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December, 2012

MC0-07 : Financial Management

1.  (a) Explain the factors that influence working capital needs of a business unit.

(b) What is the purpose of holding inventories ? Explain brief the selective inventory control techniques.

2.  A company is considering an investment proposal to install a new machine at the cost of Rs. 1,50,000. The machine has a life of 10 yrs. and salvage value is Rs. 5,000. The tax rate is 40%. Assume the firm uses straight line method of depreciation.

Compute :

(a)  Pay back period

(b)  Net present value at 10% discount rate.

3.  (a) When does financial leverage become favourable ? Discuss its impact on risk.

(b) The following data is available for ABC Ltd.

Calculate ROI leverage, operating leverage, and financial leverage.

4. (a) Briefly explain the factors that influence the capital structure of a company.

(b) Explain MM Proposition I and state its assumptions.

5. Explain the concept of share buy back and the legal requirements relating thereto. Also illustrate as to how does it increase shareholder's value.   

6. (a) What is an equity share ? How does it differ from preference share ?

(b) Explain the concept of venture capital and its current status in India.

7. (a) Explain the concept of foreign exchange exposure and its various types.

(b) Give an overview of project finance and state its basic requirements.

8.  (a) Explain briefly the various measures of risk.

(b) Distinguish between Net Present Value and Profitability Index. Which one you consider a better method of capital budgeting and why ?

9.  Write explanatory notes on any  two  of the following : 

(a)  Role of Finance Manager

(b)  Time Value of Money

(c)  Cash Management

(d)  Cost of Capital 

June, 2013

MC0-07 : Financial Management

1. (a) What is financial management ? Explain the basic finance functions.

(b) In what ways the wealth maximisation objective is superior to profit maximisation objective ?

2. (a) Explain the concept of risk and return. What are the various statistical techniques available to measure risk ?

(b) What is Capital Asset Pricing Model (CAPM) ? Explain its assumptions and implications.

3. (a) What is capital budgeting ? Why is it significant for the business firms to prepare it ?

(b) A company is considering the following investment projects :

Rank the projects according to the Accounting (Average) rate of return (ARR) method.

4. Explain the concept of project finance. Also distinguish it from corporate finance.

5. (a) What is purpose of holding the inventories ? Why is the inventory management important ?

(b) What is Economic Order Quantity ? Explain the process of its determination.

6. (a) Explain the meaning, types and significance of working capital.

(b) Discuss the different methods of ascertaining working capital requirements.

7. (a) What is meant by the 'buy back of shares' ? What is its rationale ?

(b) Is 'buy back of shares' really beneficial to the company and shareholders ? Explain.

8. Given below is the information of Gaurav Enterprise :

 Calculate the following :

(a) Degree of operating leverage;

(b) Degree of financial leverage;

(c) Degree of combined leverage; and

(d) Percentage change in EPS if sales increase by 5%

9. Write explanatory notes on any two of the following :

(a) Yield to Maturity method

(b) Capital Rationing

(c) Lease financing

(d) Cash budget