pid28507 PCMG

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1 OCTOBER 2011 Time : Three hours Maximum : 100 marks PART A (10 2 = 20 marks) Answer ALL questions. All questions carry equal marks. Each answer should not exceed 50 words. 1. Define financial management. {v À»õsø &C»UPn TÖ. 2. State any two objectives of finance function. {v o ß H uý C SÔU PõÒPøÍ TÖP. 3. Expand (a) EBIT EPS.  ÁõUP u P (A) EBIT (B) EPS. 4. What is cost of capital?»uú AhUP GßÓõÀ GßÚ? 5. Explain the term risk. "Chº õk' & ÂÍUSP. 6. List out the two types of working capital. øh øó u¼ß C ÁøPPøÍ Á ø\ kzxp. 7. What do you mean by inventory management? \µuq»õsø SÔzx } AÔÁx õx? 8. Define dividend policy. [Põuõ U öpõòøp&áøµâ»upn u P.

2 9. Expand CAPM and APM. CAPM, APM  ÁõUP u P. 10. What are financial derivatives? {v À u ÂzuÀ Gß Ú õøá? PART B (5 6 = 30 marks) Answer ALL questions. All questions carry equal marks. Each answer should not exceed 200 words. 11. (a) List of the objectives of financial management. {v À»õsø ß SÔU PõÒPøÍ mi ¼kP. Discuss the various sources of short term finance. À ÁÖ SÖQ Põ» {v»[pò SÔzx ÂÁõv. 12. (a) Explain the importance of financial planning. {v vmhªh¼ß UQ zxá ØÔ ÂÁ. Calculate operating leverage and financial leverage. sales Rs. 50,000 variable cost Rs. 25,000 interest Rs. 5,000 fixed cost Rs. 15,000 PshÔP : ö\ À õmk ö PõÀ ØÖ {v À ö PõÀ. ÂØ øú ¹. 50,000 õö ö\»ä ¹. 25,000 Ámi ¹. 5,000 õóõa ö\»ä ¹. 15,000 2

3 13. (a) Narrate the importance of cost of capital.»uú AhUPzvß UQ zxázøu GkzxøµUP. A project costs Rs. 15,60,000 and yields annually a profit of Rs. 2,70,400 after depreciation of 12% p.a. but before tax at 25% compute pay back period. J vmhzvß AhUP Âø» ¹. 15,60,000. Á hõ vµ»õ ¹. 2,70,400 12% Bsk u õúzvøs ß ØÖ 25% Á US ß. v ö Ö Põ» AÍøÁU PõsP. 14. (a) What are the various forms of working capital? À ÁÖ øh øó uà Gß Ú õøá? Calculate optimum cash balance from the particulars given below Annual cash requirements Rs. 1,50,000 Fixed cost per transaction Rs. 15 Interest rate 18% ßÁ upáàpò» Ezu öµõup C ø PõsP. Á hõ vµ öµõupz uøá ¹. 1,50,000 {ø»a ö\»ä J háiuøpus ¹. 15 Ámi ÂQu 18%. 15. (a) The earnings per share of a company is Rs. 12. The cost of equity capital is 10%. The rate of return on investment is 15% compute market price per share under Walter model, if the payout ratio is 50%. J [Qß \ õzv ¹. 12 \õuõµn [Qß AhUP 10% u½mk Á Áõ ÂQu 15%. [PÎUS ÂQu 50% GÛÀ ÁõÀhº øó À [Qß \ øu Âø»ø Psk i. State the assumptions of CAPM. CAPM ß { uøúpøíu TÖP. 3

4 PART C (5 10 = 50 marks) Answer ALL questions. All questions carry equal marks. Each answer should not exceed 500 words. 16. (a) What are the functions of financial management? {v À»õsø ß opò õøá? A firm issues 10% debentures of Rs. 1,00,000 and realising Rs. 98,000 after allowing 2% commission. The debentures are due at the end of 10 years at par calculate cost of debt. J {Ö 10% Phß zvµ[pøí ¹. 1,00,000 öáî mk 2% uµs }[P»õP ö ØÓ öuõøp ¹. 98,000. Phß zvµ[pò 10 Á h[pò PÈzx P v À «mp k PhÛß AhUPzøuU PõsP. 17. (a) Explain the various theories of capital structure.»uú Pmhø ß À ÁÖ Põm õkpøí ÂÁ. An investment of Rs. 20,000 yields the following returns : Years : Yield (Rs.) : PV factor 10% : Is the investment advisable? ¹. 20,000 v ÒÍ u½k RÇUPsh Á Áõ u QÓx. BskPÒ : Á Áõ ¹. : uòð i Põµo 10% : u½k HØÖU öpõòí h»õ õ? 4

5 18. (a) From the following details calculate : (i) average age of debtors (ii) debtors turnover Rs. Rs. Credit sales 2,70,000 Return inwards 20,000 Debtors (opening) 55,000 Debtors (closing) 45,000 Provision for doubtful debts 5,000 Assume no. of days in a year is 360. RÌUPsh  µ[pò» (i) PhÚõÎPÎß \µõ\ Bsk Põ» (ii) PhÚõÎPÒ _ÇØ] PõsP. ¹. ¹. Phß ÂØ øú 2,70,000 EÒv 20,000 PhÚõÎPÒ (Bµ ) 55,000 PhÚõÎPÒ (CÖv À) 45,000 \ upzvøs Phß JxURk 5,000 J BskUS 360 õmpò GÚU öpõòp. What are the determinants of working capital? øh øó uø» {ºn US PõµoPÒ õøá? 19. (a) Explain the factors influencing dividend policy of a firm. J {Ö zvß [Põuõ U öpõòøpø õvus PõµoPÒ SÔzx ÂÁ. From the following particulars, compute (i) (ii) Reorder level Minimum level (iii) Maximum level (iv) Average stock level. Normal usage 100 units per day Minimum usage 60 units per day Maximum usage 130 units per day Economic order quantity 5000 units Reorder period 25 to 30 days. 5

6 RÌUPõq upáàpò» (i) Ö Bøn {ø» (ii) SøÓ u m\ {ø» (iii) AvP m\ {ø» (iv) \µõ\ \µus {ø» PõsP. \uõµn E õp 100 A»SPÒ J õðus SøÓ u m\ E õp 60 A»SPÒ J õðus AvP m\ E õp 130 A»SPÒ J õðus ]UPÚ öpõò uà AÍÄ 5000 A»SPÒ Ö Bøn Põ» 25&30 õmpò. 20. (a) What are the features and limitations of APM? APM ß ]Ó PÒ ØÖ Áøµ øópò õøá? Write short notes on options. ]Ö SÔ ÁøµP ""Â ø ''. 6