IILM Greater Noida

PGDM
Batch 2019-2021
First Supplementary Examination
Module Name – Finance-I
Module Code – 506
Open Book Examination-Online Submission

Trimester – 2 Maximum Marks: 18

Academic Session: Oct 2019- Jan 2020 Duration: 2 Hours
INSTRUCTIONS
• All Questions are Compulsory.
• Marks are indicated against each question.
• Detailed explanations should form part of your answer.
• Calculator is permitted.
• Student Roll Number – IGSM/PG201900 ______________ (To be filled by student)

Answer ALL questions

Q1 a. ‘Managers should not focus on the current stock value because doing so will lead to an
overemphasis on short-term profits at the expense of long-term profits.’ Critically analysed the
statement.
b. It has been observed that in recent past especially in context of developed economies, large
financial institutions have become dominant owners of stock and these institutions are becoming
more active in corporate affairs. What are the implications of this trend for agency problems and
corporate control? (2+2=4 marks)

Q2 a. Classify the following events as mostly systematic or mostly unsystematic. Is the distinction
clear in every case?
i. Short-term interest rates increase unexpectedly.
ii. The interest rates a company pays on its short-term debt borrowing is increased by its bank.
iii. Oil prices unexpectedly decline.
iv. An oil tanker ruptures, creating a large oil spill.
v. A manufacturer loses a multimillion-dollar product liability suit.
vi. A Supreme Court decision substantially broadens producer liability for injuries suffered by
product users. (0.5*6 = 3marks)

b. Several celebrated investors and stock pickers frequently mentioned in the financial press have
recorded huge returns on their investments over the past two decades. Does the success of these
particular investors invalidate the EMH? Explain. (2 marks)

Q3 a. Is it possible for a firm’s cash cycle to be longer than its operating cycle? Explain why or
why not. (3 marks)

b. Which would a firm prefer: A net collection float or a net disbursement float? Why? (3 marks)

Q4 In each of the following pairings, indicate which firm would probably have a longer credit
period and explain your reasoning.

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i. Firm A specializes in products for landlords; Firm B specializes in products for renters.
ii. Firm A sells to customers with an inventory turnover of 10 times; Firm B sells to customers with
an inventory turnover of 20 times.
iii. Firm A sells fresh fruit; Firm B sells canned fruit. (1*3 = 3marks)

END OF DOCUMENT

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