Monday, January 23, 2012

Dibrugarh University - Security analysis and Portfolio Management 2011



1. (A) what do you mean by fundamental Analysis and Technical Analysis? Bring out clearly the points of distinction between the two.
                                                                               Or
(b) What do you mean by return? Write a note on the return when ‘capital is at risk.

2. (A) what do you understand by portfolio Management? Write a note on the time value of money.
                                                                                 Or
(b) What is Diversification? Discuss the methods of diversification of securities.

3. (A) company p has a beta 1.45, the risk –free rate is 10% and expected return on market portfolio is 165 the company pays a dividend of Rs 2 per share and expected growth in dividends is 10% p.a.
(i) What is the share’s required rate of return according to SAPM?
(ii) What are the shares ‘market price assuming the required return?
                                                                                  Or
(b) What do you mean by capital market line and Security market line? Distinguish between CML and SML.

4. (A) write notes on Sharpe’s treynor’s performance evaluation models.
                                                                                     Or
(b) Determine the treynor’s and Jensen’s’ measures of portfolio performance from the following information:
Average rate of return on market portfolio 18%
Average rate of return on this portfolio 19%
Average risk ---free return 12%
Standard deviation of this portfolio 14%
Beta of portfolio under consideration 0.95

5. (A) write a note on the contract Specification in case of options. Discuss the trading of options in developed financial markets.
                                                                                          Or
(b) What are the basic features of Future? How does it differ from options?

Dibrugarh University - Security analysis and Portfolio Management 2010


1. (A) the investment process involves a series of activities starting from policy formulation to portfolio evaluation.
                                                                                                  Or
(b) Mr.x has Rs.50, 000 to make one time investment. His son has entered the higher secondary school and he needs his money back after 2(two) years for his son’s educational expenses. As Mr. X’s outflow is one time and the duration is simply 2(two) years, now he has a choice of two types of bonds:
                (i) Bond a has a coupon rate of 7% and maturity period of 4(four) years with a current yield of 10% the current price is Rs 904.90
                (ii)Bond B has the coupon rate of 6% with a maturity period of 1 (one) year and a current yield of 10% the current price is Rs 963.64.
How can Mr. X solve his problem to avoid risk? How can he decide as to how much of his investable fund he should invest in each of the two bonds?
                (1) Calculate the duration.
                (2) Determine the proportion of funds to be invested in Bond A and Bond B.
                (3) Determine the number of bonds A and B which he can buy with Prevailing market price mentioned above.

2. (A) Discuss various steps involved in the traditional approach to portfolio construction.
                                                                         Or
(b) Stock X and Y have yielded the following returns for the past two years:
             Year                                   return 
                                                   X               Y
2007—08                             12%             14%
2008---09                             18%              12%
(i) What is the expected return on portfolio made up to 60% of X and 40% of Y?
(ii)Find out the standard deviation of each stock.
(iii) What is the covariance and coefficient of correlation between X and Y?
(iv) What is the portfolio risk of a portfolio made up to60% of X and 40% of Y?

3(a) Explain and illustrate the concept of capital asset pricing Model with the help of a suitable diagram.
                                                                               Or
(b) (i) Briefly state the advantages of adopting capital Asset pricing Model in portfolio management.
(ii) Mr. Z is considering an investment in the stock of ABC co. LTD. To earn a return of 17% in the next year. the said company’s ‘beta’ is 1.3, riskfree return is 7%and the market return is 15%. Should Mr. Z invest in ABC co.LTd?

4(a) (i) Briefly Explain, with the help of a suitable diagram, Sharpe’s performance Index.
(ii) Mr.N is having units in a mutual fund for the past three years. He wants to evaluate its performance by comparing it to the market.
                                                                       Fund                          market 
Return                                                         70.60                            41.40
Standard deviation                                  41.31                            19.44
Risk free rate                                              12%                               12% 
Beta (B)                                                    1.12                                     -----
Find out the index value according to Sharp’s performance Index.
                                                                              Or
(b) (i) Briefly Explain, with the help of a suitable diagram, treynor’s performance Index of portfolio performance.
(ii)Using the data given in Q.No. 4. (a) (ii) above, find out the index value according to Treynor’s performance Index.

