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DRIVE
fall 2016
PROGRAM
BACHELOR OF BUSINESS ADMINISTRATION (BBA)
SEMESTER
V
SUBJECT CODE & NAME
BBA502 FINANCIAL MANAGEMENT
1 Explain Real and Financial Assets, Finance & Management Functions and equity and borrowed
funds.
a) Explanation of Real and Financial Assets
b) Explanation of Finance & Management Functions
c) Explanation of equity and borrowed funds

Answer: Real and Financial Assets

A firm requires real assets to carry on its business. Tangible real assets are physical assets that include
plant, machinery, office, factory, furniture and building. Intangible real assets include technical know-
how, technological collaborations, patents and copyrights. Financial assets, also called securities, are
financial

2 Write short notes on :

a) Budgeting and forecasting
b) Financial Budgets
c) Cost Centre
Explanation of budgeting and forecasting
Explanation of financial budgets
Explanation of cost centre

Answer: a) Budgeting and Forecasting

A budget is not the same thing as a forecast. A forecast is the likelihood of events happening, given the
past data and expected changes. There is no assumption regarding the commitment of management for
realizing the forecast. A budget is an expression of the managements intentions of achieving forecasts
through
3 Explain on cost of capital and cost of preference capital.
a) Explanation of cost of capital
b) Explanation of cost of preference capital

Answer: Cost of Capital

We should recognise that the cost of capital is one of the most difficult and disputed topics in the finance
theory. Financial experts express conflicting opinions as to the correct way in which the cost of capital
can be measured. Irrespective of the measurement problems, it is a concept of vital importance in the
financial decision-making. It is useful as a standard for:
evaluating investment decisions,
designing

4 Solve the given problem below:

Determine the degree of operating leverage from the following data:
S Ltd R Ltd
Sales 25,00,000 30,00,000
Fixed costs 7,50,000 15,00,000
Variable expenses 50% of sales for firm S 25% for firm R.
Calculation of Degree

5 Explain the phases of Capital Investment Planning and Control. Why is Net Present Value (NPV)
important?
a) Explanation of phases of Capital Investment Planning and Control.
b) Importance of NPV

Answer: There are five phases of capital expenditure planning and control, which are:
1. Identification (or origination) of investment opportunities
2. Development of forecasts of benefits and costs
3. Evaluation of the net benefits
4. Authorization for progressing and spending capital expenditure
5. Control of

6 Write about cash planning and explain about cash forecasting and budgeting.
Explanation of cash planning
Explanation on cash forecasting and budgeting

Answer: Cash Planning

Cash flows are inseparable parts of the business operations of firms. A firm needs cash to invest in
inventory, receivable and fixed assets and to make payment for operating expenses in order to maintain
growth in sales and earnings. It is possible that the firm may be making adequate profits but may suffer
from the shortage of cash

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