Loyola College Financial Management Question Papers Download

Loyola College M.Com April 2012 Financial Management Question Paper PDF Download

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LOYOLA COLLEGE (AUTONOMOUS), CHENNAI – 600 034

M.Com. DEGREE EXAMINATION – COMMERCE

FIRST SEMESTER – APRIL 2012

CO 1807 – FINANCIAL MANAGEMENT

 

 

Date : 25-04-2012             Dept. No.                                        Max. : 100 Marks

Time : 9:00 – 12:00

 

Section – A

Answer all questions:                                                                                                                 10 x 2 = 20

 

  1. What is Financial Leverage?
  2. How do you classify the patterns of Capital Structure?
  3. What do you mean by “IRR”?
  4. Explain the two types of working capital?
  5. What is the significance of Capital Budgeting?
  6. What will be the value of Rs.1000 deposits every year at 10% interest at the end of 5 years?
  7. A person received an annuity of Rs.5000 for four years. If the rate of interest is 10%. What   will be

the present value of annuity?

  1. The New project under consideration requires Rs. 30,00,000. The financing option are-

i,Issue of Equity shares of Rs. 100 each

ii,Issue Equity shares of Rs. 20,00,000 and 15% debentures for Rs. 10,00,000

Tax rate is 50%.Calculate the indifference point EBIT

  1. A Company has 15% perpetual debt of Rs. 1, 00,000. The tax rate is 35% determine the cost of debt

(Kd) assuming a) debt is issued at par, b) issued at 10% discount

  1. A company has sales of Rs. 1. lakh. The variable costs are 40% of the sales while the fixed operating

costs amount to Rs.30,000. The amount of interest on long – term debt is Rs.10,000. You are required

to calculate the composite leverage.

                                                                       

Section – B

Answer any FIVE questions:                                                                                                     5 x 8 = 40

 

  1. Discuss the Factors affecting Capital Structure
  2. Explain the different types of Leasing.

13.Dicuss  the advantages of Bonus Shares.

  1. Operating Leverage = 2 : Combined leverage= 3, at present sales level of 10000 units; selling price=

Rs.12; Variable cost= 50% of sales Tax rate = 50%.        The company has no preference share capital.

If the rate of Interest of the company debt is 16% calculate the amount of Debt to the capital structure.

  1. From the following data compute the operating cycle in days.

Rs.

Average Debtors                                   4,80,000

Raw materials consumed                    44,00,000

Total production cost                             1 crore

Total cost of sales                            1,05,00,000

Sales                                                 1,60,00,000

Average stock of Raw materials           3,20,000

Average stock of WIP                          3,50,000

Average stock of Finished goods         2,60,000

Creditors payment period                      16 days

 

  1. A Ltd. is considering in purchase of machine of two models X and Y. The estimated cash inflow and certainty equivalent are as follows.
Year Cash inflow certainty equivalent of X Cash inflow certainty equivalent of Y
0 -30,000 1 -40,000 1
1 15,000 .95 25,000 .90
2 15,000 .85 20,000 .80
3 10,000 .70 15,000 .70
4 10,000 .65 10,000 .60

Risk free discount rate is 5%.  Suggest to the company in purchasing of Machine X or Machine Y.

  1. A Ltd. requires 90,000 units of certain item annually. The cost per unit is Rs. 3, ordering cost is Rs.300 per order and carrying cost Rs. 6 per unit, per year.

Calculate     (i) EOQ.

(ii)  How many orders to be placed during the year.

(iii) What should the firm do, if the supplier offers discounts as follows :-

Order x             discount

4,500 – 5,999             2%

6000 and above          3%

  1. Calculate the value of an equity shares of company X Ltd. and Y Ltd. from the

following particulars by applying Walters formula when dividend payment ratio is         (a)60% and (b)70%

X Ltd.                Y Ltd.

r          =       15%                      20%

Ke      =       10%                      10%

E        =        Rs.10                    Rs. 10

 

Section – C                                                     2 x 20 = 40

Answer any TWO questions:

  1. From the following details relating to K ltd.

EBIT                                         23,00.000

Less: – 8% Debenture Int               80,000

22,20,000

Less:-     11% Loan Int                2,20,000

EBT                                            20,00,000

Less:- Tax at 50%                       10,00,000

EAT                                            10,00.000

No of Equity shares (Rs 10 each) = 5,00,000 shares Market Price per shares  = Rs 20

PE ratio = 10.  The company has undistributed Reserves of Rs 20,00.000. It requires Rs, 30.00.000 to redeem the debentures and modernize its plant which has the following financial option-

  1. Borrow 12% loan from banks
  2. Issue 1,00.000 Equity shares of Rs. 20 each and balance from a 12% bank loans

The Company expects to improve its rate of return by 2% as a result of modernization However the PE ratio is likely to reduce to Rs. 8 if entire amount is borrowed. Advice the company.

  1. A project requires investment of Rs.1,00,000 are the working capital of Rs. 20,000 at the end of the first year. The project has a life of 5 years and the scrap value of Rs.20,000. The projects yields the following profits before tax:

 

 

 

 

 

 

Year                                     Profit before Tax (PBT)

Rs.

1                                                 20,000

2                                                 40,000

3                                                 60,000

4                                                 50,000

5                                                 30,000

Calculate

(i)   Pay- back period (PBP)(ii)  Average Rate of Return (ARR).

(iii) Net Present Value (NPV) and(iv) Profitability Index PI.

(v) Discounted pay- back  period. Assume the Cost of Capital is @ 10% and Income  Tax Rate is @50%.                             

 

  1. A Ltd,wishes to raise an additional finance of Rs.10 lakhs to meet its investment plans. It has Rs.2,10,000 in the form of retained earnings available for investment. The following are the further details:–
  • Debt Equity Ratio = 3:7
  • Cost of debt (Kd)
  • Upto Rs.1,80,000 = 10%
  • Over Rs.1,80,000 = 16%
  • EPs = Rs.4
  • Dividend payout Ratio = 50%
  • Expected growth rate of dividend = 10%
  • Current market price per share = Rs.44
  • Tax rate = 35%

i,You are required to determine the pattern for raising additional finance assuming the company intends to maintain its existing debt equity ratio.

ii, Determine the cost of additional debt.

iii,Determine the cost of equity capital and retained earnings.

Compute the W.A Cost for additional finance using book value as weights.

  1. Existing sales Rs. 2,40,000, Average collection period 30 days. The company proposals to recognize its credit period as follows:

Proposed increase in credit                   Increase over existing

period beyond 30 days                                  sales

Rs.

15 days                                                  12,000

30 days                                                  18,000

45 days                                                  21,000

60 days                                                  24,000

P.V. Ratio is 33 1/3%. Cost of capital 20%. Evaluate the alternatives.

 

 

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Loyola College B.Com Corporate & Secretaryship Nov 2008 Financial Management Question Paper PDF Download

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LOYOLA COLLEGE (AUTONOMOUS), CHENNAI – 600 034

B.Com. DEGREE EXAMINATION – BUS.ADMIN&CORP.SECRE.

QB 26

 

THIRD SEMESTER – November 2008

CO 3201/BU 3201 – FINANCIAL MANAGEMENT

 

 

 

Date : 13-11-08                     Dept. No.                                        Max. : 100 Marks

Time : 9:00 – 12:00

SECTION – A

Answer all the following questions:                                                                         (2×10=20)

  1. What is financial management?
  2. State any two factors that determine the capital structure of a firm.
  3. What is time value of money?
  4. Explain the cost of equity.
  5. Give any two merits of debenture issue.
  6. The capital structure of Reena Ltd. consists of Equity and debenture in the proportion of 70% and 30% respectively.  The cost of equity is 15%.  The cost of debenture is 10%.  Calculate weighted average cost of capital.
  7. The capital structure of a company consists of 10% preference share capital of Rs.1,00,000 , 10% debenture of Rs.2,00,000 and equity share capital @ Rs.10 each of Rs.1,00,000.  It has an EBIT of Rs.60,000.  The company is in 50% tax bracket.  Calculate financial leverage of the company.
  8. A project requires an investment of Rs.10,00,000.  The plant required under the project will have a scrap value of Rs.80,000 at the end of its useful life of 5 years.  The profits after tax are as follows:
Year 1 2 3 4 5
Rs. 50,000 75,000 1,25,000 1,30,000 80,000

Calculate Accounting rate of return.

