Mid Term Examination 2021

MG 212: Financial Management

BBA LLB IV Semester
Max Marks: 30

Que 1: Ms. Sheetal is a manufacturer and exporter of silk in the international market. She
decided to look into the domestic untapped market and secured an order to supply 30 kgs of silk
in a temple. She thought of starting the first domestic order as a philanthropist and luckily her
first order is from a temple. She waives off 25 percent of the price and delivered the product. On
the delivery of the product, the temple administration finds the product unworthy and inferior
quality. As her firm is manufacturing export-oriented silks, she doesn’t agree with inferiority of
the product. But the temple administration asked her to take back all her consignment of
delivery. As a philanthropy act, she has no Business Contract with her.

a.) What are the key learnings from this case?

b.) Export or domestic market, whichever is better?
c.) What is the role of the business contract?
d.) What do you think will be the solution for both the parties?

Que 2: Critically discuss and assess the impact of risk and uncertainty on the financial decision-
making process and be able to appropriately advice others on the basis of analysis.

Que 3: Analyze the financing decisions of firms including capital structure and cost of capital. If
you have to go for financing your firm what your decision will be under these circumstances:

a.) Family-owned business you just took over from your family.

b.) Own start up.

Que 4: Explain various Capital Structure Theories. Which theory has upper hand on other and
why? Explain.
Que 5: Company ABC and company XYZ both manufacture soda pop in glass bottles. Company
ABC produced 30,000 bottles, which cost them 100 each. Company XYZ produced 45,000
bottles at a price of 125 each. Company ABC pays Rs 10,00,000 in rent, and company XYZ pays
Rs 17,50,000. Both companies pay an annual rent, which is their only fixed expense. Compute
the operating leverage and degree of operating levarage of each company.

Particulars ABC Ltd (in Rs) XYZ Ltd (in Rs)

A. Variable Cost/ Bottle 100 125
30,000 45,000
B. Bottles Produced

C. Total Variable Cost 30,00,000 56,25,000

(A*B)
10,00,000 17,50,000
D. Add: Fixed Cost

Total Cost (C+D) 40,00,000 73,75,000

There must be no plagiarism of work or ideas. Stepwise marking will be followed. Please
submit your work in your handwriting OR typesetting (12 points, Times New Roman,
double spacing) in PDF file by 02th April 2021.