5(a) what is ‘option’? explain different types of option. Briefly state its usefulness.
                                                                                       Or
(b) what are the basic features of a ‘future’? Distinguish between ‘option’ and ‘future.’

Dibrugarh University - Management Accounting 2011


1.(a) “Management  Accounting  is the presentation of  accounting  information in such a way as to assist  management in the creation of  policy and in the day—to—day  operation of the undertaking”. Elucidate this statement.
                                                                                                 Or
(b)Describe the role of Management Accounting in modern business world. How does it differ from cost Accounting?

2. (A) from the following data, calculate:
(I)Break—even point Expressed in amount of sales in rupees.
(ii)New break –even point if selling price is reduced by 20%.
(iii) How many units must be sold to earn a net income of 10% on sale?
Selling price (per unit)            20 RS
Variable cost (per unit)           12 RS
Fixed cost                               2, 40,000

(b) An automobile  manufacturing  company  finds that while the cost of making its  own workshop  part  No.0024 is  RS 6.00 each ,the  same is available in market at  Rs 5.60  with  an  assurance of continuous Supply.
Write a report to the Managing Director giving your views whether to make or buy this part .Give also your views in case the suppliers reduce the price from 5.60 to Rs 4.60 the cost data is as follows:
Materials          2.00 RS
Direct labour     2.50 Rs
Other variable cost 0.50
Depreciation and other
Fixed cost      1.00           
Total cost       6.00
                                                                                              Or
“Marginal costs are primarily used in guiding decisions yet to be made.” Explain the statement giving examples.

3. (A) XYZ Ltd. Have prepared the budget for the production of 60000 units of the only commodity manufactured by them for the costing period as under:
Raw material                           2.52 (RS. In lakh)
Direct labour                          0.75   ””  
Direct expenses                     0.10    ”” 
Works overhead                    2.25   ”” 
(60% fixed)
Administrative overhead       0.40   ””
(80% fixed)
Selling overhead                        0.20””  
(50% fixed)
THE actual production during the period was only 40000 units. Calculate the revised budgeted cost per unit.
                                                                                          Or
(b) What do you mean by cash budget? What are its advantages? How is it prepared?

4. The following information was obtained from the record of a manufacturing unit using standard costing system:
Actual overhead ---- Rs 1,800
Budgeted overhead ----Rs 2,000
Budgeted period ---- 4000 labour hours
Standard per unit ---- 10 labour hours
Budgeted number of days ---- 20
Standard overhead per hour----- Re 0.50
Actual number of days ---22
Actual hours ----4300
Actual   production ----425 units
Calculate---------
(a)    Expenditure variance ;
(b)   Calendar variance;
(c)    Capacity variance ;
(d)   Efficiency variance     
(e)   Volume Variance.  
                                                                    Or 
What do you understand by the term variance and variance Analysis? Explain the importance of variance Analysis.

5. Following are the summarized Balance sheet of Amcor as on 31st December, 2008 and 2009:
Liabilities
Amount
Assets
Amount
2008
2009
2008
2009
Share capital     
General Reserve
Profit &loss A/c   
Bank loan (Long—term)
Creditors
Provision for tax
200000
50000
30500
70000
150000
30000
250000
60000
30600
-------
135200
35000
Land and Building
Machinery
Stock
Debtors
Cash
Bank
Goodwill
200000
150000
100000
80000
500
----------
----------
190000
169000
74000
64200
600
8000
5000

530500
510800

530500
510800

Additional Information:
(I)Divided of RS 23,000 was paid
(ii)Assets of another company were purchased for a consideration of RS 50,000 payable in shares
The following was further purchased:
Stock -----Rs 20,000
Machinery --- Rs25, 000
(iii)Machinery was further purchased for Rs 8,000
(iv) Depreciation written off on machinery RS 12,000
(v) Income tax provided during the year RS 33,000          
(vi)Loss on sale of machine RS 200 was written off to General Reserve
Prepare a cash flow Statement From the Above.
                                                                              Or
What is the purpose of preparing A cash Flow Statement? How is it prepared?

