Mirpur University of Science and Technology

(Bhimber Campus)
Paper: Business Finance Exam: Mid Term
Semester: 4th BBA(Hons) Instructor: Nabeel Akhtar
Time Allowed: 6 Hrs. Total Marks:45

Answer the following Questions.

Q#1. If the balance sheet of XYZ Company is given below then how you can do the analysis of
this balance sheet. Give your Answer in the context of Accounting liquidity, Book vs debt
value and Debt vs equity. (10)

Market Value = $ 70,000

Market Value = $ 26,000

Market Value = $ 35,725

Market Value = $ 96,000

Market Value = $ 71,000

Q#2. The optimal level (Break-even point) of capital structure of the ABC Company in 2019 is
as i.e; 60% of Debt and 40 % of equity. In 2020 company want to increase its debts by 15%
in order to undertake new investment. In 2020, the capital structure of company will
become 75% of debt while 25% of equity. As Company changing their optimal level of
capital structure so what kind of costs Company will be bear in 2020 and also what benefits
company can avail in 2020 by increasing their debts. Justify your answer in the favor of
ABC Company.

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 Mirpur University of Science and Technology
(Bhimber Campus)
Also explain the advantages and disadvantages of debt and equity. (6 + 4)
Q#3. What is cash flow statement and what are the components of the cash flow statements?
Explain them. (5)
Q#4. (a) What is Present Value? Also elaborate the relationship of Present value interest factor
(PVIF) with interest rate and time period. (4)
(b) Suppose you need RS. 1, 00,000 to buy a car in next three years and you can earn 6%
on your money. How much do you have to put up today? (6)
Q#5. (a) What is Discounting and Compounding Factor? (4)
(b) A XYZ Company wants to purchase of an asset for Rs.3, 35,000 which may be sold for
Rs.4, 00,000 in 3 years. If the discounting factor is 10%, is this a good investment? (6)

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