LOYOLA COLLEGE (AUTONOMOUS), CHENNAI – 600 034
B.Com. DEGREE EXAMINATION – COMMERCE
FIFTH SEMESTER – APRIL 2007
CO 5402 – FINANCIAL SERVICES
Date & Time: 04/05/2007 / 1:00 – 4:00 Dept. No. Max. : 100 Marks
PART – A
(10 x 2 = 20)
Answer ALL questions
- What do you mean by Merchant Banking?
- Write the role of merchant bankers in the issue of prospectus.
- Narrate the term Consortium Finance.
- List out the elements of factoring.
- What is recourse factoring?
- What are the demerits of forfaiting?
- Write a note on “Seed Capital”.
- Define securitisation.
- What is ESOP?
- Give the meaning of financial lease.
PART – B
(5 x 8 = 40)
Answer any FIVE questions
- How does merchant banking differ from commercial banking?
- Discuss the role of merchant banker in public issue.
- Briefly explain the stages of venture capital.
- What is forfaiting? Differentiate factoring from forfaiting.
- Write a note on lease evaluation from lessor and lessee point of view.
- Bring out the merits and demerits of leasing.
- Explain the process of securitisation.
- The annual turnover of M/s. Welcome Ltd is Rs.6,00,000, of which 80% is credit.
Customers are allowed one month to clear off their dues. M/s. Royal Factors Ltd. is
willing to advance 90% of the bills raised on credit for a fee of 2% a month plus a
commission of 4% of the total amount of debts. As a result of this arrangement, the
company is likely to save Rs.2160 annually in management costs and avoid bad debt
at 1% on credit sales. A Pune-based NBFC which offers corporate loans has come
forward to make an advance equal to 90% of the debts at an interest of 18% p.a.
However, its service charges will be at 3% on the debts. Would you accept factoring
or the offer of the NBFC ? Comment.
PART – C
(2 x 20 = 40)
Answer any TWO questions
- Describe the functions of a merchant banker.
- Explain the importance of venture capital financing and bring out the reason for its
slow growth in India.
- M/s. Global Travels Ltd. wishes to acquire an imported car costing Rs.10,00,000. It is
faced with 2 options:
Option I: To acquire it by taking a 15% Bank Loan repayable in 5 equal instalment at
the end each year along with interest.
Option II: To lease the asset at a rental of Rs.220 per thousand of the asset value
payable at the end of each year for 5 years.
The tax rate is determined at 50 % and Capital discount rate is estimated at 16%. The
asset is expected to have a life of 8 years with a scrap value of 50% of the book
value at the end of its life time. The rate of depreciation is determined at 20% on
diminishing balance method. Which option would you recommend? Comment.