DEGREE PROGRAMME: MBA

B. List out and explain the methods of measuring the changes in

ACADEMIC YEAR: 2013-14 SEMESTER: II

UNIT TEST: II

SUBJECT CODE: BA7202

TITLE: FINANCIAL MANAGEMENT
DATE: 17.03.14

TIME: 3 hrs

MAX. MARKS: 100

PART A
ANSWER ALL THE QUESTION (10*2=20 marks)

1. What is financial management?

2. Briefly explain the objective of financial management.
3. Individuals do have a time preference for money state the reasons
for such preference.

the value of money

13. A. What do you mean by economics of capital budgeting? Explain
OR
B. i. Mr. Raghav invests Rs.25000 in a bank at 10% for 5years.
Calculate the maturity value if interest is compounded annually.
Will he get more if interest is compounded half yearly?
ii. Shajita has entered into an agreement that will fetch her
Rs.60000 p.a for the next 4 years. She wants to know the present
value of the future cash inflows at 20% discount rate.
14. A. Explain the features, advantage and objectives of capital
budgeting.

4. Write a short note on IRR method.

OR
B. In what manner is the discounted cash flow technique useful in

5. State the features of capital budgeting.

capital budgeting decision Discuss?

6. What is meant by capital rationing?

7. How will you compute the cost of debt capital?
8. State the essentials of an appropriate capital structure.

15. A. Explain the approach of weighted average cost of capital and

state its limitations.
OR
B. Explain the types of leverage with its formula and format.

9. What is composite leverage? How is it measured?

10. List out the various assumptions of capital structure theories
Part B (5X16=80)
11. A. Financial Management is the appendage of the finance
function. Comment.
OR
B. Explain the changing scenario of financial management in
India.
12. A. Discuss fully the organization of the finance functions in a
business.
OR

MISRIMAL NAVAJEE MUNOTH JAIN ENGINEERING COLLEGE

DEGREE PROGRAMME: MBA
ACADEMIC YEAR: 2013-14 SEMESTER: II

UNIT TEST: II

SUBJECT CODE: BA7202

TITLE: FINANCIAL MANAGEMENT
DATE: 17.03.14

TIME: 3 hrs
PART A

MAX. MARKS: 100

ANSWER ALL THE QUESTION (10*2=20 marks)

1. How is the term finance more comprehensive than money

management?
2. Briefly explain any two set backs of Profit maximization.
3. What do you understand by time value of money?
4. Define Explicit Cost
5. What are the needs of capital budgeting?
6. Explain Degree of Operating Leverage.
7. What do you understand by sensitivity analysis?
8. Differentiate average cost and marginal cost.
9. What is meant by leverage?
10. Write a short note on stable dividend policy.
Part B (5X16=80)
11. A. In what ways is the wealth maximization objective superior
to the profit maximization objective? Explain.
OR
B. What is risk? How can risk of a security be calculated?
Explain your answer with an example.
12. A. State the different kinds of capital budgeting proposals. How
would you rank them for the purpose of their selection?
OR
B. A company is considering two mutually exclusive projects.
Both require an initial cash outlay of Rs. 20,000 each and have a
life of 5years. The companys required rate of return is 11 percent
and pays tax at a 40 percent rate. The projects will be depreciated
on a straight line basis. The before taxes cash flows expected to be
generated by the project are as follows:
Before tax cash flows (Rs.)
Year
1
2
3
4
5
Project A 8,000 8,000 8,000 8,000 8,000
Project B 12,000 6,000 4,000 10,000 10,000
Calculate for each project (i) the payback, (ii) ARR (iii) the net
present value and the profitability index and (iv)the internal rate of
return. Which project should be accepted and why?

13. A. As a finance manager of the firm , what are all the factors to be
considered for devising a dividend policy of the firm
OR
B. i. Mr.X deposits each year Rs.500, 1000, 1500, 2000, 2500 in his
savings bank, n=5yrs, interest rate is 5%. Find the future value of its
deposit at the end of the 5th year
ii. Shajita has entered into an agreement that will fetch her
Rs.60000 p.a for the next 4 years. She wants to know the present
value of the future cash inflows at 20% discount rate.
14. A. Explain the features, advantage and objectives of capital
budgeting.
OR
B. How is the cost of different types of capital measured? Illustrate
and explain.
15. A. What are the various factors influencing dividend policy?
Explain.
OR
B. Explain the significance of operating and financial leverage
analysis for a financial executive in corporate profit and financial
structure planning.

DEGREE PROGRAMME: MBA

ACADEMIC YEAR: 2013-14 SEMESTER: II
SUBJECT CODE: BA7202
TITLE: FINANCIAL MANAGEMENT

UNIT TEST: II

DATE: 17.03.14

TIME: 3 hrs

MAX. MARKS: 100

PART A
ANSWER ALL THE QUESTION (10*2=20 marks)

1. What is scope of financial management?

2. What is Walters formula to determine the market price per
share?
3. What is meant by inflation?
4. What is capital rationing? State the principles of capital
rationing.
5. Define and explain financial assets.
6. What you mean by an optimal capital structure?
7. State the advantages of trading on equity.
8. What is arbitrage? Give an example.
9. Explain operating risk and financial risk.
10. What is stock split? Why?
Part B (5X16=80)
11. A. Define financial management. Discuss the limitations of
profit maximization as the objective of financial management.
OR
B. Explain the various setbacks of Profit maximization and
how that can be overcome through Wealth maximization.
12. A. Calculate financial leverage and operating leverage under
situations A and B financial plans I and II respectively from the
following relating to the operations and capital structure of ABC
Installed capacity 1,000 Units
Actual production and sales 800 Units
Selling price per unit Rs. 20 Variable cost per unit Rs. 15
Fixed costs : Situation A Rs. 800
Situation B Rs. 1,500

Capital structure :
Financial plan
Equity Capital
Debt

I
II
Rs. 5,000 Rs. 7,000
Rs. 5,000 Rs. 2,000
OR
B. Explain the various techniques of capital budgeting in details
with formulas
13. A. Explain the factors affecting capital structure and its theories
OR
B. Distinguish between operating & financial leverage. Explain the
scope of operating & financial leverage analysis for a financial
executive in corporate profit and capital structure
14. A. Discuss the various determinants of dividend policies.
Distinguish between bonus issue and stock split with an illustration.
OR
B. Explain the theories under dividend decision with suitable
examples.
15. A. i. If a new project requires 500000 for its immediate investment
plan, it has 2 plans (1) either raise the entire amount through equity (2)
half the amount is raised to equity & remaining half is by debentures
@10%. Tax rate is 50%. Calculate point of indifference.
ii. A company expected annual net income is Rs.100000 & it has
Rs.300000, 10% debentures. The equity capitalization rate is 12%.
Calculate (1) The value of the firms & overall capitalization rate under
NI approach (2) Find out the impact on the value of the firm & overall
capitalization rate by increasing the debt content to Rs.400000 and
decreases in the debt up to Rs. 200000
OR
B. Explain the components and measurements of cost of capital.