(6 pages)

APRIL 2016 72221/MAM2E

Time : Three hours Maximum : 75 marks

SECTION A — (10 × 2 = 20 marks)

Answer any TEN questions.

1. List out the functions of management accounting.

2. What do you mean by financial accounting?

3. State the characteristics of ideal financial

statements.

4. What are the limitations of financial statement

analysis?

5. Current liabilities Rs. 3,00,000. Current ratio 3:1

and acid test ratio 1:1. Find out closing stock.

6. What are the theories of capital structure?

7. What do you mean by financial leverage?

8. A project cost Rs. 5,00,000 and annual profit

Rs. 80,000 after depreciation at 12% p.a but before
tax 50%. Find out payback period.

9. What do you mean by cash flow analysis?

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10. List out the different types of budget.

11. Define cost of capital.

12. State the objectives of capital expenditure budget.

SECTION B — (5 × 5 = 25 marks)

Answer any FIVE questions.

13. How does management accounting differ from

financial accounting?

14. Explain the usefulness of trend percentages in the

interpretation of financial performance of a
company.

15. From the following details relating to a project

calculate the payback period ignoring interest
factor.
Cost of the project Rs. 50,000
Return : I year Rs. 5,000; II year Rs. 20,000;
III year Rs. 30,000; IVth year Rs. 30,000; Vth year
Rs. 10,000.

16. From the following particulars calculate the cash

from operation.
Loss on sale of machinery Rs. 10,000
Depreciation on building Rs. 4,000
Depreciation on machinery Rs. 5,000

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 Preliminary expenses written off Rs. 5,000
Provision for taxation Rs. 10,000
Goodwill written off Rs. 5,000
Gain on sale of building Rs. 8,000.
After taking on to consideration the above
mentioned item the net profit for the year is
Rs. 1,00,000.

17. A firm has a sales of Rs. 20,00,000. Its variable

cost is Rs. 14,00,000 and fixed cost is Rs. 4,00,000
and debt is Rs. 10,00,000 at 10% rate of interest.
Find out the leverages.

18. A company expects a net income of Rs. 80,000. It

has Rs. 2,00,000 8% debentures. The equity
capitalisation rate of the company is 10%.
Calculate the value of the firm according to net
income approach.

19. From the following figures, prepare a raw

materials purchase budget for January.
Particulars Materials (in units)
A B
Estimated stock on 1st January 1,600 600
Estimated stock on 31st December 2,000 800
Estimated consumption 12,000 4,400

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SECTION C — (3 × 10 = 30 marks)
Answer any THREE questions.

20. Explain the objectives and limitations of

management accounting.

21. Explain the different tools of financial statement

analysis.

22. The financial manager of the company has to

advice the board of directors on choosing between
two project proposal which require an equal
investment of Rs. 1,00,000 and are expected to
generate cash flows as under :
Project I Project II
Rs. Rs.
End of year 1 48,000 20,000
2 32,000 24,000
3 20,000 36,000
4 Nil 48,000
5 24,000 16,000
6 12,000 8,000
Which project proposals should be recommended
and why? Assume the cost of capital to be 10% p.a.
The following are the present value factors at
10% p.a. The following are the present value
factors at 10% p.a.
Year : 1 2 3 4 5 6
Factor : 0.909 0.826 0.751 0.683 0.621 0.564

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[P.T.O.]
23. Following are the comparative balance sheet of
Cheran company Ltd.
Liabilities 2001 2002 Assets 2001 2002
Rs. Rs. Rs. Rs.
Share capital 70,000 74,000 Bank balance 9,000 –
Debentures 12,000 6,000 Accounts
Accounts receivable 14,900 17,700
payable 10,360 11,840 Stock 49,200 42,700
Provision for Buildings 20,000 40,600
doubtful debts 700 800 Goodwill 10,000 5,000
Profit and loss
a/c 10,040 10,560
Bank overdraft – 2,800
1,03,100 1,06,000 1,03,100 1,06,000

Additional information :
(a) Building were acquired for Rs. 20,600
(b) Goodwill written off Rs. 5,000
(c) Dividend paid Rs. 3,500
(d) Repaid of debentures Rs. 6,000.
Prepare cash flow statement.

24. From the following particulars prepare the

balance sheet of X Ltd.
Current ratio 1.5
Current assets/fixed assets 1:2
Fixed assets to turnover 1:1
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Gross profit 25%

Debtors velocity 2 months
Creditors velocity 2 months
Stock velocity 3 months
Debt equity ratio 2:5
Working capital Rs. 2,00,000.

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