MCom Part II SEM III 2017 18 Jan 2017-18 ACCOUNTANCY ADV. FIN. MGT Question Paper - Mumbai University | munotes

Questions asked in this paper

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1. Q2 Working notes and assumptions should form part of your answer
2. Q3 Use of simple calculator is allowed
3. Q1 A) Om For the year 2016 reveal the following information: On Dec 2016, there were no current assets other than stock, debtors.and bank balance and no liabilities other than share capital and current liabilities 15 marks
   • B) From the following information, prepare Balance sheet of Ram Ltd. many details as possible: 15
   • i. Current Ratio 2.5:1
   • iv. Reserves and surplus Rs. 40,000
   • vii. Liquid Assets includes Debtors & cash Balance in the ratio of 5:1
   • viii. There is no long-term loans or fictitious assets
4. Q2 A) The following is the capital structure of Mary Ford William Ltd. as on 31/3/2016. Equity shares: 10,000 shares (of Rs. 100. each) 10,00,000 10% preference shares (of Rs. 100 each) 4,00,000 The market price of the company’s Rs. 110 and it is expected that dividend of Rs. 10 per share would be declared for the year 2016. The dividend growth rate 6% 15 marks
   • (1). If the company the 50% tax bracket. Compute WACC
   • (2). Assuming that in order to finance an expansion plan, the company intends to borrow a fund of Rs bearing 14% rate of interest, what will be the company’s revised WACC? This financing decision is. expected to increase dividend from Rs. 10 to Rs. 12 per share. However, the market price of equity expected to decline from Rs. 110 to Rs. 105 per share
   • Q.P. Code :03940
   • B) PQRLtd. has the following book-value capital structure as on March 31, 2016. 15 11.5% preference shares 10,00,000 The equity share of the company sells for Rs. 20. It is expected that the company will pay a dividend of Rs. 2 per equity share, which is expected to grow at 5% p.a. forever. Assume a 35% corporate
   • i) Compute WACC of the company based on the existing capital structure
   • ii) Compute the new WACC, if the company raises an additional lakhs debt by issuing 12% debentures. This would result in increasing the expected equity dividend to Rs 2.40 and leave the growth rate unchanged, but the price to equity shares will Fall to Rs. 16 per share
5. Q3 A) Seven Up Ltd. has equity share capital of Rs. 5,00,000 divided into shares of Rs. 100 each. It wishes to raise further Rs. 3,00,000 for expansion cum modernization scheme The company plans the following financing alternatives: 15 marks
   • i) By issuing equity shares only
   • ii) Rs. 1,00,000 by issuing equity shares and Rs. 2,00,000 through debentures or term loan @ 10%
   • iii) By raising terms loan only @ 10% p. a
   • iv) Rs. 1,00,000 by issuing equity shares.and Rs. 2,00,000 by issuing 8% preference shares You are required to suggest the best alternative assuming that the estimated earning before interest and taxes (EBIT) after expansion Rs. 1,50,000 and corporate rate of Tax is 35%
   • B) VIVO Ltd., sells its product at per unit. Its variable cost to sales ratio is 70%. Fixed operating cost are 15 Rs. 10,000. Present sales are 10,000 units. you-are required to calculate:
   • (1) Degree of Operating Leverage,
   • (2) New EBIT (Earning Before Interest and Tax) if sales increasing by 40%,
   • (3) New EBIT if sales falls by 25%
   • (4) By what % should sales fall before the firms starts incurring loss State whether the following statements are True/false. 08 Ratio Analysis is an important tool of financial analysis
6. Q2 the sole objective of financial management
7. Q3 Effective rate of interest is positively correlated with frequency of compounding
8. Q4 Cash flows accruing to the firms at different time periods are directly comparable 6). Closing stock is a liquid asset Retained earnings have implicit cost only
9. Q8 is also known as operating profits
   • Q.P. Code :03940
   • B) Match the following 07
10. Q2 Test of Profitability b) Accounting values
11. Q3 Book value weights c) Constant percentages of Net
    • C) Short Notes (any three)
12. Q1 Functions of financial management
13. Q2 Classification of Ratio on the basis of financial statement
14. Q3 Significance of cost of capital
15. Q4 Types of leverages
16. Q5 Assumptions of MM model

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