Madurai Kamraj University (MKU) 2007 B.B.A Financial management - Question Paper
Financial management
MAY 2007
Maximum: 100 marksTime: Three hours
FINANCIAL MANAGEMENT
(For those who joined in July 2003 and after)
SECTION A (4 x 10 = 40 marks)
Answer any FOUR questions.
Each questions carry equal marks.
1. Compare the value of the information obtained from an examination a single balance sheet with that obtained from a series of balance sheet?
2. How is the degree of operating leverage measured?
3. What is working capital? What are the different factors to be taken in estimating?
4. Balu & Co. presents the following Financial Statements for 1988 and 1989. Prepare a Cash flow statement.
Balance Sheet Liabilities 1988 1989 Assets 1988 1989
Rs.
Bills
Cash
Rs. Rs. 1,06,000 62,000
payable 4,52,000 6,28,000 Investment 1,74,000 -Creditors 8,26,000 12,54,000 Debtors 6,92,000 10,56,000
Liabilities 1988 1989 Assets 1988 1989 Rs. Rs. Rs. Rs.
Loan from Stock 8,64,000 13,66,000
Bank 2,00,000 4,70,000 Net fixed
Reserves and assets 22,26,000 27,96,000
Surplus 13,84,000 17,28,000
Share
Capital 12,00,000 12,00,000
40,62,000 52,80,000 40,62,000 52,80,000
Depreciation of Rs. 3,78,000 was written off for the year 1989 on fixed assets.
5. From the following information, prepare a summarized Balance Sheet as at 31-03-1990.
Stock velocity 6
Fixed assets turnover ratio - 4
Capital turnover ratio - 2
Gross profit ratio - 20%
Debt collection period - 2 months
Creditors payment period - 73 days.
The gross profit was Rs. 60,000. Closing stock was Rs. 5000 in excess of opening stock. All workings should form part of your answer.
- 6. The sales director of a manufacturing company reports that next year he expects to sell 50,000 units of a particular product.
The production manager consults the store-keeper and casts his figures as follows:
Two kinds of raw materials A and B are required for manufacturing the product.
Each of the products requires 2 units of A and 3 units of B. The estimated opening balances all the commencement of the next year are:
Finished product - 10000 units Raw Material: A - 12000 units B -15000 units
The desirable closing balances at the end of the next year are : Finished product 14000 units; Raw Materials : A - 13000 units; B - 16000 units. Prepare production Budget and Materials purchase budget for the next year.
7. From the following information, calculate
(a) Break-even point
(b) Number of units that must be sold to earn a profit of Rs. 60,000 per year.
(c) Number of units that must be sold to earn a net income of 10% on sales.
Sales price - Rs. 20 per unit
Variable cost - Rs. 14 per unit
Fixed cost - Rs. 79,200.
8. From the following information of M/s Satyam & Co., you are required to forecast their working capital requirements.
Projected annual sales Rs. 130 lakhs
Percentage of Net profit on Cost of Sales 20%
Average credit allowed to Debtors 8 weeks
Average credit allowed by creditors 5 weeks
Average stock carrying (in terms of sales requirement) 4 weeks
Add 10 % to computed figures to allow for contingencies.
SECTION B (3 x 20 = 60 marks)
Answer any THREE questions.
Each questions carry equal marks.
9. Explain in detail different types of capital structure theories.
10. Define the scope of financial management. What role should the financial manager play in modem enterprise?
IP.T.O.l
11. Aruna Ltd., is considering the purchase of a new machine which will carry out some operations performed by labour. A and B are alternative models. From the following information, you are required to prepare a profitability statement and work-out the payback period, present values, net present value and profitability index:
|
Machine |
Machine | |
|
A |
B | |
|
Estimated life (years) |
5 |
6 |
|
Cost of machine (Rs) |
1,50,000 |
2,50,000 |
|
Cost of indirect materials (Rs.) |
6,000 |
8,000 |
|
Estimated saving in scrap (Rs.) |
10,000 |
15,000 |
|
Additional cost of maintenance (Rs.) |
19,000 |
27,000 |
|
Estimated saving in wages : | ||
|
Employees not required (number) |
150 |
200 |
|
Wages per employee (Rs.) |
600 |
600 |
Assume tax rate at 50% and cost of capital 10%. Which model would you recommend?
12. Following are the Balance Sheets of M/s. Sasi and Rams as on 1-1-91 and 31-12-91.
Liabilities 1-1-91 31-12-91' Assets 1-1-91 31-12-91 Rs. Rs. Rs. Rs.
Creditors 40,000 44,000 Cash 10,000 7,000
Loan from Debtors 30,000 50,000
Sasi 25,000 Stock 35,000 25,000
Liabilities 1-1-91 31-12-91 Assets 1-1-91 31-12-91 Rs. Rs. Rs. Rs.
Loan from Machinery 80,000 55,000
Bank 40,000 50,000 Land 40,000 50,000
Capital 1,25,000 1,53,000 Building 35,000 60,000
2,30,000 2,47,000 2,30,000 2,47,000
During the year a machine costing Rs. 10,000 (accumulated depreciation Rs. 3,000) was sold for Rs. 5,000. Provision for depreciation against machinery as on 1-1-91 was Rs. 25,000 and on 31-12-91 Rs. 40,000. Net profit for the year 1991 amounted to Rs. 45,000. You are required to prepare a funds flow statement.
13. The sales and profit for 1996 and 1997 are as follows:
Sales Profit Rs. Rs.
1996 1,50,000 20,000
1997 1,70,000 25,000
Find out:
(a) P/V Ratio
(b) BEP
(c) Sales for a profit of Rs. 40,000
(d) Profit for sales of Rs. 2,50,000 and
(e) Margin of safety at a profit of Rs. 50,000.
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14. From the following forecasts of income and expenditure prepare a cash budget for the 3 months commencing 1st June, when the bank balance was Rs. 1,00,000. | ||||||||||||||||||||||||||||||||||||
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A sales commission of 5 % on sales, due two months after sales, is payable in addition to selling expenses. Plant valued at Rs. 65,000 will be purchased and paid for in August, and the dividend for the last financial year of Rs. 15,000 will be paid in July. There is a two month credit period allowed to customers and received from suppliers.
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Attachment: |
| Earning: Approval pending. |
