STUDENT Examination NO: ………………………

KIU Faculty of Management

Bachelor of Management Honors in HRM- 0606 01004/0606 05001/0606 01005/0606 05002

Bachelor of Management Honors in MKT- 0706 01004/0706 05001/ 0706 01005/0706 05002
Bachelor of Management Honors in ACC- 0806 05001/0806 01005/0806 05002

2nd Year 2nd Semester – Special Repeat Examination - May 2022

ACT2302 – Financial Management

Date: 10th May 2022 Duration 02 hours

Time : 09.00 am – 11.00 am Marks 100%

This paper consists of Three Open Book questions. Answer all.

Please read the following instructions carefully before you answer questions.
All the exams should be carried out using Microsoft Teams.
The students should indicate the following details on the front page when submitting the answer sheets:
Index number
Subject name
Date
Number of questions attempted
Number of papers used
Group number
The students should indicate the examination ID number in all papers that are submitted as answers.
All the papers should be numbered in an order and sent as a single document.
Students should rename the answer script as “B03, Module code, Last four digits of ID.(e.g.B03, MGT3406,1234)

Upload your answer scripts as per the instruction given below.

1. Typed answer script

a. Make PDF format
b. Upload the file to the Assignment, My work,
c. Enter the “Turn In/Hand In” key
2. Hand-written answer script
a. Take clear photographs of the answer script
b. Make PDF format
c. Upload the file to the Assignment, My work,
d. Enter the “Turn In/Hand In” key

In an instance where the students fail to submit answers in Ms. Teams, within the given time, the student should
immediately contact the assigned lecturer/supervisor/invigilator to inform the issue and then use the following
as the answer submission methods.

KIU Department of Examinations

Page 1 of 7
 STUDENT Examination NO: ………………………

Question No. 01

1.1.Discuss the importance of studying Financial Management.

(10 marks)
1.2.What are the reasons that determine the time value of money?
(08 marks)

1.3.Imagine you are going to buy an asset for Rs. 67,000 and you would sell the asset in 3 years for
Rs. 75,000. If you could invest the Rs. 67,000 elsewhere at 10% interest, critically evaluate the
investment opportunities and select the best option with relevant calculations.
(12 marks)
(Total 30 marks)

Question 02

2.1.Cost of capital computation is based on certain assumptions. Evaluate the assumptions.

(10 marks)

2.2.Briefly discuss the difference between capital structure and financial structure of an organization.
(08 Marks)
2.3.ABC Ltd. has the following capital structure.

Equity (expected dividend 12%) – Rs. 1,000,000

10% preference shares - Rs. 500,000

8% loan - Rs. 1,500,000

You are required to calculate the weighted average cost of capital, assuming that the rate of
income tax is 50%. (08 marks)

2.4.The shares of Amana PLC are currently selling at Rs. 70 per share. The company expects to pay a
dividend of Rs. 6 per share. If the shareholders’ required rate is 11%, what is the growth rate of
common stock? (04 Marks)

(Total 30 Marks)

KIU Department of Examinations

Page 2 of 7
 STUDENT Examination NO: ………………………

Question No. 03

3.1.Some scholars argue that "ratio analysis is not a sound method to analyze the financial
statements." Do you agree with this statement? Justify your answer.
(10 Marks)

3.2.Financial statements of ABC Ltd are given below.

ABC Co. Ltd

Statement of Financial Position
as at 31st March 2019 (Rs. in Millions)
Non-current Assets
Property, plant and equipment 5,500
Furniture 2,900
Net Non-Current Assets 8,400

Current Assets
Inventory 1,500
Accounts receivable 1,100
Cash 400
Total current assets 3,000
Total Assets 11,400

Liabilities and owners' equity

Common Stocks 1,000
Reserves 1,100
Retained Earnings 3,300
Total equity 5,400

Non-current liabilities
Long term debts 2,400
Total Non-current liabilities 2,400

Current Liabilities
Accounts payables 2,400
Notes payables 1,200
Total Current liabilities 3,600

Total Liabilities and equity 11,400

KIU Department of Examinations

Page 3 of 7
 STUDENT Examination NO: ………………………

ABC Co. Ltd

Comprehensive Income Statement
for the Year Ending 31st March 2019
(RS. in
Millions)
Sales 12,920
Cost of Goods Sold 2,400
Administrative Expenses 3,600
Depreciation 1,200
Interest Expense 120
Taxes 2,200
Dividends 1,000
Addition to Retained Earnings 2,400

You are required to calculate,

1. Current Ratio
2. Liquid Ratio
3. Debt-Equity Ratio
4. Gross Profit Ratio
5. Operating Profit Ratio
6. Return on Capital Employed
7. Earnings Per Share
8. Dividend Per Share
9. Sock Turnover Ratio
10. Debtors Turnover Ratio
(30 Marks)

(Total 40 Marks)

KIU Department of Examinations

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