid
writing “K” for thousands and “L” for lakhs because you don’t have the privilege to write likes that in
examinations. To put zero takes one second and each and ever second counts in an examination. If you put K or
L in exam then examiner will award a big “O”. Attend all the questions; don’t skip any questions in the exam.
The attempt may be failure but you should not fail in attempting any of the questions. Work so hard that one day
your signature will be called an “Audited Financial Statement.”

WINNERS NEVER QUIT

&
QUITTERS NEVER WIN
WISH YOU ALL THE VERY BEST & DO WELL……

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Part A: Theory Questions

Chapter 1
Scope and Objectives of Financial Management
Basic Concepts
1. Two basic aspects of Financial Management. ( Ref. Page No. 2)
2. Two objectives of FM. ( Ref. Page No. 4)
3. 3 characteristics of Source of Fund ( Ref. Page No. 3)
4. 3 Important decision for achievement of Wealth Maximization. ( Ref. Page No. 5 & 411)
5. Difference between Profit Maximization and Wealth Maximization. ( Ref. Page No. 4)
6. Arguments in favor or Profit Maximization. ( Ref. Page No. 6)
7. Arguments against Profit Maximization. ( Ref. Page No. 6)
8. Arguments in favor of Wealth Maximization. ( Ref. Page No. 6)
9. Arguments against Wealth Maximization. ( Ref. Page No. 6)
10. 5 Roles of CFO. ( Ref. Page No. 8)
11. 9 Emerging issues affecting the future role of CFO. ( Ref. Page No. 9)
12. 2 major difference between Financial Accounting & Financial Management. ( Ref. Page
No. 10)

Chapter 2
Working Capital Management
13. Explain Operating cycle ( Ref. Page No. 11)
14. Explain the impact of double shift working on various components of working
capital. ( Ref. Page No. 15)
15. Functions of the treasury department ( Ref. Page No. 16)
16. Difference between concentration banking and lock box system ( Ref. Page No. 19)
17. 3 Advantages of Concentration Banking ( Ref. Page No. 20)
18. 2 types of cash management models ( Ref. Page No. 22)
19. Assumptions under William j. Baumol’s cash management model ( Ref. Page No. 22)
20. Explain miller – Orr cash management model ( Ref. Page No. 23)
21. 2 Assumption in miller – Orr cash management model ( Ref. Page No. 24)

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22. Explain 4 procedure for Factoring ( Ref. Page No. 26)
23. 2 Types of Factoring ( Ref. Page No. 27)
24. Benefits of Factoring ( Ref. Page No. 27)
25. Differentiate between factoring and bills discounting ( Ref. Page No. 29)
26. 4 benefits of Ageing Schedule ( Ref. Page No. 31)
27. Features of Commercial Paper ( Ref. Page No. 32)
28. Procedure for issuing of commercial paper ( Ref. Page No. 32)

Chapter 3
Cost of Capital
29. Explain WACC. ( Ref. Page No. 98)

Chapter 4
Capital Structure
30. 5 fundamental principles governing capital structure. ( Ref. Page No. 137)

31. Explain Optimum Capital Structure. ( Ref. Page No. 138)

32. Assumption under capital structure theory. ( Ref. Page No. 140)

33. Short notes on NOI Approach. ( Ref. Page No. 142)

34. Assumption under MM Approach. ( Ref. Page No. 144)

35. Difference between Business Risk & Finance Risk. ( Ref. Page No. 147)

36. Causes of over capitalization. ( Ref. Page No. 148)

37. Short notes on Trade off theory. ( Ref. Page No. 149)

38. Explain Picking order theory. ( Ref. Page No. 149)

Chapter 5
Leverage Analysis

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39. Explain trading on equity. ( Ref. Page No. 187)

40. 2 Main reason for arising Trading on Equity. ( Ref. Page No. 187)

41. Why financial leverage is called a Double Edged Sword. ( Ref. Page No. 187)

42. Difference between DOL and DFL. ( Ref. Page No. 185)

Chapter 6
Ratio Analysis
43. Explain the need for debt service coverage ratio. ( Ref. Page No. 226)

44. Discuss the limitations of financial ratios. ( Ref. Page No. 227)

Chapter 7
Capital Budgeting
45. Explain IRR ( Ref. Page No. 277)

46. Short notes on Capital Rationing. ( Ref. Page No. 277)

47. Five reasons for TVM ( Ref. Page No. 278)

48. Two methods of computation of TVM. ( Ref. Page No. 278)

49. Write short notes on MIRR. ( Ref. Page No. 279)

Chapter 8
Risk Analysis in Capital Budgeting
50. Explain Sensitivity Analysis. ( Ref. Page No. 358)
51. Explain Certainty Equivalent Approach. ( Ref. Page No. 358)

Chapter 9

Lease Financing
52. Explain the concept of Lease Financing. ( Ref. Page No. 379)
53. Difference between Operating Lease & Finance Lease. ( Ref. Page No. 380)

