LOYOLA COLLEGE (AUTONOMOUS), CHENNAI – 600 034

M.A. DEGREE EXAMINATION – SOCIOLOGY

OC 38

SECOND SEMESTER – APRIL 2006

                                         SO 2805 – HOSPITAL FINANCIAL MANAGEMENT

(Also equivalent to SO 2950)

 

 

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

 

 

PART – A

 

ANSWER ALL QUESTIONS:                                               10 ´ 2 = 20 marks

 

1. What is financial management?
2. What is trading on equity?
3. What do you mean by leverage in financial analysis?
4. What is capital structure?
5. What is specific cost?
6. What is capital budgeting?
7. What is property dividend?
8. The current market price of an equity share of a company is Rs. 100. The current dividend per share is Rs. 5. In case the dividends are expected to grow at the rate of 8% calculate the cost of equity capital.
9. What is time preference for money?
10. Define working capital.

 

PART – B                                                5 ´ 8 = 40 marks

ANSWER ANY FIVE QUESTIONS:

1. Explain the objectives of Financial Management.

12. Abu hospital is capitalized with Rs. 10 lacs divided into 10,000 shares of Rs. 100 each. The management desires to raise another Rs. 10 lacs to finance a major expansion programme. There are four possible financing plans: (i) all equity shares, (ii) Rs. 5 lacs in equity shares and Rs. 5 lacs in debentures carrying 5% interest, (iii) all debentures carrying 6% interest and (iv) Rs. 5 lacs in equity shares and Rs. 5 lacs in preference shares carrying 5% dividend. The existing earnings before interest and tax amount to Rs. 1,20,000 per annum.

You are required to calculate earnings per equity share under each of the above four financial plans.

1. Explain the types of dividend policy and forms of dividend.
2. X borrows Rs. 1 lakh at 8% interest compounded annually.  Equal annual payments are to be made for 6 years.  However at the time of the 4^th payment, x decides to settle the loan.  How much should he pay? (PVIFA = 6 years 8% = 4.623)
3. From the following information, you are required to forecast working capital requirements of National Hospital Ltd :

Rs.

Projected annual sales                                                 1,30,000

Percentage of profit on sales                                        25%

Average credit period allowed to debtors                                 8 weeks

Average credit period allowed by creditors                              4 weeks

Average stock                                                              8 weeks

Add 10% to computed figures to allow for contingencies.

1. Calculate the average rate of return for projects A and B from the following:

Particulars	PROJECT A	PROJECT B
Investments	Rs. 20,000	Rs. 30,000
Expected life (no salvage value)	4 years	5 years

Projected Net Income (after interest, depreciation, and taxes)

 

Years	Project A  (Rs)	Project B (Rs)
1	2,000	3,000
2	1,500	3,000
3	1,500	2,000
4	1,000	1,000
5	–	1,000
Total	6,000	10,000

 

1. (a) Explain the list of leverages used in financial analysis.

(b) Out put 65,000 units, Fixed cost Rs. 5,000 variable cost .20 p per unit, interest 5,000 selling price per unit .50 p per unit. Calculate, leverages.

PART – C                             2X20 = 40marks

ANSWER ANY TWO QUESTIONS:

 

18. There are two projects X & Y. X requires an investment of Rs. 26,000

while Y requires an investment of Rs. 38,000. The cost of capital is 12%.

On the basis of the following cash inflows and present value of Re 1 at

12%, you are required to state which project should be accepted, by using

Net Present Value method profitability index method.

 

Year	Cash Inflows Project X	Cash Inflows Project Y	Present value of Re. 1 at 12%
1	Rs. 9,000	Rs. 8,000	.893
2	7,000	10,000	.797
3	6,000	12,000	.712
4	5,000	14,000	.636
5	4,000	8,000	.567
6	4,000	2,000	.507
7	3,000	16,000	.452
8	3,000	–	.404
9	3,000	–	.361
10	3,000	–	.322

 

1.   The board of directors of Nanak hospital  Ltd. requests you to prepare

a statement showing the Working Capital Requirements for a level of activity of

1,56,000 units of production.

 

The following information is available for your calculations:

Per Unit (Rs.)

Raw materials                                      90

Direct Labour                                      40

Overheads                                           75

___

205

Profit                                                   60

___

Selling price per unit                            265

___

• Raw materials are in stock, on average one month.
  • Materials are in process, on average 2 weeks
  • Finished goods are in stock, on average one month.
  • Credit allowed by suppliers, one month
  • Time lag in payment from debtors, 2 months
  • Lag in payment of wages, 1.5 weeks

20% of the output is sold against cash. Cash in hand and at bank is expected to be Rs. 60,000. It is to be assumed that production is carried on evenly throughout the year. Wages and overheads accrue similarly and a time period of 4 weeks is equivalent to a month.

 

1. Explain the capital structure decision, and factors affecting capital structure.

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. 10 shares)	45,000	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 is as follows:

 

Equity share capital: 14%; Retained earnings: 13%; Preference share capital: 10%; Debentures: 5%.

 

1. Explain the capital structure decision, and factors affecting capital structure.

 

 

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