Paper - 4.

4 : Financial Management

Time : 3 Hours Max. marks : 90

Instruction : English.

SECTION - A

Answer any ten of the following. Each carries 2 marks. (2x10=20)

1. a) How do you calculate operating leverage ?

b) What do you mean by cash flow ?
c) What do you mean by Trading on equity ?
d) What do you mean by wealth maximization ?
e) How do you arrive at the combined leverage ?
f) Mention the steps involved in the capital budgeting process.
g) What is Net Present Value Method ?
h) What do you mean by scrip dividend ?
i) What is Inventory management ?
j) What do you mean by Dividend Policy ?
k) What do you mean by Receivable Management ?
l) What are the objects of cash management ?

SECTION - B

Answer any five of the following. Each carries 5 marks.

2. Examine the need for financial planning.

3. What are the importance of adequate working capital.

4. A company has Rs. 10,00,000 variable cost of Rs. 7,00,000 and fixed cost of Ts. 2,00,000 and debt
of Rs. 5,00,000 at 10% rate of interest. What are the operating and financial leverages ?

5. Mention the salient features of Net Present Value Method.

6. Brief the different forms of Dividend.

7. A industry is considering investment in a project which cost Rs. 6,00,000. The cash flows are Rs.
1,20,000, Rs. 1,40,000, Rs. 1,80,000, Rs. 2,00,000, Rs. 2,50,000. Calculate pay back.

8. What are the consequences of holding excess inventory ?

9. Mention the significance of cash management.

SECTION - C

10. What is financial planning ? Explain the determinants of financial planning.

11. What is capital budgeting ? How is it significance for a firm ?

12. What is working capital ? What factors determines its requirements ? Explain.

13. A firm’s cost of capital id 10%. It is considering two mutually exclusive profits X and Y. The details
are given below :

Year Project ‘X’ (Rs.) Project ‘Y’ (Rs.)

Investment 1,40,000 1,40,000

Net cash flow 1 20,000 1,20,000

2 40,000 80,000

3 60,000 40,000

4 90,000 20,000

5 1,20,000 20,000

3,30,000 2,80,000

Compute :

a) Pay back period

b) Net Present Value

P.V. Factor at 10% for 5 years

Year 1 2 3 4 5

P.V. Factor @ 10% 0.909 0.826 0.751 0.683 0.621

14. Calculate two companies in terms of its financial operating leverages and combined leverage.

Firm A Firm B
Sales Rs. 20,00,000 Rs. 3,00,000
Variable cost 40% of sales 30% of sales
Fixed cost Rs. 5,00,000 Rs. 7,00,000
Interest Rs. 1,00,000 Rs. 1,25,000

Interpret the results of the firms.

----------------------------