Dibrugarh University - Financial Management 2011


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?

Dibrugarh University - Financial Management 2010


1.(a) “Finance has changed from a field that was concerned primarily with the procurement of funds to one that includes the management of assets, the allocation of capital and valuation of the firm”. Give your views on the above statement.
                                                                              Or
(b) Discuss in detail the main functions of the modern finance manager.

2.(a) what do you mean by cost of capital? How is it determined? What are the problems involved in determination of cost of capital?
(b) A company is considering the replacement of its existing machine by a new one. The written down value of the existing machine is Rs 50,000 and its cash salvage value is Rs20, 000. The removal of this machine would cost Rs. 5,000. The purchase price of the new machine is Rs.20 lakh and its expected life is 10 years. The company follows straight line depreciation without considering scrap? Value. The other expenses associated with the new machine are:
Carriage inward and installation charges Rs 15,000 cost of training workers to handle the new machine Rs. 5,000.
Additional working capital Rs 10,000 (which is assumed to be received back by sale of scraps in last year) and the fees paid to a consultant for his advice to buy the new machine Rs. 10,000.
                The annual savings (before tax) from the new machine would amount to Rs 2, 00,000.the income tax rate is 50% the cutoff rate of return is 10%.
                Should the new machine be bought? Present values of re 1 at 10% discount rate are as follows:               
                1           2         3        4          5            6          7            8                 9             10
                0.91   0.83    0.75   0.68    0.62     0.66     0.51       0.470         0.42        0.39

3.(a) Discuss the methods usually adopted for evaluating the leasing proposals.
                                                                                               Or 
(b)  Between Equity shares and debentures, which one is profitable form raising additional long—term capital for a manufacturing company and why?

4(a) what is the Modigliani—miller approach of irrelevance concept of dividends? Under what assumptions do the conclusions hold well?
                                                                                    Or
(b) (I) explain fully Walter’s formula on dividend policy.
(ii) Ramu & co. LTD. Earns Rs 6 per share. With capitalisation rate of 10% and having a return on investment at the rate of 20%, what according to Walter’s model should be the price per. Share at 30% dividend payout ratio? Is this the optimum payout ratio as per Walter?

5(a) “Efficient inventory management is reflected in the liquidity and profitability of the firm.” Explain.
                                                                                                   Or
(b) Define Receivable Management. Discuss the various dimensions of receivable management.

Sunday, January 22, 2012

Dibrugarh University - Business Statistics 2010

A time series is a set of statistical observations arranged is chronological order. Time series may be defined as collection of magnitudes of some variables belonging to different time periods. It is commonly used for forecasting.

Utilities of time series analysis
1. It helps in understanding past behaviour and is useful for prediction of future.
2. It facilitates comparison.
3. The various components of time series are useful to study the effective change under each component.
4. The reasons for variation can be studied by comparing actual with expected results.

Dibrugarh University - Business Statistics 2010


i) Method of Least Square: - This method is most commonly used method of measuring trend. It is a mathematical method and a trend line is fitted to the data in such a manner that the following two conditions are satisfied:-
i) The sum of deviation of the actual values from their respective mean is zero.
ii) The sum of square of the deviations of the actual and compute values is least from this line. That is why this method is called method of least square.
The straight line trend is represented by the equation:
                                                Y = a + bx
                                Where, y = denotes the trend values
                                                a = represents the intercept on y axis.
                                                b= represents slope of the trend line.

