2011 (November)
(Financial Management)
The figures in the margin indicate full marks for the questions
(New Course)
Full Marks: 80
Pass Marks: 32
Time: 3 hours
1.
(a) profit maximization is not the adequate
criterion to judge the efficiency of a firm. Explain the statement. What should
be the right criterion and why?
Or
(b) Critically analyze the function of a financial manager
in a large –scale industrial establishment. What are the responsibilities of
the financial manager in a modern business organisation?
2. (a) (i) X LTD.
Issues Rs 2, 00,000 80% debentures at a discount of 5% the tax rate is 50%
compute the cost of debt capital.
(ii) Y LTD. Issues RS 2, 00,000 9% debentures at a premium of
10% the cost of floatation is 2% the tax rate applicable is 60% compute cost of
debt capital.
(iii) A company issues Rs. 10, 00,000 10% redeemable
debentures at a discount of 5% the cost of floatation amounts to Rs 30,000. The
debentures are redeemable after 5 years. Calculate before-tax and after-tax
costs of debt assuming a tax rate of 50%.
Or
(b) what do you mean by the term leverage? How would you
compute the degree of operating and financial leverage? Explain with suitable
example.
3. (a) what are the main source of finance available to
industries for meeting their long ---term financing requirements? Discuss. Name
any four financing institutions that provide long--- term finance to industrial
undertakings in our country
Or
(b) Define capital market. What are the important features of
Indian capital market? Also distinguish between organised capital market and unorganized
capital market.
4. (a) Explain various factors that influence the dividend
of a firm.
Or
(b)There is a strong view prevailing among financial experts
that the irrelevant hypothesis underlying the MM theory of dividend
distribution is outdated and unsuitable to present condition. Do you agree with
this view? Discuss.
5.(a)the management
of Brahmaputra LTD. Has called for a
statement showing the working capital
needed to finance a level of activity of 300000 units of output for the year.
The cost structure of the company‘s product, for the above mentioned activity
level, is detailed below:
Raw materials
20 cost per unit (RS)
Direct labour
5 cost per unit ’’’
Overheads
15 cost per unit ”’’’
Total 40
Profit 10
Selling price 50
(i) past experience indicates that raw materials are held in
stock on an average for two months.
(ii) work –in process (100% complete in regard to materials
and 50% for labour and overhead) will approximately be half a month’s production
(iii) Finished goods remain in warehouse on an average for a
month
(iv) suppliers of materials extend a month’s credit
(v)Two months credit is allowed to debtors, calculation of
debtors may be made at selling price
(vi)A minimum cash balance of RS 25,000 is expected to be maintained
(vii) The production pattern is assumed to be even during the
year
You are required to prepare the statement of working capital
Requirements.
Or
(b) what is cash management? Explain various methods of
investing surplus cash. What criteria should a firm use for investing idle cash
in marketable securities?