hobha hai Patel School of Pharmacy & Technology Management \ Programme: MPharm(P’ceutics/IP/PQA/PT}#MBA(PT&HCM) Year: II ‘Semester: VI Academic Year: 2021-22 Mark Subject: Financial Management II Time: 2.00 pm to 4.00 pm Duration: Date: 16 May 2022 No, of Pages :_ 3, [AL EXAMINATION Instructions: Candidates should read carefully the instructions printed on the question paper and on the cover of the Answer Book, which is provided for their use. 1) Question No. 1 is compulsory (Section 1) 2) Out of remaining questions, attempt any 3 questions (Section I) 3) Imall 4 questions to be attempted 4) Answer to each new question to be started on a fresh page 5) Figures in brackets on the right hand side indicate full marks 6) Assume Suitable data if necessary Section I (20 Marks)-Compulsory (Qu{@). Based on the information provided you are required to prepare statement of working capital and ‘comment upon the working capital management effectiveness of the company. (12 Marks) + Annual Sales Rs. 2500 crores © Cash sales — 15% of total sales + Receivable Credit period - 60 days * 20% of the customer availing credit also tend to pay within 20 days by availing cash discount of 2%. ‘The management separately monitors such receivables. ‘* Annual Raw Material Purchases — 900 crores with credit period of 30 days. 80% of purchases are on credit and in case of 15% of purchase advance needs to be paid on a quarterly basis * Other Annual expenses Rs. 75 crores. Paid in the following month * Purchase of Consumables Rs. 200 crores on credit with credit period of 2 months ‘* Stock of Purchased Raw material maintained at 30 days * Stock of Finished Goods is maintained at 3.5 months level at the warehouse. The stock is valued at 75% ofthe selling price. Some stock of F.G of 1.5 month is also maintained at Factory. Cash balance to be maintained @ 15 % of “Working Capital including Cash Balance”. + Lyearis 365 days Page 1 of 3Q1(b} ABC Pharma is evaluating an option of set up new machine at cost of Rs. 15 acs. The expected Sresease in sales is Rs. 10 lacs and Operating cost is Rs. 4.5 lacs per annum for next 5 years. The useful life Ofmachine is 5 years with no salvage Value. Depreciation is on straight line basis and tax rate is 25%. The ‘cost of capital is 10%. Should the machine be installed? (8 Marks) 1 Section IL (30 Marks)- Answer any 3 Q2. Based on the cash flows information provided you are required to (10 Marks) «Compute Net Present Value, Pay back Period, Discounted Payback Period, Profitability Index and “Accounting Rate of Return, «Compare the projects and recommend which project the company should implement. © Also explain the impact of increase in market interest on the projection evaluation parametes and ‘what steps should company adopt to manage the interest rate risks. Particulars Project X Project Y Initial Investment 70,00,000, 70,00,000 (Cash Inflows “|¥4 21,00,000 19,00,000 ¥2 16,00,000 19,45,000 ¥3, 15,45,000 21,28,000 ¥4 20,34,000 15,75,000 v5) 13,00,000 15,00,000 ¥6 22,00,000 14,00,000, Discount rate 12%. 12% 03. -XYZ Co. Ltd, manufacturer of electronic gadgets, has an annual sales of Rs, 80 lakh, Te offers 50 days ceriton sales, The fixed costs are Rs. 8 lakh and the variable costs are 75% ofthe sales. The company is considering a change init credit policy. Based upon its Inowledge of market response, it has estimated tikely sales figure against each of the proposed collection period is provided inthe given table Ifthe expected rate of return is 15%, which policy should be adopted and why? (1 year=365 days) (10 Marks) Policy | Collection Period (Days) | Projected Sales (Rs Lacs) A 45 100 B 60, 105, c 75. 110 D 90 iit Q4. From the information below, prepare a cash budget for a company for April, May, and June 2022 in a ‘Solamnar form, 10% of Purchases and 20% of sales are on cash basis. Collection period for eredit sales is Page 2 of 3Month [Sales _| Purchases Salaries | Other Expenses Actual _ j z 90000 35000 10000 8000 | 95000 | 40000] 15000 6000 100000| _45000/ 12000 5000 92000, 48000 18000 | 4000 85000 34000 14000 7000 0 | 62000 | 20000] —9000 | G5. Write Shor notes on any ofthe following Two topes. Support your answers with suitable examples from the Industry (5*2=10 Marks) #) Financial Decisions for a Medical Research and Development Company >) Role of Price Regulation and restrictions on Financial Management of Pharma Company © Role of Technology and Digitalisation in Financial Management eee Page 3 of 3