  1. Calculate the Debtors collection period in days from the following:

Debtors on 1.1.2006                           Rs.400

Debtors on 31.12.2006                       Rs.220

Credit sales during the year                Rs.3000

Period covered                                    365 days

  1. State True or false:
  1. The optimum capital structure is obtained when the market value per equity share is the maximum.
  2. A company cannot make a bonus issue without making the existing partly paid shares as fully paid up.

 

SECTION – B

Answer any five questions:                                                                                      (5×8=40)

 

  1. The following data pertain to Forge Limited:

Existing capital structure: 10 lakh equity shares of Rs.10 each.

Tax rate: 50%

Forge limited plans to raise additional capital of Rs.100 lakhs for financing an expansion project.  It is evaluating two alternative financing plans: (i) issue of 10,00,000 equity shares of Rs.10 each and (ii) issue of Rs.100 lakh debentures carrying 14% interest.  Calculate the EBIT level at which investors would be indifferent to the two options.

 

  1. a)  Abu Ltd has raised funds through issue of 20,000 debentures of Rs.100 each at a    discount of Rs.10 per debenture with 10 year maturity.  The coupon rate is 16%.  Floatation cost is Rs.2 per debenture.  The debentures are redeemable at a premium of 10%.  Tax rate is 30%.  Calculate the cost of debentures.
  1. b) Xyz ltd issued 1,00,000 equity shares of Rs.10 each at a premium of Rs.5 each. The company incurred Rs.15,000 expenses on issue.  The shareholders expect a dividend of 18% per annum.  Calculate the cost of equity.

 

  1. The following is the balance sheet of zee co.,

 

Liabilities Rs. Assets Rs.
Equity capital(Rs.10 per share) 60,000 Net fixed assets 1,50,000
10% Long-term debt 80,000 Current assets 50,000
Retained earnings 20,000
Current liabilities 40,000
2,00,000 2,00,000

The company’s total assets turnover ratio is 3.  Its fixed operating cost are Rs.1,00,000 and its variable operating costs ratio  to sales is 40%.  The income tax rate is 50%.  Calculate operating, financial and combined leverages.

 

  1. Compute the pay-back period under a) traditional pay-back method and b) discounted pay-back method.

Initial investment                    Rs.80,000

Estimated life                         5years

 

Earnings after tax:                      Rs.

End of year    1                        6,000

2                      14,000

3                      24,000

4                      16,000

5                         Nil

Depreciation has been calculated under straight-line method.  The cost of capital can be taken at 20% p.a.

 

 

  1. The directors of Bata Company wishes to ascertain the working capital required to meet the planned production of 275600 units during the year.  The cost of production is Rs. 180 per unit, comprising of raw material – Rs.90, direct labour – Rs.40 and overheads Rs.50.  Selling price is Rs.200 per unit.  Raw material is in stock for 4 weeks.

Work in progress (assume 50% completion) is in stock for 3 weeks

Finished good is in stock for 5 weeks.  Credit allowed by suppliers is 4 weeks

Credit allowed to debtors is 6 weeks

Lag in payment of wages is 2.5 weeks and overheads is 2 weeks

Cash at bank is expected to be Rs. 50,000.  60% of the company’s sales are for credit.

  1. “The financial goal of a firm should be to maximize profit and not wealth”.  Do you agree with this statement?  Comment.

 

  1. What are the different sources of internal financing?  Explain them with its merits.

 

  1. What is working capital management?   What are the factors that determine the working capital needs of an enterprise?

 

SECTION – C

Answer any two questions:                                                                                      (2×20=40)

 

  1. Explain the meaning of the terms “dividend” and “dividend policy”.  Discuss the main determinants of dividend policy of a firm.

 

  1. The following is the figures of Kline Ltd:

Rs.

EBIT                                                               20,00,000

Less: debenture interest@5%    50,000

Loan interest @ 10%    1,50,000            2,00,000

EBT                                                                 18,00,000

Less: Tax@ 50%                                               9,00,000

EAT                                                                  9,00,000

 

 

Number of equity shares @ Rs.10 each          4,50,000

Earnings per Share                                                      2

Market price per share                                   24

P/E ratio                                                                    12

The company has undistributed reserves of Rs.10,00,000.  It is in need of Rs. 20,00,000 to modernize the plant.  It has identified the following financial options:

  1. Raise a long term loan at 11%
  2. Issue 1,00,000 equity share of Rs.20 each

The company expects to increase its rate of return by 2% as a result of modernization, but the P/E ratio is likely to reduce to 10 if the entire amount is raised through term loan.

 

  1. A company is considering to purchase a machine.  Two machines are available X and Y costing Rs.90,000 each.  The Cash flow after tax are expected to be as follows:

 

Year       ‘X’ machine

Rs.

          ‘Y’ machine

Rs.
1 25,000 15,000
2 30,000 25,000
3 35,000 30,000
4 25,000 40,000
5 20,000 30,000

Evaluate two alternatives & suggest which machinery should be purchased according to:

  1. Internal rate of return
  2. Net present value method (cost of capital 10%).

 

 

Loyola College B.Com April 2007 Financial Management Question Paper PDF Download

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TH 23

LOYOLA COLLEGE (AUTONOMOUS), CHENNAI – 600 034

B.COM. DEGREE EXAMINATION – COMMERCE

SIXTH SEMESTER – APRIL 2007

CO 6604  –  FINANCIAL MANAGEMENT

 

 

 

Date & Time : 16.04.2007/9.00-12.00      Dept. No.                                                      Max. : 100 Marks

 

 

Section: A

Answer any ten only:                                                                                    10 x 2 = 20

 

1) What are the major types of financial decisions that a business firm makes?

 

2) Pradeep placed Rs.1, 000 in a savings account earning 8% interest compounded

Annually. How much money will he have in the account at the end of 4 years?

 

3) What is Capital Expenditure Budget?

 

4) A project costs Rs.40, 00,000 and yields annually a profit of Rs.6, 00,000 after

Depreciation @12.5% but before tax at 50%. Calculate the payback period.

 

5) What is meant by ‘Operating Cycle Concept’ in management of working capital?

 

6) The current market price of an equity share of  a company is Rs.90. the current

dividend per share is Rs.4.50. In case the dividends are expected to grow at the rate of

7%. Calculate the cost of equity capital?

 

7) State whether each of the following statements is “True” or “False”

  1. It is risky to have a high operating leverage, since even a slight fall in sales would result in a disproportionately large fall in profits.
  2. The ideal situation is to have a high financial leverage and low operating leverage.

 

8) Briefly explain the trading on equity.

 

9) What is meant by explicit cost of capital?

 

10) Calculate degree of operating leverage from the following data:

  1. Sales 2, 00,000 units @ Rs.4 per unit.
  2. Variable cost per unit @ Re. 0.70
  3. Fixed cost Rs.2, 00,000
  4. Interest charges Rs.7,336.

 

 

Section – B

Answer any five only.                                                                       5 x 8 = 40

 

11) “The operative objective of financial management is to maximize wealth of the firm”.

Discuss.

12) What do you mean by Optimum Capital Structure? Make a list of factors determining

Optimum Capital Structure.

 

  • Explain various determinants of working capital of a concern.

 

  • Using the information given below, compute the Pay-Back Period under (a) traditional Pay-Back Method, and (b) Discounted Pay-Back Method and Comment on the results.

 

Initial Outlay                         Rs.80,000

Estimated Life                       5 Years

Profit After Tax:

End of Year   1                      Rs.6,000

  • 14,000
  • 24,000
  • 16,000
  • Nil

Depreciation has been calculated under straight-line method. The cost of capital may be taken at 20%p.a and the P.V of Rs.1 at 20% p.a is given below:

 

Year:                1          2          3          4          5

P.V factor       .83       .69       .58       .48       .40

 

 

  • From the following information, extracted from the books of a manufacturing company, compute the operating cycle in days and the amount of working capital required:

 

Period covered                                                                365 days

Average period of credit allowed by suppliers               16 days

Rs.

