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MS-4

MANAGEMENT PROGRAMME

Kzt Term-End Examination
December, 2009
(:))

MS-4 : ACCOUNTING AND FINANCE FOR
MANAGERS

Time : 3 hours Maximum Marks : 100
(Weightage 70%)

Note : Attempt any five questions. All questions carry equal
marks. Use of calculators is allowed.

(a) What do you understand by Internal Audit ?
How do the functions of an internal auditor
differ from that of External Auditor ?

(b) Explain the consistency concept and Accrual
Concept of Accounting. How is the Accrual
Concept adhered to while preparing the final
accounts of a company ?

(a) What are intangible assets of a firm ? Why
are they shown in the Balance Sheet ? What
is meant by amortisation of such assets ?
Give reason for the same.

MS-4 1 P.T.O.

instead of equity shares to finance its activities ? Discuss how ? 3. Distinguish between : FIFO and LIFO methods of Inventory valuation. MS-4 2 . What do you understand by Break-even analysis ? Discuss the assumptions underlying the break-even analysis. Rights Shares and Bonus Shares (c) Direct Material Price Variance and Direct Material Usage Variance (d) Imputed Costs and Opportunity Costs. 4. if the company issues debentures. How do these assumptions make the break-even analysis unrealistic ? Explain and prepare a Break-even chart assuming relevant figures. affected. (b) What do you mean by Control Ratios ? Explain the three important control ratios and discuss their significance. (a) What do you understand by Flexible Budget ? How does it differ from a Fixed Budget ? Explain its utility to a business organisation. (b) What do you understand by Appropriation of profit of a company ? How are the profits appropriated ? How will the profits to be appropriated. 5.

P. 50 lakh Average Inventory Rs.a.. The total turnover of the company is Rs.000 p. they are free of cost. Marketing through dealers would involve MS-4 3 . manufacturing a consumer product and marketing through its network of 400 depots all over the country. Average turnover.S. 6. 80.a The inventory carrying cost is 16% p. ratio. 50. which is the rate for working capital finance. is considering closing down the depots and resorting to dealership arrangement. 200 crore per annum. Explain fully the following statements : Operating cycle plays a decisive role in estimating the working capital requirement of a firm.a Staff Salary Rs. 5 lakh Administration Expenses Rs. costs etc in respect of a depot is given below : Average Turnover Rs. A company. 7. As there is no explicit cost of retained earnings.000 p. Depreciation acts as a tax shield An investor in shares considers not only its E. but also P.E.

Marketing through dealers would involve payment of a commission of 5% on sales. MS-4 4 P. Current profit is Rs. engaging dealers for each area. This would result in increasing the capacity utilisation from 75% as at present to 90%. 5 crore with the company on which interest at 12% p. 8.T.O. You have the following information on the performance of Premier Co. Ltd. The dealers will assure a minimum sale for each area. and also the industry averages : Determine the indicated ratios for the Premier Co. . and to give your reaction if the commission to dealers is reduced to 4% on sales. Ltd. 150 lakh.. Dealers will deposit Rs. but 50% of the existing Depot Staff will have to be absorbed in the company. The Company's P/V Ratio at present is 10% and the Break even point is at 50%of the capacity. and Indicate the company's strengths and weakness as shown by your analysis. You are required to work out the impact on profitability of the company by accepting the proposal as above.a. will be paid.

00.90.0 Net Profit Margin 3.000 40.000 Stock 16.59.000 Less Taxes (50%) 1. 2008.000 10% Debentures 4. Equity Share Capital 24.000 Earnings before interest & tax 2.49.30.3% Net Profit /Total Assets 6.50.500 Net Profit 1.6% Net Profit/Net worth 10.000 Factory overhead 6.77.15.000 Sundry Debtors 5.000 38.8 Total Assets Turnover 2.20.000 Net fixed Assets 12.14.41.00.20.50.000 Less Selling & Distrubution cost 5.0 Stock Turnover 9.40.15.000 Administration & General Expenses 6.000 Other Current legend 2.5% -o0o- MS-4 5 . Sales 55.7% Total Debt/Total Assets 63. Balance Sheet as on 31st December.000 Profit & Loss A/c for the year ending 31st Dec.000 Less Cost of Goods sold : Materials 20.500 Industry Ratios Considered Ratios Current Ratio 2.000 Bills Payable 4. 2008.000 Wages 13.000 Cash 4.50.60.000 11.40.50.50.64.10.000 Gross profit 14.000 Sundry Creditors 3.4 Debtors Turnover 8.000 Less interest charges 46.000 38.