Bangalore University 2006 B.Com -F-206-FINANCIAL MANAGEMENT - Question Paper

IV SEMESTER B.COM exam ,JUNE 2006

FINANCIAL MANAGEMENT

MAX MARKS:90

TIME:30 HOURS

ans ANY TEN OF THE subsequent IN 4 LINES every .EACH CARRIES two MARKS (MARKS:2*10=20)

1a)What are the objectives of finance function?
b)Outline the functional area of finanacial management
c)Mention the steps in financial planning
d)What is capital structure ?
e)What is capital gearing?
f)What is financial leverage?
g)What is EPS?
h)Given :profitability index:1.182,P/V of cash outflow :Rs.20,00,000,p/v
of an annunity of Re. one for one for seven years at 12% discount is 4.5638
compute :O/V of cash inflow and annual cash inflows.
i)What is capital expenditure budget?
k)Name the sources of permanennt working capital
i)What is cah planning?

SECTION-B
ans ANY 5 OF THE subsequent .EACH ques. CARRIES five MARKS(MARKA:5*5=25)

2."Financial Management is indispensable in any organisation ".Bring out its importance
3.Financial planning is concerned with future .Do you agree?
4.The terms capitalization,capital structure and financial structur ,do not mean the identical .explain
5.Distinguish ranging from operating leverage and financial leverage
6.Explain in brief limitations of capital budgeting
7.What is ment by inventory management?What is it essential to a business concer?
8.Calculate the operating leverage and combined leverage from the subsequent data:
Sales, 2,00,000 units Rs. 50 per unit
Variable cost per unit Rs. 18
Fixed charges Rs. 25,00,000
Interest charges Rs. 2,00,000
9.A new project under consideration requires a capital out lag of Rs 600 lakhs for which the funds can
either be raised by the problem of equality shares of Rs.100 every or by hte problem of equality shares of the value of Rs.400 lakhs and by the problem of 15% loan of Rs .200 lakhs .find out the difference level of EBIT provided the tax rate at 50%

SECTION-C

ans ANY 3 OF HTE subsequent .EACH ques. CARRIES 15 MARKS (MARKS:15*3=45)

10.Define capital structure .What are the major determinants o fcapital structure?
11.Explain the different determinants of dividened policy
12.Explain the importance of cash,recievables and inventory managements to an organisation
13.A company`s capital structure consists of the following:
Equality shares of Rs.100 every Rs. 10,00,000
Retained earning Rs. 5,00,000
9% Pref. share Rs. 6,00,000
7% debentures Rs. 4,00,000
TOOTAL Rs.25,00,000
The company earns 12% on ots capital.The income tax rate is 50% .The company requires a sum of Rs.12,50,000 to finance its expansion program for which the subsequent options are available:
i)Issue of 10,000 equqlity shares at a premium of Rs.25 per share.
ii)Issue of 10% preference share
iii)Issue of 8% debentures
it is estimated that the P/E rations of equalit ,preference and debenture financing would be 21.4, 17 and 15.7 respectively
Which of the 3 financing options would you recommend and why?
14.Calculate the avg. rate of return for project A and B from the subsequent :
PROJECT A PROJECT B
Investments Rs 20,000 Rs.30,000
Expected life four years five years
Projected net income (after interest ,depreciation and taxes)
YEARS: one two three four 5
PROJECT A: Rs .2000 1500 1500 1000 -
PROJECT B: Rs.3000 3000 2000 1000 1000
If the ruiered rate of return is 12% which project should beundertaken?

Earning:   Approval pending.