Average total of Debtors outstanding                                        2,40,000

Raw Material consumption                                           22,00,000

Total Production cost                                                    50,00,000

Total Cost of Sales                                                       52,50,000

Sales for the year                                                          80,00,000

Value of Average Stock maintained                               1,60,000

Work in progress                                                             1,75,000

Finished Goods                                                               1,30,000

 

  • ABC Ltd. has an EBIT of Rs.1, 60,000. Its capital Structure consists of the following securities:

 

10% Debentures                    Rs.5,00,000

12%Prefernce shares              Rs.1,00,000

Equity shares of Rs.100         Rs.4,00,000

 

The company is in the 55% tax bracket. You are required to determine:

 

  • The Company’s EPS.
  • The percentage change in EPS associated with 30% increase in EBIT.
  • The degree of financial leverage.

 

  • (A) For varying level of debt-equity mix, the estimates of the cost of debt and equity capital after tax are given below:

 

Debt as % of total                        Cost of Debt             Cost of Equity

Capital Employed

0                                              7.0                             15.0

10                                              7.0                             15.0

20                                              7.0                             16.0

30                                              8.0                             17.0

40                                              9.0                             18.0

50                                            10.0                             21.0

60                                            11.0                             24.0

 

(B) The shares of a chemical company are selling at RS.20 per share. The firm had paid dividend @ Rs.2 per share last year. The estimated growth of the company is approximately 5% per year.

  • Determine the cost of equity capital of the company.
  • Determine the estimated market price of the equity share if the anticipated growth rate of the firm rises to 8%.

 

18) A) X.Ltd. is expecting annual EBIT of RS.1, 00,000. The company has

Rs.4, 00,000 in 10% Debentures. The equity capitalization rate is 12.5 %. The      company desires to redeem debentures of Rs.1, 00,000 by issuing additional equity shares of Rs.1, 00,000.

You are required to calculate the value of the firm and the overall cost of capital based on Net Income (NI) Approach.

 

  1. B) X Ltd. has an EBIT of Rs.1, 00,000. Its cost of debt is 10% and the outstanding debt amounts to Rs.4, 00,000. The overall capitalization rate is 12.5%. The company decides to raise a sum of Rs.1, 00,000 through debt at 10% and uses the proceeds to pay off the equity shareholders.

You are required to calculate the total value of the firm and also the equity capitalization rate under Net Operating income Approach (NOI)

Section – C

 

Answer any Two only.                                                                                    2 x 20 = 40

 

  • A Limited company is considering investment in a project requiring a capital outlay of Rs.1, 00,000. Forecast for annual income after depreciation but before tax is as follows:

Year.                                                   Rs.

  1.                                    50,000
  2. 50,000
  • 40,000
  1. 40,000
  2.                                  20,000

Depreciation may be taken as 10% on original cost and taxation at 50% of net income. You are required to evaluate the project according to each of the following methods.

  • Pay Back Method
  • Rate of Return on average investment method.
  • Discounted cash flow method taking cost of capital as 10%
  • Net present value index method.
  • Internal rate of return method.

 

  • The Board of Directors of RRLtd. requests you to prepare a statement showing the working capital requirements forecast for a level of activity of 3,12,000 units of production.

A ) The following information is available for your calculation:

Raw Materials Rs.180 per unit.

Direct Labour  Rs.  80 per unit

Overheads       Rs.150 per unit

————–

Rs.410 per unit

Profit               Rs. 120 per uint

————–

Selling price    Rs.530 per unit.

  1. B) 1) Raw materials are in stock on average one month.

2) Materials are in process, on average 2 weeks.

3) Finished goods are in stock, on average one month.

4) Credit allowed by suppliers one month.

5) Time lag in payment from debtors 2 months.

6) Lag in payment of wages 1 ½ weeks.

7) Lag in payment of overheads is one month.

 

20% of the output is sold against cash. Cash in hand and at bank is expected to be Rs.1, 20, 000. It is to be assumed that production is carried on evenly throughout the year, wages and overheads accrue similarly and a time period lot 4 weeks is equivalent to a month.

  • You are required to determine the weighted average cost of capital (Ko) of the J. Ltd. using 1) Book Value Weights and the 2) Market Value weights. The following information is available for your perusal:

The J.Ltd. Present book value capital structure is:

 

Debentures (Rs.100 per debenture)                8,00,000

Preference shares (Rs.100 per share)              2,00,000

Equity shares (Rs.10 per share)                     10,00,000

 

All these securities are traded in the capital markets. Recent prices are debentures @ Rs.110, Preference shares @Rs.120 and Equity shares @Rs.22. Anticipated external financing opportunities are:

 

  • 100 per debentures redeemable at par: 20 year maturity, 8% coupon rate, 4% flotation costs, sale price Rs.100.
  • 100 Preference share redeemable at par: 15 year maturity, 10% dividend rate, 5% floatation cost, sale price Rs.100.
  • Equity shares: Rs.2 per share flotation costs, sale price Rs.22.

 

In addition, the dividend expected to on the equity share at the end of the year is Rs.2 per share; the anticipated growth rate in dividends is 5% and the company has the practice of paying all its earning in the form of dividends. The corporate tax rate is 50%.

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Loyola College B.Com April 2008 Financial Management Question Paper PDF Download

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LOYOLA COLLEGE (AUTONOMOUS), CHENNAI – 600 034

 B.B.A.,B.Com. DEGREE EXAMINATION – BUS.ADM.COMMERCE

RO 9

 

THIRD SEMESTER – APRIL 2008

CO 3201 – FINANCIAL MANAGEMENT

 

 

 

Date : 05/05/2008                Dept. No.                                        Max. : 100 Marks

Time : 1:00 – 4:00

SECTION – A

 Answer all questions:                                                          (10 x 2 = 20)

Explain the following:

  1. Wealth maximization
  2. Working capital
  3. Pay back period
  4. Net present value
  5. Indifference point EBIT
  6. Annuity
  7. Operating Leverage
  8. Cost of capital
  9. Earning per share
  1. Net operating income

SECTION – B

 Answer any five questions:                                                (5 x 8 = 40)

11 Explain the factors that determine the Capital Structure?

  1. Define Cost of Capital? explain its features and importance?
  2. Explain the functions of financial manager in large manufacturing firm?

14 Ramco ltd is considering a major expansion of its production facilities involving

a cost of Rs 50 lakhs and the following alternatives financing options are

available

Particulars                              Rs in Lakhs

A              B

Share Capital                      20             10

14% Debentures                 20             15

Loan @ 18%                       10             25

—-           —

Total                                 50             50

Expected rate of return on total Capital Employed is 25% and corporate tax @50%. Compute EPS and choose the best alternative two models.

 

  1. HLL is considering purchasing of new machineries A and B have been suggested.

Details of which are as follows

Particulars

A(Rs)                   B(Rs

Cash out flows            400000              500000

Cash inflows

1                      40000                120000

2                      120000              160000                                             3                        160000              200000                                                              4                        240000              120000

5                      160000              80000

The cost of capital is 15% state which machine you consider

financially preferable using NPV Method.

 

  1. A company issues 10% Debentures of Rs 100000 the company is in 55% tax

bracket. Calculate the cost of the debt (before as well as after tax) if the

debentures are issued 1) issued at par 2) 15% discount 3) 20% Premium

 

 

 

 

 

 

  1. A choice is to be made between two competing project which required an investment of Rs 50000 and expected to generate net cash inflow as under:

Yrs                            A (Rs)                B (Rs)

1                              25000                10000

2                              15000                12000

3                              10000                18000

4                              ——-                25000

5                              12000                8000

6                              6000                 4000

Evaluate the project proposal under pay- back period.

  1. M&M has sales of Rs 1000000, variable cost of Rs 700000 and fixed cost of

Rs 200000 and debt of Rs 500000 at 10 % interest. What are the operating,

financial and combined leverage? If the firm wants to double its EBIT, how much

of a raise in sales would be needed as a percentage?