Merits:-
i) This is a mathematical method of measuring trend.
ii) Trend values can be obtained for all the given time periods in the series.
Demerits:-
i) This method is more tedious and time consuming.
ii) This method cannot be used to fit the growth curves.

ii) Semi-average method: - Under this method, the given data is divided into two parts. After that an average of each part is obtained which gives two points. Each point is plotted at the mid-point of the class interval covered by the respective part and then the two points are joined by a straight line which gives the required trend line.
Merits:-
i) This method is simple to understand as compared to the moving average method and the method of least square.
ii) This is an objective method of measuring trend as everyone who applies this method gets the same result.
Demerits:-
i) It is affected by extreme values.
ii) This method assumes straight relationship between the plotted points whether this exist or not.

iii) Method of moving average: - Under this method the average value for a certain time span is secured and this average is taken as the trend value for the unit of time falling at the middle of the period covered in the calculation of the average. While using this method it is necessary to select a period for moving average.
Merits:-
i) This method is simple to understand and apply.
ii) It is particularly effective if the trend of a series is very irregular.
iii) It is a flexible method of measuring trend because all figures are not changed if a few figures are added to the data.
Demerits:-
i) Trend values cannot be computed for all years.
ii) No there is no hard and fast rule for selecting the period of moving average.
iii) This method is not appropriate if the trend situation is not linear.

Dibrugarh University - Business Statistics 2010


Primary Data and Secondary Data:
Primary Data: Data which are collected for the first time for a specific purpose are known as Primary data. For example: Population census, National income collected by government, Textile Bulletin (Monthly), Reserve bank of India Bulletin (Monthly) etc.
Secondary Data: Data which are collected by someone else, used in investigation are knows as Secondary data. Data are primary to the collector, but secondary to the user. For example: Statistical abstract of the Indian Union, Monthly abstract of statistics, Monthly statistical digest, International Labour Bulletin (Monthly).
Methods of collecting primary data:
a)      Schedule and Questionnaire: - A Questionnaire is simply a list of questions in a printed sheet relating to survey which the investigators asks to the informants and the answers of the informants are noted down against the respective questions on the sheet. Choice of questions is a very important parts of the enquiry whatever its nature. Data under this method are collected in any of the following way:
(i)      By sending the questionnaire to the persons concerned with a request to answer the question and return the questionnaire.
(ii)    By sending the questionnaire through enumerators for helping the informants.

b)      Direct Personal observation: - This is a very general method of collecting primary data. Here the investigator directly contacts the informants, solicits their cooperation and enumerates the data. The information is collected by direct personal interviews. The novelty of this method is its simplicity. It is neither difficult for the enumerator nor the informants. Because both are present at the spot of data collection. This method provides most accurate information as the investigator collects them personally. But as the investigator alone is involved in the process, his personal bias may influence the accuracy of the data. So it is necessary that the investigator should be honest, unbiased and experienced.

Dibrugarh University - Business Statistics 2010

Method of collecting primary data:
Schedule and Questionnaire: - A Questionnaire is simply a list of questions in a printed sheet relating to survey which the investigators asks to the informants and the answers of the informants are noted down against the respective questions on the sheet. Choice of questions is a very important parts of the enquiry whatever its nature. Data under this method are collected in any of the following way:
(i)      By sending the questionnaire to the persons concerned with a request to answer the question and return the questionnaire.
(ii)    By sending the questionnaire through enumerators for helping the informants.
Characteristics of an ideal Questionnaire:
(i)      The Schedule of question must not be lengthy.
(ii)    It should be clear and simple.
(iii)   Questions should be arranged in a logical sequence.
(iv)  Each question should be brief and must aim to some particular information necessary for the investigation.
(v)    Questions of personal matter like income of property should be avoided.
(vi)  The Units of information should be Cleary shown in the sheet.

Management - Controlling

Techniques of Control or Methods of Establishing Control
A number of techniques or tools are used for the purpose of managerial control. Some of the techniques are used for the control of the overall performance of the organisation, and some are used for controlling specific areas or aspects like costs, sales, etc. The various techniques of control can be classified into categories, viz.,
(1) Traditional or Conventional techniques and
(2) Modern or Contemporary techniques.

The important Traditional or Conventional techniques are:
a.       Budgetary Control
b.      Standard Costing
c.       Break-even Analysis
d.      Inventory Control
e.      Internal Audit
f.        Statistical Data Analysis
g.       Personal Observation
h.      Production Planning and Control

The Important Modern or Contemporary techniques are:
a.       Financial Statement Analysis
b.      Return on Investment Control
c.       Management Information System
d.      Management Audit
e.      Zero-base Budgeting
f.        Human Resources Accounting
g.       Responsibility Accounting.

