Q.P.S.

NO: 857 COURSE CODE 17UBN05

(for the candidates admitted from the academic year 2019-2020 onwards)
BBA-Degree Examination , November-2021 (February-2022)
Major Subject: BBA, Semester-III
CC-V: Financial Management
Time: 3 Hours Max.Marks:75
SECTION –A(15x1=15 Marks)
Answer ALL Questions. Choose the Correct Answer.

1. Basic objective of financial management is

a. Maximization of profits b. Maximization of shareholders wealth
c. ensuring financial discipline in the firm d. All of these

2. Which one of the following features of preference shares is similar to those of equity shares?
a. redeemability b. no obligation to pay dividend c. voting rights d. charge over assets

3. Which one of the following is not a source of long term finance?

a. equity capital b. preference capital c. voting rights d. change over assets

4. The return after the pay –off period is not considered in case of
a. present value index method b. Internal rate of return method
c. pay back method d. All of these

5. If net present value for a project is negative then

a. IRR < Cost of capital b. IRR > Cost of capital c. IRR = Cost of capital d. BCR>1

6. In evaluating capital investment proposals, time value of money is considered as

a. Accounting rate of return b. Discounted cash flow method c. Pay back method d. all of these

7. --------------- is known as variable income security

a. Debentures b. Preference shares c. Equity shares d. None of these

8. The combined effect of operating leverage and financial leverage can be seen by ---------------
of the two which becomes combined leverage
a. Addition b. Subtraction c. Multiplication d. None of these

9. The degree of combined leverage measures the

a. Change in EPS due to change in cost b. Change in EPS due to change in sales
c. Change in EPS due to change in debt funds d. All of these above

10. The cost of debt capital if interest rate is 15 % and tax rate is 40% is
a.6% b. 8.5% c.9% d.10.5%

11. Instant cash payments are associated with

a. Implicit cost b. Explicit cost c. Historical cost d. Opportunity cost

12. The outcome of the company investment decisions characterized by variable returns on
assets is
a. Business risks b. Financial risks c. Business premium d. Financial premium

13. Which of the following factors does not influence the composition of working capital?
a. Nature of business b. Nature of raw materials used
c. Nature of finished goods d. Financial leverage of the firm
14. Cash includes
a. Notes and coins b. Bank balance c. Bank drafts d. All of the above

15. Which of the following is not a cost of maintaining receivables?

a. Collection costs b. Defaulting costs c. Costs of addition fund required d. Marketing schedule

Section B 2*5 10Marks

Answer Any Two of the Following Questions

16. Highlight the significance of financial management in detail.

17. Consider the following two alternatives

Particulars Continuation of old machine Installation of new machine
Cost price 20000 50000
Estimated life of machine 8 years 10 years
Estimated cas costs per annum 10 000 12000
Estimated revenues per annum 18 000 24000
Scrap value 4 000 10000
Tax is charged @ 50%. From the given information calculate accounting rate of return

18 . Calculate operating leverage from the following information. Interest Rs 5,000, sales Rs 50,000
variable cost Rs 25,000, fixed cost Rs 15,000.

19. A company shares are currently trading at a price of Rs70 with 500000 outstanding shares. Their
expected profit after tax for the coming year is Rs8400000. Calculate the cost of equity capital at per
earning yield method.

20. Elaborate the types of working capital.

Section C 5*5 = 25Marks

Answer either a or b from each of the follwing question. Each question carry equal marks.

21 .a) Compute the share value of a company paying a dividend of Rs3.60 per year over infinite maturity,
with expected zero growth. The discount rate (i) is assumed to be 12% yearly. Calculate future value
or present value or annuity?
Or
b) Rudy will retire in 20 years. This year he wants to fund an amount of Rs15,000 to become available
in 20 years. How much does he have to deposit into a pension plan earning 7% annually?

22.a) The company’s initial investment in a project was Rs 100000 and the expected cash inflows during
the project are as follows
Years 1 2 3 4 5
CFBDT Rs 10000 10692 12769 13462 20385
Compute (i) Pay back period (ii) IRR (iii) NPV and (iv) Benefit cost ratio
Or
b) A company is appraising two projects A and B. Assuming the present value of future cash flows for
project A is Rs 5000 and that the project B is 4850. Also assume tat both projects have an initial
capital investment of Rs 4750 each. Calculate the PI for both projects and determine whether or not
to invest in the projects.

23 .a) Describe the long term Sources of Finance.

Or
b) Calculate the Degree of operating leverage, degree of financial leverage and the degree of combined
leverage for the following
 Particulars Firm X Firm Y Firm Z
Output (units) 60000 15000 10000
Fixed costs (Rs) 7000 14000 1500
Variable Cost per Unit ( 0.20 1.50 0.2
Rs)
Interest on borrowed 4000 8000 -
funds (Rs)
Selling price per unit 0.60 5.00 1.00
(rs)

24 .a) Explain the types of of dividend policy.

Or
b) Describe the assumptions of Gordon’s Model

25 .a) Explain the process of cash management.

Or
b) Describe the factors affecting the size of receivables.