SECTION – C

 Answer any two questions:                                                (2 x 20 = 40)

  1. Rack & co has the following capital structure:

Particulars                                  Rs

4000 Equity shares of Rs 100 each         400000

10% preference shares                        100000

11% Debentures                         500000

The current market price of the share is Rs 102. the company is

expected to declare a dividend if Rs 10 in the current year, with an expected

growth rate of 10%. The applicable tax rate is 50%

  1. a) Find out the cost of equity capital and the WACC
  2. b) Assuming that the company can raise Rs 300000 12% Debentures, find out

the new WACC if the dividend rate is increased from 10% to 12% growth rate is

reduced from 10 to 8% and the market price is reduced to Rs 98

 

  1. Sain Gobain provides the following particulars relating to its Capital:

Particulars                  Amount in Rs per unit

Raw material                              84

Direct Labour                              36

Over heads                                36

Profit                                         44

Average stock holding period:

Raw material 1 month, Work in Progress (50% completed), 1/2 month, finished goods 1 month

Credit allowed by Suppliers and Customers 1 and 2 months respectively

Average time lag in the payment of wages and overheads ½ months Required cash in hand and at bank Rs 300000

25% of the out put is sold for cash. For an expected sale of 120000 units.

Work out the working capital requirement if the firm.

 

  1. ITC has the capital Structure consist of the following:

Particulars                                   Rs

Equity Share of Rs 100 each         2000000

Retained Earnings                                1000000

9% Preference Shares                 1200000

7% Debentures of Rs 100 each              80000

The company requires an additional capital of Rs 1200000 to finance its expansion it expects to earn 12% on its total capital employed after expansion. It has the following financing options:

  1. 20000 equity shares at a premium of Rs 25 per share
  2. 10% preference shares of Rs 100 each
  3. 8% Debentures of Rs 100 each

It is estimated that the P/E ratio in the case of equity shares, preference and debentures finance would be 15, 12, and 10 respectively. If the tax rate is 50% which financial option would you recommend?

 

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Loyola College B.Com April 2008 Financial Management (2) Question Paper PDF Download

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LOYOLA COLLEGE (AUTONOMOUS), CHENNAI – 600 034

B.Com. DEGREE EXAMINATION – COMMERCE

RO 31

 

SIXTH SEMESTER – APRIL 2008

CO 6604 – FINANCIAL MANAGEMENT

 

 

 

Date : 16/04/2008                Dept. No.                                        Max. : 100 Marks

Time : 9:00 – 12:00

SECTION A

Answer All questions:                                                                       (10×2=20 marks)

  1. List out the objectives of financial management.
  2. What is financial forecasting?
  3. What do you mean by indifference point EBIT?
  4. Define the term optimum capital structure.
  5. Define the concept of ‘cost of capital’.
  6. A company offers for public subscription equity shares of Rs. 10 each at a premium of 10%. The company pays 5% of the issue price as underwriting commission. The rate of dividend expected by the equity shareholders is 20%. You are required to calculate the cost of equity capital.
  7. A company has sales of Rs. 1 lakh. The variable costs are 40% of the sales while the fixed operating costs amount to Rs. 30,000. The amount of interest on long-term debt is Rs.10,000. You are required to calculate the composite leverage.
  8. What is trading on equity?
  9. Fixed Cost – 10,000

Operating Leverage – 2

Interest – 2,000

Calculate Financial Leverage.

  1. A limited company is considering investing in a project requiring a capital outlay of Rs. 2,00,000. Forecast for annual income after depreciation but before tax is as follows:

Year                1                      2                      3                      4                      5

Amount in Rs. 1,00,000          1,00,000          80,000             80,000             40,000

Depreciation may be taken as 20% on original cost and taxation at 30% of net income.

You are required to calculate payback period.

 

SECTION B

Answer any Five Questions:                                                             (5×8=40 marks)

  1. What are the main functions of the modern finance manager?
  2. What are the various features of on appropriate capital structure?
  3. “Capital Expenditure decisions are by far the most important decisions in the field of financial management” Elucidate.
  4. Calculate the working capital required for the production 1,80,000 units per annum. Cost per unit of the product comprises of

Material           –           Rs. 20

Labour             –           Rs. 15

Overhead        –           Rs. 5

Selling price    –           Rs. 50

Raw material is in stock for one month, processing time \month, finished stock storage

period – 1\Months, period of credit to customers – 2 Month, Credit received from suppliers – 1

Month, lag in payment of wages – \ Month.

Cash in hand to be maintained at Rs. 40,000. Raw material is introduced at the beginning of the

process. Wages and overhead accrue evenly throughout the process.

 

 

  1. A company has the following capital structure:

10,000 Equity shares of Rs. 10 each               Rs. 1,00,000

2,000 10% Pref. shares of Rs. 100 each         Rs. 2,00,000

2,000 10% Debentures of Rs. 100 each          Rs. 2,00,000

Calculate the EPS for each of the following levels of EBIT: Level under (i) Rs.

1,00,000; (ii) Rs. 60,000 and (iii) Rs. 1,40,000. The company is in 30% tax bracket. Calculate the financial leverage taking EBIT level under (i) base.

 

 

  1. A ltd. Intends issue new equity shares. It’s present equity shares are being sold in the market at Rs. 125 a share. The company’s part record regarding payment of dividends is as follows:

1994: 10.70%; 1995: 11.45%; 1996:12.25%;1997:13.11%; 1998:14.03%. The floatation costs are estimated at 3% of the current selling price of the shares. You are required to calculate:

  • Growth rate in dividends. (refer compound factor table 14.03/10.70=1.3112)
  • Cost of funds raised by issue of equity shares assuming that the growth rate as calculated under (a) above will continue for ever.
  • Cost of new equity shares.

 

 

  1. S Ltd., is considering the purchase of a new machine. Two alternative machine (A and B) have been suggested. Each having an initial cost of Rs.4,00,000 and requiring Rs.20,000 as additional working capital at the end of 1st year. Cash inflows after taxation are expected to be as follows:

Cash Inflows

Year                             Machine A                  Machine B          PV of Rs.1/- @10%

at 10%                                           Rs.                               Rs.                                  Rs.

1                                     40,000                      1,20,000                             0.91

2                                  1,20,000                      1,60,000                             0.83

3                                  1,60,000                      2,00,000                             0.75

4                                  2,40,000                      1,20,000                             0.68

5                                  1,60,000                      1,80,000                             0.62

The company has target of return on capital of 10% and on this basis, you are required to

compare  the profitability of the machines and state which alternative you consider using NPV

method preferable.

 

 

  1. Calculate the cost for the following sources of funds
  1. A Limited issued Rs. 1,000, 12% debentures of a discount of 5% redeemable at the end

of 5 years at par Tax rate 50%.

  1. X Limited issued Rs.100, 14% preference shares redeemable at the end of Five years at

5% premium. Floatation cost is Rs.2/- per preference share and the Tax rate is 40%.

  1. An equity share has a current market price of Rs. 25/-. The next expected dividend is

Rs.2/-. per issue and the growth rate of dividend is 8%.

  1. A company’s capital structure consists of 10,000 equity share of Rs.10/- and Rs. 50,000

10% Debentures. The market price of the share is Rs.20/-. EBIT – 45,000 Tax rate – 50%.

 

SECTION C

Answer any TWO questions:                                                           (2×20=40 marks)

 

  1. Explain various determinants of working capital of a concern.

 

  1. From the following capital structure of a company, calculate the overall cost of capital, using (a) book value weights and (b) market value weights.

Source                                     Book Value                 Market Value

Equity share capital                 Rs. 45,000                   Rs. 90,000

(Rs. 10 per share)

Retained earnings                   Rs. 15,000                      –

Preference share capital          Rs. 10,000                   Rs. 10,000

Debentures                              Rs. 30,000                   Rs. 30,000

The after tax cost of different sources of finance is as follows:

Equity share capital 14%; Retained earnings: 13%; preference share capital; 10%

Debentures:5%.