Traditional Techniques
a.      Budgetary Control: According to J.A. Scott, “Budgetary control is the system of management control and accounting in which all operations are forecasted and so far as possible planned ahead, and the actual results compared with the forecasted and planned ones”.

b.      Standard Costing: According to the ICMA, England, “Standard cost is a pre-determined cost which is calculated from management’s standards of efficient operation and the relevant necessary expenditure”.
c.       Break-even Analysis or Cost-Volume-Profit Analysis: Cost-Volume-Profit Analysis or Break-even Analysis is the study of the interrelationship between the cost (i.e., cost of production), volume (i.e., the volume of production and sales), the prices and the sales value, and the profits. In other words, it is the study of the inter-relationship between the cost (i.e., cost of production), volume (i.e., volume of production and sales), prices (i.e., selling prices) and profits.
d.      Inventory Control: Inventory is the stock of raw materials, work-in-progress, finished goods, consumable stores and spare parts and components at any given point to time. So, inventory control means control over different items of inventory or stock. “It is defined as physical control of stock items and implementing the principles and policies relating thereto”.
e.       Internal Audit: Internal audit is a continuous and systematic review of the accounting, financial and other operations of a concern by the staff specially appointed by the management for the purpose. In other words, it is the auditing for the management conducted by the staff specially appointed for the purpose to ensure that the work of the concern is going on smoothly, efficiently and economically.
f.        Statistical Data Analysis: It is a technique under which statistical data of the past and the present relating to the important aspects of the business are used for managerial control. The statistical data are collected from books and registers of the concern and presented to the management in a systematic manner in the form of tables, charts, graphs, etc.,
g.      Personal Observation: Under the technique of personal observation, the managers keep a close personal observation of the employees. In other words, the manager observes whether the workers are doing what they are expected to do.
h.      Production Planning and Control: According to S. Elon, “Production planning and control may be defined as the direction and co-ordination of the firm’s material and physical facilities towards the attainment of pre-specified production goals in the most efficient and valuable way”.

Modern Techniques
a.      Financial Statement Analysis: Financial statements are a means of managerial control. They can be used by the management for measuring and controlling the profitability, liquidity and the financial position of the business. By comparing the financial statement of the current year with those of the previous years and also by comparing the financial statement of their concern with those of other concerns engaged in the same industry.
b.      Return on Investment Control: Profits are the measure of overall efficiency of business. Profit earned in relation to the capital employed in a business is an important control device. ROI is used to measure the overall efficiency of a concern. It reveals how well the resources of a concern are used, higher the return better are the results.
c.       Management Information System (MIS): Management Information System (MIS) is an approach of providing timely, adequate and accurate information to the right person in the organisation which helps in taking right decisions.
d.      Management Audit: Management audit is an investigation by an independent organisation to find out whether the management is carried out most effectively or not. In case there are drawbacks at any level then recommendations should be given to improve managerial efficiency.
e.       Zero-Base Budgeting (ZBB): In the words of Peter A Pyher, “Zero-base budgeting is a planning and budgeting process which requires each manager to justify his entire budget request in detail from scratch and shifts the burden of proof to each manager to justify why he should spend money at all. The approach requires that all activities be analysed in ‘decision packages’ which are evaluated by systematic analysis and ranked in order of importance”. From his definition, it is clear that Zero-base budgeting is a technique of preparing the budget in which the previous year is not taken as the base, and every year is taken as a new year for preparing the current year’s budget.
f.        Human Resources Accounting: The American Accounting Association has defined human resources accounting as “the process of identifying and measuring data about human resources and communicating this information to interested parties”.
g.      Responsibility Accounting: Responsibility Accounting is defined as “a system designed to accumulate and report costs by individual levels of responsibility. Each supervisory area is charged only with the cost for which it is responsible and over which it has control.”

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