Pachavellam UG-PG

C23264

C 23264

FOURTH SEMESTER B.B.A. DEGREE EXAMINATION, APRIL 2017

(CUCBCSS-UG)

Core Course

BBA IVB 06-FINANCIAL MANAGEMENT

Time: Three Hours Maximum: 80 Marks

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Part A (Objective type Questions)

Answer all ten questions.

 

(A) Fill in the Blanks:

1. Cost of each component of Capital is termed as ………… cost

2. …………..refers to make up of a Firm's Capitalisation.

3. Cost of capital comprises both ………… and financial risks.

4 The most appropriate dividend policy is payment of ………………

5. Net Working Capital = Current asset minus ………….

(B) State whether the following statements are True or False:

6. Main objective of Financial Management is maximisation of profits.

7. Cash management is a trade off between cost of carrying cash and the necessity of  

    maintaining liquidity. 

8. High breakeven point would indicate a high Operating Leverage.

9. Cash flows from a project can be estimated accurately.

10. Different sources have same cost of Capital.

(10x1= 10 marks)

 

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Part B (Short answer type questions)

Answer any eight questions from ten in two or three sentences each.

 

11. What is Gross Working Capital concept? 

12. What is Financial Leverage?

13. What do you meant by Operating Cycle?

14. What is Pay-back period?

15. What is Finance Function?

16. A Ltd. issues Rs.50,000 8% debentures at a discount of 5%. The tax rate is 50%. 

     Compute the cost of debt capital.

17. A firm has sales of Rs. 10,00,000, variable cost of Rs. 7,00,000 and fixed cost of Rs. 

      2,00,000 and debt of Rs. 5,00,000 at 10% rate of interest. Calculate Operating Leverage.

18. B Ltd, has annual sales of Rs. 25,00,000, variable cost of Rs. 15,00,000, fixed cost of 

       Rs. 5,00,000. It has issued 12% debentures of Rs. 20,00,000. Calculate financial 

       leverage. 

19. X Ltd proposes to issue 1,00,000, 12% preference shares of Rs. 10 each. Issue 

      expenses are estimated at 1% of face value. Ignore redemption period. Calculate cost of 

      capital if shares are issued at par.

20. A Firm's return available to equity share holders is 20%, the average tax rate of 

      shareholders is 40% and it is expected that 2% is brokerage cost that shareholders will 

      have to pay while investing their dividends in alternative securities. What is the cost of    

      retained earnings?

 

(8 x 2 = 16 marks)

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Part C (Short essay or paragraph questions)

Answer any six questions from eight in 150 to 200 words.

 

21. What do you understand by the pay-back period method?

22. What is Receivables Management? Discuss the various dimensions of Receivables

      Management.

23. What is meant by cost of capital? Explain the significance of Cost of Capital.

24. Describe the aims of Finance Function.

25. A simplified income statement of Z Ltd. is given below. Calculate the Combined   

      Leverage.

      Income statement of Z Ltd. For the year ended 31st March 2015

 

 

26. A company issues 10,000 10% preference shares of Rs. 100 each. Cost of issue is Rs. 2 

      per share. Calculate cost of Preference Capital if these shares are issued:

      (a) At par.

      (b) At a premium of 10%.

      (c) At a discount of 5%.

27. Calculate the payback period for a project which requires a cash outlay of Rs. 30,000 

      and generate cash inflows of Rs. 6,000, Rs. 12,000, Rs. 9,000 and Rs. 3,000 in the first,  

      second, third and fourth year respectively.

28. X Ltd. is expecting an annual EBIT (earnings before interest and taxes) of Rs. 1,00,000. 

     The company has Rs. 4,00,000 in 10% debentures. The cost of equity capital or 

     capitalisation rate is 12.5%. You are required to calculate the total value of the firm 

     according to the Net Income Approach.

(6 x 4 = 24)

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Part D (Essay questions)

Answer any two questions in 600 to 800 words each.

 

29. What are the advantages of Adequate Working Capital?

30. Define Capital Budgeting? Enumerate briefly the major steps in Capital Budgeting?

 

31. Project X initially costs Rs. 25,000. It generates the following cash inflows.

 

 

Taking the cut-off rate as 10%, suggest whether the project should be accepted or not.

 

(2 x 15 30 marks)