 

  1.  A company is considering two mutually exclusive projects. Both require an initial investment of Rs. 50,000 each and have a life of five years. The cost of capital of the company is 10% and tax rate is 35%. The depreciation is charged on straight – line method. The estimated profit before depreciation and tax of the two projects are as follows:

Year                Project A         Project B         Present Value

at 10%

1                      Rs. 20,000       Rs. 30,000                0.91

2                      Rs. 22,000       Rs. 27,000                0.83

3                      Rs. 28,000       Rs. 22,000                0.75

4                      Rs. 25,000       Rs. 25,000                0.68

5                      Rs. 30,000       Rs. 20,000                0.62

 

Calculate for each project

  • Pay Back period.
  • Return on average investment.
  • Net present value.

 

 

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Loyola College B.Com April 2009 Financial Management Question Paper PDF Download

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LOYOLA COLLEGE (AUTONOMOUS), CHENNAI – 600 034

B.Com.,B.B.A. DEGREE EXAMINATION – COMMERCE & BUS.ADMIN.

KP 09

THIRD SEMESTER – April 2009

CO 3201 – FINANCIAL MANAGEMENT

 

 

 

Date & Time: 16/04/2009 / 1:00 – 4:00        Dept. No.                                                       Max. : 100 Marks

 

 

SECTION – A

Answer all the following questions:                                                             (10 x 2 = 20)

 

  1. Explain the term “operating cycle”.
  2. List out any four sources of short-term loan financing.
  3. Define the term “dividend policy”.
  4. How does the nature of enterprise affects the capital structure of the company?
  5. Explain the meaning of Trading on equity.
  6. Calculate the Raw material holding period in days from the following:

Raw material on 1.1.2007                               Rs.300

Raw material on 31.12.2007                           Rs.250

Raw material purchased during the year        Rs.500

Period covered                                                365 days

  1. Cee Ltd. has issued Rs.200 preference shares redeemable at a premium of 5% with 12 years maturity.  Coupon rate is 10%.  Floatation cost is 2%.  Calculate the cost of preference shares.
  2. The degree of operating leverage is 2.5 and degree of combined leverage is 4.  By what percentage will EBIT increase if sales increase by 5 per cent?
  3. A project requires Rs.30,000 as initial investment and it will generate an annual cash inflow of Rs.6,000 for ten years. Compute the pay-back period.
  4. State true or false:
  1. Pay-back technique takes into consideration cash flows after the pay-back period.
  2. In case of trading firm, the operating cycle is longer than that for a manufacturing firm.

 

SECTION – B

Answer any five questions:                                                                          (5×8=40)

 

  1. Explain the term “security financing”.  State the merits of different types of security financing?
  2. What are “Bonus shares”?  Explain the advantages of issuing bonus shares.
  3. Write short note on:   a) Cost of retained earnings  b) optimum capital structure                         c) working capital management           d) Financial leverage

 

  1. The existing capital structure of Cassel Ltd is as follows:

Equity shares of Rs.100 each              Rs.4,00,000

Retained earnings                               Rs.1,00,000

7% preference shares                          Rs.2,50,000

5% debentures                                                Rs.2,50,000

The existing rate of return on the company’s capital employed is 12% and tax rate 50%.  The company requires a sum of Rs.3,00,000 to finance its expansion program, for which it is considering the following options:

  1. Issue 3,000 equity shares
  2. b) Issue 10% preference shares

It is estimated the Price Earnings Ratio in the above two financing options would be 16 and 14 respectively, which option would you recommend.

 

  1. Rai Ltd plans a production of 78000 units per annum.  Selling price is Rs.100 per unit.  Raw material, direct wages and overheads comprise of 40%, 15% and 25% of selling price.  Raw material is in stock for 3 months and finished goods for 2 months.  Production process takes 1 month.  Credit allowed by suppliers is 1 month and credit given to debtors is 2 months.

Raw material is introduced at the beginning of the process.  Wages and overheads in WIP may be assumed to be 50%.

Lag in payment of wages is 1.5 months.  Calculate the working capital required at cash cost.

 

 

  1. Calculate the Degree of operating leverage, degree of financial leverage and the degree of combined leverage from the following data and interpret the results:

 

Output (in units) 30,000
Fixed costs Rs.3,50,000
Variable cost per unit Re.1.00
Interest expenses Rs.25,000
Selling price per unit Rs.300
  1. X Ltd is contemplating investment in a project which requires an initial investment of Rs.1,40,000.  The cost of capital is 8%.  The Cash flow after tax  are as under:

 

Year                       Rs.
1                       30,000
2                       40,000
3                     60,000
4                       30,000
5                   20,000

Calculate the Internal rate of return and suggest whether the project should be accepted or not.

 

  1. The balance sheet of Apple Ltd is given below:

 

Liabilities Rs. Assets Rs.
Equity capital Rs.10 each 9,00,000 Fixed assets 22,50,000
10% long term debt 12,00,000 Current assets 7,50,000
Reserves 3,00,000
Current liabilities 6,00,000
30,00,000 30,00,000

 

Tax rate is 50%.  Determine the likely level of EBIT, if EPS should be                                  a) Re.1                   b) Rs.3             c) Rs.0.

SECTION – C

Answer any two questions:                                                                                      (2×20=40)

 

  1. What is meant by financial management?  What are its objectives?  Explain its functions.

 

  1. Philips Ltd is proposing to take up a project which will need an investment of Rs. 4,00,000.  The plant and machinery required under the project will have a scrap value of Rs. 20,000 at the end of its useful life of 5 years.  The cost of capital is 10%.  Depreciation is to be charged according to the straight line method.  Tax rate is 50%.  The earnings before tax are estimated to be as follows:

 

Year                             Rs.
1 1,00,000
2 1,75,000
3 2,00,000
4 1,50,000
5 90,000

Calculate:        a) Average rate of return         b) Pay back period      c) Net present value                                        d) Profitability index

 

  1. Quest Ltd. has the following book value capital structures:

     Rs.

Equity capital Rs.100 each                             200 lakhs

12% preference capital Rs.100 each                 20 lakhs

14% debentures Rs.100 each                          100 lakhs

Retained earnings                                           240 lakhs

10% Term loan                                                160 lakhs

 

The next expected dividend is Rs. 30 per share.  The dividend is expected to grow at 5% per annum.  Market price of the share is Rs. 200.  Tax rate is 50%.  Calculate Weighted Average cost of capital using book value as weights.

 

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Loyola College B.Com April 2009 Financial Management (2) Question Paper PDF Download

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LOYOLA COLLEGE (AUTONOMOUS), CHENNAI – 600 034

B.Com. DEGREE EXAMINATION – COMMERCE

KP 32

SIXTH SEMESTER – April 2009

CO 6604 – FINANCIAL MANAGEMENT

 

 

 

Date & Time: 18/04/2009 / 9:00 – 12:00       Dept. No.                                                       Max. : 100 Marks

 

 

 

SECTION-A(10*2=20 marks)

 

ANSWER ALL QUESTIONS

 

  1. Give the meaning of finance function?

 

  1. What is optimum capital structure?

 

  1. Explain the concept of cost of capital

 

  1. What is cost of Retained earnings?

 

  1. What is operating cycle of business?

 

  1. If you deposit Rs.1,000 to-day in a bank which pays 10% interest compounded

annually,how much will the deposit grow to after 8 years?

 

  1. A project costs Rs.1,00,000 and yields an annual cash inflow of Rs.20,000 for 7

years.Calculate pay-back period?

 

  1. Calculate operating leverage from the following details

Sales   – 2,00,000 units @Rs.8 per unit

Variable costs-Rs.2 per unit

Fixed cost-Rs.30,000

 

  1. Initial outlay-Rs.50,000;Life of asset-5 years;Estimated cash flow Rs.12,500.Calculate

internal rate of return.

