St. Joseph’s College of Commerce (Autonomous)
End Semester Examination- APRIL 2014
MIB – II Semester
FINANCE FOR MANAGERS
Duration: 3 Hours Max. Marks: 100
Section –A
- Answer ANY SEVEN Each carries 5 marks. (7×5=35)
- A firm has sales of Rs. 20,00,000, variable cost of Rs. 14,00,000 and fixed cost of Rs. 4,00,000. It has a debt of Rs. 10,00,000 @10%. What are the operating, financial & combined leverage? If the firm wants to double the EBIT, how much of a rise in sales would be needed on a percentage basis?
- Write short notes on Bonus Shares.
- What is the scope/contents of Finance Function.
- Distribution of Dividends is influenced by many factors. Elucidate
- Explain any five risk accounting methods
- Explain any five inventory management techniques.
- Sunrise Ltd., wishes to arrange overdraft facilities with the banker during the period April to June 2014. Prepare Cash Budget from the following for that period.
| Month | sales | purchases | wages |
| February | 1,80,000 | 1,24,800 | 12,000 |
| March | 1,92,000 | 1,44,000 | 14,000 |
| April | 1,08,000 | 2,43,000 | 11,000 |
| May | 1,74,000 | 2,46,000 | 10,000 |
| June | 1,26,000 | 2,68,000 | 15,0000 |
50% of credit sales are realised in the month following the sales and the remaining at the second month following.
Creditors are paid in the month following the month of Purchase
Cash at Bank on 1/4/14 estimated Rs. 25,000.
- There are many external factors influencing the decision of Capital structure decision-Elucidate
- How is the value of time measured from financial aspect?
- Explain the different models of determining Cost of Equity Capital.
Section – B
- Answer any THREE Each carries 15 marks. (3×15=45)
- A Co. is considering a proposal to purchase a new equipment which would involve a cash outlay of Rs. 5,00,000 and working capital of Rs. 60,000.It has a life of 5 years without any salvage value. Straight line method of depreciation is followed by the Co. The estimated earnings before depreciation and tax are given below. Applicable tax rate is 35% and opportunity cost of capital of the company is 10%.
| YEAR | 1 | 2 | 3 | 4 | 5 |
| EBDT | 1,80,000 | 2,20,000 | 1,90,000 | 1,70,000 | 1,40,000 |
You are required to calculate:
- Pay Back Period
- Net present value
- Internal Rate of Return
- Explain important objectives of Financial Management.
- From the following compute net working capital.
| Particulars | Cost per unit |
| Raw materials | 400 |
| Direct labour | 150 |
| Overheads | 300 |
| Total cost | 850 |
| Additional information | |
| Selling price | 1,000 p.u |
| Output | 52,000 unit p.a |
| STOCK: | |
| Raw materials | 4 weeks |
| Work in progress
(complete100% for material & 50% w.r.t Labour & overheads) |
2 weeks |
| Finished goods | 4weeks |
| Credit allowed by suppliers | 4 weeks |
| Credit allowed to debtors | 8 weeks |
| Cash at bank | Rs. 50,000 |
Assume that production is sustained at an even pace during 52 weeks of the year. All sales are on credit basis. State any other assumptions that you might have made while computing.
- Critically explain Relevant and Irrelevant theories of Dividends.
- Explain the following innovative sources of finance.
- Mechanism of Factoring (3mks)
- Venture Capital (5 mks)
- Lease Financing (7 mks)
Section – C
III) Compulsory Case Study. (20 marks)
- JRS ltd wishes to raise additional finance of Rs.10 lakhs for meeting its investment plans. It has Rs.2,10,000 in the form of retained earnings available for investment purposes. The following are the further details
| Debt/equity mix
Cost of debt upto Rs.1,80,000 Cost of debt beyond Rs.1,80,000 Earnings per share Dividend payout Expected growth rate in dividend Current market price Tax rate |
30%/70%
10% (before tax) 16%(before tax) Rs.4 50% of earnings 10% Rs.44 50% |
You are required
- To determine the pattern for raising the additional finance.
- To determine the post tax average cost of additional cost
- To determine the cost of retained earnings and cost of equity
- Compute the overall weighted average after tax cost of additional finance.
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