JAIN INSTITUTE OF BUSINESS MANAGEMENT, KANAKAPURA

PRACTICE PAPER- JUNE 2020

CLASS: IV SEM BBA SUBJECT:-FINANCIAL MANAGEMENT
TIME: 3 Hours MAX MARKS: 70
SECTION-A
I. Answer any five sub-questions, each sub-question carries two marks. 5x2=10
1. a. Mention any 4 functions of financial management.
b. Define financial management.
c. What is dividend decision?
d. Give the meaning of time value of money?
e. What is an annuity?
f. Calculate the present value of 50,000 at the end of 3 years at12% per annum rate of Interest.
g. What do you mean by capital structure?

SECTION-B
II. Answer any three questions, each question carries six marks. 3x6=18
2. Find out the present value of annuity receipt of Rs 8,000 received for 5 years at the rate of 8%discont rate.
3. Explain the types of working capital.
4. Briefly explain the steps in financial planning.
5. Determine the types of leverages from the following information.
Sales (Rs.5 per unit) Rs. 1, 00,000
Variable cost per unit Rs. 1 per unit
Finance expenses Rs.20, 000
Fixed costs Rs.1, 00,000
6. State the functions of financial manager.

SECTION-C

III. Answer any three questions, each question carries fourteen marks. 3x14=42

7. Explain the factors influencing capital structure.

8. What are the principles of sound financial planning?
9. India Ltd. has a capital of Rs.1, 00,000 divided into shares of Rs.10 each. It wishes
to raise further Rs.50,000 for modernization. The company plans the following financial schemes:
a. Issues of 5,000 shares of Rs 10 each
b. Issues of 5,000, 12% preference shares of Rs 10 each
c. All in 10% debentures of Rs 50,000
The company’s EBIT is Rs.30,000. The corporate tax is 50%. Calculate EPS in each case.
 EBIT continues to be same even after expansion.
 EBIT increases by Rs 10,000
Give comment as to which capital structure is suitable.

10. A company is considering an investment proposal to install a new machine. The project will cost Rs 70,000 and will
have a life of 5 years no salvage value. The company’s tax rate is 30% and no investment allowance is allowed. The
firm uses straight line method of depreciation. The estimated cash flows before depreciation and tax are as follows :
Year Income before depreciation and tax
1 20,000
2 20,000
3 25,000
4 30,000
5 50,000
 You are required to evaluate the project according to each of the following methods:
a) Payback period
b) NPV@10% discount rate
c) Profitability index@10
(P.V. factors @10%. 0.909, 0.826, 0.751, 0.683, 0.621)
11. Compare two companies in terms of its financial, operating and combined leverages.
Particulars Firm ‘x’ Firm ‘y’
Sales Rs 2,00,000 Rs 3,00,000
Variable cost 30% of sales 40% of sales
Fixed cost Rs 50,000 Rs 60,000
Interest Rs10,000 Rs 15,000
Interpret the results of the firms

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