 

  1. Estimated cost of goods sold Rs.600 lakhs;Expected operating cycle in 90

days,desired cash balance Rs.1 lakh. What is expected working capital

requirement?(Assume 360 days in a year)

 

 

 

 

 

 

 

SECTION-B(5*8=40 marks)

 

ANSWER ANY FIVE QUESTIONS

 

  1. A company wishes to determine the optimal capital structure,from the following

selected information supplied to you,determine the optimal capital structure of the

company.

Structure     Dept.amt       Equity.amt         After tax cost of dept.    Ke

Rs.                                               %                          %

  1. 4,00,000 1,00,000                  9                             10
  2. 2,50,000 2,50,000                  6                             11
  3. 1,00,000         4,00,000                  5                             14

 

  1. A finance company advertises that it may pay a lumpsum of Rs.8000 at the end of 6

years to the investors who deposits anually Rs.1000 for 6 years.What interest rate is

implicit in this offer?

 

  1. A company’s current earnings areRs.1,25,000 to be distributed among 8000

shares.The market  price of each share is Rs.150 and the growth rate of dividend is

estimated at 9%.compute the cost of equity capital.

 

  1. From the following information ,you are required to find out the extent of operating

leverage in the  year  2008

EBIT(2007) Rs.30,000;sales(2007) 1,50,000 units

EBIT(2008) Rs.35,000;sales(2008) 1,80,000 units

 

  1. Project X initially costs Rs.2,50,000.It generates the following cash flows:

Year                    cash inflows        Present value of  

Rs                           Re.1 @10%

1                             90,000                         0.909

2                             80,000                         0.826

3                             70,000                         0.751

4                             60,000                         0.683

5                             50,000                         0.621

Taking cut off rate as 10%  Suggest whether the project should be accepted or not.

 

  1. Explain the meaning of financial management. What are its objectives?

 

  1. Explain the factors which should be taken into account while making a capital

investment decision.

 

  1. Describe in brief the various factors which are taken into account in determining the

working capital needs of a firm.

 

 

 

 

 

 

SECTION-C(2×20=40 MARKS)

 

ANSWER ANY TWO QUESTIONS

 

  1. Discuss the various factors influencing the capital structure of a corporation

 

  1. A choice is to be made between two competing projects which require an equal

investment of Rs.50,000 and are expected to generate net cash flows as under:

Year                      Project I              Project II

Rs.                      Rs.

1                            25,000               10,000

2                            15,000               12,000

3                            10,000               18,000

4                               NIL                  25,000

5                            12,000               8,000

6                            6,000                 4,000

The cost of capital of the company is 10%. The following are the present value @10%

per annum:

Year                          PV factors @ 10%p.a.

1                                 0.909

2                                 0.826

3                                 0.751

4                                 0.683

5                                 0.621

6                                 0.564

Which project proposal should be chosen and why?

Evaluate the projects proposals under;

(a) pay-back period and

(b)Discounted cash flow methods.

 

  1. A co require Rs 20,00,000/- for a new project. It has identified 3 financing options

for the same.

  • Issue 20,000/ equity shares of Rs. 100/ each.
  • Issue 10,000/ equity share of Rs. 100/ each and raise a bank loan @ 15% per annum for the balance
  • Issue 15,000/ equity share of Rs. 100/ each and Rs. 5,00,000/ 14% Debentures.

 

The company expects to earn a profit of Rs. 5,00,000/ before interest and tax. If the tax rate is 50% which financing option would you recommend..

 

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Loyola College B.Com Nov 2012 Financial Management Question Paper PDF Download

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LOYOLA COLLEGE (AUTONOMOUS), CHENNAI – 600 034

B.Com., BBA., DEGREE EXAMINATION – CORPORATE SEC. & BUSI. ADMIN.

THIRD SEMESTER – NOVEMBER 2012

CO 3201 – FINANCIAL MANAGEMENT

 

 

Date : 09/11/2012             Dept. No.                                        Max. : 100 Marks

Time : 9:00 – 12:00

 

SECTION – A

Answer all the following questions:                                                                                           (10×2=20)

 

  1. What is financial management?
  2. Give the meaning of the term “operating cycle”.
  3. If DOL = 1.56, DCL = 1.23, by what percentage will EBIT increase if sales increase by 10 per cent?
  4. Frost Ltd. has issued Rs.1,000 debentures redeemable at a premium of 10% with 10 years maturity. Coupon rate is 12%. Tax rate is 50%. Calculate the cost of debentures.
  1. Calculate the debtors collection period in days from the following:

Debtors on 1.1.2011                           Rs.500

Debtors on 31.12.2011                       Rs.380

Credit sales during the year                Rs.3,700

Period covered                                    365 days

  1. Interest = Rs.5,000 Tax rate = 40%            No of equity share = 12,000. Determine the likely level of EBIT if EPS is Re.1
  2. State any two merits of Net Present Value.
  3. What do you mean by the term “cost of equity”.
  4. What is optimum capital structure?
  5. List the different forms of dividend.

 

SECTION – B

Answer any five questions:                                                                                      (5×8=40)

 

  1. Explain the factors considered in determining working capital requirement of a firm.

 

  1. Describe the factors affecting dividend policy.

 

  1. Explain the sources of internal financing.

 

  1. The project X initially costs Rs.25,000. The cost of capital is10%.  It generates the following cash flow after tax:
year Cash inflows

      Rs.

1 9,000
2 8,000
3 7,000
4 6,000
5 5,000

Calculate a) Payback period   b) Discounted payback period

 

  1. Sales = 70 lakhs, Fixed cost = Rs.5 lakhs, Variable cost = Rs.45 lakhs, 9% debentures =Rs.40 lakhs and Equity = Rs.60lakhs.

Calculate Operating leverage, Financial leverage and Combined leverage.

 

  1. A company has the following capital structures:

Equity capital Rs.10 each                   Rs.3,00,000

9% Preference capital Rs.100 each     Rs.2,00,000

Retained earnings                               Rs.1,00,000

10% Debentures (Rs.10 each)             Rs.1,00,000

The next expected dividend is Rs. 5 per share.  The dividend is expected to grow at 8% per annum.  Market price of the equity share is Rs.12 per share.  Assume tax rate is 50%.  Calculate weighted average cost of capital using book value as weights.

 

  1. Ganesh Ltd plans a production of 57000 units per annum.  The cost of production is Rs.100 per unit, comprising of raw material – Rs.70; direct labour – Rs.20 and overheads Rs.10.

Selling price is Rs.150 per unit. Raw material is in stock for 2 months and finished goods for 3 months.  Production process takes 1 month. Credit allowed by supplier is 1.5 months and credit given to debtors is 1 month. WIP may be assumed to be 40% completed. Calculate the working capital required at cash cost.

  1. The following data relates to Reliance Ltd:

Existing capital structure: 50,000 equity shares of Rs. 100 each

The company wants to implement a new project for which Rs.10 lakhs is needed.  The following two options are identified:

  1. Equity shares @ Rs.100 each                                    10 lakhs
  2. Equity shares @ Rs.100 each 5 lakhs

10% preference shares @Rs.100 each            Rs. 5 lakhs

Calculate the EBIT at the indifference point.  Assume 30% tax.

 

SECTION – C

Answer any two questions:                                                                                      (2×20=40)

 

  1. Discuss the functions of financial management in detail.
  1. The existing capital structure of Regal Ltd is as follows:

Equity shares of Rs.100 each              Rs.5,00,000

Retained earnings                               Rs.2,00,000

8% preference shares                          Rs.2,50,000

6% debentures                                                Rs.   50,000

The existing rate of return on the company’s capital employed is 10% and tax rate 50%. The rate of return is expected to increase by 2% after expansion.  The company requires a sum of Rs.5,00,000 to finance its expansion program, for which it is considering the following options:

  1. a) Issue 5,000 equity shares of Rs.100 each
  2. b) Issue 10% preference shares
  3. c) Issue 8% debentures

The estimated Price Earnings Ratio in the above three financing options would be 17, 15 and 14 respectively. Which option would you recommend?

  1. Surya limited is considering a capital investment proposal which cost Rs.2,50,000. It has a life span of 5 years. The cost of capital is 12%. The firm uses straight line method of depreciation.  The company’s tax rate is 30%.  The estimated  Earnings before tax from the proposed investment proposal is as follows:

 

Year                            Earnings before tax

                                               Rs.

