BCom In Accounting & Finance (BCAF) SEM V 2018 19 May 2018-19 Financial Management II Question Paper - Mumbai University | munotes

Questions asked in this paper

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1. Q2 Working notes form part of your answer
2. Q3 Use of simple calculator is permitted
3. Q1 A. Rewrite the Following statements and fill in the blank (Any 8) 8 marks
4. Q1 The beta of a market is
5. Q2 Financial Leverage is zero, if ----------------is zero
6. Q3 Risk-Return trade off implies -----------------of risk
7. Q4 According to the net operating income approach capital structure of the firm---------------influence cost of capital and value of the firm
8. Q5 High Dividend Payout Ratio leads to --------------retained earnings capital structure is the particular combination of equity that maximizes firm attempts at optimization of cash balance involves a trade-off between costs and benefits of receivable
9. Q9 When the capital market is in equilibrium, required rate of return and expected rate of return are
10. Q10 Bad debt cost is not borne by factor in case of
11. Q1 B. Match the Column (Any 7) 7 marks
    • A. The expected returns and Beta of stocks are given below 08 If risk free rate is 8% and expected rate of return on the market portfolio is 15% using CAPM method comment on valuation of stock. and appropriate strategy The combined Leverage and Operating Leverage of a company are 2.5 and 1.25 respectively. Find out the 07 Financial Leverage and PV ratio given that: Equity dividend is Rs. 2 per share, Interest Payable is Rs. 1,00,000 Sales Rs. 10,00,000 and Fixed Cost Rs. 50,00,000
    • Q.P. Code :05392
12. Q2 A. The shares of Baba Ltd are selling at Rs 20 per share. It had paid Rs 2 per share dividend last year. The estimated growth of company is approximately 5% per year. Determine the estimated market price of the equity shares if the anticipated growth rate rises to (1) 8% and falls by (2) 2%. Treat each case individually Ignore the dividend tax 8 marks
13. Q2 B. The Manju has the following specific cost of capital along with the indicated book and market value weights: Calculate the weighted cost of capital, using book and market value weights 7 marks
14. Q3 Prepare a cash budget of Star Trading Ltd from the following information for Three months commencing from 15 marks
    • a. Total sales comprises of 40% of cash sales and 60% credit sales
    • b. Credit purchases are 50% of total purchases throughout
    • c. 50% of credit sales collected in the month of following the sales, balance in the second month
    • d. 50% of credit purchases are paid in the month following the purchases, balance in the second month
    • e. Wages for April 2016 are Rs. 10,000 which increases every month by 20% of the previous month and are paid with a lag of a month
    • f. Opening cash balance of Rs. 1,80,000 as at April 2016
    • g. Expenses of each month are paid with a time lag of half month
    • h. Income tax the month June 2016 Rs. 75,000
15. Q3 A company’s consists of the following: The company earns 15% on its capital: The income —tax rate is 35%. The company requires a sum of Rs 25 lakhs to finance its expansion programme for which following alternatives are available to it: Issue of 20,000 equity shares ata premium of Rs 25 per share Issue of 10% preferences shares at par Issue of 8% debentures at par It is estimated that P/E ration in the case of equity, preference and debenture financing would be 21,17 and 15.7 respectively Which alternative would you recommend and why? 15 marks
    • Q.P. Code :05392
16. Q4 Jiggy Wiggy Ltd has an annual sale of Rs 30, 00,000/- by extending 20 days credit to its customers. The finance feels that sales can pick up considerably if customers are offered higher credit period. The company is therefore considering shift in credit policy. The following additional information is available: 15 marks
17. Q1 Variable costs are 50% on Sales
18. Q3 Required (pre tax) return on investment is 20% p.a Credit Policy Increase in Average Collection Expected Annual Sales (Rs.) Determine which policy the company should adopt assuming that debtors are total cost and 1 year
19. Q4 A. Aarush Ltd is in the need of Rs. 1, 00,000 to finance its working capital requirements. The finance manager of the company believes that its various financial costs and share price will be unaffected by the selection of a particular plan, since a small sum is involved. Debentures will cost 10%, preference shares 11%, and equity shares can be sold per share. The tax rate is 35% Determine the financial break-even point Which plan has greater risk? Assume EBIT level of Rs. 50, 8 marks
20. Q4 B. The following details of Kasha Itd for the year ended 31/3/2016 are furnished: Prepare the income statement of the company 7 marks
    • A. Distinguish between over capitalization and under capitalization. 08
    • B. Discuss various objectives of Receivable Management. 07
21. Q5 Write Short Notes (Any 3) Assumptions are of M M Approach of dividend policy 15 marks
22. Q4 risk
23. Q5 Cash management

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