CHAROTAR UNTVERSTTY OF SCTENCE AND TECHNOLOGY (CHARUSAT)

FACULTY OF MANAGEMENT STUDIES (FMS)

INDUKAKI\ IPCOWALA INSTITUTE OF MANAGEMENT (I2IM)
MBA PROGRAMME
SL-NIESTEIL-II
INTERNAL EXANIINATION-1, MARCH-2O10
Sub: Iiinancial Nlanagement (M8732)
Date: I 7i0ii20l 0 'f inte: 03:00pnt to 0;l: I 5prn Total Marks: 30
Note: - (i) All questions are cornpulsorl'.
(ii) -f his is a closed booli exarnrination.
(iii) FigLrres on the right inclicate rnarks lbr each question

Q.1 a frxactll' lcu -''eals froin ruorl Sir'{'hancl iviilstart rece iving a lrension o{'lls.!009a 1iear.I"he 05
11i1,\,1|cnl it il] ccl:rtirrii* [,i':lirierir }'cars. llorl rlLiclt is the lrensiorr u'orth rro*. i1'Sri Chand's
iiriai"ast li,itc ir lii';'o'.)

(i) A l{s 100 pelpetLral boncl i5 cLrrerltly selling tbr l{s 90 TIre coLrpon rate ol'inlcrest is 110/,' 03
rncl thdlplrLopriatc clisctrunt r.i.rtc is 119i,. CalcLrlrte lhr'ralLre of the borrd. ShoLrld it be boLrght?
\\'lrat is its r ield al ntr.rtulitr'l
(ii) ,\ corrpauv proposcs to selllc'n-r'ear clebentures of Rs 10.000 each. Thc conrpanr uould 07
lcpar lis 1.0()0 ul thc cnti o1'erct',r c\clr \enrs lnri *ill par intcrcsi lnnrrall-r ul i-10r'o on thc
(rLrtstandin! rimount. Dcterrr.rine the pleseut r,ulLre trltire debenttrre issLre i1'thc capitalizatiou
t'atc is i-l'l r,.

(.)-2 (lirsr : l'aral Plastics Conrltanr t5

[)ara] Plastic Cionrparrr (PPCI) is enga,,ccl in the nrrrnLrlactLrlc olplastic-b;ised ploclLtcts fbr
honre ttse.'l'he cotttlrtrtr is locatccl irr Fariclabad in l-lalvana. It is one oltltc lcading sLrppll3;q p1
t'1:r-ll- l'r' ,l li:r.s itr llt.' nr:::'l.ii- , l'Il.ir';,.irta. Prrrt-l ab an,-l D.'lhi. ln tc;enr. \cili':. tlt- aa)llIrL-iitlr'n
il.r\ irticil\illlil lirt.l irtitit" >rit.lll rtrrur Lrlu;tLrrer': hrl\a enlL-r'c!l lhc ntrrket. I)lr(. lias been able to
lluc thc !'')nlltclition on thc strcnglh ol tlr,- LlLtrlitr entl prie r' ot'its preiclrrcls. ln spite ol-hith
r',.)ntl)rtilirrir. il Itlt. Sr'(r\\ n rlrlrilll'

Pl'C is lr pruf itablc c()l)tPiin\. bLtt ir hris h.-cn lacirrg liqLriti it,r pr()blcllt firr a coLrltlc of rcars. 'l hc
.ontl)ln\ hlis rlr'lttrr llccl in pai iir!. its obligation: ancl has strctchccl l)ir\ ntent to its creclitors.'['his
has llicctccl cor]lililn)'"s clecl itlortiriness..l-he conrpanv nranageutent is rorried that the
1t'erluent slrtttchir.tg olcreclit pavurcnts nrighl clLrsc- srrppliers to tlcrnrrrd e lr:lr par nterrts [or
-['he
ltLrrchases. rlanagin,'cjir-ectcl'theretbre \\ants the 1'luance lnanqer to plepare a cash bLrdget
iind nralic a plan 1br rtreetilrq a dct-icit sitLratiern.