1                                            45,000

2                                            60,000

3                                            95,000

4                                            63,000

5                                            50,000

 

Compute:                                                                                                                                            a) Average rate of return      b) Net present value           c) Profitability index

 

 

 

 

 

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Loyola College B.A. Economics April 2006 Financial Management Question Paper PDF Download

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LOYOLA COLLEGE (AUTONOMOUS), CHENNAI – 600 034

B.A. DEGREE EXAMINATION – ECONOMICS

RF 26

SIXTH SEMESTER – APRIL 2006

                                                    EC 6602 – FINANCIAL MANAGEMENT

(Also equivalent to ECO602)

 

 

Date & Time : 24-04-2006/9.00-12.00         Dept. No.                                                        Max. : 100 Marks

PART – A

Answer any FIVE questions in about 75 words each.           (5 ´ 4 = 20 Marks)

  1. Define business finance.
  2. Bring out the scope of Financial Management.
  3. Write a note on financial forecaste.
  4. What is the relationship between financial decision making and risk and return.
  5. Explain wealth maximization objectives of Financial Management.
  6. A finance manager’s concern must be to maintain liquidity rather than profitability.
  7. How does valuation concept help in decision making?

PART – B

Answer any FOUR questions in about 250 words each.       (4 ´ 10 = 40 Marks)

  1. Discuss the impact of globalization in the financial decision making of corporate enterprises. Also discuss the impact of liberalization on Indian industry.
  2. Explain the role and scope of finance function in business distinguishing it from the accounting function. Also give Spearman organization chart for the finance function in large corporate enterprises
  3. Explain the concept of compounding and present value. How do these two concept differ?
  4. Explain two approaches which are adopted for valuation of equity shares with appropriate examples.
  5. Explain the procedure you would adopt to minimize your risk while selecting a capital investment project.
  6. Risk analysis is an essential feature of investment decision making process. What are the major risk factors? And how will you control them.
  7. Explain the advantages and disadvantages of the following types of business organization.

(a) Sole proprietorship          (b) Partnership (c) Joint stock companies

PART – C

Answer any TWO questions in about 900 words each.         (2 ´ 20 = 40 Marks)

  1. Explain the basic provisions of the following Acts:

(a) SEBI     (b) MRTP         (c) IDRA 1956 (d) Industrial licensing policy 1993

  1. Discuss briefly the different techniques of analysis and interpretation of financial statements and explain the salient features of the various methods of financial analysis.
  2. What is profitability? How is it measured? Which of the accounting ratios serve as indicators of profitability? And how are they computed?
  3. What is meant by cost of capital of a firm? And what relevance does it have in decision-making? How is it calculated with different types of sources of capital funds? Why is the cost of capital most appropriately measured on an after tax basis?

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Loyola College B.A. Economics April 2007 Financial Management Question Paper PDF Download

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LOYOLA COLLEGE (AUTONOMOUS), CHENNAI – 600 034

B.A.  DEGREE EXAMINATION –ECONOMICS

RF 33

SIXTH SEMESTER – APRIL 2007

EC 6602 – FINANCIAL MANAGEMENT

 

 

Date & Time: 20/04/2007 / 9:00 – 12:00       Dept. No.                                                                 Max. : 100 Marks

 

 

PART A

 

ANSWER ANY FIVE QUESTIONS IN ABOUT 75 WORDS EACH

 

  • Define Co-operative organization
  • Explain the concept of Annuity
  • What is “call money” market?
  • What do you understand by accrual principle?
  • Find the present value of the following
    1. Rs 3000 due to be received six years from now with an opportunity cost of 8%
    2. Rs 1000 to be received 3 years from now with an opportunity cost of 6%

 

  • A Limited is at present paying a dividend of Rs. 4 per equity share this rate of dividend is going to continue in the years to come. The current expected dividend rate is 12% Calculate the value of equity share

 

  • A debenture holder is to receive an annual interest of Rs 100 for perpetuity on his debenture of Rs. 1000. Calculate the value of debenture if the rate of return is
    1. 12%
    2. 8%

PART B

 

ANSWER ANY FOUR QUESTIONS IN ABOUT  250 WORDS EACH

 

  • State the difference between public and private limited company
  • Examine the role of financial managers in the post liberalization era
  • Discuss the functions of the financial system
  • Discuss the role of IDBI in industrial finance
  • A Limited has issued bond of the par value of Rs 1000 the present value of the bond is Rs 900. The bond carries an interest rate of 14%. The maturity period is 6 years. You are required to calculate the yield on maturity.

 

  • ABC Ltd is expected to pay a dividend of Rs 30 per share. Dividends are expected to grow perpetually at 10% You are required to calculate the market value of the share if capitalization rate is 15%

 

  • Discuss the powers and functions of SEBI

 

 

PART C

 

ANSWER ANY  TWO QUESTIONS IN ABOUT  900WORDS EACH

 

  • Financial management as an integral part of the overall management , is not totally independent area – Justify

 

  1. a) A company issues Rs 10,00,000 16% debentures of Rs 100 each. The company is in 35% tax bracket you are required to calculate the cost of debt before and after tax. If debentures are issued at (i) at par (ii) 10% premium (iii) 10 % discount (b) If brokerage paid at 2% what will be the cost of debentures if issued at par

 

  1. From the following capital structure of a company calculate the overall cost of capital, using (a) book value weights and (b) market value weights

 

Sources Book value Market value
Equity share capital Rs 10 per shares 45000 90000
Retained earnings 15000 –
Preference share capital 10000 10000
Debentures 30000 30000

 

The after- tax cost of different sources of finance is as follows

Equity share capital 14%, Retained earnings 13% Preference share capital 10%

Debentures 5 %.

 

18. Examine the Equilibrium financial markets through four panel diagram.

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Loyola College B.A. Economics April 2008 Financial Management Question Paper PDF Download

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LOYOLA COLLEGE (AUTONOMOUS), CHENNAI – 600 034

B.A. DEGREE EXAMINATION – ECONOMICS

BC 28

 

SIXTH SEMESTER – APRIL 2008

EC 6602 – FINANCIAL MANAGEMENT

 

 

 

Date : 23/04/2008                Dept. No.                                       Max. : 100 Marks

Time : 9:00 – 12:00

 

PART – A

 

Answer any FIVE questions in about 75 words each                             (5 x 4 = 20 marks)

 

  1. Define Sole Proprietorship
  2. What is Financial Management?
  3. What do you understand by “Sweat Equity shares”?
  4. Point out the difference between VAT and CENVAT.
  5. Rs.1,000 is invested at 10% compounded annually for three years.  Calculate the compounded value after three years.
  6. A debenture holder is to receive an annual interest of Rs.100 for perpetuity on his debenture of Rs.1,000.  Calculate the value of debenture if the rate of return is   a) 15%  & b) 10%.
  7. Define New Issue Ratio (NIR).

 

PART – B

 

Answer any FOUR questions in about 250 words each.                                    (4 x 10 = 40 marks)

 

  1. Explain the role of a Finance Manager in the liberalized era.
  2. State the difference between Public and Private Limited Company.
  3. Differentiate between Debentures and Shares.
  4. What are the advantages and limitations of a cooperative society?.
  5. Discuss the Powers and Functions of SEBI.
  6. The current market price of a debenture of X Ltd is Rs.800 having a face value of Rs.1000.  The debentures will be redeemed after 5 years.  The debenture carries an interest rate of 12% p.a.  Calculate yield on maturity.
  7. Mr. A holds an equity share giving him an annual dividend of Rs.20.  He expects to sell the share for Rs.180 at the end of a year.  Calculate the value of the share if the required rate of return is 12%.

 

 

 

 

PART – C

 

Answer any TWO questions in about 900 words each                                (2 x 20 = 40 marks)

 

  1. ‘Financial Management has changed substantially in scope and complexity in recent decades’ – Justify.

