Bangalore University 2008-4th Sem B.Com Financial Management , ester, - Question Paper

IV Semester B.Com.Examination, June 2008
(Semester Scheme)
COMMERCE
Paper – 4.4 : Financial Management

Time : three Hours Max.Marks: 90

Instruction : ans should be completely either in English or in Kannada

part – A

ans any ten of the subsequent in 4 lines every. every ques. carries two marks.
(2x10=20)


1. a) elaborate the objectives of finance function?
b) Outline the functional areas of financial management.
c) Mention the steps in financial planning.
d) What is optimal capital structure?
e) What is capital gearing?
f) What is financial leverage?
g) What is EPS?
h) provided : profitability index : 1.182,P/V of cash outflows : Rs. 20,00,000
p/c of an annuity of Rs. one for seven years at 12% discount is 4.5638
i) What is capital expenditure budge?
j) State the various practices of dividend.
k) Name the sources of permanent working capital
l) What is cash planning?

part –B

ans any 5 of the subsequent. every ques. carries five marks. (5x5=25)

2. “Financial Management is indispensable in any organization”. Bring out its importance.
3. Financial Planning is concerned with future. Do you agree?
4. The term capitalization, capital structure and financial structure, do not mean the identical. discuss.
5. Distinguish ranging from operating leverage and financial leverage.
6. Explain in brief limitations of capital budgeting.
7. What is meant by inventory management? Why is it essential to a business concern.
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 equity shares of Rs.100 every ir by the problem of equity shares of the value of Rs. 400 lakhs and by the problem of 15% loan of Rs.200 laksh. Rind out the indifference level of EBIT provided the tax rate at 50%


part – C

ans any 3 of the subsequent. every ques. carries 15 marks. (15x3=45)

10. Define capital structure. elaborate the major determinants of capital structure?
11. Explain the different determinants of dividend policy.
12. Explain the importance of cash, receivables and inventory managements to an organization.
13. A company’s capital structure consists of the subsequent :
Equity shares of Rs. 100 every ----Rs. 10,00,000
Retained earn in ---------------------Rs. 5,00,000
9% Pref. shares----------------------Rs. 6,00,000
7% debentures------------------------Rs. 4,00,000
Total Rs. 25,00,000
The company earns 12% on its capital. The income tax rate is 50%. The company requires a sum of Rs. 12,50,000 to finance its expansion programmed for which the subsequent options are available:
i) Issued of 10,000 equity shares at a premium of Rs.25 per share.
ii) Issue of 10% preference shares.
iii) Issue of 8% debentures.
It is estimated that the P/Eratios for equity, 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 projects A and B from the subsequent :
------------------------Project A-------------Project B
Investment Rs. 20,000-----------Rs.30,000
Expected live four years five years
Projected net income (after interest, depreciation and taxes)

Years :------------1----------2----------3-----------4-----------5
Project A : Rs. 2000------1500-----1500 ------ 1000 nil
Project B : Rs. 3000------3000-----1000 ------ 1000 ---1000

If the needed rate of return is 12% which project should be undertaken?

*******************************************************************

Earning:   Approval pending.