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54. 5 Types of Finance Lease. ( Ref. Page No. 380)
55. Explain Sales and Lease back. ( Ref. Page No. 381)
56. Short notes on Leveraged lease. ( Ref. Page No. 382)
57. Difference between Close-ended and Open-ended lease. ( Ref. Page No. 382)
58. Difference between Lease and Hire Purchase. ( Ref. Page No. 383)
59. Explain Sale aid lease. ( Ref. Page No. 382)
60. Write short notes on tax-oriented lease. ( Ref. Page No. 381)

Chapter 10

Dividend Decisions
61. Factors that determine the dividend policy. ( Ref. Page No. 425)
62. Advantages and disadvantages of stock dividend. ( Ref. Page No. 412)
63. Irrelevance theory of dividend. ( Ref. Page No. 412)
64. Walter Model. ( Ref. Page No. 417)
65. Gordon Model / Dividend Discount Model. ( Ref. Page No. 418)
66. Assumptions of M.M hypothesis. ( Ref. Page No. 416)
67. Objectives of portfolio management. ( Ref. Page No. 423)
68. Determinants of dividend policy. ( Ref. Page No. 424)
69. Features of asset based securities. ( Ref. Page No. 425)

Chapter 11

Sources of Financing
70. 5 advantages of raising funds by issue of preference share. ( Ref. Page No.452)
71. 4 advantages of raising funds by issue of equity share. ( Ref. Page No. 452)
72. 5 Features of Ploughing back of profit. ( Ref. Page No. 467)
73. 5 Advantages of Ploughing back of profit. ( Ref. Page No. 467)
74. Difference between ADR & GDR. ( Ref. Page No. 466 )
75. 2 different certificates in double option bonds. ( Ref. Page No. )
76. 3 features of Zero coupon bonds ( Ref. Page No. 465)
77. Short notes of Seed Capital Assistance ( Ref. Page No. 462)

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78. 2 comparative conditions for the maximum assistance under Seed Capital Assistance (
Ref. Page No. 462)

79. Explain Debt Securitization ( Ref. Page No . 460 )

80. 2 way process under Debt Securitization ( Ref. Page No. 460)
81. Explain Venture Capital Assistance ( Ref. Page No. 458)
82. 2 types of payment under Income Note ( Ref. Page No. 458)
83. Explain Bridge Finance ( Ref. Page No. 457)
84. 4 Characteristics of Bridge Finance ( Ref. Page No. 457)
85. 3 principles relating to selection of marketable securities ( Ref. Page No.468 )
86. Explain ECB ( Ref. Page No. 465)
87. 2 different routes of ECB ( Ref. Page No. 465)
88. 5 types of Packing Credit ( Ref. Page No. 462)
89. 3 Phases in Participating debenture & its interest rate ( Ref. Page No. 458)
90. 3 process of debt securitization ( Ref. Page No. 460)
91. 4 methods of Venture Capital Financing ( Ref. Page No. 458)
92. Any 5 types of Financial Instruments in International Market ( Ref. Page No. 455)
93. Difference between equity shares and preference shares. ( Ref. Page No. 453)
94. Types of Debentures – Based on convertibility Difference between Preference
Shares and Debentures ( Ref. Page No. 453)
95. Types of Bond – Based on Call ( Ref. Page No. 455)
96. Various other types of Foreign Bonds ( Ref. Page No. 455)
97. Various other types of Indian Bonds ( Ref. Page No. 457)
98. Factoring vs. Debt securitization ( Ref. Page No. 462)
99. Types of Post-Shipment Finance ( Ref. Page No. 462)
100. Bridge Finance V/s. Seed Capital Assistance ( Ref. Page No. 463)
101. Secured premium notes ( Ref. Page No. 464)
102. Zero coupon bonds ( Ref. Page No. 465)
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B: Practical Problems
(Qtn Nos. based on “Simplified Approaches to FM & Economics for Finance ” for CA Inter

(5th edition) by CA K Hariharan)

Chapter 1: Basic Concepts - Theory

Chapter 1: Working Capital Management
Q. No. 2, 3, 4, 5, 7, 9, 10, 12, 15, 17, 22, 23, 28, 30, 31, 34, 37, 38, 40, 42.

Chapter 3: Cost of Capital

Q. No. 12, 16, 17, 19, 21, 23, 24, 25, 26, 27, 31, 32.

Chapter 4: Capital Structure

Q. No. 2, 3, 4, 8, 11, 13, 15, 16, 17, 18, 21, 23, 26.

Chapter 5: Leverage Analysis

Q. No. 2, 3, 6, 7, 8, 9, 13, 14, 16, 21, 22, 23, 30.

Chapter 6: Ratio Analysis

Q. No. 1, 3, 6, 7, 11, 16, 17, 19, 21, 23.

Chapter 7: Capital Budgeting

Q. No. 5, 8, 11, 13, 14, 16, 17, 18, 20, 24, 30, 31, 32, 39, 42, 44, 47, 48.

Chapter 8: Risk analysis in capital budgeting (only for N/S)

Q No: 1,3,4,5,6,7,8,9.