'l'he fltrance llanager

set to develop a monthli cash budget lor the period starling fi'orn April
200'l to JLrrre 2004. She obtained the actual sales figLrres 1l'orl the records of the lastthree
months, and based on tlte past trends arrd firtLrre marl<et prospects. developed the sales forecasts
as slrorvr.r belon':

Pttga I ttJ 2
 \\\

\
6.J'l-
'".l
l^Lht \ Sales forecast
tns. in lakhs)7, d ^C.( {
-n ^t"ql (aleS G. 260 /r c
\tnf
240
t
210 t-- \\ r-
--jl-Uluty
FebLuarY 280
March Il-,,,-a+ jlu'\ l
I I'rlrr
160
240
14.
\t4
:\ +f-
1- i-- A
-
200

lr' i
1
sep;'ub;'
o"'ot"t
160_-
201)
v{\
: F-
oithe rorar sares,lpc':.p!-{4ry/'"('"il?,ilxt;::xiy,r*.::;:ilipi:.'^":!'ll'TlilJ
" "'
: Ifi ln of "
ll,*
ancl rl.re
: n; .?.: : H :'^;:1
rer.aini'g
; : 5: ::l l:i
,rin.
f:T# f :::.'* il'."'Til
o:"^lytt"tqui"
,r-,irl ,rontrr
u very i^heavrr'rse x
"r'r.r.r7oc.i ii 70% of,sares. Trre conrpan)'bLr5s 6006 0f'
-fr.,e a'erage corrsLrrnption orrorr'*fteriar ciedit te'ris are i0
rr_rateriar.
ria[, ..,1uir.l L,, ii,. ,i.', ,,.,o,*#li;##fi*llimsrnnlieL's t'trtttlt' 200r' itr
the
tl,..on-tp"'ti;'it for 609b ol pt'':tl.t"tes itr n
i.,iL'tti"*'i"t..'t"tr i-rrc c\.e'tt'i
that
clars. Birt t'e r.ecorcis sho*
'rare 1i':'

t*o,r.rr': .rrrl ihc,'.'rii,,,,i,,g i. [lrt'cc

"t]li,,t'''ti't
\\'ages arld salll'ies'

L,1.
.ILII\ +r r

\ \Ligttst ) -:-
0*'-
are estit'ated to be
general aclmir-ristrative attd rnarketitig e\penses
fhe llred a'cl variable Po"'tt arrcl tuele\penses are
plannecl a
ab.Lrr I{s t.> iali' o.r:,-':,-,;;i ^",1-rg^ "rt"t.r",.tlptttii'el1' l) lak'pc.uo'un"l'he t:on-rpatrl''as i'Jr"tnc'
ti6pieci,tio'Ir's
cr'cetcilrrr bc i?i,,,, ,r,i.r.,-.'0 *,,,.','j,.,rn,.ittr-,.'paiJ in \rrr
ard i'.- re'raining
ca'irar c\ir..LrJirLrc.,:ii'riii',.,.,,,..u t 6o i' a'rl'trrl t*t'l it io
be prri,.l itl the trontli tr{'
ir-,,: irrlt'-'...,11 i'.,,.r.;., ." -i-he
C)rr .r Ii.: l, l.rl.h L-.i,rrii..,.
financiai
r': I -i tertr is 'iLLc it't '\pril
2-l lakh'
.ttri.. -\ r:i\ ir:r\rr.-rr t,u to be Rs
Pl'L't tll" lilrl'illtr for the tlert re-ltr is c\llcctcti
l',.luagc're ltt cstitlllttcJ t',rt 'ier,u.',r..,,,j,'',;'t;;i"if{s lr.r Dccc'ber' Thc cttt'ttittrtlr
i, e.*ilrr ir,:turrir..rr,.-- ,,, it,,;a'..'.., u,,a. -t.pi.,'rrrcr
ri'ie ir i: rli.i\ilbir irr the L.'cgi.tritrg o1'April'
u',.r b.rli brl.trtc..;ii; l-10-000
is er'ccrctl to
'arc."ri, created an Excel file b1'
aboLrt casUb$'s':l:]i:1lt':nangel
Afier collecting the iutortlation into cash receipts and parureuts'
His concern
flor,,s srsteiffial.tf
classitli'g eacrr iteur of casrr is nlade tlie casli t'lorr
in sales oL collection esperience
rvas that as ancl ,.'hett attt'change
foi...rts automaiically' get Lrpdated'
should

o''.i"i:!:;::::':'rrn bucrget rbr

ppc. and provide an explanation ior the results

!"'
l3lr r

Pnge 2 o.f 2 ,(