GC University, Faisalabad.

LYALLPUR BUSINESS SCHOOL (LBS)

Final Term ASSIGNMENT BASE Examination

Course Title: Strategic Finance

Programme / Section: (Moring + Evening) Department: LBS
th
Semester: 1
Total Marks: 30 Instructor: Dr. Safdar Husain Tahir

Postal Address: H. No 233-C, Jinnah Street, Officer Colony-2, Madina Town, Faisalabad.

Note: Attempt all questions. All questions carry equal marks. Please be
relevant to the questions.

Q.1
( This question relates to the Mini Case Study, Developing a Working Capital Policy
PUNJAB RUBBER PRODUCTS LTD from Working Capital Management Chapter.
Read the case study from the book and answer the below mentioned parts of question 1.)

a) Calculate the return on equity (ROE) for the company under the present policy and the
proposed policy. Which one yields the higher ROE? (Assume that a present interest of 9
percent is paid on the total amount of long-term debt. That is, the total amount of
current assets currently financed with borrowed funds is Rs.140.0 million. Any new
financing pattern will have the same total amount. Assume also that the change from
long-term debt to short-term debt, for a portion of total debt, is "frictionless," which
means there are no penalties or fees attached to retirement of a portion of the long-term
debt).
b) Comment upon your findings in Question 1. Consider increased or decreased risk
related to the change in policy, and also relative to the change in ROE. Should Shahid
Illahi recommend the change in policy? Why or why not?

c) What advantage does the company seem to get by maintaining the relationship
between inventory and sales throughout the year?
Q.2
a) Enumerate and discuss the contents of dividend policy of a listed company.
b) Discuss the dividend irrelevance theory from the perspective of shareholders in a
developing country like Pakistan.
c) Why would a company buy back its own shares? What effect does it have on
company’s future dividends?

Q.3
a) What is risk? How does risk differ from uncertainty? Give three instances of situations
where (i) there is uncertainty but no risk (ii) there is uncertainty as well as risk.
b) Define risk aversion. How does it differ from risk avoidance?
c) Why must one take risks?
d) What is meant by risk management? Discuss the steps involved in risk management
process.

Q.4
Please enlist all concepts not more than three lines, which you learn from this course namely
stragetic finance.

---------------------------Good Luck---------------------------