Chapter 9: Lease Financing – Only Theory alone

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Chapter 10: Dividend Decision ( only for N/S)

Q No: 2,6,7,7,9,10,11,12,13,14,15.

Chapter 11: Sources of Finance – Only Theory alone

Kindly Ref. LMR Strategy for Costing &

FM – available in my Telegram Channel
“CA Hariharan”

Why more failures in CA Course…….?

As we all know, in the CA course compared to success, failures are only spoken more by the
students. In a student’s perspective, they state that the main difficulty is completing the
paper within the stipulated time.

Why there is no enough time to complete the exam on time?

It is thoroughly because of Inadequate Writing Practice, due to which there will be a time
lag.

In few cases, we may be very strong in the content but still we fail to present it on paper due
to lack of brain - hand coordination.

Examination time is to write, not to think! Thinking alone is not going to fetch marks on the
paper. Unless and otherwise your flow of thoughts is written on paper, your job is not done.

How to overcome this issue?

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Time plays a vital role. Utilize it wisely. Grab the opportunities and come out in flying
colors.

Faculties are responsible only for making you to understand the subject. But you have to
retain whatever you have understood. You should remember all the points, to deliver the
same in the exam. The number of points presented is also equally important to score more
marks in exam.

The easiest way to recollect all the points in the exam is by developing the habit of writing
more & more tests.

Writing 1 test = Avoiding 1 attempt

To Initiate the Writing Practice, Premier Academy (PA) has brought to you 3 types of
Student Friendly Test series.

Three Types of Test in PA:

1. Topic wise Test

2. MCQ

3. Test Series

……………………………..all 3 in detail are as mentioned below

Benefits of writing Test:

• Better time management

• You are forced to complete the syllabus on time
• Unknown question/Surprise questions can be identified earlier stage
• Missing out points even in the known questions can be avoided by attempting
these tests.
• Writing speed can be increased.
• Presentation can be improved.

How to Approach us to write Test:

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• Postal test series
• After registration, Roll No will be provided.
• Test potions à visit www.premieracademy.in or Ct. 044 24622694 or whatsApp
09841661405
• Question paper will be sent through Email.
• Answer sheet has to be sent through post.
• The answer sheet will be evaluated within 10 Working days.
• The evaluated answer sheet will be sent with remarks and suggested answers.

1# TOPIC WISE TEST

• 15 Test per subject [Approx.]

• Registration Valid for 1 Year.
• 20 Marks question paper per topic.
• One 100 marks question paper with MCQs 30 marks
• For both Inter and Final, Old & New scheme
• For all the subjects
• You can write any day any test.
• Validity à 1 year from the date of registration.
• Question Paper à send by mail
• Answer paper à after writing test students has to send it by post to PA
• Valued paper you can get it by post within 10 days
• Fees Rs. 1000/- per subject (Rs. 100 postage)
#2# MCQ Test

• For both Inter & Final, Old & New scheme

• 100 Marks question paper
• Any time, any day, any test
• Postal test also available
• Fees Rs.250/- per subject

#3# “CA TEST SERIES”

Test Timing à Any day, any time (students choice)

No. of test à 5 test per subject

Method of test à Test No % of coverage Marks Time

1 First 25% of syllabus 50 1 ½ hrs

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2 Next 25% of syllabus 50 1 ½ hrs

3 Next 25% of syllabus 50 1 ½ hrs

4 Next 25% of syllabus 50 1 ½ hrs

5 FULL syllabus 100 3 hrs

Valuation by à Chartered Accountants

Other Benefits à Personal counselling session (On one to one basis)

Fee Rs. 2,400 per group / Rs.750/- subject inc. postage

Procedure to • You can write Any Day, Any Time, Any Where, Any Test &
Write Test Series Any Subject – Purely Students Choice.
• Question paper send by mail
• After Writing Test, courier your answer sheet to PA – Chennai
• Delivery of Valued paper with Suggested answer within in 10 –
15 working days
For Details Contact: 07418548404, / 09841661450 / 044-24622694

Visit : www.premieracademy.in

For Free Video classes : Visit our YouTube Channel:

“CA K HARIHARAN”

Author is taking CA Final & Inter Costing class at

Premier Academy – Chennai.

Aim CA join PA

Regular class: Final 2 months class (weekly 4 days; 3hrs/day) &

Inter 2 months class (Mon to Sat. day)

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Every 1st January & 1st July

Crash course: 14 days from every 1st March & 1st September.

To attend his class contact 07418548404, 09841661405

Visit www.premieracademy.in

CA.K.HARIHARAN

Now Costing Inter & Final

Recorded Clz are available – Contact 09841661405 / 07418548404 / 044-24622694

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