 

  1. Comment on common stock valuation. Mohan Ltd Co’s dividend per share next share is expected to be Rs.4 and it is expected to grow at a 6% rate forever. Assume that the appropriate discount rate is 14%. What is the value of one share?

 

  1. From the following capital structure of a company, calculate the overall cost of capital, using (a) Book Value Weights;  b) Market Value Weights.

 

Source

 Book value Market Value
Equity Share Capital (Rs.10 share) Rs.45,000 Rs.90,000
Retained Earnings 15,000 –
Preference Share Capital 10,000 10,000
Debentures 30,000 30,000

 

 

 

 

 

 

 

The after tax cost of different sources of Finance;  Equity 14%;  Retained Earnings 13%; Preference share 10% & Debentures 5% .

 

  1. Explain the detail the rational and significance of the concept of Time value of money. Illustrate with suitable examples.

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Loyola College B.A. Economics April 2011 Financial Management Question Paper PDF Download

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LOYOLA COLLEGE (AUTONOMOUS), CHENNAI – 600 034

B.A. DEGREE EXAMINATION – ECONOMICS

SIXTH SEMESTER – APRIL 2011

EC 6602 – FINANCIAL MANAGEMENT

 

 

 

Date : 09-04-2011              Dept. No.                                        Max. : 100 Marks

Time : 9:00 – 12:00

 

PART – A

                       

Answer any FIVE questions in about 75 words each.                                                   (5×4=20)

  1. Define business finance.
  2. Write a note on companies Act.
  3. What are financial liabilities?
  4. Write a short note on Capital Structure.
  5. State the cost of preference capital.
  1. A company issued Rs. 1,00,000 of 10% redeemable debentures at a discount of 50%. The cost of floatation amount to Rs. 3,000. The debentures are redeemable after 5 years. Compute before – tax and after – tax cost of debt. The tax rate is 50%.
  1. Discuss the cost of retained earnings.

PART – B                 

Answer any FOUR questions in about 300 words each.                                          (4×10=40)

  1. Analyse the emerging role financial managers in India.
  2. Write a note on industrial policy.
  3. Bring out the functions of financial system.
  4. Examine the various indicators of financial development.
  1. Consider a project, which has the following cash flow stream:
Investment Rs. (1,000,000)
Saving in Year Cash flow
1 200,000
2 200,000
3 300,000
4 300,000
5 350,000

The cost of capital, k, for the firm is 10 per cent. Calculate the net present value of the proposal.

  1. Discuss weighted average cost of capital.
  2. Explain the various forms of business organization.

 

 

PART – C

Answer any TWO questions in about 900 words each.                                            (2×20=40)

 

  1. Discuss the nature and scope of business finance.
  2. What is financial market and explain the equilibrium in the financial markets with four panel diagram.
  3. Bring out the SEBI guidelines for primary and secondary markets.
  4. Discuss the various misconceptions about the cost of capital concept.

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Loyola College B.A. Economics April 2012 Financial Management Question Paper PDF Download

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LOYOLA COLLEGE (AUTONOMOUS), CHENNAI – 600 034

B.A. DEGREE EXAMINATION – ECONOMICS

SIXTH SEMESTER – APRIL 2012

EC 6602 – FINANCIAL MANAGEMENT

 

 

 

Date : 20-04-2012              Dept. No.                                       Max. : 100 Marks

Time : 1:00 – 4:00

 

PART – A

 

Answer any FIVE questions in about 75 words each:                                (5 ´ 4 = 20 marks)

 

  1. State the goals of financial management.
  2. Define partnership.
  3. What is financial market?
  4. If a person invests Rs.5,000 at 12% compounded annually for three years,

calculate the compounded value after three years.

  1. Define costs of debt.
  2. What is ‘preference shares’?
  3. Write a note on companies Act.

PART – B

Answer any FOUR questions in about 250 words each:                              (4 ´ 10 = 40 marks)

 

  1. Explain the nature and scope of business finance.
  2. Discuss the SEBI guidelines for debentures.
  3. Analyse the functions of a financial system.
  4. Explain the methods of long term securities valuation.
  5. Describe the explicit and implicit costs.
  6. Write a note on industrial policy.
  7. Analyse the application of present value technique in finance.

PART – C

 

Answer any TWO questions in about 900 words each:                                (2 ´ 20 = 40 marks)

 

  1. Explain the emerging role of financial managers in India.
  2. Discuss the relevance of indirect tax structure on companies in India.
  3. Critically analyse the functions of various financial institutions in India.
  4. From the capital structure of a company given below, calculate the overall cost of capital, using (a) Book Value Weights; b) Market Value Weights.

Source                                              Book value               Market value

Equity Share Capital (Rs.10 share)            Rs.45,000                  Rs.90,000

Retained Earnings                                        Rs.15,000                  –

Preference Share Capital                            Rs.10,000                  Rs.10,000

Debentures                                                    Rs.30,000                  Rs,30,000

The after tax cost of different sources of Finance; Equity 14%; Retained Earnings 13%;

Preference share 10% and Debentures 5%.

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Loyola College B.A. Economics Nov 2012 Financial Management Question Paper PDF Download

by

LOYOLA COLLEGE (AUTONOMOUS), CHENNAI – 600 034

B.A., DEGREE EXAMINATION – ECONOMICS

SIXTH SEMESTER – NOVEMBER 2012

EC 6602 – FINANCIAL MANAGEMENT

 

 

 

Date : 5/11/2012               Dept. No.                                        Max. : 100 Marks

Time : 1.00 – 4.00

 

PART-A

 

Answer any FIVE questions in about 75 words each:                                                       (5×4=20)

 

  1. Discuss the relationship of financial management to Economics.
  2. What are the different ways of classifying financial markets?
  3. What are the principal tasks of SEBI?
  4. Determine the present value of the following cash stream if the discount rate is 14 %.
Year 1 2 3 4 5
Cash flow 5000 6000 8000 9000 8000
  1. A Rs 100 par value bond bearing a coupon rate of 12% will mature after 5 years. What

is the value of the bond, if the discount rate is 15%?

  1. Explain Implicit and Explicit cost.
  2. If you deposit Rs 1000 annually in a bank for 5 years and your deposits earn a

compound interest rate of 10 percent. What will be the value of this series of deposit at

the end of 5 years?

 

PART-B

 

Answer any FOUR questions in about 300 words each:                                                   (4×10=40)

 

  1. Explain the various forms of business organization.
  2. “Financial management is in many ways an integral part of the jobs of the managers”-

Comment.

  1. Discuss the functions of a financial system.
  2. (a) The project X cost Rs 1,00,000 and its expected cash flows are as follows:
Year 1 2 3 4 5
cash flow 20000 30000 40000 50000 30000

The cost of capital is12% calculate the net present value

(b) A company has 15% perpetual debt of Rs 100000. The tax rate is 50%. Determine

the cost of capital (before tax as well as after tax) assuming that the debt is issued at (i)

par, (ii) 10% discount, and (iii) 10% premium.

  1. Explain the equilibrium in financial markets.
  2. The market price of a Rs1000 par value bond carrying a coupon rate of 14percent and

maturing after 5 years is Rs 1050. What is the YTM on this bond? What is the

approximate YTM? What will be realized YTM if the reinvestment rate is 12 percent

 

  1. A company issues 14% irredeemable preference shares of the face value of Rs 100

each. Flotation costs are estimated as 5% of the expected sale price .What is the

cost of preference capital if preference shares are issued at (i) par value (10%)

premium and     (iii) 5% discount?

PART-C

 

Answer any TWO questions in about 900 words each:                                                     (2×20=40)

 

  1. Explain the nature and scope of Business finance.
  2. Discuss the measurement of Cost of Capital
  3. A company has on its books the following information:
     Type of capital Book value Market value Specific costs
Debt 300000 270000 8%
Preference capital 200000 230000 14%
Equity capital 500000 600000 17%
Retained Earnings 150000 17%
Total 1000000 1250000

 

Determine the weighted average cost of capital using (a) Book value weights (b) Market value weights.

 

  1. a) Discuss the various components of financial system.

 

  1. b) Explain the indicators of financial development.

 

 

 

 

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